KEY FIGURES FOR THE GROUP, IFRS MYBET HOLDING SE

Transcription

1 ANNUAL REPORT 2013

2 KEY FIGURES FOR THE GROUP, IFRS MYBET HOLDING SE INCOME STATEMENT Revenues 67,028 68,751 60,686 51,189 47,904 Sports Betting 33,337 33,320 25,096 21,300 15,659 Casino & Poker 23,419 21,671 17,100 12,863 9,359 Lotteries 3,183 6,236 13,667 13,562 19,553 Horse Betting 5,620 5,685 4,847 2,979 3,244 other 1,247 1, Net Gaming Revenue 65,648 67,869 60,128 50,705 47,290 EBITDA -6,990 10,992 6, ,212 EBIT -11,186 7,248 1,633-3,814-6,717 EBT -11,495 7,209 1,252-4,221-7,198 Consolidated earnings -10,960 6,108 1,499-4,170-7,195 Earnings per share ( ) Employees (average over period) Revenue per employee BALANCE SHEET 31/12/ /12/ /12/ /12/ /12/ Non-current assets 17,090 20,419 18,755 20,469 20,796 Deferred taxes 1, ,357 2,000 1,784 Cash holdings 7,965 13,176 5,833 4,943 9,864 Shareholders' equity 18,306 28,520 22,673 15,015 18,175 Balance sheet total 38,609 43,925 37,374 36,446 40,585 Equity ratio 47.4 % 64.9 % 60.7 % 41.2 % 44.8 % NOTE Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures

3 CONTENTS EDITORIAL REPORT OF THE SUPERVISORY BOARD CORPORATE GOVERNANCE COMBINDED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET CONSOLIDATED INCOME STATEMENTS CASH FLOW STATEMENT STATEMENT OF MOVEMENTS IN EQUITY IFRS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AUDIT CERTIFICATE THE SHARE, INVESTOR RELATIONS FINANCIAL CALENDAR, IMPRINT

4 EDITORIAL DEAR SHAREHOLDERS, Welcome, and allow me to introduce myself as a new face on the Management Board of mybet Holding SE. I have been in charge of the strategic and operational development of the mybet Holding SE since January 1, 2014; I am able to bring to mybet more than ten years of professional experience in the games and gambling industry, and over 15 years of experience in the Internet sector. Sven Ivo Brinck, Management Board member A difficult year lies behind us. mybet did not achieve its operating targets in Consolidated revenue reached EUR 67 million in 2013, roughly 2.5 percent down on the previous year s total. Compared with the revenue forecast from March 2013, which anticipated revenue in the range of EUR 80 to 87 million, the actual revenue performance fell well short. In terms of earnings, too, we clearly missed our own targets. This development was prompted in part by weak operating business as a result of the large number of wins by favourites. The unsatisfactory development in important international markets also contributed to the poor result. Our Spanish and Italian subsidiaries in particular posted significant net losses. Then there were various non-recurring effects. For example we had to make adequate provision for risks arising from legal disputes of our subsidiaries in France and Spain and with the German tax authorities. The regulatory environment in Germany gives rise to cautious optimism. It currently remains to be seen when the licensing process for the Germany-wide permits under the amended State Treaty on gaming will be completed. A subsidiary of mybet has applied for a licence and submitted its application on time. This gives added significance to the permits awarded under Schleswig-Holstein gaming legislation, which mybet group has held since MYBET HOLDING SE // ANNUAL REPORT 2013

5 We aim to tackle the unsatisfactory business performance with a comprehensive raft of measures. We are already beginning to see them have an effect: First, we have examined all existing costs as part of a cost cutting exercise. This has focused mainly on the administrative area and has also resulted in changes to the organisational structure of the mybet Group. We have built these effects into our corporate planning. Initial savings of a high six-figure sum have already been realised. In view of the consistently weak performance of the Spanish gaming market, we have decided to dispose of the Spanish subsidiaries. The planned sale of these Spanish lottery activities is the logical consequence of our strategy of focusing, which started in 2012 with the sale of the German-language lottery operations. This move means the mybet group will in future be able to concentrate on the core areas of sports betting, casino and poker. What ultimately matters to our customers is the product. Market success sets the pace of the company s growth and success. For that reason, we will be focusing more closely than ever on our customers and markets. Drawing on the comprehensive expertise of our employees, we aim to significantly improve our online and offline product range and broaden our portfolio. A recently launched quality drive will improve our product range s reliability and ease of use. mybet can look back on an eventful and successful past. The group of company s origins go back to before The past few years have seen the group systematically refine its sports betting, casino and poker products, which are available over the Internet, on mobile devices and in betting shops. The experience and skills of mybet s employees have contributed greatly to this development. They have succeeded in establishing a brand of international renown and with high-impact products. In the shape of the Maltese subsidiary C4U, mybet has now created an expert payment services provider which is able to offer fast and secure payment processes; now that it has secured an emoney licence, it is in a position to offer supplementary payment services, too. We aim to make functionality, availability and diversity the hallmarks of mybet and the foundations of a successful future will be about repositioning mybet. On the basis of a clear strategy and transparent, dependable reporting, we ask for your confidence. The first indications are positive. Compared with our targets, the months of January and February 2014 are ahead of our expectations. We aim to maintain that progress. It would give us great satisfaction to see you remain involved as we move forward. Best wishes, To round off our efforts in this domain, we will be stepping up our activities in the growth areas of mobile and social media applications. The aim is to offer more gaming fun for our loyal customers to the benefit of mybet and you, too, as our shareholders. Sven Ivo Brinck Kiel, April 2014 EDITORIAL 3

6 0

7 1 // REPORT OF THE SUPERVISORY BOARD

8 01 REPORT OF THE SUPERVISORY BOARD Finally, at the end of the year the company parted with our long-standing Management Board spokesperson, Mr Mathias Dahms, by mutual agreement. Mr Dahms had belonged to the Management Board since our company was founded. The Supervisory Board has voiced its gratitude to Mr Dahms for his many years of service. At its extraordinary meeting on December 17, 2013 the Supervisory Board appointed Mr Sven Ivo Brinck as the new and currently only Management Board member. Mr Brinck has many years of experience in the Internet industry, particularly in the lotteries, gambling and games areas. We are delighted to have found a highly suitable candidate to serve on the Management Board at short notice. We are convinced that Mr Brinck is a credible figure to represent the change needed in the company s management. Dr. Volker Heeg, Chairman of the Supervisory Board Dear shareholders, The past year was very eventful. The Supervisory Board was faced with difficult decisions which, however, needed to be taken for the good of the company. The Supervisory Board, too, has experienced changes. With effect from the end of the Shareholders Meeting on July 18, 2013 the long-serving members Mr Rainer Jacken and Mr Rodolfo Carpintier surrendered office as Supervisory Board members. The Shareholders Meeting elected Mr Marcus Geiß and Mr Clemens Jakopitsch as new Supervisory Board members. At the start of the fourth quarter I was elected Chairman of the Supervisory Board and Mr Geiß as Deputy Chairman. Mr Jakopitsch surrendered office at the end of October Finally, with effect from the end of 2013 Ms Antje Stoltenberg surrendered office. Ms Stoltenberg had been a member of the company s Supervisory Board since its founding. We take this opportunity to thank the departed members for their commitment and contributions to the company s success. PERSONNEL CHANGES THE TOPICS OF THE SUPERVISORY BOARD PLENARY MEETINGS The most notable of these decisions involved the changes on the Management Board. At the start of the fourth quarter the Supervisory Board terminated the contract of Mr Stefan Hänel as the company s Finance Director. The performance of the Finance Division did not meet the expectations of the Supervisory Board. Mr Hänel had been a member of our company s Management Board since The company is currently involved in legal proceedings with Mr Hänel. As an interim arrangement Mr Hänel was succeeded as Finance Director by Ms Monika Fiala. Ms Fiala has now left the company again. In the year under review the Supervisory Board took great care in performing the tasks incumbent upon it in accordance with the law, the articles of incorporation and the rules of internal procedure. We regularly advised the Management Board on the running of the company and monitored its activities. The Supervisory Board was involved in decisions on matters of fundamental significance for the company. The Management Board informed us both in writing and orally of corporate planning, the progress of business, strategic 6 MYBET HOLDING SE // ANNUAL REPORT 2013

9 development and the current situation of the group. On the basis of the Management Board s reports we discussed at length the business development as well as important decisions and events for the company. Deviations in the business development from the targets were considered in depth by the Supervisory Board, as was the strategic direction of the company. Wherever required by law and in accordance with the articles of incorporation, the Supervisory Board voted on the reports and the proposed resolutions of the Management Board after thoroughly examining and consulting on them. Supervisory Board meetings in the 2013 financial year took place on March 20, June 3 (by telephone), October 1, October 7 (by telephone, extraordinary), October 31 and December 17 (extraordinary). In addition several telephone conferences took place, some with and some without the involvement of the Management Board. At the meeting on March 20, the Supervisory Board discussed the draft annual and Consolidated Financial Statements for 2012 together with the report of the auditors. The Supervisory Board also discussed the current business development as well as the planning cornerstones for 2013 with the Management Board. Another topic for discussion was the state of progress in the nationwide sports betting licensing proceedings being handled by the Hesse Ministry of the Interior (E 15) as well as the proceedings in Malta to secure an electronic money institution licence. Topics for the forthcoming Ordinary Shareholders Meeting also featured large at this meeting. At the meeting conducted by telephone on June 3, 2013 the Supervisory Board was informed by the Management Board of the current business development in the first half of the year and the influence of the new sports betting tax on the business results. The Supervisory Board then addressed the attainment of the targets at length. Another topic included the proposals for election to the Supervisory Board at the forthcoming Ordinary Shareholders Meeting. The meeting on October 1, 2013 dealt with the internal constituting of the board following the election of new members at the Shareholders Meeting. The Supervisory Board was given an explanation of the development in the company s financial and economic situation by the Management Board. A critical discussion was conducted with the Management Board on the current business development and the liquidity situation. In that connection the Supervisory Board discussed the running of the company at length. The task of considering the matter further was initially delegated to the newly constituted Personnel Committee (we refer in this connection to the remarks below on the work of the committees). In response to a draft resolution by the Personnel Committee, at a meeting convened on October 7, 2013 and conducted by telephone the board then discussed at length the proposal to terminate the contract of Mr Hänel as Management Board member and voted in favour of the proposal. The meeting on October 31, 2013, too, devoted much time to following up the liquidity situation. Possible refinancing measures were discussed on that occasion. Mr Dahms continuation as Management Board member was discussed. Finally, this meeting appointed Ms Fiala as interim Management Board member for the Finance Division with effect from November 1, Subsequently, on November 10, 2013, the Supervisory Board reached mutual agreement with Mr Dahms on the termination of his contract to the Management Board. Finally, at the last meeting of the year on December 17, 2013 Mr Brinck was appointed sole Management Board member with effect from January 1, The handover issues to be addressed were discussed with Mr Dahms. In addition, the close reporting on and querying of business development issues and the liquidity situation were maintained. At its meeting on December 17, 2013 the Supervisory Board also considered the contents of and amendments to the German Corporate Governance Code. We addressed the amendments to the German Corporate Governance Code and their impact on the company. Following on from the meeting a Declaration of Conformity pursuant to Section 161 of the German Stock Corporation Act was submitted jointly with the Management Board and individual departures from the recommendations of the German Corporate Governance Code were explained. The Declaration of Conformity was made 01 REPORT OF THE SUPERVISORY 7

10 permanently available to the shareholders on the company s website. expert, and satisfies the statutory requirements as well as the requirements of the German Corporate Governance Code. THE WORK OF THE COMMITTEES Fundamentals Mr Motte, Mr Urban and Mr Jakopitsch were elected to the Nominating Committee. The Nominating Committee did not subsequently need to be constituted. To enable it to perform its duties efficiently, the Supervisory Board has created committees. These prepare resolutions and topics for consideration by the full board. Within the legally permissible scope, decision-making authority has also been transferred to the committees. At two meetings (one conducted by telephone) the newly constituted Personnel Committee initially prepared the decision on the dismissal of Mr Hänel. Then, in an orderly process, the filling of the post of Finance Director on an interim basis was considered and in-depth selection interviews were held. Work in the first to third quarters of 2013 The Audit Committee met on two occasions in the first quarter of the past financial year. The committee concerned itself intensively with the targets submitted by the Management Board. In preparation for the board s accounts review meeting, accounting topics were discussed with the participation of the auditors. The auditors were questioned in detail on the audit priorities and other aspects. The recommendations of the auditors were discussed. Until September 30, 2013 the members of the Audit Committee were Mr Frank Motte as Chairman, Ms Antje Stoltenberg and Mr Konstantin Urban. In the opinion of the Supervisory Board Mr Motte is suitably qualified on the strength of his knowledge and experience as an independent financial expert, and satisfies the statutory requirements as well as the requirements of the German Corporate Governance Code. In advance of sending out invitations to the Ordinary Shareholders Meeting a Nominating Committee comprising Mr Motte and Mr Urban was formed. The Nominating Committee made enquiries with candidates and recommended a short list on behalf of the entire board. The Audit Committee chaired by Ms Stoltenberg prepared and issued our auditors KPMG AG Wirtschaftsprüfungsgesellschaft with the audit assignment with effect from November 5 and 10, Following the departure of Mr Jakopitsch during the year and the departure of Ms Stoltenberg with effect from December 31, 2013 the committees formed are all non-decision-making committees at company level. Until replacements have been brought the board back up to the statutory number of members, the Supervisory Board has therefore adopted the practice of handling the tasks of the committees on a plenary basis. ESTABLISHMENT OF THE ANNUAL FINANCIAL STATEMENTS These annual financial statements in accordance with the German Commercial Code and the IFRS Consolidated Financial Statements, as well as the combined Management Report for the 2013 financial year, have been examined by the auditors appointed by the Shareholders Meeting, KPMG Wirtschaftsprüfungsgesellschaft, Hamburg, who have given their unqualified opinion. Work in the fourth quarter of 2013 At the meeting on October 1, 2013 the committee members were re-appointed to reflect the newly constituted board. Mr Clemens Jakopitsch, Mr Marcus Geiß and myself were elected to the Personnel Committee. The committee was constituted with Mr Jakopitsch as its Chairman. The financial statements, the combined Management Report, the audit reports of the auditors and the Management Board s proposal on the appropriation of profits were made available to the members of the Supervisory Board. The Supervisory Board examined the financial statements and the combined Management Report submitted by the Management Board and approved them on April 25, Ms Stoltenberg, Mr Geiß and Mr Urban were elected to the Audit Committee. The committee was constituted with Ms Stoltenberg as its Chairman. In the opinion of the Supervisory Board Ms Stoltenberg, too, is suitably qualified on the strength of her knowledge and experience as an independent financial The audit priorities this year involved in particular the appraisal of selected international activities of the mybet Group and an examination of the soundness of the investments. The auditors explained the principal findings of their audits and answered further questions of the Supervisory Board. 8 MYBET HOLDING SE // ANNUAL REPORT 2013

11 The auditors have assured themselves of the functioning of the risk management system. According to their examination, it satisfies the requirements of Section 91 (2) of the German Stock Corporation Act. There were no circumstances giving rise to concerns of bias on the part of the auditors. In addition to services in connection with the auditing of the financial statements, the auditors provided consultancy services amounting to EUR 92 thousand in the period under review. The audit report led to no objections; an unqualified audit opinion was issued. The Supervisory Board has acceptingly acknowledged the audit findings of the auditors and raises no objections on the basis of the concluding finding of its own examination. The Supervisory Board ratifies the annual financial statements and Consolidated Financial Statements prepared by the Management Board, which are thus approved pursuant to Section 172 of the German Stock Corporation Act. The Supervisory Board thanks the Management Board and all employees of the mybet Group for their commitment, as well as you, our shareholders, for your confidence in the company. We are aware that the substantial changes that have taken place have led to temporary uncertainty. The task now is to reposition the company under the leadership of our new Management Board, improve our competitiveness and systematically strengthen our market position. On behalf of the Supervisory Board Dr. Volker Heeg, Chairman Hamburg, April REPORT OF THE SUPERVISORY 9

12 0

13 2 // CORPORATE GOVERNANCE

14 02 CORPORATE GOVERNANCE REPORT ALSO SERVING AS CORPORATE GOVERNANCE DECLARATION PURSUANT TO SECTION 289A OF GERMAN COMMERCIAL CODE I The actions of mybet Holding SE s governing and monitoring bodies are determined by the principles of responsible, sound corporate governance. In this declaration, the Management Board also acting on behalf of the Supervisory Board provides its report on corporate governance in the company pursuant to Article 3.10 of the German Corporate Governance Code as well as Section 289a (1) of German Commercial Code. REPORTING AND DECLARATION OF CONFORMITY ON CORPORATE GOVERNANCE The German Corporate Governance Code issued by a Government Commission of the Federal Ministry of Justice in 2002, since which time it has been regularly extended, presents key statutory requirements regarding the management and governance of German listed companies. It moreover contains internationally and nationally acknowledged standards of sound, responsible corporate management. The Code is intended to render the German corporate governance system transparent and intelligible, and seeks to promote the confidence of international and domestic investors, customers, employees and the general public in the management and governance of German listed companies. The German Corporate Governance Code (GCGC) applies in the version dated May 15, As well as statutory requirements, it contains recognised corporate governance standards in the form of recommendations and suggestions. There is no statutory obligation to adhere to these standards; rather, they serve as a measure of industry s ability to practise self-regulation. Pursuant to Section 161 of the German Stock Corporation Act, however, the Management Board and Supervisory Board of all listed stock corporations in Germany are required to submit a Declaration of Conformity each year on the recommendations of the Code. mybet Holding SE addresses the issue of corporate governance intensively and responsibly. Nevertheless, in view of the relatively small size and structure of the mybet Group, not all recommendations of the Code can be usefully implemented. The Management Board and Supervisory Board of mybet Holding SE published the most recent Declaration of Conformity pursuant to Section 161 of the German Stock Corporation Act in December 2013 on the website of mybet Holding SE, at com, which was updated in April All previous declarations of compliance can equally be accessed on the Internet. Wording of Declaration of Conformity dated December 2013 DECLARATION BY THE MANAGEMENT BOARD AND SUPERVISORY BOARD OF MYBET HOLDING SE IN ACCORDANCE WITH SECTION 161 OF THE GERMAN STOCK CORPORATION ACT In accordance with Section 161 of the German Stock Corporation Act, the Management Board and Supervisory Board of a listed stock corporation are required to submit a Declaration of Conformity each year on the recommendations of the German Corporate Governance Code published by the Federal Ministry of Justice in the official section of the electronic Official Gazette of the Federal Republic. The Management Board and Supervisory Board of mybet Holding SE declare that the recommendations of the Government Commission on the German Corporate Governance Code have been complied with since the last declaration in December 2013, updated in March 2013, with the following exceptions: 1. D&O insurance cover: The German Corporate Governance Code envisages in Article 3.8 Paras. 2 and 3 that where D&O insurance cover is taken out for the Management Board and Supervisory Board, an excess for Management Board members of at least 10 % of the loss up to an amount one and a half times the fixed annual remuneration of the Management Board member should be agreed, and a corresponding excess agreed for the Supervisory Board. The D&O insurance cover taken out for the corporate bodies of mybet Holding SE envisages no excess. The Supervisory Board had given the Management Board members Dahms and Hänel an assurance in their employment contracts that it would provide D&O insurance cover with no excess. The policy concluded provides no insurance cover for wilful dereliction of their duties by the insured parties; insurance cover is granted exclusively for negligent dereliction of duties. An excess would therefore only be applicable in the case of negligent acts. The members of the corporate bodies are selected with care; they demonstrate a sense of responsibility and possess entrepreneurial experience. The agreement of an excess would not serve to heighten their sense of responsibility or motivation. The company therefore believed that the agreement of an excess would not be appropriate for either the Management Board or the Supervisory Board. 12 MYBET HOLDING SE // ANNUAL REPORT 2013

15 There is no assured D&O insurance cover without an excess for the interim Management Board member along with new Management Board members to be appointed in line with the new statutory rule; Section 93 (2) Sentence 3 of the German Stock Corporation Act is complied with. The D&O insurance cover does not include any excess for the Supervisory Board. 2. Duties of the Management Board: Pursuant to Article of the Code, the Management Board is to consider diversity when filling senior positions and in particular strive for appropriate representation of women. There is currently no human resources guideline from the Management Board stating the above goals. Decisions on appointments to senior positions are based solely on the expertise of the candidates. At present a number of senior positions within the company are filled by women, and diversity is considered in new appointments. 3. Pursuant to Article Para. 1 Sentence 1 of the German Corporate Governance Code (GCGC), the Management Board is to comprise several people. Due to the departure of the Finance Director Stefan Hänel at short notice on October 8, 2013 the Management Board area for which he was responsible was temporarily taken on by Management Board spokesman Mathias Dahms as the sole Management Board member, who resumed responsibility for the role after the departure of the interim Management Board member. The Supervisory Board has initially appointed a successor only to Mr Dahms with effect from January 1, The Supervisory Board likewise seeks to appoint a new Finance Director in the short term and will then once again be in compliance with the recommendation. 4. Disclosure of the remuneration of the Management Board and Supervisory Board: The Management Board and Supervisory Board report the remuneration of the Management Board and Supervisory Board members in the level of detail required pursuant to Articles and of the Code. The new recommendation of the Code (Article Para. 2 Sentence 3) obliges the Supervisory Board to consider the ratio between the remuneration of the Management Board and that of senior management and the workforce as a whole, including in respect of its development over time. In determining the remuneration of the interim Management Board member and the new Management Board spokesman (from January 1, 2014) the Supervisory Board has attached very high importance to appropriate remuneration rules. No explicit ratio for the remuneration of management employees of the company has been laid down. The monetary remuneration components are to comprise fixed and variable components (Article Para. 2 Sentence 2 of GCGC). Pursuant to Article Para. 2, variable remuneration components shall fundamentally have an assessment basis of more than one year and take account of both positive and negative developments. The contracts of employment with the departed and departing Management Board members were concluded in 2009 (exception: interim Management Board member) and as such only reflected the recommendations of the Code to a limited extent. In the contracts with the new Management Board members, the Supervisory Board will seek to place the emphasis of incentivisation on the long-term variable remuneration (for instance in the form of phantom stocks with phased issuance and multi-year vesting periods, or in the form of a multi-year consideration of EBIT performance or similar). It has not yet been clarified whether these variable remuneration components will be fully compliant with the recommendations of the Code. In addition, the overall remuneration and its variable remuneration components will exhibit certain caps. The contracts with the new Management Board members will envisage caps only on variable remuneration. Pursuant to Article Para. 4, when concluding Management Board contracts it should be ensured that payments to a Management Board member whose position on the Board is terminated prematurely do not exceed the value of two years salary (severance payments cap), including fringe benefits, and do not provide remuneration for more than the remaining term of the employment contract. The Management Board contracts with the departed and departing Management Board members (with the exception of the interim Management Board member) did not contain any rule on severance payments in the event of the early departure of a Management Board member. The company worked on the assumption that agreements concluded would actually be fulfilled. Severance arrangements only existed in the event of premature surrendering of office on the Management Board following a change of control. This was limited to the payment of remuneration for the remaining term, plus one year s fixed salary. In view of its short-term nature the contract for the 02 CORPORATE-GOVERNANCE-BERICHT // 02.I REPORTING AND DECLARATION OF CONFORMITY ON CORPORATE GOVERNANCE 13

16 interim Management Board member did not include the change of control rule. The severance payment cap in the contracts with the new Management Board members is to be specified as no more than two years salary (no more than residual term). The Supervisory Board considers the remuneration of the Management Board to be appropriate despite the above departures from the Code, which have been significantly limited in the contracts with the new Management Board members. Compared with the previous version, Article now expresses a preference for fixed remuneration for the Supervisory Board and recommends that where payment is performance-related, it should focus on sustained corporate development. The Shareholders Meeting last concerned itself with the Supervisory Board s remuneration in In addition to a fixed payment, the Supervisory Board receives a performance-related payment that reflects the EBIT achieved by the company and is therefore only an indirect reflection of sustained corporate development. The company believes that the current remuneration structure for the Supervisory Board remains appropriate and is not planning to change it in the short term. Pursuant to Article Para. 1 Sentence 2 the chairing and membership of committees is also to be reflected in the remuneration. Previously, the only distinction within the remuneration of the Supervisory Board applied to the Chairman in view of the small size of the Supervisory Board. It may be appropriate to address the topic of the Supervisory Board s remuneration as an agenda item for the 2014 Shareholders Meeting. 5. Succession planning, diversity and age limit for Management Board members: Pursuant to Article the Supervisory Board is to consider diversity in the composition of the Management Board, in particular in striving for appropriate representation of women, and take account of this in long-term succession planning for the Management Board. When appointing the Management Board, the Supervisory Board bases its decisions solely on the expertise of the candidates. There is currently no long-term succession planning for the Management Board and Supervisory Board. Article Para. 2 of the Code recommends that an age limit be specified for Management Board members, and Article that an age limit be specified for Supervisory Board members. No age limits apply for the members of the Management Board and Supervisory Board of mybet Holding SE, nor are such limits considered advisable. created on October 1, 2013) are all non-decision-making committees at company level. Until replacements have brought these committees back up to the statutory size, the Supervisory Board will therefore handle the tasks of the committees on a plenary basis and has therefore not considered the question of whether the Chairman of the Audit Committee possesses the necessary knowledge and experience; these are undoubtedly present in the plenary Board. Once the committees have been brought back up to the statutory size, the recommendations of Article 5.3 of the Code should once again be met. 7. Composition of the Supervisory Board: The Supervisory Board has not previously specified any firm targets for its composition pursuant to the recommendation in Article The Supervisory Board bases its personnel proposals solely on the expertise of the candidates. It is the opinion of the Supervisory Board that the majority of its members are independent. mybet Holding SE, Kiel, December 2013 The Management Board The Supervisory Board The above declaration dated December 2013 was supplemented and updated by the Management Board and Supervisory Board as follows in April 2014 in respect of Articles 6.4 and of the Code, in the light of current developments. 8. Transparency, financial reporting and auditing of financial statements: The dates of the key regular publications (including Annual Report) are, in accordance with the recommendation in Article 6.4, to be published sufficiently in advance in a Financial Calendar. Furthermore, in accordance with the recommendation in Article the Consolidated Financial Statements are to be made publicly available within 90 days of the end of the financial year. At the end of March 2014, the publication date of the annual financial statements and Consolidated Financial Statements and of the Annual Report had to be postponed at short notice to April 28, The updated Financial Calendar could therefore not be published sufficiently in advance. In addition, the Consolidated Financial Statements could only be made publicly available 120 days after the end of the financial year. In the assessment of the Management Board and Supervisory Board, this is a one-off delay. In future, the above recommendations are once again to be met unreservedly. 6. Formation of committees (Article 5.3): Following the departure of Mr Jakopitsch during the year and the departure of Ms Stoltenberg with effect from December 31, 2013 the committees formed (including the new Nominating Committee Kiel, April 2014 mybet Holding SE, The Management Board The Supervisory Board 14 MYBET HOLDING SE // ANNUAL REPORT 2013

17 COOPERATION BETWEEN MANAGEMENT BOARD AND SUPERVISORY BOARD One fundamental principle of German stock corporation law is the dual governance system, under which the corporate bodies Management Board and Supervisory Board are each allocated distinct areas of responsibility. The Management Board and Supervisory Board of mybet Holding SE work together closely and in a partnership of trust on the management and supervision of the company. Management Board Sven Ivo Brinck has been sole Management Board member of mybet Holding SE since January 1, He conducts the company s business with the aim of sustainably creating value added under his own responsibility and in the interest of the company. The Management Board regularly reports to the Supervisory Board on the progress of business and the situation of the company, including risk management, as well as on compliance. The Management Board s rules of internal procedure envisage specify that business transactions of exceptional significance such as the approval of plans, major acquisitions or capital measures, are subject to the approval of the Supervisory Board. The current version of the rules of internal procedure for the Management Board is made available to the public on the website of mybet Holding SE in the section The Company under Corporate Governance. Supervisory Board The Supervisory Board advises and monitors the Management Board s governance of the company. It is consulted on the strategy and plans, as well as on matters of fundamental significance for the company. The Supervisory Board Chairman coordinates the work of the Supervisory Board, chairs its meetings and represents the body externally. The Supervisory Board of mybet Holding SE currently comprises four members: Dr Volker Heeg (Chairman), Marcus Geiß (Deputy Chairman), Frank Motte and Konstantin Urban. The intention is to increase the Supervisory Board back up to the six members stipulated in the articles of incorporation at the next Shareholders Meeting. Clemens Jakopitsch and Antje Stoltenberg left the Supervisory Board in the 2013 financial year. Frank Motte, as a Business Administration graduate and management consultant, possesses the expertise in the areas of financial reporting and auditing of financial statements that is required pursuant to the German Accounting Law Modernisation Act (BilMoG). On October 1, 2013 the Supervisory Board formed three subcommittees, which however do not currently achieve a quorum because they each comprise only two members: II Audit and Compliance Committee: Marcus Geiß (Chairman), Konstantin Urban Personnel Committee: Dr Volker Heeg (Chairman), Marcus Geiß Nominating Committee: Frank Motte (Chairman), Konstantin Urban The Supervisory Board is kept informed by the Management Board in a timely and comprehensive manner, both in writing and orally. Reports are presented at the scheduled meetings on the plans, business performance and situation of the group, including risk management and observation of compliance guidelines. An extraordinary Supervisory Board meeting is convened to discuss any major events. The Supervisory Board has adopted rules of internal procedure for its own work. mybet Holding SE has taken out financial loss liability insurance cover (D&O insurance) for all Management Board and Supervisory Board members. The Management Board and Supervisory Board are committed to the corporate interests of mybet Holding SE. No conflicts of interest that were to be disclosed to the Supervisory Board without delay occurred in the past financial year. No Management Board member held more than three non-executive directorships of listed companies that did not belong to the group. Remuneration of the Management Board and Supervisory Board The principles of the remuneration system and the amounts of remuneration paid are disclosed in the remuneration report, which forms part of the management report. CORPORATE GOVERNANCE PRACTICES SHAREHOLDERS AND SHAREHOLDERS MEETING The shareholders exercise their rights at the company s Shareholders Meeting. For the passing of resolutions, every share corresponds to one voting right. The Shareholders Meeting elects the Supervisory Board and votes on the discharge of the Management Board and Supervisory Board. The Shareholders Meeting moreover elects the auditor proposed by the Supervisory Board. It decides on the appropriation of net earnings, on capital measures, on intercompany agreements requiring its approval, on the remuneration of the Supervisory Board and on amendments to the articles of incorporation. The Ordinary Shareholders Meeting of mybet Holding SE takes place each year; in exceptional circumstances stock corporation law provides for the convening of an Extraordinary Shareholders Meeting. Every shareholder who registers in time is entitled to participate in the Shareholders Meeting. Shareholders who are unable to attend in person have the option of arranging for a bank, a 02 CORPORATE-GOVERNANCE-BERICHT // 02.II CORPORATE GOVERNANCE PRACTICES 15

18 shareholders association, the proxy bound by instruction appointed by mybet Holding SE or another authorised agent of their choice to exercise their right to vote. The invitation to the Shareholders Meeting and the reports and information required for the resolutions are published in accordance with the requirements under stock corporation law and made available on the website of mybet Holding SE. TRANSPARENCY mybet Holding SE publishes information on the economic situation of the group, as well as all material new developments concerning the business of the mybet Group, in a regular and timely manner. The Annual Report, Interim Financial Report and Quarterly Reports on the first and third quarters are published within the specified periods. Information on topical events is made available to both capital market operators and the public in the form of press releases and, if necessary, ad hoc information. Information is disseminated using suitable electronic media such as and the Internet, and is generally disclosed simultaneously in German and English. Each year, mybet Holding SE publishes a financial calendar containing all dates of relevance for the capital market, i.e. the Shareholders Meeting, the Analysts Meeting and the publication dates of reports. The calendar is published on the Internet in good time before the start of each financial year. Extensive information about the company, the products, the market environment and mybet shares is moreover available on the group website in German and English. DIRECTORS DEALINGS Director s Dealings The changes during 2013 and the shareholdings of directors on either corporate body at December 31, 2013 are as follows: Financial reporting and auditing of financial statements The mybet Group prepares its financial statements in accordance with the International Financial Reporting Standards (IFRS). The separate financial statements of mybet Holding SE are prepared in accordance with the German Commercial Code. The annual Consolidated Financial Statements and separate financial statements of mybet Holding SE as well as three normally unaudited reports on the first, second and third quarters of each year are published. The Shareholders Meeting is responsible for the election of the auditor. RISK MANAGEMENT A responsible approach to business risks is one of the principles of sound corporate governance. In accordance with the requirements under stock corporation law, the risk management system of mybet Holding SE focuses on enabling the Management Board to identify at an early stage any risks that could potentially pose a threat to the company as a going concern, and initiate timely countermeasures. Potential risks are analysed centrally by means of a scorecard using key data and reports from the individual sections of the company, which are prepared on a monthly basis. The odds and bookmaking margins in the Sports Betting area constitute such key data. Alongside the use of predefined risk categories, the reporting corporate units bear a high degree of individual responsibility for recording risks in order to cover as broad a spectrum of risks as possible. The risk consolidated group mirrors the group of consolidated companies. The systems are continually refined, adapted to reflect changing general parameters and examined by the independent auditors. The Management Board informs the Supervisory Board regularly of existing risks and their development. The Audit Committee deals in particular with overseeing the financial reporting process, including reports, the effectiveness of the NAME POSITION TYPE OF SECURITY POSITION AT DEC 31, 2012 ADDITIONS DISPOSALS POSITION AT DEC. 31, Mathias Dahms (until 31/12/2013) Management Board spokesman Shares Options 40,000 87,500 20, ,000 87, Stefan Hänel (until 8/10/2013) Management Board Shares Options 20,000 87,500 10, ,000 87, Frank Motte Supervisory Board Shares Convertible bond 4, ,472 0 Konstantin Urban Supervisory Board Shares 16, ,000 Markus Geiß Supervisory Board Shares 0 125, ,000 1 expired options 2 or at the time of the departure of the director 16 MYBET HOLDING SE // ANNUAL REPORT 2013

19 internal system of control, risk management, compliance and the auditing of the financial statements. Details of risk management in the mybet Group are presented in the opportunities and risks report. The report on the internal control and risk management system for financial reporting purposes as required under the German Accounting Law Modernisation Act is contained in the management report of the company. Compliance and code of practice Compliance with codes of practice, laws and guidelines is a core component of mybet s entrepreneurial actions. As well as observing the law and the articles of incorporation, it above all complies with internal rules and with commitments undertaken voluntarily. mybet regards treating employees, business partners, shareholders and the public with integrity as an entrepreneurial given. As an enterprise with investments in companies operating in the gaming industry, mybet is profoundly aware that customers participating in games of skill and chance are also at risk of developing problem behaviour. By implementing preventive and educational measures in partnership with leading addiction research institutes, the companies of the mybet Group systematically strive to protect their customers and encourage them to play responsibly. This important task is taken very seriously. For example mybet has set up a special telephone hotline for players who detect problematic gaming behaviour in either themselves or in third parties. The toll-free phone number , available as standard throughout Germany and quoted both on the Internet and in the betting shops, is staffed by specially trained mybet employees who can serve as an initial point of contact for the parties concerned with regard to gaming-related problems. On the Internet and at the physical sales outlets, customers will find information on a nationwide register of help services enabling players with gaming problems to obtain consultation and treatment, specifically putting the person affected in contact with the appropriate bodies near where they live. mybet offers every player the opportunity to exclude themselves from using mybet products for a specified period. For both Internet products and the placing of bets at betting offices, players can apply to mybet to be listed on an industry-wide blocking system. In order to detect problematic gaming behaviour as early as possible and hold it in check, mybet has developed a system of identifying persons at risk of gaming addiction. Using an ongoing monitoring process, every player is allocated to a risk category. mybet employees who regularly come into contact with customers are given in-depth training on social aspects. They are instructed in the following knowledge and skills: Sensitisation to the dangers of gaming addiction in connection with sports betting Education about the probability of winning and losing in the sphere of sports betting General information on problematic and pathological gaming behaviour Early detection of problematic and pathological gaming behaviour The fundamental options for advice on and treatment of gaming problems Options and scope for sales staff to intervene in the case of customers with unusual gaming behaviour and to provide or arrange help Information and measures involved in the industry-wide blocking system and the self-exclusion options offered by mybet Blanket ban on gaming by minors and banned players mybet is aware of its responsibility for ensuring that young people under 18 years of age may not participate in gaming. In order to comply with the law on the protection of minors, mybet has introduced extensive measures and processes to ensure that minors cannot use the gaming products offered by mybet. REMUNERATION REPORT We present the basic features of the remuneration system for the Management Board and Supervisory Board in the remuneration report, which is part of the combined management report (see p. 48 ff.). mybet Holding SE, Kiel, April 2014 Der Vorstand Der Aufsichtsrat 02 CORPORATE-GOVERNANCE-BERICHT // 02.II CORPORATE GOVERNANCE PRACTICES 17

20 0

21 3 // MANAGEMENT REPORT

22 03 MANAGEMENT REPORT COMBINED MANAGEMENT REPORT OF MYBET HOLDING SE AT DECEMBER 31, 2013 I BASIC PROFILE OF THE GROUP AND OF MYBET HOLDING SE 1. BUSINESS MODEL mybet Holding SE is the parent company of the mybet Group, which is among the leading providers of and agents for licensed gaming in Europe. The companies of the mybet Group, on the basis of their own licences and permits, offer gaming in the European market in compliance with the national laws of each country. The products are made available to a broad target group via online services such as mybet.com, mybet.de and pferdewetten.de, as well as through mobile applications and franchise betting shops. Alongside the core market Germany, the target markets include Greece, Belgium and various countries in Eastern Europe, Africa and Latin America where the regulatory environment makes it possible to offer gaming products. In view of the persistently weak economic situation in Spain, the business of the DIGIDIS companies is to be discontinued. The Management Board of mybet Holding SE is currently involved in negotiations on the sale of the Spanish companies. The emphasis of the mybet Group s business activities is on offering sports betting, with the complementary area of poker and casino games. The lottery area was significantly reduced in size through the sale of German-language activities under the JAXX brand in the 2012 financial year. The planned disposal of the DIGIDIS companies will now also entail the shedding of Spanish lottery operations. The business of the mybet subsidiary C4U-Malta Ltd. has grown in significance; on the basis of a permit to operate as a financial and e-money institution it is increasingly offering payment transaction services and is fundamentally in a position to develop and sell its own financial market products. The principal direct investments of mybet Holding SE include the following: 20 MYBET HOLDING SE // ANNUAL REPORT 2013

23 MYBET HOLDING KIEL MYBET-GROUP EMPLOYEES 31/12/13 (previous year): 15 (16) RESSORTS: Management Board Controlling, Finance Personnel, Legal Investor Relations, Corporate Communications 99.4% 100% 50/62.2% 52.2% 100% PEI/SWS ANYBET C4U DIGIDIS pferdewetten.de Malta/Berlin/Modena Hamburg Malta Madrid Düsseldorf EMPLOYEES 31/12/13 (previous year): 89 (97) EMPLOYEES 31/12/13 (previous year): 46 (40) EMPLOYEES 31/12/13 (previous year): 7 (6) EMPLOYEES 31/12/13 (previous year): 14 (10) EMPLOYEES 31/12/13 (previous year): 12 (12) RESSORTS: Sportsbook, Trading RESSORTS: Software RESSORTS: Payment Services RESSORTS: DIGIDIS SA (50%): RESSORTS: Horse betting Casino & Poker Development Poker & Casino Spain Marketing/Sales IT Betting shop System DIGIDIS SL (62.2%): Operations administration Lotteries Spain Customer Care Quality assurance Platform Development Design / Frontend SPORTS BETTING CASINO & POKER OTHER OPERATING LOTTERIES CASINO HORSE BETTING 03 MANAGEMENT REPORT // 03.I BASIC PROFILE OF THE GROUP AND OF MYBET HOLDING SE 21

24 The investment in DIGIDIS SL (62.2 percent), which operates Spanish lottery business, was deconsolidated with effect from November 30, 2013 because of a loss of control by mybet Holding SE. The ownership interest in pferdewetten.de AG fell to 52.2 percent as at the end of 2013 following the sale of 11.4 percent of the total shares. A comprehensive summary of the investments can be found in the summary of investments in the Notes section of the Consolidated Financial Statements (under 2.2). In the 2013 financial year the core segments of the mybet Group comprised Sports Betting, Casino and Poker, Horse Betting and Lotteries. Consolidated revenue comprises the hold for bets placed (betting stakes less payouts of winnings) and casino games, agency commission for racecourses and lotteries, payments from poker networks (rake) as well as service revenue. The revenue of the holding company comes mainly from reapportioned charges for services (accounting, legal, controlling, personnel) which are performed centrally on behalf of the subsidiaries. 2. GOALS AND STRATEGIES The Management Board pursues the strategy of further developing the mybet Group into an innovative, top-quality provider in the gaming segment. The mybet business model features closely dovetailed offline and online sales. The Management Board plans to adhere to this distribution approach. However the opportunities that could present themselves from focusing on one sales channel are continually reappraised. In order to boost long-term competitiveness and minimise dependence on individual markets, the Management Board pursues these three priority goals: Continuous improvement in product quality A progressively broader product range Diversification into new sales markets It aims to achieve these goals within the next five years. They translate into the following strategies for the individual segments: In the Sports Betting segment, the priority is to acquire customers for the mybet products and to optimise the shop network. Productivity per shop is to be increased by expanding the product range and improving the quality of fittings. Diversifying the product range through entry into additional markets should reduce dependence on the individual countries in which mybet currently conducts most of its business. The Casino and Poker segment is highly dependent on the acquisition of customers in the Sports Betting area. The aim is to further increase cross-marketing between the segments and to make additional attractive games available, especially in the Casino area. Extra stand-alone product offerings, particularly in the Casino area, should moreover directly target new customer segments in the proximity of Casino activities. In the Horse Betting segment, the management pursues a similar strategy to the Sports Betting segment of increasing revenue and improving profitability by improving products and diversifying markets. The strategic relevance and role of the segment within mybet is currently being examined. Lottery business is not to be continued in its current form. Following the sale of German-language lottery operations in 2012, the Spanish operations too are to be sold off in 2014 due to the continuing weak underlying conditions. Nevertheless it is conceivable that lottery products could be added to the overall portfolio once again if suitable venture partners can be found, subject to the regulatory framework. The key consideration here is for the risk to be minimised and for the company not to launch operations in its own right, but instead to offer existing customers additional gaming opportunities through an appropriate add-on product and thus derive added value from the customer base. In developing a new business area at C4U Malta Ltd., the Management Board is pursuing the strategic goal of monetising the mybet Group s high expertise and many years of experience in payment transactions for gaming products. C4U s permit to operate as an e-money institution now enables it to offer services both for the group s own portals and for third-party portals. On the one hand C4U is able to operate reliably in a complex regulatory environment with tough compliance requirements. On the other hand C4U is in a position to develop a large number of modern, collaborative tools and functions for various segments of electronic commerce; the management thus considers it to be a pioneer in this area. mybet Holding SE, as the group parent, pursues the goal of continuing to provide dependable services through the group network as the individual group companies grow. 22 MYBET HOLDING SE // ANNUAL REPORT 2013

25 3. SYSTEM OF CONTROL The key financial performance indicators used for internal control are revenue, hold and EBIT (earnings before interest and taxes). Non-financial performance indicators are not used for internal control. II ECONOMIC REPORT 1. GENERAL AND INDUSTRY-SPECIFIC AS WELL AS REGULATORY ECONOMIC ENVIRONMENT ECONOMIC ENVIRONMENT The Management Board of mybet Holding SE implements various control systems and methods for the group. With the aid of special tools, up-to-date evaluations of the most important key figures for the group s individual platforms and companies can be made, enabling the Management Board to form an impression of the financial performance indicators both on a regular and an ad hoc basis. The key figures for the individual companies are summarised in weekly reports. The monthly reports by the group companies, which contain both performance figures and indicators of the financial performance, financial position and net worth, are regularly analysed in depth by the Management Board. 4. RESEARCH AND DEVELOPMENT As in the previous year, increasing levels of gaming software and platforms were developed through the focus on new gaming products such as casino and poker, as well as on new European markets. In addition, the licensing processes in Germany and other markets necessitate adaptation of the existing platforms. This software enables the companies of the mybet Group to offer their customers new products and tap into new markets in other countries. The main basis for the development of new products and new software modules is the mybet platform, which is being steadily refined by ANYBET GmbH. The main projects of 2013 included the platform s multi-currency capability, the betting terminals and mobile applications. Third-party services were used for the development of the terminals and mobile applications. Total development spending in the 2013 financial year came to EUR 3.4 million (previous year EUR 3.4 million). This constitutes the cost price in terms of hours of development work done. The capitalisation rate has risen to 49.7 percent (previous year 35.8 percent) as a result of changed project structures. Production for own assets capitalised thus came to EUR 2,194 thousand (previous year EUR 1,446 thousand). Depreciation and amortisation of production for own assets capitalised came to EUR 1,244 thousand in the 2013 financial year (previous year EUR 1,052 thousand). The German economy, which constitutes the central sales market of the mybet Group, grew slightly in 2013 but continues to lose momentum. According to calculations by the Federal Statistical Office, price-adjusted gross domestic product (GDP) rose by 0.4 percent in Growth had been stronger in the preceding years (2012: 0.7 percent, 2011: 3.0 percent, 2010: 4.2 percent). Its moderate pace of growth means Germany is again ahead of the average of -0.4 percent forecast for the eurozone by the Federal Statistical Office. Other European countries are emerging only slowly from the economic crisis. In the past financial year, the significant sales markets for mybet of Spain (-1.3 percent), Italy (-1.8 percent) and Greece (-4.0 percent) again suffered a year-on-year fall in economic output. 1 INDUSTRY ENVIRONMENT According to a study by the market researcher Goldmedia, the German sports betting market generated total revenue of EUR 6.8 billion in The online market made up the greater part of this figure, contributing EUR 3.7 billion. Sports bets amounting to EUR 2.9 billion were placed at betting shops. The state offerings (Oddset, football pools) and regulated horse betting between them generated revenue of only EUR 245 million. 2 No more recent figures for the sports betting market in Germany are available. According to studies by Goldmedia and H2 Gambling, the global online gaming market is expected to expand by around five percent by In Europe, the pace of growth is markedly higher: according to market research estimates, the compound annual growth rate (CAGR) between 2003 and 2015 is expected to be around 23 percent. 3 Overall, the mybet Group was unable to mirror the general market growth, with a slight fall in revenue in However if one considers the development of its online sports betting business in isolation, its growth is nevertheless on a par with the market trend at over 17 percent. 1 Cf. GDP 2013 press brochure 2 Cf. Goldmedia sports betting study 3 Cf. Handelsblatt, December 12, MANAGEMENT REPORT // 03.II ECONOMIC REPORT 23

26 REGULATORY ENVIRONMENT The 20 Germany-wide sports betting licences based on the amended State Treaty on Gaming (GlüÄndStV) from 2012 have not yet been awarded. Due to a large number of complaints and appeals, certain aspects of stage two of the licensing process, which involves a total of 41 applicants, are being repeated by the Hesse Ministry of the Interior, which is leading the process. The applicant companies including mybet have been requested to submit supplementary documentation. mybet filed this information in time on March 14, Based on the documents, in consultation with the Gaming Council of the federal states this government body intends to award a maximum of 20 sports betting licences. When the licences will be awarded remains unclear. The Ministry of the Interior itself latterly indicated that awarding is not expected to take place before summer Individual market observers go even further and do not expect the licences to be awarded in 2014 because the revised process still exhibits extensive shortcomings (breach of principles of European law due to process s lack of transparency and unequal treatment of German and international providers). In addition, fundamental legal concerns about the statutory basis, in other words the amended State Treaty on gaming, have still not been eliminated. For example, infringement proceedings with the European Court of Justice (ECJ) are still pending. In a ruling on January 24, 2013 the Federal Court of Justice referred key issues of compatibility with European law to the ECJ. The restriction to an arbitrary 20 sports betting licences envisaged in GlüÄndStV, the ban on online casino and poker games and the argument that the lottery monopoly can be justified by the need to combat addiction are key arguments that the ECJ is unlikely to uphold because it had already criticised these in earlier, similar proceedings. In regulatory terms there is a clear trend towards national regulation throughout Europe. EU member states are increasingly opting for dot-country models where providers have to fall in line with national licensing requirements. mybet is now licensed to operate in Belgium, Italy, Spain, Cyprus and Germany (Schleswig-Holstein), and is officially tolerated by the relevant authority in Greece. The subsidiary PEI Ltd. holds sports betting licences for Malta. Other markets in Europe, Africa and Latin America are currently being examined. On the other hand dot-com operations that are based on EU-wide licences and are still tolerated in a number of EU member states are increasingly becoming the subject of legislative attacks in certain countries. France in particular is currently adopting a strong line against offerings that do not hold a domestic licence. mybet, too, has been obliged to block access to its offerings for French customers, resulting in a substantial loss of revenue and earnings. 2. BUSINESS PROGRESS All in all, the 2013 financial year fell well short of the expectations of the former management. The revenue forecast published along with the Annual Report at the end of March 2013 was for between EUR 80 and 87 million. In autumn 2013 the forecast bandwidth was scaled back to EUR 65 to 70 million mainly because of the loss of French activities, system failures at the shops and an exceptionally high proportion of wins by favourites. The consolidated revenue for 2013 of EUR 67.0 million lies within this reduced range. For EBIT, the company initially expected a range of EUR 2.5 to 3.0 million, which was downgraded to EUR -1.0 to EUR -3.0 million in the autumn and was firmed up at the level of operating EBIT (before non-recurring effects). The operating EBIT (before non-recurring effects) of EUR -3.6 million (previous year EUR -0.1 million) was thus marginally out of line with the downgraded expectations. Alongside the loss from operating business, there were various non-recurring effects which cumulatively diminished the net result for the period by a total of EUR 7.6 million: NON-RECURRING EFFECTS 000 Amortisation of loan/investment Spanish companies 2,474 Additional claims for gaming levies 1,720 Accruals/costs for other levies 1,038 Depreciation and amortisation of mybet Italia 715 Depreciation and amortisation of other international activities Accruals and costs in connection with the termination of employment contracts Accruals for litigation costs France and Spain Downstream costs in connection with the sale of JAXX Total non-recurring effects 7, MYBET HOLDING SE // ANNUAL REPORT 2013

27 At group level, the decision to dispose of the Spanish companies entails expenses of EUR 2,474 thousand. These relate to the depreciation and amortisation of loans and investments in the amount of EUR 1,037 thousand, increased depreciation of capitalised syndicate contracts of EUR 652 thousand, a negative deconsolidation effect of EUR 523 thousand, and EUR 262 thousand for goodwill amortisation for DIGIDIS SL. A demand by the Schleswig-Holstein tax authorities for levies on income from Internet casino and poker products results in a liability of EUR 1,720 thousand. However the justification for that demand is questionable. mybet takes the view that this income, generated outside Schleswig-Holstein, is not subject to Schleswig-Holstein gaming regulations and therefore does not attract levies. The sum of EUR 1,038 thousand relates to other accruals and liabilities from levies and taxes attributable to non-recurring effects in In addition receivables and other assets relating to the business of the Italian subsidiary mybet Italia as well as to other international activities amounting to EUR 1,244 thousand were written off; the Management Board considers that they are no longer recoverable. The sum of EUR 419 thousand was spent for accruals and costs in connection with the termination of employment contracts and contracts of service. mybet created a provision for EUR 300 thousand for the legal disputes in the French market. A further EUR 100 thousand was set aside for litigation costs in Spain. The disposal of the JAXX Group in 2012 led to downstream expenditure from purchase price adjustments of EUR 267 thousand, which diminished the 2013 result. The Management Board at that time expected mybet Holding SE to achieve net income under commercial law of EUR 825 thousand for the 2013 financial year. The difference compared with the result actually achieved of EUR -8,155 thousand derives from the significantly higher depreciation and amortisation of EUR 9,033 thousand (previous year EUR 23 thousand), which mainly concern the investments in the Spanish companies DI- GIDIS SL and DIGIDIS SA as well as FLUXX GmbH. 03 MANAGEMENT REPORT // 03.II ECONOMIC REPORT 25

28 2.1. SPORTS BETTING SEGMENT KEY FIGURES FOR SPORTS BETTING CHANGE Q Q Q Q Q CHANGE Q4 2013/ IN % Revenue for segment 33,337 33, % 10,536 6,507 7,405 8,889 10,097-12,0 Other revenue 1,586 1, % % Betting stakes 180, , % 46,257 43,279 40,626 50,378 48, % Online 106,263 90, % 26,334 25,298 25,147 29,483 25, % as % of betting stakes 59% 49% 57% 58% 62% 59% 53% Offline 74,278 93, % 19,923 17,980 15,479 20,896 23, % as % of betting stakes 41% 51% 43% 42% 38% 41% 47% Hold 31,751 32, % 10,104 6,007 7,047 8,593 9, % Margin in % 17.6% 17.4% 21.8% 13.9% 17.3% 17.1% 20.4% Hold online 13,978 11, % 4,395 2,570 3,154 3,858 4, % Margin in % 13.2% 12.8% 16.7% 10.2% 12.5% 13.1% 16.1% Hold offline 17,773 20, % 5,709 3,437 3,893 4,735 5, % Margin in % 23.9% 21.9% 28.7% 19.1% 25.2% 22.7% 25.1% Existing customers (online) Active online customers in period Active online sports betting customers in month (average) Betting stakes per active online customer in month ( ) 1,206,574 1,048, % 1,100,417 1,136,132 1,168,702 1,206,574 1,048, % 121, , % 57,545 51,007 43,811 49,349 51, % 24,771 22, % 26,896 23,848 22,059 26,281 25, % % % The quarterly figures are unaudited 26 MYBET HOLDING SE // ANNUAL REPORT 2013

29 The revenue of the Sports Betting segment is generated mainly by the sports betting operations of PEI Ltd., Malta. While mybet operates as a provider (business-to-consumer or B2C) under its own brand in most markets, in certain markets it also operates as a systems supplier or service provider because of the regulatory environment or for ease of access to the market. In the course of 2013, mybet thus sharply increased its involvement in the Belgian market through the partnership with the local provider BetFirst. mybet provides the technical infrastructure and the betting odds. The partner takes charge of all other activities, in particular marketing. mybet receives a commission for its services, based on the revenue (hold), and is thus able to spread the bookmaking risk more widely. In the 2012 financial year and the first nine months of the 2013 financial year, both the betting stakes and the entire hold from the partnership with BetFirst were reported in the Consolidated Financial Statements for 2012 and the 2013 quarterly reports of the mybet Group. Only the commission on the hold is reported as revenue in the 2013 Consolidated Financial Statements. The figures for the previous year and previous quarters were adjusted accordingly. The table of key figures was extended to include overall revenue and other revenue for the Sports Betting segment that essentially comprises service revenue from third-party business. The change in recognition of the activities in Belgium correspondingly reduced the figures for the betting stakes and the hold. Reclassification had no effect on the result. In the 2013 financial year, betting stakes for the segment were slightly down on the prior-year period at EUR million. 59 percent of betting stakes were generated over the Internet (online) and 41 percent via terrestrial channels in betting shops (offline). While online business again grew sharply by 17.4 percent, the stakes placed at the mybet betting shops fell by 20.5 percent. Alongside the consolidation of the franchise portfolio above all in Germany, system failures in the first quarter of 2013 also contributed to the downturn in shop-based business. 24,800 customers were active at least once a month in 2013 (+11 percent). In the fourth quarter of 2013, 26,300 customers were active at least once a month (+3 percent). The average monthly betting stakes per active customer again rose, from EUR 338 in 2012 to EUR 357 in In the fourth quarter of 2013, per capita betting stakes reached EUR 374 (previous year EUR 335). As a result of consolidation of the sales structure, the number of mybet betting shops was reduced to 327 (previous year 388) at December 31, In Germany, the number of shops declined from 232 to 204. On the other hand, the total number of sales outlets affiliated to the B2B arrangements in Belgium climbed from 55 to 195 in The development of the mybet product range in Italy fell well short of expectations, with lower betting stakes and weak margins producing an EBIT loss of EUR 1.5 million for the 2013 financial year (previous year EUR -0.3 million). As a result, intangible assets as well as other assets amounting to EUR 715 thousand were written off. The segment s revenue for 2013 was on a par with the previous year at EUR 33.3 million. Other revenue grew by 26 percent to EUR 1.6 million thanks to the extended partnership in Belgium. The effects described above meant that EBIT for the Sports Betting segment fell to EUR -5.4 million (previous year EUR -0.6 million). Other operating income for 2013 came to EUR 722 thousand (previous year EUR 619 thousand) and relates mainly expenditure for services rebilled to venture and sales partners. Operating expenditure (EBITDA costs) for 2013 amounted to EUR 38.4 million (previous year EUR 34.1 million). The major expense items for the segment include commissions for venture partners and franchisees, as well as gaming taxes, marketing, payment transaction costs, personnel costs and administrative expenses. The hold from sports betting (betting stakes less payouts of winnings) for 2013 was around 1.0 percent down on the prior-year period at EUR 31.8 million. The margin of 17.6 percent was on a par with the previous year. As a result of the marketing activities, the number of registrations in 2013 was increased by 159,000 to now 1,207,000. That is an increase of about 15 percent. The average number of active online customers of 121,600 was roughly 13 percent up on the previous year, when around 107,900 customers were active on at least one occasion, in other words made a payment. The greater part of the group s overall investment spending in 2013 went on the Sports Betting segment, principally for the expansion of the systems infrastructure and the development of new products such as betting terminals, the software basis for the loyalty card and mobile applications. 2.2 CASINO & POKER SEGMENT The Casino and Poker segment consists mainly of the products on the mybet.com platform, which is licensed in Malta. In May 2013 mybet and Amaya Gaming Group Inc., the Canadian 03 MANAGEMENT REPORT // 03.II ECONOMIC REPORT 27

30 provider of online gaming, agreed on a broader basis for their existing joint activities. mybet has been using Amaya products in the casino domain since as far back as The extended agreement spans the integration of a live dealer product, where real croupiers sit opposite the player. Revenue for the segment climbed 8.1 percent, from EUR 21.7 million in the previous year to EUR 23.4 million; this more than compensated for the loss of French business thanks to continuing solid revenue growth in the remaining markets. On the earnings side, above all the loss of the French activities led to a marked drop in EBIT, which declined from EUR 2.9 million in the previous year to EUR 1.8 million in companies. The Spanish companies were deconsolidated with effect from November 30, 2013 because of the loss of control of a corporate body from the perspective of mybet Holding SE. Revenue for the segment fell year on year from EUR 6.2 million to EUR 3.2 million. Depreciation and amortisation of the loans and investments drove down the segment s EBIT from EUR -283 thousand in the prior-year period to EUR -3.6 million in Expenditure (EBITDA costs) for 2013 amounted to EUR 3.3 million (previous year EUR 6.0 million). The main expense items for the segment include commissions for venture partners, personnel expenses as well as marketing and payment transaction costs. The activities of the 50 percent investment DIGIDIS SA, which operates casino products in Spain through a joint venture, continued to fall short of expectations mainly because of the persistently weak Spanish economy. The Management Board is currently involved in negotiations on the sale of this investment. Expenditure (EBITDA costs) for 2013 amounted to EUR 21.6 million (previous year EUR 18.5 million). The main expense items for the segment include commissions for venture partners and licence fees, as well as marketing costs and personnel expenses. The total investment spending for the group included a small portion for the development of live dealer products for the Casino segment. 2.3 LOTTERIES SEGMENT The Lotteries segment comprises the lottery operations of the Spanish subsidiary DIGIDIS SL. The prior-year figures still include proceeds from lottery activities in the German-speaking countries for the period January to April 2012, which were disposed of with effect from May 1, With Spanish lottery business having broken even in the first half of 2013 from a flat revenue performance, both revenue and earnings declined further in the second half of the year. A lasting easing of the economic situation is still not in sight, with the result that Spanish lottery business is expected to continue delivering weak revenue and earnings. In light of this, the new Management Board has decided not to continue the business operations of the DIGIDIS companies. The Management Board of mybet Holding SE is currently involved in negotiations on the sale of its shares in the Spanish No major investment spending took place in the Lotteries segment. 2.4 HORSE BETTING SEGMENT The Horse Betting segment comprises the activities of pferdewetten.de AG. The slight fall in revenue for the segment from EUR 5.7 million to EUR 5.6 million stems from changes in the cash inflow structure at pferdewetten.de AG. The loss of high-margin third-party business in individual markets such as Cyprus and Austria outweighed the development of the group s own business in other markets. By concentrating on its own business, however, the segment saw an overproportional improvement in its result: EBIT climbed from EUR 290 thousand to EUR 777 thousand. Expenditure (EBITDA costs) for 2013 amounted to EUR 4.9 million (previous year EUR 5.2 million). The main expense items concern commissions for venture partners, purchases of goods and gaming taxes, as well as costs for marketing, personnel and technology. No major investment spending took place in the Horse Betting segment. 2.5 OTHER OPERATING SEGMENT The subsidiary C4U-Malta Ltd. received a permit to operate as a financial and emoney institution on September 9, Based on this licence, C4U operates as an independent financial institution and can offer payment processing and related services to other businesses, among other things. The management anticipates that the products in the pipeline will enable C4U to develop with considerable promise over the coming 28 MYBET HOLDING SE // ANNUAL REPORT 2013

31 years. As the main service provider within the mybet Group, C4U is moreover able to handle its own payment transactions on a low-cost basis. On the one hand it can thus reliably implement the high regulatory requirements and on the other hand the improved terms will enable C4U to realise savings on payment transaction costs of up to 25 percent. C4U commenced activities based on the licence in the fourth quarter of There has been investment spending on setting up the structure required to secure the licence and on meeting formal requirements, as well as on the development of the payment transaction platform that will reflect the technical framework of the regulatory scope. board has had four members, under the chairmanship of Dr Volker Heeg. His deputy is Marcus Geiß. The intention is to restore the Supervisory Board to a full six members at the Shareholders Meeting. mybet is seeking to complement and build on the specialist expertise of its existing Supervisory Board members, in order to reflect the capital market conditions more closely. Revenue for the segment fell year on year from EUR 1.8 million to EUR 1.2 million. EBIT for the segment came to EUR 452 thousand (previous year EUR 613 thousand). Expenditure (EBITDA costs) for 2013 amounted to EUR 0.9 million (previous year EUR 1.2 million). The major expense items for the segment include payment transaction costs and personnel, as well as costs for technology and administrative activities. 2.6 PERSONNEL CHANGES There were significant changes on the Management Board and Supervisory Board of the company in the 2013 financial year. MANAGEMENT BOARD On October 8, 2013 Stefan Hänel retired as the company s Finance Director. This led to legal proceedings against the company. Monika Fiala was appointed as interim Finance Director on November 1, She surrendered office on December 17, Prior to that, Mathias Dahms announced his retirement: he surrendered office as Management Board spokesperson for personal reasons with effect from December 31, Since January 1, 2014 the company has been led by Sven Ivo Brinck as sole Management Board member. SUPERVISORY BOARD Rainer Jacken and Rodolfo Carpintier Santana surrendered office as members of the company s Supervisory Board with effect from the end of the Shareholders Meeting on July 18, Marcus Geiß and Clemens Jakopitsch were elected as new members at the Shareholders Meeting. The latter surrendered office again on November 1, In addition, at the end of last year the former Supervisory Board Chairman Antje Stoltenberg surrendered office for health reasons. Since January 1, 2014 the 03 MANAGEMENT REPORT // 03.II ECONOMIC REPORT 29

32 3. POSITION 3.1 FINANCIAL PERFORMANCE FINANCIAL PERFORMANCE OF THE GROUP As a result of the changes in the revenue structure in the Sports Betting area as presented in detail under 2.1 and because of weaker shop business, consolidated revenue for 2013 fell by 2.5 percent from EUR 68.8 million to EUR 67.0 million. Sports Betting generated 50 percent of revenue, the Casino & Poker segment 35 percent, Horse Betting 8 percent and Lotteries 5 percent. 2 percent came from other operating segments. The net gaming revenue (NGR), which represents revenue less gaming tax, declined by 3.3 percent from EUR 67.9 million to EUR 65.6 million. Roughly 93 percent of revenue was generated in Europe (previous year 97 percent), the bulk of this in Germany. The remainder of revenue is from regions outside Europe. The prior-year figures were adjusted to reflect the reclassification of service revenue from B2B business in Belgium. REVENUE FIVE-YEAR OVERVIEW CHANGE IN % Revenue 67,028 68,751-2,5 60,686 51,189 47,904 of which Sports Betting 33,337 33, ,096 21,300 15,659 Casino & Poker 23,419 21, ,100 12,863 9,359 Lotteries 3,183 6, ,667 13,562 19,553 Horse Betting 5,620 5, ,847 2,979 3,244 Other 1,247 1, Net gaming revenue 65,648 67, ,128 50,705 47, MYBET HOLDING SE // ANNUAL REPORT 2013

33 Personnel expenses for the 2013 financial year were on a par with the previous DEVELOPMENT IN REVENUE year at EUR 11.0 million. This total includes EUR 284 thousand in connection with the termination of employment. The average number of employees rose slightly from 176 in the previous year to 182 in Staffing levels peaked at 191 employees mid-way through the year. In the course of the restructuring, which involved adjusting staffing levels by the end of the year, and also as a result of the deconsolidation of the Spanish companies, the personnel total for the group fell to 169 at year-end. The decision to focus on the Sports Betting segment meant that personnel were recruited mainly for software development tasks for that area. MIO Expenditure per employee declined slightly from EUR 62 thousand in the previous year to EUR 60 thousand. Revenue per employee fell from EUR 391 thousand to EUR 368 thousand. The personnel expenses ratio rose from 16.0 to 16.3 percent Q Q Q Q SPORTS BETTING CASINO & POKER LOTTERIES HORSE BETTING OTHER The quarterly figures are unaudited On the back of sharp growth in online business, the cost of purchased materials rose by 9.8 percent from EUR 41.1 million to EUR 45.2 million. In view of their close connection to revenue, the commissions for venture partners and franchisees were reclassified from other operating expenses to cost of purchased materials. The prior-year figures were adjusted accordingly. They increased by 7.4 percent, from EUR 29.3 million to EUR 31.5 million. The expenses for licence fees for casino software providers and poker networks as well as gaming tax came to EUR 4.9 million (previous year EUR 3.8 million). The sharp increase of 21 percent in bonuses claimed by customers from EUR 3.7 million to EUR 4.4 million is attributable to the high growth in online products. In view of the growing importance of business by C4U-Malta Ltd., the expenses for PERSONNEL EXPENSES DEVELOPMENT MIO ,0 11,0 16,0 % 16.3 % % % 17.5 % 17.2 % 18.0 % Q Q Q Q PERSONNEL EXPENSES PERSONNEL EXPENSES RATIO The quarterly figures are unaudited MANAGEMENT REPORT // 03.II ECONOMIC REPORT 31

34 payment transaction services, which are to be classified as cost of providing the services, have equally been reclassified from other operating expenses to cost of purchased materials in these Consolidated Financial Statements. The previous year was adjusted accordingly. The position increased from EUR 2.7 million in the previous year to EUR 2.8 million in The other operating expenses increased by 23.8 percent to EUR 21.6 million in 2013, compared with EUR 17.5 million in the previous year, mainly due to the booking of levies on casino and poker proceeds to income as a precaution, as well as increased technology costs. The item also includes impairments to current assets of EUR 1,573 thousand (previous year EUR 0 thousand) in connection with the depreciation and amortisation on Spanish and Italian business. Marketing expenditure fell 13.4 percent to EUR 6.2 million compared with the previous year. There was a 24.3 percent increase in sponsorship activities to EUR 1.6 million (previous year EUR 1.3 million). As well as maintaining its involvement in the football clubs Fortuna Düsseldorf, Eintracht Braunschweig, Greuther Fürth and VfR Neumünster, the group supported other events such as the handball World Championship in Spain at the start of the 2013 financial year. These investments have the objective of increasing the number of direct registrations by customers by boosting brand awareness, thus lowering the acquisition costs per customer in the medium term. Due to the non-recurring effects presented above and weaker offline business, earnings before interest, taxes, depreciation and amortisation (EBITDA) were a substantially lower EUR -7.0 million. The prior-year EBITDA of EUR 11.0 million included the positive divestment proceeds of EUR 7.7 million from the sale of JAXX business. EBIT for the 2013 financial year came to EUR million. This figure includes depreciation and amortisation, which increased to EUR 4.2 million (previous year EUR 3.7 million) due to the restructuring measures, the weak performance of Italian business and the deconsolidation of the Spanish operations. The prior-year EBIT of EUR 7.2 million includes the divestment proceeds of EUR 7.7 million. The net profit/loss for 2013 reached EUR million (previous year EUR 6.1 million). Earnings per share for 2013 were EUR -0.46, compared with EUR 0.25 in the previous year FINANCIAL PERFORMANCE OF MYBET HOLDING SE The revenue of the group parent mybet Holding SE totalled EUR 776 thousand in 2013 (previous year EUR 970 thousand) and was generated by the reapportioning of administrative costs among affiliated companies. The other operating income of EUR 3,720 thousand mainly comprises income from the reversal of a loan receivable from a subsidiary that had already been unilaterally written off, as well as book profits from the sales of shares in pferdewetten.de AG and income from the rebilling of services to group companies. The prior-year figures were dominated by other operating income from the disposal of JAXX business. PRINCIPAL EXPENSE ITEMS FIVE-YEAR OVERVIEW VERÄNDERUNG IN % Cost of purchased materials 45,164 41, ,226 24,340 18,442 of which commissions 31,516 29, ,470 16,528 12,301 Personnel expenses 10,952 10, ,369 10,700 10,081 Employees (average for year) Other operating expenses 21,624 17, ,172 18,169 18,316 of which marketing 6,202 7, ,775 10,230 9, MYBET HOLDING SE // ANNUAL REPORT 2013

35 EARNINGS EBITDA/EBIT DEVELOPMENT ,992 7, , ,745-1,398-2,347-5,541-7, , Q Q Q Q EBITDA EBIT The quarterly figures are unaudited EARNINGS FIVE-YEAR OVERVIEW (INCL. DIVESTMENT PROCEEDS FOR JAXX) CHANGE IN % Divestment proceeds 0 7,738 n,a, EBITDA -6,990 10,992 n,a, 6, ,212 Adjusted EBIT* -3, ,633-3,814-6,717 EBIT -11,186 7,248 n,a, 1,633-3,814-6,717 Earnings before tax -11,495 7,209 n,a, 1,252-4,221-7,198 Net profit/loss for the period -10,960 6,108 n,a, 1,499-4,170-7,195 Earnings per share ( ) n.a * before non-recurring effects 03 MANAGEMENT REPORT // 03.II ECONOMIC REPORT 33

36 Personnel expenses for the holding company in the period under review came to EUR 1,743 thousand (previous year EUR 2,039 thousand). The number of permanent employees declined from 17 to 15. Other operating expenses were slightly up on the previous year at EUR 2.9 million. This item is comprised mainly of waived receivables from affiliated companies. Total depreciation and amortisation for the 2013 financial year came to EUR 9,033 thousand (previous year EUR 23 thousand). EUR 6,230 thousand (previous year EUR 0 thousand) of this amount concerned depreciation and amortisation of financial assets (DIGIDIS SL and DIGIDIS SA as well as FLUXX GmbH). Depreciation and amortisation of loans, receivables and other assets came to EUR 2,802 thousand. The interest result for 2013 of EUR 1,025 thousand (previous year EUR 705 thousand) essentially comprises interest income from loans that were extended to subsidiaries. The net loss of mybet Holding SE in 2013 was EUR -8,155 thousand. This contrasted with a profit of EUR 652 thousand in the previous year. 3.2 FINANCIAL PERFORMANCE AND NET WORTH The group was financed mainly from operating cash flow in the period under review. Before changes in working capital, cash flow came to EUR -4,242 thousand (EUR 3,612 thousand). Changes in inventories, receivables and other assets of EUR -788 thousand (previous year EUR -1,007 thousand) compare with changes in liabilities and other assets amounting to EUR 5,294 thousand (previous year EUR 1,953 thousand). Overall, cash flow from operating activities came to EUR 465 thousand (previous year EUR 3,762 thousand). The targets of investment spending included the expansion of the systems infrastructure and the development of multi-currency capability, betting terminals and mobile Internet content. The greater part of investment spending concerns the Sports Betting segment, with the Casino and Poker, Horse Betting and other operating segments accounting for a lesser portion. Another portion of overall investment spending concerns ongoing replacement investment in the infrastructure and technical facilities of the group. As a result of the aforementioned activities, the investment volume in 2013 grew to EUR 5,387 thousand (EUR 3,298 thousand). Interest income produced a cash inflow from investing activities of EUR 229 thousand (previous year EUR 75 thousand). There were no significant investment obligations at December 31, FINANCIAL PERFORMANCE AND NET WORTH OF THE GROUP Cash and cash and cash equivalents fell due to the negative result and reached EUR 8.0 million on December 31, 2013 (previous year EUR 13.2 million). Of this sum, EUR 2.0 million (previous year EUR 1.5 million) is attributable to pferdewetten.de AG and is therefore not available group-wide. The restricted cash still reported under cash and cash equivalents in previous years was reclassified to other assets. The previous year was adjusted accordingly. Restricted cash at December 31, 2013 remained unchanged at EUR 1.7 million (previous year EUR 1.7 million) and relates to security set aside mainly for licences. All in all, the group was able to meet its payment obligations in the 2013 financial year. For the 2014 financial year, mybet is planning to invest at least EUR 1.7 million in the further development of the technical platform and the development of further tools for the Sports Betting and Casino areas. If financial resources over and above those already envisaged are available, at least a portion of this surplus will likewise be channelled into the optimisation and broadening of the product range. In September 2008 mybet Holding SE issued a convertible bond (ISIN DE000A0XYGS9) with an interest rate of 6.66 percent. At its maturity date in December 2013, 4,019 debentures remained unredeemed. That represents 2.5 percent of the total number of debentures originally issued. Taking account of the terms of the bond, the Management Board, with the LIQUIDITY FIVE-YEAR OVERVIEW 31/12/ /12/ /12/ /12/ /12/2009 Cash and cash equivalents (EUR 000) 7,965 13,176 5,833 4,943 9,864 Liquiditätsgrad 2* 106 % 160 % 136 % 80 % 132 % * Liquidity ratio 2 describes the ratio between current assets (excl. inventories) and current liabilities 34 MYBET HOLDING SE // ANNUAL REPORT 2013

37 consent of the Supervisory Board, exercised its right to redeem the bond compulsorily in December 2013 in order to preserve the company s liquidity. Instead of a cash outflow of EUR 84 thousand, this meant that 40,190 new shares were issued from the conditional capital. The capital stock of the company rose correspondingly by EUR 40, to EUR 24,257, No major financing measures were carried out in the financial year under review. The company utilised credit lines for EUR 3.7 million (previous year EUR 3.9 million). No other credit lines are available. The overall cash flow from financing activities came to EUR -325 thousand (previous year EUR -127 thousand) as a result of cash payments for the redemption of bonds and loans. With regard to further financing, the Management Board is fundamentally considering whether to improve the group s capital base through the placement of a convertible bond, the disposal of operations and participating interests or other financing measures. consist of a mortgage loan for holiday apartments on Rügen. At December 31, 2013 eight of the original ten apartments had been sold, including one during The remaining apartments are likewise to be sold as soon as possible. The current liabilities rose by EUR 5.5 million to EUR 20.3 million mainly from the change in trade accounts payable and other financial liabilities. On the other hand there was a rise of EUR 3.8 million in receivables and other assets. Other financial liabilities increased to EUR 8.4 million in 2013 (previous year EUR 8.6 million) and mainly comprise current liabilities in respect of customers, taxes and payment service providers. The debt ratio at December 31, 2013 was 52.6 percent (December 31, 2012: 35.1 percent) FINANCIAL PERFORMANCE AND NET WORTH OF THE SE The non-current assets fell from EUR 20.4 million at December 31, 2012 to EUR 17.1 million at the reporting date due to deconsolidation of the Spanish companies and the amortisation of the loan granted to DIGIDIS SA, as well as depreciation and amortisation of Italian business. Current assets fell from EUR 23.5 million in the previous year to EUR 21.5 million at December 31, 2013 largely as a result of the cash outflow. Shareholders equity declined by EUR 10.2 million compared with the balance sheet date of December 31, 2012 and was EUR 18.3 million at December 31, 2013 due to the negative result for the year. The equity ratio fell to 47.4 percent, with the balance sheet total contracting by EUR 5.3 million to EUR 38.6 million. The mybet Group is largely free of non-current interest-bearing liabilities. The non-current liabilities of EUR 22 thousand reported on the balance sheet (previous year EUR 668 thousand) The current assets of the group parent mybet Holding SE amounted to EUR 18.2 million at the balance sheet date (previous year EUR 22.5 million) and consist primarily of receivables from affiliated companies, cash and cash equivalents, and securities. The decrease is mainly attributable to the fall in cash (cash on hand/ cash in banks) from EUR 7.4 million to EUR 3.1 million. The financial assets of the group parent mybet Holding SE fell to EUR 17.3 million at the 2013 balance sheet date as a result of depreciation and amortisation of the investments in the Spanish companies and the write-down of the valuation of FLUXX GmbH in the course of testing for impairment, compared with EUR 24.0 million in the previous year. The liabilities decreased from EUR 4.0 million to EUR 1.1 million largely as a result of the fall in liabilities to affiliated companies. This item includes liabilities of EUR 650 thousand to pferdewetten.de AG. They result from the concluding of a domain transfer and domain licensing agreement between mybet Holding SE and pferdewetten.de AG on November 29, The agreement envisages SHAREHOLDERS EQUITY AND BORROWED CAPITAL 31/12/ /12/ /12/ /12/ /12/2009 Shareholders equity ( 000) 18,306 28,520 22,673 15,015 18,175 Borrowed capital (long-term) ( 000) ,144 1,532 7,446 Equity ratio 47.4 % 64.9 % 60.7 % 41.2 % 44.8 % 03 MANAGEMENT REPORT // 03.II ECONOMIC REPORT 35

38 the transfer of the domains sportwetten.de and sportwetten. com to the mybet Group, after the end of a prior agreement on the usage transfer of the domains, for a maximum period of 36 months and a call option that mybet Holding SE may exercise at any time at a fixed buy-back price during the usage transfer. mybet Holding SE was granted EUR 650 thousand in financial resources for this by way of a loan (real repurchase agreement). Shareholders equity fell from EUR 42.4 million to EUR 34.4 million as a result of the net loss for the year. The subscribed capital of mybet Holding SE amounted to EUR 24.3 million at December 31, 2013 (previous year EUR 24.2 million). There was a slight increase in additional paid-in capital from EUR 18.2 million to EUR 18.3 million as a result of the conversion of bonds. The accounting loss for 2013 was EUR -8.2 million. In the previous year, the loss carry-forward was netted against the additional paid-in capital to leave a net result for the year of EUR PRINCIPLES AND AIMS OF FINANCIAL MANAGEMENT In its financial management approach, mybet Holding SE strives for predominantly short-term investments of a money market character with a balanced risk/reward ratio. It encompasses monitoring cash and cash equivalents, watching certain cash indicators and assuring liquidity. 3.3 FINANCIAL AND NON-FINANCIAL PERFORMANCE INDICATORS The principal financial performance indicators of the mybet Group include revenue and EBIT. Revenue showed a slight decrease due to the effects presented above. EBIT is influenced by a wide range of non-recurring effects and is deeply negative. In contrast, the previous year was influenced very positively by the sale of the JAXX operations. To that extent, a direct comparison yields a distorted picture. If the non-recurring effects are stripped out of EBIT, an operating EBIT of EUR 0.1 for 2012 compares with an EBIT of EUR -3.6 million for In this comparison, the delta is much less pronounced. At product level, the hold from betting operations is an important performance indicator because it represents the profitability of the group s most important segment. In offline business, the hold dipped by 13 percent due to system failures and the decrease in revenue that these prompted. In online business, on the other hand, the hold rose sharply by 21 percent. No analysis of the non-financial performance indicators is needed as these are not used for internal control purposes. 3.4 GENERAL STATEMENT ON THE ECONOMIC SITUATION The management considers the 2013 financial year to have been highly disappointing. System failures at the start of 2013 affected the shops in the Sports Betting segment, an unsatisfactory performance in Italy undermined online business and the loss of the French activities led to a fall in profitability in the Casino and Poker segment. mybet was unable to maintain its profitability in the operating sphere in 2013, let alone improve it. Meanwhile investments in new markets such as Italy and Spain did not yield the success that had been hoped for. Instead, they turned out to be a financial risk to the company, necessitating a swift correction in the corporate strategy. Other non-recurring effects accelerated the deteriorating financial performance. It is worth singling out the positives of growth in online sports betting and in casino and poker business, which overcompensated for the loss of the French market with solid revenue growth in other markets. All in all, the economic situation of the mybet Group at the balance sheet date of December 31, 2013 can be described as not optimal, with an equity ratio of 47.4 percent and financial resources of EUR 9.7 million. The reduced financial base limits its scope to act, as a result of which the group is more susceptible to the consequences of possible risks to its net worth, financial position and financial performance. The Management Board is considering whether to improve the group s capital base through the placement of a convertible bond, the disposal of operations and participating interests or other financing measures. The primary purpose of raising additional financial resources is to accelerate the product and quality offensive set out in the report on expected developments in order to prepare the way for sustained profitability in mybet s business activities. The strategic goals have been redefined by the new Management Board of the company; it is therefore too early to make the statement required under German Accounting Standard 20 on the level of attainment of the strategic goals in this report. III REPORT ON POST-BALANCE SHEET DATE EVENTS Sven Ivo Brinck has been sole Management Board member of mybet Holding SE since January 1, He was appointed 36 MYBET HOLDING SE // ANNUAL REPORT 2013

39 to the Management Board of the company at the Supervisory Board meeting on December 17, As part of the licensing process for a sports betting licence, mybet Holding SE issued a promise of financing for its subsidiary PEI Ltd., Malta. This states that in the event of illiquidity of PEI Ltd., mybet Holding SE will provide up to EUR 5 million for the development of German business. The exact terms and conditions of assignment are then to be defined on the basis of an intercompany agreement. On January 2, 2014, ANYBET GmbH assigned to mybet Holding SE outstanding receivables of EUR 6,892 thousand from the group company QED Software Systems GmbH for the furnishing of IT services. By way of counterperformance the latter reduced its loan receivables from ANYBET GmbH by the same amount. The measure renders it possible to present loan flows within the sub-groups with greater transparency and has no effect on the net worth, financial position and financial performance of the group or the holding company. action in the first instance by the District Court of Dortmund. The compensation claim had been brought against Westlotto representatively for the entire German lottery and pools organisation. IV OPPORTUNITIES AND RISKS REPORT RISK MANAGEMENT In accordance with the requirements under stock corporation law, the risk management system of mybet Holding SE focuses on enabling the Management Board to identify at an early stage any risks that could potentially pose a threat to the company as a going concern, and initiate timely countermeasures. Operational responsibility for risk management rests with the individual operating segments. The Management Board of mybet Holding SE assesses both the risk position of the group and group parent and the risk position of the subsidiaries. In connection with the streamlining of the group structure, SWS Service GmbH, a subsidiary of QED Ventures Limited, Malta, was merged with FLUXX GmbH, Hamburg, by notarised deed dated March 10, 2014 and with effect from January 1, Following the merger the latter will change its name to SWS Service GmbH and move its registered office to Berlin. The measure has no effect on the net worth, financial position and financial performance of the group or the holding company. On March 28, 2014 mybet Holding SE and the acquirers of the JAXX Group sold in 2012 reached agreement on the early payment of the balance of the purchase price, less a discount of 4 percent. mybet Holding SE thus accrues a total of EUR 2.8 million in liquidity, noticeably improving the mybet Group s scope for action. The early repayment releases the acquirers of the JAXX Group from the obligation to use services of the mybet Group. On April 9, 2014 the Higher Regional Court of Düsseldorf ordered Westdeutsche Lotterie GmbH & Co. OHG (Westlotto), Münster, to pay EUR 11.5 million plus interest in damages to FLUXX GmbH. No right of appeal was granted. Westlotto still has the option of filing a complaint about the non-admission of an appeal with the Federal Supreme Court within one month of receipt of the grounds for the judgement. If the complaint is rejected, a cash inflow of about EUR 14.4 million is to be expected towards the end of the year. With its ruling, the Higher Regional Court of Düsseldorf altered the dismissal of the The basis for assessing the risk position of the mybet Group is risk reports, which are prepared in the course of regular mandatory reporting. The risk reports contain predefined risk categories. Over and above the predefined risk categories, the reporting corporate units are also asked to report on identified risks in order to cover as broad a spectrum of risks as possible; as such, they bear a high degree of individual responsibility. The risk reports are supplemented by separate reports, in each case submitted as necessary, on the occurrence of or change in particular risks. In addition reference is made to the audit reports of the independent auditors of the group companies, wherever auditing is obligatory or is carried out voluntarily. Risk management as a whole, as well as the procedure for implementing risk early warnings, mainly follow a uniform pattern in the individual segments, taking account of the scope of business activities and the size of the segments. They are brought in line with current developments as necessary. The risk consolidated group mirrors the group of consolidated companies. In summary, the risks/opportunities profile of the mybet Group is highly influenced by the regulatory environment for gaming. Legal and regulatory risks, along with financial risks, pose a threat to the company s development. On the one hand the opening-up of markets brings major opportunities for mybet to exploit fresh profit potential. On the other hand differences 03 MANAGEMENT REPORT // 03.IV OPPORTUNITIES AND RISKS REPORT 37

40 in the interpretation of individual regulations give rise to risks which are not immediately apparent in view of the highly heterogeneous nature of European legislation; these can result in major deviations from plan. If one or more of these risks should materialise, the business activities of the mybet Group could be hampered. There could be significant consequences for the financial performance, financial position and net worth of the group. The management of each of the segments takes the identified risks very seriously and takes account of them in both operational and strategic decisions. The development of relevant risks is monitored on an ongoing basis. As well as currently identified risks, future potential dangers are included in the consideration. In the early identification, evaluation, prevention and control of risks, priority is given to those that pose a threat to the company s development and are especially significant. evaluated both in terms of their probability and the inherent monetary loss if they materialise. In the case of technical risks, defined emergency procedures are initiated if the defined deviations from the target values are reached. In this area, developments in safety standards are moreover continually monitored and corresponding adjustments made to the safety systems on an ongoing basis. Legal changesin the relevant markets in which the mybet Group is active are regularly evaluated. The management calls on both internal and external experts for this purpose, so that unusual occurrences can be identified swiftly and an appropriate response initiated as necessary. General risks, as well as risks that have no indirect or direct influence on the business areas of the mybet Group, are not covered. Based on the systems it has put in place, both within its individual segments and as a whole the mybet Group is in a position to identify the relevant risks swiftly, evaluate them and initiate prompt action to limit or minimise the impact of these risks. This assessment of the principal opportunities and risks of the mybet Group is as of the balance sheet date and covers the period of at least one year. In specific, risk management at the mybet Group covers the following: Operating risks 4 weare monitored by regularly checking relevant financial and other key figures. A variety of systems and economic methods based on a scorecard are employed in monitoring these. For each key figure, the monitoring frequency, the person responsible for monitoring and the codes of practice in the event of defined deviations from target figures are specified. Revenue, hold and EBIT are key figures for this purpose. With the aid of special tools, up-to-date evaluations of the most important key figures for the group s individual platforms and companies can be made, enabling the Management Board to form an impression of the financial performance indicators both on a regular and an ad hoc basis. The key figures for the individual areas are summarised in weekly reports. The monthly reports by the group companies, which contain both performance figures and indicators of the financial performance, financial position and net worth, are regularly analysed in depth by the Management Board. Risks are The risk management system itself is continually monitored and updated. The Management Board of the mybet Group is regularly informed of the findings of the risk evaluations. It is possible that risks that have not been identified and reported on may occur and likewise have a negative effect on business operations. An agglomeration of fundamentally independent risks could present additional threats to the company which may amplify one another. mybet will therefore continue to observe its environment and review the effectiveness both of the measures agreed and of the risk management system as a whole. Despite ongoing adjustments to the risk management system, it is not possible to quantify the risks presented here in terms of their probability and financial impact. We are convinced that the risk early warning and risk management system in place is as a whole suitable for promptly identifying the threats to the mybet Group arising from possible risks and, to the extent that is necessary or possible, for responding appropriately to those risks. PRESENTATION OF OPPORTUNITIES AND RISKS The categorisation of the principal opportunities and risks of the mybet Group corresponds to the structure laid down internally for risk management purposes, and states the gross amounts: We have identified the following principal opportunities and specific risks for the business of the mybet Group: 4 The operating risks in a broader sense encompass the risks listed below: Market and competition risks, Financial risks, Operating risks, Price change, credit and liquidity risks, risks from fluctuating payment streams as well as Risks of future development. 38 MYBET HOLDING SE // ANNUAL REPORT 2013

41 1. MARKET AND COMPETITION OPPORTUNITIES AND RISKS The competitive situation for the mybet Group has changed considerably over the past few years. Competition in the market for sports betting and casino games is very intense. Several relatively major and a large number of small companies have already positioned themselves here, with the result that market success harbours greater risks in respect of recognition, product acceptance and the features of the products offered. On the other hand, mybet has the opportunity to participate in strong market growth. Demand for products such as sports betting and casino is on the increase worldwide. The increasing shift in products towards the Internet and the rapid spread in market coverage by mobile Internet give mybet a chance to generate extra growth with its products through the mere strength of the market environment. In addition, new product categories and distribution channels such as mobile betting keep producing ways of challenging established players for market shares with intelligent product strategies. The successful expansion of the mybet brand and the recruitment of new customers are highly dependent on intensive marketing and branding activities. The plans are based on certain budget assumptions about the acquisition of customers. If the cost of acquiring customers should escalate beyond the expected margin of fluctuation as a result of growing competition, it could prove impossible to achieve the defined growth targets with the planned budget. The opportunities and risks from the market and competitive environment also apply to mybet Holding SE, via the evaluation for its investments. 2. LEGAL AND REGULATORY OPPORTUNITIES AND RISKS The development of the regulatory framework in the European gaming context is exhibiting a general trend towards liberalisation. This offers numerous opportunities because the openingup of a market is generally accompanied by strong signs of growth. mybet is nevertheless fundamentally exposed to the risk that it might not be able to realise revenues or profits, or not realise them to the extent planned, as a result of changes in the law in individual European countries. mybet is responding to this situation by operating predominantly in those markets where the process of liberalisation is already under way or has already been completed, and thus provides considerable scope for growth. For the German core market, mybet expects further liberalisation and harmonisation of the gaming industry in the medium term. If contrary to expectation this does not occur or if mybet should be unable to secure licences or meet the requirements for licences, this could have a strong negative effect on the company s financial performance. On the other hand regulation provides ample opportunities: planning and investment certainty, higher valuation on the capital market, orderly competition. However the management believes that mybet has one of the strongest brand names in the industry, as well as the necessary licences for serving the target markets in tandem with marketing partners. A general risk in the sports betting industry is the high transparency of the betting range s price structure. By using various services available on the Internet, users can compare the prices being offered by the various betting providers with relative ease and choose the cheapest service. On the other hand such transparency gives mybet the scope to analyse the competition very closely and respond swiftly and specifically to changes. The ban on online casino and poker products which is enshrined in the amended State Treaty on gaming of Germany s federal states could if it should unexpectedly stand up to the scrutiny of the European Court of Justice and the Federal Court of Justice erode results in the highly profitable Casino and Poker segment of the mybet Group. Equally, it is possible that new legal provisions will be interpreted differently by various parties with the result that only by going through the courts at various instances will it be possible to arrive at the correct interpretation in a long drawn-out and expensive process. There is a further risk in the shop sales structure, which is dependent on a small number of sales partners. The withdrawal of one or more partners would remove a significant proportion of the affiliated shops and the income they generate. On the other hand the sales concept offers the opportunity to add a large number of shops through deals with new sales partners, and possibly even to access new markets swiftly. The platforms of the mybet Group must meet high regulatory requirements. Above all in respect of the protection of minors, the prevention of addiction, data security and money laundering guidelines, the internal processes and platforms of the mybet Group currently meet very high standards. There is nevertheless the risk that the licensing terms will not be met wholly or partially, or will be regarded as not met, and that this could 03 MANAGEMENT REPORT // 03.IV OPPORTUNITIES AND RISKS REPORT 39

42 be regarded as a breach of the licensing terms. A licence could then be withdrawn. The regulatory opportunities and risks affecting the investments of mybet Holding SE also affect mybet Holding SE. 3. FINANCIAL OPPORTUNITIES AND RISKS won. Particularly at the start and end of the European football season, the number of wins by favourites increases, and with it the risk of increased payouts of betting winnings. There also exists a fundamental risk of high payouts of winnings in the other product segments. However, the risk can be limited by restricting stakes and monitoring gaming behaviour. The liquidity position of the group is controlled and monitored through cash and liquidity management. Through rolling financial and liquidity planning, risks in connection with the raising of financial resources are identified and tracked. There was a marked fall in the mybet Group s cash holdings in the 2013 financial year, above all as a result of the negative business results but also due to the loss of French activities, system failures affecting the shops and the unusually large number of wins by favourites. Although the current cash situation means there is no danger to the financing of business operations at a stable level, it nevertheless restricts planning flexibility by holding back additional investments aimed at accelerating growth. mybet Holding SE is exposed to financial risks in that it extensively guarantees the liquidity of the mybet subsidiaries. Unlike other non-listed companies in its industry, mybet also has scope to use the capital market in order to meet its liquidity requirements. mybet s shareholders have in the past supported capital measures aimed at expanding the business and defending the market position. The opportunities and risks to operating business also affect the net worth, financial position and financial performance of mybet Holding SE via the evaluation for its investments. 5. TECHNICAL OPPORTUNITIES AND RISKS In the technical sphere, the mybet Group is exposed to a range of risks which can nevertheless be classed as low thanks to the processes and systems that have been set up over several years. All the same, it cannot be excluded that deficiencies in software and hardware or in the service provided could result in recourse. For example, in the first quarter of 2013 it was necessary to make compensation payments to shop partners because the systems were out of action for several days. There furthermore exists a general risk in connection with the use of the Internet as a sales channel. Technical bottlenecks due to high growth in its use, temporary restrictions as a result of attacks, viruses or attempts to hack in and the growing complexity of the software could restrict use despite the fact that data transfer concepts are becoming increasingly efficient. 4. OPERATING OPPORTUNITIES AND RISKS At the operating end, the group companies that act as bookmakers are fundamentally exposed to a high financial risk. The individual risks resulting from these activities may add up to an overall risk that can pose a threat to the financial performance, financial position and net worth of the mybet Group. Bookmakers have to offer attractive odds that are in line with the market and attractive to customers for a large number of sporting events. The mybet companies employ several licensed, well-trained bookmakers and are affiliated to early-warning systems such as Sportradar and FIFA s Early Warning System. mybet s odds are competitive, and the average bookmaker s margin achieved was among the leaders in 2013, at 17.6 percent. This means that mybet has the opportunity to achieve a higher hold than the competition from the same betting stakes. The possibility can nevertheless not be excluded that payouts could far exceed betting receipts if a high number of bets are On the other hand mybet is participating in the sustained, sharp rise in demand for internet gaming products. Furthermore, mybet can capitalise on extra growth potential by making targeted investments in new technologies and increasing the scalability of the platform. The technical opportunities and risks also apply to mybet Holding SE through the evaluation for its investments. 6. PRICE CHANGE, CREDIT AND LIQUIDITY RISKS, RISKS FROM FLUCTUATING PAYMENT STREAMS In respect of its assets, liabilities and planned transactions, the mybet Group is exposed to diverse risks from movements in trading prices and market prices and exchange rate risks. The aim of financial risk management is to limit these market risks by means of ongoing operational and finance-oriented activities. Certain transactions require the prior permission of the Management Board or Supervisory Board. Liquidity, trading price and interest rate risks are moreover addressed by the risk 40 MYBET HOLDING SE // ANNUAL REPORT 2013

43 V management system. Foreign exchange risks arise as a result of international business operations. 7. RISKS OF FUTURE DEVELOPMENT The anticipated future development is presented in the report on expected developments. Our positive assessment of future financial performance is based on planning assumptions incorporating certain expectations of future development that we consider to be plausible. Notwithstanding this, it is possible that the planning assumptions may fail to materialise and that the valuation of the carrying amounts of investments will thus need to be corrected in the separate financial statements of mybet Holding SE. In this instance, the letters of subordination and comfort to subsidiary companies would at the same time have to be increased. At December 31, 2013 mybet Holding SE covers the losses incurred by the subsidiaries totalling EUR 32,464 thousand (previous year EUR 33,045 thousand) through letters of subordination and comfort. The failure of the planning assumptions to materialise or further material losses by the subsidiaries could result in the development of mybet Holding SE being severely hampered. The failure of planning assumptions to materialise can moreover result in the entire or partial absence of anticipated cash flows and consequently in bottlenecks. INTERNAL CONTROL SYSTEM (ICS) AND RISK MANAGEMENT SYSTEM IN RESPECT OF THE GROUP ACCOUNTING PROCESS At the mybet Group we take the internal control and risk management system to mean all established principles, procedures and measures that have the goal of assuring the certainty and efficiency of business processes, the reliability of financial reporting, and compliance with laws and directives. In this, we echo the definition of the internal control system for accounting and of the risk management system by the Institute of Public Auditors in Germany. INTERNAL CONTROL SYSTEM (ICS) AND RISK MANAGEMENT SYSTEM IN RESPECT OF THE GROUP ACCOUNTING PROCESS A variety of monitoring measures in the group accounting process helps to ensure that the controls implemented enable Consolidated Financial Statements that comply with the regulations, despite possible risks. The Management Board of the group bears overall responsibility for the internal control and risk management system in respect of the accounting processes of the consolidated companies, as well as the group accounting process. Fundamentally all companies included in the Consolidated Financial Statements are incorporated by way of defined management and reporting organisations. Material risks are to be reported without delay to the Management Board of the group when they arise. Uniform accounting is assured by the use of a group-wide software system with a uniform chart of accounts that is used to monitor all accounting processes centrally and provides evaluations and analyses that meet IFRS standards. Closely defined access rules for IT guarantee safe operation and exclude unauthorised access to the accounting systems. Accounting in compliance with standards is assured through group-wide specifications on the financial reporting process as well as through ongoing checks that these standards are being met by Controlling and Accounts. We thus maintain a uniform procedure and minimise potential risks from false declarations in the group accounting process and in external reporting. To comply with the relevant requirements, specific employee training and continuing education measures are employed on an ongoing basis in the Finance, Bookkeeping and Controlling areas. In 2013, for example, extensive continuing education was provided in connection with the implementation of the money laundering directive. Within the internal control system, there is a clear division of tasks in respect of consolidation, in particular in the areas of reconciling intragroup balances, carrying out consolidation measures and monitoring the reporting deadlines and reporting quality with regard to the data of the consolidated companies. If necessary, expert opinions are sought as part of the process of preparing the Consolidated Financial Statements and are reflected in the group accounting procedures. The control process for accounting and group accounting is based on the dual-control principle. Key (group) accounting processes are subject to regular checks. The Supervisory Board regularly considers key aspects of (group) accounting, risk management, the audit assignment for the consolidated and annual financial statements, and its focus. 03 MANAGEMENT REPORT // 03.V INTERNAL CONTROL SYSTEM (ICS) AND RISK MANAGEMENT SYSTEM 41

44 The mybet Group outsources certain accounting processes in Germany and internationally. These include in particular payroll accounting. With regard to the accounting processes of the consolidated companies and the group accounting process, we have identified as important those components of the internal control and risk management system that can significantly influence corporate accounting and the overall statement of the net worth, financial position and financial performance in the Consolidated Financial Statements, including the Management Report. These include the following areas in particular: Identification of significant risk and control areas that are relevant for the group-wide accounting process; Controls to monitor the group accounting process and its results at Management Board level as well as at the level of the companies included in consolidation; Preventive control measures in the financial and accounting system and the companies included in consolidation; Preventive control measures in performance-related business processes that generate key information for the preparation of the Consolidated Financial Statements and Group Management Report; Measures to assure the proper IT-based processing of group accounting matters and data; Reporting information from international group companies that enables mybet Holding SE to prepare Consolidated Financial Statements including a Group Management Report. RISK MANAGEMENT SYSTEM IN RESPECT OF THE GROUP ACCOUNTING PROCESS accounting are performed by the Controlling and Accounts department. Those tasks include e.g. conducting regular checks on compliance with guidelines and the functioning of the control systems that have been introduced to limit identified risks. The effect is to ensure that identified risks are limited. In addition, Controlling and Accounts examines identified risks in terms of their influence on the Consolidated Financial Statements and on the way those risks are reflected. Additionally, the Supervisory Board has specified certain audit priorities for the independent auditors. The Management Board and Supervisory Board also continually examine the scope for refining the risk management system procedures in respect of the group accounting process. The independent auditors have assured themselves of the functioning of the risk early warning system. It satisfies the requirements of Section 91 (2) of the German Stock Corporation Act. VI RISK REPORTING ON THE USE OF FINANCIAL INSTRUMENTS Responsibility for financial management within the group rests with mybet Holding SE, as the group parent. The Risk Management department of mybet Holding SE identifies and evaluates the risks arising from the use of financial instruments in close collaboration with the group s operational departments. The goal of risk management overall is to eliminate, or at least limit, potentially negative effects through operating and financial activities. Over and above the internal control system, the mybet Group has implemented a risk management system for the group accounting process that contains measures to identify and evaluate risks that could run counter to the objective of preparing Consolidated Financial Statements and a Group Management Report in compliance with the relevant rules. These measures include, for example, systematic and manual reconciliation processes carried out both at the subsidiaries and in the group s holding company to identify risks with regard to the group accounting process. Responsibility for setting up and maintaining an appropriate and effective risk management system rests with the Management Board. The management hierarchy constitutes the basis for the roles in the internal control and risk management system. The tasks of the internal auditing system to monitor the internal control and risk management system in respect of group The mybet Group is exposed to mainly liquidity and exchange rate risks in connection with the use of non-derivative and derivative financial instruments. NON-DERIVATIVE FINANCIAL INSTRUMENTS The liquidity risk for the mybet Group from non-derivative financial instruments is that it might not have adequate financial resources to meet fixed payment obligations, or is unable to raise the required liquidity on the expected terms. Financial management maintains the liquidity of the mybet Group at all times. It thus ensures that sufficient liquid funds are available at all times for business operations and capital investments. Fundamentally all money and capital market products, but also leasing and factoring, are considered as refinancing instruments. The liquidity requirements of the 42 MYBET HOLDING SE // ANNUAL REPORT 2013

45 mybet Group are monitored by means of rolling financial and liquidity planning and are subjected to regular deviation analyses. DERIVATIVE FINANCIAL INSTRUMENTS The liquidity risks from non-derivative financial instruments can result in liquidity and exchange rate risks from the casino and betting stakes, as well as from betting winnings from bets outstanding that constitute financial liabilities with the character of derivative financial instruments. An accumulation of wins by favourites poses the risk of mybet having to pay out high amounts in winnings, leading to a high outflow of liquidity and a reduction in the bookmaker s margin and hold. The risk management goal in connection with the liquidity risk from betting operations is to avoid the risk of high losses. In order to achieve that goal, the mybet Group employs bookmakers and risk managers who continually monitor betting odds and respond to changing risks by adjusting odds as necessary. In the mybet Group, exchange rate risks from bets placed in foreign currency are not hedged. As one of its financial management activities, the mybet Group regularly examines the bets placed in foreign currency and analyses the advantages and disadvantages of derivative financial instruments to hedge the exchange rate risks that exist with the goal of avoiding high exchange rate losses. Because the liquidity and exchange rate risks from the casino and betting stakes or betting winnings from bets outstanding are inherent to the fundamental business activity of the mybet Group, the group is obliged to take these risks. The only area in which a risk is passed on to third parties is jackpot winnings in the casino area. Other derivative financial instruments are used exclusively for hedging purposes, in other words only in connection with underlying transactions from the original entrepreneurial activity or from financial transactions that exhibit a risk profile opposite to that of the hedge. The nature and scope of derivative financial instruments must be approved by the Supervisory Board. No other derivative financial instruments were used in the 2013 financial year. Accordingly, no economic hedging relationships are shown in the Consolidated Financial Statements as hedging relationships recognised in the accounts. With regard to the use and handling of other financial instruments, there are rules in place designed in particular to ensure that no material financial transactions take place without coordination with the Management Board of mybet Holding SE. VII REPORT ON EXPECTED DEVELOPMENTS The priorities for the 2014 financial year, to which the report on expected developments refers, will be on restructuring and focusing operations under the leadership of the new Management Board of mybet Holding SE. The product range and technological basis of the mybet platform are first of all to be appreciably improved as part of a product and quality drive. As a general principle, the Management Board is planning to invest a significant portion of the available funds in the development of new products, mainly for the betting, casino and games areas. Meanwhile it aims to ensure that mybet products are accessible along all the relevant sales channels (in particular mobile media) and that system stability issues cannot adversely affect the business performance. The cost-cutting programme initiated in 2013 has been relaunched, widened and continued. As a consequence, at least EUR 1.0 million in administrative costs is to be saved in 2014, including EUR 0.7 million at the holding company alone. In revamping the products and optimising the technology, the Management Board is also aiming to cut distribution costs. A more attractive product range should enable mybet to secure more advantageous terms from shops and sales partners and become a more in-demand partner. A more extensive product range and improved quality will moreover create fresh potential in the B2B area, too. In addition, revised internal processes and a professional approach to project and process management should boost the efficiency of the organisation. At the same time, errors and the negative effects they have on costs are to be avoided as far as possible. The impact of these aspects on earnings could be many times greater than the cost-cutting measures described. Nevertheless, mybet considers it important to use the available resources with the utmost prudence in future. In operating terms the first quarter of 2014 got off to a very promising start for the mybet Group. Both January and February brought revenue and earnings above the internal planning levels. With regard to the licensing proceedings in Germany, it remains to be seen whether, and if so when, any licences are issued. Certain market observers do not expect them to be granted 03 MANAGEMENT REPORT // 03.VII REPORT ON EXPECTED DEVELOPMENTS 43

46 during Further legal disputes are certainly to be expected before the European Court of Justice rules on whether the German regulatory model is compatible with EU law. No ruling is expected before The Schleswig-Holstein permits for sports betting and casino, as well as the Maltese licences, will continue to grow in significance and therefore also value. mybet will use this phase to consolidate and extend its position in the German market. The management is aware that it would be wise for mybet to branch out into further international markets, if only for the sake of spreading the risks better. To the extent that is feasible, mybet will again be pursuing those goals in markets. Based on the advanced bookmaking software, it plans to move into a series of new markets in 2014, realising economies of scale from the platform. In the other operating segment, business involving payment transaction services will gain greater importance; C4U-Malta Ltd. aims to provide such services increasingly also for companies outside the group in C4U-Malta Ltd. will thus generate significant levels of external revenue for the first time this year. On this basis, C4U plans to make a positive contribution to consolidated earnings as early as GENERAL STATEMENT mybet Holding SE plans to restore its profitability by implementing cost-cutting measures, thus keeping the administrative costs passed on to the subsidiaries as low as possible. In the personnel area, the company aims to appoint a CFO in the short term. FORECAST FOR THE SEGMENTS The Sports Betting segment will build on its important role as the mainstay of revenue in the next few years. The greater part of the marketing budget available group-wide is channelled into customer acquisition work, which is managed by marketing of the sports betting product range. Particularly with the 2014 World Cup in Brazil on the horizon, mybet expects to be able to generate high growth in new customers by using marketing funds efficiently. Investment spending on the product and quality drive in 2014 will focus on refining the systems and platform technology and on the development and promotion of new product highlights such as the loyalty card, betting terminals and mobile applications. The Casino & Poker segment will continue to benefit from the acquisition of new customers in the Sports Betting segment in the 2014 financial year and should be able to maintain or even improve its profitability. The targets for investment spending will be the development of new products in the casino and games area, along with mobile applications. Following the sale of the German-language operations in 2012 and the planned disposal of the Spanish activities in 2014, the Lotteries segment will be discontinued in After a difficult 2013, the mybet Group will now concentrate fully in its operational core skills. With cost savings on the one hand and a product and quality drive on the other, the mybet Group aims to secure a healthy level of growth for its operations in At group level, attrition losses are to be reduced through controlling measures, cost-cutting and greater professionalism, paving the way for the future profitability of the group. These activities will be flanked by internal structural and organisational measures that will strengthen the company long-term. For the 2014 financial year, the Management Board anticipates a slight rise in revenue to between EUR 70 million and 75 million, underpinned mainly by a hold from sports betting and casino products that is expected to reach between EUR 65 million and EUR 68 million. On the earnings side, the Management Board is aiming for a marked improvement on the previous financial year that will yield a balanced EBIT. The Management Board expects mybet Holding SE to close the 2014 financial year on a net loss of EUR -1,457 thousand. VIII. DISCLOSURES RELEVANT TO TAKEOVERS Disclosures pursuant to Sections 289 (4) and 315 (4) of German Commercial Code SHARE CAPITAL At the balance sheet date the share capital of mybet Holding SE amounted to EUR 24,257,373, divided into 24,257,373 registered ordinary shares (no par value shares). Each share carries one vote. All shares carry the same rights. The Horse Betting segment should enjoy further growth in the 2014 financial year as a result of branching out into new There exist no special restrictions concerning voting rights or the transfer of shares, or shares bearing special rights that 44 MYBET HOLDING SE // ANNUAL REPORT 2013

47 bestow powers of control. Nor have any particular stipulations regarding the control of voting rights been agreed if employees hold a share of the capital and do not exercise their rights of control directly. the reporting thresholds of 20 %, 15 %, 10 %, 5 % and 3 % again on October 1, 2013 and on January 1, GOVERNANCE SHAREHOLDINGS OF OVER 10 PERCENT On March 4, 2013 pursuant to Section 26 (1) of German Securities Trading Act (WpHG) mybet Holding SE published the following notice in accordance with Section 27a (1) of WpHG: Mr Clemens Jakopitsch, Austria, Franz Freiherr von Brackel, Germany, Brickell Investments S.L., Madrid, Spain, Mr Sascha Badelt, Spain, Mr Jose Mieres, Spain, Arcalis Balear S.L. Palma de Mallorca, Spain, Marxant Balear S.L., Palma de Mallorca, Spain, Mr Jaquinto Farrus Sarrado, Spain, Mr Thomas Hütel, Germany, Ms Anna Hütel, Germany, Mr Rodrigue Schäfer, Germany, Mr Zeno Osskó, Germany and Mr Murat Tutkun, Germany, have informed us of the following pursuant to Section 27a (1) of WpHG on February 28, 2013 in connection with the exceeding or attainment of the 10 % threshold or a higher threshold on February 1, 2013, as well as on February 11, 2013 and February 27, 2013: The investment serves strategic goals. The parties subject to disclosure requirements intend to obtain further voting rights through acquisition or other means within the next twelve months. The parties subject to disclosure requirements seek to influence appointments to administrative, management and/or supervisory bodies of the issuer. The parties subject to disclosure requirements do not seek any fundamental change in the capital structure of the company, in particular in respect of the balance between financing with equity and borrowed capital, as well as the dividend policy. The parties subject to disclosure requirements consider a share buy-back programme of the company to be a suitable instrument for financing future acquisitions of companies and investments. The origin of the financial resources comprises partly equity capital and partly borrowed capital, which the parties subject to disclosure requirements have raised to finance the acquisition of the voting rights. The disclosure requirements pursuant to Sections 21 f. and 27a of WpHG arise from the fact that the voting rights of the parties subject to disclosure requirements are attributable to each other pursuant to Section 22 (2) of WpHG. The shareholders Murat Tutkun, Anna Hütel and Thomas Hütel subsequently informed the company that they moved below In accordance with the articles of incorporation, the Management Board of mybet Holding SE comprises one or more persons. The Supervisory Board may appoint a Management Board Chairman and a Management Board Deputy Chairman. Amendments to the articles of incorporation must be carried by a three-quarters majority of the Shareholders Meeting. The Supervisory Board may perform amendments to the articles of incorporation that relate to the wording alone. AUTHORISATION TO ISSUE SHARES AND TO ACQUIRE TREASURY SHARES The authorisations of the Management Board to issue or buy back shares all stem from corresponding authorising resolutions of the Shareholders Meeting. We refer to the disclosures in the Notes section (under 6.3.1) for details of the company s conditional and authorised capital. The Shareholders Meeting on July 18, 2013 authorised the Management Board to acquire treasury shares subject to the following conditions: a) The Management Board is, with the consent of the Supervisory Board, authorised until July 17, 2018 to acquire treasury shares representing up to 10 percent of the capital stock at the time of the resolution. At no time may the acquired shares, together with other treasury shares held by the company or attributable to it pursuant to Sections 71a ff. of the German Stock Corporation Act, represent more than 10 percent of the capital stock The authorisation may not be used for the purpose of trading treasury shares. b) Such shares shall, at the choice of the Management Board and with the consent of the Supervisory Board, be acquired on the stock market or by way of a public offer to buy or by way of a public call to submit an offer to sell. A combination of the above forms of acquisition is possible. aa) To the extent that the shares are acquired on the stock market, the countervalue per share paid by the company (excluding incidental acquisition costs) may not exceed or undercut the trading price of shares of the company in the XETRA trading system (or a comparable successor system) by more than 10 percent in the opening auction on the trading date. 03 MANAGEMENT REPORT // 03.VIII DISCLOSURES RELEVANT TO TAKEOVERS 45

48 bb) To the extent that shares are acquired by way of a public offer to buy or by way of a public call to submit an offer to sell, the purchase or sales price offered or the upper and lower limits of the purchase or sales price range per share (excluding incidental acquisition costs) may not exceed or undercut the average closing prices of the shares of the company in the XETRA trading system (or a comparable successor system) by more than 10 percent on the three trading days prior to the date of publication of the offer to buy or the public call to submit an offer to sell. If there are considerable deviations in the relevant price following the publication of an offer to buy or the public call to submit an offer to sell, the offer or the call to submit an offer to sell may be adjusted so that the corresponding average closing price on the three trading days prior to publication is taken as the basis. The offer to buy or the call to submit an offer to sell may envisage further conditions. In the event that the offer to buy is oversubscribed, or if several offers of equal value are received in response to a call to submit an offer to sell and not all can be accepted, acceptance shall be pro rata. A privileged acceptance of small numbers of up to 500 shares offered to the company per shareholder may be taken into account, with partial exclusion of any potential rights of shareholders to tender their shares. c) The Management Board is, with the consent of the Supervisory Board, authorised to use shares of the company acquired on the basis of this authorisation for any legally permissible purpose, in particular for the purposes set forth below. aa) The Management Board is, with the consent of the Supervisory Board, authorised to retire the shares without the need for a further shareholder resolution on the retirement or its implementation. They may also be retired by the simplified procedure without capital reduction, by adjusting the proportion of the company s capital stock represented by each of the remaining no par value shares. If retirement is by the simplified procedure, the Management Board is authorised to adjust the number of no par value shares in the articles of incorporation. bb) The Management Board is, with the consent of the Supervisory Board, authorised to dispose of treasury shares by other means than on the stock market or by way of an offer to all shareholders, provided disposal is for cash contribution and at a price that does not significantly undercut the market price of the company s shares of the same features at the time of disposal. In that instance the number of shares to be disposed of overall may not exceed the limit of 10 percent of the capital stock at the time of the shareholder resolution on this authorisation, or at the time the authorisation is exercised if the latter figure is lower. The above authorisation volume of 10 percent of the capital stock is reduced by the proportion of the capital stock represented by shares or by option and/or conversion rights or obligations from bonds that have been issued or sold after the start of July 18, 2013 excluding subscription rights, in direct, corresponding or mutatis mutandis application of Section 186 (3) Sentence 4 of the German Stock Corporation Act. cc) Furthermore the Management Board is, with the consent of the Supervisory Board, authorised to dispose of treasury shares to third parties for contribution in kind, particularly in connection with the acquisition of companies, parts of companies or interests in companies, as well as with mergers of companies and the acquisition of other assets (including receivables). dd) Furthermore the Management Board is authorised to issue the treasury shares to employees of the company and of affiliated companies, including to the management of affiliated companies instead of using a conditional capital of the company, and to use them to service rights and/or obligations to acquire shares of the company that have been or will be granted to the aforementioned groups of people under the 2005, 2006 and 2010 stock option or employee participation plans. Of the maximum number of stock options to be issued under the 2005/2006 plans, which were approved by the Shareholders Meetings on May 3, 2005 and May 17, 2006, up to 30 percent may be granted to the members of the company s Management Board, up to 40 percent to the managing directors of subsidiaries and up to 80 percent to employees of the company and its subsidiaries. No new stock options may now be issued. The options may only be exercised if the trading price at the time of exercise reaches at least 115 percent of the trading price at the time of issuance. For this purpose, the last minimum price determined and published on the Internet by the Federal Financial Supervisory Authority according to the German Securities Acquisition and Takeover Act (WpÜG) shall apply. The stock options may only be exercised after a waiting period of two years from the date of issue (vesting period). The stock options may be exercised in the three years following expiry of the vesting period. Stock options not exercised shall expire when five years from the time of their issue have elapsed. The stock options may be exercised after expiry of the vesting period in each case within a period of three weeks following publication of the quarterly reports for the second and third quarters, as well as after the holding of the Ordinary Shareholders Meeting. The 46 MYBET HOLDING SE // ANNUAL REPORT 2013

49 Management Board and also the Supervisory Board in respect of members of the Management Board may appropriately extend or shorten the exercise periods as required. Of the stock options from the 2010 stock option plan, which was approved by the Shareholders Meeting on June 10, 2006, up to 60 percent may be granted to the members of the company s Management Board, up to 60 percent to the managing directors of subsidiaries and up to 80 percent to employees of the company and its subsidiaries. Options may only be exercised if the trading price at the time of exercise reaches at least 115 percent of the trading price at the time of issuance. The weighted average price over the preceding three months applies here. Employees may acquire stock options during the period of the authorisation in response to a corresponding offer, within the deadline stated in the offer. However acquisitions are excluded during the two-week period prior to the publication of interim reports, first-half and annual financial reports, or where applicable prior to the publication of (provisional) business results released before these reports. The stock options may only be exercised after a waiting period of four years from the date of issue (vesting period). The stock options may be exercised in the two years following expiry of the vesting period. Stock options not exercised shall lapse when six years from the time of their issue have elapsed. The stock options may be exercised after expiry of the vesting period in each case within a period of three weeks following publication of the quarterly reports for the second and third quarters, as well as after the holding of the Ordinary Shareholders Meeting. The Management Board and also the Supervisory Board in respect of members of the Management Board may appropriately extend or shorten the above exercise periods as required. ee) Furthermore the Management Board is authorised to use treasury shares with the consent of the Supervisory Board to service bonds issued by the company featuring option or conversion rights or a conversion obligation, provided the bonds were or will be issued in corresponding application of Section 186 (3) Sentence 4 of the German Stock Corporation Act, excluding the subscription right of shareholders. d) The Supervisory Board is authorised to use treasury shares acquired on the basis of this authorisation, instead of using a conditional capital of the company, to service rights and/or obligations to acquire shares of the company that have been or will be granted to members of the company s Management Board by way of variable remuneration components, in particular under the stock option plans described in letter c) dd). e) The authorisations pursuant to letters c) and d) may each be utilised on one or more occasions, in full or in part, singly or in combination. The authorisation may be exercised directly by the company or by third parties appointed by the company. f) The shareholders right to subscribe to these treasury shares is only excluded to the extent that these shares are used in accordance with the authorisations under letters c) bb) to ee) and letter d). In addition the Management Board may, with the consent of the Supervisory Board, exclude the subscription right in the event of the disposal of shares through an offer to sell to the shareholders, in order to exclude residual amounts. The Management Board has not made use of the authorisation to date. IX PLEDGES TO THE MANAGEMENT BOARD IN THE EVENT OF TERMINATION OF EMPLOYMENT OF A MANAGEMENT BOARD MEMBER For particulars of the post-contractual restraint on competition and the change of control arrangements, please refer to the remarks in the remuneration report. No other compensation agreements with the members of the Management Board or employees have been reached in the event of a takeover bid. The appointment and dismissal of members of the Management Board takes place in accordance with Sections 84 and 85 of the German Stock Corporation Act as well as Section 6 of the articles of incorporation, according to which the Supervisory Board may determine the number, scope of duties and term of office of the members of the Management Board at variance with the statutory provisions. Amendments to the articles of incorporation follow the regulations contained in Section 133 and Sections 179 ff. of the German Stock Corporation Act. mybet Holding SE, Kiel, encompasses the subsidiaries as listed in the summary of investments in the Notes to the Consolidated Financial Statements (under 2.2.), stating the registered office, and also an office in Hamburg. CORPORATE GOVERNANCE DECLARATION The corporate governance declaration pursuant to Section 289a (1) of German Commercial Code is published on the website of mybet Holding SE at in the section The Company under Corporate Governance. The corporate 03 MANAGEMENT REPORT // 03.IX CORPORATE GOVERNANCE DECLARATION 47

50 practices to be declared according to Section 289a (2) No. 2 of German Commercial Code are also published there REMUNERATION REPORT REMUNERATION OF THE MANAGEMENT BOARD The remuneration system for the Management Board fundamentally envisages performance-related components, alongside fixed pay, in the form of profit-related bonuses and stock options as components with a long-term incentivising effect, in line with the respective area of activity and responsibility of each Management Board member. Both personal performance and factors pertaining to the company s success and the development in the share price are thus appropriately reflected in the remuneration. The remuneration of the Management Board is discussed and determined by the full Supervisory Board, and its appropriateness regularly reviewed once a year. The level of the profit-related bonus is dependent on the attainment of an IFRS net profit for the mybet Group, before tax (EBT) and Management Board profit-related bonus. The profit-related bonus is between 2.0 and 3.5 percent of EBT. Its payment is due within one month of establishment of the annual financial statements. No entitlement to a profit-related bonus arose in 2013 (previous year EUR 446 thousand). The share-based payment takes the form of the issue of stock options in accordance with the terms of the stock option plans approved by the Shareholders Meetings on May 3, 2005 and May 17, Detailed disclosures on the particulars of the stock option plans are given in Section 8.8 of the Notes to the Consolidated Financial Statements. No options were granted in the 2013 financial year and no options were exercised. 175,000 options lapsed or were forfeited as a result of the departure of the Management Board members Mathias Dahms and Stefan Hänel. OTHER SERVICES REMUNERATION STRUCTURE All the following particulars relate to the remuneration system that applied in determining the remuneration of the Management Board members during The following criteria apply for the individual components of the Management Board s remuneration: The non-performance-related fixed remuneration is paid monthly in the form of a salary. In addition to the fixed and variable remuneration, the Management Board members receive a choice of a leased vehicle by way of a company car, or a monthly car allowance. The company has furthermore taken out group accident insurance cover as well as D&O liability insurance on behalf of the Management Board members. For the 2013 financial year, the following remuneration for the Management Board members was recognised as an expense (prior-year values in brackets): REMUNERATION MANAGEMENT BOARD MEMBERS Mathias Dahms, until Dec. 31, 2013 Stefan Hänel, until Oct. 8, 2013 F E S T E VERGÜTUNG* FIXED PAY / SALARY PERFORMANCE-RELATED PAY / PROFIT-RELATED BONUS (220.0) (220.0) 0 (223.1) 0 (223.1) STOCK OPTIONS (UNITS) FAIR VALUE AT ISSUE ( 000) - (-) - (-) - (-) - (-) COMPONENTS WITH A LONG- TERM INCENTIVISING EFFECT GESAMT (10.1) 10.3 (11.8) (453.2) (454.9) Monika Fiala, Nov. 1 Dec. 17, (-) 0 (-) - (-) - (-) 0 (-) 32.0 (-) Total (440.0) 0 (446.2) - (-) - (-) 20.4 (21.9) (908.1) 48 MYBET HOLDING SE // ANNUAL REPORT 2013

51 The profit-related bonus entitlement of EUR thousand each arising in the previous year on the basis of the consolidated EBT was recognised as an expense in The actual amount paid out in 2013 was reduced by a total of EUR 40 thousand as the Management Board distributed a portion of its profit-related bonus to the company s employees. and a consultancy contract envisaging an overall fee of a maximum of EUR 60 thousand. The following table provides information on the stock options held by the members of the Management Board, which formed part of the share-based payment in previous financial years. Mathias Dahms is receiving the amount of EUR 150 thousand for his early exit, comprising a settlement of EUR 90 thousand MANAGEMENT BOARD STOCK OPTIONS POSITION AT JAN 1, 2013 GRANTED IN 2013 EXERCISED IN 2013 LAPSED/FORFEITED IN 2013 POSITION AT DEC 31, 2012 NO. OF OPTIONS AVERAGE WEIGHTED EXERCISE PRICE UNITS AWEP UNITS AWEP UNITS AWEP UNITS AWEP Mathias Dahms, until Dec. 31, 2013 Stefan Hänel, until Oct. 8, 2013 Monika Fiala, Nov. 1 Dec. 17, , , , , Total 175, , The stock options were granted in the years 2005 and 2010 under the terms of the stock option plans approved by the Shareholders Meetings of mybet Holding SE on May 3, 2005 and May 17, 2006 (for further information on the mybet stock option plans, please refer to the Notes to the Consolidated Financial Statements, Section 8.8). As a result of the departure of the two Management Board members Mathias Dahms and Stefan Hänel, all stock options granted to the Management Board lapsed or were forfeited. FAIR VALUE AT TIME OF THE STOCK OPTIONS ISSUE TOTAL AT ISSUE ISSUED EXERCISE PRICE FAIR VALUE POSITION AT DEC 31, 2013 OPTION VALUE AT ISSUE OPTION VALUE DEC 31, 2013 Mathias Dahms 175,000 January ,250 0 Stefan Hänel 175,000 January ,250 0 Total 350, , MANAGEMENT REPORT // 03.IX CORPORATE GOVERNANCE DECLARATION 49

52 There were no subsequent changes in value that resulted from a change in the vesting conditions. PLEDGES TO THE MANAGEMENT BOARD IN THE EVENT OF TERMINA- TION OF EMPLOYMENT OF A MANAGEMENT BOARD MEMBER POST-CONTRACTUAL RESTRAINT ON COMPETITION For the duration of the post-contractual restraint on competition of one year, the Management Board member in question shall receive a compensation payment amounting to 50 percent of their final average contractual remuneration. The restraint on competition and an accompanying compensation payment shall not apply if the contract of employment is terminated as a result of a change of control. CHANGE OF CONTROL A change of control exists in the event of a firm commitment according to the German Securities Acquisition and Takeover Act (WpÜG), the merger or break-up of mybet Holding SE into a different legal entity or the conclusion of a control and/or profit transfer agreement where mybet Holding SE is a dependent company. In the event of a change of control, the company shall have the right to terminate the employment contract with three months notice, effective from the end of a month, within twelve months of the change of control occurring. The employed relationship may also be cancelled within twelve months of its establishment or revoked pursuant to Section 84 (3) of the German Stock Corporation Act. In the event of notice being served by the company or termination in the form of cancellation or revocation, the Management Board member shall receive a settlement amounting to the target salary outstanding, discounted at 5.5 percent, including profit-related bonus on the basis of the previous financial year, for the entire remaining term of the contract. The Management Board member shall in addition receive a further year s salary plus performance-related pay. Stock options already granted shall remain valid. Other cash or non-cash benefits shall not be taken into account in the settlement. position within the Management Board, the Management Board member shall receive a settlement amounting to the target salary outstanding, including profit-related bonus based on the past financial year, for the entire remaining term of the contract, but at least two years pay. Stock options already granted shall remain valid. In the event of termination by the Management Board member for other reasons, the Management Board member shall merely be entitled to payment of the pro rata profit-related bonus up until the date of termination. Stock options already granted shall remain valid. Members of the Supervisory Board: Chairman: Dr Volker Heeg, Hamburg, lawyer and tax consultant (Chairman since October 1, 2013) Deputy Chairman: Marcus Geiß, Monza (Italy), managing director (member since July 18, 2013, Deputy Chairman since October 1, 2013) Frank Motte, Stuttgart, managing partner (Deputy Chairman until October 1, 2013) Konstantin Urban, Gräfelfing, management consultant Retired in 2013: Antje Stoltenberg, Kiel, auditor (Chairman until October 1, 2013, member until December 31, 2013) Rainer Jacken, Kiel, management consultant (until July 18, 2013) Rodolfo Carpintier Santana, Madrid (Spain), management board chairman (until July 18, 2013) Clemens Jakopitsch, Vienna (Austria), management consultant (July 18, 2013 to October 31, 2013) Over and above their activities as Supervisory Board members of mybet Holding SE, Mr Carpintier Santana held office as a non-executive director of xplane Inc., St Louis, USA, Mr Urban as Supervisory Board Chairman of YORXS AG, Munich, and Mr Geiß as a member of the Board of Directors of NeoLotto Ltd., Malta. REMUNERATION OF THE SUPERVISORY BOARD In the event of a change of control, each Management Board member shall furthermore have the right to terminate their employment contract with three months notice, effective from the end of a month. The remuneration of the Supervisory Board equally comprises a fixed and a variable portion. The variable portion in turn consists of a short-term and a long-term performance-oriented remuneration component. In the event of termination by the Management Board member due to a change in the fundamental direction of business operations or a change in the Management Board member s The remuneration principles for the Supervisory Board were determined at the 2005 Shareholders Meeting and the amounts adjusted at the 2010 Shareholders Meeting. 50 MYBET HOLDING SE // ANNUAL REPORT 2013

53 For its services the Supervisory Board shall receive: a) Fixed remuneration per member of EUR 15,000 annually, plus proven expenses. The Supervisory Board Chairman shall receive remuneration of EUR 22,500 for their services. b) An annual payment based on the short-term performance of the company amounting to 0.3 percent of the company s EBIT for the year per Supervisory Board member, based on the IFRS Consolidated Financial Statements, up to a limit of EUR 15,000 for Supervisory Board members and EUR 22,500 for the Supervisory Board Chairman. have belonged to the Supervisory Board for only part of a financial year or leave the Supervisory Board before the end of their term of office shall receive a pro rata payment. This payment was granted for the first time for the 2010 financial year. The payment pursuant to letter a) shall be payable after the end of the financial year in question. The payment pursuant to letter b) shall be payable after the end of the Shareholders Meeting which grants discharge of the Supervisory Board for the financial year ended. The payment pursuant to letter c) shall be payable after the end of the Shareholders Meeting which grants discharge of the Supervisory Board for the final financial year of the Supervisory Board s regular term of office. c) A performance-related, long-term payment of EUR 15,000 for Supervisory Board members and EUR 22,500 for the Supervisory Board Chairman due after the ending of each term of office of the Supervisory Board. The long-term payment shall be paid out if the earnings of the company (EBIT) have risen by an average of 30 percent per year during the term of office of the Supervisory Board member in question. d) Insofar as sales tax is due on the remuneration, the company is obliged to refund it. Supervisory Board members who OTHER SERVICES The company in addition reimbursed the Supervisory Board members for proven expenses and travel costs. For the 2013 financial year, the following remuneration for the Supervisory Board members was recognised as an expense (prior-year values in brackets): SUPERVISORY BOARD REMUNERATION IN 2013 FIXED PAY* SHORT-TERM VARIABLE PAY LONG-TERM VARIABLE PAY TOTAL* EXPENSE / TRAVEL COSTS* Dr Volker Heeg, Chairman 16.9 (15.0) 0.0 (15.0) - (-) 16.9 (30.0) 0.8 (0.0) Marcus Geiß, Deputy Chairman, since July 18, (-) 0.0 (-) - (-) 6.9 (-) 5.9 (-) Frank Motte 15.0 (15.0) 0.0 (15.0) - (-) 15.0 (30.0) 1.8 (0.0) Konstantin Urban 15.0 (15.0) 0.0 (15.0) - (-) 15.0 (30.0) 1.9 (1.1) Antje Stoltenberg, until December 31, (22.5) 0.0 (22.5) - (-) 20.6 (45.0) 0.3 (0.2) Rainer Jacken, until July 18, (15.0) 0.0 (15.0) - (-) 8.1 (30.0) 0.0 (0.0) Rodolfo Carpintier Santana until July 18, 2013 Clemens Jakopitsch July 18 October 31, (15.0) 0.0 (15.0) - (-) 8.1 (30.0) 0.0 (3.2) 4.4 (-) 0.0 (-) - (-) 4.4 (-) 0.0 (-) Total 95.0 (97.5) 0.0 (97.5) - (-) 95.0 (195.0) 10.7 (4.5) * plus VAT 03 MANAGEMENT REPORT // 03.IX CORPORATE GOVERNANCE DECLARATION 51

54 XRESPONSIBILITY STATEMENT BY THE MANAGEMENT The Management Board gives assurance that to the best of its knowledge and belief the business performance, including the business results and the situation of the company, are presented in this Management Report in such a way as to provide a true and fair view and that the principal opportunities and risks are described. This combined Management Report contains future-related statements and information in other words, statements about events that lie ahead rather than in the past. These future-related statements can be identified by words such as expect, anticipate, intend, plan, believe, aim, estimate, assess and similar. Such future-related statements are based on our present expectations and on certain assumptions. They therefore entail a number of risks and uncertain factors. The business activities, success, business strategy and results of mybet are influenced by a great many factors, many of which are beyond the control of mybet. These factors may mean that the actual results, achievements and performance of the mybet Group could depart substantially from the figures used to indicate results, achievements or performance, whether explicitly or implicitly, in the future-related statements. Kiel, April 23, 2014 Sven Ivo Brinck 52 MYBET HOLDING SE // ANNUAL REPORT 2013

55 03 MANAGEMENT REPORT // 03.X CORPORATE GOVERNANCE DECLARATION 53

56 0

57 4 // CONSOLIDATED FINANCIAL STATEMENTS

58 04 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2013 INTANGIBLE ASSETS NOTE 31/12/ /12/ A. Non-current assets 17,090 20,419 I. Intangible assets ,457 14, Goodwill 6,186 6, Other intangible assets 6,310 7, Construction in progress 1, II. Property, plant and equipment ,121 1, Leasehold improvements Other plant and equipment 1,060 1,001 III. Investment property IV. Investments accounted for using the equity method 2.3 / V. Financial assets , Investments Other receivables 0 3,260 V. Deferred taxes , B. Current assets 21,520 23,505 I. Inventories II. Receivables and other assets ,494 10, Trade accounts receivable/other receivables 5,302 3, Other financial assets 8,192 6,624 III. Cash and cash equivalents ,965 13,176 IV. Assets held for sale Total Assets 38,609 43, MYBET HOLDING SE // ANNUAL REPORT 2013

59 SHAREHOLDERS EQUITY AND LIABILITIES NOTE 31/12/ /12/ A. Shareholders equity 18,306 28,520 I. Share capital ,257 24,217 II. Additional paid-in capital ,637 11,662 III. Group equity generated ,781-8,670 Shareholders equity attributable to the shareholders of mybet Holding SE 16,113 27,210 IV. Non-controlling interests ,192 1,310 B. Non-current liabilities Bonds Due to banks B. Current liabilities 20,282 14, Due to banks Trade accounts payable/other liabilities ,738 4, Other financial liabilities 6.4 8,363 8, Other accrued expenses Total shareholders equity and liabilities 38,609 43, CONSOLIDATED FINANCIAL STATEMENTS // CONSOLIDATED BALANCE SHEET 57

60 CONSOLIDATED INCOME STATEMENT NOTE Revenue ,028 68,751 Production for own assets capitalised 4.2 2,194 1,446 Other operating income 4.3 1,528 10,392 Cost of purchased materials ,164 41,145 a) Commission charges 31,516 29,344 b) Licence fees, gambling taxes 4,910 3,736 c) Betting bonuses 4,425 3,652 d) Payment transaction expenses 2,997 2,749 e) Other cost of purchased materials 1,316 1,664 Personnel expenses ,952 10,991 a) Wages and salaries 9,661 9,653 b) Social insurance 1,292 1,337 Depreciation and amortisation 4.6 4,196 3,744 Other operating expenses ,624 17,462 Operating profit / loss -11,186 7,248 Other interest and similar income Interest and similar expenses Depreciation and amortisation of investments Depreciation and amortisation of financial assets Financial result Earnings before tax -11,495 7,209 Steuern vom Einkommen und vom Ertrag ,098 Other tax 2 3 Net profit/loss for the period ,960 6,108 Profit attributable to non-controlling interests Profit attributable to the shareholders of mybet Holding SE -11,088 6,102 Earnings per share Earnings per share (basic, ) Earnings per share (diluted, ) MYBET HOLDING SE // ANNUAL REPORT 2013

61 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Net profit/loss for the period -10,960 6,108 Foreign currency translation gains and losses from the financial statements of foreign subsidiaries Overall result -10,960 5,865 of which non-controlling interests of which shareholders of mybet Holding SE -11,088 5, CONSOLIDATED FINANCIAL STATEMENTS // CONSOLIDATED INCOME STATEMENT 59

62 CASH FLOW STATEMENT FOR THE PERIOD JANUARY 1 TO DECEMBER Net profit/loss for the period -10,960 6,108 Depreciation and amortisation of intangible assets and property, plant and equipment 4,196 3,744 Depreciation and amortisation of current assets 1,573 0 Depreciation and amortisation of investments Depreciation and amortisation of non-current other receivables Expense / income from income tax ,098 Expense / income from other taxes 2 0 Interest income Interest expense Other non-cash expenses and income 1, Profit / loss from the disposal of fixed assets Profit / loss from the disposal of business units (lottery operations) 0-7,738 Cash flow before changes to working capital -4,242 3,612 Changes in inventories, receivables and other assets that are not investing or financing activities ,007 Changes in liabilities and other items on the shareholders equity and liabilities side 5,294 1,953 Increase/decrease in short-term accruals Interest paid Income taxes paid Cash flow from operating activities 465 3,762 Cash receipts from the disposal of fixed assets and business units (lottery operations) 94 7,860 Cash payments for investments in fixed assets -3,298 Interest received 75 Cash flow from investing activities -5,065 4,637 Cash receipts from capital increases 0 1 Cash receipts paid into additional paid-in capital 0 24 Cash payments for the redemption of bonds and loans Cash flow from financing activities Overall effective adjustment -4,925 8,271 Changes to cash funds due to exchange rate movements and changes in consolidation Cash and cash equivalents at the start of the period 13,176 5,833 Cash and cash equivalents at the end of the period 7,965 13, MYBET HOLDING SE // ANNUAL REPORT 2013

63 STATEMENT OF MOVEMENTS IN EQUITY FOR THE PERIOD DECEMBER 31, 2011 TO DECEMBER 31, 2013 (SEE NOTES, SECTION 6.3) SHARE CAPITAL ADDITIONAL PAID-IN CAPITAL GROUP EQUITY GENERATED DIFFERENCE FROM FOREIGN CURRENCY TRANSLATION SHAREHOL- DERS OF P A R E N T COMPANY NON- CONTROLLING INTERESTS TOTAL Position at Dec 31, ,217 22,635-25, ,347 1,326 22,673 Conversion of bond Withdrawal for netting of loss carry-forward of mybet Holding SE with reserve -11,041 11, Premiums from employee options pferdewetten.de AG: recognition of share-based payments Change in interest in fluxx.com Telewette GmbH Divestment of lottery operations Change in interest in Lotosystems Network S.L Net profit/loss for the period 6,102 6, ,108 Other result (change in currency translation item) Overall result 6, , ,865 Position at Dec 31, ,217 11,662-8, ,210 1,310 28,520 Conversion of bond Premiums from Management Board options Reclassification of Management Board stock options pferdewetten.de AG: recognition of share-based payments Change in investment venture pferdewetten.de AG Net profit/loss for the period -11,088-11, ,960 Deconsolidation of DIGIDIS SL Equity transactions with shareholders: other netting Overall result -11, , ,965 Position at Dec 31, ,257 11,637-19, ,113 2,192 18, CONSOLIDATED FINANCIAL STATEMENTS // CASH FLOW STATEMENT STATEMENT OF MOVEMENTS IN EQUITY 61

64 1 GENERAL DISCLOSURES GROUP PARENT mybet Holding SE is a company based in Germany. The address of the company s registered office is Jägersberg 23, Kiel. The company is filed with the Commercial Register of the Local Court of Kiel (Entry No ). view of the net worth, financial position and financial performance of the mybet Group. The Consolidated Financial Statements are fundamentally prepared on the basis of accounting of the assets and liabilities at amortised cost. Primary financial instruments available for sale and derivative financial instruments are an exception, and are in each case recognised at the fair value on the balance sheet date. The Consolidated Financial Statements of the company for the financial year ended on December 31, 2013 covers the company and its subsidiaries (referred to in combination as the group and individually as group companies ). The group offers gaming on the basis of its own licences and permits in the European market, subject to the various national laws. The focus of the group s business activities here is on the areas of sports betting, casino & poker and horse betting. On the basis of the option in IAS 1, the income and expenditure recognised through profit and loss are shown in the income statement, while the reconciliation of the net profit or loss for the period with the comprehensive income is shown via the income-neutral recording of income and expenditure in a separate Statement of Comprehensive Income. The income statement is formatted according to the nature of expense method. The declaration on the German Corporate Governance Code required pursuant to Section 161 of the German Stock Corporation Act has been submitted and made available to the shareholders by mybet Holding SE and by pferdewetten.de AG. This Declaration of Conformity can also be consulted on the websites of mybet Holding SE ( and pferdewetten.de AG ( The shares of mybet Holding SE are traded on the Frankfurt Stock Exchange under ISIN DE000A0JRU67. The separate financial statements given the unqualified opinion of KPMG AG Wirtschaftsprüfungsgesellschaft, Hamburg, as well as the Consolidated Financial Statements of mybet Holding SE at December 31, 2012, have been published in the electronic Federal Gazette. ACCOUNTING PRINCIPLES The Consolidated Financial Statements have been prepared in agreement with the International Financial Reporting Standards (IFRS) as adopted by the European Union. The supplementary provisions pursuant to commercial law in accordance with Section 315a (3) of German Commercial Code in conjunction with Section 315a (1) of German Commercial Code have additionally been taken into account. The requirements of IFRS as adopted by the European Union have been met in full and as a result provide a true and fair 2 The Consolidated Financial Statements were approved for publication by the Management Board on April 23, FUNCTIONAL AND PRESENTATION CURRENCY These Consolidated Financial Statements are presented in euros, the functional currency of the company. All financial information presented in euros has been rounded to the nearest thousand, unless otherwise stated. Rounding differences may correspondingly occur. CONSOLIDATION 2.1 CONSOLIDATION PRINCIPLES The Consolidated Financial Statements of mybet Holding SE include all material domestic and international subsidiaries where mybet Holding SE directly or indirectly has the power to control the financial and business policy of the company in question. (A) BUSINESS COMBINATIONS Business combinations are accounted for by the purchase method at the time of acquisition in other words, when control passed to the group. Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activity. In assessing whether control exists, 62 MYBET HOLDING SE // ANNUAL REPORT 2013

65 the group also takes account of exercisable potential voting rights. The group assesses goodwill at the time of acquisition as: the fair value of the consideration transferred plus the recorded amount of all non-controlling interests in the acquired company plus the fair value of the previously existing equity capital share in in the acquired company if the business combination has been achieved in stages less the net amount (generally the fair value) of the acquired identifiable assets and liabilities assumed. If the amount is negative, an income is recorded directly in the income statement following renewed examination of the valuations of the acquired assets and liabilities. The consideration transferred does not contain any amounts associated with the fulfilment of pre-existing relationships. Such amounts are fundamentally recognised in profit or loss. Transaction costs other than those associated with the issuance of bonds or equity securities incurred by the group in connection with a business combination are recognised immediately as an expense. Any other contingent consideration due is measured at fair value at the time of acquisition. If the contingent consideration is classified as equity capital, it is not remeasured and a payment in lieu is reported in shareholders equity. Otherwise subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. If share-based payment awards (substitute awards) have to be exchanged for awards that are held by employees of the acquired enterprise (awards of the acquired enterprise), the substitute awards of the acquirer are included fully or only in part in the measurement of the consideration transferred upon the business combination. This calculation is based on the ratio of the market-based value of the substitute awards to the market-based value of the awards of the acquired enterprise and the extent to which the substitute awards refer to performance prior to the combination. (B) NON-CONTROLLING INTERESTS at fair value or at its corresponding share of the identifiable net assets of the acquired enterprise, which is generally measured at fair value. Changes in the group s share of a subsidiary that do not lead to a loss of control are accounted for as transactions with owners and are recognised within equity. The goodwill is not adjusted. (C) SUBSIDIARIES Subsidiaries are enterprises controlled by the group. The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date on which control begins, up until the date on which control ends. (D) LOSS OF CONTROL Upon loss of control the group derecognises the assets and liabilities of the subsidiary, non-controlling interests and the other components of the equity capital of the subsidiary. The result arising is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value at the date of loss of control. This retained interest is subsequently reported as an investment accounted for using the equity method or as a financial asset available for sale, depending on the level of influence. (E) FINANCIAL ASSETS ACCOUNTED FOR USING THE EQUITY METHOD The group s financial assets accounted for using the equity method comprise investments in associates and in joint ventures. Associates are companies where the group exercises significant influence but no control or joint arrangement exists in respect of the financial and business policy. Significant influence is suspected to exist if the group holds between 20 and 50 percent of the voting rights of another company. Joint ventures are companies over whose business activities the group exercises joint control in conjunction with one or more partners on the basis of a contractual agreement, and where unanimous agreement on financial and operating decisions is necessary. Investments in associates and in joint ventures are accounted for using the equity method and initially reported at cost. Transaction costs are also included in the cost. In every business combination the group decides to measure any non-controlling interests in the acquired enterprise either The Consolidated Financial Statements include the share of profit or loss and of the other result of companies accounted 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.2 CONSOLIDATION 63

66 for using the equity method, after adjustment to align the accounting methods to those of the group, from the date on which significant influence or joint control begins, up until the date on which significant influence or joint control ends. If the group s share in the losses exceeds its investment in an enterprise accounted for using the equity methods, the carrying amount of this investment including all non-current components attributable to it are reduced to nil. No further losses are recorded except to the extent to which the group has an obligation or has made payments for the equity investment. Where the influence of investments on the net worth, financial position and financial performance is immaterial considered both individually and as a whole, they are recognised at cost. (F) TRANSACTIONS ELIMINATED ON CONSOLIDATION (G) CONVERSION OF FINANCIAL STATEMENTS DENOMINATED IN A FOREIGN CURRENCY The assets and liabilities of subsidiaries whose functional currency is not the euro are translated at the exchange rate applicable on the balance sheet date. Translation at the reporting date rate is equally used for derivative goodwill as well as for hidden reserves and liabilities that were recognised upon the initial consolidation of a subsidiary. Items in the income statement are translated at the weighted average for the year in question. Equity components of the subsidiaries are translated at the corresponding historical rate when they occur. The exchange differences resulting from translation are reported in the other result, under the item Exchange differences on translation. Intragroup balances and transactions along with all unrealised income and expenses from intragroup transactions are eliminated in the preparation of the Consolidated Financial Statements. Unrealised gains from transactions with companies accounted for using the equity method are derecognised against the investment in proportion to the group s interest in the equity investment. Unrealised losses are eliminated in the same way as unrealised gains, but only if there is no evidence of impairment. With the exception of the group company JAXX UK Ltd. disposed of in 2012, the functional currency of all group companies corresponds to that of the group. The following rates were used in translation of the foreign-currency financial statements of JAXX UK Ltd. into euros: CONVERSION OF FINANCIAL STATEMENTS DENOMINATED IN A FOREIGN CURRENCY AVERAGE RATE REPORTING DATE RATE Foreign-currency equivalent of EUR 1w /12/ /12/2012 GBP - 0,8112-0, MYBET HOLDING SE // ANNUAL REPORT 2013

67 SUMMARY OF INVESTMENTS REGISTERED OFFICE NOMINAL CAPITAL OWNERSHIP INTEREST 000 IN % 2.2 CONSOLIDATED COMPANIES The following list provides an overview of the composition of the mybet Parent company Group s scope of consolidation: mybet Holding SE Kiel 24,257 - Direct investments FULLY CONSOLI- DATED COMPANIES 31/12/ /12/ 2012 ANYBET GmbH Hamburg FLUXX GmbH Hamburg PNO Ventures Ltd. Malta Germany International Total QED Ventures Ltd. Malta pferdewetten.de AG Düsseldorf 3, Indirect investments PNO Casino Ltd. Malta PNO Sportsbetting Ltd. Malta C4U-Malta Ltd. Malta 1, PEI Ltd. Malta SWS Service GmbH Berlin QED Software Systems GmbH Wien Derrypark Gibraltar QED Belgium s.p.r.l Brussels mybet Italia s.r.l. Modena QED Network N.V. Curacao PCM Services Ltd. Malta pferdewetten-service.de GmbH Düsseldorf ASSOCIATES AND JOINT VENTURES ACCOUNTED FOR USING THE EQUITY METHOD - Germany International 2 1 Total 2 1 The mybet Group holds percent of the shares of DIGIDIS SL. Due to arrangements laid down in the articles of incorporation, the group no longer has any scope to control this company. The principal investments pursuant to Section 313 (2) of German Commercial Code are shown left. NetX International Ltd. Malta NetX Betting Ltd. Malta NetX Services Ltd. Malta NetX Casino Ltd. i.l. Malta Accendere GmbH Mülheim Associate DIGIDIS SL Madrid Joint venture Digital Distribution Management Iberica S.A. Madrid CONSOLIDATED FINANCIAL STATEMENTS // 04.2 CONSOLIDATION 65

68 2.3 CHANGES IN CONSOLIDATION ACQUISITION TRANSACTIONS No or no material acquisition transactions were conducted in the 2012 and 2013 financial years. In the previous year, the mybet Group sold its German lottery operations and the portals JAXX.de and JAXX.com by deed of May 4, 2012, with economic effect retroactively as of January 1, This means that the acquirer is entitled to the profits from January 1, The transfer of the assets and liabilities, along with deconsolidation, took place on April 30, DECONSOLIDATIONS With effect from November 30, 2013 DIGIDIS SL, Madrid, Spain was deconsolidated because the mybet Group no longer has any scope to control the company. From then on, until the end of the year, the company has been included in the Consolidated Financial Statements using the equity method and is reported at December 31, 2013 as an asset available for sale because its sale is planned. The background to this change is the surrendering of directorships by the former Management Board members of mybet Holding SE, Mr Mathias Dahms and Mr Stefan Hänel, as well as by two further employees of mybet Holding SE, and the resulting loss of control. The fair value of the shares in DIGIDIS SL was taken as the basis for determining the deconsolidation result. This came to EUR 1 thousand at November 30, The assets and liabilities removed from the Consolidated Balance Sheet upon deconsolidation were as follows: 30/11/ Assets Non-current assets 1,159 Current assets 1,030 Liabilities Non-current liabilities 240 Current liabilities 1,601 The purchase contract comprised the transfer of shares in the companies which constituted the German lottery operations of the mybet Group, and also the transfer of assets such as domains and software licences. The selling price was EUR 12.5 million. The assets and liabilities removed from the Consolidated Balance Sheet upon deconsolidation were as follows: 30/04/ Assets Non-current assets 662 Current assets 2,983 Liabilities Non-current liabilities 0 Current liabilities 2,025 The deconsolidation of the companies accordingly led to a profit of EUR 7,738 thousand, which was reported under other operating income. The companies of the JAXX Group which constituted the German lottery operations of the mybet Group generated revenue of EUR 3,147 thousand in the 2012 financial year up until deconsolidation with effect from April 30, 2012; earnings before tax came to EUR 1,321 thousand. 2.4 ASSETS HELD FOR SALE At December 31, 2013 the investments in DIGIDIS SA and DIGI- DIS Iberica SL are reported under assets held for sale. The total carrying amount is EUR 1 thousand. The deconsolidation of the company accordingly led to a loss of EUR 523 thousand, which is reported under other operating expenses. In the past financial year, up until its deconsolidation, DIGIDIS SL generated revenue of EUR 3,301 thousand and a result before tax of EUR -718 thousand. The expected disposal of DIGIDIS SA and DIGIDIS SL, and therefore of Spanish lottery operations, reflects the closer focus of business operations on the growth areas of sports betting and casino. The investments will be disposed of in the 2014 financial year by way of a share deal. 66 MYBET HOLDING SE // ANNUAL REPORT 2013

69 3 The carrying amount of the investment in DIGIDIS SA of EUR 260 thousand was written down to the amount of EUR 1.00 in the 2013 financial year in view of its hitherto disappointing performance. DIGIDIS SA was previously reported under Shares accounted for using the equity method and was therefore included in the Consolidated Financial Statements as an associate. Deconsolidation of DIGIDIS SL took place with effect from November 30, The carrying amount of the investment of EUR 750 thousand was written down to EUR 1 thousand. The investments are each measured at fair value. The fair values are determined on the basis of Management Board estimates. This assessment was prompted by the losses incurred by the companies in recent years and in the period under review. PRINCIPLES OF RECOGNITION AND MEASUREMENT Uniform principles of recognition and measurement were used in the preparation of the separate financial statements at the date of the Consolidated Financial Statements for the subsidiaries included in the Consolidated Financial Statements. With the exception of the changes explained under (o) Changes in recognition and measurement methods, the group has consistently applied the following recognition and measurement methods in all periods presented in these Consolidated Financial Statements. The Consolidated Financial Statements have been prepared on the basis of historical costs. The following items with other measurement bases at the respective reporting dates are exceptions. ITEM MEASUREMENT BASES complete development and to use or sell the asset. Research expenditure is not capitalised; it is instead recognised directly within profit or loss when it occurs. Acquired intangible assets are recognised at cost. Intangible assets with an indefinite useful life do not exist in the mybet Group, with the exception of the derivative goodwill, the brand rights and domains recognised from the acquisition of pferdewetten.de AG and gaming and other licences. The useful life of the licences, brand rights and domains is unlimited because as matters stand it cannot be determined how often the licences can be renewed or over what period it may ultimately be possible to use the brand rights and domains consistently. The internally produced and acquired intangible assets with a limited useful life are amortised as follows by the straight-line method over their estimated economic life: INTANGIBLE ASSETS Syndicate contracts acquired as well as address bases Acquired customer base of pferdewetten.de AG Internally produced software Other USEFUL LIFE 5 months 10 years 4 years 3 4 years The syndicate contracts acquired as well as the address bases of DIGIDIS SL, which was deconsolidated with effect from November 30, 2013, were written down over an average economic life of five months (previous year eight months). The contracts fundamentally have maturities of three to 36 months. Derivative financial instruments measured at fair value through profit and loss. Financial assets held for sale Fair value Fair value Intangible assets with an unlimited useful life are not amortised. Impairment on intangible assets with a limited and unlimited useful life is applied where it exists. (A) INTANGIBLE ASSETS Internally produced intangible assets are recognised at cost. The development costs are only capitalised if they can be reliably be measured, the product or process is technically and commercially suitable, a future economic benefit is probable and the group both intends to and has sufficient resources to The write-downs are fundamentally recognised in profit or loss. Gains or losses from the disposal of intangible assets are reported in other operating income or expenses. The useful lives and write-down methods are examined at the reporting dates. If expectations differ from previous estimates, the corresponding changes are applied pursuant to IAS CONSOLIDATED FINANCIAL STATEMENTS // 04.3 PRINCIPLES OF RECOGNITION AND MEASUREMENT 67

70 (B) PROPERTY, PLANT AND EQUIPMENT Items of property plant and equipment are capitalised at cost and depreciated by the straight line method in line with their anticipated economic life. No borrowing costs were to be capitalised. Depreciation is applied uniformly throughout the group over the following useful lives: PROPERTY USEFUL LIFE IN YEARS LEASEHOLD IMPROVEMENTS TERM OF LEASE Other plant and equipment 3 10 Except for deferred tax assets and financial assets that fall within the scope of IAS 39, non-current assets (and disposal groups) that are classified as held for sale are measured at their original carrying amount or the fair value less disposal costs, whichever is the lower. (F) FINANCIAL ASSETS AND FINANCIAL LIABILITIES (FINANCIAL INSTRUMENTS) The group classifies non-derivative financial assets according to the following categories: financial assets measured at fair value through profit and loss, held-to-maturity investments, loans and receivables, as well as financial assets available for sale. The group classifies non-derivative financial liabilities as other financial liabilities. The useful lives and write-down methods are examined at the reporting dates. If expectations differ from previous estimates, the corresponding changes are applied pursuant to IAS 8. Changes in the residual values or useful lives that arise during the use of the assets are taken into account in determining the depreciation charges. NON-DERIVATIVE FINANCIAL ASSETS AND FINANCIAL LIABILITIES RE- COGNITION AND DERECOGNITION The group recognises loans and receivables and bonds issued from the date on which they arose. All other financial assets and liabilities are reported from the trade date. Impairment is applied where it exists. Gains or losses from the disposal of property plant and equipment are reported in other operating income or expenses. (C) INVESTMENT PROPERTY Investment property is measured by the acquisition costs model (IAS 40). (D) INVENTORIES Inventories are measured at the lower of cost and net realisable value. (E) NON-CURRENT ASSETS HELD FOR SALE / DISPOSAL GROUP Non-current assets or disposal groups comprising assets and liabilities are reported as held for sale if it is very highly probable that they will be realised predominantly through disposal and not through continued use. That is always the case if disposal is very highly probable and the non-current asset (or disposal group) is available for an immediate sale as it stands. The management must have undertaken to make the disposal. This means it must be assumed that the disposal transaction will be completed within one year of such a classification. The group derecognises a financial asset if the contractual rights with regard to the cash flows from an asset expire or it transfers the rights to receive the cash flows as part of a transaction in which all material risks and opportunities associated with ownership of the financial asset are also transferred. Derecognition also takes place if the group neither transfers nor retains all material risks and opportunities associated with ownership and it does not retain control over the transferred asset. Any share in such transferred financial assets that arise or remain within the group is reported as a separate asset or liability. Financial liabilities are derecognised if the contractual obligations have been met or rescinded or have expired. Financial assets and liabilities are offset and the net amount is reported on the balance sheet if the group has a legal entitlement to offset the reported amounts and it is intended either to settle on a net basis or to realise the asset and settle the liability simultaneously. NON-DERIVATIVE FINANCIAL ASSETS MEASUREMENT Financial assets measured at fair value through profit and loss A financial asset is measured at fair value through profit and loss if it is held for trading or is determined as such upon initial 68 MYBET HOLDING SE // ANNUAL REPORT 2013

71 recognition. Attributable transaction costs are recognised in profit or loss as soon as they occur. Financial assets measured at fair value through profit and loss are measured at the fair value and corresponding changes, which also include alll interest and dividend income, are recognised in profit or loss. Loans and receivables COMPOUND FINANCIAL INSTRUMENTS Compound financial instruments issued by the group comprise euro-denominated convertible bonds which, at the choice of the bearer, may be converted into equity interests to the extent that the number of shares to be issued is specified and does not arise from changes in the fair value. Upon initial recognition, loans and receivables are measured at fair value plus directly attributable transaction costs. Upon subsequent measurement they are measured at amortised cost, using the effective interest rate method. Cash and cash equivalents Within the Consolidated Cash Flow Statements, cash and cash equivalents comprise credit balances with banks due in the short term, which are a central component of controlling payment transactions for the group. Financial assets held for sale Financial assets held for sale are initially measured at their fair value plus directly attributable transaction costs. Upon subsequent measurement the financial assets held for sale are measured at fair value and corresponding changes in value, apart from impairment, are recognised in the other result and in the revaluation surplus within equity. If an asset is derecognised, the other comprehensive income is reclassified to profit or loss. The company s financial assets are categorised as held for sale if there is the intention to realise them in the short term. Financial investments in equity instruments for which no active market exists and the fair value of which cannot be reliably determined are measured at cost and categorised as held for sale. NON-DERIVATIVE FINANCIAL LIABILITIES MEASUREMENT Non-derivative financial liabilities are measured upon initial recognition at fair value, which generally corresponds to the transaction price, less the directly attributable transaction costs. Upon subsequent measurement, these financial liabilities are measured at amortised cost using the effective interest rate method. SHARE CAPITAL The costs directly attributable to the issuance of ordinary shares are recognised as a deduction from equity (net after taxes, if appropriate). The equity capital component of the compound financial instrument is initially recognised at the fair value of a similar liability that does not include an option of conversion into equity. Upon initial recognition the equity capital component is reported as the difference between the fair value of the compound financial instrument and the fair value of the equity capital component. Directly attributable transaction costs are to be allocated in proportion to the carrying amounts of the borrowed and equity capital components of the financial instrument at the time of initial recognition. Upon subsequent measurement, the equity capital component of the compound financial instrument is measured at amortised cost using the effective interest rate method. The equity capital component of the compound financial instrument is rolled over at the initial recognition value. Interest in connection with the financial liability is recognised in profit or loss. Upon conversion, the financial liability is reclassified as equity with no effect on income. DERIVATIVE FINANCIAL INSTRUMENTS Under IAS 39, casino stakes as well as betting stakes and betting winnings from the organising of sports and horse betting constitute financial liabilities that have the character of derivative financial instruments. Contracts that give rise to a financial asset at one party and a financial liability at the other party to the contract constitute financial instruments according to IAS 39. In placing a bet, such a contract is formed between the player and the bookmaker (mybet Group). The liability arising on the part of the mybet Group (winnings to be paid out for bets placed or repayment obligation/risk of payout for bets outstanding) is to be measured at fair value. The categorisation of fair value is based on deductible market prices (betting odds as in previous year Level 2 of the fair value hierarchy according to IFRS 7.27). The fair value of the payout risk for betting events not yet having taken place (bets outstanding) is determined from the odds offered by the bookmaker and the underlying probability of the future events on which the bets are placed. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.3 PRINCIPLES OF RECOGNITION AND MEASUREMENT 69

72 (G) IMPAIRMENT NON-DERIVATIVE FINANCIAL ASSETS A financial asset that is not classified as at fair value through profit and loss, including a share in a company that is accounted for using the equity method, is examined at every closing date of the accounts in order to establish whether there is any objective evidence of impairment. cash flow, discounted at the original effective interest rate of the asset. Losses are recognised in profit or loss and presented in an account for impairment. If the group does not have any realistic prospect of collecting the asset, the amounts are written off. If an event occurring after the impairment is recorded results in a reduction in the amount of the impairment, the reduction in impairment is recognised in profit. FINANCIAL ASSETS HELD FOR SALE The following are regarded as objective evidence of impairment: Default or delinquency by a debtor, Restructuring of an amount owed to the group on terms that the group would not otherwise consider, Evidence that a debtor or issuer is going into administration, Adverse changes in the payment status of debtors or issuers, Disappearance of an active market for a security, or Observable data indicating a noticeable reduction in the anticipated payments of a group of financial assets. In the case of an equity instrument held, a significant or sustained fall in the fair value to below its cost is considered objective evidence of impairment. The group considers a fall of 20 percent to be significant and a period of nine months to be sustained. FINANCIAL ASSETS MEASURED AT AMORTISED COST The group considers evidence of impairment for these financial assets both at the level of the individual asset and at a collective level. All assets which are intrinsically significant are evaluated for specific impairment. Those assets that are not identified to be specifically impaired are then evaluated collectively for any impairment that has arisen but not yet been identified. Assets that are not intrinsically significant are evaluated collectively for impairment by grouping assets with similar risk characteristics together into a group. For evaluating collective impairment, the group uses historical information on the timing of payments and the amount of the losses arising. In addition the Management Board takes account of whether the current economic environment and credit conditions are such that the actual losses are likely to be greater or lower than the losses that would be expected based on the historical trends. An impairment is calculated as the difference between the carrying amount and the present value of estimated future Impairment of financial assets held for sale is recognised through reclassification of the losses recorded income-neutrally within equity to profit or loss. The accumulated loss that is reclassified from equity to profit or loss is the difference between the cost, net of any principal repayment and amortisation, and the current fair value net of any impairment already previously recognised through profit and loss. If the fair value of an impaired debt instrument available for sale rises in a subsequent period and this increase can objectively be attributed to an event occurring after recognition of the impairment, the impairment is reversed and the amount of the reversal recognised in profit or loss. In other cases, a reversal is recognised in the other result. FINANCIAL ASSETS ACCOUNTED FOR USING THE EQUITY METHOD An impairment loss for a financial asset accounted for using the equity method is measured by comparing the recoverable amount of the shares with their carrying amount. An impairment loss is recognised in profit or loss. An impairment loss is reversed if there is an advantageous change in the estimates that were applied in determining the recoverable amount. NON-FINANCIAL ASSETS The carrying amounts of the group s non-financial assets except for investment property, inventories and deferred tax assets are examined on each closing date of the accounts to establish whether there is any evidence of impairment. If there is, the recoverable amount for the asset is estimated. The goodwill and intangible assets with an unlimited useful life are examined annually for impairment, as well as whenever there is evidence of impairment. To test whether impairment exists, assets are grouped together in the smallest group of assets that generate cash inflows from continuing use and are largely independent of the cash inflows from other assets or cash-generating units (CGUs). Goodwill acquired through a business combination is allocated to the CGUs or groups of CGUs of which it is expected that they will 70 MYBET HOLDING SE // ANNUAL REPORT 2013

73 derive a benefit from the synergies of the combination. Allocation is on the basis of the internal reporting system. The recoverable amount of an asset or CGU is the higher of the value in use or the fair value less disposal costs. In assessing the value in use, the estimated future cash flows are discounted to their present value, applying a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to an asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment is recognised in profit or loss and reported under depreciation and amortisation. Impairment recognised for CGUs is first attributed to any goodwill and then to the carrying amounts of the other assets of the CGU (group of CGUs) on a pro rata basis. An impairment loss on the goodwill is not reversed. for other assets, an impairment loss is only reversed to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined net of depreciation or amortisation if no impairment loss had been recognised. INTANGIBLE ASSETS WITH UNLIMITED USEFUL LIFE To check goodwill for impairment, this CGU has been allocated. Allocation is on the basis of the internal reporting system. The CGUs generally comprise subsidiaries. The following goodwill and intangible assets with an unlimited useful life exist: ALLOCATION TO CGU 31/12/ /12/2012 CARRYING AMOUNT IN EUR 000 CARRYING AMOUNT IN EUR 000 Goodwill of the QED Group QED 5,581 5,581 sportwetten.de domain QED sportwetten.com domain QED pferdewetten brand pferdewetten.de AG 1,138 1,138 ANYBET GmbH ANYBET GmbH DIGIDIS SL DIGIDIS SL QED The QED Group operates the sports betting, casino and poker product offerings. The recoverable amount for this CGU is based on its fair value less the disposal costs, which was determined by discounting the planned future cash flows from continuing use of the CGU. The capitalisation interest rates are determined on the basis of the discounted cash flow (DCF) method using a riskfree interest rate of 2.75 percent (previous year 2.25 percent), a borrowed-capital interest rate of 7.75 percent (previous year 6.00 percent), an relevered beta of 0.95 (previous year 0.97) and a market risk premium of 5.75 percent (previous year 6.00 percent). A peer group of comparable listed companies was used for the comparative data. The following assumptions were made in estimating the fair value less the disposal costs: QED IN % IN % Capitalisation interest rate before tax The above key assumptions are extrapolated monthly on the basis of historical data for the first planning year. The other four planning years are determined based on estimates of further growth by the management. For this purpose reference is also made to the overall growth expectations for the gaming market in Germany based on external studies. A factor of 0.00 percent was assumed as the long-term growth rate. Sustainable growth rate CONSOLIDATED FINANCIAL STATEMENTS // 04.3 PRINCIPLES OF RECOGNITION AND MEASUREMENT 71

74 Based on steadily rising customer numbers and the high activity rates of customers in 2013, taking account of correlating customer acquisition costs in the planning period, a positive, steadily rise in EBIT and thus a free cash flow are expected. a borrowed-capital interest rate of 6.15 percent (previous year 6.00 percent), an relevered beta of 0.95 (previous year 0.97) and a market risk premium of 5.75 percent (previous year 6.00 percent). A peer group of comparable listed companies was used for the comparative data. Changes to the key assumptions serving as the basis for the estimate of the fair value less the costs of disposal may result in an impairment of the valuations. Because the respective fair value less the costs of disposal of the remaining goodwill based on the interest rates applied is significantly higher than the carrying amounts, there is mainly a risk that the planning assumptions for customer growth and activity rates might not be achieved or that the customer acquisition costs will rise appreciably. As matters stand there are no developments suggesting that it will be necessary to make such a major correction to the planning assumptions, and that will probably necessitate goodwill impairment. Cash flows for a period of five years have been fed into the discounted cash flow model. The above key assumptions are extrapolated monthly on the basis of historical data for the first planning year. The other four planning years are determined based on estimates of further growth by the management. For this purpose reference is also made to the overall growth expectations for the gaming market in Germany based on external studies. No long-term growth was assumed. Based on steadily rising customer numbers and the high activity rates of customers in 2013, taking account of correlating customer acquisition costs in the planning period, a positive, steadily rise in EBIT and thus a free cash flow are expected. ANYBET GMBH That period is followed by a trend calculation of future cash flows for the subsequent periods based on a sustainable growth factor of 0.00 percent (previous year 1.00 percent). The basis for the estimate of the sustainable growth rate is the regulatory framework, the forthcoming liberalisation of the gaming market in Germany, and the good market forecast for the German gaming market. The recoverable amount for this CGU is based on its fair value less the costs of disposal, which was determined by discounting the planned future cash flows from continuing use of the CGU. The following assumptions were made in estimating the fair value less the disposal costs: PFERDEWETTEN.DE AG The recoverable amount for this CGU is based on its fair value less the costs of disposal, which was determined by discounting the planned future cash flows from continuing use of the CGU. ANYBET IN % IN % Capitalisation interest rate before tax Growth rate The following assumptions were made in estimating the fair value less the disposal costs: PFERDEWETTEN.DE AG IN % IN % Capitalisation interest rate before tax Growth rate The capitalisation interest rates are determined on the basis of the discounted cash flow (DCF) method using a riskfree interest rate of 2.75 percent (previous year 2.25 percent), The capitalisation interest rates are determined on the basis of the discounted cash flow (DCF) method using a risk-free interest rate of 2.75 percent (previous year 2.25 percent), a borrowed-capital interest rate of 6.15 percent (previous year 6.00 percent), an relevered beta of 0.95 (previous year 0.97) and a market risk premium of 5.75 percent (previous year 6.00 percent). A peer group of comparable listed companies was used for the comparative data. The above key assumptions are extrapolated monthly on the basis of historical data for the first planning year. The other four planning years are determined based on estimates of further growth by the management. For this purpose reference 72 MYBET HOLDING SE // ANNUAL REPORT 2013

75 is also made to the overall growth expectations for the gaming market in Germany based on external studies. No long-term growth was assumed. are to be examined at each balance sheet date. Changes are to be recognised through profit and loss over the remaining period until vesting. On the basis of a continuous calculation of software development services to group companies based on specified project requirements, the management expects a constantly positive EBIT in the planning period and thus a free cash flow. (J) FOREIGN CURRENCY TRANSLATION Business transactions in foreign currency are translated at the spot exchange rate on the day of the transaction into the corresponding functional currency of the group company. Changes to the key assumptions serving as the basis for the estimate of the fair value less the costs of disposal may result in an impairment of the valuations. Because the respective value in use of the remaining goodwill based on the interest rates applied is significantly higher than the carrying amounts, there is essentially a risk that the planning assumptions for customer growth and activity rates might not be achieved or that the customer acquisition costs will rise appreciably. As matters stand there are no developments suggesting it will be necessary to make such a major correction to the planning assumptions that goodwill impairment will be likely. (H) OTHER ACCRUED EXPENSES The other accrued expenses take account of all legal and constructive obligations of the mybet Group existing at the balance sheet date in respect of third parties from past occurrences, where fulfilment is probable and the amount in question can be reliably determined. The provisions are measured at the anticipated settlement value, taking account of all discernible risks. This is the best estimate of the expenditure required to settle the present obligation at the balance sheet date. Long-term accruals are reported on the basis of corresponding market rates at the discounted settlement value at the balance sheet date. (I) SHARE-BASED PAYMENTS Share-based payments to employees counterbalanced by equity instruments (employee stock options) are measured at the fair value of the equity instrument on the date of granting. Details of how the fair value is determined are provided in Note 8.8. Monetary assets and liabilities denominated in a foreign currency on the closing date of the accounts are translated into the functional currency at the closing rate. Non-monetary assets and liabilities which are measured at fair value in a foreign currency are translated at the rate applicable when the fair value was determined. Foreign currency translation differences are fundamentally reported in the profit or loss for the period. Non-monetary items that are measured at historical cost in a foreign currency are not translated. (K) REVENUE REALISATION The mybet Group realises revenue in the following areas: REVENUE Hold Gambling fees Service proceeds Handling fees Commissions Other DESCRIPTION Net betting income (balance of betting stakes and winnings) for sports and horse betting events organised, as well as payments from poker networks (rake) Net betting income (balance of betting stakes and winnings) for casino games Payment transaction services for third-party customers as well as for providing technical infrastructure to other sports betting providers Fees levied from customers for arranging lotteries and horse betting Commissions of racecourses and lottery companies for the organising of betting and lottery tickets Service and licence revenue The fair value determined upon granting is carried by the straight-line method as an expense over the period until vesting and is based on the expectations of mybet Holding SE regarding the stock options that are likely to become vested. The estimates on the number of stock options that become vested With the exception of revenue from hold and gambling fees, revenue is accounted for in accordance with IAS 18. Revenue is fundamentally recorded at the time the service is provided, if the amounts in question can be reliably determined and the economic benefit is likely to flow to the company. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.3 PRINCIPLES OF RECOGNITION AND MEASUREMENT 73

76 REVENUE FROM HOLD AND GAMBLING FEES Under IAS 39, casino stakes as well as betting stakes and betting winnings from the organising of sports and horse betting constitute financial liabilities that have the character of derivative financial instruments (see 3(f) above). rates applicable at the closing date or applicable shortly, as well as all adjustments to the tax liability in respect of previous years. Current tax liabilities also include all tax liabilities arising as a result of the determination of dividends. DEFERRED TAXES The gains and losses from these derivatives are allocated netted under revenue, as the net betting income, provided the betting event has taken place by the closing date of the accounts and the bets are thus closed. Deferred taxes are reported in respect of temporary differences between the carrying amounts of the assets and liabilities for group accounting purposes, and the amounts used for fiscal purposes. Where the betting event has not yet taken place at the closing date of the accounts and open bets therefore exist at the closing date, the betting stakes are recognised as a financial liability and measured at fair value upon initial recognition as well as subsequently. If the customer wins their bet, the derivative financial instrument is fulfilled after the betting event through the payout of winnings by way of cash settlement, and derecognised. Differences between the carrying amount (betting stake) and the cash settlement of the winnings are recognised to revenue through profit and loss as the valuation results of derivatives. If the customer loses their bet, no payout takes place and the betting stake is recognised in full as revenue. The difference between betting stakes and betting winnings corresponds to the hold or gambling fees that are reported net in the income statement as revenue. REVENUE FROM SERVICES The service proceeds are recognised as soon as the service due has been rendered. REVENUE FROM PROVISIONS AND HANDLING FEES A deferred tax asset is recognised for tax losses not yet used, tax credits not yet used and deductible temporary differences to the extent that it is probable that future taxable profit will be available for which they can be utilised. Deferred tax assets are examined on each closing date of the accounts and reduced by the amount by which it is no longer probable that the related tax advantage will be realised. Deferred taxes are measured using tax rates that are expected to be applied to temporary differences as soon as they reverse upon the application of tax rates that are applicable or have been announced at the closing date of the accounts. The measurement of deferred taxes reflects the fiscal consequences arising from the group s expectation regarding the way in which the carrying amounts of its assets or the settlement of its liabilities are realised at the closing date of the accounts. Deferred tax assets and liabilities are offset subject to certain requirements being met. The revenue from commissions and handling fees from are recorded when the underlying agency transaction has been rendered and therefore the entitlement is realised. (L) INCOME TAXES As in the previous year, a total rate of corporation and trade tax of 25 percent in Austria, 30 percent in Spain and 35 percent in Malta was used as the basis for calculating the tax recoverable and tax debt. For Germany, the tax rate is 32 percent as in the previous year. Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised within profit or loss except to the extent that they are in connection with a business combination or with an item recognised directly within equity or in the other result. CURRENT TAX Current tax is the anticipated tax liability or tax asset on the taxable income or tax loss for the financial year, based on tax (M) MISCELLANEOUS Unless otherwise indicated in individual instances, there were no interest rate risks. (N) USE OF ESTIMATES AND DISCRETIONARY DECISIONS The preparation of IFRS Consolidated Financial Statements in accordance with IFRS, as adopted within the European Union, requires management to make discretionary decisions, 74 MYBET HOLDING SE // ANNUAL REPORT 2013

77 estimates and assumptions with regard to the application of accounting methods and the reported amounts for assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are continually examined and recorded in all future periods affected. CRITICAL DISCRETIONARY DECISIONS Information on significant discretionary decisions regarding the application of accounting methods that significantly affect the amounts reported in the Consolidated Financial Statements is given in the following notes: Note 2.2 Consolidation: determining whether control exists despite the existence of a majority of the voting rights Note 3 (a) The assessment of whether unlimited useful life exists for intangible assets Note 3 (f) Classification of financial instruments Note 4.1 Revenue: realisation and recognition of the revenue from hold and gambling fees Note 4.1 Commissions: determining whether the group is acting as agent or principal in a transaction SIGNIFICANT ASSUMPTIONS AND ESTIMATES Assumptions and estimates potentially giving rise to a considerable risk such that a material adjustment will be required within the financial year ending on December 31, 2014 exist in the following areas: DETERMINATION OF FAIR VALUES IFRS requirements as adopted within the European Union, including the level in the fair value hierarchy to which these valuations belong. Key aspects of the valuation are reported to the Audit Committee. In determining the fair value of an asset or liability, as far as possible the group uses data observable on the market. Based on the input factors used in the valuation techniques, the fair values are classified into various levels in the fair value hierarchy: Level 1: Quoted prices (unadjusted) on active markets for identical assets and liabilities. Level 2: Measurement parameters that do not constitute the quoted prices taken into account in Level 1 but that can be observed either directly (in other words, as a price) or indirectly (in other words, derivatively from prices) for the asset or liability. Level 3: Measurement parameters for assets or liabilities that are not based on observable market data. If the input factors used for determining the fair value of an asset or liability can correspond to various levels of the fair value hierarchy, the fair value measurement is as a whole allocated to the level of the fair value hierarchy that corresponds to the lowest input factor that is as a whole significant for measurement. The group records reclassifications between various levels of the fair value hierarchy at the end of the reporting period in which the change occurred. A number of accounting methods and disclosures by the group call for the determination of fair values for financial and non-financial assets and liabilities. The group has specified a control framework concept for the determination of fair values. This includes a valuation team that bears general responsibility for the monitoring of all material fair value measurements, including Level 3 fair values, and reports directly to the Management Board. Further information on the assumptions made in determining fair values is provided in the following notes Disclosure 3(f) and 8.2 Financial instruments Note 8.8 Share-based payment agreements * as well as in the following remarks. IMPAIRMENT TEST The valuation team conducts regular checks of the material, non-observable input factors and of the value adjustments. If third-party information is used in determining fair values, for example price quotations of brokers or price information services, the valuation team checks the evidence obtained from the third parties in order to verify that such valuations meet The impairment test for goodwill as well as for other intangible assets with unlimited use is based on forward-looking assumptions. The key assumptions that have been taken as the basis in the determination of the recoverable amount for cash-generating units allocated to the goodwill or other intangible assets with unlimited use are listed in Note 3 (g) * The measurement rules and disclosures of IFRS 13 Fair Value Measurement are not applicable to agreements for share-based payments. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.3 PRINCIPLES OF RECOGNITION AND MEASUREMENT 75

78 Impairment. These assumptions have been made on the basis of the estimated situation at the balance sheet date. An assumption on the future development of the economic context that was considered to be realistic at that point in time was moreover taken into account in estimating future business development. The actual amounts may differ from the estimates as a result of differences between actual developments in the underlying situation and the assumed developments. In such instances the assumptions and, if necessary, the carrying amounts of the assets and liabilities in question, are adjusted. The carrying amounts reported under this item were EUR 7,927 thousand at December 31, 2013 (previous year EUR 8,189 thousand). RECOGNITION OF DEFERRED TAX ASSETS STOCK OPTION PLANS Recognition and measurement of the stock options is likewise performed on the basis of forward-looking assumptions that are built into the option price models, such as fluctuation. The actual developments in future may depart significantly from these estimates. Information on the stock option plans is provided in Note 8.8 Stock option plans. OTHER AREAS The preparation of the Consolidated Financial Statements moreover necessitates certain additional assumptions and estimates that apply to the carrying amounts of the assets, liabilities, income and expenditure recognised in the accounts. With regard to testing deferred taxes for impairment on the basis of the company s tax planning, the annual planning of the mybet Group was used as the basis, taking into account the conditions at the balance sheet date. A realistic future development of the market environment was taken into account. This planning is based on the same estimates and assumptions as the impairment tests for goodwill and the other intangible assets with unlimited use. Here too, the estimates and assumptions may therefore differ from actual experience. Further information can be found in Note 4.9 Income tax The recognition of deferred tax assets is moreover dependent on the full recognition of tax loss carry-forwards by the tax authorities. The accounts have been tax-audited up to and including On the basis of the information currently available, there is no evidence that loss carry-forwards will not be permitted. In all, the disclosure of deferred tax assets amounting to EUR 1,350 thousand (previous year EUR 969 thousand) is affected. Of this amount, EUR 626 thousand (previous year EUR 428 thousand) applies to loss carry-forwards OTHER ACCRUED EXPENSES The recognition and measurement of the other accrued expenses involves certain estimates that are based on the information available at the time of preparation of the Consolidated Financial Statements. This concerns in particular accruals for litigation. The probable outcomes of these are measured following consultation with the lawyers acting on behalf of the mybet Group. Nevertheless, the outcome of pending or future legal proceedings is often not predictable, with the result that costs exceeding the scale envisaged in the accruals could arise. Information on the other accrued expenses is provided in Note 6.5 Other accrued expenses. 76 MYBET HOLDING SE // ANNUAL REPORT 2013

79 (O) CHANGES IN RECOGNITION AND MEASUREMENT PRINCIPLES CHANGES IN RECOGNITION AND MEASUREMENT METHODS DUE TO A NEW STANDARD OR NEW INTERPRETATION In accordance with IAS 8.28, disclosures are to be made in the Notes to the Consolidated Financial Statements if the first-time adoption of a standard has effects on the period under review or on an earlier period. This rule applies even if such effects are merely possible. All changes to recognition and measurement principles fall within the scope of IAS The International Accounting Standards Board (IASB) has approved amendments to existing International Financial Reporting Standards (IFRS) and Interpretations (IFRIC) as well as certain new IFRS, the adoption of which has been mandatory since January 1, CHANGES IN RECOGNITION AND MEASUREMENT METHODS STANDARD / INTERPRETATION TITLE OF THE STANDARD/ INTERPRETATION OR AMENDMENT FIRST-TIME ADOPTION 1 Amendments to IFRS 7 Disclosures Offsetting Financial Assets and Financial Liabilities January 1, 2013 IFRS 13 Fair Value Measurement January 1, 2013 Amendments to IAS 1 Presentation of Items of Other Comprehensive Income July 1, 2012 Amendments to IAS 12 Recovery of Underlying Assets January 1, IAS 19 (rev. 2011) Employee Benefits January 1, 2013 IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine January 1, 2013 Improvements to IFRS Amendments to IFRS 1, IAS 1, IAS 16, IAS 32, IAS 34 January 1, Business years, which begin at or after date stated 2 IASB effective date 01/01/2012 AMENDMENTS TO IFRS 7 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES This amendment to IFRS 7 widens the disclosures on financial instruments that are and may be offset. The amendments have no material effect on the Consolidated Financial Statements of mybet Holding SE. IFRS 13 FAIR VALUE MEASUREMENT This standard introduces a uniform approach to fair value measurement in IFRS financial statements. All fair value measurements required under other standards must now follow the uniform rules of IFRS 13; there only continue to be separate arrangements for IAS 17 and IFRS 2. The standard moreover replaces and widens the disclosures with regard to fair value measurement in other IFRS rules. Fair value according to IFRS 13 is determined as the exit price, i.e. the price that would be realised by the sale of an asset or the price that would need to be paid in order to transfer a liability. As already known from the fair value measurement of financial assets, a three-level hierarchy is introduced to reflect the dependence on observable market prices. The group has adopted the new rules of IFRS 13 on fair value measurement prospectively and not provided any prior-year comparative information for new disclosures. Notwithstanding this, the amendment had no material impact on the measurements of group assets and liabilities. AMENDMENTS TO IAS 1 PRESENTATION OF ITEMS OF OTHER COMPRE- HENSIVE INCOME This amendment has changed the way the comprehensive income is presented in the Statement of Comprehensive Income. Items of other comprehensive income that in certain circumstances are subsequently reclassified to the income statement (recycled) are now presented separately to the items of other comprehensive income that are never reclassified. Where the items are reported gross, i.e. without netting against effects from deferred tax, deferred tax is now allocated to the two groups of items rather than simply reported as one amount. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.3 PRINCIPLES OF RECOGNITION AND MEASUREMENT 77

80 The mybet Group has complied with the changed disclosure requirements. The comparative information was adjusted accordingly. (revised 2011) now means only typical returns on the plan assets at the discount rate of the pension obligations at the start of the period are permissible. AMENDMENTS TO IAS 12 RECOVERY OF UNDERLYING ASSETS In the case of investment property it is often difficult to assess whether temporary tax differences are reversed in continued use or in the context of disposal. The amendment to IAS 12 has now clarified that the measurement of the deferred tax is to be based on the rebuttable presumption that reversal takes place through disposal. The amendment has no effects on the Consolidated Financial Statements of mybet Holding SE. IAS 19 EMPLOYEE BENEFITS (REVISED 2011) The most significant change from the revision of IAS 19 (revised 2011) concerns the accounting of pension obligations from defined benefit plans. Until now it has been possible to exercise an option on how to account for the actuarial gains and losses in the financial statements. These could be accounted for either (a) through profit and loss, (b) in other comprehensive income (OCI) or (c) with a delay using the so-called corridor method. The new version of IAS 19 has abolished this option for the sake of clearer and more readily comparable presentation, with the result that now only direct, full accounting in the year in which they occur is permissible. Reporting in other comprehensive income is mandatory. In addition, past service cost must now be reported in the year in which it occurs, directly in profit or loss. As well as the change in the accounting method, there are also changes to the disclosures, e.g. in the form of sensitivity analyses. The changed definition of termination benefits affects the accounting of the top-up amounts pledged in connection with phased retirement plans. Previously, the top-up amounts were classified as termination benefits and were consequently set aside at their full amount at the time a phased retirement contract was agreed. In view of the change in the definition of termination benefits, the top-up amount under IAS 19 (revised 2011) no longer satisfies the requirements for termination benefits. Rather, they are fundamentally other long-term employee benefits that are to be accrued over the relevant service period of the employees. Because the group neither makes pension commitments nor has concluded phased retirement contracts, the revision of IAS 19 (revised 2011) has no effect on the Consolidated Financial Statements of mybet Holding SE. IMPROVEMENTS TO IFRS Amendments were made to five standards under the Annual Improvements project. The adjustment of the wording used in individual IFRS standards is intended to clarify the existing rules. There are in addition changes that affect accounting, recognition, measurement and disclosures. The standards affected are IAS 1, IAS 16, IAS 32, IAS 34 and IFRS 1 Moreover, at the start of the accounting period the expected return on the plan assets was previously determined on the basis of the management s expectations regarding the investment portfolio s development in value. The adoption of IAS 19 The amendments have no material effect on the Consolidated Financial Statements of mybet Holding SE. 78 MYBET HOLDING SE // ANNUAL REPORT 2013

81 STANDARDS, INTERPRETATIONS AND AMENDMENTS PUBLISHED BUT NOT YET APPLIED. In accordance with IAS 8.30 an enterprise is to report on new standards or interpretations of the IASB if adoption of those standards and/or interpretations was not yet mandatory in the period under review and if they have not yet been adopted early. The adoption of these standards will have no or no significant effect on the Consolidated Financial Statements of mybet Holding SE, unless indicated separately in the explanatory remarks on the standards. STANDARD/ INTERPRETATION TITLE OF THE STANDARD/ INTERPRETATION OR AMENDMENT FIRST-TIME ADOPTION 1 IAS 8.30, ENDORSED BY EU BY DECEMBER 31, 2013 IFRS 10 Consolidated Financial Statements January 1, IFRS 11 Joint Arrangements January 1, IFRS 12 Disclosure of Interests in Other Entities January 1, Amendments to IFRS 10, IFRS 11 and IFRS 12 Amendments to IFRS 10, IFRS 12 and IAS 27 TRANSITIONAL PROVISIONS January 1, 2014 Investment Entities January 1, 2014 Amendments to IAS 27 Separate Financial Statements January 1, Amendments to IAS 28 Investments in Associates and Joint Ventures January 1, Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities January 1, 2014 Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets January 1, 2014 Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting January 1, Business years, which begin at or after date stated 2 IASB effective date 01/01/2013 IFRS 10 CONSOLIDATED FINANCIAL STATEMENTS IFRS 11 JOINT ARRANGEMENTS This standard comprehensively redefines the concept of control. If one enterprise controls another enterprise, the parent is to include the subsidiary in consolidation. According to the new concept, control exists if the potential parent has decision-making power over the potential subsidiary on the basis of voting or other rights, it participates in positive or negative variable returns from the subsidiary and can influence those returns through its decision-making power. The new standard is to be applied for the first time for financial years beginning on or after January 1, IFRS 10 is with certain exceptions to be applied retrospectively. IFRS 11 redefines the accounting of joint arrangements. Based on the new concept it is necessary to determine whether a joint operation or a joint venture exists. A joint operation exists if the parties with joint control hold direct rights to the assets and obligations for the liabilities. The individual rights and obligations are accounted for proportionately in the consolidated financial statements. On the other hand in a joint venture, the parties with joint control hold rights to the net assets. That right is reflected in adoption of the equity method in the Consolidated Financial Statements, so the option of proportionate inclusion in the Consolidated Financial Statements does not apply. The amendments have no material effect on the Consolidated Financial Statements of mybet Holding SE. The new standard is to be applied for the first time for financial years beginning on or after January 1, There are specific 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.3 PRINCIPLES OF RECOGNITION AND MEASUREMENT 79

82 provisions for the transition e.g. from proportionate consolidation to the equity method. Because the mybet group already includes joint ventures in the Consolidated Financial Statements using the equity method, the adoption of IFRS 11 in conjunction with the amended IAS 28 does not lead to any changes. IFRS 12 DISCLOSURE OF INTERESTS IN OTHER ENTITIES The amendments have no effect on consolidated financial statements that include investment entities, provided the parent itself is not an investment entity. The amendments are to be applied for the first time for financial years beginning on or after January 1, The amendments have no effect on the Consolidated Financial Statements of mybet Holding SE. This standard deals with the disclosure requirements in respect of interests in other entities. The disclosures required are considerably more extensive than the disclosures to be made previously under IAS 27, IAS 28 and IAS 31. The new standard is to be applied for the first time for financial years beginning on or after January 1, Over and above the wider disclosures required, the amendments have no material effect on the Consolidated Financial Statements of mybet Holding SE. AMENDMENTS TO IFRS 10, IFRS 11 AND IFRS 12 TRANSITION GUIDANCE AMENDMENTS TO IAS 27 SEPARATE FINANCIAL STATEMENTS In the context of the approval of IFRS 10 Consolidated Financial Statements, the rules for the control principle and the requirements for the preparation of consolidated financial statements are removed from IAS 27 and treated conclusively in IFRS 10 (see remarks on IFRS 10). As a result, IAS 27 in future contains only the rules on the accounting of subsidiaries, joint ventures and associates in IFRS separate financial statements. The amendment is to be applied for the first time for financial years beginning on or after January 1, The amendments contain a clarification and additional simplifications for the transition to IFRS 10, IFRS 11 and IFRS 12. For example adjusted comparative information is required merely for the preceding comparative period. In addition, the obligation to disclose comparative information for periods prior to first-time adoption of IFRS 12 in connection with disclosures on non-consolidated structured entities is removed. The amendments to IFRS 10, IFRS 11 and IFRS 12 are to be applied for the first time for financial years beginning on or after January 1, The amendments have no material effect on the Consolidated Financial Statements of mybet Holding SE. The amendments have no material effect on the Consolidated Financial Statements of mybet Holding SE. AMENDMENTS TO IAS 28 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES In the context of the approval of IFRS 11 Joint Arrangements, adjustments were also made to IAS 28. As previously, IAS 28 deals with use of the equity method. However the scope is significantly broadened by the approval of IFRS 11 because in future, investments not only in associates, but also in joint ventures (see IFRS 11) will have to be measured using the equity method. Application of proportionate consolidation for joint ventures is thus not required. AMENDMENTS TO IFRS 10, IFRS 12 AND IAS 27 INVESTMENT ENTITIES The amendments contain a definition of the term investment entities and remove such entities from the scope of IFRS 10 Consolidated Financial Statements. Investment entities do not now include the entities they control in their IFRS consolidated financial statements; this exception to the general principles is not to be understood as an option. Instead of comprehensive consolidation, they measure investment entities at fair value and report periodic fluctuations in value in profit or loss. A further amendment concerns accounting according to IFRS 5 if only a portion of an investment in an associate or joint venture is available for sale: IFRS 5 is to be applied to the portion that is to be disposed of, while the remaining portion (to be retained) is to be still accounted for using the equity method until the disposal of the former portion. The amendment is to be applied for the first time for financial years beginning on or after January 1, Because the mybet group already includes joint ventures in the Consolidated Financial Statements using the equity method, 80 MYBET HOLDING SE // ANNUAL REPORT 2013

83 the adoption of IFRS 11 in conjunction with the amended IAS 28 does not lead to any changes. The amendments have no material effect on the Consolidated Financial Statements of mybet Holding SE. AMENDMENTS TO IAS 32 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES AMENDMENT TO IAS 39 NOVATION OF DERIVATIVES AND CONTINUA- TION OF HEDGE ACCOUNTING This supplement to IAS 32 clarifies the requirements for the offsetting of financial instruments. In the supplement, the meaning of the current legal entitlement to offsetting is explained and it is clarified what methods involving gross settlement can be regarded as net settlement within the meaning of the standard. The amendment to IAS 32 is to be applied for the first time for financial years beginning on or after January 1, The amendments have no material effect on the Consolidated Financial Statements of mybet Holding SE. AMENDMENT TO IAS 36 RECOVERABLE AMOUNT DISCLOSURES FOR NON-FINANCIAL ASSETS Following a consequential amendment from IFRS 13 Fair Value Measurement, a new mandatory disclosure on the goodwill impairment test to IAS 36 was introduced: the recoverable amount of the cash-generating units is to be disclosed, irrespective of whether impairment has actually been applied. As this disclosure was introduced unintentionally, it is removed again by this amendment from May On the other hand this amendment results in additional disclosures if impairment was actually applied and the recoverable amount was determined on the basis of a fair value. The amendments are to be applied for the first time for financial years beginning on or after January 1, As a result of this amendment, statutory requirements mean that in certain circumstances derivatives continue to be designated as hedges in continuing hedging relationships, despite novation of a hedge to a central counterparty. The amendments are to be applied for the first time for financial years beginning on or after January 1, The amendments have no material effect on the Consolidated Financial Statements of mybet Holding SE. NOTES TO THE CONSOLIDATED INCOME STATEMENT 4.1 REVENUE Revenue includes the hold from sports and horse betting organised, gambling fees from casino and poker games as well as commissions and proceeds from the handling of lottery and horse betting. Compared to the previous period, the growing significance of service proceeds has been recognised and this item is now reported separately within revenue. It mainly consists of income from the rebilling of payment transaction services to partners outside the group. The figures for the previous period were adjusted correspondingly and are shown in the following table. REVENUE REVENUE 2012 (AS STATED IN 2012 ANNUAL REPORT) RECLASSES REVENUE 2012 (AFTER RECLASSIFICATION) Commissions 1, ,060 Gambling fees 25,098-2,578 22,520 Hold 37, ,631 Other 1, ,864 Service proceeds 0 2,056 2,056 Handling fees 4, ,619 Total 69, , CONSOLIDATED FINANCIAL STATEMENTS // 04.4 NOTES TO THE CONSOLIDATED INCOME STATEMENT 81

84 In addition, a reassessment of the recognition of the revenue achieved with a B2B partner was carried out. This led to a correction to the hold (EUR -491 thousand) in the comparative period. Correspondingly, the commissions for venture partners also fell in the comparative period (EUR -444 thousand); following further reclassification these are now reported under the cost of purchased materials (see Note 4.4). The revenue from this B2B business is now equally presented in a more accurate way under service proceeds (EUR 47 thousand for the comparative period). The amount of EUR 1,284 thousand was reclassified from gambling fees to other revenue in the comparative period. This sum relates to proceeds from the handling of payment transactions charged to customers. An opposite effect arose from the reclassification from other revenue to service proceeds, with the amount of EUR 462 thousand relating to the billing of a B2B partner in the comparative period. REVENUE CHANGE IN % Hold 36,166 36, % Gambling fees 22,965 22, % Service proceeds 3,438 2, % Handling fees 1,674 4, % Commissions 1,181 1, % Other 1,605 1, % Total 67,028 68, % Revenue fell slightly by 2.5 percent compared with the previous year (previous year percent). There was marked variation in how the individual types of revenue developed. The hold from sports betting declined by 1.0 percent overall to EUR 31,751 thousand (previous year EUR 32,063 thousand). Offline business showed a negative development due to system failures in the first quarter of 2013 and the consolidation of the franchise portfolio, and fell by 13.3 percent to EUR 17,773 thousand (previous year EUR 20,499 thousand). On the other hand online business rose by 20.8 percent to EUR 13,978 thousand (previous year EUR 11,564 thousand), but did not equal the growth rate of the reference period. The hold from horse betting fell by 2.8 percent to EUR 4,415 thousand (previous year EUR 4,568 thousand). odds. Strong growth of 67.2 percent to EUR 3,438 thousand (previous year EUR 2,056 thousand) was achieved in that area. The handling fees fell sharply by 63.8 percent to EUR 1,674 thousand (previous year EUR 4,619 thousand), mainly as a result of the sale of German-language lottery operations in the previous period. This item now mainly comprises proceeds from the Spanish lottery activities for the first eleven months of the period under review, as DIGIDIS SL was only deconsolidated with effect from November 30, The commissions mainly comprise agency commission of pferdewetten.de AG and of DIGIDIS SL. This item increased overall by 11.4 percent to EUR 1,181 thousand (previous year EUR 1,060 thousand). The gambling fees from casino games were up 10.5 percent at EUR 21,328 thousand (previous year EUR 19,294 thousand), overcompensating for the loss of income from the cessation of French activities in the third quarter of Other revenue mainly comprises proceeds from the furnishing of shops and declined due to the lower number of new shops opened. It also includes proceeds from a small number of slot machines. The service proceeds consist mainly of the payment services performed by C4U-Malta Ltd. for third-party customers and B2B business with a provider in the sports betting area. In that instance mybet provides the technical infrastructure and the betting 4.2 PRODUCTION FOR OWN ASSETS CAPITALISED Production for own assets capitalised of EUR 2,194 thousand (previous year EUR 1,446 thousand) relates to internally 82 MYBET HOLDING SE // ANNUAL REPORT 2013

85 produced intangible assets. The intangible assets in question are exclusively internally produced software. The main basis for the development of new products and new software modules is the mybet platform, which is being steadily refined by ANYBET GmbH. The main projects of 2013 included the platform s multi-currency capability, the betting terminals and mobile applications. Third-party services were used for the development of the terminals and mobile applications. 4.3 OTHER OPERATING INCOME Other operating income mainly comprises the reversal of accruals (EUR 69 thousand, previous year EUR 133 thousand), income unrelated to the accounting period (EUR 39 thousand, previous year EUR 106 thousand), from the realisation of receivables already written off and the rebilling of expenditure to shop partners (EUR 445 thousand, previous year EUR 407 thousand), income from charges for cash-value benefits (EUR 95 thousand, previous year EUR 117 thousand) and the rebilling of cost of purchased materials to B2B partners (EUR 100 thousand, previous year EUR 137 thousand). In the comparative period a substantial portion of EUR 7,738 thousand was received by way of the sales proceeds for the lottery operations. In the period under review, the item consequently fell to EUR 1,528 thousand (previous year EUR 10,392 thousand). 4.4 COST OF PURCHASED MATERIALS The components that make up the cost of purchased materials were redefined for the period under review. In view of their high dependence on revenue, the commission charges for venture partners and franchisees (EUR 31,516 thousand, previous year EUR 29,344 thousand) were reclassified from other operating expenses to cost of purchased materials. The granting of the e-money licence for C4U and the expansion in business with third-party customers that it has prompted have given the expenses for payment transactions the character of costs for the direct provision of payment transaction services. These expenses were therefore reclassified from other operating expenses to cost of purchased materials (EUR 2,997 thousand, previous year EUR 2,749 thousand). EUR 1,664 thousand was reclassified from the licence fees and gambling tax to other cost of purchased materials, and a further EUR 622 thousand relating to pferdewetten.de AG was reclassified to other operating expenses (marketing). The following table shows a detailed breakdown of the reclassifications to the cost of purchased materials for COST OF PURCHASED MATERIALS COST OF PURCHASED MATE- RIALS 2012 (AS STATED IN 2012 ANNUAL REPORT) RECLASSES COST OF PURCHASED MATERIALS 2012 (AFTER RECLASSIFICATION) ORIGINAL ITEM / TARGET ITEM T T T Commission charges 0 29,344 29,344 from other operating expenses: commissions for venture partners / marketing Licence fees, gambling taxes 6,022-2,286 3,736 in cost of purchased materials: other cost of purchased materials / in other operating expenses: marketing Betting bonuses 3, ,652 No reclassification Payment transaction expenses 0 2,749 2,749 from other operating expenses: payment transaction costs Other cost of purchased materials 0 1,664 1,664 from cost of purchased materials: licence fees, gambling taxes Total 9,674 31,471 41, CONSOLIDATED FINANCIAL STATEMENTS // 04.4 NOTES TO THE CONSOLIDATED INCOME STATEMENT 83

86 This item increased overall by 9.8 percent to EUR 45,164 thousand (previous year EUR 41,145 thousand). The figure for the comparative period includes EUR 73 thousand for the JAXX Group, which was deconsolidated with effect from May 1, After elimination of this effect, the rate of increase is 9.8 percent. The following comparisons refer to the adjusted figures. COMMISSION CHARGES This item was up 7.4 percent on the comparative period to EUR 31,516 thousand (previous year EUR 29,344 thousand). It was mostly made up of commissions for franchisees, which are normally paid on the basis of the hold generated in the betting shop. The commissions for shop partners fell by 8.9 percent to EUR 11,661 thousand (previous year EUR 12,795) and thus by a slower rate than the hold (-13.3 percent). It also includes the commissions for the JAXX Group, sold on May 1, 2012, with a rate of increase of 26.4 percent to EUR 4,230 thousand (previous year EUR 3,401 thousand). The royalty fees were to be eliminated within the group in the first four months of the previous year and reallocated to third-party expenses after sale. With the current reporting period, a full calendar year is therefore being compared with an eight-month period. The expenses for sales partners operating as self-employed field representatives between mybet and the franchisees fell underproportionally to the hold by 9.6 percent to EUR 1,718 thousand (previous year EUR 1,899 thousand). The reassessment of recognition of the revenue achieved with a B2B partner led to a correction in the comparative period of both the hold (EUR -491 thousand) and the commissions for venture partners (EUR -444 thousand). LICENCE FEES, GAMING TAXES This item increased by 31.4 percent in the period under review to EUR 4,909 thousand (previous year EUR 3,736 thousand). This development was driven by the overproportional rise in licence payments to the casino operators of 23.7 percent to EUR 2,777 thousand (previous year EUR 2,120 thousand). Licence costs as a share of the hold from casino products climbed from 11.0 percent in the previous period to 13.1 percent in the period under review. Licence expenditure for poker declined by 8.5 percent to EUR 520 thousand (previous year EUR 564 thousand) and therefore by a slower rate than the decline in the poker hold (-21.0 percent). BONUS EXPENDITURE The expenditure for various types of bonuses climbed by 21.2 percent to EUR 4,425 thousand (previous year EUR 3,652 thousand). This item includes EUR 432 thousand for a time-limited offer by mybet to to absorb the sports betting levies on combination bets placed by German customers. After elimination of this effect, the rate of increase is 9.3 percent. OTHER COST OF PURCHASED MATERIALS The major component of expenditure for data purchases went up by 8.1 percent to EUR 1,007 thousand (previous year EUR 931 thousand). mybet purchases betting odds from third-party providers, has them assessed by its own team of bookmakers and adjusts them to reflect its own assessment of the risk. This approach enables mybet to offer its customers individualised, market-led odds. PAYMENT TRANSACTION EXPENSES The expenditure for payment transactions climbed overall by 9.1 percent to EUR 2,997 thousand (previous year EUR 2,749 thousand). It is mainly in connection with online customer transactions. The rate of increase was below the rate of increase for online betting stakes. 4.5 PERSONNEL EXPENSES This item declined by 0.4 percent to EUR 10,952 thousand and therefore basically remained at the previous year s level (previous year EUR 10,991 thousand). The figure for the comparative period includes EUR 684 thousand for the JAXX Group, which was deconsolidated with effect from May 1, After elimination of this effect, the rate of increase is 6.3 percent. The following explanatory notes refer to these adjusted figures. In the QED Group, personnel expenses increased by 15.0 percent to EUR 4,435 thousand (previous year EUR 3,856 thousand). As well as to pay increases, this was attributable to the recruitment of personnel at mybet Italia. pferdewetten.de AG saw a 9.8 percent increase in personnel expenses to EUR 1,074 thousand (previous year EUR 978 thousand). This includes the amount of EUR 37 thousand (previous 84 MYBET HOLDING SE // ANNUAL REPORT 2013

87 year EUR 23 thousand) allocated for stock options pursuant to IFRS The deconsolidation of DIGIDIS SL with effect from November 30, 2013 means an eleven-month reporting period is compared with a full prior-year period. There were in addition savings at management level. Personnel expenses fell by 20.2 percent to EUR 637 thousand (previous year EUR 798 thousand). More personnel were recruited for software development activities, and as a result personnel expenses rose 19.4 percent to EUR 2,858 thousand (previous year EUR 2,393 thousand). The increase correlates to the rise in the number of employees in that area. Personnel expenses for mybet Holding SE fell by 18.4 percent to EUR 1,700 thousand (previous year EUR 2,084 thousand). The major factor behind the decrease was the profit-related bonuses for the Management Board members in the previous year. There was an opposite effect from accruals for settlements in the period under review. A positive effect results from the reversal of lapsed options pursuant to IFRS 2.28 (EUR 54 thousand). The sum of EUR 10 thousand (previous year EUR 67 thousand) was added pursuant to IFRS At the reporting date there were 169 employees (previous year 171). There were 182 employees as an average for the year (previous year 176). No further categorisation is performed as the group has only office employees. 4.6 DEPRECIATION AND AMORTISATION This item includes the ongoing depreciation and amortisation of intangible assets, property, plant and equipment and investment property, which are to be stated separately in the Assets Movement Schedule. Depreciation of fixed assets increased by 12.1 percent in the period under review to EUR 4,196 thousand (previous year EUR 3,744 thousand). The amount includes EUR 451 thousand for depreciation of the fixed assets of mybet Italia (see Note 4.7). 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.4 NOTES TO THE CONSOLIDATED INCOME STATEMENT 85

88 4.7 OTHER OPERATING EXPENSES OTHER OPERATING EXPENSES CHANGE IN % Marketing, sales, IR 6,202 7, % Service and maintenance, hosting, technical services 2,982 1, % Impairment of current assets 1, Other consultancy costs 1,531 1, % Costs of premises % Legal consultancy costs % Travel and entertainment costs % Deconsolidation Membership and other fees, insurance % Losses on receivables % Costs of annual accounts and audit % Non-deductible input tax % Telephone % Vehicle costs % Other personnel expenses % Other operating supplies % Payment transaction costs % Supervisory Board remuneration % Exchange differences on translation % Other services % Office supplies % Other operating expenses 2,705 1, % Total 21,624 17, % The components that make up other operating expenses were redefined for the period under review. In view of their high dependence on revenue, the commission charges for venture partners and franchisees (EUR 31,516 thousand, previous year EUR 29,344 thousand) were reclassified from other operating expenses to cost of purchased materials. The prior-year figures were adjusted correspondingly (cf. Note 4.4). Other operating expenses rose by 23.8 percent year on year to EUR 21,624 thousand (previous year EUR 17,462 thousand). IMPAIRMENT OF CURRENT ASSETS This item consists mainly of the amortisation of the loans granted to DIGIDIS SA amounting to EUR 778 thousand. In addition, the current assets of mybet Italia apart from cash were fully written off by EUR 264 thousand. The calculation of write-down is based on the estimates of the Management Board, taking particular account of the negative earnings performance in the past and the negative planning figures or the non-materialisation of planning assumptions. 86 MYBET HOLDING SE // ANNUAL REPORT 2013

89 MARKETING, SALES, INVESTOR RELATIONS This item declined by 13.4 percent compared with the comparative period to EUR 6,202 thousand (previous year EUR 7,162 thousand). The figure for the previous period includes EUR 228 thousand from JAXX business, which was disposed of on May 1, After elimination of this effect, expenses fell by 10.6 percent. The following disclosures refer to the adjusted figures. The expenses for online marketing fell by 14.4 percent to EUR 3,554 thousand (previous year EUR 4,128) and thus by a slower rate than the development in the hold from online activities. This positive effect is mainly the result of a further efficiency improvement. In the area of advertising, consultancy on advertising strategy and advertisement costs for print media were major cost components. EUR 357 thousand (previous year EUR 710 thousand, percent) was incurred for these activities in the period under review. There was a 24.3 percent increase in sponsorship activities to EUR 1,589 thousand (previous year EUR 1,279 thousand). As well as maintaining its involvement in the football clubs Fortuna Düsseldorf, Eintracht Braunschweig, Greuther Fürth and VfR Neumünster, the group supported other events such as the handball World Championship in Spain at the start of the 2013 financial year. These investments have the objective of increasing the number of direct registrations by customers by boosting brand awareness, thus lowering the acquisition costs per customer in the medium term. Cost items of less than EUR 100 thousand in the year under review and in the previous year as well as expenses that do not belong under any of the items listed were grouped together under this item. PAYMENT TRANSACTION COSTS In the past, the payment transaction costs incurred in connection with customer transactions were reported under other operating expenses. They are now allocated to the cost of purchased materials in the amount of EUR 2,997 thousand (previous year EUR 2,749 thousand). The background to this change is the growing significance of C4U s business with customers outside the group since it was granted a permit to operate as a financial and e-money institution. The purchase costs of the bought-in services that are used in handling transactions are thus allocable to the cost of purchased materials. The prior-year figures were adjusted accordingly. This item therefore now comprises the payment transaction costs for the group s business operations, which fell by 3.4 percent to EUR 251 thousand (previous year EUR 260 thousand). The figure for the comparative period includes EUR 22 thousand for the JAXX Group, which was disposed of with effect from May 1, After elimination of this effect, the costs of payment transactions went up by 5.7 percent. LEGAL CONSULTANCY AND LEGAL COSTS The distribution costs of EUR 272 thousand (previous year EUR 547 thousand, percent) were made up mainly of expenditure for syndicates of the Spanish subsidiary DIGIDIS SL. DI- GIDIS SL was deconsolidated with effect from November 30, 2013, with the result that an eleven-month reporting period is compared with a full prior-year period. OTHER OPERATING EXPENSES This item increased percent in the year under review to EUR 2,705 thousand (previous year EUR 1,067 thousand). Expenditure of EUR 1,383 thousand for levies on proceeds from casino and poker products booked to income as a precaution and relating to previous periods was a major factor. The item in addition includes the derecognition of receivables (EUR 73 thousand) that became uncollectable as a result of the consolidation of shop business. This item fell by 1.0 percent in the period under review to EUR 741 thousand (previous year EUR 748 thousand). It includes EUR 10 thousand for the comparative period that is allocable to the JAXX Group, which was disposed of on May 1, After elimination of this effect, the rate of increase is 0.4 percent. The following information refers to the figures after this effect has been stripped out. The legal consultancy costs reflect the ongoing expenditure on litigation in connection with the regulatory environment and the licence application under the E-15 process. It additionally includes expenditure for consultancy on corporate and employment law. OTHER CONSULTANCY COSTS The other consultancy costs were up 10.6 percent on the previous period to EUR 1,531 thousand (previous year EUR 1, CONSOLIDATED FINANCIAL STATEMENTS // 04.4 NOTES TO THE CONSOLIDATED INCOME STATEMENT 87

90 thousand). The figure for the comparative period includes EUR 37 thousand for the JAXX Group, which was deconsolidated with effect from May 1, After elimination of this effect, the rate of increase is 13.7 percent; the following comparisons refer to the adjusted figures. The expenditure for freelance employees who work for companies of the QED Group has a major influence on the level of other consultancy costs. This expenditure rose by 18.9 percent in the period under review to EUR 1,151 thousand (previous year EUR 968 thousand). In mybet Holding SE, consultancy costs climbed by 25.1 percent to EUR 362 thousand (previous year EUR 290 thousand). This mainly comprises expenses for strategic consultancy, the costs of appraisals, as well as the cost of evaluations of entry into international markets. At the other subsidiaries, spending on consultancy was at a more modest level, on a par with the previous year. COSTS OF PREMISES there was a 1.5 percent increase in the costs of premises to EUR 962 thousand (previous year EUR 948 thousand). The figure for the comparative period includes EUR 7 thousand for the JAXX Group, which was deconsolidated with effect from May 1, After elimination of this effect, the costs of premises rose by 2.3 percent and were therefore on a par with the previous year s level. MEMBERSHIP AND OTHER FEES, INSURANCE This item rose by 27.6 percent in the period under review to EUR 615 thousand (previous year EUR 482 thousand). The figure for the comparative period includes EUR 2 thousand from the JAXX Group, which was deconsolidated with effect from May 1, After elimination of this effect, the rate of increase is 28.2 percent. The comparisons below refer to the adjusted figures. The company has concluded insurance policies to cover various operating risks (see Note 8.3). Expenditure on this fell by 23.4 percent in the period under review to EUR 126 thousand (previous year EUR 164 thousand). Expenses for membership and other fees rose by 68.5 percent to EUR 64 thousand (previous year 37.9 percent). This item also includes expenditure for fines amounting to EUR 426 thousand (previous year EUR 278 thousand). COSTS OF ANNUAL ACCOUNTS AND AUDIT The costs of annual accounts and audit were up 24.6 percent on the previous period to the amount of EUR 454 thousand (previous year EUR 365 thousand). The figure for the comparative period includes EUR 3 thousand from JAXX business, which was disposed of with effect from May 1, After elimination of this effect, the rate of increase is 25.5 percent. TRAVEL AND ENTERTAINMENT COSTS Travel and entertainment costs rose by 19.0 percent in the period under review to EUR 694 thousand (previous year EUR 583 thousand). The figure for the comparative period includes EUR 1 thousand for the JAXX Group, which was deconsolidated with effect from May 1, After elimination of this effect, the rate of increase is 19.2 percent. The rise is attributable to increased travel as a result of greater diversification into international markets. DECONSOLIDATION This item shows the difference between the asset and debt positions of DIGIDIS SL, which was deconsolidated with effect from November 30, Major factors behind the increase included specially commissioned appraisals in connection with the sale of JAXX business (EUR 62 thousand) and the licensing process for German sports betting business (EUR 30 thousand). The costs of auditing the annual financial statements were on a par with the previous year. BAD DEBT COSTS Bad debt costs fell by 35.0 percent to EUR 497 thousand (previous year EUR 764 thousand). This development was mainly attributable to the sharp drop in bad debts from Spanish business (EUR -142 thousand) thanks to changed processes in extending syndicate shares. Whereas in the past the extension process was started concurrently with the payment process, in the period under review the shares were only effectively extended once payment had been made. 88 MYBET HOLDING SE // ANNUAL REPORT 2013

91 In offline sports betting business, the item rose by 34.6 percent to EUR 413 thousand (previous year EUR 307 thousand). This was mainly from the realisation of bad debts in connection with the consolidation of shop business and a disruption to payments in the newly established shop business in Cyprus (EUR 75 thousand). EXPENSE FROM FOREIGN CURRENCY TRANSLATION This item fell by 80.2 percent to EUR 65 thousand (previous year EUR 325 thousand). A major component in the comparative period was expenditure of EUR 220 thousand in connection with the sale of the JAXX Group on May 1, NON-DEDUCTIBLE INPUT TAX Individual operating units of the mybet Group are not entitled to deduct input tax because they do not generate any revenue on which input tax is chargeable. The input tax is reported as an expense at those subsidiaries. The 24.9 percent increase to EUR 404 thousand (EUR 323 thousand) results mainly from the start-up costs for C4U as a financial and e-money institution. TELEPHONE COSTS In the period under review, expenditure arose mainly from exchange rate differences affecting poker business handled in US dollars. OFFICE SUPPLIES Expenditure for office supplies declined by 58.1 percent to EUR 46 thousand (previous year EUR 109 thousand). In the comparative period, over and above the customary expenditure EUR 47 thousand was spent on setting up the office in Italy. The telephone costs are incurred mainly in connection with providing customer care; the 6.4 percent increase to EUR 326 thousand (previous year EUR 306 thousand) reflects slower growth than that for customer activity, which accelerated by 12.7 percent in the year under review. VEHICLE COSTS The item includes leasing costs and vehicle operating expenditure. These are incurred for sales employees at the shops and for pay components to which managers are contractually entitled. The 16.9 percent increase to EUR 314 thousand (EUR 269 thousand) stems mainly from sales activities. OTHER PERSONNEL EXPENSES 4.8 INTEREST RESULT AND OTHER FINANCIAL RESULT The other interest and similar income results from bank balances. The interest expense relates principally to loans of EUR 80 thousand (previous year EUR 105 thousand) and the convertible bond issued in September 2008 (EUR 4 thousand in total, previous year EUR 6 thousand). Of the total interest expense of EUR 94 thousand (previous year EUR 111 thousand), an amount of EUR 94 thousand had a cash effect in the period under review (previous year EUR 103 thousand). All interest expense comes under the category Financial liabilities at amortised cost. The item comprises substantially the expenditure for personnel recruitment and continuing education. A key factor behind the rise of 77.3 percent to EUR 304 thousand (previous year EUR 171 thousand) is the contingent fees that were due to staffing agencies for the placement of employees for software development. SUPERVISORY BOARD REMUNERATION The Supervisory Board remuneration fell by 53.4 percent to EUR 114 thousand (previous year EUR 244 thousand). The figures for the comparative period included profit-related bonuses arising on the basis of the remuneration system approved by the Shareholders Meeting. Details are provided in the remuneration report, which is part of the management report. The depreciation and amortisation of investments includes EUR 260 thousand relating to DIGIDIS SA (see Note 2.3). The depreciation and amortisation of other non-current financial receivables of EUR 265 thousand results from the value adjustment of a loan that DIGIDIS SL had granted to a company outside the group INCOME TAX Income tax includes corporate taxes such as corporation and trade tax, or similar taxes of domestic and foreign companies. In addition to the current tax expense for individual subsidiaries, this item includes the deferred tax expense or income from the origination and reversal of temporary differences and of tax loss carry-forwards. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.4 NOTES TO THE CONSOLIDATED INCOME STATEMENT 89

92 Deferred tax assets are netted against deferred tax liabilities if they relate to income taxes collected by the same tax office and if an entitlement exists to net a current tax refund claim against a current tax liability. The notional expense for income tax that would have arisen if the tax rate for the group parent mybet Holding SE of 32.0 percent had been applied to the IFRS consolidated earnings before tax can be reconciled with the income tax according to the income statement as follows: PROGRESSION FROM ANTICIPATED TAX INCOME TO REPORTED TAX INCOME Net profit/loss for the period before tax -11,495 7,209 Anticipated tax income / previous year: tax expense (32% / previous year 30 %) -3,678 2,307 Non-deductible expenses Use of loss carry-forwards Deviations in the fiscal assessment basis Corrected disclosure deferred tax assets 3, Tax-free income Expense from differences in local tax rates Tax income / expense not relating to the period Deconsolidation result Miscellaneous Tax income / previous year: Tax expense ,098 INCOME TAX EXPENSE / INCOME BREAKDOWN Current tax income of which from previous year Current tax expense (+) / tax income (-) - from temporary differences from the use of tax loss carry-forwards from adjustment to previous year from corrected disclosure for deferred tax assets from reversals as well as depreciation and amortisation 0-75 Total deferred tax income Tax income , MYBET HOLDING SE // ANNUAL REPORT 2013

93 DEFERRED TAXES 12/31/13 12/31/12 IN 000 ASSETS LIABILITIES ASSETS LIABILITIES Intangible assets Tangible assets Accrued expenses Loss carry-forwards 1, Costs of capital increase (mybet Holding SE) Gross amount 1, , Offsetting Net amount 1, DEFERRED TAXES CLOSING LEVEL 31/12/2011 / OPENING LEVEL 01/01/2012 RECOGNISED IN INCOME THROUGH PROFIT AND LOSS CLOSING LEVEL 31/12/2012 / OPENING LEVEL 01/01/2013 RECOGNISED IN INCOME TH- ROUGH PROFIT AND LOSS THROUGH DE- CONSOLIDA-TION RESULT CLOSING LEVEL 31/12/2013 IN 000 Intangible assets Property, plant and equipment -4 4 Accrued expenses Loss carry-forwards 1, , ,236 Costs of capital increase (mybet Holding SE) From operations held for sale , ,350 The soundness of the deferred tax assets on loss carry-forwards is based on corporate plans in conjunction with the past development of the individual group companies EUR 71,215 thousand (previous year EUR 60,045 thousand) for which no deferred taxes were recognised. The loss carry-forwards can be carried forward indefinitely. After offsetting, deferred tax assets totalling EUR 626 thousand (previous year EUR 428 thousand) were reported for unused loss carry-forwards of the mybet Holding Group amounting in total to EUR 1,956 thousand (previous year EUR 1,347 thousand). There existed loss carry-forwards amounting to 4.10 NET PROFIT/LOSS FOR THE PERIOD The net loss for the year is EUR 10,960 thousand, as against a profit of EUR 6,108 thousand for the previous year. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.4 NOTES TO THE CONSOLIDATED INCOME STATEMENT 91

94 5 NOTES TO THE CASH FLOW STATEMENT 5.1 CASH FLOW FROM OPERATING ACTIVITIES Cash inflows in the previous period were arose in particular from the purchase price collected for the disposal of the lottery operations for a total of EUR 7,860 thousand. The cash flow from operating activities comprises largely earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for non-cash expenses and income of EUR 1,146 thousand. A significant component of this item is the increased minority interest in pferdewetten.de AG as a result of the sale of shares. The effects deriving from this of the remeasurement of the minority interest at the date of initial consolidation as well as the higher attributed current earnings for the financial year compared to the previous year led to a change of EUR 882 thousand. The major factor in the comparative period was the divestment proceeds of EUR 7,738 thousand from the sale of the German-language Lotteries division. The rise in liabilities and in other equity and liabilities mainly reflects the amounts set aside for non-recurring effects CASH FLOW FROM FINANCING ACTIVITIES There were cash outflows of EUR 325 thousand in the financial year (previous year EUR 152 thousand) for the redemption of loans and convertible bonds. The cash outflow for the redemption of bonds and loans was covered mainly from the sale of properties. The proceeds were used to redeem them. The financial resources correspond to credit balances with banks due in the short term. CONSOLIDATED BALANCE SHEET 6.1 NON-CURRENT ASSETS INTANGIBLE ASSETS 5.2 CASH FLOW FROM INVESTING ACTIVITIES Investing activities comprised mainly cash outflows for the acquisition of intangible assets and property, plant and equipment. The intangible assets include goodwill and other intangible assets from the various corporate acquisitions. An amount of EUR 2,194 thousand was in addition capitalised for internally produced software (previous year EUR 1,446 thousand). DEVELOPMENT OF GOODWILL 31/12/2012 DEPRECIATION AND AMORTISATION 31/12/ Anybet GmbH QED (mybet) 5, ,581 Digidis , ,186 The other intangible assets furthermore include EUR 1,138 thousand and EUR 603 thousand respectively for the brands and domains acquired in connection with the takeover of pferdewetten.de AG. These assets have an indefinite useful life and are not depreciated. An impairment test carried out revealed no need for write-downs. The development in the carrying amounts of these goodwill items, together with the prior-year figures, is given in the enclosed Assets Movement Schedule. 92 MYBET HOLDING SE // ANNUAL REPORT 2013

95 6.1.2 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment comprises hardware, office equipment and furnishings, and other fixtures and fittings. Hardware is depreciated by the straight-line method over a period of three to four years, and office equipment and furnishings and other fixtures and fittings are depreciated by the straight-line method over a useful life of between three and ten years. Further details of costs and depreciation are provided in the Assets Movement Schedule INVESTMENT PROPERTY Depreciation of the investment property is performed by the straight-line method over 50 years; the remaining useful life is 33 years. One apartment was sold in the financial year (previous year two apartments). As a result of the sales in recent years, the fair value of the apartments has largely been clarified at the level of the carrying amount. No valuation by an expert was carried out. Rental income totalled EUR 11 thousand in 2013 (previous year EUR 29 thousand), and costs for marketing, maintenance and repairs EUR 15 thousand (previous year EUR 6 thousand). Proceeds of EUR 94 thousand (previous year EUR 178 thousand) were realised from the sale FINANCIAL ASSETS ACCOUNTED FOR USING THE EQUITY METHOD The financial asset of the shares of DIGIDIS SA accounted for using the equity method in the previous year (EUR 260 thousand) is reported as held for sale (see Note 2.4) FINANCIAL ASSETS The financial assets include the investment in Seepark Sellin AG, which is reported at cost because no active market for the investment exists (see also disclosures on the financial assets and other receivables, 4.8, and 8.2). 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.6 CONSOLIDATED BALANCE SHEET 93

96 6.1.6 DEFERRED TAXES For disclosures concerning deferred taxes, please refer to Note 4.9. ASSETS MOVEMENT SCHEDULE 2013 ACQUISITION AND MANUFACTURING COST DEPRECIATION AND AMORTISATION POSITION AT 1/1/ RECLASSES 000 ADDITIONS 000 DISPOSALS 000 DECON- SOLIDATION DIGIDIS S.L. 000 POSITION AT 12/31/ POSITION AT 1/1/ I. Intangible assets 1. Licences, software, rights of use and customer base 15, , ,961 8,801 10, Goodwill 11, ,867 5, Payments on account Internally produced software 5. intangible assets under development. 10, ,879 7, , , , , ,219 33,664 23,084 II. Property, plant and equipment 1. Leasehold improvements 2. Other assets, fixtures and fittings 3. Construction in progress , ,608 4, , ,086 4,557 III. Investment property Total 43, , ,431 39,952 27, MYBET HOLDING SE // ANNUAL REPORT 2013

97 RECLASSES 000 ADDITIONS (SCHEDULED) 000 ADDITIONS (FROM IM- PAIRMENT) 000 ADDITIONS (CHANGE *) 000 ABGÄNGE 000 DECON- SOLIDATION DIGIDIS S.L. 000 POSITION AT 12/31/ CARRYING AMOUNT 12/31/ CARRYING AMOUNT 12/31/ , ,283 4,863 3,937 4, ,682 6,186 6, , ,662 2,217 2, , , ,513 19,207 14,457 14, , ,965 1,121 1, , ,615 24,212 15,740 15,929 * Additions (change in non-current assets held for sale) 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.6 CONSOLIDATED BALANCE SHEET 95

98 ASSETS MOVEMENT SCHEDULE 2012 ACQUISITION AND MANUFACTURING COST POSITION AT 1/1/ RECLASSES 000 ADDITIONS 000 DISPOSALS 000 POSITION AT 12/31/ I. Intangible assets 1. Licences, software, rights of use and customer base 15,361 1,029 1,087 2,450 15, Goodwill 11, , Payments on account Internally produced software 9, , Construction in progress ,482 1,029 2,660 2,450 37,721 II. Property, plant and equipment 1. Leasehold improvements Other assets, fixtures and fittings 8, ,369 5, Construction in progress 1, , , ,696 5,593 III. Investment property IV. Financial assets 1. Investments accounted for using the equity method Investments Total 47,521 1,499 3,298 8,404 43, MYBET HOLDING SE // ANNUAL REPORT 2013

99 DEPRECIATION AND AMORTISATION POSITION AT 1/1/ RECLASSES 000 ADDITIONS 000 DISPOSALS 000 POSITION AT 12/31/ CARRYING AMOUNT 12/31/ CARRYING AMOUNT 12/31/ , ,734 2,438 10,301 4,726 4,919 5, ,420 6,449 6, , , ,364 2,743 3, , ,266 2,438 23,084 14,637 14, , ,309 4, , , , ,635 4,557 1, ,125 1,019 3,744 8,163 27,725 16,190 16, CONSOLIDATED FINANCIAL STATEMENTS // 04.6 CONSOLIDATED BALANCE SHEET 97

100 6.2 CURRENT ASSETS The current assets include inventories, trade accounts receivable, other assets and cash and cash equivalents. The trade accounts receivable mainly comprise receivables from over-the-counter betting operations, as well as receivables from the sale of lottery operations amounting to EUR 2,917 thousand INVENTORIES Inventories include infrastructure components for betting shops (betting tills, scanners, printers) that are sold to the shops franchisees. Inventories totalling EUR 159 thousand (previous year EUR 96 thousand) were recognised as an expense in the financial year. The main items reported under other financial assets are receivables from payment service providers amounting to EUR 3,227 thousand, restricted cash of EUR 1,708 thousand and guarantees amounting to EUR 1,190 thousand. The other receivables relate to compensation claims from legal proceedings RECEIVABLES AND OTHER ASSETS RECEIVABLES AND OTHER FINANCIAL ASSETS 31/12/2013 CURRENT UP TO 1 YEAR NON-CURRENT 1-5 YEARS NON-CURRENT > 5 YEARS Non-current financial assets Trade accounts receivable/other receivables 5,302 5, of which Trade accounts receivable 4,850 4, Other receivables Other financial assets 8,192 8, Total 13,494 13, RECEIVABLES AND OTHER FINANCIAL ASSETS 31/12/2012 CURRENT UP TO 1 YEAR NON-CURRENT 1-5 YEARS NON-CURRENT > 5 YEARS Non-current financial assets 3, ,260 0 Trade accounts receivable/other receivables 3,630 3, of which Trade accounts receivable 3,100 3, Other receivables Other financial assets 6,624 6, Total 13,514 10,254 3, MYBET HOLDING SE // ANNUAL REPORT 2013

101 The other financial assets and the other receivables generally have a maturity of between 30 and 90 days. There are in essence no overdue items here. Individual and general allowances for uncollectable trade accounts receivable amounting to EUR 185 thousand (previous year EUR 107 thousand) were applied. TRADE ACCOUNTS RECEIVABLE 31/12/ /12/ days 1,933 2, days 0 0 up to 1 year 2, Overdue, not impaired 0 0 Total 4,850 3,100 With regard to the receivables and other assets that were neither impaired nor overdue, there is no evidence at the reporting date that the debtors will not meet their payment commitments. As in the previous year, the maximum default risk amounts to the level of the receivables and other assets reported CASH AND CASH EQUIVALENTS Cash and cash and cash equivalents fell due to the negative result and reached EUR 8.0 million on December 31, 2013 (previous year EUR 13.2 million). Of this sum, EUR 2.0 million (previous year EUR 1.5 million) is attributable to pferdewetten.de AG and is therefore not available group-wide. The restricted cash still reported under cash and cash equivalents in previous years was reclassified to other assets. The previous year was adjusted accordingly. Restricted cash at December 31, 2013 came to at EUR 1.7 million (previous year EUR 1.7 million) and relates to security set aside mainly for licences. 6.3 SHAREHOLDERS EQUITY SHARE CAPITAL The share capital of mybet Holding SE amounts to EUR 24,257, (previous year EUR 24,217,183.00) and is divided into the same number of no par value shares. On the basis of the capital increase resolved on May 10, 2007, 40,190 pre-emptive shares were issued from Conditional Capital 2007/I in the 2013 financial year. The shares are fully paid in. The company has various approved sums of capital amounting to up to EUR 12,000,000 in total. With regard to the Authorised Capital 2010/I, the Management Board is authorised, with the consent of the Supervisory Board, to increase the capital stock up until May 17, 2016 through the issue of new shares for cash, whether as a single transaction or in multiple transactions, by up to EUR 7,000, The shareholders shall be granted a fundamental subscription right; however the Management Board is, with the consent of the Supervisory Board, authorised to exclude the shareholders subscription right for residual amounts. Moreover the Management Board is, with the consent of the Supervisory Board, authorised to determine the further terms of the share issue for the Authorised Capital 2010/I. With regard to the Authorised Capital 2010/II, the Management Board is authorised, with the consent of the Supervisory Board, to increase the capital stock up until May 17, 2016 through the issue of new shares for contribution in kind, whether as a single transaction or in multiple transactions, by up to EUR 5,000, In this connection the Management Board is, with the approval of the Supervisory Board, authorised to exclude the shareholders subscription right to an amount totalling up to EUR 5,000,000.00, whether as a single transaction or in multiple transactions, if the new shares are issued for contribution in kind and the issuing price of the new shares does not undercut by more than 5 % the market price of shares of the same features already listed at the time when the issuing price is finally fixed. The market price is deemed to be the arithmetical average of the closing prices (Xetra) on the ten trading days prior to the fixing date. CONDITIONAL CAPITAL a) Convertible bonds The Shareholders Meeting of May 10, 2007 resolved to increase the capital stock conditionally by an amount of EUR 6,000, through the issue of up to EUR 6,000,000 registered ordinary shares with no par value (no par value shares). The Management Board was authorised to issue convertible bonds with a total nominal value of up to EUR 60,000, up until April 30, 2010 on one or more occasions and to equip the convertible bonds with conversion rights that entitle the acquirer to purchase shares in the company as further specified in that resolution and in the terms of the bond. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.6 CONSOLIDATED BALANCE SHEET 99

102 A further convertible bond, divided into 161,830 equally ranking bearer debentures with a par value of EUR each, was placed in September 2008 on the basis of the above authorising resolution for a total nominal amount of up to EUR 3,398, with the right to convert each debenture into ten shares. The debentures pay interest at 6.66 % annually on their nominal amount. This convertible bond had a term lasting until December 15, By way of compulsory conversion, the final 4,019 debentures were converted into 40,190 pre-emptive shares on December 9, Conditional Capital 2007/I no longer exists. The Shareholders Meeting of May 18, 2011 resolved to increase the capital stock conditionally by an amount of EUR 5,000, through the issue of up to EUR 5,000,000 registered ordinary shares with no par value (no par value shares). The Management Board was authorised to issue convertible bonds with a total nominal value of up to EUR 25,000, up until May 17, 2014 on one or more occasions and to equip the convertible bonds with conversion rights that entitle the acquirer to purchase shares in the company as further specified in the resolution and in the terms of the bond (Conditional Capital 2011/I). The Shareholders Meeting of May 24, 2012 resolved to increase the capital stock conditionally by an amount of EUR 4,000, through the issue of up to EUR 4,000,000 registered ordinary shares with no par value (no par value shares). The Management Board was authorised to issue convertible bonds with a total nominal value of up to EUR 20,000, up until May 23, 2016 on one or more occasions and to equip the convertible bonds with conversion rights that entitle the acquirer to purchase shares in the company as further specified in the resolution and in the terms of the bond (Conditional Capital 2012/I). No use has yet been made of the above authorisations to issue convertible bonds. At December 31, 2013 there were 270,000 stock options issued under the various plans. c) Acquisition of treasury shares The Shareholders Meeting on July 18, 2013 authorised the Management Board until July 17, 2018 to acquire, with the consent of the Supervisory Board, treasury shares representing up to 10 percent of the capital stock at the time of the resolution. At no time may the acquired shares, together with other treasury shares held by the company or attributable to it pursuant to Sections 71a ff. of the German Stock Corporation Act, represent more than 10 percent of the capital stock The authorisation may not be used for the purpose of trading treasury shares. No use has yet been made of the authorisation ADDITIONAL PAID-IN CAPITAL The company has additional paid-in capital amounting to EUR 11,637 thousand (previous year EUR 11,662 thousand) made up essentially of additional payments from capital increases and the equity capital portion of the convertible bonds issued. b) Stock options There exist several conditional capital amounts for the issuance of subscription rights to the management and employees of the company, and to affiliated companies. Following its partial cancellation, Conditional Capital 2005/I amounts to EUR 205,000 and Conditional Capital 2006/I totals EUR 475,000. Exercise of the corresponding employee options is possible for a period of five years after their issuance. Conditional Capital 2010/I amounts to EUR 550, Exercise of the corresponding employee options is possible for a period of six years after their issuance. 100 MYBET HOLDING SE // ANNUAL REPORT 2013

103 6.3.3 GROUP EQUITY GENERATED 31/12/ /12/ Position at 31/12/2013 / 31/12/2012-8,670-25,748 Withdrawal for netting of loss carry-forward of mybet Holding SE with reserve 0 11,041 Change in investment venture pferdewetten.de AG Deconsolidation of DIGIDIS SL Equity transactions with shareholders: other netting -5 0 Change in interest in fluxx.com Telewette GmbH 0-30 Change in interest in Lotosystems Network S.L Overall result -11,088 6,102 Position at 31/12/2013 / 31/12/ ,781 8,670 The change in respect of the investment in pferdewetten.de AG results from the sale of shares in the company. In connection with the deconsolidation of DIGIDIS SL, group equity generated was adjusted by EUR 151 thousand NON-CONTROLLING INTERESTS 6.4 LIABILITIES DEFERRED TAXES At the balance sheet date the deferred tax liabilities were netted against existing deferred tax assets. Non-controlling interests in the share capital and the additional paid-in capital are reported here. Interests in the result for the period relate to the other shareholders of QED Ventures Ltd., Malta, and of pferdewetten.de AG. There was no netting of other interests in earnings, as the other minority shareholders do not participate in the respective earnings LIABILITIES As well as the financial liabilities, other liabilities are classified by maturity as follows: LIABILITIES 31/12/2013 CURRENT UP TO 1 YEAR NON-CURRENT 1-5 YEARS NON-CURRENT > 5 YEARS Bonds Due to banks Trade accounts payable/other liabilities 10,738 10, Other financial liabilities 8,363 8, Total 19,257 19, CONSOLIDATED FINANCIAL STATEMENTS // 04.6 CONSOLIDATED BALANCE SHEET 101

104 LIABILITIES 31/12/2012 CURRENT UP TO 1 YEAR NON-CURRENT 1-5 YEARS NON-CURRENT > 5 YEARS Bonds Due to banks Trade accounts payable/other liabilities 4,897 4, Other financial liabilities 8,570 8, Total 14,444 13, The other financial liabilities include derivative liabilities (from bets outstanding) amounting to EUR 312 thousand; these are due in less than one year two holiday apartments remain in the ownership of the mybet Group. It is planned to sell the remaining two holiday apartments in BONDS (LONG-TERM) TRADE ACCOUNTS PAYABLE / OTHER LIABILITIES The final debentures issued were converted into shares in December The trade accounts payable have a term of up to one year. They are secured to the customary extent by retention of title. DUE TO BANKS OTHER FINANCIAL LIABILITIES Amounts due to banks mainly comprise loans. The amount of EUR 71 thousand (previous year EUR 257 thousand) is secured by mortgages. Of that total, EUR 39 thousand (previous year EUR 29 thousand) is due in less than one year and reported under current liabilities. These relate exclusively to the holiday apartments in Sellin. At the start of 2010 mybet Holding SE had extended the loan for a further five years. At the end of The item mainly comprises liabilities from gaming operations of EUR 3,924 thousand (previous year EUR 3,212 thousand), liabilites from social insurance of EUR 257 thousand (previous year EUR 203 thousand), liabilties to payment services providers of EUR 27 thousand (previous year EUR 402 thousand) and tax liabilities of EUR 1,872 thousand (previous year EUR 1,650 thousand) 102 MYBET HOLDING SE // ANNUAL REPORT 2013

105 6.5 OTHER ACCRUED EXPENSES OTHER ACCRUED EXPENSES POSITION AT 01/01/2013 RECLASSES CONSUMED REVERSED ALLO- CATED DECON- SOLIDATION DIGIDIS S.L. POSITION AT 31/12/ Personnel expenses Settlements profit-related bonus Litigation costs Other tax accruals OTHER ACCRUED EXPENSES POSITION AT 01/01/2013 RECLASSES CONSUMED REVERSED ALLO- CATED DECON- SOLIDATION DIGIDIS S.L. POSITION AT 31/12/ Personnel expenses Settlements profit-related bonus Litigation costs Other tax accruals The accruals for personnel costs substantially comprise obligations for outstanding vacation leave, bonuses, settlements and industrial accident insurance contributions. Accrued expenses amounting to EUR 105 thousand (previous year EUR 5 thousand) were formed for litigation costs in connection with the termination of employment. The accruals for settlements total EUR 348 thousand and are in connection with the change of Management Board members at mybet Holding SE. All accrued expenses are short-term in nature, with a term of up to 1 year; no reimbursements are expected. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.6 CONSOLIDATED BALANCE SHEET 103

106 7SEGMENT REPORTING 2013 SPORTS BETTING CASINO & POKER LOTTERIES HORSE BETTING Revenue 33,337 23,419 3,183 5,620 Other operating income Expenses (EBITDA costs) -38,440-21,618-3,341-4,850 EBITDA -4,380 2, ,112 Depreciation and amortisation -1, , EBIT -5,446 1,817-3, Interest income Interest expense Depreciation and amortisation of financial assets and investments -1,717 Earnings before tax Taxes Net profit/loss for the period (IFRS) 2012 SPORTS BETTING CASINO & POKER LOTTERIES HORSE BETTING Revenue 33,320 21,671 6,236 5,685 Other operating income Expenses (EBITDA costs) -34,131-18,508-6,001-5,241 EBITDA , Depreciation and amortisation , EBIT , Interest income Interest expense Earnings before tax Taxes Net profit/loss for the period (IFRS) 104 MYBET HOLDING SE // ANNUAL REPORT 2013

107 OTHER OPERATING SEGMENT TOTAL OPERATING SEGMENTS MISCELLANEOUS TOTAL SEGMENTS CONSOLIDATED TRANSFERS TOTAL ,247 66, , , , ,569 2,153 3, ,099-6,413-75, , ,245-6,935 1,517-5, , , , ,008-6,695-12,703 1,516-11, , ,717 1, , ,960 OTHER OPERATING SEGMENT TOTAL OPERATING SEGMENTS MISCELLANEOUS TOTAL SEGMENTS CONSOLIDATED TRANSFERS TOTAL ,840 68, , , ,445 8,890 10,335 1,503 11,838-1,184-65,065-4,437-69, , ,132 4,453 9,585 1,407 10, , ,502-1,242-3, ,926 4,157 7, , ,209-1,101-1,101-1,101 6, CONSOLIDATED FINANCIAL STATEMENTS // 04.7 SEGMENT REPORTING 105

108 To reflect its organisation, the group is structured into legal entities that serve as the basis for preparing the financial statements and for formal external reporting. These product areas represent the cost units and therefore the segments, and serve as the basis on which the management reaches controlling decisions. The uniform cost unit and cost centre approach across all group subsidiaries provides a general overview of the products performance. The management bases its decisions primarily on the revenue performance of these product areas and on the costs directly associated with them. This structure is a crucial part of the management s decision-making process and accordingly constitutes the basis for segment reporting pursuant to IFRS 8. EBIT and EBITDA are reported internally by way of results for the segments. The segments comprise the four product areas Sports Betting, Casino & Poker, Lotteries and Horse Betting. The other operating segment mainly comprises the activities of the subsidiary C4U-Malta Ltd., which as an independent financial institution is in a position to offer its payment transaction services to other companies. The holding activities that have not been apportioned among the individual operating segments are the main items reported under the Miscellaneous segment. It reflects the actual costs of the holding operations as well as key operating areas (accounts, controlling, legal, human resources) which are handled by the holding company for organisational reasons. The basis for internal cost allocation was reviewed further in 2012, with the result that differentiated contribution accounting is now practised. Since 2012 these costs have been differentiated as direct and indirect costs (prime costs) and as apportioned overheads. The overheads include costs that cannot be apportioned either directly or indirectly and are therefore apportioned to the segments using an allocation key. In its segment-specific decisions the management disregards the interest income and expense as well as the assets and liabilities per segment, as these items are not relevant for purposes of control. The financing of the group with borrowed capital is not currently relevant and asset utilisation is very low. Nor are taxes taken into consideration in the decision-making process at segment level. Regional revenue patterns are not used for steering purposes on the one hand because the platform products are structured internationally (.com) and not by country or region, and on the other hand are each operated centrally by a national company that does not normally correspond to the customer s country of domicile. There is correspondingly no geographical segmentation by country/region. In view of the structure chosen, revenue between the segments does not occur because the cost units and cost centres are grouped together into segments on a cross-company basis. Sports Betting: The group s sports betting activities are combined in this segment. As a licensed bookmaker, PEI Ltd. accepts bets primarily on sporting events and offers the odds paid on these. This segment includes the relevant revenue from online sales on the mybet.com and mybet.de platforms, and the revenue at over-the-counter betting shops. The segment is the growth driver of revenue and new customer totals. It also accounts for the greater part of marketing expenses. To capitalise on its earnings-generating capacity, customer marketing activities are shared with the Casino & Poker segment. Overall, revenue was on a par with the previous year. Despite revenue remaining flat, the results for the segment are down on the previous year; among other things this reflects the effects already referred to in the management report. Roughly 93 percent of revenue was generated in Europe (previous year 97 percent), the bulk of this in Germany. The remainder of revenue is from regions outside Europe. Depreciation and amortisation includes EUR 715 thousand for the assets of mybet Italia for licences and payments in advance for operating expenses. Casino & Poker: The segment brackets the online products for casino and poker games on the various platforms. Alongside the Sports Betting segment, this segment is the main driver of revenue growth. However, customers are acquired predominantly through the activities of the Sports Betting segment. Despite the loss of French activities, the segment s revenue was increased further. On the earnings side, the withdrawal of the online products led to a fall in profitability. Lotteries: In this segment, the agency commission for the placement of lottery products is reported, along with the handling fees levied on the lottery stakes. The revenue reported in the segment is generated mainly with customers located in Spain. Because of the sale of the German-language lottery operations in the previous year and the protracted stagnation of the Spanish economy, revenue for this segment continues to decline. In light of this, the Management Board has decided to dispose of Spanish business. The result for the segment includes the DI- GIDIS companies only for the first eleven months, as the subgroup was already deconsolidated with effect from November 30, Horse Betting: The segment spans the group s horse betting activities and comprises both bookmaking revenue (hold) and 106 MYBET HOLDING SE // ANNUAL REPORT 2013

109 commissions from betting stakes handled on behalf of racecourses. The structure of this segment closely resembles that of the Sports Betting segment. Thanks to the quality focus on own business and the decision to decline low-margin third-party business, the result for the segment is up on the previous year. EUR thousand of revenue came from a single customer of the group. No other individual customers contributed 10 percent or more to consolidated revenue in Revenue is achieved predominantly with customers located in Germany (EUR 2.2 million, previous year EUR 2.0 million). The remainder of revenue is generated by customers in other countries, mainly in Europe. All revenue disclosures are made based on the place of residence of the betting customer. Other operating segment: Mainly the revenue, costs and results from payment transaction services are reported here. Another revenue component in this segment was the software services provided for the now-sold JAXX Group, which brought in less than in the previous year. C4U business is still in the start-up phase, but the management expects it to show a very promising performance over the coming years. Miscellaneous: This segment mainly comprises the holding activities that were not apportioned among the individual operating segments. In addition, a charge of EUR 1.7 million has been booked to this segment for non-recurring effects from additional claims for gaming levies. EBIT for the segment came to EUR -6.7 million (previous year EUR 4.5 million). mybet Holding SE achieved high disposal gains from the successful sale of the German lottery operations in 2012, leading to a high gain for the segment. The consolidated transfers include entries from consolidation that cannot be attributed to the individual segments. These substantially comprise the elimination of intermediate gains and consolidating entries for receivables from and liabilities to affiliated companies. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.7 SEGMENT REPORTING 107

110 8OTHER INFORMATION 8.1 EARNINGS PER SHARE EARNINGS PER SHARE 31/12/ /12/2012 Profit for period attributable to the shareholders of mybet Holding SE ( 000) -11,088 6,102 Weighted average number of ordinary shares outstanding during the period under review 24,219,416 24,216,805 Basic earnings per share ( ) Dilutive shares from options and bonds (units) 0 41,068 Dilution of result from pferdewetten.de AG ( 000) -6-4 Interest payments saved ( 000) 0 6 Consolidated earnings ( 000) + opposite dilutive effect ( 000) -11,094 6,104 Number of dilutive shares (units) 24,219,416 24,257,873 Diluted earnings per share ( ) Earnings per share are diluted slightly by the diluted result for pferdewetten.de AG. The effects from the options issued are not dilutive because the options are currently quoted at below the exercise thresholds. The weighted average number of shares outstanding during the period under review was calculated as follows: SHARE CAPITAL 31/12/ /12/ /12/2011 Capital stock on Jan 1 24,217,183 24,216,683 19,371,428 Weighted total of new shares from bonds 40, from capital increase 0 0 4,035,714 Weighted average number of shares outstanding during the period under review 24,219,416 24,216,805 23,407, MYBET HOLDING SE // ANNUAL REPORT 2013

111 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.8 OTHER INFORMATION 109

112 8.2 FINANCIAL ASSETS AND LIABILITIES CLASSIFICATION AND FAIR VALUES The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not contain any information on the fair value of financial assets and financial liabilities that were not measured at fair value if the carrying amount represents a reasonable approximation of the fair value. CARRYING AMOUNT DECEMBER 31, 2013 NOTE LOANS AND RECEIVABLES AVAILABLE FOR SALE OTHER FINANCI- AL LIABILITIES TOTAL Financial assets measured at fair value Assets held for sale (no recurring fair value measurement) Financial assets not measured at fair value Investments accounted for using the equity method 2.3 / Investments Other receivables Trade accounts receivable/other receivables ,302 5,302 Other financial assets ,192 8,192 Cash and cash equivalents ,965 7,965 21, ,460 Financial liabilities measured at fair value Other financial liabilities (recurring fair value measurement) Financial liabilities not measured at fair value Bonds Due to banks Trade accounts payable/other liabilities ,738 10,738 Other financial liabilities 6.4 8,363 8,363 10, ,363 19, MYBET HOLDING SE // ANNUAL REPORT 2013

113 FAIR VALUE LEVEL 1 LEVEL 2 LEVEL 3 TOTAL GAIN (+) / LOSS (-) FROM FINANCIAL INSTRUMENTS CONSOLIDATED FINANCIAL STATEMENTS // 04.8 OTHER INFORMATION 111

114 CARRYING AMOUNT DECEMBER 31, 2012 NOTE LOANS AND RECEIVABLES AVAILABLE FOR SALE OTHER FINANCI- AL LIABILITIES TOTAL Financial assets measured at fair value Financial assets not measured at fair value Financial assets accounted for using the equity method 2.3 / Investments Other receivables ,260 3,260 Trade accounts receivable/other receivables ,630 3,630 Other financial assets ,624 6,624 Cash and cash equivalents ,176 13,176 26, ,952 Financial liabilities measured at fair value Other financial liabilities (recurring fair value measurement) Financial liabilities not measured at fair value Bonds Due to banks Trade accounts payable/other liabilities 6.4 4,897 4,897 Other financial liabilities 6.4 8,348 8, ,328 14, MYBET HOLDING SE // ANNUAL REPORT 2013

115 FAIR VALUE LEVEL 1 LEVEL 2 LEVEL 3 TOTAL GAIN (+) / LOSS (-) FROM FINANCIAL INSTRUMENTS Other financial liabilities include derivative liabilities measured at fair value and with a maturity of less than one year. These are the bets outstanding at the reporting date. 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.8 OTHER INFORMATION 113

116 8.3 HEDGING POLICY AND DERIVATIVE FINANCIAL INSTRUMENTS There exists no interest rate risk in view of the long-term loan agreements with fixed interest rates. No hedging of the interest rate risk is therefore practised. The company has concluded insurance policies to cover various operating risks. The following table shows the levels of cover for the principal credit risks. INSURED TYPE Third-party insurance Business, product and environmental liability Activity of corporate bodies Business interruption Electronics insurance Criminal law legal costs insurance Fidelity insurance OTHER FINANCIAL OBLIGATIONS They are not recognised on the balance sheet, but explained separately. In particular the ruling of the Higher Regional Court of Düsseldorf should be mentioned in this connection; it has ordered Westdeutsche Lotterie GmbH & Co. OHG, Münster, to pay EUR 11.5 million plus interest in damages to FLUXX GmbH, a fully-owned subsidiary of mybet Holding SE. 8.6 LEASES The lease agreements concluded by the company consist of operating lease agreements. Vehicles, office machinery and telecommunications systems are financed using operating leases. The agreements concluded have terms to maturity of between one and five years. The expense from these operating lease agreements and from tenancy agreements for furniture and fittings totalled EUR 289 thousand in the financial year (previous year EUR 280 thousand), and the expense from tenancy agreements EUR 717 thousand (previous year EUR 692 thousand). The expenses are reported in other operating expenses under vehicle costs, rental for fixtures and fittings and expenses for premises. The following table shows the future minimum expenses that will be incurred from lease and tenancy agreements in view of the terms and notice periods of these agreements. These come under other financial obligations (see also Note 8.4). The company must spend EUR 3,094 thousand (previous year: EUR 4,125 thousand) in the future for rent, leases, contracts for services and similar obligations. 8.5 CONTINGENT LIABILITIES AND OTHER FINANCIAL OBLIGATIONS / CONTINGENT ASSETS Contingent liabilities are potential obligations towards third parties or actual obligations where an outflow of resources is not improbable. They are not recognised on the balance sheet, but explained in the Notes. Companies of the mybet Group are the defendants in various proceedings in connection with the State Treaty on gaming, the outcome of which is uncertain. Based on the legal assessment of the company s legal consultants and on rulings already delivered, the company considers it improbable that it will have to meet any claims as a result. The are no risks from pending proceedings not recognised on the balance sheet. By way of supplementary information we refer to the remarks on estimates under Note TENANCY AND LEASE AGREEMENTS 31/12/ /12/ Tenancy agreements Maturity up to 1 year Maturity 1 to 5 years 1,458 1,863 Lease agreements Maturity up to 1 year Maturity 1 to 5 years Contingent assets are potential claims from third parties or actual claims where an inflow of resources is not improbable. 114 MYBET HOLDING SE // ANNUAL REPORT 2013

117 8.7 RELATED PARTIES MYBET HOLDING SE The following table shows the amounts due to related parties which diminished the result for 2013 (see also Note 8.12). The amounts concerned are in respect of consultancy services. GWU mbh (Managing Director) Antje Stoltenberg, Chairman of the Sup ervisory Board) Rainer Jacken (Supervisory board Member) 12/30/13 12/30/ Clemens Jakopitsch 18 0 In 2013, Netsales factory S.L. (Managing Director Sascha Badelt, Managing Director of DIGIDIS SL) waived receivables in favour of DIGIDIS SL in the amount of EUR 100 thousand, thus increasing the net result for the period. In addition the following expenditure arose for consultancy services provided by Franz Freiherr von Brackel (Managing Director of SWS Service GmbH), reducing the net result for the period: T T QED Software Systems GmbH, Vienna QED Ventures Ltd., Malta Total The prices are in line with arm s-length transactions. The consultancy services are invoiced on the basis of hours worked, at hourly rates that are in line with the market, or on the basis of the applicable fee scales. Of the maximum number of stock options to be issued under the 2005/2006 plans, up to 30 percent may be granted to the members of the company s Management Board, up to 40 percent to the managing directors of subsidiaries and up to 80 percent to employees of the company and its subsidiaries. No new stock options may now be issued. Each stock option shall bear an entitlement to acquire one share in the company at the exercise price, if exercised. The exercise price for stock options from these plans shall be the last minimum price determined and published by the Federal Financial Supervisory Authority according to the German Securities Acquisition and Takeover Act (WpÜG), upon issue of the stock options. The options may only be exercised if the trading price at the time of exercise reaches at least 115 percent of the trading price at the time of issuance. For this purpose, the last minimum price determined and published on the internet by the Federal Financial Supervisory Authority according to the German Securities Acquisition and Takeover Act (WpÜG) shall likewise apply. The stock options may only be exercised after having been held for a period of two years from the date of issue (vesting period). The stock options may be exercised in the three years following expiry of the vesting period. Stock options not exercised shall expire when five years from the time of their issue have elapsed. The stock options may be exercised after expiry of the vesting period in each case within a period of three weeks following publication of the quarterly reports for the second and third quarters, as well as after the holding of the Ordinary Shareholders Meeting. The Management Board, and also the Supervisory Board in respect of members of the Management Board, may appropriately extend or shorten the above exercise periods as required. The beneficiaries must furthermore observe the restrictions proceeding from general statutory provisions such as the German Securities Trading Act (insider law). There were no outstanding liabilities at the closing date. 8.8 STOCK OPTION PLANS Both mybet Holding SE and the listed subsidiary pferdewetten. de AG have launched stock option plans. Stock options from the stock option plans may be granted only to employees not under notice of the company or an affiliated company. Stock options from the 2010 stock option plan may be granted only to employees not under notice of the company or an affiliated company. The persons in questions need not yet have commenced their activity on the behalf of the company or the affiliated company. Of the aforementioned maximum number of stock options to be issued, up to 60 percent may be granted to the members 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.8 OTHER INFORMATION 115

118 of the company s Management Board, up to 60 percent to the managing directors of subsidiaries and up to 80 percent to employees of the company and its subsidiaries. Stock options may be issued continuously. Each stock option shall bear an entitlement to acquire one share in the company at the exercise price, if exercised. The exercise price shall be the trading price at the time of issue. For this purpose trading price means the weighted average price over the three months prior to issuance. The options may only be exercised if the trading price at the time of exercise reaches at least 115 percent of the trading price at the time of issuance. The weighted average price over the preceding three months again applies here. Employees may acquire stock options during the valid period of the authorisation in response to a corresponding offer, within the deadline stated in the offer, but acquisitions are excluded during the two-week period prior to the publication of interim reports, first-half and annual financial reports, and, where applicable, prior to the publication of (provisional) business results released before these reports. The stock options may only be exercised after a waiting period of four years from the date of issue (vesting period). The stock options may be exercised in the two years following expiry of the vesting period. Stock options not exercised shall expire when six years from the time of their issue have elapsed. options were granted until the expiry of the vesting period. The value of the options is to be determined correspondingly and spread over the vesting period, taking account of such factors as employee fluctuation. As the options can be exchanged for shares in the company (equity settled) and are not redeemed in cash, the booking of salary expenses increases the additional paid-in capital. The expense entry simultaneously reduces the profit in the period when the expense is recorded, with the result that the effect on shareholders equity is corrected again. The options in question were measured at market price upon issue, applying Black-Scholes option pricing models and the binomial model. The exercise threshold was taken into account in the calculation using the above model. The staggered vesting period and employee fluctuation of ten percent per year were likewise taken into account. No fluctuation was assumed for the Management Board. No dividend payments were assumed. PFERDEWETTEN.DE AG Of the maximum number of stock options to be issued of 360,000 ordinary shares, up to 60 percent may be granted to the members of the Management Board of pferdewetten.de AG, up to 60 percent to the managing directors of subsidiaries and up to 80 percent to employees of the company and its subsidiaries. Stock options may be issued continuously during the period of the authorisation. The stock options may be exercised after expiry of the vesting period in each case within a period of three weeks following the publication of the quarterly reports for the second and third quarters, as well as after the holding of the Ordinary Shareholders Meeting (exercise periods). The Management Board, and also the Supervisory Board in respect of members of the Management Board, may appropriately extend or shorten the above exercise periods as required. The beneficiaries must furthermore observe the restrictions proceeding from general statutory provisions such as the German Securities Trading Act (insider law). When an employee leaves the company, options not exercised normally expire. Pursuant to IFRS 2, all options are to be measured and reported as salary expenses. For this purpose it is assumed that the value of the options provided they are granted free of charge represents remuneration for the period from the time the Employees may acquire stock options during the period of the authorisation in response to a corresponding offer, within the deadline stated in the offer. However acquisitions are excluded during the two-week period prior to the publication of interim reports, first-half and annual financial reports, and, where applicable, prior to the publication of the (provisional) business results released before this report. The stock options may only be exercised after a waiting period of four years from the date of granting (vesting period). The stock options may be exercised in the two years following expiry of the vesting period. Stock options not validly exercise thus expire. The stock options may be exercised after expiry of the vesting period in each case within a period of three weeks following the publication of the quarterly reports for the second and third quarters, as well as after the holding of the Ordinary Shareholders Meeting (exercise periods). The Management Board, and also the Supervisory Board in respect of members of the 116 MYBET HOLDING SE // ANNUAL REPORT 2013

119 Management Board, may appropriately extend or shorten the above exercise periods as required. The beneficiaries must furthermore observe the restrictions proceeding from general statutory provisions such as the German Securities Trading Act (insider law). Each stock option shall bear an entitlement to acquire one share in the company at the exercise price, if exercised. The exercise price shall be the trading price at the time of issue. For this purpose trading price means the weighted average price over the three months prior to issuance. The options may only be exercised if the trading price at the time of exercise reaches at least 115 percent of the trading price at the time of issuance. The weighted average price over the preceding three months again applies here. The options have been measured at the market price upon issue, with the aid of the Black-Scholes model. For their measurement, the exercise threshold, vesting period and an employee fluctuation rate of ten percent have been taken into account. The development in the options to be reported pursuant to IFRS 2 is shown below. The stock options have been granted in compensation of employee services in future periods. To that extent the fair value of the total stock options granted is reported time proportionally over the vesting period of four years. The expenditure from this is recognised as personnel expenses. Because the options granted involve an entitlement to acquire ordinary shares in pferdewetten.de AG and cannot be paid out in cash, their reporting as personnel expenses increases the shareholders equity (reserve for employee payments to be fulfilled in shareholders equity, cf. III 3.7. letter e). MYBET HOLDING SE TOTAL A V G. EXERCISE PRICE TOTAL A V G. EXERCISE PRICE Options outstanding at January 1 547, , Granted in the period (employees) 0 0 Granted in the period (Management Board) 0 0 Lapsed in the period (employees) -26, , Lapsed in the period (employees) -55, Lapsed / forfeited in the period (Management Board) -15, , Exercised in the period 0 0 Expired in the period 0 0 Options outstanding at Dec. 31, 2012 / Dec.31, , , Exercisable options at Dec. 31, 2012 / Dec.31, CONSOLIDATED FINANCIAL STATEMENTS // 04.8 OTHER INFORMATION 117

120 The principal parameters used in calculating the price of options are shown below. C A M P A I G N OPTIONS GROUPS DATE GRANTED SPREAD OF EXERCISE PRICES AVERAGE WEIGHTED EXERCISE PRICE HISTORICAL / EXPECTED VOLATILITY TERM IN YEARS RISK-FREE INTEREST RATE FAIR VALUE Employees 02/ % % 0.73 Management Board (lapsed / forfeited) 01/ % % 0.79 Employees 12/ % % 0.64 Management Board (lapsed) Employees (lapsed) Management Board (lapsed) 06/ % % / % % / % % 1.24 Average 1.31 Historical volatility was not used for the options granted in 2004 and 2005, as this was not representative due to the change in the business model following the restructuring of the mybet Group in The consistently positive development in the financial performance at the time the options were measured, coupled with falling volatility, was an indication of lower expected volatility. The calculation was based on projections of current trends based on historical volatility. The option price calculation for the options granted in 2011 and 2012 is based on historical volatility. The remaining weighted average contractual term is 1 year (previous year 1 year). In the financial year, EUR 10 thousand (previous year EUR 67 thousand) from the stock options issued was reported as personnel expenses. As a result of the surrendering of Management Board mandates, equity components were released against personnel expenses and other accrued expenses. PFERDEWETTEN.DE AG PARAMETER Date of granting 17/05/2012 Share price at date of granting 1.14 Exercise price 1.11 Expected volatility % Vesting period 4 Jahre Risk-free interest rate 1.00 % Fair value 0.41 The expected volatility has been determined from the prices for the last three months prior to the granting of the stock options. 118 MYBET HOLDING SE // ANNUAL REPORT 2013

121 The development of the options in question is shown below: PFERDEWETTEN.DE AG TOTAL AVG. EXERCISE PRICE TOTAL AVG. EXERCISE PRICE Options outstanding at January , Granted in the period ,11 Lapsed in the period Exercised in the period Options outstanding at Dec , ,11 Options exercised at Dec Exercisable options The total salary expenses for the group arising from the granting of options (Management Board and employees) amounting to EUR 37 thousand (previous year EUR 67 thousand) were included in personnel expenses. merger the latter will change its name to SWS Service GmbH and move its registered office to Berlin. The measure has no effect on the net worth, financial position and financial performance of the group or the holding company EVENTS OCCURRING AFTER THE BALANCE SHEET DATE Sven Ivo Brinck has been sole Management Board member of mybet Holding SE since January 1, He was appointed to the Management Board of the company at the Supervisory Board meeting on December 17, As part of the licensing process for a sports betting licence, mybet Holding SE issued a promise of financing for its subsidiary PEI Ltd., Malta. This states that in the event of illiquidity of PEI Ltd., mybet Holding SE will provide up to EUR 5 million for the development of German business. The exact terms and conditions of assignment are then to be defined on the basis of an intercompany agreement. On January 2, 2014, ANYBET GmbH assigned to mybet Holding SE outstanding receivables of EUR 6,892 thousand from the group company QED Software Systems GmbH for the furnishing of IT services. By way of counterperformance the latter reduced its loan receivables from ANYBET GmbH by the same amount. The measure renders it possible to present loan flows within the sub-groups with greater transparency and has no effect on the net worth, financial position and financial performance of the group or the holding company. In connection with the streamlining of the group structure, SWS Service GmbH, a subsidiary of QED Ventures Limited, Malta, was merged with FLUXX GmbH, Hamburg, by notarised deed dated March 10, 2014 and with effect from January 1, Following the On March 28, 2014 mybet Holding SE and the acquirers of the JAXX Group sold in 2012 reached agreement on the early repayment of the balance of the purchase price, less a discount of 4 percent. mybet Holding SE thus accrues a total of EUR 2.8 million in liquidity, noticeably improving the mybet Group s scope for action. The early repayment releases the acquirers of the JAXX Group from the obligation to use services of the mybet Group. On April 9, 2014 the Higher Regional Court of Düsseldorf ordered Westdeutsche Lotterie GmbH & Co. OHG (Westlotto), Münster, to pay EUR 11.5 million plus interest in damages to FLUXX GmbH. No right of appeal was granted. Westlotto still has the option of filing a complaint about the non-admission of an appeal with the Federal Supreme Court within one month of receipt of the grounds for the judgement. If the complaint is rejected, a cash inflow of about EUR 14.4 million is to be expected towards the end of the year. With its ruling, the Higher Regional Court of Düsseldorf altered the dismissal of the action in the first instance by the District Court of Dortmund. The compensation claim had been brought against Westlotto representatively for the entire German lottery and pools organisation DISCRETIONARY DECISIONS IN THE APPLICATION OF THE RECO- GNITION AND MEASUREMENT PRINCIPLES / ESTIMATES AND EVALUA- TIONS BY THE MANAGEMENT the impairment test for goodwill is based on forward-looking assumptions. These assumptions have been made on the basis 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.8 OTHER INFORMATION 119

122 of the estimated situation at the balance sheet date. An assumption on the future development of the economic context that was considered to be realistic at that point in time was moreover taken into account in estimating future business development. The actual amounts may differ from the estimates as a result of differences between actual developments in the underlying situation and the assumed developments. In such instances the assumptions and, if necessary, the carrying amounts of the assets and liabilities in question, are adjusted. The carrying amounts reported under this item were EUR 6,186 thousand at December 31, 2013 (previous year EUR 6,449 thousand). A rise in the market risk premium from 6 percent to 7 percent would have resulted in an 11 percent reduction in goodwill. With regard to testing deferred taxes for impairment on the basis of the company s tax planning, the annual planning of the mybet Group was used as the basis, taking into account the conditions at the balance sheet date. A realistic future development of the market environment was taken into account. This planning is based on the same estimates and assumptions as the impairment tests for goodwill. Here too, the estimates and assumptions may therefore differ from actual experience. The recognition of deferred tax assets is moreover dependent on the full recognition of tax loss carry-forwards by the tax authorities. The accounts have been tax-audited up to and including On the basis of the information currently available, there is no evidence that loss carry-forwards will not be permitted. In all, the disclosure of deferred tax assets amounting to EUR 1,350 thousand (previous year EUR 969 thousand) is affected. The recognition and measurement of the other accrued expenses involves certain estimates that are based on the information available at the time of preparing the Consolidated Financial Statements. This concerns in particular accruals for litigation. The probable outcomes are measured following consultation with the lawyers acting on behalf of mybet Holding SE. Nevertheless, the outcome of pending or future legal proceedings is often not predictable, with the result that costs exceeding the scale envisaged in the accruals could arise. In total, accrued expenses of EUR 842 thousand were formed. As well as the customary costs for outstanding vacation leave and variable remuneration payments, accrued expenses were created in connection with the termination of employment contracts and contracts of service. Recognition and measurement of the stock options is likewise performed on the basis of forward-looking assumptions that are built into the option price models, such as fluctuation. The actual developments in future may depart significantly from these estimates. The preparation of the Consolidated Financial Statements moreover necessitates certain additional assumptions and estimates that apply to the carrying amounts of the assets, liabilities, income and expenditure recognised in the accounts MANAGEMENT OF FINANCIAL RISKS AND DISCLOSURES ON CA- PITAL MANAGEMENT FINANCIAL RISK In respect of its assets, liabilities and planned transactions, the mybet Group is exposed to diverse risks, in particular from exchange rate movements, stock market prices and market prices. The aim of financial risk management is to limit these market risks by means of ongoing operational and finance-oriented activities. Certain transactions require the prior permission of the Management Board or Supervisory Board; liquidity, trading price and interest rate risks moreover form part of the risk management system and are reported on and evaluated monthly with the aid of a scorecard. For this purpose, risks are evaluated in terms of their probability and the inherent monetary loss if they materialise. The risks can consequently be categorised into different risk classes. CREDIT RISKS Credit risks arise in the online sector for example from the receivables terms and returned direct debits from business transactions with customers. These risks are countered by implementing appropriate scoring methods that on the one hand are intended to ensure that e.g. stolen credit cards, false bank details or addresses and also under-age customers are detected during the registration process, so as to prevent transactions. On the other hand the risk is then shared to some extent with the providers of such methods of payment, such as credit cards; these parties then bear the loss if a credit card payment is not honoured (charge-back). Risks from business transactions e.g. with betting shop operators are limited by prepaid methods and, in the event of delayed payment, by reducing the limits available. However the credit risk here tends to be higher than in the online sector. In general, the risk of losses on receivables but also high payouts of winnings is limited by capping the stakes; particularly in the case of new customers, this prevents high outstanding debts or payouts of winnings from occurring. As a fundamental rule credit risks in business operations involving financial instruments are continually monitored. They are reflected by means of specific and general allowances for 120 MYBET HOLDING SE // ANNUAL REPORT 2013

123 uncollectable receivables. The maximum credit risk is reflected by the carrying amounts of the financial assets reported in the balance sheet. (Cf. also remarks under Notes 3 and ) LIQUIDITY RISKS Liquidity risks are monitored operationally on the one hand with the help of liquidity statistics with trend analysis. The status is then projected on the basis of the plans drawn up for the financial year in progress, by means of a monthly cash flow statement. Liquidity risks involve potential difficulties in meeting payment commitments on time or generally pro rata or in entirety. The weekly and monthly liquidity and cash flow reports and the ongoing monitoring of revenue and payment streams compared with the plans drawn up monthly are intended to maintain solvency at all times. As a medium-sized corporate group, the mybet Group does not have credit lines, so cash management is correspondingly more important for the group. As well as cash and cash equivalents, this includes current receivables especially from payment service providers, because a liability is recognised on the balance sheet from the moment a customer makes a payment using a payment service provider (e.g. credit card), but the cash inflow is only realised upon settlement with the payment service provider. The terms are indicated under Notes 6.4 and 6.5. monthly movement of +/- 10 percent in the USD, as occurred several times in the highly volatile financial environment of 2013, would have led to the additional realisation of foreign currency gains / losses of EUR +31 thousand / EUR -26 thousand. Fluctuations in the Ghanaian Cedi (GHS) may also have an effect. At the reporting date there were receivables from betting shops amounting to GHS 612,678 (previous year GHS 106,171). An exchange rate movement of +/-10 percent would have led to the additional realisation of exchange rate gains/losses of EUR +19 thousand / EUR -19 thousand. There is no evidence of interest rate risks, as all loans originated by the enterprise, receivables and liabilities entered into entail no or only fixed-rate interest agreements. Changes to the market rates of fixed-interest primary financial instruments only affect the earnings if these instruments are measured at fair value. All fixed-interest financial instruments measured at amortised cost are consequently not exposed to interest rate risks as defined by IFRS 7. No other price risks are in evidence. INVESTMENT RISKS The group invested EUR 5.4 million (previous year EUR 3.3 million) in fixed assets in The investment objects were primarily intangible assets. MARKET RISKS In the mybet Group, exchange rate risks stem from investments, financing measures and operating activities as well as from the credit balances of poker players, which are held in USD. Foreign currency translation can have a considerable effect on the result. In the operating sphere, the individual group companies handle their activities predominantly in their individual functional currency (predominantly the euro). The exchange rate risk for the mybet Group from ongoing business operations is therefore rated as low. The minor sterling risk still existing in the previous year has disappeared as a result of the sale of JAXX UK Ltd. Fluctuations in the USD may have an effect because there were again average liabilities in respect of poker players amounting to USD 0.4 million in 2013 (previous year USD 0.5 million). A 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.8 OTHER INFORMATION 121

124 CAPITAL MANAGEMENT The priority aim of capital management at mybet Holding SE is to assure an equity ratio of at least 50 percent, to assure financing and, over the short-term horizon of one year, to generate a positive cash flow. The shareholders equity of the mybet Group amounted to EUR 18,306 thousand at December 31, 2013 (previous year EUR 28,520 thousand). The equity ratio is currently 47 percent (previous year 65 percent). The return on equity in 2013 was percent (previous year 21.7 percent). For the medium term the management is targeting a return on equity of around 20 percent. Both currently and in the medium term, the group s ability to repay its debt and its financial substance are of particular significance, taking account its need to secure its existence in a legally difficult environment while simultaneously safeguarding and accessing alternative markets and investment options. The challenge here is to strike a balance between exploiting existing earnings potential, tough economy measures and disinvestment, and developing new products and markets in an increasingly stable legal environment. The group monitors capital with the aid of this adjusted ratio of net debt to equity, according to the following formula: CAPITAL MANAGEMENT Total liabilities 20,304 15,405 Less cash and cash equivalents -7,965-13,176 Net liabilities 12,339 2,228 Total shareholders equity 18,306 28,520 Net liabilities to shareholders equity MYBET HOLDING SE // ANNUAL REPORT 2013

125 8.12 CORPORATE BODIES Members of the Management Board Sven Ivo Brinck, Economics Graduate (BA) (from January 1, 2014) Mathias Dahms, Information Technology Graduate (until December 31, 2013) Stefan Hänel, Economics Graduate (until October 8, 2013) Monika Fiala, MA (November 1, 2013 to December 17, 2013) For the 2013 financial year, according to Section 314 of German Commercial Code the Management Board members received the following remuneration (prior-year values in brackets): REMUNERATION MANAGEMENT BOARD FIXED PAY / SALARY PERFORMANCE-RELATED PAY / PROFIT-RELATED BONUS COMPONENTS WITH A LONG-TERM INCENTIVISING EFFECT NON-MONETARY BENEFITS FROM NON- CASH REMUNERATION TOTAL STOCK OPTIONS (UNITS) FAIR VALUE AT ISSUE ( 000) Mathias Dahms, until Dec. 31, (220.0) 0 (223.1) - (-) - (-) 10.1 (10.1) (453.2) Stefan Hänel, until Oct. 8, (220.0) 0 (223.1) - (-) - (-) 10.3 (11.8) (454.9) Monika Fiala, Nov. 1 Dec. 17, (-) 0 (-) - (-) - (-) 0 (-) 32.0 (-) total (440.0) 0 (446.2) - (-) - (-) 20.4 (21.9) (908.1) Details of the remuneration are provided in the management report. As a result of the departure of the two Management Board members Mathias Dahms and Stefan Hänel, all stock options granted to the Management Board lapsed or were forfeited. There are receivables of the company from Management Board members amounted to EUR 1.4 thousand. In connection with the early termination of Mathias Dahms period of service, a provision for compensation of EUR 90 thousand was formed. Members of the Supervisory Board Rainer Jacken, Kiel, management consultant (until July 18, 2013) Rodolfo Carpintier Santana, Madrid (Spain), management board chairman (until July 18, 2013) Clemens Jakopitsch, Vienna (Austria), management consultant (July 18, 2013 to October 31, 2013) Over and above their activities as Supervisory Board members of mybet Holding SE, Mr Carpintier Santana held office as a non-executive director (board member) of xplane Inc., St Louis, USA, Mr Urban as Supervisory Board Chairman of YOR- XS AG, Munich, and Mr Geiß as a member of the Supervisory Board of NeoLotto Ltd., Malta. Chairman: Dr Volker Heeg, Hamburg, lawyer and tax consultant Deputy Chairman: Marcus Geiß, Monza (Italy), managing director Frank Motte, Stuttgart, managing partner Konstantin Urban, Gräfelfing, management consultant Retired in 2013: Antje Stoltenberg, Kiel, auditor, Chairman (until December 31, 2013) REMUNERATION OF THE SUPERVISORY BOARD The remuneration of the Supervisory Board equally comprises a fixed and a variable portion. The variable portion in turn consists of a short-term and a long-term performance-oriented remuneration component. The remuneration principles for the Supervisory Board were determined at the 2005 Shareholders Meeting and the amounts adjusted at the 2010 Shareholders Meeting. For its services the Supervisory Board shall receive 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.8 OTHER INFORMATION 123

126 a) Fixed remuneration per member of EUR 15,000 annually, plus proven expenses. The Supervisory Board Chairman shall receive remuneration of EUR 22,500 for their services. b) An annual payment based on the short-term performance of the company amounting to 0.3 percent of the company s EBIT for the year per Supervisory Board member, based on the IFRS Consolidated Financial Statements, up to a limit of EUR 15,000 for Supervisory Board members and EUR 22,500 for the Supervisory Board Chairman. c) A performance-related, long-term payment of EUR 15,000 for Supervisory Board members and EUR 22,500 for the Supervisory Board Chairman due after the ending of each term of office of the Supervisory Board. The long-term payment shall be paid out if the earnings of the company (EBIT) have risen by an average of 30 percent per year during the term of office of the Supervisory Board member in question. d) Insofar as sales tax is due on the remuneration, the company is obliged to refund it. Supervisory Board members who have belonged to the Supervisory Board for only part of a financial year or leave the Supervisory Board before the end of their term of office shall receive a pro rata payment. The payment shall be granted for the first time for the 2012 financial year. The payment pursuant to letter a) shall be payable after the end of the financial year in question. The payment pursuant to letter b) shall be payable after the end of the Shareholders Meeting which grants discharge of the Supervisory Board for the financial year ended. The payment pursuant to letter c) shall be payable after the end of the Shareholders Meeting which grants discharge of the Supervisory Board for the final financial year of the Supervisory Board s regular term of office. OTHER SERVICES The company in addition reimbursed the Supervisory Board members for proven expenses and travel costs. For the 2013 financial year, the Supervisory Board members received the following remuneration (prior-year figures in brackets): REMUNERATION SUPERVISORY BOARD MEMBERS FIXED PAY* SHORT-TERM VARIABLE PAY LONG-TERM VARIABLE PAY TOTAL* EXPENSE / TRAVEL COSTS* TRAVEL COSTS* Dr. Volker Heeg, Chairman 16.9 (15.0) 0.0 (15.0) - (-) 16.9 (30.0) 0.8 (0.0) Marcus Geiß, Deputy Chairman, since July 18, (-) 0.0 (-) - (-) 6.9 (-) 5.9 (-) Frank Motte 15.0 (15.0) 0.0 (15.0) - (-) 15.0 (30.0) 1.8 (0.0) Konstantin Urban 15.0 (15.0) 0.0 (15.0) - (-) 15.0 (30.0) 1.9 (1.1) Antje Stoltenberg, until December 31, (22.5) 0.0 (22.5) - (-) 20.6 (45.0) 0.3 (0.2) Rainer Jacken, until July 18, (15.0) 0.0 (15.0) - (-) 8.1 (30.0) 0.0 (0.0) Rodolfo Carpintier Santana, until July 18, 2013 Clemens Jakopitsch July 18 October 31, (15.0) 0.0 (15.0) - (-) 8.1 (30.0) 0.0 (3.2) 4.4 (-) 0.0 (-) - (-) 4.4 (-) 0.0 (-) Total 95.0 (97.5) 0.0 (97.5) - (-) 95.0 (195.0) 10.7 (4.5) * plus VAT 124 MYBET HOLDING SE // ANNUAL REPORT 2013

127 8.13 INDEPENDENT AUDITORS FEE The following fees were recognised as expenses for the services rendered by the independent auditors of the Consolidated Financial Statements, KPMG AG Wirtschaftsprüfungsgesellschaft, Hamburg: Auditing of the financial statements Other assurance services Other services Total The fees for auditing of the financial statements consist mainly of the fees for auditing the Consolidated Financial Statements and for auditing the financial statements of mybet Holding SE. Kiel, April 23, 2014 Sven Ivo Brinck 04 CONSOLIDATED FINANCIAL STATEMENTS // 04.8 OTHER INFORMATION 125