THIS DOCUMENT AND ANY ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. If you are in any doubt as to what action you should take, you are recommended to seek immediately your own financial advice from your stockbroker, bank manager, solicitor, accountant, fund manager or other appropriate independent financial adviser, who is authorised under the Financial Services and Markets Act 2000 (the "FSMA") if you are in the United Kingdom or, if not, from another appropriately authorised independent financial adviser in the relevant jurisdiction.

This document constitutes a prospectus (the "Prospectus") for the purposes of Article 3 of the European Parliament and Council Directive 2003/71/EC of 4 November 2003 (the "Prospectus Directive") relating to ZEAL Network SE (the "Company") and has been prepared in accordance with the Prospectus Rules of the Financial Conduct Authority ("FCA") made under Section 73A of the FSMA and Commission Regulation (EC) No 809/2004 of 29 April 2004, as amended (the "EU Prospectus Regulation"). The Prospectus has been approved by the FCA in accordance with Section 85 of the FSMA, will be made available to the public and has been filed with the FCA in accordance with the Prospectus Rules. The FCA only approves this Prospectus as meeting the requirements imposed under the laws of England and Wales and EU law pursuant to the Prospectus Directive. Such approval relates only to the ZEAL shares (as defined herein) which are to be admitted to trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard). The Company has requested that the FCA provides the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – "BaFin") in Germany and the European Securities Market Authority with a certificate of approval attesting that this Prospectus has been drawn up in accordance with the Prospectus Directive.

The Prospectus has been prepared in connection with the Company's applications to the Frankfurt Stock Exchange for 14,010,982 new registered shares of a nominal value of EUR 1.00 each of the Company offered to Lotto24 AG shareholders as offer consideration (the "Offer Shares") to be admitted to trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) (the "Admission"). Application was made accordingly to the Frankfurt Stock Exchange.

_______________________

(registered in England and Wales under company number SE000078)

Proposed admission to trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional postadmission obligations (Prime Standard) of 14,010,982 registered ordinary shares of ZEAL Network SE of a nominal value of EUR 1.00 each

The Company and its directors whose names are set out in section "16.2.1 Current Composition of the Executive Board" accept responsibility for the information contained in the Prospectus. To the best of the knowledge and belief of the Company and the directors (each of whom has taken all reasonable care to ensure that such is the case), the information contained in the Prospectus is, to the best of their knowledge, in accordance with the facts and contains no omissions likely to affect the import of such information.

The Company will comply with its obligation to publish a supplementary prospectus containing further updated information required by law or any regulatory authority, but assumes no further obligation to publish additional information.

You should read the Prospectus in its entirety. Your attention is specifically drawn to the risk factors set out in section "1 Risk Factors" of the Prospectus.

No person has been authorised to give any information or to make any representations other than those contained in the Prospectus and, if given or made, such information or representations must not be relied on as having been so authorised. Any delivery of the Prospectus shall not, under any circumstances, create any implication that there has been no change in the affairs of ZEAL and Lotto24 (the "Combined Group") since, or that the information contained herein is correct at any time subsequent to, the date of the Prospectus. The contents of the Prospectus are not to be construed as legal, financial or tax advice. Each recipient of the Prospectus should consult his, her or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice.

The Prospectus does not constitute an invitation or offer to sell or exchange, or the solicitation of an invitation or offer to buy, exchange or subscribe for any security or to become a shareholder of the Company. It has been prepared solely for the purpose of the Admission (as required by Article 3 para. 3 of Directive 2003/71/EC of the European Parliament and of the Council, Section 3 para 4 of the German Securities Prospectus Act (Wertpapierprospektgesetz) and Section 32 para. 3 no. 2 of the German Stock Exchange Act (Börsengesetz) and in accordance with the Prospectus Rules of the FCA made under Section 73A of the FSMA and the EU Prospectus Regulation). The distribution of the Prospectus in certain jurisdictions may be restricted by law and, accordingly, persons into whose possession the Prospectus comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction for which the Company, the directors and M.M.Warburg & CO (AG & Co.) KGaA, acting as listing agent, disclaim all responsibility. No action has been, or will be, taken by the Company to permit a public offering of the Offer Shares, or to permit the possession or distribution of the Prospectus (or any other offering or publicity materials relating to the Offer Shares) in any jurisdiction where any action that has not been taken by ZEAL shares, may be required for that purpose.

The language of the Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law.

Certain terms used in the Prospectus, including certain technical and other items, are explained and defined in section "24 Glossary" of the Prospectus.

The Prospectus is dated 8 May 2019.

SUM	MARY OF THE PROSPECTUS	S-1
B – IsC – SD – R	suerecurities	S-1S-17S-18
	ffer
1 RIS	K FACTORS
1.11.21.31.41.51.6	Risks Related to the Regulatory Environment, Legal and Tax Risks Risks Related to the Market Risks Related to the Business Risks Related to the Financial Situation Risks Related to the Offer Risks Related to the Company's Shares	163138
2 GEN	NERAL INFORMATION	47
2.12.22.32.42.52.62.72.8	Responsibility Statement Purpose of the Prospectus Forward-looking Statements Sources of Market Data Documents Available for Inspection Note Regarding Alternative Performance Measures Currency Presentation and Presentation of Figures Consent
3 INF	ORMATION ON THE OFFER SHARES AND THE LISTING	55
3.13.23.33.4	Form and Certification Voting Rights Dividend and Liquidation Rights Currency of the Offer Shares	555555
3.53.63.73.83.93.10	Issuance of the Offer Shares, Listing and Commencement of Trading ISIN/WKN/Ticker Symbol Existing Quotation Disposal and Transferability of the Offer Shares Costs of the Admission Interests of the Parties Participating in the Issue	555656
4 THE	E COMBINATION	57
4.2	OverviewReasons for the Offer	57
	IDENDS AND DIVIDEND POLICY
	PITALISATION AND INDEBTEDNESS; STATEMENT ON WORKING CAPITAL
7.17.27.37.4	Capitalisation Indebtedness Contingent Liabilities and Indirect Liabilities Statement on Working Capital	6464
8 SEL	LECTED CONSOLIDATED FINANCIAL INFORMATION OF ZEAL	66
8.18.2	Selected Consolidated Financial Information
	NAGEMENT'S DISCUSSION AND ANALYSIS OF NET ASSETS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS	74
9.19.29.3	OverviewKey Factors Influencing ZEAL's Results from Operating Activities (EBIT)Presentation of Financial Information	75

9.4	ZEAL's Results of Operations	90
9.5	Balance Sheet
9.6	Liquidity and Cash Flow Resources
9.7	Investments
9.8	Contingent Liabilities and Indirect Liabilities
9.9	Significant Accounting Policies
9.10	Disclosure of Financial Risks

	AUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF THE
C	OMBINED GROUP	120
10.1	Unaudited Pro Forma Consolidated Financial Information of the Combined Group	120
10.1	Accountant's Report on the Unaudited Pro Forma Financial Information of the	120
10.2	Combined Group	126
	·
11 MA	RKETS AND COMPETITION	128
11.1	Markets	120
11.1	Competition
–	·
12 BU	SINESS	148
10.1	Overview	4.40
12.1	Overview
12.2	Strengths
12.3	Strategy
12.4	Business Segments
12.5	Business Operations
12.6	Information Technology
12.7	Transaction Processing and Accounting Systems
12.8	Customers
12.9	Marketing and Distribution
12.10	Material Agreements
12.11	Material Litigation
12.12	Intellectual Property and Domains
12.13	Research and Development
12.14	Property, Plant and Equipment
12.15	Insurances
12.16	Employees
12.17	Risk Management and Hedging	179
13 RF	GULATORY ENVIRONMENT	184
10111
13.1	Regulatory Environment in Germany
13.2	Regulatory Environment in Other Jurisdictions	196
14 GE	NERAL INFORMATION ON THE COMPANY AND ZEAL	203
14 GL	NERAL IN ORMATION ON THE COMPANT AND ZEAL	203
14.1	Formation, Incorporation, Commercial Name, Fiscal Year and Registered Office	203
14.2	Duration of the Company and Corporate Purpose	203
14.3	History and Development	203
14.4	Impact of the Withdrawal of the United Kingdom from the European Union
14.5	Intended Transfer of the Company's Registered Office	205
14.6	Group Structure	206
14.7	Key Subsidiaries	207
14.8	Statutory Auditor	207
14.9	Paying Agent	207
14.10	Designated Sponsor and Listing Agent
45 DE
	SCRIPTION OF THE SHARE CAPITAL OF ZEAL NETWORK AND APPLICABLE	000
K	EGULATIONS
15.1	Current Share Capital; Shares	208
15.2	Special Aspects of the Shares
15.3	Development of the Share Capital since the Company's Foundation	209
15.4	Further Authority to Allot Shares
15.5	Purchase of Own Shares
15.6	General Provisions Governing the Winding-Up of the Company

15.715.815.9	General Provisions Regarding the Company's Share Capital 211Shareholder Notification Requirements; Takeovers; Managers' Transactions 211Brexit Implications on Corporate Legal Aspects of the Company 213
	16 GOVERNING BODIES OF ZEAL NETWORK SE 215
16.116.216.316.4	Overview 215Executive Board 216Supervisory Board 223Certain Information Regarding the Members of the Executive Board and Supervisory
16.516.616.716.8	Board 230Conflicts of Interest of the Members of the Executive Board and Supervisory Board 230General Meeting 231Corporate Governance 232Provisions for Pension Obligations 232
	17 SHAREHOLDER STRUCTURE 233
	18 CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS 234
	19 COMPARISON OF SHAREHOLDER RIGHTS IN RELATION TO LOTTO24 AND ZEALNETWORK 236
	20 MATERIAL TAX CONSIDERATIONS 244
20.1	Taxation of Lotto24 Shareholders in Connection with the Exchange of Shares in Lotto24for Shares in the Company 244
20.2	Taxation of ZEAL Shareholders in Connection with the Exchange of Shares in Lotto24for Shares in the Company 248
20.3	Taxation of Dividend Income on Resulting ZEAL Shares after the Exchange of Sharesin Lotto24 for Shares in the Company 248
20.420.5	Taxation of Capital Gains on ZEAL Shares 251Inheritance and Gift Tax Considerations for Resulting ZEAL Network IndividualShareholders Post-transaction 253
20.620.7	Taxation of Dividend Income on Lotto24 shares 255Impact of the Exchange of Shares in Lotto24 for Shares in the Company on Carried
20.8	Forward Tax Losses 256German Real Estate Transfer Tax (Grunderwerbsteuer) in Connection with the
20.920.10	Exchange of Shares in Lotto24 for Shares in the Company 258Stamp Duty and Stamp Duty Reserve Tax in Connection with the Offer 258Tax Implications of a Potential Migration of Tax Residency of ZEAL Network from theUK to Germany 258
	21 RECENT DEVELOPMENTS AND OUTLOOKD-1
	22 FINANCIAL INFORMATIONF-1
	23 STATEMENT BY ZEAL NETWORK ON QUANTIFIED FINANCIAL BENEFITS Q-1
	24 GLOSSARY G-1

SUMMARY OF THE PROSPECTUS

Summaries are made up of disclosure requirements known as elements ("Elements"). These Elements are numbered in sections A-E (A.1-E.7). This summary contains all the Elements required to be included in a summary for this type of security and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of security and issuer, it is possible that no relevant information can be given regarding that Element. In such cases, the summary includes a short description of the Element with the words "not applicable".

A – Introduction and Warnings

A.1 Warnings This summary should be read as an introduction to the prospectus (the "Prospectus"). Any decision to invest in the related securities should be based on consideration of the Prospectus as a whole by the investor.

Where a claim relating to the information contained in the Prospectus is brought before a court the plaintiff investor might, under the national legislation of the member states of the European Economic Area, have to bear the costs of translating the Prospectus before legal proceedings are initiated.

Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities.

A.2 Information regarding the subsequent use of the prospectus

Not applicable. Consent regarding the use of the Prospectus for a subsequent resale or placement of shares has not been granted.

B – Issuer

B.1 Legal and commercial name

ZEAL Network SE.

B.2 Domicile, legal form, legislation under which the issuer operates, country of incorporation

ZEAL Network SE (the "Company" or "ZEAL Network" and, together with its consolidated subsidiaries, "ZEAL", including Lotto24 AG, following Completion (as defined in "B.8") of the voluntary public takeover offer for all shares of Lotto24 AG) has its registered office at 5th Floor, One New Change, London EC4M 9AF, United Kingdom, and is registered in England and Wales with Companies House, Cardiff, under company number SE000078. The Company is a European public limited liability company (Societas Europaea, 'SE') governed by European law and the laws of England and Wales.

B.3 Current operations and principal business activities and principal markets in which the issuer competes

At the date of the Prospectus, ZEAL's main business segment is 'Lottery Betting', comprising the offering of bets on the outcome of lottery draws of state-licensed lotteries ("Primary Lotteries"), i.e. customers bet that certain lottery numbers will be drawn in Primary Lotteries against payment of stakes ("Secondary Lotteries") and the sale of instant win products where winnings are determined by random-number generators that generate the information if and how much a bet wins ("Instant Win Products"). ZEAL's business activities in this segment take place within myLotto24 Limited and its subsidiaries ("myLotto24 Sub-Group"), an independently organised sub-group of affiliated companies, in which ZEAL holds an equity interest of 40% but which are fully consolidated in ZEAL's accounts.

The 'Lottovate' segment focuses on the operation of Primary Lotteries and the establishment of partnerships with charities, foundations and communities in order to jointly develop new sources of funding through bespoke lottery platforms.

The 'ZEAL Ventures' segment is run by the Company and focuses on external investments and internal incubation (i.e. the support of businesses - primarily in their early development phase - in implementing their business concept), and supports start-ups that are developing new lottery business models or products. The Company provides start-ups with venture capital and advice. In return, it expects to establish partnerships with these start-ups or to acquire them, and to generate investment returns.

ZEAL is predominantly active in the online lottery markets of several European jurisdictions, notably Germany, Ireland, Norway, the Netherlands and the United Kingdom ("UK").

B.4a Most significant recent trends affecting the issuer and the industry in which it operates

ZEAL's business activities are influenced by numerous demographic, economic, regulatory and political factors. ZEAL is most significantly affected by developments in, and related to, the gambling markets in general and the lottery markets in particular. At the date of the Prospectus, ZEAL's business depends on its offering of Secondary Lotteries in the German online market.

While the global lottery market has been growing in recent years (source: Global Betting and Gaming Consultants, Key Markets Gambling Data 2001 to 2022), the German lottery market has been virtually stagnating as regards regulated lotteries between 2016 and 2017 (source: Goldmedia GmbH Strategy Consulting, Study as of May 2018 and updated 12 June 2018, titled 'German Gaming Market Monitor 2018'), which ZEAL partly attributes to the restrictive regulatory environment. However, pursuant to ZEAL's assessment, the online lottery market is growing faster than the lottery industry as a whole. In Germany, the online lottery market has shown growth from approximately 5% to approximately 9% from 2014 to 2017 (relating to the Primary Lotteries of Deutscher Lotto und Totoblock, based on online gross gambling win; source: market data from H2 Gambling Capital on gross gambling turnover and gross gambling win, dated 5 March 2019). Beyond the longer term trends, the jackpot environment and large jackpot pay-outs influence the demand and therefore short-term growth in the lottery industry.

Although, pursuant to ZEAL's assessment, more countries

have recently opened their lottery markets to private lottery operators or brokers, most regulation is national or at state level, as in Germany. As a result, lottery market regulation differs significantly between markets, and private market participants like ZEAL have to adjust their products, business model and market approach to the regulation of the specific target markets.

B.5 Description of the group and the issuer's position within the group

The Company is the parent company of ZEAL. The Company's consolidated financial statements include the financial information of the subsidiary interests owned by the Company. Subsidiaries are entities controlled by the Company. Control is where the Company has power to vary the returns from its investment, and exposure to the variability of those returns. The equity interests of all subsidiary companies included in the consolidated financial statements of the Company are 100% owned by it with the exception of the Company's interests in myLotto24 Sub-Group. At the date of the Prospectus, the group of consolidated companies includes 10 direct and 15 indirect subsidiaries of the Company.

B.6 Persons who, directly or indirectly, have a (notifiable) interest in the issuer's capital and voting rights

Based on information received by the Company (including TR-1 notifications in accordance with the DTR, notifications on managers' transactions and other notifications pursuant to the former Section 21 of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG) prior to the transfer of the Company's registered office to the UK in 2014), the following shareholders directly or indirectly hold more than 3% of the Company's shares and voting rights at the date of the Prospectus. It should be noted that the number of voting rights last notified could have changed since such notifications were submitted to the Company without requiring the relevant shareholder to submit a corresponding voting rights notification if no notifiable threshold has been reached or crossed.

Shareholder (1)	Percentage ofvoting rights (2)
Oliver Jaster (Bamberg)	10.278% (3)
Working Capital Management Pte., Ltd.(Singapore)	7.377% (4)
Lottoland Holdings Limited (Gibraltar)	5.557% (*)
Bram Cornelisse	3.954% (5)
Marc Peters (Hamburg)	3.273% (6)(*)

(*) Held directly.

____________________

(1) The ZEAL shares attributed to Schroders plc were sold in December 2018 as notified to the Company (without a TR-1 notification). Prior to the sale, Schroders plc had most recently notified in 2017 that it held 4.996% of the voting rights via the controlled undertakings Schroder Investment Management Limited and Schroder Investment Management North America Limited
(2) Percentage of the 8,341,178 voting rights of the Company, deducting the 43,910 ZEAL shares held by the Company in treasury from the total number of ZEAL shares. Percentages are rounded to the third decimal place in accordance with accepted commercial standards.
(3) Held indirectly through a chain of controlled undertakings: Günther SE (Bamberg), Günther Holding SE (Hamburg), Othello Drei Beteiligungs-Management GmbH (Hamburg),

Othello Drei Beteiligungs GmbH & Co. KG (Hamburg). To the Company's knowledge, Othello Drei Beteiligungs GmbH & Co. KG directly holds 10.278% of the Company's voting rights at the date of the Prospectus.

(4) Voting rights as stated in the irrevocable undertaking dated 19 November 2018 between the Company and Working Capital Partners, Ltd. (Grand Cayman, Cayman Islands) and High Street Partners, Ltd. (Grand Cayman, Cayman Islands) both controlled by Working Capital Management Pte., Ltd. (Singapore). To the knowledge of the Company, Working Capital Partners directly holds 4.273% and High Street Partners, Ltd. directly holds 3.104% of the voting rights of the Company at the date of the Prospectus.
(5) Held indirectly through a chain of controlled undertakings: Farringdon Capital Management (Amsterdam, The Netherlands), Farringdon Netherlands BV, Farringdon I - SICAV and Blackwell Partners LLC. To the knowledge of the Company, Farringdon Netherlands BV indirectly holds 3.954% of the voting rights of the Company at the date of the Prospectus.
(6) Percentage of voting rights at the date of the Prospectus to the knowledge of the Company, based on a confirmation by Marc Peters (Hamburg) in January 2019.

Different voting rights of major shareholders

Not applicable. All of the Company's shares confer the same voting rights.

Direct or indirect control over the issuer and nature of such control

Not applicable. The Company is not controlled by any shareholder.

B.7 Selected key historical financial information

The following selected consolidated financial information of ZEAL is taken or derived from the audited consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016, 2017 and 2018 and the Company's accounting records or its internal reporting system. The audited consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016, 2017 and 2018 have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS"). Additional financial information included in the Prospectus has been taken or derived from the audited unconsolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018, which were prepared in accordance with IFRS.

The following selected consolidated financial information relates to reporting periods or reporting dates prior to the acquisition of Lotto24 AG (the "Target" or "Lotto24") and consequently does not contain any financial information with respect to Lotto24. For financial information of Lotto24, investors should refer to Lotto24's financial reports and quarterly statements published on Lotto24's website www.lotto24-ag.de under the investor relations section. Lotto24 is expected to be consolidated for the first time in the half-year consolidated financial statements of the Company as of and for the six months ended 30 June 2019. As a result of such first consolidation, these consolidated financial statements will differ materially from the consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016, 2017 and 2018.

Ernst & Young LLP, 1 More London Place, London SE1 2AF, United Kingdom has audited the Company's consolidated financial statements, prepared in the English language, as of and for the fiscal years ended 31 December 2016, 2017 and 2018, and the Company's unconsolidated financial statements, prepared in the English language, as of and for the fiscal year ended 31 December 2018, and issued in each case an unqualified audit opinion thereon, prepared in the English language. On adoption of IFRS 9, gains on short term financial assets, for periods after 1 January 2018, have been reclassified from other comprehensive income to the income statement. In addition, for periods after 1 January 2018, other reserves have been reclassified to retained earnings. Where financial information in the following tables is labelled "audited", this means that it has been taken from the audited consolidated financial statements mentioned above. The label "unaudited" is used in the following tables to indicate financial information that has not been taken from the audited consolidated financial statements mentioned above but was taken either from the unaudited condensed interim consolidated financial statements mentioned above, or the Company's accounting records or its internal reporting system, or has been calculated based on figures from the aforementioned sources. Some of the following figures, financial measures and adjustments are not presented in accordance with IFRS or any other generally accepted accounting principles nor have these measures been reviewed by an outside consultant, expert or auditor. Unless otherwise noted, all of these "non-IFRS measures" are derived from the Company's accounting records or its internal reporting system. All non-IFRS measures are defined by the Company and may not be comparable to similar measures used by other companies.

All of the financial information presented in the text and tables below is shown in thousands of Euro (in TEUR), except as otherwise stated. Certain financial information (including percentages) in the following tables has been rounded according to established commercial standards. As a result, the aggregate amounts (sum totals or sub-totals or differences or if numbers are put in relation) in the following tables may not correspond in all cases to the aggregated amounts of the underlying (unrounded) figures appearing elsewhere in the Prospectus. Furthermore, in those tables, these rounded figures may not add up exactly to the totals contained in those tables. Financial information presented in parentheses denotes the negative of such number presented. In respect of financial information set out in the Prospectus, a dash ("–") signifies that the relevant figure is not available, while a zero ("0.0") signifies that the relevant figure is available but has been rounded to zero.

Selected Consolidated Financial Information

Consolidated Income Statement

		For the year

		ended 31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Revenue (1)	112,935	134,295	154,751
Other operating income	26,703	6,951	4,901
Total Operating Performance (TOP)	139,638	141,246	159,652
Personnel expenses	(26,705)	(28,630)	(28,837)
Other operating expenses	(70,405)	(85,758)	(83,690)
Exchange rate differences	(1,304)	(422)	617
Amortisation/depreciation on intangible
assets and property,
plant and equipment	(2,166)	(1,255)	(1,147)
Gain/(loss) on liquidation of subsidiary	238	-	-
Loss on acquisition	(1,340)	-	-
Result from operating activities beforeExceptional Items (Adjusted EBIT)	37,956	25,181	46,595
Exceptional items	-	-	(8,288)
Result from operating activities (EBIT)	37,956	25,181	38,307
Finance income	390	385	331
Finance costs	(237)	(335)	(204)
Loss on short term financial assets	-	-	(449)
Impairment of convertible loan	(1,598)	-	-
Share of loss of
associated companies	-	-	-
Share of loss of joint ventures	-	-	-
Results from financing andinvesting activities	(1,445)	50	(322)
Profit before income tax	36,511	25,231	37,985
Income tax expense	(10,560)	(8,053)	(11,322)
Profit attributable to the equity sharehold
ers of the Company	25,951	17,178	26,663

(1) 'Revenue' consists of 'Stakes' from Secondary Lotteries and Instant Win Products. These products are classified as derivative financial instruments and are disclosed in the consolidated income statement net of VAT, free bets and winnings pay-outs. 'Revenue' is also recognised from ticket fees and commissions, which ZEAL receives for placing bets on behalf of customers.

Consolidated Statement of Financial Position

	As of31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Property, plant and equipment	1,901	2,607	2,425
Other investments	1,198	3,041	3,433
Total non-current assets	4,677	6,634	6,932
Other current assets and prepaid
expenses	12,835	13,025	16,354
Financial assets	19,682	27,123	12,894
Cash and pledged cash	94,983	92,052	132,993
Total current assets	131,339	134,477	162,280
TOTAL ASSETS	136,016	141,111	169,212

	As of31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Total non-current liabilities	2,199	1,765	3,918
Other liabilities	22,545	23,098	25,424
Income tax liabilities	5,952	1,074	5,702
Total current liabilities	36,259	32,730	42,096
Subscribed capital	8,385	8,385	8,385
Share premium	21,578	21,578	21,578
Retained earnings	68,237	77,030	94,710
Total equity	97,558	106,616	123,198
TOTAL EQUITY & LIABILITIES	136,016	141,111	169,212

Consolidated Statement of Cash Flows

For the year ended 31 December 2016 2017 2018

	(audited, unless otherwise specified, andrestated)	(audited, unlessotherwise specified,and restated)	(audited, unlessotherwise specified)
	TEUR	TEUR	TEUR
Cash flow from operating activities	33,968(1)(2)	13,152(2)	38,202
Net cash outflow from investing activities	(3,258)	(511)	5,554
Net cash outflow from financing activities	(23,478)	(8,385)	(10,244)
Net increase/(decrease) in cash, pledgedcash and short-term financial assets	7,232(1)(2)	4,256	33,512
Cash and cash equivalentsat the end of the financial period	108,119(1)(2)	112,375(2)	145,887
Composition of cash and cash equivalents
Cash and pledged cash	94,983	92,052	132,993
Short-term financial assets	13,136(1)(2)	20,323(2)	12,894

(1) Unaudited.

____________________

Selected Other Consolidated Key Financial and Operating Data

		For the yearended 31 December
	2016(unaudited, unlessotherwise specified)	2017(unaudited, unlessotherwise specified)	2018(unaudited, unlessotherwise specified)
	(thousands)	(thousands)	(thousands)
CustomersRegistered
customers (2)	3,265	3,510	3,943
New registered customers (3)Average Monthly Active Users	314	411	614
(MAU) (4)	376	380	404
	EUR	EUR	EUR
Average Billings Per User per month(ABPU)(5)	58.03	57.58	57.57
Average costs per new customer(6)	65.69	60.72	34.99
	TEUR	TEUR	TEUR
Income statement
Billings (7)	280,435	280,509	296,286
Stakes (8)	243,765 (1)	241,306 (1)	254,538

(2) The cash flows for the years ended 31 December 2016 and 31 December 2017 have been restated to remove the equity investments from cash and cash equivalents.

For the year ended 31 December

		ended 31 December
	2016(unaudited, unlessotherwise specified)	2017(unaudited, unlessotherwise specified)	2018(unaudited, unlessotherwise specified)
	(thousands)	(thousands)	(thousands)
Revenue (9)	112,935 (1)	134,295 (1)	154,751
Normalised revenue (10)	145,515	147,020	157,384
EBITDA (11)	41,224	26,436	47,742
Adjusted EBIT (12)Result fromoperating activities	37,956	25,181	46,595
(EBIT)	37,956 (1)	25,181 (1)	38,307 (1)
Normalised EBIT (13)	50,820	38,096	49,430
Profit before income taxProfit attributable to the equity	36,511 (1)	25,231 (1)	37,985 (1)
shareholders of the Company	25,951 (1)	17,178 (1)	26,663(1)
Balance sheet	TEUR	TEUR	TEUR
Cash and pledged cash	94,983 (1)	92,052 (1)	132,993 (1)
Net cash (14)	43,683	69,512	101,917
Personnel	No.	No.	No.
Number ofemployees (15)	250 (1)	274 (1)	262 (1)
	TEUR	TEUR	TEUR
Personnelexpenses	(26,705) (1)	(28,630) (1)	(28,837) (1)
Expenses per employee (16)	107	104	110
Share	No.	No.	No.
Average number of shares (undiluted)	8,385,088	8,385,088	8,366,792 (21)
	EUR	EUR	EUR
Earnings per share (undiluted)Operating cash flow per share	3.09(1)	2.04(1)	3.18
(undiluted) (17)	4.05	1.57	4.57
Ratios	%	%	%
EBIT margin (18)	33.6	18.8	24.8
Net operating margin (19)	23.0	12.8	17.2
Return-on-equity (ROE) (20)	26.6	16.1	21.6

(1) Audited.

(2) 'Registered customer' means a unique user who has successfully registered for an account on a ZEAL website. A registration is considered successful after a new customer has provided the required information, before such information has been verified (e.g. as regards the customer's age and place of residence). The verification is a prerequisite for the customer to place bets or to buy other products on a ZEAL website. The qualification of a user as 'Registered customer' does not depend on whether it has actually placed a bet or purchased other products on a ZEAL website.

(3) 'New registered customer' means a unique user who has, for the first time, become a 'Registered customer' on a ZEAL website or (from 2017 on) on a ZEAL partner website (such as the Spanish ONCE)

(4) 'Average Monthly Active Users (MAU)' is defined as the average number of unique users (i.e. 'Registered customers') who have either purchased a bet or participated in a draw in a given month (including free bets). MAU provides a measure of ZEAL's ability to retain and attract new customers.

(5) 'Average Billings per User per month (ABPU)' is defined as the average net billings received from each active 'Registered customer' in a given month. In this context, active 'Registered customer' means a unique user who purchases a bet or participates in a draw in a month. ABPU provides a measure of ZEAL's ability to increase loyalty and value from its customers. ABPU is calculated by dividing monthly net billings by 'Average Monthly Active Users (MAU)'.

(6) 'Average costs per new customer' are defined as acquisition marketing expenses per 'new registered customer' on a ZEAL website.

(7) 'Billings' is defined as all 'Stakes' from customers (as well as brokerage stakes, such as commissions and booking fees, and associated VAT) net of free bets and provides a measure of ZEAL's ability to increase the economic value of 'Stakes' from customers (including brokerage stakes) over a period of time.
(8) 'Stakes' is defined as amounts paid for bets from customers net of free bets (and without brokerage stakes, such as commissions and booking fees, but including associated VAT) and provides a measure of ZEAL's ability to increase the economic value of stakes from customers over a period of time.
(9) 'Revenue' consists of stakes from Secondary Lotteries and Instant Win Products. These products are classified as derivative financial instruments and are disclosed in the consolidated income statement net of VAT, free bets and winnings pay-outs. Revenue is also recognised from ticket fees and commissions, which ZEAL receives for placing bets on behalf of customers.
(10) 'Normalised revenue' is defined as 'revenue' as reported in accordance with IFRS which has been adjusted for the underlying statistical average pay-out ratio. Therefore, normalisation adjustments bridge the quantum of statistically expected pay-outs to consolidated 'revenue' as reported in accordance with IFRS which include actual pay-outs. In the lotteries on whose results ZEAL relies, there are underlying statistical average pay-out ratios for ongoing lottery draws. For ZEAL's main products, this is approximately 50%. The difference between the actual pay-out including hedging effects and the expected prize pay-out before hedging effects is referred to as normalisation or 'normalisation adjustment'.
(11) 'EBITDA' is defined as result from operating activities (EBIT) before loss on acquisition, gain/loss on liquidation of subsidiary and amortisation/depreciation on intangible assets and property, plant and equipment.
(12) 'Adjusted EBIT' is defined as the result from operating activities (EBIT) in accordance with IFRS before exceptional items. 'Adjusted EBIT' provides a measure of ZEAL's ability to increase the economic value of its operating activity over a period of time, excluding exceptional items which could distort the result of ZEAL period over period, in particular non-recurring costs such as cost relating to transactions outside the ordinary course of business as well as to restructuring or to the closure of a business.
(13) In addition to the normalisation adjustments with respect to 'Normalised revenue', 'Normalized EBIT' adjusts the following effect: if ZEAL hedges Secondary Lotteries in the form of physical hedging, winnings from physically hedged lottery tickets are recognised as 'other operating income'. The corresponding amount to be paid out to customers is recognised under 'Revenue', i.e. it reduces the amount of 'Revenue' in a certain period.
(14) 'Net cash' is defined as the sum of current financial assets, other current assets and prepaid expenses less trade payables, other liabilities, income tax liabilities and a hedging reserve. The hedging reserve decreased from TEUR 50,000 as of 31 December 2016 to TEUR 30,000 as of 31 December 2017 due to the implementation of the Hoplon III-Insurance. It was further reduced to TEUR 21,627 as of 31 December 2018 and to TEUR 21,390 as of 31 March 2019. Net cash provides a measure of ZEAL's ability to reinvest profits or to pay dividends to shareholders.
(15) Based on full-time equivalents (average over a given period). Number of employees (average over) 2016 was taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.
(16) 'Expenses per employee' are defined as personnel expenses divided by the number of full-time equivalents over a given period. Number of employees (average over) 2016 was taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.
(17) 'Operating cash flow per share (undiluted)' is calculated as cash flow from operating activities (restated for the financial years ended 31 December 2016 and 31 December 2017) divided by the average number of shares (undiluted) over a given period.
(18) 'EBIT margin' is defined as result from operating activities (EBIT) as a percentage of revenue, each in accordance with IFRS, and, on a segment level, as 'normalised EBIT' as a percentage of 'normalised revenue' (as defined above) for the respective segment.
(19) 'Net operating margin' is defined as profit attributable to the equity shareholders of the Company as the percentage of revenue in accordance with IFRS.
(20) 'Return-on-equity (ROE)' is defined as profit attributable to the equity shareholders of the Company as the percentage of total equity at the end of the respective period.
(21) Shares of the Company carrying voting rights.

Significant changes to the Company's financial condition and operating results during and after the period covered by the historical key financial information

Developments since 31 December 2018

On 31 January 2019, the Company launched the Offer. The Offer was accepted for 22,473,615 shares of the Target (the "Target Shares"), representing 93.04% of the total number of Target Shares issued.

The following table shows selected financial information from ZEAL's unaudited interim consolidated income statement for the periods presented:

For the three months ended 31 March

	ended 31 March
	2018	2019
	(unaudited, restated)	(unaudited)
_	TEUR	TEUR
Revenue (1)	38,700	36,462
Other operating income	1,130	911
Total Operating Performance (TOP)	39,830	37,373
Personnel expenses	(7,741)	(5,508)
Other operating expenses	(22,481)	(19,511)
Exchange rate differences	(150)	(153)
Depreciation and amortisation of non-current assets	(200)	(260)
	(299)	(269)
Depreciation of right of use assets Result from operating activities before	_	(364)
Exceptional Items (Adjusted EBIT)	9,159	11,568
Exceptional items	· –	(1,792)
Result from operating activities (EBIT)	9,159	9,776
Finance income	20	30
Finance costs	(84)	(142)
Gain/(loss) on financial assets	(87) (2)	173
Results from financing and	. ,
nvesting activities	(151) (2)	61
Profit before income tax	9,008 (2)	9,837
Income tax expense	(2,727)	(2,951)
Profit attributable to the equityshareholders of the Company	6,281 (2)	6,886

The following table shows selected financial information from ZEAL's unaudited interim consolidated statement of financial position as of the effective dates presented:

	As of
	31 December 2018	31 March 2019
	(audited)	(unaudited)
	TEUR	TEUR
Property, plant and equipment	2,425	2,130
Right of use asset	-	6,560
Other investments	3,433	3,455
Total non-current assets	6,932	13,371
Trade receivables and other current assets	16,354	10,406
Financial assets	12,894	16,048
Cash and pledged cash	132,993	131,981
Total current assets	162,280	158,474
TOTAL ASSETS	169,212	171,845
Total non-current liabilities	3,918	9,126
Other liabilities	25,424	18,844
Deferred income	3,098	1,908
Income tax liabilities	5,702	4,546
Provisions	4,341	2,597
Total current liabilities	42,096	32,793
Subscribed capital	8,385	8,385
Share premium	21,578	21,578
Retained earnings	94,710	101,304
Total equity	123,198	129,926
TOTAL EQUITY & LIABILITIES	169,212	171,845

(2) 'Gains/(loss) on financial assets' for the three month period ended 31 march 2018 has been restated to include TEUR 87, previously recognised in other comprehensive income. This has resulted in 'Results from financing and investing activities', 'Profit before income tax' and 'Profit attributable to the equity shareholders of the Company' for the comparative financial information in the unaudited interim consolidated income statement of the Company for the three months ended 31 March 2018 being restated to reflect the increased cost.

The following table shows selected financial information from ZEAL's unaudited interim consolidated statement of cash flows for the periods presented:

For the three months ended 31 March

	2018	2019
	(unaudited, restated (1))	(unaudited)
	TEUR	TEUR
Cash inflow from operating activities	6,553	2,994
Net cash outflow from investing activities	(226)	(3,349)
Net cash outflow from financing activities	–	(494)
Net increase/(decrease) in cash, pledgedcash and short-term financial assets	6,327	(849)
Cash, pledged cash and financial assetsat the end of the period	118,702	145,038
Composition of cash, pledged cash andfinancial assets at the end of the period
Cash and pledged cash	98,426	131,981
Financial assets	20,276	13,057

(1) The cash flows for the comparative financial information in the unaudited interim consolidated statement of cash flows of the Company for the three months ended 31 March 2018 have been restated to remove the equity investments from cash and cash equivalents.

'Billings' for the three-month period ended 31 March 2019 decreased by TEUR 5,382 to TEUR 67,369 (2018: TEUR 72,751). 'Stakes' for the three-month period ended 31 March 2019 decreased by TEUR 472 to TEUR 62,527 (2018: TEUR 62,999).

The number of 'New registered customers' was 182 thousand over the three-month period ended 31 March 2019, representing a 30% increase year-on-year (2018: 140 thousand). 'Average Billings Per User per month (ABPU)' were broadly maintained year-on-year at EUR 57.47 in the three-month period ended 31 March 2019 (2018: EUR 58.02).

'Net cash' as at 31 March 2019 increased by TEUR 27,133 to TEUR 102,132 (2018: TEUR 74,999). The definition of 'Net cash' as at 31 March 2019 has been updated to exclude current provisions and current lease liabilities.

The average number of employees of ZEAL (full-time equivalents) for the three-month period ended 31 March 2019 was 192 (2018: 272).

Except for the developments mentioned above, no significant changes in ZEAL's financial or trading position have occurred between 31 December 2018 and the date of the Prospectus.

Fiscal Years Ended 31 December 2018 and 2017

In the fiscal year 2018, 'Revenue' increased by 15% from TEUR 134,295 in the fiscal year 2017 to TEUR 154,751. The main driver of the increase in 'Revenue' is the increase of around TEUR 13,232 in 'Stakes'.

The introduction of Secondary Lotteries on the two US lotteries 'Powerball' and 'Mega Millions' in October and November 2017, respectively, resulted in an increase of around TEUR 7,700 in 'Stakes' in the fiscal year 2018 compared to the fiscal year 2017. In addition, according to the Company's internal reporting system, the average jackpot amounts in the lotteries 'EuroJackpot', 'EuroMillions' and 'LOTTO 6aus49' increased by around 17% from the fiscal year 2017 to the fiscal year 2018. ZEAL further contributed the increase in 'Stakes' to this development. However, ZEAL estimates that a certain part of the 'Billings' has shifted from other products in the portfolio as customers preferred to play the US lotteries, which typically promise higher jackpots.

The introduction of these new Secondary Lotteries resulted in an increase in the 'Average monthly active users (MAU)' by around 24 thousand from around 380 thousand in the fiscal year 2017 to around 404 thousand in the fiscal year 2018. This further contributed to the increase in 'Revenue' and was consistent with the increase in 'Registered customers' from around 3,510 thousand at 31 December 2017 to around 3,943 thousand at 31 December 2018. 'Average Billings per User per month (ABPU)' remained broadly consistent at around EUR 57.58 in the fiscal year 2017 and around EUR 57.57 in the fiscal year 2018.

The other driver of 'Revenue' was the value of 'Prizes' paid out. 'Prizes' paid-out in the fiscal year 2018 were around TEUR 4,594 lower than in the fiscal year 2017. The decrease was largely a result of a reduction in the value of 'significant' prize pay-outs which totalled around TEUR 8,299 in the fiscal year 2018, compared to around TEUR 15,228 in the fiscal year 2017. ZEAL considers pay-outs as 'significant' if they amount to more than TEUR 5,000. The volume and value of pay-outs is dependent on the external lottery results. 'Normalised revenue' increased by TEUR 10,364 to TEUR 157,384 in the fiscal year 2018 from TEUR 147,020 for the fiscal year 2017. This increase was driven by a TEUR 20,456 increase in 'Revenue' and a TEUR 10,092 decrease in the normalisation adjustment, which bridge the quantum of statistically expected pay-outs to 'Revenue' according to IFRS. This was primarily due to a fall of significant pay-outs, as mentioned before.

As an opposite effect, 'Ticket Fees' and 'Commission and other Revenue' increased from around TEUR 25,114 in the fiscal year 2017 to around TEUR 27,744 in the fiscal year 2018, primarily due to the higher levels of fees and commission being charged on 'EuroMillions', 'EuroJackpot' and Instant Win Products.

In the Lottovate business segment, 'Revenue' decreased from TEUR 7,773 for the fiscal year 2017 to TEUR 7,637 for the fiscal year 2018, primarily driven by the closure of Lotto Network Limited.

Fiscal Years Ended 31 December 2017 and 2016

'Revenue' for the fiscal year 2017 increased by 19% from TEUR 112,935 in the fiscal year 2016 to TEUR 134,295. The main driver for the increase in 'Revenue' was the decrease in 'Prizes' from TEUR 153,282 in the fiscal year 2016 to TEUR 132,125 in the fiscal year 2017. This decrease was largely a result of a reduction in the value of significant prize pay-outs.

In addition, according to the Company's internal reporting system, the average jackpot amounts in the lotteries 'Euro-Jackpot', 'EuroMillions' and 'LOTTO 6aus49' increased by around 39% in the fiscal year 2016 to the fiscal year 2017. According to ZEAL's assessment, the increase in 'Stakes' further contributed to this development. However, ZEAL estimates that a certain part of the 'Billings' has shifted from other products in the portfolio as customers preferred to play the US lotteries, which typically promise higher jackpots.

The introduction of Secondary Lotteries of two US lotteries 'Powerball' and 'Mega Millions' in October and November 2017 resulted in an increase in the 'Average monthly active users (MAU)' by around 4.1 thousand from around 375.7 thousand in the fiscal year 2016 to around 379.8 thousand for the fiscal year 2017. This further contributed to the increase in 'Revenue' and was consistent with the increase in 'Registered customers' from around 3,265 thousand at 31 December 2016 to around 3,510 thousand at 31 December 2017. 'Average billings per user per month (ABPU)' remained broadly consistent at around EUR 58.03 in the fiscal year 2016 and around EUR 57.58 in the fiscal year 2017.

As a counter effect, 'Ticket Fees' and 'Commission and other revenue' increased from TEUR 22,452 in the fiscal year 2016 to TEUR 25,114 in the fiscal year 2017, primarily due to the higher levels of fees and commission being charged on 'EuroMillions', 'EuroJackpot' and Instant Win Products.

B.8 Selected key pro forma financial information

The unaudited pro forma consolidated income statement and unaudited pro forma consolidated statement of financial position (together "Unaudited Pro Forma Consolidated Financial Information") of a group of Companies formed by ZEAL and Lotto24 (the "Combined Group") set out on the following pages have been prepared for illustrative purposes only, in accordance with item 20.2 of Annex I of the Commission Regulation (EC) No 809/2004 of 29 April 2004 (as amended) and on the basis of the notes set out below. The unaudited interim pro forma consolidated income statements for the fiscal year ended 31 December 2018 have been prepared to illustrate the effect on the consolidated income statement of the Company as if the completion of the Offer ("Completion", and the successful combination of the business of ZEAL and Lotto24 following completion of the Offer, "Combination") had taken place on 1 January 2018. The unaudited pro forma consolidated statement of financial position has been prepared to illustrate the effect on the consolidated statement of financial position of the Company as of 31 December 2018 as if the Completion had taken place on 31 December 2018.

The Unaudited Pro Forma Consolidated Financial Information has been prepared in a manner consistent with the accounting policies adopted by the Company in preparing the audited consolidated financial statements for the fiscal year ended 31 December 2018.

The Unaudited Pro Forma Consolidated Financial Information has been prepared for illustrative purposes only and, because of their nature, addresses a hypothetical situation and does not, therefore, represent the Combined Group's actual financial position or results.

The Unaudited Pro Forma Consolidated Financial Information has not been prepared, or shall not be construed as having been prepared, in accordance with Regulation S-X under the US Securities Act of 1933. In addition, the Unaudited Pro Forma Consolidated Financial Information does not purport to represent what the Company's or the Combined Group's financial position and results of operations actually would have been if the Offer had been completed on the dates indicated nor do they purport to represent the Company's or the Combined Group's results of operations for any future period or the Company's or the Combined Group's financial position at any future date.

Investors should read the whole of the Prospectus and not rely solely on the Unaudited Pro Forma Consolidated Financial Information contained in this section. In addition to the matters noted above, the Unaudited Pro Forma Consolidated Financial Information does not reflect the effect of anticipated synergies and efficiencies associated with Completion.

Unaudited Pro Forma Consolidated Income Statement for the Period from 1 January 2018 to 31 December 2018

	Company(1),(4)	Target (2),(4)	Pro formaadjustments (3),(4)	Pro formaconsolidatedincomestatement (4)
	TEUR	TEUR	TEUR	TEUR
Revenue	154,751	38,289	-	193,040
Other operating income	4,901	246	-	5,147
Total Operating performance (TOP)	159,652	38,535	-	198,187
Personnel expenses	(28,837)	(9,048)	-	(37,885)
Other operating expenses	(83,690)	(25,038)	-	(108,728)
Marketing expenses	(19,666)	(15,424)	-	(35,090)
Direct costs of operations	(44,323)	(3,015)	-	(47,338)
Other costs of operations	(19,701)	(6,599)	-	(26,300)
Exchange rate differences	617	-	-	617
Amortisation/depreciation on intangibleassets and property, plant and equipment	(1,147)	(1,202)	-	(2,349)
Result from operating activities beforeexceptional items (Adjusted EBIT)	46,595	3,247	-	49,842
Exceptional items	(8,288)	-	(2,498)	(10,786)
Result from operating activities(EBIT)	38,307	3,247	(2,498)	39,056
Finance income	331	-	-	331
Finance costs	(204)	(118)	-	(322)
Gain/(loss) on short term financial assets	(449)	(599)	-	(1,048)
Results from financing and investingactivities	(322)	(717)	-	(1,039)
Profit before income tax	37,985	2,530	(2,498)	38,017
Income tax expense	(11,322)	5,168	-	(6,154)
Profit attributable to the equity shareholders of the Company	26,663	7,698	(2,498)	31,863

(1) The Company financial information has been extracted from the consolidated financial statements of the Company for the fiscal year ended 31 December 2018.

____________________

Unaudited Pro Forma Consolidated Statement of Financial Position as of 31 December 2018

	Company(1),(5)	Target (2),(5)	Pro forma adjustments(3),(4),(5),(6),(7)	Pro formaconsolidatedstatement offinancial position (7)
	TEUR	TEUR	TEUR	TEUR
Non-current assets
Property, plant and equipment	2,425	1,409	-	3,834
Intangible assets	301	572	-	873
Deferred tax assets	627	12,464	-	13,091
Goodwill	-	18,850	270,969	289,819
Other investments	3,433	-	-	3,433
Other assets and prepaid expenses	146	-	-	146
Total non-current assets	6,932	33,295	270,969	311,196

(2) The Target financial information has been extracted from the financial statements of the Target for the fiscal year ended 31 December 2018 and from the unaudited historical financial information of the Target as adjusted for the purposes of the pro forma consolidated income statement. Presentation adjustments have been made.

(3) Transaction costs of TEUR 6,350 are attributable to the Combination and recognised through profit or loss as exceptional items. These expenses are non-recurring in nature and are not expected to have a continuing impact on the consolidated results. In the Company's consolidated income statement for the fiscal year ended 31 December 2018, transaction costs of TEUR 3,852 for the Combination have already been recognised in profit or loss. Consequently, exceptional items are to be increased by TEUR 2,498. Transaction costs of TEUR 650 are attributable to the share issuance and are to be charged to equity. Furthermore, for the purposes of the Unaudited Pro Forma Consolidated Financial Information and on the basis of a preliminary analysis, the Company assumes that none of the transaction costs will be tax deductible.

(4) There have been no adjustments been made to reflect the results of the operations of the Company and the Target since 31 December 2018 or other changes of their financial situation within this period of time.

	Company(1),(5)	Target (2),(5)	Pro forma adjustments(3),(4),(5),(6),(7)	Pro formaconsolidatedstatement offinancial position (7)
	TEUR	TEUR	TEUR	TEUR
Current assets
Trade and other receivables	-	-	-	-
Income tax receivables	39	-		39
Trade receivables and other currentassets	16,354	9,021		25,375
Financial assets	12,894	-		12,894
Cash and pledged cash	132,993	8,072	(3,148)	137,917
Total current assets	162,280	17,093	(3,148)	176,225
Total Assets	169,212	50,388	267,821	487,421
Non-current liabilities
Provisions	2,160	1,505	-	3,665
Other liabilities	1,758	233	-	1,991
Total non-current liabilities	3,918	1,738	-	5,656
Current liabilities
Trade payables	3,425	1,934	-	5,359
Other liabilities	25,424	12,008	-	37,432
Financial liabilities	106	-	-	106
Deferred income	3,098	-	-	3,098
Income tax liabilities	5,702	-	-	5,702
Provisions	4,341	2,382	-	6,723
Total current liabilities	42,096	16,324	-	58,420
Equity
Subscribed capital	8,385	24,155	(10,144)	22,396
Share premium	21,578	2,415	285,282	309,275
Treasury shares	(1,903)	-	-	(1,903)
Other reserves	227	-	-	227
Foreign currency translationreserve	201	-	-	201
Non-controlling interest	-	-	937	937
Retained earnings	94,710	5,756	(8,254)	92,212
Total equity	123,198	32,326	267,821	423,345
Total equity & liability	169,212	50,388	267,821	487,421

(1) The Company financial information has been extracted from the consolidated financial statements of the Company for the fiscal year ended 31 December 2018.

____________________

(3) Transaction costs of TEUR 6,350 are attributable to the Combination and recognised through profit or loss as execeptional items. In the Company's consolidated income statement for the fiscal year ended 31 December 2018, transaction costs of TEUR 3,852 for the Combination have already been recognised in profit or loss. Consequently, retained earnings are to be reduced by TEUR 2,498.Transaction costs of TEUR 650 are attributable to the share issuance and are to be charged to share premium. Furthermore, for the purposes of the Unaudited Pro Forma Consolidated Financial Information and on the basis of a preliminary analysis, the Company assumes that none of the transaction costs will be tax deductible.
(4) Pro forma adjustment of TEUR 3,148 has been posted to recognise to adjust the cash balance for the transaction costs of TEUR 7,000 (TEUR 6,350 recognised in the income statement and TEUR 650 capitalised) less TEUR 3,852 of costs already paid at 31 December 2018.
(5) The unaudited pro forma consolidated statement of financial position has been prepared on the basis that the transaction will be treated as a business combination in accordance with IFRS 3. However, it does not reflect any fair value adjustments to the acquired net assets and liabilities as the fair value measurement of these items will only be performed as at the date of Completion. The fair value adjustments, when finalised, may be material. For the purposes of the unaudited pro forma consolidated statement of financial position, the estimated excess purchase consideration over the carrying amount of net assets has been presented as a single value in goodwill. The goodwill balance has been calculated as the consideration transferred of TEUR 302,357 less the acquired net assets of the Target of TEUR 13,476. The goodwill included on the historical statement of financial position of the Target of TEUR 18,850 has been excluded from the acquired net assets of the Target.
(6) Pro forma adjustments have been posted to recognise the TEUR 14,011 of shares issued to acquire the Target. TEUR 288,347 of share premium and TEUR 937 of non-controlling interest have been recognised as the difference between the

consideration transferred of TEUR 302,357 and the nominal value of shares issued.
(7) The Target's subscribed capital of TEUR 24,155, share premium of TEUR 2,415 and retained earnings of TEUR 5,756 have been eliminated on consolidation.
(8) There have no adjustments been made to reflect the results of the operations of the Company and the Target since 31 December 2018 or other changes of their financial situation within this period of time.

B.9 Profit forecast or estimate Not applicable.

B.10 Qualifications in the audit report on the historical financial information

Not applicable. The audit opinions on the audited historical financial statements included in the Prospectus have been issued without qualification.

B.11 Insufficiency of the issuer's working capital

Not applicable. The Company is of the opinion that the working capital available to ZEAL is sufficient for its present requirements, that is, for at least 12 months from the date of the Prospectus.

C – Securities

C.1 Type and class of the securities being admitted to trading

14,010,982 new registered shares of the Company of a nominal value of EUR 1.00 each (the "Offer Shares").

Security identification number

International Securities Identification Number (ISIN) .......................................... GB00BHD66J44

German Securities Identification Number

(Wertpapierkennummer, WKN) ................ TPP024

Ticker Symbol ........................................... TIM

C.2 Currency Euro.

C.3 The number of shares issued and fully paid

The aggregate nominal value of the issued ordinary share capital of the Company upon admission of the Offer Shares to trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) (the "Admission") will be EUR 22,396,070, divided into 22,396,070 registered ordinary shares of EUR 1.00 each. Such shares will be issued fully paid as part of the Completion.

Nominal value Each of the Company's shares has a nominal value of EUR 1.00.

C.4 Rights attached to the securities

Each of the ZEAL shares carries one vote at shareholders' meetings of the Company (unless a vote is taken by show of hands). There are no restrictions on voting rights, except for restrictions which may be imposed by the members of the Company's executive board ("Executive Board") where notice in writing has been given to a ZEAL shareholder to disclose information relating to the ownership of or interests in ZEAL shares and ZEAL shareholder fails to do so in the prescribed period. In respect of the ZEAL shares in relation to which the default occurred, the ZEAL shareholder will not be entitled to attend or vote either personally or by proxy at a general meeting.

The Offer Shares will have the same rights as the existing ZEAL shares. They will carry full dividend rights following their issuance. The holders of Offer Shares are entitled to receive such dividends as the Company's shareholders or the Executive Board from time to time may declare or pay, by reference to a record date, after the date of issuance of the Offer Shares, out of funds legally available for that purpose. In the event of the Company's liquidation, any surplus assets remaining after payment of its creditors will be distributed to the holders of ZEAL shares in proportion to their interest in the Company's share capital.

C.5 Restrictions on the free transferability of the securities

Not applicable. The Offer Shares are freely transferable. At the time of Completion and subject to applicable law and the provisions of the Company's statutes, trading of Offer Shares will not be subject to any prohibitions on disposals and there will be no restrictions with respect to the transferability of the Offer Shares.

C.6 Application for admission to trading on a regulated market and identity of regulated markets where the securities are to be traded

On 2 May 2019, the Company applied for Admission of all Offer Shares.

C.7 Dividend policy The ability of the Company to pay dividends will remain dependent on a number of factors and there is no assurance that the Company will pay dividends, or if a dividend is paid, what the amount of such dividend will be. The Executive Board has proposed, and the Company's supervisory board ("Supervisory Board") has approved, a dividend policy under which the Company will pay annual dividends at yearend, which are expected to amount to a total of at least EUR 1.00 per share. An announcement of the amount of the dividend, and the record date for entitlement to the dividend, will be made in advance of payment. This position is subject to periodic review and may be amended depending on ZEAL's future earnings and financial position. Following the announcement of the acquisition of Lotto24, the Executive Board and Supervisory Board are reviewing the Company's dividend policy.

D – Risks

D.1 Investing in and holding shares of the Company is subject to a number of risks. Investors should carefully review all of the information contained in the Prospectus and should pay particular attention to the following risks associated with an investment in the shares of the Company which should be considered together with all other information contained in the Prospectus. If one or more of the following risks were to arise, ZEAL's business, prospects, financial condition, results of operations or cash flows and/or the Company's share price could be materially and adversely affected and investors could lose all or part of their investment. The risk factors are based on assumptions that could turn out to be incorrect. Furthermore, the risks set out below may not be exhaustive and do not necessarily comprise all of the risks associated with an investment in ZEAL and the Offer Shares. Additional risks and uncertainties not currently known to ZEAL or which ZEAL currently deems immaterial may arise or become material in the future and could, individually or cumulatively, have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows and/or the Company's share price. The sequence of risk factors set out below is not a statement about the probability of occurrence, degree or importance of the individual risks or the scope of any potential harm to ZEAL's business, prospects, financial condition, results of operations or cash flows and/or the Company's share price.

Key risks specific to the issuer and its industry

Risks Related to the Regulatory Environment, Legal and Tax Risks

Uncertainties relating to the regulatory environments in the countries in which ZEAL operates could have a nega tive impact on ZEAL's business activities.
ZEAL depends on permits, licences and other govern mental authorisations for its business. The competent au thorities could not renew any of these authorisations after their expiry dates, revoke any of these authorisations or adversely modify or supplement any renewed authorisa tion compared to the existing authorisations. ZEAL may fail to obtain new authorisations it requires for the expan sion in further lottery markets.
After the transformation of ZEAL's business model of the 'Lottery Betting' segment into a model based on local state licences in Germany, ZEAL is exposed to the same risks Lotto24 faces as regards brokerage licences, adver tising licences and brokerage fees.
ZEAL is exposed to risks from present and potential future legal disputes. In particular, Tipp24 Services Lim ited and myLotto24 Limited could be forced to discontin ue their business activities in certain or all Federal States of Germany. Each of them may be sentenced by German courts to pay compensations to State Lottery Operators due to unlawful business activities.
The conduct of ZEAL's business activities in the 'Lottery Betting' segment in Germany by means of offering Sec ondary Lotteries could be considered as a criminal of fense.
Failure to comply with existing regulations or increased or amended regulation of ZEAL's operations, including the introduction of new or the expansion of existing licensing requirements, such as those relating to age verification regulations, could lead to restrictions of ZEAL's business, higher costs or higher entry barriers into certain markets.
Uncertainties and changes relating to ZEAL's regulatory tax environment for its online offerings can significantly impact its business. ZEAL could be required to pay addi tional taxes, including lottery taxes, and other duties as a result of tax audits, legal proceedings relating to tax as sessments, changes in ZEAL's effective tax rate or the loss of its tax loss carry forwards and other tax credits.
The conduct of ZEAL's business activities in the segment

'lottery betting' in Germany, the UK or other jurisdictions may require the entities of the myLotto24 Sub-Group to be licensed or otherwise subject them to financial mar kets regulation which would result in restrictions or even prohibitions in respect of the business activities conduct ed by the myLotto24 Sub-Group.

Risks Related to the Market

ZEAL is dependent on the product portfolio offered by the operators of Primary Lotteries and the stability of the lot tery markets in various jurisdictions. ZEAL could be ad versely affected by declines in the demand for Primary Lotteries and general declines and economic downturns in these markets. Any decline in the demand on the lot tery markets could therefore have a material adverse ef fect on ZEAL's business, prospects, financial condition and results of operations or cash flows.
A weak jackpot environment, i.e. the absence of excep tionally profitable lottery events in the form of large jack pots or the reduction of the maximum amount of jackpots could lead to a reduction in the gambling activity and consequently in the sales of lottery bets and lottery tick ets.
The markets in which ZEAL operates are competitive and competition in the online lottery market could intensify. Existing competitors could, for example, expand their business activities, reduce their prices for lottery tickets or bets on lotteries and new competitors could enter into the same markets in which ZEAL is active in. Increased competition could result in ZEAL losing market shares or being forced to significantly increase its expenses for ac quiring and securing market shares.

Risks Related to the Business

ZEAL's business activities are highly dependent on complex IT systems whose functionality can be signifi cantly impaired by internal and external circumstances. Actual or alleged procedural errors or functional problems in the processing of gambling orders and the payment of lottery winnings could result in claims for damages from customers for lost gambling winnings and significantly impair ZEAL's reputation. The systems made available by ZEAL in the form of lottery platforms to the coopera tion partners could also have actual or alleged procedural errors or functional problems for which ZEAL is responsi ble. ZEAL's IT systems could not be sufficient for multi product launches or scalability.
ZEAL relies on cooperation agreements to market its products and services, and discontinuation of such agreements could decrease its reach. Investments into international markets as well as investments into other companies could not pay-off for ZEAL. Investments in early-stage start-ups may not reach a profitable maturity and such start-ups may not be able to secure follow-up fundings and ZEAL may not be able to liquidate its posi-

tion or only by accepting even significant losses.

– ZEAL depends on its ability to acquire new customers, improve the activity of existing customers as well as re activating the dormant proportion of the customer base by means of marketing measures, which may not be ef fective or may incur higher expenses than expected.

Risks Related to the Financial Situation

ZEAL is exposed to bookmaking risks through myLotto24 Sub-Group as operator of Secondary Lotteries. Lottery prizes owed to customers could exceed myLotto24 Sub-Group's own funds and the coverage provided under hedging arrangements, which could ultimately lead to the insolvency of members of the myLotto24 Sub-Group.
Existing hedging arrangements in the form of insurances could be terminated by the insurer before the end of their respective term and ZEAL or myLotto24 Sub-Group could not be able to take out new insurance cover at all or only with a time delay. ZEAL or myLotto24 Sub-Group could not be able to renew existing insurance contracts after the end of their respective term or could only obtain significantly lower insurance coverage or insurance cov erage against payment of significantly higher insurance premiums. Additional hedging arrangements may fail partly or entirely, and may not be sufficient to cover risks associated with the operation of ZEAL's business. The winning of high jackpots by customers could lead to myLotto24 Sub-Group's inability to accept further lottery bets due to insufficient cover by its hedging instruments.
Insurers providing coverage for the event of a high jack pot could be unable, unwilling or not obliged to pay out the insurance benefit.

Risks Related to the Offer

The Combination may not be successful or may not proceed as planned or may involve higher or unexpected costs and the Company may be required to effect the Completion despite a material adverse change.
The expected dis-synergies and non-recurring cost in connection with the Combination may be higher than an ticipated and expected synergies may not be fully real ised, or at all.

D.3 Key risks specific to the securities

Risks Related to the Company's Shares

Future capital measures could lead to substantial dilution (i.e. a reduction in the value of existing shareholders' in terests in the Company).
Any future sales of shares of the Company by a major shareholder of the Company could depress the market price of the shares. The share price and trading volume of the Company's shares may fluctuate significantly, which could result in substantial losses.
The Company's ability to pay dividends depends on a variety of factors. Dividends paid in the past are not nec essarily indicative for future dividend payments, and the Company's dividend policy may change.
The proposed financial transaction tax could result in a substantial new tax burden in the secondary market for investors buying ZEAL's shares and trading them in a European Union member state which implements such a tax.

E – Offer

E.1 Total net proceeds The Prospectus does not constitute an offer or invitation to any person to subscribe for or purchase any shares in the Company. The Company will not receive any proceeds from the listing.

Estimate of the total expenses

The Company expects that the total costs incurred by ZEAL in connection with the listing of the Offer Shares will amount to approximately EUR 7 million net of any applicable value added tax.

Estimated expenses charged to the investor

Investors will not be charged with expenses by the Company in connection with the listing of the Offer Shares.

E.2a Reasons for the offer, use of proceeds, estimated net amount of the proceeds

The Prospectus does not constitute an offer or invitation to any person to subscribe for or purchase any shares in the Company.

The Company will not receive any proceeds from the listing of the Offer Shares.

E.3 Terms and conditions of the offer

Not applicable. The Prospectus does not constitute an offer or invitation to any person to subscribe for or purchase any shares in the Company.

E.4 Any interest that is material to the issue including conflicting interests

The Company as well as the group of companies controlled by Oliver Jaster, which holds a share of approximately 10.22% in the Company and a share of approximately 41.62% in Lotto24 AG ("Günther Group"), Working Capital Management Pte., Ltd. and the companies controlled by it as well as Jens Schumann have an interest in the issue because they believe that the Completion will provide multiple benefits to both ZEAL and Lotto24.

Lotto24 has an interest in the issue because it believes that the cooperation agreed in a business combination agreement with the Company is in the best strategic interest of Lotto24, its shareholders and other stakeholders.

Günther Group has an additional interest in the issue because Completion would result in a significant increase of the percentage of its voting rights in the Company to above 30%, which would likely entail a de facto control (faktische Kontrolle) of the Company and thereby indirectly maintain the existing de facto control of Lotto24.

Furthermore, Lazard & Co. GmbH, Frankfurt am Main, Germany ("Lazard") is acting as financial advisor to ZEAL in connection with the issue and is providing investment banking services in this context. Lazard will receive a success fee for these services, which is why Lazard has an interest in the issue.

Conflicting interests Not applicable. There are no conflicts of interest.

E.5 Name of the person or entity offering to sell the security

Not applicable. The Prospectus does not relate to an offering of shares and there are no lock-up agreements.

E.6 Amount and percentage of immediate dilution resulting from the Offer

Prior to the Completion, the Company's net book value per share amounted to EUR 14.69 as of 31 December 2018 (based on 8,385,088 shares of the Company issued on that date). As of 31 December 2018, the net book value per share of the Target amounted to EUR 1.34 (based on 24,154,890 shares of the Target issued on that date).

The Target's shareholders have accepted the Offer for 22,473,615 Target Shares.

The calculation of the amount and percentage of dilution resulting from the Offer set forth below is based on the following assumptions:

Upon Completion, a total of 24,154,890 Target Shares will be outstanding.
Upon Completion, 22,473,615 Target Shares will be contributed to the Company in the form of a contribution in kind against the issuance of 14,010,982 Offer Shares (corresponding to a consideration of one Offer Share for each 1.604 Target Shares or 0.62344 Offer Shares for each one Target Share).
The Company's acquisition costs for all 22,473,615 Target Shares amount to approximately TEUR 302,357, based on the value of the 14,010,982 Offer Shares issued in exchange for the Target Shares tendered into the Offer, each such Offer Share valued at EUR 21.58, corresponding to the three-month volume-weighted average price of the Company's shares on 18 November 2018, i.e. the day prior to the publication of the Company's decision to launch the Offer, as notified by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, "BaFin") to the Company on 27 November 2018.
The total costs incurred by ZEAL in connection with the Offer (legal, banking and other professional fees and costs) will amount to approximately TEUR 6,350, TEUR 3,852 of which was recognised in the income statement for the fiscal year ended 31 December 2018.
There are no tax or interest effects.
Preliminary goodwill of approximately EUR 290 million is created upon Completion.

Based on these assumptions, the net book value of the Company increases from TEUR 123,198 as of 31 December 2018 by approximately TEUR 284,074 to approximately TEUR 407,976, and the number of shares of the Company increases from 8,385,088 as of 31 December 2018 to 22,396,070 following the Completion. The net book value per share of the Company increases from EUR 14.69 as of 31 December 2018 by approximately EUR 3.49, or approximately 19%, to EUR 18.18 following the Completion. The dilution of the proportionate share of voting rights for shareholders of the Company amounts to 62.7%.

The difference between the value per Offer Share of EUR 21.58 assumed for the purpose of calculating the dilution and the proportionate equity attributable (net book value) per ZEAL Share of EUR 18.18 after Completion results in a value-related dilution of the Lotto24 shareholders accepting the Offer of EUR 3.40 (15.8%).

E.7 Estimated expenses charged to the investor by the issuer

Not applicable. Investors will not be charged with expenses by the Company in connection with the listing of the Offer Shares.

1 RISK FACTORS

Investing in and holding shares of ZEAL Network SE (the "Company" or "ZEAL Network" and, together with its consolidated subsidiaries, "ZEAL", including Lotto24 AG (the "Target" or "Lotto24"), following completion of the voluntary public takeover offer for all shares of Lotto24, in the form of an exchange offer (the "Offer")), Lotto24 is subject to a number of risks. Investors in the 14,010,982 new registered shares of the Company of a nominal value of EUR 1.00 each (the "Offer Shares") should carefully review all of the information contained in this prospectus (the "Prospectus") and should pay particular attention to the following risks associated with an investment in the shares of the Company which should be considered together with all other information contained in the Prospectus. If one or more of the following risks were to arise, ZEAL's business, prospects, financial condition, results of operations or cash flows and/or the Company's share price could be materially and adversely affected and investors could lose all or part of their investment. The risk factors are based on assumptions that could turn out to be incorrect. Furthermore, the risks set out below may not be exhaustive and do not necessarily comprise all of the risks associated with an investment in ZEAL and the Offer Shares. Additional risks and uncertainties not currently known to ZEAL or which ZEAL currently deems immaterial may arise or become material in the future and could, individually or cumulatively, have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows and/or the Company's share price. The sequence of risk factors set out below is not a statement about the probability of occurrence, degree or importance of the individual risks or the scope of any potential harm to ZEAL's business, prospects, financial condition, results of operations or cash flows and/or the Company's share price.

1.1 Risks Related to the Regulatory Environment, Legal and Tax Risks

1.1.1 Uncertainties relating to the regulatory environments in the countries in which ZEAL operates could have a negative impact on ZEAL's business activities.

ZEAL is predominantly active in the online lottery markets of several European jurisdictions, notably Germany, Ireland, Norway, the Netherlands, Spain and the United Kingdom. The online lottery markets are sub-sectors of the gambling and lottery markets which are typically highly regulated and impose severe restrictions for the offering of lotteries and other games of chance. ZEAL's, and also Lotto24's, business models and further growth depend decisively on the regulatory environments in the jurisdictions in which they are active or might expand to in the future. ZEAL's business activities are divided into the three segments 'Lottery Betting', 'Lottovate' and 'ZEAL Ventures'.

Business segments

At the date of the Prospectus, ZEAL's main business segment is 'Lottery Betting', which comprises the operation of secondary lotteries: "Secondary Lotteries" are bets on the outcome of lottery draws of state-licensed lotteries ("Primary Lotteries"), i.e. customers bet that certain lottery numbers will be drawn in Primary Lotteries against payment of stakes. Since the lottery numbers of a Primary Lottery are unpredictable real-life events, Secondary Lotteries qualify, in ZEAL's view, as betting and not as lotteries and are therefore governed by betting regulations in all jurisdictions in which ZEAL operates. ZEAL's business activities in this segment takes place within myLotto24 Limited and its subsidiaries ("myLotto24 Sub-Group"), an independently organised sub-group of affiliated companies, in which ZEAL holds an equity interest of 40%, but which is fully consolidated in ZEAL's accounts. myLotto24 Sub-Group offers Secondary Lotteries under two consumer brands 'Tipp24' and 'myLotto24'. At www.*tipp24.com*, Tipp24 Services Limited provides an offer made in the German language, which is therefore first and foremost used by customers in the German speaking countries, to broker Secondary Lotteries operated by myLotto24 Limited. At www.*mylotto24.co.uk* and other internet sites, myLotto24 Limited operates the 'Lottery Betting' business and offers Secondary Lotteries in the English language targeted at customers in Ireland and the United Kingdom ("UK"). This business segment also includes the sale of games of chance where winnings are determined by random-number generators that generate the information if and how much a bet wins ("Instant Win Products").

The 'Lottovate' business segment is focused on the operation of Primary Lotteries and the establishment of partnerships with charities, foundations and communities in order to jointly develop new sources of funding through customer-specific lottery platforms. At the date of the Prospectus, the business activities in this segment are conducted in Norway, the Netherlands and Spain. The 'ZEAL Ventures' segment is run by the Company and focuses on external investments and internal incubation (i.e. the support of businesses - primarily in their early development phase - in implementing their business concept), and supports start-ups that are developing new lottery business models or products. The Company provides start-ups with venture capital and advice. In return, it expects to establish partnerships with these start-ups or to acquire them, and to generate investment returns. ZEAL Ventures has made investments in the UK and the United States of America.

Envisaged changes in the business segment 'Lottery Betting'

At the date of the Prospectus, ZEAL's business depends on its offerings of Secondary Lotteries in the German online market. In Germany, the State Treaty on Gambling (Glücksspielstaatsvertrag), which entered into force on 1 July 2012 ("Treaty on Gambling 2012"), constitutes a gambling monopoly, including a monopoly on the operation of lotteries, of the German federal states (Länder) ("Federal States"). This treaty prohibits the private operation of lotteries (with an exemption of certain lotteries "with a lower risk potential") and has established the principle that the operation and brokerage of public games of chance on the internet is generally prohibited. Only the online brokerage, but not the operation, of lotteries and the operation and brokerage of sports bets on the internet may be permitted by the Federal States provided that this activity does not conflict with certain legal objectives of the Treaty on Gambling 2012, and additional requirements are met in each Federal State (e.g. strict provisions regarding the age verification of players and, in the case of lotteries, the obligation to divide gambling revenues among all sixteen state-owned lottery operators of the Federal States (Landeslotteriegesellschaften) ("State Lottery Operators") based on the player's place of residence). There is expressly no legal entitlement to the granting of a licence; rather it is a discretionary decision of the competent authority.

The operation of Secondary Lotteries in Germany is regarded as a violation of the gambling and lottery monopoly constituted by the Treaty on Gambling 2012, and, accordingly, as illegal activity by, among others, the sixteen State Lottery Operators. At the date of the Prospectus, ZEAL is facing a number of administrative and civil proceedings, in particular aimed at prohibiting Tipp24 Services Limited and myLotto24 Limited from doing business in the German market (see "1.1.4 ZEAL is ex posed to risks from present and potential future legal disputes. In particular, Tipp24 Services Limited and myLotto24 Limited could be forced to discontinue their business activities in certain or all Federal States of Germany. Each of them may be sentenced by German courts to pay compensations to State Lottery Operators due to unlawful business activities."). In addition, this business activity could be considered as a criminal offense (see "1.1.5 The conduct of ZEAL's business activities in the 'Lottery Betting' segment in Germany by means of offering Secondary Lotteries could be considered as a criminal offense.").

Against the background of a regulatory environment that has not been liberalised in many relevant countries in a way that would enable ZEAL to continue offering Secondary Lotteries on a reliable legal basis without significant uncertainties, ZEAL intends to transform the business model of the 'Lottery Betting' segment into a model based on local state licences in particular in Germany ("Business Model Change"), with the intention of reducing ZEAL's exposure to operational, tax and regulatory risks, in particular as described in this section "1.1". Lotto24 already carries on a lottery brokerage business in Germany based on local state licences. The Company believes that a combination with Lotto24 creates the opportunity for ZEAL to re-enter the German lottery brokerage market and to transfer the customers of its independently managed UK associated company Tipp24 Services Limited to a lottery brokerage business based on local state licences. Following completion of the Offer ("Completion"), ZEAL intends to transform its German Secondary Lottery business, operated by Tipp24 Services Limited, into an online brokerage business by having Lotto24's existing brokerage licence expanded to include brokerage to the customers of Tipp24 Services Limited (subject to the discontinuation of ZEAL's Secondary Lottery business activities in Germany) ("Lotto24 Licence Expansion"). On 8 February 2019, the competent Ministry of the Interior of Lower Saxony granted the Lotto24 Licence Expansion, which enables Lotto24 to broker lottery tickets to the State Lottery Operators via the domains www.tipp24.de and www.tipp24.com. Tipp24 Services Limited's customers may henceforth participate in Primary Lotteries operated by the sixteen State Lottery Operators and other permitted lottery products offered by Lotto24 (class lotteries and charity lotteries).

Uncertainties in the regulatory environment in Germany

The conduct of ZEAL's business activities, including Lotto24's lottery brokerage business following Completion, depends on the regulatory environment in Germany. The German legal framework regarding gambling law, including lottery law, is characterised by legal uncertainties which constitute a risks for the conduct of ZEAL's business even after the implementation of the Business Model Change as intended. These uncertainties result from various factors, including the fact that the gambling regulations have been the subject of constant changes in the past and that the Company assumes that there will be no reliable legal framework in the foreseeable future. Further, all sixteen Federal States (and thus sixteen legislators) are involved in the process of creating the regulation, some of which have different views on its content, and the compatibility of the existing regulation with higherranking law is uncertain. In particular:

− The Treaty on Gambling 2012 expires on 30 June 2021, unless the Federal States vote to extend the treaty with at least thirteen votes in which case the extended treaty will continue to apply in the Federal States which voted in favour of an extension. Lotto24's brokerage licence, as amended by the Licence Expansion, expires on 30 June 2021. In 2017, the Federal State of Hesse proposed an amendment to the existing treaty which, however, has become obsolete after several Federal States refused to ratify the amendment. In March 2019 the prime ministers of the Federal States agreed on an amendment of the Treaty on Gambling 2012 with respect to sports betting. The prime ministers approved changes that would set up an interim sports-betting licensing programme starting 1 January 2020 and remove limitations on the number of licences to be granted.
− The Federal States also agreed in March 2019 to continue with the consultation and negiotation of a new interstate treaty on gambling to take effect from June 2021. To the Company's knowledge, the outcome of these discussions is currently open. If the Treaty on Gambling 2012 is not extended or a new treaty based on the same or similar understanding not passed before the expiration of Lotto24's licence, or if the new treaty reverts to rules similar to the first interstate treaty on gambling (Glücksspielstaatsvertrag, "Treaty on Gambling 2008"), which completely prohibited online brokerage of lotteries, ZEAL may not be able to participate in the German lottery brokerage market. This could lead to substantial losses to ZEAL and jeopardise its anticipated growth in the future and thus adversely affect the ability to continue or further expand ZEAL's and Lotto24's business and therefore have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.
− The regulation of gambling in Germany is not uniformly structured but is subject either to federal law or to the laws of the individual sixteen Federal States. The competence of the Federal States to pass legislation encompasses, among other games of chance, lotteries. It cannot be excluded that, in the case that the sixteen Federal States cannot agree on a uniform legislation that comes into force after the expiry of the Treaty on Gambling 2012, ZEAL and Lotto24 will be confronted with up to sixteen different regulations, one for each Federal States, including, in particular, different provisions governing the terms and conditions for online lottery brokerage licences. The example of the Federal State of Schleswig-Holstein demonstrates that this is not completely unlikely: after the expiry of the Treaty on Gambling 2008 on 1 January 2012, Schleswig-Holstein unilaterally introduced the 'Law on the Reorganisation of Gambling' (Glücksspielgesetz, "Gambling Act SH") which allowed the brokerage of state lotteries with no more than one draw per day via the internet without the broker requiring a prior permission of a supervisory authority. There was only an obligation to notify such activity. Furthermore, there were fewer restrictions (as compared to the Treaty on Gambling 2008 and 2012) for the advertisement of online brokerage of lottery products. It was also the government of Schleswig-Holstein who, in June 2017, said that it will adopt a new law, similar to the Gambling Act SH, after the expiry of the Treaty on Gambling 2012. Accordingly, there is a risk that the online brokerage of lotteries will be allowed in some Federal States (with or without a licence), while in other Federal States it will be restricted or even prohibited. This could have a material adverse impact on ZEAL's and Lotto24's business activities in Germany because, in order to comply with the different regulations, customers from Federal States where the online brokerage is not permitted would have to be excluded. In addition, the German federal legislator itself or the European Union could assume the regulation of gambling law previously regulated by the Federal States and could prohibit private brokerage activities or brokerage via the internet in general. This could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.
− There are considerable concerns regarding the compatibility of the Treaty on Gambling 2012 with, in particular, EU law, in particular with regard to the following considerations. Based on the European Court of Justice's ("ECJ") rulings in various cases (including joint cases no. C-316/07, C-358/07 to C-360/07, C-409/07 and C-410/07 "Markus Stoß", case no. C-46/08 "Carmen Media"

and case no. C-243/01 'Gambelli') the court has provided a wide variety of understandings of the EU law and awarded broad discretion to the member states of the European Union ("EU Member States") to regulate games of chance (including establishing a state monopoly for games of chance or a licence procedure for private operators). Thus, the ECJ ruled that EU Member States can require operators to obtain local licenses to carry out gambling businesses therein, even when the offer is duly registered and authorised in another EU Member State. However, restrictions for operators under national law cannot be justified under EU law if the legislative goals invoked by the EU Member State (e.g. the prevention of gambling addiction) are not consistently pursued in all areas of gambling. The ECJ further clarified that the so-called primacy of application of European law has a direct effect and that national law is therefore immediately inapplicable if it contradicts EU law. As a consequence, national legislation which prohibits or sanctions gambling business activities without a licence or authorisation from the EU Member State concerned, while a licence from another EU Member State is held, can violate the fundamental freedom of establishment and the fundamental freedom to provide cross-border services from one EU Member State into any other EU Member State, each as provided for under EU law, if the national legislation is not compatible with EU law. Against this background, it cannot be said for certain how the ECJ will react to various national laws and restrictions. In particular, it is not certain whether the Treaty on Gambling 2012 or any possible amended or new legislation were to be ruled incompatible with EU law by the ECJ. Should the ECJ confirm national legislation in Germany restricting cross-border online betting and the online brokerage of lotteries or affecting the licences obtained by ZEAL now or in the future, or should the Federal States introduce even stricter regulations after the ECJ has declared the existing legislation incompatible with EU law, this could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

In summary, the development of the regulatory environment in Germany is uncertain, in particular for the time after the expiry of the Treaty on Gambling 2012 on 30 June 2021. Should, for example, the Treaty on Gambling 2012 be amended or replaced by an even stricter regulatory regime, in particular relating to online lottery brokerage, or should a complete ban on online gambling or online lottery offers be re-introduced, this could adversely affect the ability to continue or further expand ZEAL's and Lotto24's business and thus have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

Uncertainties in the regulatory environment in other markets

ZEAL conducts business in a number of other regulatory jurisdictions including, Ireland, Norway, the Netherlands, Spain and the UK. ZEAL cannot predict the development of the regulatory framework in these jurisdictions and in other jurisdictions in which ZEAL may become active in the future Each change could have a negative impact on ZEAL's business in the concerned market.

In Ireland, for example, myLotto24 Limited holds a 'remote bookmakers licence' granted by the competent Irish Revenue Commissioners. This licence was granted as part of the scheme to licence remote betting operators introduced by the amendment of the 'Betting Act 1931' in 2015. ZEAL expects that a draft bill to update the existing gambling legislation ('Gambling Control Bill') will be published in 2019. A recent draft bill was proposed by the Irish opposition party Finna Fáil to amend the current Irish 'Betting Act 1931' to ban the betting on the outcome of any lottery game under that of the Irish National Lottery (on which myLotto24 Limited offers Secondary Lotteries). It is uncertain, whether this proposal will be implemented in the final 'Gambling Control Bill'. In addition, the Irish Government recently confirmed the increase of the Irish betting tax from 1% to 2% which will come into effect in January 2019. However, ZEAL does not expect that this increase will have a material adverse impact on its business. Should the new legislation hinder Lottery Betting on the Irish National Lottery in any way, ZEAL's ability to continue or further expand its business would be adversely affected, including loss in net assets, financial condition, results of operations or cash flows.

As another example, Lottovate Nederland B.V. holds a charity lottery licence in the Netherlands. The Dutch gambling market is currently governed by the Dutch 'Gambling Act of 1964'. Online gambling is not accounted for in the current legislation. In 2011, the Dutch State Secretary of Justice decided to modernise the 'Gambling Act of 1964'. A corresponding legislative proposal for games of chance organised using telecommunications (Remote Gambling Bill) was approved by the Dutch House of Representatives in 2016 and is currently debated in the Senate. The 'Remote Gambling Bill' would enable the provision of online games of chance in the Netherlands, provided that a licence had been obtained. By law, charity lotteries in the Netherlands are obliged to give a minimum of 50% of their sales to charities. This essentially means that half of the price for each lottery ticket sold goes to charity. There is no limit on price ranges or jackpot sizes. Mid 2018 the Dutch Government confirmed that once the 'Remote Gambling Bill' has become law, the percentage will be lowered to 40% in order to stimulate innovation. However, ZEAL cannot exclude that the final 'Remote Gambling Bill' will not contain this reduction, or that it will contain other provisions which have a negative impact on its business in the Netherlands.

Any change in the regulatory environment in any jurisdiction in which ZEAL is already active, or will be active in the future, could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.1.2 ZEAL depends on permits, licences and other governmental authorisations for its business. The competent authorities could not renew any of these authorisations after their expiry dates, revoke any of these authorisations or adversely modify or supplement any renewed authorisation compared to the existing authorisations. ZEAL may fail to obtain new authorisations it requires for the expansion in further lottery markets.

ZEAL's business activities currently expand over several European jurisdictions, namely Germany, Ireland, the Netherlands, Norway, Spain and the UK, and ZEAL intends to enter into further markets in the future. Each jurisdiction has different laws and regulations regarding gambling and lottery legislation that are, as regards the European Union, not harmonised under European law. The conduct of ZEAL's business activities depends crucially on these regulatory environments. The offering of lottery and other gambling products is typically subject to restrictions, in particular the requirement that they must not be offered without permits, licences and other authorisations granted by the competent authority (collectively "licences" or "authorisations"). Accordingly, ZEAL depends on these authorisations for its business activities in the 'Lottery Betting' segment, the offering of Primary Lotteries and Instant Win Products, including operating licences and licences relating to advertising. Furthermore, ZEAL cannot exclude that additional licence requirements will arise, in particular due to changes in the regulatory environment or changed interpretation of the existing regulatory environment (see "1.1.1 Uncertainties relating to the regulatory environments in the countries in which ZEAL operates could have a negative impact on ZEAL's business activities." and "1.1.8 The conduct of ZEAL's business activities in the segment 'lottery betting' in Germany, the UK or other jurisdictions may require the entities of the myLotto24 Sub-Group to be licensed or otherwise subject them to financial markets regulation which would result in restrictions or even prohibitions in respect of the business activities conducted by the myLotto24 Sub-Group."). The authorisation procedures are often complex, timeconsuming and costly, and may be influenced by factors that are beyond ZEAL's control. The issuance of new, and the renewal or extension of existing authorisations is also often subject to a considerable discretion by competent authorities and the authorities may introduce new requirements and conditions. ZEAL may fail to renew authorisations required for its existing business activities and to obtain new or extensions of existing authorisations it requires for the expansion in further lottery markets, for example also with regard to the lottery brokerage business in Germany after Completion. ZEAL's business strategy to enter into new markets could suffer significant setbacks if a required authorisation will not be granted at all or granted only after a considerable delay (e.g. after successful legal proceedings to obtain the authorisation).

For example, in 2017, Lottovate Limited, which is a wholly-owned subsidiary of the Company, entered into a partnership with UNICEF Norway and was granted a licence from the Norwegian Lottery Authority to operate a charity lottery in this country for a period of nine years. In addition, at the end of 2016, its subsidiary Lottovate Nederland B.V. was granted a licence in the Netherlands to run a nationwide charity lottery under the Dutch regulatory framework for a period of five years. There is no certainty that these or other existing licences will be extended at all or extended without interruption. It cannot be ruled out that extended licences will limit the number of the offered products or will contain other negative deviations, in particular in the form of restrictions (e.g. as regards the number of draws, the maximum amount of stakes per customer or the maximum amount of lottery prizes).

Licences in the UK

Certain members of the myLotto24 Sub-Group are regulated in the UK and hold licences granted by the Gambling Commission of the United Kingdom ("UK Gambling Commission"). Tipp24 Services Limited holds a licence granted by the UK Gambling Commission (licence number 000-007499-R-101718), comprising a 'remote betting intermediary operating licence' and a 'remote casino operating licence':

− 'Remote betting intermediary operating licences' allows the licensee to bring two or more betting parties together online in circumstances where the licensee does not have liability for their bets. In the case of Tipp24 Services Limited, the betting parties are, on the one hand, its customers, and on the other hand, myLotto24 Limited.
− 'Remote casino operating licences' allows to offer casino games to customers via a website, mobile phone, TV or other online service. This includes poker, roulette, blackjack and other casino games, as well as online slot games, and also covers the offering of Instant Win Products.

myLotto24 Limited holds the licence number 000-004578-R-103863 from the UK Gambling Commission. The licence comprises a 'remote casino licence', a 'remote gambling software licence' and a 'remote general betting operating licence':

− 'Remote gambling software licence' allows the licensee to manufacture, supply, install or adapt gambling software by means of remote communication. For example, it allows to supply gambling software via methods of secure file transmission or to make gambling software available for download by operators from the licensee's server.
− 'Remote general betting operating licence entitles the licensee to provide facilities for betting on the outcome of real events (whether or not the licensee also provide betting on virtual events, e.g. virtual games or virtual races) by means of remote communication.

Another 'remote gambling software licence' and certain other licences are held by Smartgames Technologies Limited which provides and runs the internet platforms for myLotto24 Limited and Tipp24 Services Limited (licence number 000-027795-R-309654-011). Smartgames Technologies Limited is a member of ZEAL.

UK operating licences are valid for a year and are automatically renewed, unless the licensee fails to pay the annual fee (e.g. the licence of Tipp24 Services Limited has a term until 17 September 2019 and the licence of myLotto24 Limited has a term until 15 October 2019). The UK Gambling Commission may determine that operating licences, or a specified class of operating licence, shall cease of have effect at the end of a specified period, where the holder of an operating licence is convicted of a relevant offence by or before a court in Great Britain and the court orders forfeiture of the licence, or upon suspension or revocation by the UK Gambling Commissions if, in particular, the licenced activity is being or has been carried on in a manner which is inconsistent with the licensing objectives, a condition of a licence has been breached or the licensee is unsuitable to carry on the licensed activities. Accordingly, ZEAL cannot guarantee that a licence will not be suspended or revoked by the UK Gambling Commission and not cease to have effect for any other reason permitted by UK law. In the event that the UK Gambling Commission makes an existing licence or the granting of a new licence subject to the fulfilment of certain conditions, the concerned member of the myLotto24 Sub-Group could incur significant expenses for their fulfilment. The fulfilment of conditions could also prove to be uneconomical with the result that the licence can no longer be used. The same could be the case if the UK Gambling Commission limits, adversely modifies or supplements a licence.

Following the planned withdrawal of the United Kingdom the from the European Union (a process commonly known as "Brexit"), ZEAL may no longer be able to argue that it may render its offerings in the EU under UK licences based on the fundamental freedom in European law to provide cross-border services from one EU Member State into any other EU Member State (see "1.2.5 The withdrawal of the United Kingdom from the European Union could lead to ZEAL no longer being able to offer Sec ondary Lotteries in other member states of the European Union on the basis of the freedom to provide services guaranteed under European law."). In this case, Tipp24 Services Limited and myLotto24 Limited would need to rely on authorisations in other EU Member States (and myLotto24 Sub-Group is currently applying for such authorisations in Malta), with the risk that such authorisations will not be granted at all or granted only after a considerable delay (e.g. after successful legal proceedings to obtain the authorisation).

Licences in Germany

Following Completion, ZEAL's business will also depend on licences held by Lotto24 for the German market: on 24 September 2012, Lotto24 received a licence for the nationwide brokerage of state lotteries on the internet. On 26 July 2017, the competent Ministry of the Interior of Lower Saxony granted Lotto24 a follow-up licence until 30 June 2021, the day on which the Treaty on Gambling 2012 expires. Based on this licence, Lotto24 offers in particular the lottery products 'LOTTO 6aus49', 'Super 6', 'Spiel 77', 'EuroJackpot' and 'GlücksSpirale' online throughout Germany. In the original licence of 2012, the authority had generally reserved the right to revoke the licence in whole or in part and to add, amend or supplement ancillary provisions, in particular in the event that the provisions of the Treaty on Gambling 2012 and the gambling laws of the Federal States as well as the ancillary provisions contained in the brokerage licence are not complied with or this appears necessary in the interest of public safety and order.

In addition, in March 2013, Lotto24 was granted an advertising licence by the competent German authority which authorises Lotto24 to advertise the brokering of state-operated lotteries throughout Germany on the internet and on television with certain restrictions, e.g. on email advertising, discount amounts and social media advertising. This advertising licence has been prolonged and is valid until 30 June 2021, but does not permit the advertisement for products offered by Tipp24 Services Limited. It is not certain whether the advertising licence will be expanded at all or in a timely manner to permit the advertisement of products offered by Tipp24 Services Limited.

To the Company's knowledge, Lotto24's renewed brokerage licence and advertising licence do not restrict Lotto24's business activities in comparison to the situation under the original licences. However, there is no assurance that the terms and conditions of future licences will not be more restrictive, which could have a material impact on Lotto24's lottery brokerage business and its advertising activities. Moreover, it cannot be excluded that the existing licences will be revoked in whole or in part or amended or supplemented to the detriment of Lotto24, and that future licences will not be granted at all. Furthermore, it is uncertain whether and on which legal basis the licences will be granted after the expiry of the Treaty on Gambling 2012. It should also be noted that following Completion and in the context of the intended Business Model Change and the Lotto24 Licence Expansion granted on 8 February 2019, ZEAL's business is expected to depend on the expended licence held by Lotto24 as it is envisaged by ZEAL that only under this licence, Tipp24 Services Limited will offer its customers the participation in Primary Lotteries operated by the sixteen State Lottery Operators and other permitted lottery products offered by Lotto24 (class lotteries and charity lotteries).

In addition, while ZEAL believes that the terms and conditions of the licences granted to private lottery brokers in Germany are comparable and do not create a competitive advantage for individual brokers, there can be no assurance the competent authorities impose more restrictive conditions on Lotto24 or ZEAL than on their competitors in the future, which may impede their business operations including, for example, the acquisition of new customers, and may have a negative impact on ZEAL's and Lotto24's competitiveness.

Any or all of these factors described in this entire section "1.1.2" may adversely affect ZEAL's ability to obtain, maintain or renew necessary authorisations in any relevant jurisdiction at all or at reasonable terms. If ZEAL is unable to maintain, renew or obtain these licences, or is only able to do so on unfavourable terms and conditions, this could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.1.3 After the transformation of ZEAL's business model of the 'Lottery Betting' segment into a model based on local state licences in Germany, ZEAL is exposed to the same risks Lotto24 faces as regards brokerage licences, advertising licences and brokerage fees.

Following Completion and in the context of the intended Business Model Change and the Lotto24 Licence Expansion granted on 8 February 2019, ZEAL's business is expected to depend on the expanded licence held by Lotto24 as described in section "1.1.2". As a consequence, after Completion and the implementation of the Business Model Change, ZEAL would be exposed to the same risks Lotto24 is already exposed to as a lottery broker in Germany.

In addition to the risks as described above for the regulatory environment and licences (see section "1.1.1 Uncertainties relating to the regulatory environments in the countries in which ZEAL operates could have a negative impact on ZEAL's business activities." and section "1.1.2 ZEAL depends on permits, licences and other governmental authorisations for its business. The competent authorities could not renew any of these authorisations after their expiry dates, revoke any of these authorisations or adversely modify or supplement any renewed authorisation compared to the existing authorisations. ZEAL may fail to obtain new authorisations it requires for the expansion in further lottery markets."), ZEAL would be exposed, in particular, to the following risks:

− The licensing requirements of Section 4 para. 1 and para. 5 of the Treaty on Gambling 2012 for the brokerage of lotteries are interpreted by the Federal States as meaning that only the brokerage of lotteries which are permitted in the individual Federal State may be brokered under a brokerage licence (so-called principle of territoriality – Regionalitätsprinzip). Accordingly, the Federal States claim that lottery tickets may only be submitted by the broker to the operator of the Primary Lottery who is seated in the same Federal State in which the lottery player is resident (i.e. Lotto24 as a lottery broker has to submit – also for Tipp24 Services Limited's customers after the implementation of the Business Model Change – the lottery ticket submitted by a customer resident in Hamburg to the operator of the lottery seated in Hamburg. It is not permitted to submit that lottery ticket, for example, to the operator in Schleswig-Holstein). As a consequence, the lottery broker cannot submit lottery tickets in its own discretion to the operator who pays the highest brokerage fees. As a result, Lotto24 might not achieve the brokerage fees that it believes it could achieve in a functioning intermediary market without the 'principle of territoriality (Regionalitätsprinzip)'. The sixteen State Lottery Operators could exploit their monopoly position created by the 'principle of territoriality (Regionalitätsprinzip)' in order to reduce brokerage fees to the disadvantage of Lotto24 and thus ZEAL in which case ZEAL's business would be adversely affected.
− Lotto24 has entered into brokerage agreements (Vermittlungsvereinbarungen) with each of the sixteen State Lottery Operators. Following Completion, ZEAL envisages that after the implementation of the Business Model Change, lottery tickets submitted by Tipp24 Services Limited's customers shall be brokered under these brokerage agreements as well. Each State Lottery Operator could terminate the existing brokerage agreements with Lotto24 with or without notice, in particular with reference to a breach of the contractually agreed compliance with the objectives of the Treaty on Gambling 2012 or conditions of the brokerage licence. It cannot be excluded that the brokerage agreements of Lotto24 expire upon the expiry of the relevant lottery brokerage licence and must be extended. It cannot be ruled out that brokerage agreements will not be extended, only with a longer delay or only at less favourable conditions. Any such event would result in ZEAL being unable to continue or further expand its business in Germany.
− Some or all of the Federal States could introduce bans on brokerage fees in the future. In this case, the payment of commissions and similar remuneration to Lotto24 and Tipp24 Services Limited by the respective State Lottery Operator would no longer be permissible, and Lotto24 could be forced to demand additional brokerage fees from their customers. This would make online brokerage by ZEAL more costly and unattractive compared to sales, in particular, in stationary lottery shops (Lottoannahmestellen) or the State Lottery Operators' own internet offerings.
− The State Lottery Operators could refuse to accept lottery tickets brokered by Lotto24, or to pay out lottery winnings in the event of an actual or alleged violation of, in particular, the objectives of the Treaty on Gambling 2012, the relevant brokerage licence or the relevant brokerage agreement with the respective State Lottery Operator. This could result in customer claims for compensation in view of lost lottery winnings and significantly damage Lotto24, and thus ZEAL's, reputation.
− Under the Treaty on Gambling 2012, advertising for public gambling on television, the internet and telecommunications systems is prohibited. Deviating from this, the Federal States may permit advertising, in particular for lotteries on the internet and on television, in order to better achieve the objectives of the treaty. In March 2013, Lotto24 received a licence for the nationwide advertising licence (Werbeerlaubnis). This advertising licence has been prolonged and is valid until 30 June 2021, but does not permit the advertisement for products offered by Tipp24 Services Limited. The advertising licence entitles Lotto24 to advertise its products on the internet or on television. Lotto24 considers the advertising licence as the basis for the planned expansion of its business activities and market share (als Grundlage für den geplanten Ausbau der Ges-

chäftstätigkeit sowie des Marktanteils) (source: Lotto24 AG, Annual Report (Geschäftsbericht) 2017, page 37). However, ZEAL cannot rule out that the existing advertising licence granted to Lotto24 may be revoked in whole or in part, restricted or disadvantageously amended or supplemented. Moreover, it cannot be ruled out that the advertising licence granted to Lotto24 may not be extended or that the extension will be delayed. It is not certain whether the advertising licence will be expanded at all or in a timely manner to permit the advertisement of products offered by Tipp24 Services Limited.

Any or all of these factors described in this entire section "1.1.3" could result in ZEAL not being able to compete in the German market and therefore have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.1.4 ZEAL is exposed to risks from present and potential future legal disputes. In particular, Tipp24 Services Limited and myLotto24 Limited could be forced to discontinue their business activities in certain or all Federal States of Germany. Each of them may be sentenced by German courts to pay compensations to State Lottery Operators due to unlawful business activities.

Members of ZEAL currently are, or may become in the future, involved in passive and active out-ofcourt disputes, litigations, arbitrations and administrative proceedings and governmental investigations. Such legal disputes, proceedings and investigations have arisen and may arise from their relationships with customers, investors, employees, other contractual counterparties, State Lottery Operators, other operators of Primary and Secondary Lotteries and public authorities alleging breaches of contract, tort or failure to comply with applicable laws and regulations. ZEAL may be required to discontinue its business activities, to pay damages or fines and to take, or to refrain from taking certain actions. This risk can be demonstrated by the case of Ventura 24 S.L.U. ("Ventura24"), a whollyowned subsidiary of the Company: Ventura24 has been operating as an online lottery broker in Spain since 2002 with, at the date of the Prospectus, more than 700,000 customers. Ventura24 had assessed that this business did not require a licence from the Spanish state lottery operator 'Sociedad Estatal de Loterias y Apuestas del Estado (SELAE)' to manage the online purchase of lottery products. In October 2018, in the context of a legal dispute with the Spanish Directorate General for the Regulation of Gambling (Dirección General de Ordenación del Juego, the "Spanish Gambling Commission"), the Supreme Court of Spain (Tribunal Supremo de España) confirmed – contrary to Ventura24's view – that its business may not be conducted without a licence. As a result, the Spanish Gambling Commission has instructed Ventura24 to discontinue its brokerage business. Ventura24 has stopped offering products to its customers at the end of December 2018, and the closure of the brokerage business is anticipated to be finalised by the end of May 2019. In addition, the Spanish Gambling Commission could initiate sanction proceedings against Ventura24 and impose fines ranging from EUR 0.1 million to EUR 1 million.

Members of ZEAL or its employees could also become subject to investigations which may also include regulatory law and licensing requirements, and could become involved in criminal or civil proceedings which may involve substantial claims for damages or other liabilities, including labour disputes and civil damage claims by customers, claims by collaborators and other partners or claims in connection with past or future alleged or actual violations of regulatory provisions.

For example, Tipp24 Services Limited and myLotto24 Limited are currently involved in legal proceedings before several administrative and civil courts in Germany. Tipp24 Services Limited offers customers in Germany brokerage services for Secondary Lotteries, which are operated by myLotto24 Limited. The Treaty on Gambling 2012 constitutes a gambling monopoly, including a lottery monopoly, of the Federal States and prohibits the private operation of lotteries (with an exemption of certain lotteries with a lower risk potential as defined in the Treaty on Gambling 2012). A number of German gambling supervisory authorities (Glücksspielaufsichtsbehörden) claim that the offering of Secondary Lotteries on the Internet is an illegal activity. Thus, the gambling supervisory authorities of the Federal States of Saxony-Anhalt, Baden-Württemberg, Saarland and Hesse have issued administrative orders against Tipp24 Services Limited with the demand to discontinue the offering of Secondary Lotteries in these Federal States (each a "Prohibition Order"). In the case of Hesse, such order was also rendered to myLotto24 Limited. Tipp24 Services Limited and myLotto24 Limited have filed appeals against each Prohibition Order addressed to them to the competent administrative courts (Verwaltungsgerichte). In January 2018, also the supervisory authority of Rhineland-Palatinate started administrative proceedings against Tipp24 Services Limited and myLotto24 Limited through formal hearings. Such a hearing is usually the first step before the authority may render of a Prohibition Order. Under the Treaty on Gambling 2012, appeals and legal actions against Prohibition Orders have no suspensive effect unless a court grants preliminary judicial relief.

At the date of the Prospectus, only the administrative proceedings between Tipp24 Services Limited and Saxony-Anhalt have been finally decided. In February 2014, the competent Higher Administrative Court as the court of second instance confirmed the lawfulness of the Prohibition Order. The third instance, the German Federal Administrative Court (Bundesverwaltungsgericht), did not permit an appeal against this decision and the German Federal Constitutional Court (Bundesverfassungsgericht) dismissed Tipp24 Services Limited's constitutional complaint in March 2016. Therefore, the Prohibition Order is legally binding, although the supervisory authority of Saxony-Anhalt has not commenced any enforcement actions against Tipp24 Services Limited as at the date of the Prospectus. The appeals filed by Tipp24 Services Limited with the administrative courts of Karlsruhe (Baden-Württemberg) and Saarland were also unsuccessful, but further appeals to the courts of second instance have been filed which were undecided at the date of the Prospectus.

Furthermore, Tipp24 Services Limited is party to two civil lawsuits based on competition law concerning the requests by the State Lottery Operators of North Rhine-Westphalia and Bremen, Westdeutsche Lotterie GmbH & Co. oHG and Bremer Toto und Lotto GmbH, to discontinue the offering of Secondary Lotteries. In these two legal disputes, it is also questioned whether Tipp24 Services Limited has to pay compensation for its purported unlawful business activities to these State Lottery Operators. At the date of the Prospectus, no decisions of the courts of first instance have been made.

In the event of a negative outcome of any material proceedings, such as for example the abovementioned proceedings against Tipp24 Services Limited or myLotto24 Limited, or proceedings relating to tax assessments (see "1.1.7 Uncertainties and changes relating to ZEAL's regulatory tax environ ment for its online offerings can significantly impact its business. ZEAL could be required to pay addi tional taxes, including lottery taxes, and other duties as a result of tax audits, legal proceedings relat ing to tax assessments, changes in ZEAL's effective tax rate or the loss of its tax loss carry forwards and other tax credits."), whether based on a judgment, award or settlement, ZEAL could be obliged to discontinue parts of its business or make substantial changes to its business model or make substantial payments. Should, for example, Tipp24 Services Limited or myLotto24 Limited be forced to discontinue their business activities in Saxony-Anhalt, should further present or future Prohibition Orders be issued or confirmed by the courts and become legally binding or should Tipp24 Services Limited be defeated in the civil lawsuit against Westdeutsche Lotterie GmbH & Co. oHG and Bremer Toto und Lotto GmbH so that, in each case, Tipp24 Services Limited or myLotto24 Limited would be obliged to discontinue the offering of Secondary Lotteries in further or all Federal States or must pay compensation, this could have a material adverse effect on ZEAL's ability to compete and thus a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows. In addition, such proceedings could distract the management's attention from its daily operations and/or strategic business decisions and result in significant litigation and arbitration costs and harm ZEAL's reputation (in some cases, regardless of the merits of the claim or the outcome of the proceedings).

The realisation of any risks from other legal disputes, including administrative, civil law proceedings and, in particular, legal disputes originating from violations of intellectual property rights (see "1.3.12 Any threat to, or impairment of, ZEAL's intellectual property rights and know-how could cause ZEAL to incur costs to defend these rights and impair its ability to compete effectively, and any viola tion of third party intellectual property rights by ZEAL could result in liability for damages and litigation costs."), could also have a material adverse effect on ZEAL's ability to compete and thus a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.1.5 The conduct of ZEAL's business activities in the 'Lottery Betting' segment in Germany by means of offering Secondary Lotteries could be considered as a criminal offense.

According to German Federal criminal law, it is prohibited to organise or hold games of chance without official permission or to provide facilities for this purpose pursuant to Section 284 of the German Criminal Code (Strafgesetzbuch, "StGB") and pursuant to Section 285 StGB, it is also a criminal offence to participate in unauthorised games of chance. Section 287 StGB criminalises the operation of public lotteries or play-outs of movable or immovable goods without the permission of a public authority. There is no provision sanctioning the participation in unauthorised lotteries.

Tipp24 Services Limited and myLotto24 Limited have their respective corporate seats and are regulated in the UK, and each of them holds betting licences granted by the UK Gambling Commission. The websites of Tipp24 Services Limited and myLotto24 Limited, including the offerings of Secondary Lotteries, are accessible in Germany. However, neither Tipp24 Services Limited nor myLotto24 Limited (nor any other member of ZEAL) has been licensed in Germany to offer lottery products or other games of chance. For this reason, ZEAL's business activities in the segment 'Lottery Betting' in Germany by means of offering Secondary Lotteries and Instant Win Products could be considered a criminal offense under Sections 284 et seqq. StGB.

ZEAL believes that Sections 284 et seqq. StGB do not apply to the Secondary Lottery offerings by Tipp24 Services Limited and myLotto24 Limited as these criminal provisions require the operation of games of chance or public lotteries or raffles (Ausspielungen) of goods "without the permission of a public authority". It could be argued that the lack of such a permission (i.e. licence) cannot be held against the operators of Secondary Lotteries if they hold licenses granted by another EU Member State, or if the permission cannot be obtained with reasonable efforts due to an unlawful regulatory situation. However, as discussed above (see "1.1.1 Uncertainties relating to the regulatory environ ments in the countries in which ZEAL operates could have a negative impact on ZEAL's business activities."), the compatibility of the German regulatory framework for games of chance with the prevailing European law is unclear. Therefore, it cannot be excluded that ZEAL' acts may be considered as illegal under German criminal law, contrary to its belief that Sections 284 et seqq. StGB do not apply to Secondary Lotteries.

Accordingly, ZEAL cannot rule out that its business activities in Germany, particularly the operation, offering and advertising of Secondary Lotteries, may be prosecuted by the German law enforcement authorities and eventually be sanctioned by German criminal courts. Criminal investigations alone, independent of a later conviction of managing directors and other employees of myLotto24 Sub-Group or any other member of ZEAL, can lead to a considerable reputational damage at myLotto24 Sub-Group and thus ZEAL, including a significant decline in the gambling activities of customers and loss of market share (see also "1.3.14 Failure to adequately protect the reputation of the brands under which ZEAL operates could negatively affect its business.") This decline could be caused in particular by the fear of customers that they could also be prosecuted and convicted under Section 285 StGB due to a "participation in an unauthorised game of chance", or by the fear that myLotto24 Sub-Group might no longer be able to pay out lottery winnings. Criminal investigations and proceedings would not even have to be directed directly against ZEAL or any of ZEAL's board members or employees. ZEAL may also be forced to restrict or completely discontinue its business activities in Germany by legal proceedings which have been initiated against competitors if, as a consequence, ZEAL's customers decide not to use ZEAL's offerings any more.

Any such event could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.1.6 Failure to comply with existing regulations or increased or amended regulation of ZEAL's operations, including the introduction of new or the expansion of existing licensing requirements, such as those relating to age verification regulations, could lead to restrictions of ZEAL's business, higher costs or higher entry barriers into certain markets.

ZEAL's operations are subject to various laws and regulations in the jurisdictions in which it operates. ZEAL, its management and its employees have to comply with various laws, regulations and rules with respect to, among other things, gambling, youth protection, anti-money laundering and data protection. Similarly, in operating its business, ZEAL has to comply with any terms and conditions attaching to its operating licences (see "1.1.2 ZEAL depends on permits, licences and other governmental authorisations for its business. The competent authorities could not renew any of these authorisations after their expiry dates, revoke any of these authorisations or adversely modify or supplement any renewed authorisation compared to the existing authorisations. ZEAL may fail to obtain new authorisa tions it requires for the expansion in further lottery markets."). Regulatory authorities typically exercise considerable discretion in matters of enforcement and interpretation of applicable laws, regulations and rules. Any failure to comply with existing or new laws, regulations or rules may result in the imposition of sanctions (including civil and administrative penalties applicable to the relevant member of ZEAL, and criminal and administrative penalties applicable to its managers and employees), and/or ZEAL may be required to cease business activities and to remedy past infringements.

Furthermore, any new regulations, legislative amendments, changes in interpretation of existing legislation, other regulatory changes, court decisions or imposition of additional requirements or sanctions may restrict ZEAL's current and future operations or result in higher costs.

For example, legal requirements in terms of youth and player protection oblige Tipp24 Services Limited and myLotto24 Limited (and following Completion also ZEAL through Lotto24) to verify the age of their customers and to take other protective measures. myLotto24 Sub-Group has guidelines and controls in place to comply with these laws, including identity and age checks through service providers as well as general player protection measures such as deposit limits, time outs and selfexclusions. In addition, myLotto24 Sub-Group is able to analyse customer data on spend, activity, winning patterns and product split to monitor gambling behaviour and identify gambling addictions. However, ZEAL cannot exclude that certain authorities may demand additional measures and procedures for age verification and to prevent gambling addiction. Should these requirements be increased, this could result in higher costs and fewer new customer registrations.

As another example, the German Money Laundering Act (Geldwäschegesetz, "GWG") has in the past required online gambling brokers to identify players according to strict criteria. Due to strict age verification requirements, State Lottery Operators and brokers could be exempted from the additional antimoney laundering requirements if they submitted the appropriate application. Lotto24 has in the past only received a partial exemption from the application of various provisions of the GWG. While these requirements under the GWG were lifted for Lotto24 following a recent change in the law, ZEAL faces the risk that the relevant legislation or administrative handling of similar legislation further tightens and it may not be able to obtain further (partial) exemptions of other regulatory provisions which could also result in higher costs and fewer new customer registrations.

Moreover, regulations regarding data processing and data protection have become stricter in the past and may continue to become stricter in the future. New laws, regulations or developments in this field and changes in consumer behaviour could interfere with ZEAL's practice to use privacy-related information and could consequently have an adverse effect on its strategy, business and results of operations. For example, the EU Regulation (EU) 2016/679 on data privacy of 27 April 2016 (the "GDPR") has introduced substantial changes to the data protection regime in the EU, both regarding intragroup as well as external data transfers. The GDPR has to a large extent replaced national data protection laws and has imposed a substantially higher compliance burden on ZEAL's business. In addition, the GDPR has increased the maximum amount of fines for corporations to the higher of up to EUR 20 million or 4% of the worldwide annual revenue of the prior fiscal year. Data protection regulation or their enforcement by supervisory authorities could become even stricter, which would adversely affect ZEAL's business activities which could also result in higher costs and fewer new customer registrations.

As a result of any substantial amendments to laws or regulations in the jurisdictions in which ZEAL operates, ZEAL may have to incur higher compliance costs, change its business practices and strategy, and face an increasing risk of sanctions for non-compliance due to the increased complexity of such laws or regulations. ZEAL may also be forced to discontinue existing business activities or to limit or refrain from expanding its business, all of which would have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.1.7 Uncertainties and changes relating to ZEAL's regulatory tax environment for its online offerings can significantly impact its business. ZEAL could be required to pay additional taxes, including lottery taxes, and other duties as a result of tax audits, legal proceedings relating to tax assessments, changes in ZEAL's effective tax rate or the loss of its tax loss carry forwards and other tax credits.

ZEAL is subject to various tax laws across several jurisdictions and dependent on their application and interpretation. Tax laws and administrative guidance (relating, among other things, to their interpretation or application) might be subject to changes, and changes in tax laws, their interpretation or application or changes in ZEAL's effective tax rate could increase its future tax burden.

In addition, ZEAL and Lotto24 are subject to periodic tax audits by tax authorities. As a result of current or future tax audits, additional taxes, including withholding taxes, capital duty, stamp duty and value added tax ("VAT") could be imposed on ZEAL and Lotto24. Also, issued tax assessments could be revised or additional taxes, including interest and penalty payments or social security payments, could be imposed in relation to future or previous tax assessment periods. This may be due, among other things, to an interpretation or view of laws or facts by tax authorities in a manner deviating from ZEAL's and Lotto24's own interpretations and could lead to an increase in ZEAL's tax obligations.

ZEAL engages in significant cross border activity in jurisdictions where the tax environment (specifically in the gambling sector) is subject to a lack of clarity over tax law interpretations. The recording of certain tax and other duty-related transactions and disclosures can be complex by their nature and cannot be finally determined until a formal resolution has been reached with the relevant tax authority. ZEAL considers the treatment of all tax and other duty-related items with the following items having the most significant impact on the consolidated financial statements:

Due to changes in German VAT legislation introduced on 1 January 2015, there is judgment around whether certain services provided by myLotto24 Sub-Group are subject to VAT and the tax base on which any VAT payable would be calculated. Until 31 December 2014, VAT liabilities on electronicallysupplied services ("ESS") to private consumers and non-taxable customers were accounted for in accordance with the applicable laws of the country in which the supplier was established. With effect from 1 January 2015, the German VAT Act (Umsatzsteuergesetz) was amended, implementing the directive (EU) 2006/112/EC of 28 November 2006 on the common system of value added tax ("EU VAT Directive"). In terms of ZEAL's business, in particular the myLotto24 Sub-Group, ESS provided to private consumers and non-taxable customers (i.e., those not deemed to be 'in business' for VAT purposes) are now taxable in the EU Member State in which the recipient is established rather than in the supplier's country of establishment. Implications to these changes in the law are not fully predictable and the resulting tax burden is dependent on interpretation of this new legislation, which might have a considerable impact on ZEAL's business. Should these services nonetheless be considered "electronically-supplied" there is still an uncertainty as to whether they are tax-exempt. Furthermore, there is uncertainty in respect of the tax base that would be applied in the event that it were to be ultimately determined that VAT is due on any of these services.

Although myLotto24 Sub-Group is not actively targeting this market, its products can also be purchased in Austria. In January 2011, duty became payable on a point of consumption basis in Austria. There is judgement over whether the correct Austrian gaming duty should be payable based on 2% of 'Stakes' (or 4% of 'Stakes' from 1 January 2017), which is the rate for 'betting' or 40% of gross gaming revenue, which is the rate for 'gaming' activities. Previously, the Company considered the most likely outcome was that the duty would be due based on 'Stakes' and accrued on this basis. However, correspondence with the Specialist Division (Fachbereich) of the Austrian Tax Office for Duties, Transfer Taxes and Gaming (the "Austrian Tax Office") now indicates that activities in Austria are likely to be classified as gaming. The Austrian Tax Office argues that since lotteries qualify as gaming, bets on the outcome of lotteries also qualify as gaming. This correspondence does not present legally binding statement of the view of the Austrian Tax Office. Such a legally binding view may follow in the form of a tax assessment. However, the Company now considers that it is probable that an assessment will be received on the basis of gaming activities and have begun to provide on the basis that myLotto24 Sub-Group will be assessed at 40% of gross gaming revenue. As a result, a EUR 1.9 million provision has been recorded in 2018. This amount is provided for based on advice from legal professionals, management's interpretation of gaming duty laws and the likelihood of settlement. ZEAL can, however, not exclude that the actual gaming duty to will exceed the EUR 1.9 million catch-up provision.

On 2 May 2017 myLotto24 Limited received a formal assessment based on stakes from the tax authority (Finanzamt) Hannover-Nord for unpaid VAT for 2015, 2016 and part of 2017. myLotto24 Limited has appealed all VAT assessments issued by the tax authority (Finanzamt) Hannover-Nord since the tax period January 2015 at the fiscal court (Finanzgericht) Hannover. To date, no oral hearing has taken place in this proceeding. In addition, myLotto24 Limited applied for a stay of execution regarding these VAT assessments, which the tax authority Hannover-Nord granted without a demand for security. However, the tax authority (Finanzamt) Hannover-Nord has indicated that it will only grant, as from the start of the tax period May 2018, a stay of execution for any future assessments under the condition that myLotto24 Limited provides security. Such security must be equivalent to the amount of the assessed VAT. myLotto24 Limited also appealed against the assessment of a security deposit at the fiscal court (Finanzgericht) Hannover. On the basis of a review of the facts and independent legal advice, the Company is of the opinion that, if ZEAL were unsuccessful in its appeals of the VAT assessments, VAT would at most be payable based on gross gaming revenue (stakes minus prizes). Following recent discussions with the tax authority (Finanzamt) Hannover-Nord, the potential financial effect in the case that ZEAL's appeal should not be successful is estimated at EUR 70.3 million as at 31 March 2019 (31 December 2018: EUR 64.6 million, 31 December 2017: EUR 41.3 million, 31 December 2016: EUR 23.3 million), in each case including interest, plus any fines. An unfavourable outcome of the appeals leading to a taxation based on stakes would significantly increase the potential financial effect. If ZEAL is unsuccessful in its defence of any case brought against it by the tax authority (Finanzamt) Hannover-Nord, the resultant VAT liabilities could substantially lower ZEAL's results.

Further risks derive from the taxation of Secondary Lotteries in Germany. In August 2016, the Tax Investigation Office (Steuerfahndung) of the German city of Hagen informed Tipp24 Services Limited that it had commenced investigations concerning suspected evasion of lottery tax owed pursuant to Section 21 para. 3 of the German Race Betting and Lottery Act (Rennwett- und Lotteriegesetz) between 2009 and 2016. Although the criminal investigations were closed in July 2017 ZEAL cannot entirely exclude that there will be further investigations which could lead to a significant additional tax burden for ZEAL's operations and, thus, materially adversely affect ZEAL's business, should stakes originated by ZEAL as from 2009 be considered as taxable. In addition, about two years before the date of the Prospectus, to the knowledge of the Company, there were discussions between the Federal State legislators to make amendments to the German Race Betting and Lottery Act (Rennwettund Lotteriegesetz) with the aim to make stakes in Secondary Lotteries taxable. The Company has learned that these amendments were not pursued further, but it cannot exclude either that these plans are taken up again at a later date. Any future taxation of stakes in Secondary Lotteries could lead to a significant additional tax burden for ZEAL's operations and, thus, materially adversely affect ZEAL's business should the taxation be applicable before the Business Model Change has been implemented.

These and other tax related regulatory uncertainties could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.1.8 The conduct of ZEAL's business activities in the segment 'lottery betting' in Germany, the UK or other jurisdictions may require the entities of the myLotto24 Sub-Group to be licensed or otherwise subject them to financial markets regulation which would result in restrictions or even prohibitions in respect of the business activities conducted by the myLotto24 Sub-Group.

Similarly, the Directive (EU) 2015/2366 on payment services in the internal market (also known as PSD2) as implemented in each EU Member State provides that only authorised payment institutions are permitted to provide payment services in the EU. As part of the brokerage services, Tipp24 Services Limited, a member of the myLotto24 Sub-Group, keeps the gambling accounts for the customers and accepts payments by the customers or by myLotto24 Limited to the gambling accounts, or remits payments to the customers or to myLotto24 Limited from the gambling accounts. There may be a risk that these activities, or some of them, constitute regulated payment services in one or more EU jurisdictions (or the UK after Brexit), in particular money remittance services.

Another example is the Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (also known as CRD IV), as implemented in each EU Member State, provides that persons or undertakings shall be prohibited from carrying out the business of taking deposits or other repayable funds from the public in the EU unless they are appropriately licensed. There may be a risk that the activities of Tipp24 Services Limited in accepting funds for gambling purposes from its customers and in running customers' gambling accounts may, in one or more EU jurisdictions, or the UK, constitute the regulated activity of taking deposits.

However, currently, no entity in the myLotto24 Sub-Group holds a licence under financial markets regulation in any EU jurisdiction and there can be no guarantee that the respective entities of the myLotto24 Sub-Group and ZEAL would obtain such licenses. Failure to obtain such required licenses could lead to penalties under local laws which could include being subject to criminal liability, fines and/or imprisonment, as well as a requirement to cease the relevant activity. In addition, contracts entered into in the course of carrying on the relevant unlicensed activity may be unenforceable under English law and restitution orders may be made in respect of any resulting losses caused to third parties. Penalties could be placed against directors or employees of myLotto24 Sub-Group, and cause reputational damage and loss of market share.

This risk applies, or will apply, also but to a lesser extent in Germany to Lotto24 and to ZEAL after the Business Model Change. The BaFin confirmed to Lotto24 in 2014 that for as long as it conducts its activities solely within the scope of its gambling licence it is not required to be authorised under the Payment Services Act (Zahlungsdiensteaufsichtsgesetz, ZAG). However, there is no certainty that the BaFin will not change its view in the future.

Any of these or similar negative changes in the interpretation of regulatory environment in any jurisdiction in which ZEAL is already active, or will be active in the future, could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.1.9 ZEAL's compliance structure may not have been, or may not be, sufficient to adequately protect ZEAL from all legal or financial risks.

ZEAL appointed an anti-corruption officer and a data protection officer and implemented a group-wide code of conduct to protect ZEAL against legal and other potential risks. These binding policies address law-abiding conduct, including corruption prevention, insider information, conflicts of interest, information and data protection, and protection of company property and apply to all employees, the members of the Company's executive board ("Executive Board") and the Company's supervisory board ("Supervisory Board").

The aforementioned code of conduct may not be sufficient and may not have been sufficient in the past to completely rule out all unauthorised practices, legal infringements, criminal offenses or corruption by employees of ZEAL. In case of a breach of law or other unauthorised practice, ZEAL's brand, image or reputation may suffer and ZEAL may become subject to fines and other penalties as well as the obligation to pay damages.

Furthermore, the Secondary Lottery business is operated by the myLotto24 Sub-Group, which, although fully consolidated, is a non-controlled minority shareholding of the Company. As such, even though the Company has a right to repurchase the remainder of the shares not held by it in myLotto24 Sub-Group, it will not be able to enforce the implementation and observance of its code of conduct or structural changes in this regard, also not following Completion, until such repurchase rights are exercised. Should the Company be required to repurchase the remaining shares in order to enforce its code of conduct or structural changes in this regard, the Company will face the risk that such repurchases may be blocked or delayed by the current majority shareholder of myLotto24 Sub-Group in non-compliance with contractual obligations. This could result in the Company not being able to avert the aforementioned damages from ZEAL.

Any violation of its code of conduct and thus breaches of law could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations, cash flows or reputation.

1.1.10 ZEAL relies to a large extent on standardised contractual conditions and general business terms and could be exposed to risks from such standardised conditions and general business terms.

ZEAL maintains legal relationships with a large number of persons, primarily its customers, and it uses both standardised contractual conditions and general business terms in this context. If these terms contain provisions that are disadvantageous to ZEAL, or if clauses therein are invalid or become invalid, e.g., due to new legislation or jurisprudence, or are replaced with provisions unfavourable to ZEAL, the consequences may affect a large number of contracts and may, thus, harm ZEAL's business materially. Even in the case of contracts prepared with legal advice, risks of this nature cannot be prevented, either from the outset or in the future due to subsequent changes in the legal framework, particularly jurisprudence, making it impossible for ZEAL to avoid the ensuing legal disadvantages.

For example, ZEAL's terms and conditions include provisions relating to the release of inactive ("dormant") customer accounts following significant diligence. Although ZEAL consults with external experts when drafting its terms and conditions it cannot exclude that these or other provisions of its general business terms may be challenged and could eventually be found to be invalid.

The realisation of any of these risks associated with standardised conditions and general business terms may have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations, cash flows or reputation.

1.2 Risks Related to the Market

1.2.1 ZEAL is dependent on the product portfolio offered by the operators of Primary Lotteries and the stability of the lottery markets in various jurisdictions. ZEAL could be adversely affected by declines in the demand for Primary Lotteries and general declines and economic downturns in these markets.

ZEAL is predominantly active in the online lottery markets of several European jurisdictions, notably Germany, Ireland, Norway, the Netherlands and the UK. ZEAL's business activities are divided into the three segments 'Lottery Betting', 'Lottovate' and 'ZEAL Ventures' (see "1.1.1 Uncertainties relating to the regulatory environments in the countries in which ZEAL operates could have a negative impact on ZEAL's business activities.").

In the 'Lottery Betting' segment, ZEAL's business depends, in particular, on two factors: the product portfolio offered by the operators of Primary Lotteries and the stability of the lottery markets in which ZEAL is active. Similarly, Lotto 24 depends on these factors. Long-term customer loyalties are also important for ZEAL's and Lotto24's business success. Lotto24, for example, reports loyalty of different customer generations (grouped according to their initial registration) which sustainably contributed to Lotto24's billings in the past. Loyalty of ZEAL's and Lotto24's customers may decrease due to several factors, including, inter alia, less attractive product offerings or a general decline in the demand on the lottery markets. Any such decrease of customer loyalty may negatively affect ZEAL's business.

Product dependency

As a bookmaker, myLotto24 Sub-Group offers its customers to take bets on Primary Lotteries, including Primary Lotteries they would not typically be eligible to play (such as the US lotteries 'Powerball' and 'Mega Millions' which the operators may and do not offer in Europe). myLotto24 Sub-Group is not able to influence the product portfolio offered by the operators of the Primary Lotteries. Similarly, Lotto24, whose business is to broker Primary Lotteries as well as Tipp24 Services Limited after the envisaged Business Model Change to the brokerage of Primary Lotteries also depend on the product portfolio offered by the operators of Primary Lotteries.

myLotto24 Sub-Group and Lotto24 have no control over such product portfolio, the relevant terms and conditions and amendments of such portfolio and conditions. Should an operator decide to cease some or all of their lottery offerings or replace them with other lottery products, this could lead to a material decline in brokered transactions for Lotto24 and sold lottery bets by myLotto24 Sub-Group. Declines could also result from changes in the game concept of Primary Lotteries, e.g. if chances of winnings or possible winning heights are changed to the detriment of the players. In the recent past, as far as ZEAL is concerned and aware of, there have been various adjustments made to products offered by the Federal Lottery Companies. While these adjustments have not significantly influenced neither to ZEAL's business nor, to the Company's knowledge, Lotto24's business, it cannot be excluded that this will neither be the case for future changes.

Any changes in the product portfolios of the operators of Primary Lotteries could therefore have a material adverse effect on ZEAL's business, prospects, financial condition and results of operations or cash flows.

Market dependency

In addition, ZEAL's business depends on the stability of the lottery markets in the countries where ZEAL offers its products. At the date of the Prospectus, ZEAL' depends on its offering of Secondary Lotteries in the German online market. This dependency is further increased after the Completion, because Lotto24 operates exclusively in the German market as an online broker of Primary Lotteries. The envisaged Business Model Change will not reduce ZEAL's dependency on the German market.

This means that any decline in the demand on the German lottery market, and to a limited extent also markets relevant to ZEAL, could have a negative impact on ZEAL's business. Such a decline could, for example, result from changes in customer demand in the overall gambling market towards online casinos, sports betting or other games of chance. In addition, even stricter regulatory regimes, including a prohibition of marketing for (online) lotteries may entail negative market changes (see "1.1.1 Uncertainties relating to the regulatory environments in the countries in which ZEAL operates could have a negative impact on ZEAL's business activities."). Further, the public acceptance of lotteries may generally, or in specific markets, change negatively. This might include falling public awareness for lotteries due to generally lower advertising spending and news on lottery winnings, both by Primary Lottery operators and brokers as well as Secondary Lottery operators.

Additionally, a general decrease in the economic growth or a deterioration of the economic conditions, including consumer confidence and spending, could negatively impact the lottery markets. Economic downturns in any of ZEAL's markets or even a complete collapse in the global economy would constitute a risk for ZEAL's business. Although ZEAL has in the recent past not experienced any major effects of worsening macroeconomic conditions on the online gambling behaviour of its customers, it cannot exclude the possibility that an exceptionally strong economic downturn in the markets in which it operates may adversely affect the stability of the lottery markets and, thus, its business, or that the impact of negative macroeconomic conditions on ZEAL's markets and business may increase in the future. These events usually lead to a decline in the average disposable household income, which could mean that customers lack the funds to indulge in their gambling habits.

Any decline in the demand on the lottery markets could therefore have a material adverse effect on ZEAL's business, prospects, financial condition and results of operations or cash flows.

1.2.2 A weak jackpot environment, i.e. the absence of exceptionally profitable lottery events in the form of large jackpots or the reduction of the maximum amount of jackpots could lead to a reduction in the gambling activity and consequently in the sales of lottery bets and lottery tickets.

Many lotteries (e.g. the European lotteries 'EuroJackpot', 'EuroMillions' and 'LOTTO 6aus49' and the US-lotteries 'Powerball' and 'Mega Millions') feature progressive jackpots. After each drawing in which the jackpot is not won, a large amount of money is "carried forward" to the jackpot for next drawing. When the jackpot is won, the jackpot for the next play is reset to a predetermined value, and resumes increasing under the same rule.

Generally, the amount of jackpots offered by European lotteries cannot rise into the immeasurable; rather, the lottery terms of the Primary Lotteries could provide that a compulsory pay-out or transfer into lower winning classes takes place if the jackpot has not been won over a certain number of lottery draws. In the German lottery 'LOTTO 6aus49', for example, this happens whenever the jackpot has not been won in twelve consecutive draws. In this case, the jackpot must be played in the 13th draw: if there are one or more winners in the highest prize category 1 (6 correct number plus bonus number), the jackpot amount will be paid out regularly. However, if no player wins in category 1, the jackpot is added to category 2 (6 correct numbers) and if no one wins in this category, the next lower category receives the jackpot (5 correct number plus bonus number) etc. Other lottery rules provide for a cap of the maximum jackpot amount (e.g. 'EuroJackpot' at EUR 90 million). In the case of the US-lotteries 'Powerball' and 'Mega Millions', there are no maximum jackpot amounts and no compulsory pay-outs, and with increased media coverage and hype the ticket volume and the amount of Jackpots rolledover to the next draw is typically growing exponentially.

ZEAL has regularly experienced in the past, and expects to experience in the future, a substantial increase in gambling activity when large jackpot pay-outs are likely, either as a result of roll-overs of jackpots to the next draw or guaranteed minimum jackpots for special dates or events. In turn, ZEAL has also experienced in the past, and expects to experience in the future, that the absence of large jackpots over a longer period of time, i.e. in the event that jackpots are regularly won, so that no higher amounts can accumulate, leads to a decline in gambling activities, accompanied by fewer ticket sales and thus revenues. As the size of jackpots are results of lottery draws and the game concept over which neither ZEAL nor Lotto24 has control, it cannot be excluded that, over a longer period of time, no such significant lottery winnings are offered. In addition, ZEAL might incur, for example, higher marketing costs to acquire new customers if there are longer periods where the interest in playing lotto typically tends to be lower due to the absence of high jackpots. Should ZEAL face a longer period without large jackpots, this may negatively affect its business. Similar risks could result should the game concept be changed to further reduce the potential maximum amounts or the likelihood of jackpots.

Any weak jackpot environment could have a material adverse effect on ZEAL's business, prospects, financial condition and results of operations or cash flows.

1.2.3 The markets in which ZEAL operates are competitive and competition in the online lottery market could intensify. Existing competitors could, for example, expand their business activities, reduce their prices for lottery tickets or bets on lotteries and new competitors could enter into the same markets in which ZEAL is active in. Increased competition could result in ZEAL losing market shares or being forced to significantly increase its expenses for acquiring and securing market shares.

ZEAL's strategy comprises a concentration of its business activities on selected European lottery markets, in particular in Germany, but also in Ireland, the Netherlands, Norway, Spain and the UK. The classification of competition is customer-centric, i.e. a competitor is considered to be someone who can satisfy the same customer demand and who is competing for the same budget of customers (in the case of ZEAL, customer budgets for lottery products and other games of chance). ZEAL's main competitors in these markets are thus the lottery shops and the online distribution channels of sixteen State Lottery Operators as well as other online- and offline providers of lottery products. ZEAL regards not only those companies as competitors that are, like myLotto24 Sub-Group, active in online Secondary Lottery business, but all operators of Primary Lotteries, irrespective of whether they are purely brokers, bookmakers or operators of these lotteries. Other potential competitors are companies that sell other games of chance on the internet or in shops.

Competition in the online lottery market is already intense. Increased competition could, for example, also result from market entries of new competitors with a comparable or more attractive product portfolio of lotteries as well as possibly larger financial and technical resources in the same markets in which ZEAL is active. Furthermore, existing competitors could expand their activities in these markets further and more strongly than ZEAL. As another example, competitors that are already active in these markets could expand advertising activities for their products, which could lead to increased competition and thus to a decline in demand for the products offered by ZEAL.

Larger financial and technical resources of competitors, their potentially also well-known online platforms, the experience of their management and the reputation of their brand could enable each of them to secure larger market shares and thus become stronger competitors. If competitors are successful in binding a larger number of customers, this would have a material adverse effect on ZEAL's business. In particular, ZEAL's costs for acquiring new customers and retaining existing customers and, thus, securing market shares could increase beyond its current planning, since, for example, advertising measures would have to be intensified and competition for attractive advertising space could arise.

In addition, competition for customers could also be conducted by reducing prices for lottery tickets, and bets on lotteries to be paid by the customers. While most of ZEAL's competitors feature the official lottery ticket prices, some of them currently demand lower prices, e.g. have waived the ticket fee on a core product, the bet on or the brokerage of the German 'LOTTO 6aus49'. While the Company does not have any evidence that price leadership is a relevant decision factor for customers, further competitors could take this measure to increase their market share. This is to be expected in particular from smaller providers of lottery products on the internet who do not have a large advertising budget and could therefore use lower prices as an easy means for the acquisition of new customers. In addition, the customers' general expectation could increase that prices on the internet have to be cheaper than in retail stores, which could lead to a shift in demand to the cheapest providers, even without it being necessary for these providers to make advertise for it in a targeted manner. In this context, it should be noted that many competitors offer identical products and have, like ZEAL, no influence on the design of the lotteries. Therefore, ZEAL will not be able to justify higher ticket prices and other fees by making its lottery products more attractive (e.g. by means of higher chances of winning). It is uncertain whether ZEAL will be able to justify higher ticket prices and other fees in the future with reference to its services free of charge (for example information about upcoming jackpots, customer service, virtual safekeeping of tickets, automatic prolongation of ticket subscriptions, crediting of prizes, notifications about prizes by e-mail, SMS or push notification), especially as many competitors offer or may offer the same or similar services. ZEAL may therefore be forced to reduce its ticket prices and other fees due to competitive pressure.

Furthermore, competitors may seek to disturb ZEAL's business activities by pursuing injunctions or other legal actions for alleged or actual anti-competitive behaviour or violations of regulatory requirements, as has happened in individual cases in the past (see "1.1.4 ZEAL is exposed to risks from present and potential future legal disputes. In particular, Tipp24 Services Limited and myLotto24 Limited could be forced to discontinue their business activities in certain or all Federal States of Germany. Each of them may be sentenced by German courts to pay compensations to State Lottery Operators due to unlawful business activities.").

There is no assurance that ZEAL will be able to compete successfully against current and competitors or future new market entrants and formats, and, accordingly, competitive pressures could restrict ZEAL's further growth and/or have a material adverse effect on its business, prospects, financial condition and results of operations or cash flows.

1.2.4 ZEAL could face increased competition from providers of games of chance other than lotteries. Existing competitors could expand their business activities and new competitors could enter into the same markets in which ZEAL is active in and offer gambling products which are not included in ZEAL's product portfolio. Customers' demand could shift from lotteries to other gambling products, especially sports betting and online-casinos. Increased competition and shifts in customers' demands could result in ZEAL losing market shares or being forced to significantly increase its expenses for acquiring and securing market shares.

The lottery market is part of the gambling market, which includes lottery products as well as sports betting, casino games and other games of chance. New competitors who (also) offer games of chance other than lotteries and potentially have greater financial or technical resources than ZEAL could enter the same markets as ZEAL is active in and offer their own or other gambling products or have them brokered by third parties. In addition, competitors who are already active in the markets in which ZEAL is active could start offering other gambling products on the internet or in shops or expand their activities. An expansion of the range of gambling products could lead to increased competition and thus to a decline in demand for the lottery products offered by ZEAL. ZEAL may need to add new products to its product portfolio. Should ZEAL fail to do so, or fail to do so in time, this could result in a decline in ZEAL's customer base and sales revenue.

It cannot be ruled out that, for example, the active marketing of sports betting, casino games and other games of chance could lead to a shift in demand from lotteries to these products which are not in ZEAL's product portfolio. Furthermore, competition for attractive advertising space on the internet could arise on the internet, which could lead to an increase in the cost of ZEAL acquiring new customers and retaining existing customers. Such costs could increase beyond ZEAL's current planning, since, for example, advertising measures would have to be intensified and competition for attractive advertising space could arise.

Each of the aforementioned factors could weaken ZEAL's growth as a result of falling demand and could lead to a significant churn of customers and make it more expensive for ZEAL to acquire new customers. Each such event could therefore have a material adverse effect on ZEAL's business, prospects, financial condition and results of operations or cash flows.

1.2.5 The withdrawal of the United Kingdom from the European Union could lead to ZEAL no longer being able to offer Secondary Lotteries in other member states of the European Union on the basis of the freedom to provide services guaranteed under European law.

As a result of the United Kingdom's referendum on its membership in the European Union, which took place on 23 June 2016, the Government of the United Kingdom invoked Article 50 of the Treaty on European Union on 29 March 2017, thereby formally notifying the European Council of the UK's intention to withdraw from the European Union. This commenced the process of negotiating and concluding an agreement between the EU and the UK, setting out the arrangements for the withdrawal, taking into account of the framework for its future relationship with the EU.

On 14 November 2018, the negotiators of the European Commission and the United Kingdom reached a deal on the terms of a 'Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community' ("Draft Withdrawal Agreement"). The Draft Withdrawal Agreement covers all elements of the UK's withdrawal from the EU: citizens' rights, the financial settlement, a transition period, governance, protocols on Ireland, Gibraltar and Cyprus, as well as a range of other separation issues. The Draft Withdrawal Agreement provides for a transition period until 31 December 2020, during which EU law will fundamentally continue to apply to the UK. The future relationship between the EU and the UK will be negotiated once the UK becomes a third country, i.e. ceases to be a member of the EU. The EU and the UK negotiators have agreed to use their best endeavours to have – by 1 July 2020 – a future agreement concluded before the end of the transition period. Should this not be the case, the EU and the UK could jointly extend the transition period. On 14 November 2018, the Draft Withdrawal Agreement was endorsed by the UK government and on 25 November 2018 by the leaders of the remaining EU Member State (EU27). On 15 January 2019 and 12 March 2019, the British Parliament voted against the Draft Withdrawal Agreement.

At the date of the Prospectus, the outcome of the negotiations between the EU and the UK as regards the framework of the future relationship, in particular, the terms and conditions for the post-Brexit access of the UK to the European single market, is not clear. It cannot be excluded that, if the Draft Withdrawal Agreement will not have been approved by 31 October 2019, the UK will leave the EU without EU law being applicable for the transition period.

The access of the myLotto24 Sub-Group to the EU markets is currently based on the fundamental freedom to provide cross-border services from one EU Member State into any other EU Member State. It is therefore uncertain whether myLotto24 Sub-Group will be entitled to offer Secondary Lotteries in the remaining EU Member States after the UK has left the EU. In the event that any of them no longer has access to these markets based on its UK licences, ZEAL may lack the time to obtain a licence in an EU Member State. In particular, the current application of the myLotto24 Sub-Group for the grant of gambling licences in the EU Member State Malta could be delayed or denied. The lack of a licence in an EU Member State could lead to a business interruption and have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.2.6 ZEAL is exposed to currency risks, in particular due to the exchange rate of the British pound sterling and the US Dollar against the euro.

ZEAL operates in jurisdictions whose official currency is the euro (Germany, Ireland, the Netherlands and Spain) as well as in jurisdictions with other currencies, namely Norway (Norwegian krone) and the UK ("GBP"). In addition, ZEAL incurs a material amount of its costs in US Dollars ("USD"), in particular in relation to the costs incurred by its hedging instruments. ZEAL's financial accounting and the basis for calculating dividends is based on the euro. Because ZEAL does not generate significant revenues in currencies other than the euro, it is exposed to a currency risk, in particular due to the exchange rate of GBP and USD against the euro. Approximately 35% to 45% of ZEAL's cost base is denominated in either GBP or USD. ZEAL cannot predict the impact of foreign currency fluctuations on its business. At the date of the Prospectus, ZEAL does not use currency hedging to protect against uncertainty in future exchange rates between GBP and USD and the euro.

ZEAL's hedging instruments for jackpot pay-outs are denominated in USD (see "1.4.2 Existing hedg ing arrangements in the form of insurances could be terminated by the insurer before the end of their respective term and ZEAL or myLotto24 Sub-Group could not be able to take out new insurance cover at all or only with a time delay. ZEAL or myLotto24 Sub-Group could not be able to renew existing insurance contracts after the end of their respective term or could only obtain significantly lower insur ance coverage or insurance coverage against payment of significantly higher insurance premiums. Additional hedging arrangements may fail partly or entirely, and may not be sufficient to cover risks associated with the operation of ZEAL's business. The winning of high jackpots by customers could lead to myLotto24 Sub-Group's inability to accept further lottery bets due to insufficient cover by its hedging instruments."). In case of a large jackpot pay-out to be made in euro, ZEAL has to bear the currency risk resulting from a low USD to EUR exchange rate.

The materialisation of currency risks generated by movements in local currencies against the euro, in particular of the exchange rate between GBP and euro as well as USD and euro, could have a material adverse effect on ZEAL's business, prospects, financial condition and results of operations or cash flows.

1.3 Risks Related to the Business

1.3.1 ZEAL's business activities are highly dependent on complex IT systems whose functionality can be significantly impaired by internal and external circumstances. Actual or alleged procedural errors or functional problems in the processing of gambling orders and the payment of lottery winnings could result in claims for damages from customers for lost gambling winnings and significantly impair ZEAL's reputation. The systems made available by ZEAL in the form of lottery platforms to the cooperation partners could also have actual or alleged procedural errors or functional problems for which ZEAL is responsible. ZEAL's IT systems could not be sufficient for multi-product launches or scalability.

ZEAL uses a number of automated processes to handle customer transactions and transactions of its business partners. The efficiency and reliability of ZEAL's offerings and services is therefore highly dependent on the functionality and stability of the underlying technical infrastructure and any interruptions in, failures of or damage to its IT systems could lead to delays or interruptions in ZEAL's business processes. Accordingly, the functionality of ZEAL's online platforms and the associated hardware and software infrastructure is essential for ZEAL's business activities, its reputation and its attractiveness to customers and business partners. Malfunctions and instabilities of the IT infrastructure, including the online platforms, as well as in the existing hardware and software cannot be completely ruled out and ZEAL cannot guarantee that anticipated and/or recognised malfunctions or security deficits can be avoided by appropriate preventive security measures in every case.

Despite the security measures currently in place, the handling of customer transactions could be significantly impaired by failures or disruptions to IT systems due to hardware destruction, power outages not covered by backup facilities, system crashes, software problems, virus and other cyber attacks, intrusion of unauthorised persons into the system by persons outside and within ZEAL or similar malfunctions, and in particular by so-called Distributed Denial-of-Service attacks (i.e. automated generations of massive requests to a server via the internet with the aim of rendering the server unusable due to overload). This could motivate existing customers to use internet platforms of ZEAL's competitors to place their lottery bets or to buy tickets of Primary Lotteries and potential new customers not to register on ZEAL's sites. This could also motivate business partners to terminate the partnerships and to enter into new partnerships with ZEAL's competitors.

In particular, ZEAL makes use of automated procedures for handling of lottery bets, which is carried out via complex hardware and software. ZEAL cannot guarantee that the receipt of lottery bets will always function perfectly. In particular, this could lead to lottery bets not being recorded or being incorrectly recorded and transmitted, with the result that a customer either does not participate in a draw at all or participates with content that differs from the lottery bet. Although customers receive a confirmation e-mail after submission of the lottery bet, in which the content of their lottery bet is reproduced, customers could either not even take note of this e-mail or not check its content.

It cannot be excluded that there are no procedural errors or functional problems on the part of ZEAL, but customers nevertheless claim, and make this publicly known, that they have not received the game prize to which they are allegedly entitled. In this case, ZEAL's reputation could be damaged. Customers could also assert claims for damages against ZEAL, in particular for lost game winnings. Reputational losses could lead to a decline in the participation of existing customers and a lower number of new registrations.

In addition, ZEAL's 'Lottovate' segment is focused on the operation of Primary Lotteries and the establishment of partnerships with charities, foundations and communities. It cannot be ruled out that the software and lottery platforms adapted to the needs of ZEAL's business partners may have unrecognised errors or functional problems, or that such errors and functional problems may occur during the individual adaptation or during updates of the software and hardware for which ZEAL is responsible. It cannot be excluded that there are no procedural errors on the part of ZEAL, but that ZEAL's business partners nevertheless claim, and make this publicly known, ZEAL has to take responsibility. In this case, ZEAL's reputation could be damaged. Business partners could also assert claims for damages against ZEAL, in particular for lost revenues. Reputational losses could lead to early terminations of partnerships with charities, foundations and communities.

Furthermore, ZEAL's IT systems may not be sufficient for its ongoing expansion and there is no guarantee that ZEAL will be able to adapt its IT systems to new requirements or that they are not sufficient for multi-product launches or scalability. If ZEAL were to decide to introduce new IT systems in the future or to adapt existing IT systems, there is no guarantee that such adaptions will be completed without interruptions or at all. Problems when adapting its IT systems could lead to delays or interruptions to ZEAL's business processes. In addition, new IT systems may turn out to be incompatible with ZEAL's existing IT systems, which could also cause problems with respect to ZEAL's existing IT systems. Also, past and future acquisitions, joint ventures and investments in businesses, including the Offer itself which is planned to contain an integration of the IT systems of Lotto24 and ZEAL entail risks relating to the integration of and into ZEAL's IT systems. Such integrations may be a complex, time-consuming and expensive processes and involve a number of uncertainties. These include, among other things, costs and expenses associated with unexpected difficulties, diversion of management's attention from its daily operations and/or strategic business decisions.

The occurrence of any such risk could restrict ZEAL's further growth and/or have a material adverse effect on its business, prospects, financial condition and results of operations or cash flows.

1.3.2 ZEAL relies on cooperation agreements to market its products and services, and discontinuation of such agreements could decrease its reach. Investments into international markets as well as investments into other companies could not pay-off for ZEAL. Investments in early-stage start-ups may not reach a profitable maturity and such start-ups may not be able to secure follow-up fundings and ZEAL may not be able to liquidate its position or only by accepting even significant losses.

ZEAL has entered and plans to continue to enter into various cooperation or partnership agreements to market or increase the reach of its products and services. For example, in 2017, Lottovate Limited, which is a wholly-owned subsidiary of the Company, entered into a partnership with UNICEF in Norway. Lottovate Limited acts as a full service provider for UNICEF Norway and operates a charity lottery which is played entirely online and designed to be mobile-first. Proceeds from ticket sales are split, with 30% of each ticket sold going straight to UNICEF Norway, 40% to prize funding and 30% for the lottery's operation. In Spain, Ventura24 works together with ONCE, the Spanish 'National Organisation for the Blind' which supports people who are blind or visually impairment to lead independent lives. Ventura24 manages ONCE's digital sales channel, from product management to player acquisition and retention. Ventura24 holds an eight year contract with ONCE under which it receives a share of the revenue from ticket sales.

ZEAL might lose one or more of its cooperation partners or experience a reduction in the level of business with one or several of such partners or customers, for example if they were to reduce lottery offerings. ZEAL is also exposed to the risk that existing cooperation agreements may be terminated prematurely or may not be extended on expiry, or that relevant economic conditions of such agreements may change to ZEAL's disadvantage, for example that ZEAL may need to stronger incentivise its partners. All of these risks associated with cooperation agreements and other partnerships ZEAL has entered into in the past and may enter into in the future could negatively impact its business and could have a material adverse effect on its business, prospects, financial condition and results of operations or cash flows.

Furthermore, in its 'Lottovate' segment, ZEAL incorporates new companies to offer Primary Lotteries on selected markets, such as, at the end of 2016, Lottovate Nederland B.V., a wholly-owned subsidiary of Lottovate Limited, that, in 2018, introduced 'Raffld – The Experience Lottery' in the Netherlands which was however paused in the beginning of 2019 to review the vision and strategy of the overall lottery. ZEAL's third business segment 'ZEAL Ventures' focuses, inter alia, on external investments and the support of start-ups that are developing new lottery business models or products. For example, on 16 December 2016, ZEAL acquired a 10% shareholding in Pick Media Limited (formerly Free Postcode Lottery Ltd), trading as Pick My Postcode, which operates an advertising-funded, free-toplay, lottery-style game. As another example, on 1 May 2017, the Company bought a 2.5% stake in form of preference shares for TEUR 1,843 (USD 2,000 thousand) in the Los Angeles based start-up Omaze Inc. ("Omaze"). Omaze is an online fundraising platform that offers certain 'experiences' and exclusive merchandise in support of critical causes. Similarly, in July 2018, ZEAL invested TEUR 115 (GBP 100 thousand) in a 5% interest and in March 2019 a further TEUR 345 (GPB 300 thousand) in an additional 15% interest in Cloud Canyon Limited, which runs a lottery syndicate business under the brand 'wshful'. In addition, in December 2018, the Company invested TEUR 135 (GBP 120 thousand) in a 10% interest in De Integro Limited, a private limited company registered in England and Wales, which operates an early-stage lottery product under the brand 'Dream Makers'.

ZEAL intends to continue to consider establishing cooperations and partnerships, to incorporate new subsidiaries to offer Primary Lotteries and to invest in and to acquire existing companies (including start ups) in order to further expand its business in a targeted manner (together "Investments").

There can be no assurance that ZEAL will be able to identify suitable targets or to make Investments on favourable terms or at all or receive necessary public approvals. ZEAL may also incur significant costs (including advisory costs) in relation to Investments and it is possible that not all material risks in connection with any Investments, including those described above, have been or will be identified in the due diligence process and that such risks have been or will be (sufficiently or at all) taken into account in the decision-making process, or the respective agreements (including warranties). For example, in connection with ZEAL's acquisition of the remaining shares in Geonomics Global Games Limited and Geo24 UK Limited, ZEAL had recorded a charge of EUR 1.6 million relating to a write-off of the amounts drawn on a convertible loan facility and a loss on the total acquisition of EUR 1.3 million. In addition, future Investments may also give rise to financial and tax restructuring measures which, even if designed with the aim to achieve a tax-efficient structure, may expose ZEAL to risks, such as the possibility of tax authorities challenging any of the implemented tax structures.

Furthermore, past and future Investments entail risks relating to the integration of businesses, including (among other factors) employees, processes, IT, logistics and other systems, and product offerings and such businesses may not, or not within the anticipated timeframe, achieve the targeted operative development. In particular, integration may be a complex, time-consuming and expensive process, may take more time than anticipated and likely involves a number of other uncertainties. These uncertainties include, for example, costs and expenses associated with unexpected difficulties, the diversion of management's attention from its daily operations and/or strategic business decisions, the potential loss of key employees, partners or customers, difficulties in complying with regulatory requirements and the additional demands on management related to the increase in the size and scope of ZEAL's operations. Furthermore, ZEAL may not realise anticipated synergies after the integration of past and future Investments or only slower than targeted.

In addition, past and future Investments could be more capital intensive than expected and could deplete ZEAL's financial resources. Future Investments could also require ZEAL to issue shares and other instruments to finance such Investments, which may dilute the interest of its existing shareholders. In addition, there is no assurance that ZEAL would have sufficient resources to make an Investment if ZEAL considers that such Investments are necessary to, for example, ensure that ZEAL is able to maintain or expand its market share in relevant markets.

Furthermore, in cooperations and partnerships ZEAL may have only limited influence on the organisation and business success of the companies concerned. Thus, ZEAL's ability to fully exploit the strategic potential in markets in which it operates or which it enters could be impaired if ZEAL was unable to agree with its partners or co-shareholders on a common strategy and its implementation. The interests of ZEAL's partners or co-shareholders could also conflict with ZEAL's interests. Minority shareholders in certain cooperations and partnerships may also have approval or other rights under applicable corporate laws, cooperation and partnership agreements or other organisational documents, such as shareholder agreements, which they could exercise contrary to ZEAL's interests. The expected benefits from past and future Investments may not materialise, and ZEAL may incur additional costs or other disadvantages which could have a material adverse effect on its reputation, business, financial position and results of operations. In addition, ZEAL could be subject to fiduciary or contractual obligations to its partners or co-shareholders which may prevent or impede its ability to unilaterally expand the business of the cooperation or partnership. If a cooperation, partnership or other Investment is dissolved or terminated, ZEAL may be required to make payments to its partners or co-shareholders.

ZEAL may also divest, from time to time, past and future Investments and ZEAL may face various risks in doing so, including regulatory or tax risks. Furthermore, ZEAL may not be able to achieve the economic value which it anticipates or may incur further hurdles and delays within the divestment process, which might also be costly. It is uncertain whether ZEAL will be able to liquidate its position as investor at the time ZEAL had made the decision for such de-investment or whether ZEAL will only be able to liquidate the position by accepting even significant losses.

There is no assurance that ZEAL's strategy to generate revenues or dividends from past and future Investments will be successful and that they will pay-off. Especially investments in start-ups is inherently risky for a variety of reasons, such as the uncertainty whether there is a market for new products offered by start-ups, whether the management is sufficiently qualified or whether follow-up financings can be secured. ZEAL cannot exclude that its past and future investments in start ups may prove to be unprofitable and that it may lose its investment in start-ups in whole or in part.

The occurrence of any such risk could restrict ZEAL's further growth and/or have a material adverse effect on its business, prospects, financial condition and results of operations or cash flows.

1.3.3 ZEAL depends on its ability to acquire new customers, improve the activity of existing customers as well as re-activating the dormant proportion of the customer base by means of marketing measures, which may not be effective or may incur higher expenses than expected.

ZEAL depends to a large extent on the volume and success of its, including myLotto24 Sub-Group's marketing activities. The marketing activities are focused on acquiring new customers, improve the activity of existing customers as well as re-activating the dormant proportion of the customer base with the aim to increase the billings. Maintaining and enhancing ZEAL's brand awareness, acquiring new customers and increasing the number of customer visits on ZEAL's online platforms, in particular 'www.tipp24.com' and 'www.mylotto24.co.uk', as well as the volume of stakes placed by its customers, is critical to ZEAL's business.

ZEAL, including myLotto24 Sub-Group and, after the takeover, Lotto24, intends to continue to acquire new customers, thus to expand its customer base and to replace existing but inactive customers and customers who have de-registered from its internet platform. In addition, inactive customers shall be animated to resuming their gambling activities. ZEAL's strategy to achieve this goal in the German market is to use its broad network of marketing affiliates, social media channels and offline print materials. In addition, ZEAL optimises its online visibility of its websites in web search engines like Google (so-called Search Engine Optimisation), a measure that has become more competitive but still leads a significant number of new customers to the websites. In the other markets ZEAL follows the same strategy and uses similar marketing instruments, but also benefits from additional acquisition channels, notably mobile app stores, Facebook and TV commercials.

ZEAL's decisions about which marketing instruments to use substantially depend upon its analysis of their effectiveness in terms of new customer registrations and increasing customer activities in the past. ZEAL cannot guarantee that certain methods of advertising currently utilised by it or by Lotto24 will not become less effective, be prohibited or otherwise be unavailable to ZEAL in the future (see also "1.1.2 ZEAL depends on permits, licences and other governmental authorisations for its business. The competent authorities could not renew any of these authorisations after their expiry dates, revoke any of these authorisations or adversely modify or supplement any renewed authorisation compared to the existing authorisations. ZEAL may fail to obtain new authorisations it requires for the expansion in further lottery markets.").

The marketing expenses have a significant impact on ZEAL's results. They depend in particular on the price level in the advertising market, the mix of marketing instruments and the efficiency of marketing measures. In addition, the applicable procedures for the youth protection, the limited availability of particularly attractive advertising space and the jackpot environment at the time of a marketing campaign are influencing factors for the amount of marketing expenses. The higher the jackpot played out at the time of a marketing campaign, the higher its expected effectiveness. In addition, the advertising activities of competitors also have an influence: if they advertise intensively for a certain lottery product, the activity of ZEAL's customers usually also increases, without ZEAL incurring its own costs.

There can be no assurance that ZEAL's marketing measures are in reasonable proportion to their costs. Moreover, changes to offline, online or social media providers' advertising terms and conditions or fee structures, as well as changes to search engines' algorithms or terms of services could significantly impact ZEAL's marketing expenses, the effectiveness of its marketing strategy or exclude its offerings from, or rank them lower in, search results or media coverage.

If ZEAL is unable to acquire new customers, improve the activity of existing customers as well as reactivating the dormant proportion of the customer base, its future growth could be limited or its business could even decline. The occurrence of any of these factors, including any significant increase of marketing expenses, alone or in combination, could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.3.4 ZEAL depends on external service providers, in particular with regard to the acceptance of lottery bets from its customers as well as the payment and accounting procedures. It cannot be ruled out that in cashless payment processing by credit card or direct debit, payment defaults or delays may occur. Payment transactions may be restricted and payment service providers for the gambling market may leave this market segment or increase their fees for payment transactions. ZEAL may not be able to comply with the data security standard required by the credit card industry.

ZEAL depends on the cooperation with external service providers who have special knowledge and technologies for the handling of ZEAL's business. This includes, for example, services related to data and voice communications, server hosting, hardware and software maintenance, payment processing, customer verification, customer services (e.g. via internet chat) and marketing services.

It is possible that external service providers may not provide the services on time, without errors, in the quality required, or at all. It is therefore possible that ZEAL may be unable to provide its own services at all or to provide them in a timely and error-free manner due to errors or omissions on the part of the external service providers. This may in turn result in loss of income, potential liabilities and significant reputational damage to ZEAL's business.

ZEAL also depends, in particular, on payment service providers, i.e. banks and credit card companies (VISA and Mastercard) because payments for the purchase of lottery products on the online platforms operated by myLotto24 Sub-Group and other members of ZEAL are made cashless. Customers may transfer the amount required for the purchase of products, in particular lottery bets to their gambling accounts by credit card, direct debit, bank transfer or any other method approved by the operator of the online platform. It cannot be ruled out that in cashless payment processings payment defaults or delays may occur.

In addition, national or international payment transaction restrictions may be introduced in connection with the further regulation of gambling markets (see also "1.1.1 Uncertainties relating to the regulatory environments in the countries in which ZEAL operates could have a negative impact on ZEAL's busi ness activities."). The number of available payment service providers for the gambling market is restricted. As a consequence, there is a risk that such providers may leave this market segment and no suitable replacement may be available for ZEAL. This applies, in particular, for payments by means of credit cards as the number of credit card associations is limited. At the date of the Prospectus, ZEAL accepts credit card payments from the two most widespread associations, VISA and Mastercard.

The fees for credit card payment transactions are borne by ZEAL and, where applicable, by myLotto24 Sub-Group. The amount of the fees is subject to negotiations between ZEAL and, respectively, myLotto24 Sub-Group and the payment service provider. It cannot be excluded that payment service provider increase the fees for credit card payments. Furthermore, due to stricter compliance requirements banks are required to constantly monitor and review their clients and in view of ZEAL's industry sector and the regulatory environment, there is a potential risk that ZEAL's account banks terminate the account relationships and withdraw services. If, in such case, a replacement account bank could not be found at all or in a timely manner to render the payment services, payments by customers could not be made to ZEAL. In addition, there is a risk that banking facilities (commercial banking, bank guarantees, credit cards) may not be available to ZEAL the future in its current or in potential new markets.

ZEAL has taken precautions to meet the requirements of the Payment Card Industry Data Security Standard (PCI DSS) developed for processing credit card transactions. The credit card service providers to be engaged by ZEAL for payment processing could check compliance with this standard and find it inadequate. If ZEAL is not able to meet the requirements of the PCI DSS and other (especially future) data security standards for credit card transactions on time, this could lead to ZEAL having to pay fines, accept restrictions or being prohibited from accepting credit cards. In this case, customers who are not prepared to use another payment method could turn away from ZEAL.

Any errors, delays and default by service providers and any refusal of a payment service provider, whether for reasons of payment transaction restrictions or for other reasons, to continue to render their services to lottery providers in general or to ZEAL in particular, as well as any increase of fees for lottery payment transactions, could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.3.5 ZEAL is dependent on the internet and on the online availability of its platforms for its products and services, in particular on mobile devices, and unavailability, including the blocking of its mobile apps, could be detrimental to its business.

As ZEAL relies on the internet and mobile apps for virtually all of its operations, ZEAL might be subject to disruptions and slowdowns of the internet in general or, more specifically, certain websites, applications or app stores. In particular, if customers cannot access ZEAL's websites or download or access its mobile apps, even only temporarily, they are excluded from making stakes and ZEAL would be unable to accept lottery bets or to sell other products.

Furthermore, ZEAL increasingly depends upon the availability of its products and services on mobile devices and in particular their offerings via leading providers such as Google and Apple. For example, ZEAL offers apps for mobile devices for the two relevant mobile operating systems, Android (Google) and iOS (Apple). These apps are specifically designed to meet the needs of users on their respective mobile devices, whether smartphone or tablets. ZEAL is subject to considerable discretion of, for example, Google or Apple to include its apps in the download areas for their respective operating systems, and if such providers were to reject advertising for games of chance, as they have done in the past, or were to delist ZEAL's apps for other reasons, ZEAL may be excluded from offering its products and services on mobile devices. As a consequence, ZEAL's business could be adversely affected, given the increasing demand to use its products and services via dedicated apps and not only via its websites, leading, among other things, to lower activity rates of its customers or to lower new customer registrations. For example, applications relating to the myLotto24 Sub-Group are blocked entirely from both the Google Play Store and the Apple App Store. While Android users may download the app via one of ZEAL's webpages, those customers using iOS (Apple) cannot download these apps for technical reasons and can only access related products via optimised mobile webpages. Similarly, apps offered by Lotto24 are blocked from the Google Play Store but are available in the Apple App Store.

The occurrence of any such risk could restrict ZEAL's further growth and/or have a material adverse effect on its business, prospects, financial condition and results of operations or cash flows.

1.3.6 ZEAL may fail to adopt and apply technological advances in a timely manner and to anticipate trends in the online lottery market and thus lose market shares.

ZEAL's ability to sell its products and services depends, in particular, on its ability to predict and respond to trends in the online lottery markets and changing customer preferences in a timely manner. As the rest of the e-commerce sector, the online lottery business has been developing rapidly in the past and is under a permanent pressure of adaptation to new developments, including technological progress and changing consumer behaviour.

In particular, new advances in technology can increase competitive pressure and the success of ZEAL's business highly depends on its ability to improve its current technological infrastructure and platforms. This includes, for example, permanent updates to existing and the development of new website formats and mobile applications for a variety of platforms in a timely manner. Any failure to adopt and apply new technological advances could decrease the attractiveness of ZEAL's websites and apps to customers and thus limit its growth or even lead to a decline of its business.

ZEAL may also fail to recognise relevant trends, including, among others, adequate product and service developments and innovations and new sales channels or sales formats. ZEAL also may fail to adequately consider or anticipate changes to the applicable regulatory regimes or it may not be able to translate market trends into appropriate and saleable products and services that are competitively designed and priced. In particular, ZEAL has observed a trend towards mobile use of its products but as it currently only has limited experience in this area, it may fail to adequately address the changes in customer activity and lose market shares.

Risks may also emerge from potential strategic misjudgements, in particular with respect to anticipated regulatory or technological changes and customer behaviour. In particular, ZEAL faces the potential risk of inadequate focus on, or omission of, certain products or services which may result in an inability to access new customers or the loss of existing customers.

If not appropriately addressed, these and other changes in technological and market trends or customer preferences and demands could have a material adverse effect on ZEAL's business, prospects, financial condition and results of operations or cash flows.

1.3.7 Unauthorised persons could gain access to customer data and misuse this data for their own purposes. Customers and employees could commit fraud for the detriment of ZEAL.

ZEAL is dependent on its reputation for handling its customers' data safely, as well as providing safe online platforms through which business can be transacted. Regulations such as those regarding data protection in credit card processing, the use of customer-specific information in big data solutions that are associated with an increased public debate about misuse and the growing complexity of IT systems generate risks for ZEAL's business.

In particular, customers provide ZEAL with their personal data via ZEAL's internet platforms. These customer data are stored electronically by ZEAL and can be viewed by the customer on the internet site. It cannot be ruled out that unauthorised persons will break ZEAL's security precautions and enter ZEAL's computer system via networks or otherwise gain access to the customer database. This could be done with the aim of obtaining customer data in order to misuse it for criminal or other purposes. Similarly, ZEAL relies on its employees and third-party services providers who may fail to abide by contractual terms, laws, regulations or industry standards, among other things, on data protection. Should this become publicly known, the number of new registrations could fall for fear of data misuse. Additional safety precautions may also be required, which may result in higher costs. In addition, existing customers could stop playing and require ZEAL to delete their personal data. Moreover, if ZEAL or any third-party service providers on which it may rely fails to transmit customer information in a secure manner, or if any such loss of personal customer data were otherwise to occur, this could give rise to civil liability, administrative orders (including injunctive relief), fines or even criminal charges and could have a material adverse impact on ZEAL's reputation and its business.

Customers could also commit frauds to the detriment of ZEAL, for example, by making payments on the internet with stolen debit or credit cards, whereupon ZEAL must repay funds received to the true cardholder, by denying or reversing direct debit transactions made by ZEAL for no reason, or by playing using another person's account details, by abusing promotions or by using a false identity. Fraud could also be committed by employees of ZEAL.

Any such event could have a negative impact on the transaction volume and turnover. Any such event could also lead to a liability for damages and considerable damage to ZEAL's reputation and thus have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.3.8 ZEAL's organisational and risk monitoring system may be inadequate or may not keep pace with growth.

ZEAL's internal organisational and risk monitoring system serves the early detection of undesirable developments and risks, especially in the IT area. In this respect, ZEAL faces the challenge, inter alia, to identify and correctly assess existing and new risks in time and to further develop the existing organisational and risk monitoring system appropriately and promptly in order to keep pace with the future growth of ZEAL, in particular by increasing personnel and expanding the product range.

ZEAL cannot rule out that its current or future organisational and risk monitoring system may be inadequate to recognise and control risks, trends and undesirable developments in time. Should gaps or deficiencies in the existing organisational and risk monitoring system become apparent in the course of business activity or should ZEAL fail to create appropriate structures and systems in connection with the planned growth in a timely manner, this could lead to a limitation of the ability to recognise and control risks, trends and undesirable developments in time.

If the organisation and risk monitoring system is inadequate or does not keep pace with growth, this could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.3.9 Risks arise for ZEAL's business from potential counterparty default, in particular relating to cash and cash investments. Financial institutions where ZEAL holds account balances and issuers of securities in which ZEAL has invested in may default, which could lead to the partial or complete loss of ZEAL's cash deposits and investments. ZEAL may not be in a position to access its cash and pledged cash and short term investment sufficiently quickly in order to satisfy its liabilities.

ZEAL frequently holds significant cash balances on deposit with financial institutions or has it invested on a short-term basis. As at 31 December 2018, ZEAL held cash and pledged cash in Germany, Spain, Switzerland and the UK in the amount of EUR 133 million in bank accounts with various European banks, including Joh. Berenberg, Gossler & Co. KG (Berenberg Bank), Wirecard AG, The Standard Bank of South Africa Limited, Banco Santander S.A., Rothschild & Co., Privatbank IHAG Zürich AG and Banco de Sabadell, S.A. as well as short-term financial assets of EUR 12.9 million. In addition, ZEAL could be owed significant amounts of money by payment processors, relating to funds collected from its customers before they have been transferred to ZEAL.

These deposits, financial assets and other contractual arrangements give rise to credit risks on amounts due from counterparties, including financial institutions. ZEAL may experience write-downs or severe delays in payments by counterparties, for example if economic conditions do not improve or if they worsen or due to other factors or events which may cause some of its counterparties having difficulties making the required payments to ZEAL in full or on a timely basis. In particular, a default of certain financial institutions where ZEAL holds balances could lead to a partial or complete loss of its deposits. Similarly, the collapse of individual issuers of short-term financial assets may lead to the partial or complete loss of these financial assets.

The collapse of any account bank or individual issuers of short-term financial assets may lead to the partial or complete loss of these cash deposits or financial assets. It is also possible that ZEAL must withdraw cash from an account bank within a short time to satisfy its liabilities, but that the bank refuses to make the withdrawal due to significant restrictions of business across the backdrop of regulatory developments or for any other reason.

Each such event could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.3.10 ZEAL is dependent on the expertise, commitment and performance of a limited number of key members of its management and other qualified employees and ZEAL may fail to hire or retain such personnel. In addition, ZEAL could fail to retain the current members of the management board and other key employees of Lotto24 AG after completion of the Offer.

ZEAL's success depends on the performance of the members of the Executive Board and other qualified employees in key positions. Furthermore, ZEAL may need to hire additional qualified employees if its future growth exceeds its current personnel resources or if ZEAL is forced to replace qualified employees. Additional qualified employees may particularly be required in connection with a future expansion into new markets and jurisdictions.

Following Completion, the Company would become the majority shareholder of Lotto24 AG. Members of Lotto24's management board and other key employees may not agree with the combination of ZEAL and Lotto24, for example because they do not share ZEAL's business strategy or because they consider themselves disadvantaged in their own professional development.

Due to the intense competition for qualified personnel, there is no guarantee that ZEAL will be able to hire sufficiently qualified key employees at acceptable terms in the future.

The loss of any of the members of the Executive Board of the Company or the management board of Lotto24 or any other key employees or the failure to attract new qualified employees could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.3.11 The internal cost savings program initiated by ZEAL in November 2018 may be unsuccessful or may incur higher costs for its implementation than projected.

On 19 November 2018, the Company announced an internal cost savings program, in relation to which 24 employees of ZEAL received notices of termination. An amount of EUR 1.5 million for restructuring and severance costs associated with the internal cost savings program has been accounted for as an exceptional item in ZEAL's results for the year ended 31 December 2018.

ZEAL may be unable to achieve the projected cost savings entirely or in a timely manner. In particular, the costs associated with the implementation of the program could turn out higher than the projected amount. Failure to realise a significant part of the cost savings in a timely manner could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.3.12 Any threat to, or impairment of, ZEAL's intellectual property rights and know-how could cause ZEAL to incur costs to defend these rights and impair its ability to compete effectively, and any violation of third party intellectual property rights by ZEAL could result in liability for damages and litigation costs.

ZEAL depends on trademark protection provided by the applicable law to protect its brands. Trademark protection may not adequately safeguard ZEAL's intellectual property and ZEAL may incur significant costs to defend its intellectual property rights. In particular, there is a risk that third parties, including ZEAL's competitors, may infringe on its intellectual property rights, in which case ZEAL would have to defend these rights. There is also a risk that third parties, including ZEAL's competitors, may seek to revoke its intellectual property rights, take legal action to have its intellectual property rights declared null and void or demand an assignment of such rights. These third parties may also bring infringement claims against ZEAL, its collaborators or its customers. Accordingly, ZEAL could be involved in lengthy and costly litigation to protect its intellectual property, the outcome of which cannot be predicted.

ZEAL may also decide to file further trademark applications in seeking to protect selected newlydeveloped brands, or apply for registration of existing brands in other relevant jurisdictions as part of an international expansion. ZEAL can, however, not be sure that such trademark registrations will be issued. There is also a risk that ZEAL could, by omission, fail to renew a trademark on a timely basis or that its competitors could challenge or invalidate any existing or future trademarks registered for or licenced by ZEAL. In addition, even if a trademark has been duly registered, not using a trademark for a certain period of time (such as five years in the EU) could render the trademark registration voidable. Moreover, expiry of intellectual property rights or the imposition of geographical restrictions could allow competitors to use ZEAL's intellectual property rights in order to facilitate entry into a market or strengthen their competitiveness.

In addition, ZEAL's products and services may violate the intellectual property rights of third parties, in particular their trademarks and design rights. If ZEAL violates a third party's rights, it may be liable for damages as well as litigation costs, and could be obligated to purchase a licence to use such rights. For example, in 2017 ZEAL's competitor Lottoland Limited applied an interim injunction against Tipp24 Services Limited at a civil court in Frankfurt am Main to interdict the use of the trademark 'Mega Millions'. ZEAL considers this interim injunction as void as it has not been formally served within the required time.

The realisation of any of these risks related to intellectual property may have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations, cash flows or reputation.

1.3.13 ZEAL offers its lottery products in particular under the domains 'mylotto24.co.uk' and 'tipp24.com' and Lotto24 offers its products predominantly under the domain 'lotto24.de'. Competitors already use similar domains and could use similar domains in the future which include the terms "lotto" and "tipp".

ZEAL offers its lottery products in particular under the domains '*www.mylotto24.co.u*k' and 'www.tipp24.com' and Lotto24 offers its products predominantly under 'www.lotto24.de'. Competitors already use similar domains (e.g. 'www.lottery.co.uk', 'www.lotto.com', 'www.lottostar.com' or 'www.lotto.co.uk') and could use similar domains in the future which include the terms "lotto" and "tipp".

It cannot be ruled out that customers who are interested in ZEAL's products and services will be redirected to one of those websites containing the "lotto" or "tipp" component used for their business activities instead of the websites 'www.mylotto24.co.uk' or 'www.tipp24.com' or, following Completion, 'www.lotto24.de' or 'www.tipp24.de'. In such cases, ZEAL could lose potential or existing customers, which would have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.3.14 Failure to adequately protect the reputation of the brands under which ZEAL operates could negatively affect its business.

To a large extent, ZEAL's success is dependent on the reputation, strength and value associated with the 'myLotto24', 'Tipp24', 'ZEAL' and other brands under which it operates. Similar dependencies will arise relating to the 'Lotto24' brand following Completion.

The reputation of these brands is subject to various risks including, among others, unsuccessful or insufficient marketing efforts implemented and carried out by ZEAL or its marketing partners, inability to adequately respond to customer tastes and preferences or deterioration of the public image or reputation as a result of unfavourable publicity concerning ZEAL, the products and services that it offers. If ZEAL fails, or is perceived to have failed, to deliver to its customers' satisfaction the expected standards (such as IT standards and secure transaction handling and data protection standards), its customers' confidence in and loyalty to ZEAL could be impaired.

For example, ZEAL uses information on customers to improve the efficiency of its marketing activities. In particular, ZEAL has derived socio-demographic characteristics and other affinities to help tailor its advertising media to reach relevant target groups. Against this background, ZEAL also has installed tracking systems for all areas of marketing to be able to precisely measure the success of all marketing campaigns. Perceived or actual breach of data protection standards in this regard may lead to adverse publicity and damage ZEAL's reputation. In addition, blogging and social media activities can materially negatively influence ZEAL's business success. Criticism in blogs, online-forums and social media based on ethical or other considerations, regardless of whether such criticism is reasonable or not, may rapidly spread online and damage ZEAL's reputation and brands materially.

In addition, ZEAL, and to ZEAL's knowledge also Lotto24, uses automated processes to participate in Secondary Lotteries or broker lottery products using complex IT systems. These systems are subject to errors and faults (see also 1.3.1 ZEAL's business activities are highly dependent on complex IT systems whose functionality can be significantly impaired by internal and external circumstances. Actual or alleged procedural errors or functional problems in the processing of gambling orders and the payment of lottery winnings could result in claims for damages from customers for lost gambling winnings and significantly impair ZEAL's reputation. The systems made available by ZEAL in the form of lottery platforms to the cooperation partners could also have actual or alleged procedural errors or functional problems for which ZEAL is responsible. ZEAL's IT systems could not be sufficient for multi product launches or scalability.). For example, ZEAL bears the risk that lottery bets are registered incorrectly or not at all, so that the customer would not be able to participate in a draw, or only with a bet the customer did not choose. In particular, if a bet the customer had placed via ZEAL's websites and which was not accordingly transmitted would have won a large prize, ZEAL's reputation could be significantly damaged. Similar risks arise when there are no mistakes on ZEAL's side but customers nonetheless claim that there were alleged faults.

Additionally, if websites of competitors are similar to those used by ZEAL (see also "1.3.13 ZEAL offers its lottery products in particular under the domains 'mylotto24.co.uk' and 'tipp24.com' and Lot to24 offers its products predominantly under the domain 'lotto24.de'. Competitors already use similar domains and could use similar domains in the future which include the terms "lotto" and "tipp"."), the reputation of ZEAL's own brands might be harmed and ZEAL might lose potential or existing customers if similar faults occur on these websites.

Furthermore, in light of the increased public focus on corporate social responsibility issues, any breach or perceived breach of relevant laws, regulations, permits or licenses relating to ZEAL's online lottery products and services, or failure to achieve or maintain particular standards, could also lead to adverse publicity, a substantial erosion in the reputation of its brands (including tarnishing the reputation of products or services other than those specifically affected by the reputational issue) and damage to customer relationship. More generally, any scandals or negative publicity in the lottery market, even if they are not directly related to ZEAL's own brands and products or services, such as negative media coverage relating to another Secondary Lottery operator's refusal to pay out a jackpot or other lottery win could also have negative effects on ZEAL's ability to acquire and retain customers and, thus, on its business*.*

Any deterioration of the reputation, strength and value of ZEAL's brands could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.4 Risks Related to the Financial Situation

1.4.1 ZEAL is exposed to bookmaking risks through myLotto24 Sub-Group as operator of Secondary Lotteries. Lottery prizes owed to customers could exceed myLotto24 Sub-Group's own funds and the coverage provided under hedging arrangements, which could ultimately lead to the insolvency of members of the myLotto24 Sub-Group.

ZEAL's main business segment 'Lottery Betting' is operated by myLotto24 Sub-Group which operates Secondary Lotteries and, thus, operates as a bookmaker offering bets on the outcome of Primary Lotteries in Europe and North America. Typically, Tipp24 Services Limited promises its customers lottery prizes in case of a winning bet equal to the quota paid out by the relevant Primary Lottery (e.g. if there is a single winner of a jackpot in the Primary Lottery worth EUR 10 million, Tipp24 Services Limited pays out the same amount to a customer who is the only winner of the jackpot in the related Secondary Lottery; if there are several winners in that Secondary Lottery, the EUR 10 million will be equally shared by these winners). In contrast, customers who play Secondary Lotteries on the websites of myLotto24 Limited are treated as they have to "share" a winning with winners in that Primary Lottery (e.g. if there is one winner of a EUR 10 million jackpot in the Primary Lottery and one winner in the related Secondary Lottery, myLotto24 Limited pays out EUR 5 million to "its" winner). myLotto24 Sub-Group does not act as online brokers such as Lotto24, who pays out lottery prizes received from the Primary Lotteries as an intermediary to its customer. The chance for customers to win a high lottery prize (in particular a jackpot) corresponds to myLotto24 Sub-Group's own risk of having to pay out that lottery prize from its own funds. Accordingly, myLotto24 Sub-Group – and thus ZEAL – bears the bookmaking risks for its Secondary Lottery business.

This risk can be illustrated by the jackpot amounts of the primary lotteries on whose results the myLotto24 Group offers bets: For example, the jackpot amount in the German Primary Lottery 'LOTTO 6aus49' is limited by a compulsory payout only if the jackpot was not won in twelve consecutive draws. In this case, the jackpot must be paid out in the 13th draw. The highest jackpot to date was around EUR 45.4 million. The minimum jackpots of the Primary Lotteries 'EuroJackpot' and 'EuroMillions' are currently EUR 10 million and EUR 40 million respectively and the maximum is EUR 90 million and EUR 190 million respectively. The jackpots of the two US lotteries 'Powerball' and 'MegaMillions' are not limited in their amount and each amount to at least USD 40 million.

Unlike Primary Lotteries, a customer winning a jackpot is a risk for myLotto24 Sub-Group and ZEAL because myLotto24 Sub-Group can neither influence the ratio between the amount of lottery prizes and the 'Stakes' from the sale of lottery tickets (the "Pay-out Ratios") nor the frequency of jackpots. Primary Lotteries only pay out prizes, including from jackpots, which are a certain fraction of the previously generated stakes from the sale of lottery tickets (minimum jackpot amounts could be paid-out from certain reserves if the revenues from ticket sales are not sufficient). For example, the German lottery 'LOTTO 6aus49' has a Pay-out Ratio of 50, which means that only 50% of the revenues from ticket sales are paid out as lottery prizes, as the State Lottery Operators are legally obligated to retain the residual 50% of the revenues from ticket sales for the payment of tax, administrative costs and fees to lottery shops. In contrast, myLotto24 Sub-Group may encounter a large jackpot win from the sale of bets on the outcome of a particular primary lottery irrespective of the amount of 'Stakes' received. Accordingly, myLotto24 Sub-Group's Pay-out Ratios may significantly exceed 100 for a particular draw or even an extended period of draws. As at the date of the Prospectus, myLotto24 Sub-Group has never generated enough 'Stakes' in relation to a particular Primary Lottery draw to be able to cover the jackpot prize of that draw. In addition, Primary Lottery Operators are able to fund large jackpot prizes by accumulating stakes over several draws in phases of increasing jackpots, whereas myLotto24 Sub-Group faces the repeated jackpot pay-out risk described immediately below.

The bookmaking-risk described above is increased by the following circumstances:

− It cannot be ruled out that one or more of myLotto24 Sub-Group's customers win a jackpot, whereas in the Primary Lottery, the jackpot has not been won and, accordingly, will not be reduced to its lowest amount in the next draw. Rather, in that next draw, the jackpot will even be increased and myLotto24 Sub-Group has to offer the same jackpot-amount although it has already paid-out the jackpot in the last draw.
− myLotto24 Sub-Group operates several Secondary Lotteries, which is why more than one jackpot may be paid-out at the same time or one after the other in a short time, so that not sufficient time remains to replenish the reserves for high lottery prizes.

Although it is highly likely that, over time, the stakes submitted also exceed the pay-outs of a Secondary Lottery operator as the occurrence and height of pay-outs follow statistical patterns, there is no guarantee that a Secondary Lottery will be operated profitably, in particular as significant pay-outs, including high jackpot pay-outs, are not under control of the Secondary Lottery operator. In order to make the bookmaking risks manageable and to prevent a high lottery win from posing a threat to the existence of myLotto24 Sub-Group, a multi-layer hedging strategy was introduced, consisting of a hedging reserve of USD 24 million (TEUR 21,390) as of 31 March 2019, insurance coverage in the amounts of USD 90 million and USD 30.5 million, special insurance coverage of EUR 20 million per draw and EUR 40 million in aggregate for all draws within the term of the insurance, as well as the purchase of tickets in Primary Lotteries matching the numbers or other elements of bets placed by customers on myLotto24 Sub-Group's online platforms for the related Secondary Lottery ("Physical Hedging"). The purchase of lottery tickets from Primary Lotteries is at the expense of myLotto24 Sub-Group's and ZEAL's profit margin and is more expensive than the insurance premiums to be paid under the hedging strategy. Accordingly, Physical Hedging is a suitable hedging instrument provided that the stakes generated through the sale of a Secondary Lottery cover at least the costs of the purchase of matching entries in the corresponding Primary Lottery (which is typically the case for 'Powerball', 'Mega Millions' and 'EuroMillions').

However, in particular in the following circumstances, myLotto24 Sub-Group's risks could not be sufficiently hedged:

− Bets on Primary Lotteries could not be made available to the myLotto24 Sub-Group's loss adjuster who is responsible to verify that each risk resulting from the sale of bets is sufficiently hedged. In this case, there is a risk that the hedging instruments described below, in particular the insurances, will not settle myLotto24 Sub-Group's obligations in case of a high winning of customers.
− In the case of significant structural changes in the Primary Lotteries against which myLotto24 Sub-Group offers Secondary Lottery products, the hedging arrangements may not be sufficient in case of high winnings.
− myLotto24 Sub-Group could neglect to hedge lottery bets physically, i.e. through the purchase of lottery tickets from Primary Lotteries, due to technical or human error, Primary Lotteries could refuse to sell lottery tickets to myLotto24 Sub-Group or to pay out a lottery prize or purchased lottery tickets may be lost, stolen or destroyed.
− myLotto24 Sub-Group could buy lottery tickets from Primary Lotteries with the wrong combination of numbers or other elements as compared to the bets placed by customers on myLotto24 Sub-Group's online platform.

Should myLotto24 Sub-Group be unable to pay out lottery prizes which are not covered by hedging arrangements or its cash reserves, myLotto24 Limited or any of its subsidiaries owing that lottery prize could be required to file for insolvency which would also have a material adverse effect on the financial position and performance of ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.4.2 Existing hedging arrangements in the form of insurances could be terminated by the insurer before the end of their respective term and ZEAL or myLotto24 Sub-Group could not be able to take out new insurance cover at all or only with a time delay. ZEAL or myLotto24 Sub-Group could not be able to renew existing insurance contracts after the end of their respective term or could only obtain significantly lower insurance coverage or insurance coverage against payment of significantly higher insurance premiums. Additional hedging arrangements may fail partly or entirely, and may not be sufficient to cover risks associated with the operation of ZEAL's business. The winning of high jackpots by customers could lead to myLotto24 Sub-Group's inability to accept further lottery bets due to insufficient cover by its hedging instruments.

myLotto24 Sub-Group uses insurance coverage of USD 90 million and USD 30.5 million as well as special insurance coverage of EUR 20 million per draw and EUR 40 million in aggregate for all draws within the term of the insurance as a material part of its hedging strategy. In addition, myLotto24 Sub-Group has a hedging reserve for the Self-Retention (as defined below). Another hedging instrument consists of the Physical Hedging.

At the date of the Prospectus, myLotto24 Sub-Group has taken out the following insurances:

Hedging Instrument Description

Insurance of USD 90 million ("Hoplon III-Insurance")

myLotto24 Limited entered into insurance contracts with Hoplon III Insurance Limited, a special purpose vehicle registered in Bermuda, as the insurer ("Hoplon III"). Hoplon III provides insurance cover of, in total, USD 90 million for a term of two years from 1 January 2018 until 31 December 2019, divided into two risk periods of one year each. Hoplon III is liable, in respect of each covered lottery draw during the two risk periods, to indemnify myLotto24 Limited and any of its affiliates (each an "Insured") in respect of all jackpot winning lottery bets an Insured is liable to pay out on each lottery draw exceeding the selfretention of USD 30 million ("Self-Retention") in each risk period ("Insured Event"). Jackpot winning lottery bets are lottery prizes of the lottery class which is mathematically least likely to win. Lottery draws which are covered by the Hoplon III-Insurance are the German lottery 'LOTTO 6aus49', 'EuroMillions', 'EuroJackpot', the US lotteries 'Powerball' and 'Mega Millions', the Irish National Lottery as well as, under certain conditions, other lotteries.

In order to be able to have sufficient financial resources should an

Hedging Instrument Description

Insured Event occur, Hoplon III has outplaced the risk on the capital market by selling preference shares in the total nominal amount of USD 90 million ("Hoplon III Preference Shares") to a group of investors ("Hoplon Investors") in the form of a private placement. The Hoplon III Preference Shares are structured similarly to catastrophe bonds to securitise and transfer myLotto24 Sub-Group's bookmaking risks to the Hoplon Investors. The "catastrophe" is the Insured Event, i.e. a high jackpot winning not covered by the Self-Retention. The Hoplon III Preference Shares have a term of two years from 1 January 2018 until 31 December 2019. During this term, Hoplon III pays a preferred dividend in the form of a fixed and a variable payment to the Hoplon Investors and, at the end of the term, Hoplon III redeems the Hoplon III Preference Shares by repaying their principal amounts back to the Hoplon Investors. However, if an Insured Event occurs during the two-years-term, then the principal would be forgiven and Hoplon III would use this money to pay the insured amount to myLotto24 Sub-Group, i.e. in this case the principal is lost to the Hoplon Investors in whole or in part. The Hoplon III Preference Shares consist of three tranches of USD 30 million each with a different risk profile. The first tranche would be to first to bear the loss in the event of an Insured Event; in return, the first tranche carries the highest dividend (the second tranche would be lost as the second and third tranche as the third).

Private insurance of USD 30.5 million ("Private Insurance") In addition, myLotto24 Limited and several insurance companies ("Insurance Syndicate") entered into a private insurance agreement. Under the Private Insurance, myLotto24 Limited procures additional insurance coverage in the amount of USD 30.5 million in respect of jackpot winning lottery bets that it may be liable to pay in excess of the amounts which are covered by the Self-Retention and the Hoplon III-Insurance. The Private Insurance has a term of one year from 1 January 2019 to 31 December 2019. If the coverage under the Private Insurance is wholly exhausted, then it shall reinstate against provision of a retention of at least USD 5 million such that there is further insurance coverage in an amount of USD 30.5 million. The reinstatement shall occur no more than once during the term of the insurance and the insurance coverage does not exceed USD 30.5 million at any time. The lottery draws which are covered by the Private Insurance are the same as under the Hoplon III-Insurance

Special insurance of EUR 20 million per draw and EUR 40 million in aggregate for all draws ("Special Insurance")

myLotto24 Limited and several insurance companies ("Special Insurance Syndicate") entered into a special risk policy for a term of one year from 1 January 2019 to 31 December 2019. The Special Insurance serves as protection against high lottery winnings in particular events, e.g. in the case that in the German lottery 'LOTTO 6aus49' a compulsory pay-out occurs (i.e. whenever the jackpot has not been won in twelve consecutive draws resulting in a compulsory pay-out in the 13th draw) or, in the case of 'EuroJackpot' or 'EuroMillions', the total gross money payable to a lottery winner are equal to or exceed a certain cap (each a "Special Event"). The Special Insurance Syndicate is liable, in respect of each covered lottery draw during the term, to indemnify the Insured in respect of any loss caused by a Special Event incurred or payable by an Insured in relation to such lottery draw where and to the extent that any such loss exceeds EUR 5 million (or such higher amount as notified by myLotto24 Limited prior to a draw). The maximum sum insured is EUR 20 million per draw and EUR 40 million in aggregate for all draws.

Each insurance may be terminated by the insurers by giving 15 business days written notice if, in particular, a claim under the relevant insurance and a payment was made, to the satisfaction of a court, as a consequence of fraudulent or dishonest act or omission of an Insured, or in case of a payment default by myLotto24 Limited. In addition, the insurances have been taken out for a limited term; each insurance will expire on 31 December 2019 and, in each case, myLotto24 Sub-Group will be required to enter into new insurance contracts taking effect after the expiry date, or to stipulate an extension.

It is neither foreseeable whether myLotto24 Sub-Group will be able to take out new insurance replacing the Private Insurance and the Special Insurance or any future similar insurance, nor to extend these insurances, nor whether new insurance cover can be obtained without interruption after the termination or expiry of the insurances. In the case of the Hoplon III-Insurance or future similar insurances, it is uncertain whether myLotto24 Sub-Group will be able – by means of an insurance special purpose vehicle comparable to Hoplon III – to place new preference shares or other instruments (e.g. bonds) on the capital market to hedge the insurance risks in which case this insurance model cannot be repeated in lack of collateralisation.

Moreover, as regards all insurances it cannot be ruled out that the insurance premiums to be paid by myLotto24 Sub-Group will not increase. For example, generally increasing interest rates on the capital markets could require higher dividends for shares or coupons for bonds replacing the Hoplon III Preference Shares and, thus, higher insurance premiums to be paid to the insurance special purpose vehicle. Similar implications would, for example, arise if the risk profile changes or is seen differently by insurance companies, investors or similar providers of insurances for the disadvantage of myLotto24 Sub-Group. The risk profile could change to the disadvantage of myLotto24 Sub-Group for various reasons, e.g. in the case that the likelihood of higher jackpots increases due to changes a Primary Lottery's terms and conditions. In such cases, there is the risk that myLotto24 Sub-Group could not be able to obtain insurance coverage in the same amount as it will be required to hedge its bookmaking risks.

myLotto24 Sub-Group's business model depends on the fact that the risks associated with the operation of Secondary Lotteries (see the description of the risk factor "1.4.1 ZEAL is exposed to bookmak ing risks through myLotto24 Sub-Group as operator of Secondary Lotteries. Lottery prizes owed to customers could exceed myLotto24 Sub-Group's own funds and the coverage provided under hedging arrangements, which could ultimately lead to the insolvency of members of the myLotto24 Sub-Group.") can be covered by hedging arrangements or insurances. In the event that myLotto24 Sub-Group is not able to hedge its bookmaker risk with suitable hedging instruments and also does not have the necessary cash reserves, myLotto24 Sub-Group would have to cease its business activities temporarily or even permanently.

Similar risks may arise if myLotto24 Sub-Group has to pay out a high jackpot before it has taken out new insurance cover or in the case that myLotto24 Sub-Group can only obtain significantly lower insurance cover which is insufficient to hedge the bookmaking risks. In the latter case, myLotto24 Limited or any of its subsidiaries owing that lottery prize could also be required to file for insolvency.

Furthermore, the other hedging instruments, i.e. the hedging reserve and Physical Hedging may prove to be insufficient or not reliable, for example, if Physical Hedging does not occur due to technical or human errors and may hence not cover the bookmaker risks, partly or entirely. If, for example, there is a high win that has not been physically hedged, myLotto24 Sub-Group could be forced to pay out the prize by using the hedging reserve as well as the insurances. This could lead to a situation in which these hedging instruments are not available to cover the risks from the sale of other Secondary Lotteries. In this case, myLotto24 Sub-Group could decide to discontinue all or certain of its business activities until the hedging instruments are available again.

Any of these events, or the occurrence of any of these insurance or hedging related risks, could restrict ZEAL's further growth and/or have a material adverse effect on its business, prospects, financial condition, results of operations or cash flows.

1.4.3 Insurers providing coverage for the event of a high jackpot could be unable, unwilling or not obliged to pay out the insurance benefit.

myLotto24 Sub-Group uses insurance coverage in the amounts of USD 90 million, USD 30.5 million and EUR 20 million per draw and EUR 40 million in aggregate for all draws within the term of the insurance (together, and including any replacements and extensions thereof, the "Jackpot Insurances") as a material part of its hedging strategy (see "1.4.2 Existing hedging arrangements in the form of insurances could be terminated by the insurer before the end of their respective term and ZEAL or myLotto24 Sub-Group could not be able to take out new insurance cover at all or only with a time delay. ZEAL or myLotto24 Sub-Group could not be able to renew existing insurance contracts after the end of their respective term or could only obtain significantly lower insurance coverage or insurance coverage against payment of significantly higher insurance premiums. Additional hedging arrange- ments may fail partly or entirely, and may not be sufficient to cover risks associated with the operation of ZEAL's business. The winning of high jackpots by customers could lead to myLotto24 Sub-Group's inability to accept further lottery bets due to insufficient cover by its hedging instruments."). It cannot be ruled out that in the event that myLotto24 Sub-Group has to assert an insurance claim due to a high jackpot won by one of its customers the insurer is unable or unwilling to pay or disputes its payment obligation.

Under certain conditions, the insurers under the Jackpot Insurances are not obliged to indemnify the insured in respect of a jackpot winning lottery bet, notably if the insured receives the lottery prize as principal for its own accounts under other insurances, hedging instruments or other risk mitigation techniques, such as Physical Hedging. For example, a dispute could arise as to whether the Insured Event has actually occurred or if the insurer is obliged to pay out the insurance benefit. In particular, the insurance company may consider that myLotto24 Sub-Group should have paid the jackpot from its own resources, taking into account the reserves or physically hedged lottery bets. Moreover, it cannot be ruled out that an insurance company itself is in financial difficulties and cannot pay-out the insurance benefit.

Furthermore, it cannot be excluded that the operators of Primary Lotteries have implemented structural changes in the game concepts which are not reflected in the terms and conditions of the Jackpot Insurances with the consequence that there is no or not sufficient insurance cover.

Any refusal to pay out the insurance benefit could have a material adverse effect on the financial position and performance of ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.4.4 ZEAL could incur substantial losses from other damages not covered by, or exceeding the coverage limits of, its insurance policies.

In addition to Jackpot Insurances, insurance policies taken out by ZEAL, including against property damage, increased cost of working, terrorism, employers' liability, public and products liability, employee fidelity, impairment of computer services by insider and outsider attack, are subject to exclusions and limitations of liability both in amount and with respect to the Insured Events. There can be no assurance that ZEAL's assessment that it is sufficiently insured against contingencies is accurate. Even in cases where ZEAL has obtained sufficient insurance coverage, its insurance providers could become insolvent, thereby forcing ZEAL to bear any costs itself.

If ZEAL incurs costs against which it is uninsured or insufficiently insured, this could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.4.5 Forward-looking statements as contained in the Prospectus involve known and unknown risks, uncertainties and other factors that may cause the actual future results, financial position, development or performance of ZEAL to differ materially from those expressed or implied by such statements.

The Prospectus contains data and forecasts on the development of the gambling market, in particular the lottery market. These data and forecasts were taken from or derived from publications and were not checked and verified by ZEAL. The Company's assessment of the relevance of the listed data to the matters dealt with in the Prospectus may be inaccurate. Forecasts, i.e. forward-looking statements and expectations, contain known and unknown risks, uncertainties and other factors that may cause the actual future results, financial position, development or performance of ZEAL to differ materially from those expressly or implicitly assumed in these statements. These factors include, among others, the behaviour of customers with respect to their demand for lottery products, competition from other companies, ZEAL's capital requirements, financing costs, the development of the regulatory environment, uncertainties arising from the business operations of ZEAL and other factors mentioned in the Prospectus.

1.4.6 ZEAL's historical earnings and other historical financial figures are not predictive of earnings and other financial figures of ZEAL going forward and the Company could decide to reduce its dividend payments.

The financial information discussed in the Prospectus and the consolidated financial statements of the Company printed in the financial section of the Prospectus relate in particular to the past performance of ZEAL. The future development of ZEAL could deviate significantly from past results due to a large number of internal and external factors. Historical earnings and other historical financial figures of ZEAL are therefore not predictive of earnings or other financial figures of ZEAL going forward.

ZEAL generally bases its current and future expense levels on its forecasts of its business and estimates of future revenue. In particular as ZEAL operates a relatively new business model in the dynamic and growing online lottery market and within an unclear regulatory framework, such future revenue and result from operating activities are difficult to forecast. ZEAL's financial planning also depends on the amount of stakes that customers place with ZEAL, changes in the size of relevant jackpots and pay-out of large jackpot winnings for its Secondary Lotteries, among other things, all of which are uncertain. Variations in ZEAL's working capital requirements and cash flows also increase the difficulty of ZEAL's financial forecasting and could adversely affect its ability to predict financial results accurately.

1.4.7 ZEAL may not be in a position to raise sufficient debt and equity capital for the establishment and expansion of its business activities and the exploitation of future business opportunities.

For the further development and expansion of business activities and for the exploitation of future business opportunities, ZEAL may have additional capital requirements which cannot be foreseen as at the date of the Prospectus and which are not or not fully covered by its funds. In this case, ZEAL could be dependent on the willingness of external equity or debt capital providers to provide additional funds at economically reasonable conditions. If, for example, ZEAL is unable to obtain debt capital due to an increase in interest rates or due to a negative result of a credit assessment, not to the desired extent or only on economically inappropriate terms, then ZEAL may not have sufficient financial resources available to take advantage of future business opportunities. In addition, there is the risk that external financing is not available and credit institutions and other debt providers are not able to offer debt financings due to ZEAL's business model, industry or regulatory issues.

In such cases, ZEAL would also be dependent on the condition and the development of the financial markets, in particular in Germany and other European countries. As a consequence, future financial market or economic crises could have a material adverse impact on ZEAL's ability to carry out such alternative financing activities.

Each such event could restrict ZEAL's further growth and have a material adverse effect on its business, prospects, financial condition and results of operations or cash flows.

1.4.8 ZEAL could be required to write-down its assets, including goodwill, and such assets could be impaired.

ZEAL is subject to the risk of write-downs and impairments regarding its future consolidated financial statements. As a young group operating in the dynamic and growing online lottery market, ZEAL's relatively new business models may prove to be unprofitable or unfeasible in the future, any of which might lead to write-downs or impairments. In particular, Lotto24, which has only been in business since 2012, has only reached break-even in 2017 and continuously incurred significant operating losses since inception and until 2017, and there can be no guarantee that ZEAL or any of its subsidiaries will operate profitably in the future.

Furthermore, ZEAL may face potential write-offs or impairment charges relating to businesses, which it may acquire in the future as ZEAL has for example experienced in the past relating to the acquisition of the remaining shares in Genomics Global Games Limited and Geo24 UK Limited, where ZEAL had recorded a charge of EUR 1.6 million relating to a write-down of the amounts drawn on a convertible loan facility and a loss on the total acquisition of EUR 1.3 million. Also, in 2018, ZEAL recorded an impairment charge of EUR 5.3 million against its investment in Ventura24, EUR 1.3 million against its investment in Ventura24 Games S.A., and EUR 1.5 million against its investment in Geonomics Global Games Limited. Similar risks originate in connection with the Offer (see "1.5.2 The expected dis synergies and non-recurring cost in connection with the Combination may be higher than anticipated and expected synergies may not be fully realised, or at all.").

For various reasons, including the potential deterioration of ZEAL's prospects as well as the use of valuation options, judgments and estimates, future write-downs and impairments cannot be excluded.

Any impairment test requiring a write-down or additional impairment could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.5 Risks Related to the Offer

1.5.1 The Combination may not be successful or may not proceed as planned or may involve higher or unexpected costs and the Company may be required to effect the Completion despite a material adverse change.

Following a successful combination of ZEAL and Lotto24 after Completion (the "Combination"), Lotto24 and ZEAL will form a combined group of companies (the "Combined Group"). The full implementation of the Combination is expected to take several years and to require considerable personnel capacities and financial resources. For a successful Combination, it is particularly important to integrate the existing personnel, corporate cultures, IT systems and group structures for the Combined Group, as well as to implement common processes for the Combined Group. The Combination will be time-consuming and expensive, and it may disrupt the businesses of ZEAL and/or Lotto24.

ZEAL and Lotto24 may encounter numerous difficulties in the course of the Combination, including:

− managing a significantly larger Combined Group;
− ensuring compliance with regulatory requirements arising in connection with the Business Model Change;
− in particular, ensuring compliance with potentially onerous conditions of Lotto24 brokerage licence as amended as a result of the Lotto24 Licence Expansion (see "1.1.2 ZEAL depends on permits, licences and other governmental authorisations for its business. The competent authori ties could not renew any of these authorisations after their expiry dates, revoke any of these au thorisations or adversely modify or supplement any renewed authorisation compared to the exist ing authorisations. ZEAL may fail to obtain new authorisations it requires for the expansion in fur ther lottery markets.");
− integrating and unifying the offerings and services available to customers of ZEAL and Lotto24 and coordinating operations;
− coordinating corporate and administrative infrastructures and harmonising insurance coverage for the Combined Group;
− unanticipated issues in coordinating accounting, information technology, communications, administration and other systems;
− difficulties addressing possible differences in corporate cultures and management philosophies;
− creating uniform standards, controls, procedures and policies for the Combined Group;
− litigation relating to the Combination, including shareholder litigation;
− diversion of management's attention from other operations;
− maintaining existing agreements and relationships with State Lottery Operators and other counterparties of material contracts and avoiding delays in entering into new agreements with any of them;
− unforeseen and unexpected liabilities related to the Combination or Lotto24's business, including the risk that certain members of the Company's Supervisory Board, who will become members of the Target's supervisory board, may be subject to additional fiduciary duties and liability;
− identifying and eliminating redundant and underperforming functions and assets;
− loss of members of Lotto24's management and other key personnel;
− integration of Lotto24's IT systems;
− higher than anticipated revenue and customer loss caused by the envisaged Business Model Change (see "1.5.2 The expected dis-synergies and non-recurring cost in connection with the Combination may be higher than anticipated and expected synergies may not be fully realised, or at all."); and
− delays or failure of an effort of the Company to regain control of the majority shares not held by it in the myLotto24 Sub-Group despite existing contractual obligations of the majority shareholder, in view of the fact that a controlling position in the myLotto24 Sub-Group is a prerequisite for the Business Model Change.

If the Combined Group is unable to pursue the Combination in an efficient and effective manner, the anticipated benefits and cost savings and synergies of the Combination may not be fully realised, or at all, or it may take longer to realise them, which could adversely affect ZEAL's business, prospects, financial condition, results of operations or cash flows.

In addition, the Combination may result in additional or unforeseen expenses, and the anticipated benefits of the Combination may not be fully realised, or at all. Actual growth and cost savings, if achieved, may be lower than what the Company currently expects and may take longer to achieve than currently anticipated. If the Company is unable to adequately address integration challenges, the Combined Group may be unable to pursue the Combination or to realise the anticipated benefits of the Combination.

Furthermore, not every adverse change in Lotto24's business, prospects, financial condition, results of operations or cash flows would lead to a failure of the Offer. If the Company is required to effect the Completion despite such adverse change, this could adversely impact the market price for the Company's shares.

The materialisation of any of these risks could have material adverse effects on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.5.2 The expected dis-synergies and non-recurring cost in connection with the Combination may be higher than anticipated and expected synergies may not be fully realised, or at all.

The Company believes that the following cost savings and synergies as well as revenue synergies and dis-synergies will arise from the Combination and the envisaged Business Model Change.

Cost savings and synergies: the Company expects that savings in direct costs of operations will account for around 60% of the overall cost synergies because all costs covering the bookmaking risks for the German market (hedging costs) will not be required after the Business Model Change, and the amount of non-deductible VAT will be reduced with the myLotto24 Sub-Group. Furthermore, the Company expects that a reduction of personnel expenses and other operating expenses within the Combined Group will represent around 40% of the overall cost synergies and will result from removing business related duplicated roles enabled by the migration of the German brokerage businesses of the Combined Group onto one technology platform, removing duplication of central functions roles, duplicates in senior management structure and roles related to hedging activities, rationalisation of the Combined Group's locations, and reduction of consultancy expenses and professional fees based on de-duplication and changed requirements due to the Business Model Change. The Company anticipates annual run-rate cost synergies of EUR 57 million – equivalent to approximately 41% of the Combined Group operating expenses (including personnel expenses) from continuing operations of EUR 138 million, calculated based on the consolidated audited accounts of ZEAL and the audited annual report of Lotto24, in each case for the fiscal year ended 31 December 2017. The Company expects that the cost synergy realisation will take place progressively, with approximately 80% of the total cost synergies achieved by the end of year one after Completion, rising to 100% achieved by the end of year two after Completion.

Revenue synergies and dis-synergies: for the Combined Group it is envisaged that there will be overall net annual run-rate revenue dis-synergies (net revenue loss) of approximately EUR 107 million within the timeframe described below, mainly caused by the Business Model Change. This represents the loss of approximately 67% of the Combined Group's revenue of EUR 160 million, calculated based on the consolidated audited accounts for each of ZEAL and Lotto24 for the fiscal year ended 31 December 2017. The Company expects that the revenue dis-synergies and synergies will principally comprise:

− business model-related revenue dis-synergies of EUR 120 million, generated mainly from an overall billings loss due to the customer loss which will be caused by the Business Model Change, and reduced average billings per user, due to the restriction to the product portfolio of Primary Lotteries which may be brokered in Germany. Dis-synergies are also expected to result from a reduction in the margin applied to ZEAL's reduced billings, as a result of the lower margin of an online brokerage business, relative to the higher margin enjoyed by ZEAL's current Secondary Lottery business.
− revenue synergies of EUR 13 million: the business model-related revenue dis-synergies will be offset to some extent by increased billings generated by the Combined Group mainly arising from reduced customer acquisition costs due to improved access to and optimisation of marketing channels within the Combined Group, which leads to more newly registered and active customers, and decreased legal restrictions and improved customer quality, leading to a higher number of active customers and / or higher average spend per user.

The Company plans to implement the Business Model Change within the first full year following completion of the Combination. Revenue dis-synergies will take effect at the same time as the Business Model Change with a full run-rate by the end of the first year following Completion.

The Company expects that the revenue synergies realisation will take place progressively, with approximately 40% of the total revenue synergies achieved by the end of the first year following completion of the Combination, approximately 70% achieved by the end of the second year and with full the run-rate effect achieved by the third year after the completion of the Combination.

The Company expects that the implementation of the Business Model Change and the realisation of the cost and revenue synergies would result in total non-recurring costs in the range of approximately EUR 15 million to EUR 20 million incurred within the first two years following Completion. These costs consist mainly of employee restructuring costs and IT migration costs.

The Company has calculated the cost savings and synergies as well as revenue synergies and dissynergies in particular on the basis of the profit-and-loss forecast for the full year 2018 and Lotto24's rolling 12-months actual profit-and-loss data for the period July 2017 to June 2018. In addition, the Company made the following operational assumptions:

− the Combined Group will migrate the two brokerage businesses onto one technology platform;
− policies and procedures will be harmonised according to best practices at ZEAL and Lotto24; and
− the Combined Group will, wherever possible, utilise existing resource and capabilities within ZEAL and Lotto24 to deliver the revenue synergies.

The Company has, in addition, made the following assumptions, all of which are outside its control:

− there will be no change to macroeconomic, political, regulatory or legal conditions in the markets or regions in which Lotto24 and ZEAL operate that materially impact the implementation or costs to achieve the proposed cost and revenue synergies;
− there will be no material change in current foreign exchange rates; and

− there will be no change in tax legislation or tax rates or other legislation or regulation in the countries in which Lotto24 and ZEAL operate that could materially impact the ability to achieve any benefits.

The assessment and quantification of the potential synergies have in turn been informed by ZEAL management's industry experience as well as their experience of executing and integrating past acquisitions.

Separately, the Company plans to achieve, and has already started to implement recurring cost savings of approximately EUR 4 million per annum as a result of an internal cost saving initiative, which was delivered by end of 2018 (see "1.3.11 The internal cost savings program initiated by ZEAL in November 2018 may be unsuccessful or may incur higher costs for its implementation than project ed.").

ZEAL cannot guarantee that the operational assumptions and the data used for the calculation of the cost savings and synergies as well as revenue synergies and dis-synergies could prove to be incorrect or unfounded at a later point in time. Accordingly, it cannot be excluded that the cost savings and synergies and the revenue synergies are significantly lower than anticipated and that the business model-related revenue dis-synergies are significantly higher than expected.

Furthermore, goodwill may be recognised in connection with the acquisition of Lotto24. Any goodwill actually accounted for by the Company depends on a variety of factors, such as the acceptance rate for the Offer, the actual value of Lotto24's net assets and/or the Company's share price at Completion. Any potential goodwill is subject to regular impairment tests and may, if synergies turn out to be lower than expected, result in significant impairments that would have to be recognised as impairment losses in the consolidated financial statements of the Company.

The materialisation of any of these risks could have material adverse effects on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.5.3 The rights of ZEAL shareholders are subject to the laws of England and Wales as well as to the statutes of ZEAL Network and they differ from the rights of a shareholder under German law and the current articles of association of Lotto24 AG.

As long as the Company's registered office is in the United Kingdom, the Company's corporate affairs are governed by its statutes and the laws governing companies incorporated in the United Kingdom. There are certain differences between German corporate law and English corporate law. The rights and provisions to protect the ZEAL shareholders and the responsibilities of members of the Executive Board and Supervisory Board under the laws of England and Wales differ from the rights and provisions to protect the shareholders and the responsibilities of the members of a company's management board and supervisory board under German law.

English courts usually have jurisdiction over civil proceedings brought by shareholders against English companies and English courts may reach decisions which differ from decisions that would be taken by German courts. It may also be difficult and costly to enforce any decision of a German court (or any other foreign court) in England and Wales. Rights and remedies that may be available under the laws of Germany, including certain securities laws of Germany, may not be available under English law.

It may be difficult for legal and beneficial holders of ZEAL shares who are not familiar with UK corporate law and market practice to exercise their shareholder rights due to foreign legal concepts, language and customs. In addition, the Company's shareholder meetings are held in London, United Kingdom and it may therefore be expensive and otherwise burdensome to attend these meetings in person (for those ZEAL shareholders who prefer to vote in person rather than sending a proxy), in particular for ZEAL shareholders who reside outside of the UK.

1.5.4 ZEAL shareholders would no longer be protected by the UK City Code on Takeovers and Mergers should the Company relocate following Offer.

The Executive Board believes that, if the Offer is completed, it will be in the best interests of the Company and the ZEAL shareholders as a whole to transfer the registered office of the Company to Germany. Such relocation would be conditional on the approval of shareholders if the Offer is completed. If the relocation occurs, the Company would no longer have its registered office in England and Wales or any other part of the UK and, since its securities are not admitted to trading on a regulated market in the UK, would no longer be subject to the UK City Code on Takeovers and Mergers (the "City Code"). Therefore, if the relocation were approved and implemented, ZEAL shareholders would lose the protections afforded by the City Code. In particular, if the relocation were to occur, further purchases of ZEAL shares made by members of the group of companies controlled by Oliver Jaster, which holds a share of approximately 10.22% in the Company and a share of approximately 41.62% in Lotto24 AG ("Günther Group") after the relocation would not give rise to any statutory obligation on the part of those purchasers to make a general offer to ZEAL shareholders to acquire their shares under the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, "Takeover Act") in contrast to the rules of the City Code, which provide for such an obligation, and ZEAL shareholders would only have the benefit of a number of similar protections under the Takeover Act.

Othello Vier Beteiligungs GmbH & Co. KG has, however, irrevocably committed itself in a tender obligation to publish a voluntary public purchase offer for all shares of the Company following a possible relocation of the Company's registered office to Germany, if Othello Vier Beteiligungs GmbH & Co. KG or one of its affiliated companies itself, or due to attribution within five years of completion, should exceed the threshold of 45% of the voting rights in the Company, except as a result of the Completion.

1.5.5 ZEAL may experience negative reactions to the Offer or the Combination from its employees, service providers and other contractual counterparties.

Due to management's focus on the Combination instead of on pursuing other business opportunities that could have been beneficial to ZEAL, its employees, service providers and other contractual counterparties may react negatively to the Offer and the Combination. These risks may materialise even if the Completion is not effected, and such risks could have material adverse effects on ZEAL's business, prospects, financial condition, results of operations, cash flows or reputation.

1.5.6 Shareholders of Lotto24 who do not accept the Offer may delay or prevent future measures enacted for the benefit of the Combination.

Despite the current opinion of the Company that synergies from the Combination can be achieved without the need for structural measures under corporate law with respect to Lotto24 (e.g. the conclusion of a domination and profit and loss transfer agreement, a squeeze-out, a merger, or a change of the legal form), the Company could take the view at a future point of time that any such measure would provide additional benefit. Under German law, remaining minority shareholders of Lotto24 have certain rights which may result in delays or disruptions of the implementation of any such structural measures. Minority shareholders may delay or even prevent such measures. Such delays or a failure to implement important measures as well as any legal disputes associated therewith may limit ZEAL's control over Lotto24, limit the Company's access to Lotto24's cash flows and delay or even prevent corporate measures enacted for the benefit of the Combination.

The materialisation of any of these risks could have material adverse effects on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.5.7 The fixed exchange ratio in the number of Offer Shares offered for every share of Lotto24 does not reflect market changes.

Shareholders of Lotto24 will receive one Offer Share as offer consideration for each 1.604 Lotto24 shares validly tendered into the Offer. The market values of the Offer Shares and/or Lotto24's shares may fluctuate, and may vary significantly from their respective value at the date of publication of the Prospectus.

1.5.8 The Company could not conduct a full due diligence investigation of Lotto24 prior to the date of the Prospectus. Risks associated with the Offer, the Completion or Combination could not have been correctly identified or assessed.

Given that Lotto24 is a publicly listed company and was only involved in the preparation of the Offer to a limited extent, the Company could not conduct a full due diligence investigation of Lotto24 prior to the date of the Prospectus. Therefore, important circumstances which may have been material for the Company's evaluation of Lotto24, the determination of the offer consideration and the attractiveness of the Combination could not have been sufficiently taken into account. In particular, the Company may have been unable to correctly identify and assess all risks associated with the Offer, the Completion, Combination or the Business Model Change. Also, Lotto24's business, prospects, financial condition, results of operations or cash flows may develop differently than originally anticipated by the Company.

A failure to correctly identify and assess all risks associated with the Offer, the Completion, Combination or Business Model Change could have material adverse effects on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.5.9 The Unaudited Pro Forma Consolidated Financial Information of the Company is presented for illustrative purposes only and is not an indication of the Combined Group's future business, prospects, financial condition, results of operations or cash flows. It can be assumed that the actual figures will differ materially from the figures shown as Unaudited Pro Forma Consolidated Financial Information.

The unaudited pro forma consolidated income statements, the unaudited pro forma consolidated statement of financial position and the corresponding explanations (together "Unaudited Pro Forma Consolidated Financial Information") are only presented for illustrative purposes. The Unaudited Pro Forma Consolidated Financial Information should not be considered as an indication of ZEAL's future business, prospects, financial condition, results of operations or cash flows following the Completion and the Combination.

The Unaudited Pro Forma Consolidated Financial Information has been based on the historical consolidated financial statements of the Company and historical financial information of Lotto24, subject to certain adjustments, assumptions and estimates. These adjustments, assumptions and estimates are preliminary and based on information available at the time of the preparation of the Unaudited Pro Forma Consolidated Financial Information. For example, the estimated purchase price reflected in the Unaudited Pro Forma Consolidated Financial Information assumes that all issued shares of Lotto24 are validly tendered into the Offer in exchange for the Offer Shares as consideration. Moreover, the Unaudited Pro Forma Consolidated Financial Information may not reflect all costs that ZEAL incurs in connection with the Completion, the Combination and the Business Model Change. As a result, it can be assumed that ZEAL's actual future business, prospects, financial condition, results of operations and cash flows will differ materially from the Unaudited Pro Forma Consolidated Financial Information. In addition, the assumptions used in the preparation of the Unaudited Pro Forma Consolidated Financial Information may prove to be inaccurate, and other factors may materially affect ZEAL's future business, prospects, financial condition, results of operations or cash flows following the Completion.

1.5.10 Certain agreements of Lotto24 may contain change of control provisions that could be triggered by the Completion and the Combined Group could be adversely affected by the termination of any of Lotto24's existing agreements.

Some of the agreements of Lotto24 may contain change-of-control provisions that may be triggered by the Completion and which may provide for special termination rights of the contractual counterparty.

Lotto24 may also lose the benefits of any agreements that are terminated as a consequence of the Offer or the Completion, or it may be forced to renegotiate such agreements on less favourable terms. The materialisation of any of these risks could have material adverse effects on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.5.11 The Completion could lead to a loss of carried forward tax losses of Lotto24

As of 31 December 2018, Lotto24 reported 'Deferred tax assets' of TEUR 12,464. To the extent these represent carried forward tax losses, those may not be available at Completion and/or may be forfeited due to the Completion.

The exchange of all Lotto24 AG shares for shares in the Company in the course of the Offer will result in a change of control in Lotto24 AG of more than 50% by a single acquirer within a period of five years. As a consequence, the entire carried forward tax losses as at year end 2018 (including any 2019 year-to-date tax losses incurred until Completion, if any) by Lotto24 AG should forfeit, unless either of the so-called built-in gains exception or the so-called business continuity exception applies.

Further exceptions on the basis of which carried forward tax losses may be preserved (group exception or restructuring exception) should not apply according to the actual facts and circumstances of the Offer since Lotto24 is not in a financially distressed position (which would be a requirement for the restructuring exception to apply).

The Company expects Lotto24's carried forward tax losses to be fully preserved by virtue of the built-in gains exception. This conclusion is based on management's expectation that the delta between (i) Lotto24's prospective market capitalisation at Completion of the share-for-share exchange and (ii) Lotto24's tax equity at completion of the share-for-share exchange will provide for sufficient taxable built-in gains to shelter Lotto24's carried forward tax losses from forfeiture by virtue of the built-in gains exception.

Should the Company's expectations not be met, or should a final tax assessment of Lotto24 result in a forfeiture of Lotto24's carried forward tax losses for other reasons, this could have material adverse effects on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.5.12 Lotto24 may remain publicly listed, with shares held by shareholders outside of ZEAL. The Company could lose its majority at the shareholders' meeting of Lotto24 and the Company's oversight of and influence on Lotto24's business operations could be limited.

Lotto24 is publicly listed and may remain so following the Completion. If, in such case, the Company's shareholding in Lotto24 falls below the threshold of 50%, the Company would lose its majority in the voting rights in Lotto24. This situation could arise, for example, if Lotto24 carries out a capital increase and the Company cannot participate in this capital increase. If the Company ceases to have a secure majority at the shareholders' meeting of Lotto24, this could have a material adverse effect on ZEAL's business, prospects, financial condition, results of operations or cash flows.

1.6 Risks Related to the Company's Shares
1.6.1 Future capital measures could lead to substantial dilution (i.e. a reduction in the value of existing shareholders' interests in the Company).

The Company may require additional capital in the future to finance its business operations and growth (e.g. through further acquisitions or take-overs of companies) or to repay debt or other liabilities. The raising of additional equity through the issuance of new shares as well as the potential exercise of conversion and option rights by holders of any convertible bonds or bonds with warrants that may be issued in the future could dilute shareholders' interests.

Such dilution could also arise from the acquisition of other companies or investments in other companies in exchange, fully or in part, for newly issued shares of the Company, as well as from the exercise of stock options by the Company's employees in the context of future stock option programs or the issuance of shares to employees in the context of future employee participation programs.

1.6.2 Any future sales of shares of the Company by a major shareholder of the Company could depress the market price of the shares.

Shareholders may sell all or some of their shares in the Company for various reasons, e.g. in order to diversify their investments. If one or more of the Company's major shareholders were to sell all or a substantial part of their shareholdings in the Company or if market participants were to believe that such sale or sales might occur, this could have a material adverse effect on the market price of the Company's shares.

1.6.3 The share price and trading volume of the Company's shares may fluctuate significantly, which could result in substantial losses.

In the past, the market price of the Company's shares has been volatile and characterised by fluctuating trading volumes and may continue to show such movements in the future. If the Company's share price declines, investors could be unable to resell the Company's shares at or above their purchase price.

Securities markets in general, and shares of gambling companies in particular, have been volatile in the past. Some of the factors that could adversely affect the Company's share price or result in fluctuations in the price or trading volume of the Company's shares include:

− changes in the Company's actual or projected results of operations or those of its competitors;
− changes in earnings projections or failure to meet investors' and analysts' earnings expectations;
− investors' evaluation of the success and effects of the strategy described in the Prospectus and evaluation of the related risks;
− changes in general economic conditions; and
− changes in the Company's shareholding structure.

Additionally, fluctuations in share prices in general could lead to pressure on the Company's share price, even if there is no specific reason in ZEAL's business or earnings outlook.

1.6.4 The Company's ability to pay dividends depends on a variety of factors. Dividends paid in the past are not necessarily indicative for future dividend payments, and the Company's dividend policy may change.

The Company may only pay dividends out of its profits available for the purpose, taking into account the requirements of Section 836 of the Companies Act 2006, and similar requirements would apply under German laws in the case of a transfer of the Company's registered office to Germany. In addition, the Company may only make a distribution if the amount of its net assets is not less than the aggregate of its called-up share capital and distributable reserves and if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.

Any proposal to the Company's annual general shareholders' meeting for a payment of dividends or any payment of interim dividends at the discretion of the Executive Board with the approval of the Supervisory Board is subject to the development of ZEAL's business, while also taking into account the required capital base for growth initiatives and the current business prospects. There can be no assurance that dividends in line with the current dividend policy will be paid in the future or that dividends will be paid at all.

1.6.5 The proposed financial transaction tax could result in a substantial new tax burden in the secondary market for investors buying ZEAL's shares and trading them in a European Union member state which implements such a tax.

On 14 February 2013, the European Commission published a proposal for a directive for a common financial transaction tax in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (each a "Participating Member State"). In December 2015, Estonia withdrew from the group of Participating Member States. The proposed tax has a broad, potentially extraterritorial scope. It would apply to financial transactions where at least one party is a financial institution, and (i) one party is established in a Participating Member State or (ii) the financial instrument which is subject to the transaction is issued in a Participating Member State. A financial institution may be, or be deemed to be, "established" in a Participating Member State in a broad range of circumstances.

In relation to many secondary market transactions in bonds and shares, the new tax would be charged at a minimum rate of 0.1% of the aggregate amount of the trade on each financial institution which is party to the financial transaction. The proposed tax provides for the Participating Member States to individually apply the tax at a higher rate than 0.1%. There are no broad exemptions for financial intermediaries or market makers. Therefore, the effective cumulative rate applicable to some dealings in bonds or shares (for instance, cleared transactions) could be greatly in excess of 0.1% of the aggregate amount of the trade. In addition, such a tax could negatively affect ZEAL's financing costs, since ZEAL expects that financial institutions will pass on cost relating to the proposed tax to customers such as ZEAL, and the tax would also apply to ZEAL to the extent that ZEAL trades with financial instruments and derivatives (in such case, the tax would be charged at a minimum rate of 0.01%) on a platform subject to the tax and if ZEAL were to be categorised as a non-financial entity subject to the proposed regulation.

The proposal remains subject to negotiation between the Participating Member States and may therefore be altered. Additional Member States may decide to participate. Prospective investors in the offered shares are strongly advised to seek their own professional advice in relation to the financial transaction tax.

2 GENERAL INFORMATION

2.1 Responsibility Statement

ZEAL Network SE, with its registered office at 5th Floor, One New Change, London EC4M 9AF, United Kingdom, and registered in England and Wales with Companies House under company number SE000078 (the "Company" or "ZEAL Network", and, together with its consolidated subsidiaries, "ZEAL", including Lotto24 AG following Completion) and its directors whose names are set out in section "16.2.1 Current Composition of the Executive Board" accept responsibility for the contents of this prospectus (the "Prospectus"). To the best of the knowledge and belief of the Company and its directors (who have all taken reasonable care to ensure that such is the case), the information contained in the Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.

2.2 Purpose of the Prospectus

The Prospectus has been prepared in connection with the Company's applications to the Frankfurt Stock Exchange for 14,010,982 new registered shares of a nominal value of EUR 1.00 each of the Company to be offered to the Target's shareholders as Offer Consideration (as defined beliow) (the "Offer Shares") to be admitted to trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the subsegment of the regulated market with additional post-admission obligations (Prime Standard) (the "Admission"). Application was made accordingly to the Frankfurt Stock Exchange.

On 31 January 2019, the Company published a voluntary public takeover offer for all shares of Lotto24 AG, with its registered office in Hamburg, Germany, and registered in the commercial register (Handelsregister) of the local court (Amtsgericht) of Hamburg, Germany, under registration number HR B 123037 and with registered office at Straßenbahnring 11, 20251 Hamburg (the "Target" or "Lotto24") in the form of an exchange offer (the "Offer"). The Company has offered one new share for each 1.604 shares of the Target (the "Offer Consideration"). The Offer was accepted for 22,473,615 shares of the Target. By resolution of the general meeting of the Company on 18 January 2019, the Company's executive board ("Executive Board") is authorised, subject to the approval of the Company's supervisory board ("Supervisory Board"), to allot and issue a number of new shares as is required to satisfy the Company's obligation under the Offer (see "15.4 Further Authority to Allot Shares").

2.3 Forward-looking Statements

The Prospectus contains certain forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts or events or to facts or events at the date of the Prospectus. This applies, in particular, to statements in the Prospectus containing information on ZEAL's future earnings capacity, plans and expectations regarding its business growth and profitability, and the general economic conditions to which ZEAL is exposed. Statements made using words such as "assumes", "estimates", "predicts", "forecasts", "plans", "intends", "endeavours", "expects" or "targets" may be an indication of forward-looking statements.

The forward-looking statements contained in the Prospectus are subject to risks and uncertainties, as they relate to future events, and are based on estimates and assessments made to Company's present knowledge. These forward-looking statements are based on assumptions, uncertainties and other factors, the occurrence or non-occurrence of which could cause the Company's actual results, including the financial condition and profitability of ZEAL, to differ materially from, or fail to meet, the expectations expressed or implied in the forward-looking statements. These expressions can be found in different sections of the Prospectus, for example in the sections titled "1 Risk Factors", "6 Dividends and Dividend Policy", "9.2 Key Factors Influencing ZEAL's Results from Operating Activities (EBIT)", "10 Unaudited Pro Forma Consolidated Financial Information of the Combined Group" and "11 Markets and Competition" and wherever information is contained in the Prospectus regarding the Company's intentions, beliefs, or current expectations relating to its future financial condition and results of operations, plans, liquidity, business prospects, growth, strategy and profitability, as well as the economic and regulatory environment to which ZEAL is subject.

In light of these uncertainties and assumptions, it is also possible that the future events mentioned in the Prospectus might not occur. In addition, the forward-looking estimates and forecasts reproduced in the Prospectus from third-party reports could prove to be inaccurate (for more information on the thirdparty sources used in the Prospectus, see "2.4 Sources of Market Data"). Actual results, performance or events may differ materially from those in such statements due to, among other reasons:

− changes in legislation or regulatory requirements impacting on ZEAL's operations or its accounting policies;
− negative developments in the Secondary Lottery (as defined below) market, especially in Germany (before ZEAL has transformed its German Secondary Lottery business into an online brokerage business based on local state licences), which may prevent ZEAL from retaining its current competitive positions in the markets in which it operates;
− if the jackpot environment in the markets in which ZEAL operates deviates significantly from long term trends;
− the level of pay-outs won by customers may deviate from statistically expected pay-out levels, including the risk that higher individually-significant jackpot wins will be borne by ZEAL than expected based on long term trends;
− material changes to the competitive environment leading to an adverse impact on customer preferences;
− changes in general economic conditions in Germany, Ireland, Norway, Spain, the Netherlands or the United Kingdom ("UK"), including changes in the unemployment rate, the level of consumer prices, wage levels etc.; and
− material change in the scale and type of marketing activity to retain existing customers and acquire new customers.

Moreover, it should be noted that the Company does not assume any obligation to update any forward-looking statement or to conform any such statement to actual events or developments, except to the extent required by the prospectus rules made by the FCA pursuant to section 73A of the UK Financial Services Market Act 2000 ("FSMA"), Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse ("Market Abuse Regulation"), the rules and regulations made by the FCA acting in its capacity as the competent authority for the purposes of Part VI of the FSMA and the Disclosure Rules and the Transparency Rules made by the FCA under Part VI of FSMA, or by applicable law.

"Secondary Lotteries" are bets on the outcome of lottery draws of state-licensed lotteries ("Primary Lotteries"), i.e. customers bet that certain lottery numbers will be drawn in Primary Lotteries against payment of stakes.

For a further description of some of the factors that could influence the actual outcome of the matters described in the Company's forward-looking statements see "1 Risk Factors", "4.2 Reasons for the Offer", "11 Markets and Competition" and "12 Business".

Forward-looking statements contained in the Prospectus do not in any way seek to qualify the "Statement on Working Capital" contained in section 7.4 of the Prospectus.

2.4 Sources of Market Data

Unless otherwise specified, the information contained in the Prospectus on the market environment, market developments, growth rates, market trends and competition in the markets in which ZEAL operates are based on data, statistical information, sector reports and third-party studies as well as the Company's assessments. These assessments, in turn, are based in part on internal observations of the markets and on various market studies.

The following sources were used in the preparation of the Prospectus.

"Camelot, 2017/18 AnnualReport & Accounts"	Camelot UK Lotteries Limited's Annual Report & Accounts forthe year ended 31 March 2018, available on the internet atwww.camelotgroup.co.uk/about-us/reporting.
"DLTB Press Release 2017"	DeutscherLotto-undTotoblock,pressreleasedated11 January 2017, titled "Jahresbilanz 2016: 112 neue Millionäre und erneut Steigerungen der Spieleinsätze beim Deutschen Lotto- und Totoblock (DLTB)".
"DLTB Press Release 2018"	DeutscherLotto-undTotoblock,pressreleasedated30 January 2018 titled "DLTB Jahresbilanz: 105 neue LottoMillionäre und 2,8 Milliarden Euro zur Förderung des Gemeinwohls Doch illegale Online-Angebote und Schwarzlotterien bedrohen das gemeinwohlorientierte Glücksspiel".
"DLTB Press Release 2019"	DeutscherLotto-undTotoblock,pressreleasedated10 January 2019, titled "Deutsche Lottogesellschaften mitEinsatzplus von über vier Prozent"
"Gainsbury Report"	Sally Gainsbury, A review of secondary lotteries, 30 June2017, available on the internet at www.greo.ca.
"GBGC Analysis Germany"	Global Betting and Gaming Consultants, Gambling Report forGermany, data available in the form of a PDF file, downloaded by the Company on 6 March 2019, available at the Company's registered office (see "2.5 Documents Available forInspection").
"GBGC Analysis Ireland"	Global Betting and Gaming Consultants, Gambling Report forIreland, data available in the form of a PDF file, downloadedby the Company on 6 March 2019, available at the Company's registered office (see "2.5Documents Available forInspection").
"GBGC Analysis Netherlands"	Global Betting and Gaming Consultants, Gambling Report forthe Netherlands, data available in the form of a PDF file,downloaded by the Company on 6 March 2019, available atthe Company's registered office (see "2.5 Documents Available for Inspection").
"GBGC Analysis Spain"	Global Betting and Gaming Consultants, Gambling Report forSpain, data available in the form of a PDF file, downloaded bythe Company on 6 March 2019, available at the Company'sregistered office (see "2.5 Documents Available for Inspection").

"GBGC Analysis UK" ...................... Global Betting and Gaming Consultants, Gambling Report for the United Kingdom, data available in the form of a PDF file, downloaded by the Company on 6 March 2019, available at the Company's registered office (see "2.5 Documents Availa ble for Inspection").

"GBGC Market Data" ....................... Global Betting and Gaming Consultants, Key Markets Gambling Data 2001 to 2022, data available in the form of Microsoft Excel Spreadsheets, downloaded by the Company on 6 March 2019, available at the Company's registered office (see "2.5 Documents Available for Inspection").

"Goldmedia Analysis 2018"............. Goldmedia GmbH Strategy Consulting, Study as of May 2018 and updated 12 June 2018, titled 'German Gaming Market Monitor 2018' available at the Company's registered office (see "2.5 Documents Available for Inspection").

"H2 Gambling Capital Data" ........... Market data from H2 Gambling Capital on gross gambling turnover and gross gambling win, data available in the form of Microsoft Excel Spreadsheets, last updated (i) 12 November 2018 for Ireland, (ii) 6 February 2019 for Spain, (iii) 20 February 2019 for Norway, (iv) 21 February 2019 for the Netherlands, (v) 22 February 2019 for Sweden, (vi) 25 February 2019 for Finland, (vii) 1 March 2019 for the United Kingdom and (viii) 5 March 2019 for Germany, available at the Company's registered office (see "2.5 Documents Available for Inspection").

"La Fleur Almanac" ......................... TLF Publications, Inc. MD, USA, Study entitled "La Fleur's 2018 World Lottery Almanac, 26th Edition" available at the Company's registered office (see "2.5 Documents Available for Inspection").

"UK Gambling Commission,

Facts and Figures 2019" ................ UK Gambling Commission, An Introduction to the Gambling Commission, Facts and Figures, January 2019 Issue, available on the webpage: www.gamblingcommission.gov.uk/ PDF/survey-data/Who-we-are-and-what-we-do.pdf.

"UK Gambling Commission, Industry Statistics, November 2018" ................................................ UK Gambling Commission, Industry statistics April 2015 to March 2018, published in November 2018 (updated 19 December 2018), available on the webpage https://www.gamblingcom-mission.gov.uk/PDF/survey-data/ Gambling-industry-statistics.pdf.

It should be noted in particular that reference has been made in the Prospectus to information concerning markets and market trends. Such information was obtained from the aforementioned sources. The Company has accurately reproduced such information and the Company has not - as far as it is aware and able to ascertain from information published by such third parties - omitted any facts that would render the reproduced information inaccurate or misleading. Nevertheless, prospective investors are advised to consider this information with caution. For example, market studies are often based on information or assumptions that may not be accurate or appropriate, and their methodology is inherently predictive and speculative.

Irrespective of the assumption of responsibility for the content of the Prospectus by the Company (see "2.1 Responsibility Statement"), the Company has not independently verified the figures, market data or other information on which third parties have based their studies. Accordingly, the Company assumes no liability for and makes no representation or warranty as to the accuracy of any such information from third-party studies included in the Prospectus. Prospective investors should note that the Company's own estimates and statements of opinion and belief are not always based on studies of third parties as the Prospectus also contains estimates of Market Data and other data and information derived from such data, which cannot be obtained from publications by market research institutes or from other independent sources. Such information is partly based on ZEAL's own market observations, the evaluation of industry information (from conferences, sector events, etc.) or internal assessments. The Company's management believes that its estimates of Market Data and other data and the information it has derived from such data assists investors in gaining a better understanding of the industry in which companies of ZEAL operate in and ZEAL's position therein. The Company's own estimates have not been checked or verified externally. ZEAL nevertheless assumes that its own market observations are reliable. However, they may differ from estimates made by competitors of ZEAL or from future studies conducted by market research institutes or other independent sources. The Company gives no warranty that their estimates do not differ materially from actual events.

Information contained on any website mentioned in the Prospectus, including ZEAL's website, is not incorporated by reference in the Prospectus and is not part of the Prospectus, unless otherwise explicitly indicated.

2.5 Documents Available for Inspection

For the period during which the Prospectus is valid, the following documents will be available for inspection at the Company's registered office at 5th Floor, One New Change, London EC4M 9AF, United Kingdom, during regular business hours (telephone: +44 20 3739 7123):

− the Company's statutes (the "Statutes");
− the Company's audited consolidated financial statements prepared in accordance with IFRS as of and for the fiscal year ended 31 December 2016;
− the Company's audited consolidated financial statements prepared in accordance with IFRS as of and for the fiscal year ended 31 December 2017;
− the Company's audited consolidated financial statements prepared in accordance with IFRS as of and for the fiscal year ended 31 December 2018;
− the Company's audited unconsolidated financial statements prepared in accordance with IFRS as of and for the fiscal year ended 31 December 2018; and
− the GBGC Analysis Germany, the GBGC Analysis Ireland, the GBGC Analysis Netherlands, the GBGC Analysis Spain, the GBGC Analysis UK, the GBGC Market Data, the Goldmedia Analysis 2018, the La Fleur Almanac, and the H2 Gambling Capital Data (the "Market Studies*"*).

The aforementioned documents (other than the Market Studies) are also available on the Company's website www.zeal-network.co.uk under the investors section*.* The consolidated financial statements as of and for the fiscal years ended 31 December 2016, 31 December 2017 and 31 December 2018 are also available on the website https://beta.companieshouse.gov.uk of the Companies House.

The Company's future consolidated financial statements, unconsolidated financial statements and condensed interim consolidated financial statements will be available from the Company on its website.

2.6 Note Regarding Alternative Performance Measures

Throughout the Prospectus, ZEAL presents financial measures and normalisations that are derived from or based on ZEAL's financial statements, its accounting records or internal reporting system and are not presented in accordance with IFRS or any other internationally accepted accounting principles, (collectively, "Alternative Performance Measures"). The Company has defined each of the following Alternative Performance Measures as follows:

– "Adjusted EBIT" is defined as the result from operating activities (EBIT) in accordance with IFRS before exceptional items. 'Adjusted EBIT' provides a measure of ZEAL's ability to increase the economic value of its operating activity over a period of time, excluding exceptional items which could distort the result of ZEAL period over period, in particular non-recurring costs such as cost relating to transactions outside the ordinary course of business as well as to restructuring or to the closure of a business.

"Average Billings per User per month (ABPU)" is defined as the average net billings received from each active 'Registered customer' in a given month. In this context, active 'Registered customer' means a unique user who purchases a bet or participates in a draw in a month. ABPU provides a measure of ZEAL's ability to increase loyalty and value from its customers. ABPU is calculated by dividing monthly net billings by 'Average Monthly Active Users (MAU)'.
"Average costs per new customer" are defined as acquisition marketing expenses per 'new registered customer' on a ZEAL website.
"Average Monthly Active Users (MAU)" is defined as the average number of unique users (i.e. 'Registered customers') who have either purchased a bet or participated in a draw in a given month (including free bets). MAU provides a measure of ZEAL's ability to retain and attract new customers.
"Billings" is defined as all 'Stakes' from customers (as well as brokerage stakes, such as commissions and booking fees, and associated value-added tax (VAT)) net of free bets and provides a measure of ZEAL's ability to increase the economic value of 'Stakes' from customers (including brokerage stakes) over a period of time.
"EBIT margin" is defined as result from operating activities (EBIT) as a percentage of revenue, each in accordance with IFRS, and, on a segment level, as 'normalised EBIT' as a percentage of 'normalised revenue' (as defined below) for the respective segment.
"EBITDA" is defined as result from operating activities (EBIT) before loss on acquisition, gain/loss on liquidation of subsidiary and amortisation/depreciation on intangible assets and property, plant and equipment.
"Expenses per employee" is defined as personnel expenses divided by the number of full time equivalents over a given period.
"Net cash" is defined as the sum of short-term financial assets, other current assets and prepaid expenses less trade payables, other liabilities, income tax liabilities and a hedging reserve. The hedging reserve decreased from TEUR 50,000 as of 31 December 2016 to TEUR 30,000 as of 31 December 2017 due to the implementation of the Hoplon III-Insurance (see "12.10.1.1 Hoplon III-Insurance of USD 90 million"). It was further reduced to TEUR 21,627 as of 31 December 2018 and to TEUR 21,390 as of 31 March 2019. Net cash provides a measure of ZEAL's ability to reinvest profits or to pay dividends to shareholders.
"Net operating margin" is defined as profit attributable to the equity shareholders of the Company as the percentage of revenue in accordance with IFRS.
"New registered customer" means a unique user who has, for the first time, become a 'Registered customer' on a ZEAL website or (from 2017 on) on a ZEAL partner website (such as the Spanish ONCE).
"Normalised EBIT" is defined as the result from operating activities (EBIT) in accordance with IFRS, which has been adjusted for the underlying statistical average pay-out ratio. Therefore, normalisation adjustments bridge the quantum of statistically expected pay-outs to the actual consolidated results in accordance with IFRS, which include actual pay-outs. In the lotteries on whose results ZEAL relies, there are underlying statistical average pay-out ratios for ongoing lottery draws. For ZEAL's main products, this is approximately 50%. The difference between the actual pay-out including hedging effects and the expected prize pay-out before hedging effects is referred to as normalisation or normalisation adjustment.
"Normalised revenue" is defined as revenue in accordance with IFRS, which has been adjusted for the underlying statistical average pay-out ratio. Therefore, normalisation adjustments bridge the quantum of statistically expected pay-outs to consolidated results in accordance with IFRS, which include actual pay-outs. In the lotteries on whose results ZEAL relies, there are underlying

statistical average pay-out ratios for ongoing lottery draws. For ZEAL's main products, this is approximately 50%. The difference between the actual pay-out including hedging effects and the expected prize pay-out before hedging effects is referred to as 'normalisation' or 'normalisation adjustment'.

"Operating cash flow per share (undiluted)" is calculated as cash flow from operating activities (restated for the fiscal years ended 31 December 2016 and 31 December 2017) divided by the average number of shares (undiluted) over a given period.
"Registered customer" means a unique user who has successfully registered for an account on a ZEAL website. A registration is considered successful after a new customer has provided the required information, before such information has been verified (e.g. as regards the customer's age and place of residence). The verification is a prerequisite for the customer to place bets or to buy other products on a ZEAL website. The qualification of a user as "registered customer" does not depend on whether it has actually placed a bet or purchased other products on a ZEAL website.
"Return-on-equity (ROE)" is defined as profit attributable to the equity shareholders of the Company as the percentage of total equity at the end of the respective period.
"Stakes" is defined as amounts paid for bets from customers net of free bets (and without brokerage stakes, such as commissions and booking fees, but including associated VAT) and provides a measure of ZEAL's ability to increase the economic value of stakes from customers over a period of time.

The Company presents these Alternative Performance Measures as (i) they are used by ZEAL's management to measure operating performance and liquidity, including in presentations to the members of the Executive Board and the members of the Supervisory Board, and as a basis for strategic planning and forecasting, and (ii) they represent similar measures in accordance and not in accordance with IFRS, that the Company believes are widely used by certain investors, securities analysts and other parties as supplemental measures of operating and financial performance. These Alternative Performance Measures may enhance management's and investors' understanding of ZEAL's financial performance and liquidity by excluding items that are outside of ZEAL's ongoing operations, such as taxes on income, costs of capital and non-cash expenses.

However, these Alternative Performance Measures are not measures presented in accordance with IFRS or any other internationally accepted accounting principles, and should not be considered as an alternative to the historical financial results or other indicators of ZEAL's performance based on IFRS measures. They should not be considered as alternatives to Total Operating Performance (TOP) or result from operating activities (EBIT) as indicators of ZEAL's performance, profitability or as alternatives to cash flow from operating activities as an indicator of ZEAL's liquidity. The Alternative Performance Measures, as defined by the Company, may not be comparable to similarly titled measures as presented by other companies due to differences in the way ZEAL's Alternative Performance Measures are calculated. Even though the Alternative Performance Measures are used by management to assess ongoing operating performance and liquidity and these types of measures are commonly used by investors, they have important limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of ZEAL's results or cash flows as reported under IFRS.

2.7 Currency Presentation and Presentation of Figures

In the prospectus, "euro" and "EUR" refer to the single European currency adopted by certain, participating member states of the European Union ("EU Member States"), including Germany. "GBP" refers to the official currency of the UK and "US Dollar" and "USD" refer to the official currency of the United States of America.

Where financial information in tables in the Prospectus is labelled "audited", this means that such data has been taken from the audited financial statements included elsewhere in the Prospectus. The label "unaudited" is used in tables in the Prospectus to indicate financial information that have not been taken from the audited financial statements included elsewhere in the Prospectus but was taken either from the Company's internal reporting system or is based on calculations of figures from the abovementioned sources.

All of the financial information presented in the text and tables in the Prospectus are shown in thousands of euro (in EUR thousand or TEUR), except as otherwise stated. Certain financial information (including percentages) in the Prospectus has been rounded according to established commercial standards. As a result, the aggregate amounts (sum totals or sub-totals or differences or if numbers are put in relation) in tables in the Prospectus may not correspond in all cases to the aggregated amounts of the underlying (unrounded) figures appearing elsewhere in the Prospectus. Furthermore, in those tables, these rounded figures may not add up exactly to the totals contained in those tables. Financial information presented in parentheses denotes the negative of such number presented. In respect of financial information set out in the Prospectus, a dash ("-") signifies that the relevant figure is not available, while a zero ("0.0") signifies that the relevant figure is available but has been rounded to zero.

2.8 Consent

Ernst & Young LLP, 1 More London Place, London SE1 2AF, United Kingdom, has given and has not withdrawn its written consent to the inclusion of its report in section 10.2 of the Prospectus and the references to its name in the form and context in which they appear and has authorised the contents of its report for the purposes of paragraph 5.5.3R(2)(f) of the Prospectus Rules of the FCA.

3 INFORMATION ON THE OFFER SHARES AND THE LISTING

3.1 Form and Certification

All of the Company's shares ("ZEAL shares") are registered shares, each with a nominal value of EUR 1.00. All ZEAL shares are represented by a global share certificate deposited with Clearstream Banking AG, Frankfurt am Main, Germany ("Clearstream").

Clearstream is registered as a member in the Company's register of members for all ZEAL shares. Clearstream holds the ZEAL shares in trust for their beneficial owners. This is comparable to the legal position of a nominee (see "15.2 Special Aspects of the Shares"). The beneficial owners of shares in the Company are hereinafter also referred to as "shareholders of the Company" or "Company's shareholders" or "ZEAL shareholders" (or, in each case, similar expressions).

3.2 Voting Rights

Each of the ZEAL shares carries one vote at shareholders' meetings of the Company (unless a vote is taken by show of hands). There are no restrictions on voting rights, except for restrictions which may be imposed by the Executive Board where notice in writing has been given to a ZEAL shareholder to disclose information relating to the ownership of or interests in ZEAL shares and ZEAL shareholder fails to do so in the prescribed period. In respect of the ZEAL shares in relation to which the default occurred, the ZEAL shareholder will not be entitled to attend or vote either personally or by proxy at a general meeting.

The major shareholders of the Company do not have different voting rights.

3.3 Dividend and Liquidation Rights

3.4 Currency of the Offer Shares

The Company's shares, including the Offer Shares, are denominated in Euro.

3.5 Issuance of the Offer Shares, Listing and Commencement of Trading

On 2 May 2019, the Company applied for admission of the Offer Shares to listing and trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard). It is expected that 14,010,982 Offer Shares intended for the settlement of the Exchange Offer will be issued on or about the date hereof and will be admitted to trading on or about 10 May 2019 and that the Offer Shares will be introduced to trading on the Frankfurt Stock Exchange on or about 14 May 2019 . However, there is no guarantee that the admission will be approved.

3.6 ISIN/WKN/Ticker Symbol

The trading details of the Offer Shares are as follows:
International Securities Identification Number ("ISIN")GB00BHD66J44
German Securities Identification Number (Wertpapierkennnummer ("WKN"))TPP024
Ticker SymbolTIM

3.7 Existing Quotation

As the date of the Prospectus, all of the Company's 8,385,088 issued shares are admitted to trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard).

3.8 Disposal and Transferability of the Offer Shares

The Offer Shares are freely transferable. Subject to applicable law and the provisions of the Company's statutes, trading of Offer Shares will not be subject to any prohibitions on disposals and there will be no restrictions with respect to the transferability of the Offer Shares.

3.9 Costs of the Admission

The Company expects that the total costs incurred by ZEAL in connection with the listing of the Offer Shares will amount to approximately EUR 7 million net of any applicable value added tax.

Investors will not be charged with expenses by the Company in connection with the listing of the Offer Shares.

3.10 Interests of the Parties Participating in the Issue

The Company as well as the group of companies controlled by Oliver Jaster, which holds a share of approximately 10.22% in the Company and a share of approximately 41.62% in Lotto24 AG ("Günther Group"), Working Capital Management Pte., Ltd. and the companies controlled by it as well as Jens Schumann have an interest in the issue because they believe that the completion of the Offer ("Completion") will provide multiple benefits to both ZEAL and Lotto24.

Lotto24 has in interest in the issue because it believes that the cooperation agreed in a business combination agreement with the Company (see "12.10.4.2 Business Combination Agreement between the Company and Lotto24") is in the best strategic interest of Lotto24, its shareholders and other stakeholders.

4 THE COMBINATION

4.1 Overview

On 31 January 2019, the Company published a voluntary public takeover offer for all shares of Lotto24 in the form of the Offer.

The Offer related to the acquisition of all registered no-par-value shares of the Target with ISIN DE000LTT0243 (WKN LTT024), each with a nominal value of EUR 1.00 of the Target's share capital, including any dividend rights and ancillary rights at the time of the settlement of the Offer. The Company offered one Offer Share as Offer Consideration in exchange for each 1.604 Lotto24 shares for which the Offer has been validly accepted. Each Offer Share has a par value of EUR 1.00.

The period for acceptance of the Offer (the "Tender Period") started on 31 January 2019 and expired on 10 April 2019. Lotto24 shareholders who had not accepted the Offer during the Tender Period could still accept it within two weeks after the publication of the result of the Offer by the Company pursuant to Section 23 para. 1 sentence 1 no. 2 of the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, "Takeover Act") ("Additional Tender Period"). The Additional Tender Period started on 16 April 2019 and expired on 29 April 2019, 24:00 hours, Central European Time ("CET").

Until the end of the Tender Period (including the Additional Tender Period), the Offer was accepted for a total of 22,473,615 Offer Shares. This corresponds to 93.04% of all Lotto24 shares issued at the time of the expiry of the Tender Period. The minimum acceptance rate of at least 12,077,446 Lotto24 shares (this corresponds to 50% plus one share of all Lotto24 shares issued at the time of expiry of the Tender Period) was thus achieved. All other conditions of the Offer (all conditions, the "Offer Conditions") had also been satisfied at or prior to the end of the Tender Period.

The conditional statutory withdrawal right of the tendering Lotto24 shareholders expired with expiry of the Tender Period.

4.2 Reasons for the Offer

Through the Offer, the Company intends to create a digital lottery group with currently more than 6 million combined customers globally, current combined billings of about EUR 620 million (each based on the respective financial statements of the Company and the Target for the fiscal year 2018) and a diverse international footprint. The group of companies to be formed by ZEAL and Lotto24 (the "Combined Group") is to build on the market position of Lotto24 AG as the largest commercial broker for lottery products in Germany. ZEAL estimates that the online share of the German lottery market in 2017 amounted to around EUR 900 million (calculated on the basis of the online share of Deutscher Lotto- und Totoblock in the German lottery market in 2017) of which 22% can be allocated to ZEAL and 24% to Lotto24, resulting in a 46% online market share of the Combined Group. The Company intends to discontinue the German Secondary Lottery business operated under the name Tipp24 and to convert it into a commercial brokerage business (see "12.3.2 Focus on Businesses based on Local State Licences"). To this end, the Company intends to regain corporate control of its fully consolidated minority interests myLotto24 Limited and Tipp24 Services Limited by exercising respective options for the purchase of the majority shares not yet held by it (see "12.4.1.4.3 Status of myLotto24 Limited and Tipp24 Services Limited within ZEAL"). Furthermore, the Company intends to transfer its own registered office to Germany.

The Company believes that the change to its business model in Germany will lead to significant financial benefits in the medium term, as a result of reduced operational, tax and regulatory risk as well as improved growth potential. As part of ZEAL's intention to transform the business model of the 'Lottery Betting' segment into a model based on local state licences in particular in Germany ("Business Model Change"), the Company will discontinue certain products and focus on less volatile brokerage income in the German market, resulting in net annual run-rate revenue dis-synergies (net revenue loss) of approximately EUR 107 million. The Company assumes that these will be compensated over time through accelerated growth of the enlarged Combined Group. The combination with Lotto24 is also expected to deliver annual run-rate cost synergies of around EUR 57 million through greater platform efficiencies and significant reductions in other operational costs, in particular the elimination of previous costs for hedging profit pay-out risks. The Company expects that the cost synergy realisation will take place progressively, with approximately 80% of the total cost synergies achieved by the end of year one after Completion, rising to 100% achieved by the end of year two after Completion (see also "1.5.2 The expected dis-synergies and non-recurring cost in connection with the Combina tion may be higher than anticipated and expected synergies may not be fully realised, or at all.").

For further details on estimated cost savings, revenue synergies and dis-synergies arising from the successful combination of the business of ZEAL and Lotto24 following Completion ("Combination") see "23 Statement by ZEAL Network on quantified financial benefits".

The Company believes that the Combination will combine ZEAL's strong financing structure, its highquality loyal customer base and its technological capabilities with Lotto24's proven expertise in the German lottery brokerage market. Following the combination, the Company believes that the Combined Group will thus be in a unique position to accelerate online brokerage growth in the German lottery market.

After Completion, the Company intends to conduct an analysis of further synergy and efficiency potentials together with the management of Lotto24.

After Completion, Lotto24 would become a subsidiary of ZEAL Network and thus part of ZEAL. The Company intends for Lotto24 to continue its current business activities essentially unchanged. In contrast, the Company intends to convert substantial parts of ZEAL's business into a commercial lottery brokerage business, as is currently operated by Lotto24 AG, within twelve months Completion and, as a prerequisite for this, to regain corporate control of its fully consolidated minority interests myLotto24 Limited and Tipp24 Services Limited. The Company intends to ensure close cooperation with Lotto24 within the Combined Group by means of suitable agreements, whereas in particular the conclusion of a domination and/or profit and loss transfer agreement is not considered necessary by the Company and is therefore currently not intended. The Company and Lotto24 have already within the framework of a business combination agreement (see "12.10.4.2 Business Combination Agree ment between the Company and Lotto24") agreed to cooperate on the implementation of certain gambling regulatory Offer Conditions. On the basis of the gambling regulatory permits granted in this connection on 8 February 2019, the Company intends in the future to offer to a majority of the current customers of the Secondary Lottery business of myLotto24 Limited and Tipp24 Services Limited the participation in German lotteries, involving Lotto24 as commercial lottery broker. To this end, the Company intends to enter into corresponding agreements with Lotto24. The Company expects an efficient integration process due to the companies' shared history and culture, proven management teams and similar operational infrastructure.

5 DILUTION

Dilution comprises two distinct aspects: the dilution of the shareholding percentage and the valuerelated dilution of the equity participation.

Dilution of the shareholding refers to the effect that the issuance of new shares in the Company has on the individual percentage of shareholding of the Company's existing shareholders if they do not subscribe to the newly issued shares in a proportion corresponding to their prior shareholding or if their subscription rights are excluded.

Value-related dilution refers to the effect that the issuance of new shares of the Company at a certain issue price has on the Company's equity per share.

The Target's shareholders have accepted the Offer for 22,473,615 Target Shares.

The calculation of the amount and percentage of dilution resulting from the Offer set forth below is based on the following assumptions:

Upon Completion, a total of 24,154,890 shares of the Target (the "Target Shares") will be outstanding.
Upon Completion, 22,473,615 Target Shares will be contributed to the Company in the form of a contribution in kind against the issuance of 14,010,982 Offer Shares (corresponding to an Offer Consideration of one Offer Share for each 1.604 Target Shares or 0.62344 Offer Shares for each one Target Share).
The Company's acquisition costs for all 22,473,615 Target Shares amount to approximately TEUR 302,357, based on the value of the 14,010,982 Offer Shares issued in exchange for the Target Shares tendered into the Offer, each such Offer Share valued at EUR 21.58, corresponding to the three-month volume-weighted average price of the Company's shares on 18 November 2018, i.e. the day prior to the publication of the Company's decision to launch the Offer, as notified by the BaFin to the Company on 27 November 2018.
The total costs incurred by ZEAL in connection with the Offer (legal, banking and other professional fees and costs) will amount to approximately TEUR 6,350, TEUR 3,852 of which was recognised in the income statement for the fiscal year ended 31 December 2018.
There are no tax or interest effects.
Preliminary goodwill of approximately EUR 290 million is created upon Completion.

Calculation of Dilution	ZEAL	Lotto24
Net Book Value(1) as of 31 December 2018Equity attributable to shareholders (net book value)(1) in accordancewith IFRS as of 31 December 2018 (in TEUR)	123,198 (2)	32,326 (3)
Number of shares issued as of 31 December 2018Proportionate book value of equity attributable to shareholders (netbook value)(1) per share (in EUR)	8,385,08814.69	24,154,8901.34
Net Book Value(1) after Completion		-
Number of shares of the Company issued in the course of CompletionNumber of shares of the Company outstanding following	14,010,982	-
Completion	22,396,070	-
Increase in equity attributable to shareholders (net book value)(1) (inTEUR)	284,074	-
Equity attributable to shareholders (net book value)(1), (4) (in TEUR)	407,976	-
Dilution(1) after CompletionProportionate equity attributable (net book value) (1), (5) per share (inEUR)	18.18	--
Increase in proportional equity attributable to shareholders (net bookvalue)(1) per share (in EUR)	3.49	-
Increase in proportional equity attributable to shareholders (net bookvalue)(1) per share (in%)	19%	-
Dilution of the voting rights percentage of existing shareholdersof the Company(6) (in%)	62.7%	-

(1) The net book value refers to the Company's total assets minus the sum of its total liabilities and non-controlling interests.

(2) As shown in the audited consolidated financial statements for the fiscal year ended 31 December 2018.

(3) As shown in the audited consolidated financial statements for the fiscal year ended 31 December 2018.

(4) Based on the aggregate value of the newly issued Offer Shares in an amount of approximately TEUR 302,357 (corresponding to the issuance of 14,010,982 Offer Shares at a value of EUR 21.58 per Offer Share) minus the total costs incurred by ZEAL in connection with the Offer in an amount of approximately TEUR 6,350, TEUR 3,852 of which was recognised in the income statement for the fiscal year ended 31 December 2018.

(5) Based on an increase in equity attributable to shareholders of TEUR 22,396 plus equity attributable to shareholders as of 31 December 2018 of TEUR 8,385.

(6) Based on a change in the share of voting rights from 100.0% prior to the Offer to 37.3% following the Completion.

6 DIVIDENDS AND DIVIDEND POLICY

Subject to the provisions of the Companies Act, the Company may by ordinary resolution declare dividends in accordance with the respective rights of the shareholders, provided that no dividend shall exceed the amount recommended by the Executive Board.

Subject to the provisions of the Companies Act, the Executive Board may with the consent of the Supervisory Board pay interim dividends if it appears to the Executive Board and the Supervisory Board that they are justified by the profits of the Company available for distribution.

Dividends may be declared and paid in any currency or currencies that the Executive Board shall determine. The Executive Board may also determine the exchange rate and the relevant date for determining the value of the dividend in any currency.

A general meeting declaring a dividend may, on the recommendation of the Executive Board (with the consent of the Supervisory Board), by ordinary resolution of the shareholders direct that it shall be satisfied wholly or partly by the distribution of assets, including without limitation paid up shares or debentures of another body corporate.

The Executive Board (with the consent of the Supervisory Board) may, if authorised by an ordinary resolution of the shareholders, offer any holder of shares the right to elect to receive shares, credited as fully paid, instead of cash in respect of the whole (or some part, to be determined by the Executive Board) of all or any dividend specified by the resolution.

Dividends may only be paid out of a company's distributable profits available for this purpose and may only be paid if the amount of the company's net assets is not less than the aggregate of its called-up share capital and undistributable reserves.

The members of the Executive Board must have regard to their statutory duties, including their duty to act with reasonable care, skill and diligence and in a way likely to promote the success of the company, when deciding whether to declare a dividend and when deciding how much such dividend should be.

ZEAL Network has, since its relocation to the UK, paid dividends as interim dividends declared by the Executive Board with the approval of the Supervisory Board. Most recently, ZEAL Network paid an interim dividend of EUR 1.00 per share at the end of 2018. Following the announcement of the acquisition of Lotto24, the Executive Board and Supervisory Board are reviewing the Company's dividend policy.

Generally, no UK withholding tax is to be withheld from dividends paid by the Company to its shareholders; however the ZEAL shareholders' custodian banks outside the UK may have to withhold local withholding taxes on the dividends paid to the individual shareholders. For more information on the taxation of dividends see "20 Material Tax Considerations".

The ability of the Company to pay dividends will remain dependent on a number of factors and there is no assurance that the Company will pay dividends, or if a dividend is paid, what the amount of such dividend will be. The Executive Board of the Company has proposed, and the Supervisory Board of the Company has approved, a dividend policy under which the Company will pay annual dividends at year-end, which are expected to amount to a total of at least EUR 1.00 per share. An announcement of the amount of the dividend, and the record date for entitlement to the dividend, will be made in advance of payment. This position is subject to periodic review and may be amended depending on ZEAL's future earnings and financial position. Following the announcement of the acquisition of Lotto24, the Executive Board and Supervisory Board are reviewing the Company's dividend policy.

As such, the ability of the Company to pay dividends is subject to a number of factors and there is no assurance that the Company will pay dividends at all, or if a dividend is paid, what the amount of such dividend will be. The Company can make no predictions as to the size of any future profits available for distribution, and hence the Company cannot guarantee that dividends are paid in the future (see also "1.4.6 ZEAL's historical earnings and other historical financial figures are not predictive of earn ings and other financial figures of ZEAL going forward and the Company could decide to reduce its dividend payments." and "1.6.4 The Company's ability to pay dividends depends on a variety of fac- tors. Dividends paid in the past are not necessarily indicative for future dividend payments, and the Company's dividend policy may change.)".

The following table shows: (i) the net income and earnings per share as shown in the Company's respective audited consolidated financial statements prepared in accordance with IFRS and (ii) distributions to shareholders and dividend payments for the periods presented:

For the year ended 31 December

	2016	2017	2018
	(audited and in TEUR,unless otherwise indicated)
Profit attributable to the equity shareholders of the Company (in TEUR)	25,951	17,178	26,663
Earnings per share (in EUR) (undiluted)	3.09	2.04	3.18
Distributions to shareholders and dividend payments (in TEUR)	23,478	8,385	8,341
Distributions per share (in EUR) (1)	2.8 (2)	1 (2)	1 (2)

(1) Calculated on a number of 8,341,178 shares carrying dividend rights, deducting the 43,910 ZEAL shares held by the Company in treasury from the total number of ZEAL shares.

____________________

(2) Unaudited.

7 CAPITALISATION AND INDEBTEDNESS; STATEMENT ON WORKING CAPITAL

The following tables set forth the consolidated capitalisation and indebtedness of ZEAL as at 31 March 2019, taken from ZEAL's unaudited interim consolidated statement of financial position as of 31 March 2019, published on 7 May 2019, from which selected information is included in "21 Recent Developments and Outlook". Investors should read these tables in conjunction with "8 Selected Con solidated Financial Information of ZEAL", "9 Management's Discussion and Analysis of Net Assets, Financial condition and Results of Operations", the consolidated financial statements and the financial information contained elsewhere in the Prospectus.

7.1 Capitalisation

The following table shows an overview of ZEAL's capitalisation (including total debt) as of 31 March 2019:

	As of 31 March 2019(unaudited)TEUR
Total current debt (1)	32,793
of which secured	–
of which guaranteed	–
of which unsecured / not guaranteed	32,793
Total non-current debt (2)	9,126
of which secured	–
of which guaranteed	–
of which unsecured / not guaranteed	9,126
Shareholders' equity	28,622
Subscribed capital	8,385
Legal reserves (3)	21,578
Other Reserves (4)	(1,341)
TOTAL	70,541

(1) Designated as 'total current liabilities' in the Company's unaudited interim consolidated statement of financial position as of 31 March 2019.

(2) Designated as 'total non-current liabilities' in the Company's unaudited interim consolidated statement of financial position as of 31 March 2019.

(3) Designated as 'share premium' in the Company's unaudited interim consolidated statement of financial position as of 31 March 2019.

(4) 'Total equity' in the Company's unaudited interim consolidated statement of financial position as of 31 March 2019 less 'subscribed capital', 'share premium' and 'retained earnings'.

7.2 Indebtedness

The following table shows an overview of ZEAL's indebtedness as of 31 March 2019:

	As of 31 March 2019(unaudited)TEUR
Cash (1)	131,981
Cash equivalents (2)	16,048
Trading securities	–
Liquidity (A+B+C)	148,029
Current financial receivables (3)	10,406
Current liabilities due to financial institutions	–
Current portion of non-current debt	–
Other current financial debt (4)	4,898
Current financial debt (F+G+H)	4,898
Net current financial indebtedness (I-E-D)	(153,537)
Non-current liabilities due to financial institutions	–
Bonds issued	–
Other non-current loans	–
Non-current financial indebtedness (K+L+M)	–
Net financial indebtedness (J+N)	(153,537)

(1) Designated as 'cash and pledged cash' in the Company's unaudited interim consolidated statement of financial position as of 31 March 2019. 'Cash and pledged cash' comprises 'bank balances', 'cash on hand' and 'pledged cash'.

7.3 Contingent Liabilities and Indirect Liabilities

There is a significant uncertainty as to whether value-added tax ("VAT") is due in respect of certain services provided by myLotto24 Limited and its subsidiaries ("myLotto24 Sub-Group"), an independently organised sub-group of affiliated companies, in which ZEAL holds an equity interest of 40%, to customers domiciled in the European Union from 1 January 2015. Furthermore, there is uncertainty in respect of the tax base to be applied in the event that it is ultimately determined that VAT is due on any of these services. Based on a thorough legal assessment, which included a review of the existing legal framework and case law, the Executive Board considers that the likelihood of outflow of economic resources is not probable and timings of associated financial impact is uncertain. Accordingly, the Executive Board has not recorded any liability in the Company's consolidated financial statements. Following recent dialogue with the tax authority (Finanzamt) Hannover-Nord in Germany it was estimated that in the event that ZEAL is unsuccessful in its defence, the potential financial effect amounted to EUR 70.3 million as at 31 March 2019 (31 December 2018: EUR 64.6 million, 31 December 2017: EUR 41.3 million, 31 December 2016: EUR 23.3 million), in each case including interest, plus potential fines (see "1.1.7 Uncertainties and changes relating to ZEAL's regulatory tax environment for its online offerings can significantly impact its business. ZEAL could be required to pay additional taxes, including lottery taxes, and other duties as a result of tax audits, legal proceedings relating to tax assessments, changes in ZEAL's effective tax rate or the loss of its tax loss carry forwards and other tax credits."). Potential fines have been excluded from the estimate of the contingent liability because ZEAL considers the likelihood of fines being imposed in the event of an unsuccessful outcome remote. Although uncertain, it is expected that an outcome will be known within two to four years. In respect of other taxes and duties, with the exception of those provided in ZEAL's financial statements, the Executive Board considers it unlikely that any further liability will arise from the final settlement of any such assessments. The Executive Board will continue to closely monitor any changes.

(2) Designated as 'financial assets' in the Company's unaudited interim consolidated statement of financial position as of 31 March 2019.

(3) Designated as 'trade receivables and other current assets' in the Company's unaudited interim consolidated statement of financial position as of 31 March 2019.

(4) 'Total current liabilities' in the Company's unaudited interim consolidated statement of financial position as of 31 March 2019 (designated as 'total current debt' in section "7.1") less 'other liabilities', 'deferred income', ' income tax liabilities ' and 'provisions'.

There were neither other contingent liabilities nor indirect liabilities. For operating leases and other financial commitments see "9.8.2 Operating Leases" and "9.8.3 Other Financial Commitments".

7.4 Statement on Working Capital

The Company is of the opinion that the working capital available to ZEAL is sufficient for its present requirements, that is, for at least 12 months from the date of the Prospectus.

8 SELECTED CONSOLIDATED FINANCIAL INFORMATION OF ZEAL

The following selected consolidated financial information of ZEAL is taken or derived from the audited consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016, 2017 and 2018 and the Company's accounting records or its internal reporting system. The audited consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016, 2017 and 2018 have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS"). Additional financial information included in the Prospectus has been taken or derived from the audited unconsolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018, which were prepared in accordance with IFRS.

The following selected consolidated financial information relates to reporting periods or reporting dates prior to the acquisition of Lotto24 and consequently does not contain any financial information with respect to Lotto24. For financial information of Lotto24, investors should refer to Lotto24's financial reports and quarterly statements published on Lotto24's website www.lotto24-ag.de under the investor relations section. Lotto24 is expected to be consolidated for the first time in the half-year consolidated financial statements of the Company as of and for the six months ended 30 June 2019. As a result of such first consolidation, these consolidated financial statements will differ materially from the consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016, 2017 and 2018.

Ernst & Young LLP, 1 More London Place, London SE1 2AF, United Kingdom has audited the Company's consolidated financial statements as of and for the fiscal years ended 31 December 2016, 2017 and 2018, and the Company's unconsolidated financial statements as of and for the fiscal year ended 31 December 2018, and issued in each case an unqualified audit opinion thereon.

On adoption of IFRS 9, gains on short term financial assets, for periods after 1 January 2018, have been reclassified from other comprehensive income to the income statement. In addition, for periods after 1 January 2018, other reserves have been reclassified to retained earnings.

Where financial information in the following tables is labelled "audited", this means that it has been taken from the audited consolidated financial statements mentioned above. The label "unaudited" is used in the following tables to indicate financial information that has not been taken from the audited consolidated financial statements mentioned above but was taken either from the unaudited condensed interim consolidated financial statements mentioned above, or the Company's accounting records or its internal reporting system, or has been calculated based on figures from the aforementioned sources. Some of the following figures, financial measures and adjustments are not presented in accordance with IFRS or any other generally accepted accounting principles nor have these measures been reviewed by an outside consultant, expert or auditor. Unless otherwise noted, all of these non-IFRS measures are derived from the Company's accounting records or its internal reporting system. All non-IFRS measures are defined by the Company and may not be comparable to similar measures used by other companies.

The Company's historical results are not necessarily indicative of the results that should be expected in the future, and its interim results are not necessarily indicative of the results that should be expected for the full year or any other period. The following selected financial information should be read together with the additional financial information contained elsewhere in the Prospectus, in particular in sections "1 Risk Factors", "7 Capitalisation and Indebtedness; Statement on Working Capital", "9 Management's Discussion and Analysis of Net Assets, Financial condition and Results of Opera- tions" and "12 Business", as well as the Company's consolidated financial statements and the Company's unconsolidated financial statements, in each case including the related notes.

8.1 Selected Consolidated Financial Information

8.1.1 Consolidated Income Statement

The following table shows selected financial information from ZEAL's consolidated income statement for the periods presented:

		For the yearended 31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Revenue (1)	112,935	134,295	154,751
Other operating income	26,703	6,951	4,901
Total Operating Performance (TOP)	139,638	141,246	159,652
Personnel expenses	(26,705)	(28,630)	(28,837)
Other operating expenses	(70,405)	(85,758)	(83,690)
Exchange rate differences	(1,304)	(422)	617
Amortisation/depreciation on intangible
assets and property,plant and equipment	(2,166)	(1,255)	(1,147)
Gain/(loss) on liquidation of subsidiary	238	-	-
Loss on acquisition	(1,340)	-	-
Result from operating activities before
Exceptional Items (Adjusted EBIT)	37,956	25,181	46,595
Exceptional items	-	-	(8,288)
Result from operating activities (EBIT)	37,956	25,181	38,307
Finance income	390	385	331
Finance costs	(237)	(335)	(204)
Loss on short term financial assets	-	-	(449)
Impairment of convertible loan	(1,598)	-	-
Share of loss of
associated companies	-	-	-
Share of loss of joint ventures	-	-	-
Results from financing andinvesting activities	(1,445)	50	(322)
Profit before income tax	36,511	25,231	37,985
Income tax expense	(10,560)	(8,053)	(11,322)
Profit attributable to the equity sharehold
ers of the Company	25,951	17,178	26,663

8.1.2 Consolidated Statement of Financial Position

The following table shows selected financial information from ZEAL's consolidated statement of financial position as of the effective dates presented:

	As of
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Property, plant and equipment	1,901	2,607	2,425
Other investments	1,198	3,041	3,433
Total non-current assets	4,677	6,634	6,932
Other current assets and prepaid
expenses	12,835	13,025	16,354
Financial assets	19,682	27,123	12,894
Cash and pledged cash	94,983	92,052	132,993
Total current assets	131,339	134,477	162,280
TOTAL ASSETS	136,016	141,111	169,212
Total non-current liabilities	2,199	1,765	3,918
Other liabilities	22,545	23,098	25,424
Income tax liabilities	5,952	1,074	5,702
Total current liabilities	36,259	32,730	42,096
Subscribed capital	8,385	8,385	8,385
Share premium	21,578	21,578	21,578
Retained earnings	68,237	77,030	94,710
Total equity	97,558	106,616	123,198
TOTAL EQUITY & LIABILITIES	136,016	141,111	169,212

8.1.3 Consolidated Statement of Cash Flows

The following table shows selected financial information from ZEAL's consolidated statement of cash flows for the periods presented:

For the yearended 31 December
2017	2018
(audited, unlessotherwise specified,and restated)	(audited, unlessotherwise specified)
TEUR	TEUR
13,152(2)	38,202
(511)	5,554
(8,385)	(10,244)
4,256	33,512
112,375(2)	145,887

92,052	132,993
20,323(2)	12,894

(1) Unaudited.

8.2 Selected Other Key Financial and Operating Data

The following tables show selected other key financial and operating data for the periods presented. Certain of the following figures, financial measures and adjustments are not presented in accordance with IFRS or any other internationally accepted accounting principles. These Alternative Performance

(2) The cash flows for the years ended 31 December 2016 and 31 December 2017 have been restated to remove the equity investments from cash and cash equivalents.

Measures are defined by the Company and may not be comparable to similar measures used by other companies. For further information, see "2.6 Note Regarding Alternative Performance Measures".

		For the yearended 31 December
	2016(unaudited, unlessotherwise specified)	2017(unaudited, unlessotherwise specified)	2018(unaudited, unlessotherwise specified)
	(thousands)	(thousands)	(thousands)
Customers
Registeredcustomers (2)	3,265	3,510	3,943

New registered customers (3)Average Monthly Active Users	314	411	614
(MAU) (4)	376	380	404
	EUR	EUR	EUR
Average Billings Per User per month(ABPU)(5)	58.03	57.58	57.57
Average costs per new customer(6)	65.69	60.72	34.99
	TEUR	TEUR	TEUR
Income statement
Billings (7)	280,435	280,509	296,286
Stakes (8)	243,765 (1)	241,306 (1)	254,538
Revenue (9)	112,935 (1)	134,295 (1)	154,751
Normalised revenue (10)	145,515	147,020	157,384
EBITDA (11)	41,224	26,436	47,742
Adjusted EBIT (12)Result from	37,956	25,181	46,595
operating activities(EBIT)	37,956 (1)	25,181 (1)	38,307 (1)
Normalised EBIT (13)	50,820	38,096	49,430
Profit before income tax	36,511 (1)	25,231 (1)	37,985 (1)
Profit attributable to the equity shareholders of the Company	25,951 (1)	17,178 (1)	26,663(1)
Balance sheet	TEUR	TEUR	TEUR
Cash and pledged cash	94,983 (1)	92,052 (1)	132,993 (1)
Net cash (14)	43,683	69,512	101,917
Personnel	No.	No.	No.
Number ofemployees (15)	250 (1)	274 (1)	262 (1)
	TEUR	TEUR	TEUR
Personnelexpenses	(26,705) (1)	(28,630) (1)	(28,837) (1)
Expenses per employee (16)	107	104	110
Share	No.	No.	No.
Average number of shares (undiluted)	8,385,088	8,385,088	8,366,792 (21)
	EUR	EUR	EUR
Earnings per share (undiluted)	3.09(1)	2.04(1)	3.18
Operating cash flow per share (undiluted) (17)	4.05	1.57	4.57

For the year ended 31 December

	2016(unaudited, unlessotherwise specified)	2017(unaudited, unlessotherwise specified)	2018(unaudited, unlessotherwise specified)
	(thousands)	(thousands)	(thousands)
Ratios	%	%	%
EBIT margin (18)	33.6	18.8	24.8
Net operating margin (19)	23.0	12.8	17.2
Return-on-equity (ROE) (20)	26.6	16.1	21.6

(2) 'Registered customer' means a unique user who has successfully registered for an account on a ZEAL website. A registration is considered successful after a new customer has provided the required information, before such information has been verified (e.g. as regards the customer's age and place of residence). The verification is a prerequisite for the customer to place bets or to buy other products on a ZEAL website. The qualification of a user as 'Registered customer' does not depend on whether it has actually placed a bet or purchased other products on a ZEAL website.
(3) 'New registered customer' means a unique user who has, for the first time, become a 'Registered customer' on a ZEAL website or (from 2017 on) on a ZEAL partner website (such as the Spanish ONCE).
(4) 'Average Monthly Active Users (MAU)' is defined as the average number of unique users (i.e. 'Registered customers') who have either purchased a bet or participated in a draw in a given month (including free bets). MAU provides a measure of ZEAL's ability to retain and attract new customers.
(5) 'Average Billings per User per month (ABPU)' is defined as the average net billings received from each active 'Registered customer' in a given month. In this context, active 'Registered customer' means a unique user who purchases a bet or participates in a draw in a month. ABPU provides a measure of ZEAL's ability to increase loyalty and value from its customers. ABPU is calculated by dividing monthly net billings by 'Average Monthly Active Users (MAU)'.
(6) 'Average costs per new customer' are defined as acquisition marketing expenses per 'new registered customer' on a ZEAL website.
(7) 'Billings' is defined as all 'Stakes' from customers (as well as brokerage stakes, such as commissions and booking fees, and associated VAT) net of free bets and provides a measure of ZEAL's ability to increase the economic value of 'Stakes' from customers (including brokerage stakes) over a period of time. The following table shows a reconciliation of 'Revenue' to 'Billings' for the periods presented:

For the year ended 31 December

	2016	2017	2018
	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)
	TEUR	TEUR	TEUR
Revenue	112,935 (*)	134,295 (*)	154,751 (*)
Commission and Other revenue	(5,922) (**)	(7,019) (*)	7,244
Ticket fees	(16,530) (**)	(18,095) (*)	20,500
Prizes	153,282 (**)	132,125 (*)	(127,531)
Stakes	243,765 (**)	241,306 (*)	254,538
Add VAT	4,811	4,933	5,334
Add Ticket fees	16,530	18,095	20,500
Add Commission	3,431	3,728	3,157
Add/(Less) Accrued stakes	(1,589)	(116)	1,096
Less Free bets	(231)	(220)	(788)
Add stakes owned by partners	14,472	13,887	13,220
Less lottery shop commission	(754)	(1,077)	770
Less other	-	(27)	10
Billings	280,435	280,509	296,286

(*) Audited.

(1) Audited.

(**) Audited and taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.

(8) 'Stakes' is defined as amounts paid for bets from customers net of free bets (and without brokerage stakes, such as commissions and booking fees, but including associated VAT) and provides a measure of ZEAL's ability to increase the economic value of stakes from customers over a period of time. The following table shows a reconciliation of 'Revenue' to 'Stakes' for the periods presented:

For the year ended 31 December

	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Revenue	112,935	134,295)	154,751 (*)
Commission and Other revenue	(5,922)(*)	(7,019)	7,244
Ticket fees	(16,530)(*)	(18,095)	20,500
Prizes	153,282(*)	132,125)	(127,531)
Stakes	243,765(*)	241,306	254,538

(*) Taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.
(9) 'Revenue' consists of stakes from Secondary Lotteries and Instant Win Products. These products are classified as derivative financial instruments and are disclosed in the consolidated income statement net of VAT, free bets and winnings pay-outs. Revenue is also recognised from ticket fees and commissions, which ZEAL receives for placing bets on behalf of customers. The following table shows the combination of 'Revenue' for the periods presented:

For the year

	ended 31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Stakes	243,765(*)	241,306	254,538
Prizes	(153,282)(*)	(132,125)	(127,531)
Ticket fees	16,530(*)	18,095	20,500
Commission and other revenue	5,922(*)	7,019)	7,244
Revenue	112,935	134,295	154,751

(*) Taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.
(10) 'Normalised revenue' is defined as 'revenue' as reported in accordance with IFRS which has been adjusted for the underlying statistical average pay-out ratio. Therefore, normalisation adjustments bridge the quantum of statistically expected pay-outs to consolidated 'revenue' as reported in accordance with IFRS which include actual pay-outs. In the lotteries on whose results ZEAL relies, there are underlying statistical average pay-out ratios for ongoing lottery draws. For ZEAL's main products, this is approximately 50%. The difference between the actual pay-out including hedging effects and the expected prize pay-out before hedging effects is referred to as normalisation or 'normalisation adjustment'. The following table shows a reconciliation of 'Revenue' according to IFRS to 'normalised revenue' for the periods presented:

For the year

		ended 31 December
Revenue	2016	2017	2018
	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)
	TEUR	TEUR	TEUR
Actual	112,935 (*)	134,295 (*)	154,751 (*)
Normalised (**)	145,515	147,020	157,384
Normalisationadjustment (***)	32,580	12,725	2,633

(*) Audited.
(**) Actuals, adjusted for expected pay-outs.
(***) Difference between actual and normalised amounts. The financial reports use different terms, besides 'normalisation adjustment', the terms 'deviations' and 'normalisation effect' are used.

(11) 'EBITDA' is defined as result from operating activities (EBIT) before loss on acquisition, gain/loss on liquidation of subsidiary and amortisation/depreciation on intangible assets and property, plant and equipment. The following table shows a reconciliation of 'EBITDA' to 'Result from operating activities (EBIT)' for the periods presented:

	For the yearended 31 December
	2016	2017(audited, unlessotherwise specified)	2018(audited, unlessotherwise specified)
	(audited, unless otherwise specified)
	TEUR	TEUR	TEUR
EBITDA	41,224 (*)	26,436 (*)	47,742 (*)
Amortisation/depreciation on intangible assets andproperty, plant and equipment	(2,166)	(1,255)	(1,147)
Gain/(Loss) on liquidation of subsidiary	238	-	-
Loss on acquisition	(1,340)	-	-
Exceptional items	-	-	(8,288)
Result from operating activities (EBIT)	37,956	25,181	38,307

(*) Unaudited.
(12) 'Adjusted EBIT' is defined as the result from operating activities (EBIT) in accordance with IFRS before exceptional items. 'Adjusted EBIT' provides a measure of ZEAL's ability to increase the economic value of its operating activity over a period of time, excluding exceptional items which could distort the result of ZEAL period over period, in particular non-recurring costs such as cost relating to transactions outside the ordinary course of business as well as to restructuring or to the closure of a business.
(13) In addition to the normalisation adjustments with respect to 'Normalised revenue', 'Normalized EBIT' adjusts the following effect: if ZEAL hedges Secondary Lotteries in the form of Physical Hedging, winnings from physically hedged lottery tickets are recognised as 'other operating income' (see "9.4.2.2 Other Operating Income"). The corresponding amount to be paid out to customers is recognised under 'Revenue', i.e. it reduces the amount of 'Revenue' in a certain period. The following table shows a reconciliation of 'result from operating activities (EBIT)' according to IFRS to 'normalised EBIT' for the periods presented:

		For the yearended 31 December
EBIT	2016	2017	2018
	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)
	TEUR	TEUR	TEUR
Actual	37,956 (*)	25,181 (*)	38,307 (*)
Normalised (**)	50,820	38,096	49,430
Normalisationadjustment (***)	12,864	12,915	2,835

(*) Audited.
(**) Actuals, adjusted for expected pay-outs.
(***) Difference between actual and normalised amounts. The financial reports use different terms, besides "normalisation adjustment", the terms "deviations" and "normalisation effect" are used.

(14) 'Net cash' is defined as the sum of current financial assets, other current assets and prepaid expenses less trade payables, other liabilities, income tax liabilities and a hedging reserve. The hedging reserve decreased from TEUR 50,000 as of 31 December 2016 to TEUR 30,000 as of 31 December 2017 due to the implementation of the Hoplon III-Insurance (see "12.10.1.1 Hoplon III-Insurance of USD 90 million"). It was further reduced to TEUR 21,627 as of 31 December 2018 and to TEUR 21,390 as of 31 March 2019. Net cash provides a measure of ZEAL's ability to reinvest profits or to pay dividends to shareholders. The following table shows a reconciliation of cash to 'net cash' for the periods presented:

For the year
ended 31 December

	2016	2017	2018
	(audited, unless otherwise specified)	(audited, unlessotherwise specified)	(audited, unlessotherwise specified)
	TEUR	TEUR	TEUR
Cash andpledged cash	94,983	92,052	132,993
Pledged cash	(268)	(3,006)	(4,144)
Cash withoutpledged cash	94,715 (*)	89,046 (*)	128,849
Short-termfinancial assets	19,682	27,123	12,894
Other currentassets and
prepaid expenses	12,835	13,025	16,354
Trade payables	(5,052)	(5,510)	(3,427)
Current other liabilities	(22,545)	(23,098)	(25,424)
Income tax liabilities	(5,952)	(1,074)	(5,702)
Hedging reserve	(*) (50,000)	(*) (30,000)	(21,627)
Net cash	43,683 (*)	69,512 (*)	101,919

(*) Unaudited.
(15) Based on full-time equivalents (average over a given period). Number of employees (average over) 2016 was taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.
(16) 'Expenses per employee' are defined as personnel expenses divided by the number of full-time equivalents over a given period. Number of employees (average over) 2016 was taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.
(17) 'Operating cash flow per share (undiluted)' is calculated as cash flow from operating activities (restated for the fiscal years ended 31 December 2016 and 31 December 2017) divided by the average number of shares (undiluted) over a given period.
(18) 'EBIT margin' is defined as result from operating activities (EBIT) as a percentage of revenue, each in accordance with IFRS, and, on a segment level, as 'normalised EBIT' as a percentage of 'normalised revenue' (as defined above) for the respective segment.
(19) 'Net operating margin' is defined as profit attributable to the equity shareholders of the Company as the percentage of revenue in accordance with IFRS.
(20) 'Return-on-equity (ROE)' is defined as profit attributable to the equity shareholders of the Company as the percentage of total equity at the end of the respective period.
(21) Shares of the Company carrying voting rights.

9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF NET ASSETS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following financial information of ZEAL is taken or derived from the audited consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016, 2017 and 2018 and the Company's accounting records or its internal reporting system. The audited consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016, 2017 and 2018 have been prepared in accordance with IFRS. Additional financial information included in the Prospectus has been taken or derived from the audited unconsolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018, which were prepared in accordance with IFRS.

The following financial information relates to reporting periods or reporting dates prior to the acquisition of Lotto24 and consequently does not contain any financial information with respect to Lotto24. For financial information of Lotto24, investors should refer to Lotto24's financial reports and quarterly statements published on Lotto24's website www.lotto24-ag.de under the investor relations section. Lotto24 is expected to be consolidated for the first time in the half-year consolidated financial statements of the Company as of and for the six months ended 30 June 2019. As a result of such first consolidation, these consolidated financial statements will differ materially from the consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016, 2017 and 2018.

Ernst & Young LLP, 1 More London Place, London SE1 2AF, United Kingdom has audited the Company's consolidated financial statements as of and for the fiscal years ended 31 December 2016, 2017 and 2018, and the Company's unconsolidated financial statements as of and for the fiscal year ended 31 December 2018 and issued in each case an unqualified audit opinion thereon.

The Company's historical results are not necessarily indicative of the results that should be expected in the future, and its interim results are not necessarily indicative of the results that should be expected for the full year or any other period. The following discussion and analysis should be read together with the additional financial information contained elsewhere in the Prospectus, in particular in sections "1 Risk Factors", "7 Capitalisation and Indebtedness; Statement on Working Capital", "8 Selected Consolidated Financial Information of ZEAL" and "12 Business", as well as the Company's consolidat- ed financial statements and the Company's unconsolidated financial statements, in each case including the related notes.

9.1 Overview

ZEAL Network SE was founded in 1999 as an online broker of Primary Lotteries in Germany. Following regulatory changes in 2009 in Germany, the Company changed the business model of a major part of its businesses from the brokerage of Primary Lotteries to the operation of Secondary Lotteries in the form of offering bets on the winning lottery numbers of Primary Lotteries (see "14.3 History and Development"). The Company is a European public limited liability company (Societas Europaea, 'SE') registered in England and Wales and headquartered in London, UK. Its shares are admitted to trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard).

ZEAL Network SE and its consolidated subsidiaries are a group of companies operating in the areas of online Secondary Lotteries under different lottery brands, in particular 'Tipp24' and 'myLotto24' ('Lottery betting' segment), Primary Lotteries and social lotteries ('Lottovate' segment), and lottery venture capital ('ZEAL Ventures' segment). As of 31 December 2018, ZEAL reported more than 3.9 million 'Registered customers'. Since the Company's incorporation in 1999 until 31 December 2018, ZEAL has generated 'Stakes' of more than EUR 3 billion, and has paid out more than EUR 1.5 billion in 'prizes'. ZEAL has also helped to generate significant amounts for charitable causes. At the date of the Prospectus, ZEAL has active businesses in six countries, with the objective to expand its business operations into other markets in the coming years. ZEAL's business activities are divided into the three segments 'Lottery Betting', 'Lottovate' and 'ZEAL Ventures' (for further details see "12.4 Business Segments").

In the fiscal year ended 31 December 2018, ZEAL and its partners recorded about 614,000 'new registered customers', i.e. unique users who have, for the first time, become a 'Registered customer' on a ZEAL website or (from 2017 on) on a ZEAL partner website (such as the Spanish ONCE), representing a 49% increase from the fiscal year 2017, in which ZEAL and its partners were able to attract around 411,000 'new registered customers', an increase of 31% compared to the fiscal year 2016 with around 314,000 'new registered customers'. In the fiscal year ended 31 December 2018, ZEAL's 'Total Operating Performance (TOP)', i.e. the sum of 'Revenue' and 'other operating income', was TEUR 159,652, and the 'result from operating activities (EBIT)', which results from the difference between, on the one hand, ZEAL's 'Total Operating Performance (TOP)' and, on the other hand, expenses (personnel expenses, other operating expenses) and certain other items as disclosed in the consolidated income statement, amounted to TEUR 38,307. In the fiscal year ended 31 December 2017, ZEAL's 'Total Operating Performance (TOP)' was of TEUR 141,246 and the 'result from operating activities (EBIT)' TEUR 25,181, compared to TEUR 139,638 and, respectively, TEUR 37,956 in the fiscal year 2016.

9.2 Key Factors Influencing ZEAL's Results from Operating Activities (EBIT)

ZEAL believes that the operating factors discussed below have contributed to the development of its 'results from operating activities (EBIT)' for the periods covered by the financial information contained in the Prospectus.

9.2.1 Regulatory Environment and Markets

ZEAL operates in typically highly regulated markets and its success depends on the local regulatory environment in the jurisdictions in which it operates and plans to expand into. In the periods covered by the financial information contained in the Prospectus, the key market for ZEAL in terms of revenue was Germany. Other markets were Ireland, Norway, the Netherlands, Spain and the UK. While ZEAL cannot control regulatory changes in existing and targeted markets, there is a possibility of further liberalisation of local gambling legislations and ZEAL continues to actively monitor any changes. The decision to launch in a new market is driven by the ability to obtain a gambling licence for this market, customer demand and the question whether the products ZEAL intends to offer are already on offer in this market. According to ZEAL's experience, lottery products whose product brand, game concept, chances of winning as well as the time and frequency of draws are already known in the relevant market can be marketed more easily than previously unknown products that do not have an organic demand yet.

In the second quarter of 2017, Ireland became ZEAL's first new international market in addition to Germany and Spain. With a lottery market size of EUR 700 million in stakes (as estimated by ZEAL at the time the investment decision was made; for the reported figures for 2016 and 2017 see "11.1.3.5 Irish Gambling and Lottery Market"), it offered ZEAL the opportunity to test other markets and to learn from the entry into a new market. In December 2017, ZEAL expanded its business into the UK. ZEAL offers Secondary Lotteries on the internet through myLotto24 Limited in both new markets. In the fiscal year ended 31 December 2018, myLotto24 Limited's business activities in Ireland and the UK contributed around 0.43% of ZEAL's total 'Billings'.

The dependency of ZEAL on the regulatory environment can be demonstrated by the following example: Ventura24 S.L.U. ("Ventura24"), a wholly-owned subsidiary of the Company, has been operating as an online lottery broker in Spain since 2002 with, at the date of the Prospectus, more than 700,000 customers. Ventura24 had assessed that this business did not require a licence from the Spanish state lottery operator 'Sociedad Estatal de Loterias y Apuestas del Estado (SELAE)' to manage the online purchase of lottery products. In October 2018, in the context of a legal dispute between from the Spanish Directorate General for the Regulation of Gambling (Dirección General de Ordenación del Juego, the "Spanish Gambling Commission"), the Supreme Court of Spain (Tribunal Supremo de España) confirmed – contrary to Ventura24's view – that its business may not be conducted without a licence. As a result, the Spanish Gambling Commission has instructed Ventura24 to discontinue its brokerage business. Ventura24 has stopped offering products to its customers at the end of December 2018, and the closure of the brokerage business is anticipated to be finalised by the end of May 2019. In the fiscal year ended 31 December 2018, ZEAL recorded 'Billings' of TEUR 15,558 for Ventura24 (see "9.2.5.4 Billings by Product."). ZEAL expects that these 'Billings' will disappear completely after the activities have been ceased.

9.2.2 Jackpot Environment and Large Jackpot Pay-Outs

The jackpot environment and large jackpot pay-outs affect ZEAL's 'result from operating activities (EBIT)' in different ways. While large jackpots generally have a positive effect on the amount of bets placed by customers and thus 'Billings' and 'Stakes', they make it necessary for myLotto24 Sub-Group to incur higher costs as regards hedging measures for the event that high winnings actually occur.

ZEAL has regularly experienced in the past, and expects to experience in the future, a substantial increase in gambling activity when large jackpot pay-outs are likely, as a result of roll-overs of jackpots to the next draw or guaranteed minimum jackpots for special dates or events - this experience is shared by Deutscher Lotto- und Totoblock (see "11.1.3.3 German Gambling and Lottery Market", subsection "Lottery Segment"). The size of jackpots is typically influenced by the number of tickets of a Primary Lottery sold for a draw, the timing and value of previous wins in a Primary Lottery and the rules and regulations associated with a specific Primary Lottery. The demand for lottery tickets is affected by marketing, demographics, purchasing power and the odds of win.

myLotto24 Sub-Group operates Secondary Lotteries and, thus, operates as a bookmaker offering bets on the outcome of Primary Lotteries in Europe and North America. Typically, Tipp24 Services Limited promises its customers lottery prizes in case of a winning bet equal to the quota paid out by the relevant Primary Lottery (e.g. if there is a single winner of a jackpot in the Primary Lottery worth EUR 10 million, Tipp24 Services Limited pays out the same amount to a customer who is the only winner of the jackpot in the related Secondary Lottery; if there are several winners in that Secondary Lottery, the EUR 10 million will be equally shared by these winners). In contrast, customers who play Secondary Lotteries on the websites of myLotto24 Limited are treated as if they had played the Primary Lottery insofar as they have to "share" a winning with winners in that Primary Lottery (e.g. if there is one winner of a EUR 10 million jackpot in the Primary Lottery and one winner in the related Secondary Lottery, myLotto24 Limited pays out EUR 5 million). myLotto24 Sub-Group does not act as an online broker such as Lotto24, who pays out lottery prizes received from the Primary Lotteries as an intermediary to the customer. Rather, myLotto24 Sub-Group has to use its own funds. Accordingly, myLotto24 Sub-Group – and thus ZEAL – bears the bookmaking risks for its Secondary Lottery business (see "12.17.3.1 Bookmaking Risk").

Accordingly, whereas large jackpots generally have a positive impact on ZEAL's 'results from operating activities (EBIT)', large jackpots affect these results also adversely due to increasing hedging costs (see "9.2.3 Hedging Costs"), in particular the costs incurred by the Physical Hedging (as defined below). In addition, the results are typically adversely affected in the case of large jackpot pay-outs from the hedging reserve (see "9.2.3 Hedging Costs"). Total actual pay-outs for Secondary Lotteries in the fiscal year 2018 were TEUR 2,633 above the expected pay-out value. In the fiscal year 2017, total pay-outs for Secondary Lotteries were TEUR 12,725 above the expected pay-out value.

9.2.3 Hedging Costs

Movements in hedging costs can have a significant influence on ZEAL's results. In order to make the bookmaking risks manageable and to prevent a high lottery win from posing a threat to the existence of myLotto24 Sub-Group (see "1.4.1 ZEAL is exposed to bookmaking risks through myLotto24 Sub-Group as operator of Secondary Lotteries. Lottery prizes owed to customers could exceed myLotto24 Sub-Group's own funds and the coverage provided under hedging arrangements, which could ulti mately lead to the insolvency of members of the myLotto24 Sub-Group."), a multi-layer hedging strategy was introduced, consisting of a hedging reserve for the self-retention of USD 30 million ("Self-Retention") required under the first of the following insurances, insurance coverage in the amounts of USD 90 million, USD 30.5 million and EUR 20 million per draw and EUR 40 million in aggregate for all draws within the term of the insurance (together the "Jackpot Insurances"), as well as the purchase of tickets in Primary Lotteries matching the numbers or other elements of bets placed by customers on myLotto24 Sub-Group's online platforms ("Physical Hedging") (see "12.17.3 Management of Specific Risks – Hedging"). Physical Hedging is a suitable hedging instrument provided that the stakes generated through the sale of a Secondary Lottery cover at least the costs for the purchase of matching entries in the corresponding Primary Lottery (which is typically the case for 'Powerball', 'Mega Millions' and 'EuroMillions').

The following table shows the development of the hedging reserve for the periods presented:

	For the yearended 31 December
	2016	2017	2018
	(unaudited)	(unaudited)	(unaudited)
	TEUR	TEUR	TEUR
Hedging reserve (1)	(50,000)	(30,000)	(21,627)

(1) Hedging reserve decreased from TEUR 50,000 as of 31 December 2016 to TEUR 30,000 as of 31 December 2017 due to the implementation of the Hoplon III-Insurance (see "12.10.1.1 Hoplon III-Insurance of USD 90 million"). It was further reduced to TEUR 21,627 as of 31 December 2018 and to TEUR 21,390 as of 31 March 2019.

Hedging costs are part of the 'direct costs of operations' (see "9.4.3.2 Other Operating Expenses"). Hedging costs are influenced by the jackpot environment, the type of products on offer and the number of tickets which are hedged by means of a Physical Hedging. The purchase of lottery tickets from Primary Lotteries is at the expense of myLotto24 Sub-Group's and ZEAL's profit margin since parts of the revenue from the sale of lottery bets must be used on it.

9.2.4 Average Monthly Active Users (MAU) and Average Billings per User per month (ABPU)

'MAU' and 'ABPU' are primarily influenced by the level of marketing performed by ZEAL and the Primary Lotteries (see "9.2.6 Marketing Activities and Expenses"), by the jackpot environment (see "9.2.2 Jackpot Environment and Large Jackpot Pay-Outs") as well as by the range and types of lottery products offered to customers (see "9.2.5 Business Segments and Product Range" below).

The following table shows the development of 'MAU' and 'ABPU' for the periods presented:

For the year ended 31 December

	2016	2017	2018
	(unaudited)	(unaudited)	(unaudited)
Customers	EUR	EUR	EUR
Average Billings Per User per month(ABPU)(1)	58.03	57.58	57.57
	(thousands)	(thousands)	(thousands)
Average Monthly Active Users(MAU) (2)	376	380	404

(1) 'Average Billings per User per month (ABPU)' is defined as the average net billings received from each active 'Registered customer' in a given month. In this context, active 'Registered customer' means a unique user who purchases a bet or participates in a draw in a month. ABPU provides a measure of ZEAL's ability to increase loyalty and value from its customers. ABPU is calculated by dividing monthly net billings by Average Monthly Active Users which is defined as the average number of unique users ('Registered customers') who have either purchased a bet or participated in a draw in a given month.

9.2.5 Business Segments and Product Range

ZEAL's business activities are divided into the three segments 'Lottery Betting', 'Lottovate' and 'ZEAL Ventures' (for further details see "12.4 Business Segments"):

9.2.5.1 Lottery Betting

____________________

At the date of the Prospectus, ZEAL's main business segment is 'Lottery Betting', comprising the Secondary Lottery business and the sale of instant win products where winnings are determined by random-number generators that generate the information of and how much a bet wins ("Instant Win Products"). ZEAL's activities in the area of 'Lottery Betting' takes place within myLotto24 Sub-Group.

In the 'Lottery Betting' segment, the range and type of lottery products offered to customers is a driver of revenue. As a bookmaker, myLotto24 Sub-Group offers its customers the opportunity to participate in Primary Lotteries, including lotteries they would not typically be eligible to participate in (such as the US lotteries 'Powerball' and 'Mega Millions' which the operators may not and do not offer in Europe). myLotto24 Sub-Group is not able to influence the product portfolio offered by the operators of the Primary Lotteries and has no control over the relevant terms. In addition, ZEAL's business depends on the stability of the lottery markets in the countries where ZEAL offers its products. In the periods covered by the financial information contained in the Prospectus, ZEAL was dependent on its offering of Secondary Lotteries in the German online market.

In the periods covered by the financial information contained in the Prospectus, ZEAL expanded its product portfolio with significant impacts on the 'results from operating activities (EBIT)'. In 2017, ZEAL launched 'Cash4Life' and the betting on the two US lotteries, 'Powerball' and 'Mega Millions'. 'Powerball' was ZEAL's most successful product launch of Secondary Lotteries to the date of the Prospectus: In the 30 days following its launch, this product had the highest number of new customers and tickets sold, as well as the highest gross and net 'billings' ever recorded by ZEAL for a new product launch within the same period. In the fiscal year ended 31 December 2018, the new product offerings 'Powerball' and 'Mega Millions' increased 'Billings' by TEUR 8,795. However, ZEAL estimates that a certain part of the 'Billings' has shifted from other products in the portfolio as customers preferred to play the US lotteries, which typically promise higher jackpots.

9.2.5.2 Lottovate

(2) 'Average Monthly Active Users (MAU)' is defined as the average number of unique users (i.e. 'Registered customers') who have either purchased a bet or participated in a draw in a given month (including free bets). MAU provides a measure of ZEAL's ability to retain and attract new customers.

the end of 2016 Lottovate Nederland B.V. became the Netherlands' first new charity lottery licence holder since 1989 which allowed Lottovate Nederland B.V. to introduce the nationwide charity lottery 'Raffld – The Experience Lottery' in 2018 (see "9.2.1 Regulatory Environment"). At the beginning of 2019, the lottery was paused to review the vision and strategy of the overall lottery. ZEAL's 'Lottovate' segment also helped Spain's Primary Lottery 'ONCE' to increase online billings and, thus to help 'ONCE's' work supporting blind and visually-impaired people in Spain.

9.2.5.3 ZEAL Ventures

'ZEAL Ventures' is run by the Company and focuses on external investments and internal incubation (i.e. the support of businesses - primarily in their early development phase - in implementing their business concept), and supports start-ups that are developing new lottery business models or products. The Company provides start-ups with venture capital and advice. In return, it expects to establish partnerships with these start-ups or to acquire them, and to generate investment returns.

The following provides examples of external investments:

On 16 December 2016, the Company acquired 10% interest in Pick Media Limited (formerly Free Postcode Lottery Ltd) operating under the brand 'Pick My Postcode', which operates an advertising-funded, free-to-play, lottery-style game.
On 1 May 2017, the Company bought a 2.5% stake in form of preference shares for TEUR 1,843 (USD 2,000 thousand) in the Los Angeles based start-up Omaze Inc. ("Omaze"). Omaze is an online fundraising platform that offers certain "experiences" and exclusive merchandise in support of critical causes, such as celebrity meet-and-greets and tickets to high profile sporting occasions. ZEAL has a board observer seat and various rights to protect and extend its shareholding.
In July 2018, ZEAL invested TEUR 115 (GBP 100 thousand) in a 5% interest and in March 2019 a further TEUR 345 (GPB 300 thousand) in an additional 15% interest in Cloud Canyon Limited, which runs a lottery syndicate business under the brand 'wshful'.
In addition, in December 2018, the Company invested TEUR 135 (GBP 120 thousand) in a 10% interest in De Integro Limited, a private limited company registered in England and Wales, which operates an early-stage lottery product under the brand 'Dream Makers'.

On 30 March 2016, ZEAL acquired the remaining shares in Geonomics Global Games Limited ("GGGL") and Geo24 UK Limited ("Geo24"), to obtain 100% ownership. The objective of the acquisition was to secure the software development team and the expertise of the employees from both entities. A loss on acquisition of TEUR 1,340 was recorded in the fiscal year 2016.

In the 'ZEAL Ventures' segment, ZEAL does not generate revenue. The income would come from the payment of dividends or increased valuation if ZEAL sold its investment. At the date of the Prospectus, ZEAL has neither received any dividends nor sold any of its investments in whole or in part.

9.2.5.4 Billings by Product and by Region

'Billings' is defined as all 'Stakes' from customers (as well as brokerage stakes, such as commissions and booking fees, and associated VAT) net of free bets and provides a measure of ZEAL's ability to increase the economic value of stakes from customers (including brokerage stakes) over a period of time.

The following table shows the 'Billings' by product for the periods presented:

For the year ended 31 December

	2016	2017	2018
	(unaudited)	(unaudited)	(unaudited)
	TEUR	TEUR	TEUR
Lottery Betting
Cash4Life	-	4,049	4,238
EuroJackpot	21,977	19,275	30,260
EuroMillions	32,808	35,507	28,469
Glücksrad	994	-	-
GlücksSpirale	10,160	10,593	12,514
Instant Win Products	35,189	38,538	48,776
Irish Lotto	-	12	391
KENO	4,585	4,116	5,007
Lottery syndicates	11,040	10,909	13,551
LOTTO 6aus49	140,128	129,599	116,546
Scratchcards	690	-	-
UK Lotto	-	-	2
US Mega Millions	-	711	6,594
US Powerball	-	3,047	5,959
Spanish Christmas lottery 'El Gordo'	4,616	6,603	6,695
	262,187	262,960	279,002
Lottovate
UNICEF Lotteriet	-	15	-
Raffld – The Experience Lottery	-	-	-
Ventura24	16,962	16,392	15,554
Lotto Network	1,384	1,165	824
	18,347	17,573	16,613
TOTAL	280,534	280,533	295,615

In the periods covered by the financial information contained in the Prospectus, Germany was the most important market for ZEAL in terms of 'Billings'. Other markets were Ireland, Norway, the Netherlands, Spain and the United Kingdom. While the vast majority of 'Billings' for the periods covered by the financial information contained in the Prospectus was attributable to Germany and to a lesser extent to Spain, only a small part of 'Billings' for those periods is attributable to other geographical markets.

9.2.6 Marketing Activities and Expenses

ZEAL's 'result from operating activities (EBIT)' depends to a significant extent on the volume and success of its marketing activities. The marketing activities are focused on acquiring 'new registered customers', improve the activity of existing 'Registered customers' as well as re-activating the inactive ("dormant") portion of the 'Registered customers' with the aim to increase the 'Billings' (see "*9.2.4 Average Monthly Active Users (MAU) and Average Billings per User per month (*ABPU)").

The 'marketing expenses' have a significant impact on ZEAL's results. They depend in particular on the price level in the advertising market, the mix of marketing instruments and the efficiency of marketing measures. In addition, the applicable procedures for the youth protection (see "13.1.6 Protection of Minors"), the limited availability of particularly attractive advertising space and the jackpot environment at the time of a marketing campaign are influencing factors for the amount of 'marketing expenses'. The higher the jackpot played out at the time of a marketing campaign, the higher its expected effectiveness. In addition, the advertising activities of competitors also have an influence: if they intensively advertise a certain lottery product, the activity of ZEAL's customers typically increases as well, without ZEAL incurring own costs.

The following table shows ZEAL's marketing expenses for the periods presented:

For the year ended 31 December

2016(unaudited, unlessotherwise specified)	2017(unaudited, unlessotherwise specified)	2018(unaudited, unlessotherwise specified)
TEUR	TEUR	TEUR
(14,830) (1)	(19,131) (1)	(19,666) (1)
(thousands)	(thousands)	(thousands)
3,265	3,510	3,943
314	411	614
376	380	404
EUR	EUR	EUR
58.03	57.58	57.57
65.69	60.72	34.99
TEUR	TEUR	TEUR
280,435	280,509	296,286

(1) Audited.

____________________

(2) Registered customer means a unique user who has successfully registered for an account on a ZEAL website. A registration is considered successful after a new customer has provided the required information, before such information has been verified (e.g. as regards the customer's age and place of residence). The verification is a prerequisite for the customer to place bets or to buy other products on a ZEAL website. The qualification of a user as "registered customer" does not depend on whether it has actually placed a bet or purchased other products on a ZEAL website.
(3) 'New registered customer' means a unique user who has, for the first time, become a 'Registered customer' on a ZEAL website or (from 2017 on) on a ZEAL partner website (such as the Spanish ONCE).
(4) 'Average Monthly Active Users (MAU)' is defined as the average number of unique users (i.e. 'Registered customers') who have either purchased a bet or participated in a draw in a given month (including free bets). MAU provides a measure of ZEAL's ability to retain and attract new customers.
(5) 'Average Billings per User per month (ABPU)' is defined as the average net billings received from each active 'Registered customer' in a given month. In this context, active 'Registered customer' means a unique user who purchases a bet or participates in a draw in a month. ABPU provides a measure of ZEAL's ability to increase loyalty and value from its customers. ABPU is calculated by dividing monthly net billings by Average Monthly Active Users which is defined as the average number of unique users ('Registered customers') who have either purchased a bet or participated in a draw in a given month.
(6) 'Average costs per new customer' are defined as acquisition marketing expenses per 'new registered customer' on a ZEAL website.
(7) 'Billings' is defined as all 'Stakes' from customers (as well as brokerage stakes, such as commissions and booking fees, and associated VAT) net of free bets and provides a measure of ZEAL's ability to increase the economic value of stakes from customers (including brokerage stakes) over a period of time.

An important key figure in the context of marketing activities and expenses are the 'average costs per new customer' which describes the acquisition marketing expenses per 'new registered customer' on a ZEAL website. In this context, 'new registered customer' means a unique user who has, for the first time, become a 'Registered customer' on a ZEAL website or (from 2017 on) on a ZEAL partner website (such as the Spanish ONCE) In the fiscal year ended 31 December 2018, ZEAL acquired about 614,000 'new registered customers' for average costs per 'new customer' of EUR 34.99. The number of 'new registered customers' aquired represented a 49% increase from the fiscal year 2017, in which the number of 'new registered customers' was about 411,000 with 'average costs per new customer' of EUR 60.72. The 'average costs per new customer' depend on regulatory developments, the competitive situation and the total marketing expenses and may therefore be subject to certain fluctuations. On average, however, ZEAL expects a relatively stable level of the 'average costs per new registered customer'. Following Completion, ZEAL expects to see a reduction in the 'average cost per new registered customer'. The improvement is expected to result from a better access to marketing instruments in Germany to and optimisation of marketing channels.

ZEAL's marketing expenses amounted to TEUR 19,666 in the fiscal year 2018, representing only a slight increase from the TEUR 19,131 of expenses incurred in 2017 (2016: TEUR 14,830). The significant increase from 2016 to 2017 was driven by the decision to make changes in the marketing instruments to increase the numbers of 'Registered customers' and re-activating the dormant portion of the 'Registered customers'. This resulted in a one-off cost of TEUR 3,500 in the fiscal year 2017 for a TVmarketing campaign for the introduction of 'Danke Million'. 'Danke Million' itself is a marketing instrument: If a customer of Tipp24 Services Limited wins a jackpot, a person chosen by the winner gets EUR 1 million. ZEAL expects stable marketing expenses for the Combined Group in the amount of around EUR 25 million.

9.2.7 Personnel Expenses and Other Operating Expenses

ZEAL's 'result from operating activities (EBIT)' also depends on 'personnel expenses' and 'other operating expenses'.

9.2.7.1 Personnel Expenses

The following table shows the 'number of employees' and 'personnel expenses' for the periods presented:

	For the yearended 31 December
	201620172018
	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)
Personnel	No.	No.	No.
Number ofemployees (2)	250 (1)	274 (1)	262 (1)
	TEUR	TEUR	TEUR
Personnelexpenses	(26,705) (1)	(28,630) (1)	(28,837) (1)
Expenses per employee (3)	107	104	110

(1) Audited.

During the fiscal year 2018, ZEAL had a total of 262 employees (2017: 274 employees, in each case full-time equivalent on average). In the fiscal year 2018, personnel expenses amounted to TEUR 28,837 (2017: TEUR 28,630).

In the fiscal year 2018, 66 employees had received notices of termination in connection with the closure of Ventura24 (see "12.4.2.3 Online Lottery Brokerage in Spain") as well as with an internal cost savings program. Of these terminations, 12 had become effective until 31 December 2018 and another 54 have become effective in 2019. Considering these headcount reductions as well as the increases in employee numbers due to the Combination, the overall headcount number following Completion will increase to around 300 full-time equivalents. ZEAL plans to reduce the number of employees to around 200 full-time equivalents by the end of year two after Completion (subject to any headcount growth dedicated to growth investments into new markets).

(2) Based on full-time equivalents (average over a given period). Number of employees (average over) 2016 was taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.

(3) 'Expenses per employee' are defined as personnel expenses divided by the number of employees (average) over a given period. Number of employees (average over) 2016 was taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.

9.2.7.2 Other Operating Expenses

'Other operating expenses' include 'marketing expenses' (see "9.2.6 Marketing Activities and Expens es"), 'direct costs of operations' and 'other costs of operations'. The following table shows the other operating expenses for the periods presented:

	For the yearended 31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Other operating expenses	(70,405)	(85,758)	(83,690)
Marketing expenses	(14,830)	(19,131)	(19,666)
Direct costs of operations	(33,909)	(43,365)	(44,323)
Other costs of operations	(21,666)	(23,262)	(19,701)

The 'direct costs of operations' include costs for the Jackpot Insurances and costs for Physical Hedging. These costs are variable and depend on the number of Secondary Lotteries, i.e. the higher the number of bets on Primary Lotteries in a certain period, the higher the costs for Jackpot Insurances and Physical Hedging in the same period. The increase of 'direct costs of operation' in the fiscal year 2018 by TEUR 958 compared to the fiscal year 2017 was due to a reduction in hedging costs. The increase of 'direct costs of operations' in the fiscal year 2017 by TEUR 9,456 compared to the fiscal year 2016 was due to an increase in costs for Physical Hedging caused by a high number of Secondary Lotteries hedged with this instrument. These costs have been partially offset by a reduction in costs for the Jackpot Insurances. The Company anticipates cost savings and synergies of EUR 57 million per annum following the Combination and expects that savings in 'direct costs of operations' will account for around 60% of the overall cost synergies for the reasons that all costs covering the bookmaking risks for the German market (hedging costs) will not be required after the Business Model Change, and the amount of non-deductible VAT in relation to the myLotto24 Sub-Group will be reduced (see "4.2 Reasons for the Offer").

'Other costs of operations' include consultancy expenses incurred in connection with the international expansion and the launch of new products as well as fees charged by auditors and tax advisors. The volatility in these costs is mainly due to the variable needs for consultancy in ZEAL's projects. The increase of TEUR 1,596 in the fiscal year 2017 was primarily due to increased consultancy expenses of TEUR 855 associated with ZEAL's international expansion strategy both in the 'Lottery Betting' and 'Lottovate' segment along with the launch of the new products 'Cash4Life', 'Powerball' and 'Mega Millions' (see "9.2.1 Regulatory Environment and Markets" and "9.2.5 Business Segments and Product Range"). The decrease of TEUR 3,342 in the fiscal year 2018 was primarily due to a reduction in the number of new products launched in the fiscal year 2018 compared with the fiscal year 2017 and a decrease in costs spent on external advisors associated with international expansion.

9.3 Presentation of Financial Information

9.3.1 Basis of Preparation of ZEAL's Consolidated Financial Statements

9.3.1.1 Restatement of Cash Flow Statements

Under IAS 7, equity instruments cannot be classified as cash and cash equivalents. This has resulted in the cash flow statements for the fiscal years ended 31 December 2016 and 31 December 2017 being restated.

ZEAL invested the following amounts as stated in the third column of the table below in equity instruments in the periods stated in the first column. The 'opening cash and cash equivalents balance' as stated in the second column of each table below had been reduced in each period as shown in each respective fourth column titled 'restated cash and cash equivalents balance'.

Period	Opening cash and cashequivalents balance(TEUR)	Value invested in equityinstruments & non-cashchanges(TEUR)	Restated cash and cashequivalents balance(TEUR)
For the year ended31 December 2016	114,665	6,546	108,119
For the year ended31 December 2017	119,175	6,800	112,375

Other non cash charges as stated in the third column of the table below have been restated as follows, to remove the fair value movement in the equity instruments in the period stated in the first column:

Period	Opening cash and cashequivalents balance(TEUR)	Non-cash changes(TEUR)	Restated cash and cashequivalents balance(TEUR)
For the year ended31 December 2016	234	227	461
For the year ended31 December 2017	298	(254)	44

There is no impact on the classification of short term financial assets in the consolidated statement of financial position or the consolidated income statement, as a result of this restatement.

The following table sets out the full restated consolidated statement of cash flows for the periods presented:

For the year ended 31 December

	2016	2017
	audited, unless otherwise specified,and restated	audited, unless otherwise specified,and restated
	TEUR	TEUR
Profit from continuingoperations before tax	36,511	25,231
Adjustments for:
Depreciation and amortisation of noncurrent assets	2,166	1,255
Net loss on sale ofnon-current assets	-	1
Finance income	(390)	(385)
Finance costs	237	335
Impairment of convertible loan	1,598	-
Share of resultof associated companies	-	-
Share of result of joint ventures	-	-
Gain on liquidation of subsidiary	(238)	-
Loss on acquisition	1,340	-
Acquisition of GGGL and
Geo24 net of cash acquired	(623)	-
Other non-cash changes	461(1)	44(1)
Changes in:
Trade and other receivables	9,487	(1,048)
Other assets and prepaid
expenses	(641)	(427)
Trade payables	39	458
Other liabilities	(980)	119
Financial liabilities	10	(17)
Deferred income	(1,726)	(146)
Provisions	(718)	501

For the year ended 31 December

	2016	2017
	audited, unless otherwise specified,and restated	audited, unless otherwise specified,and restated
	TEUR	TEUR
Interest received	390	385
Interest paid	(237)	(335)
Income taxes paid	(12,718)	(12,819)
Cash flow from operating activities	33,968(1)	13,152
Cash flow from investing activities
(Payments for) acquisition of intangibleassets	(240)	(236)
(Payments for) acquisition of property,plant and equipment	(460)	(1,436)
Proceeds from the sale ofproperty, plant and equipment	-	4
Payments for acquisitionof investment	(1,198)	(1,843)
Receipt/(Payments) onliquidation of subsidiary	238	-
Contributions (loan) toassociated companies	(1,598)	-
Long term loans (advancedto other companies)	-	-
Loan receipt from othercompanies	-	-
Short term loan	-	3,000
Net cash outflow from investing activities	(3,258)	(511)
Cash flow from financing activities
Payments to acquiretreasury shares	-	-
Dividends paid to the
Company's shareholdersNet cash outflow from financing activities	(23,478)(23,478)	(8,385)(8,385)

Net increase in cash, pledged cash andshort-term financial assets	7,232(1)	4,256
Cash, pledged cash and short-term financial assets at the beginning of the financial period	100,887(1)	108,119
Cash and cash equivalentsat the end of the financial period	108,119(1)	112,375

Composition of cash and cash equivalents
Cash and pledged cash	94,98313,136(1)	92,052
Short-term financial assets		20,323

(1) Unaudited and restated to remove the equity investments from cash and cash equivalents.

9.3.1.2 Adoption of IFRS 9

____________________

ZEAL has adopted IFRS 9 (Financial instruments) on 1 January 2018. Details of the significant changes and quantitative impact of the changes are set out below:

Other investments

Before the adoption of IAS 9, ZEAL held certain investments at historical cost and certain investments at fair value through the profit and loss. Under IFRS 9, all of ZEAL's investments are required to be measured at fair value in accordance with IFRS 13 (Fair value measurement). The fair value of each investment is calculated using a discounted cash flow method and consideration of the fair value of

(2) Due to changes in presentation taken from the audited consolidated financial statements as of and for the year ended 31 December 2016.

rights arising from the terms of the relevant purchase agreements to determine the amount that could be obtained on disposal of the asset.

ZEAL has calculated the fair value of the investments at the date of adoption of IAS 9 and the date of the financial statements and has determined that no transition adjustments are required.

Short-term financial assets

On adoption of IFRS 9, ZEAL has classified financial assets (investments in fixed income funds and equity funds) previously held as available-for-sale, as investments held at fair value through profit or loss (FVPL). Under IAS 39 (Financial instruments: Recognition and Measurement), all gains and losses on disposal of short-term financial assets were recognised in other comprehensive income (OCI) and reclassified recycled to the income statement on disposal of the underlying short term financial assets. Further under IFRS 9, there is no requirement to consider whether or not there is a significant or prolonged decline in the value of these assets.

At 31 December 2018, ZEAL held TEUR 12,894 (at 31 December 2017: TEUR 27,123) of short-term financial assets, these were invested in fixed income funds. At 31 December 2017 shorts-term financial assets were invested in equity funds in an amount of TEUR 6,800 and in fixed income funds in an amount of TEUR 20,323. In the fiscal year 2018 ZEAL disposed of TEUR 13,780 of short-term financial assets. The fair value movement in the fiscal year 2018 was a loss of TEUR 449, which was recognised in the income statement. The gain of TEUR 225 for the fiscal year 2017 was recognised in the statement of comprehensive income.

Expected credit losses

IFRS 9 requires ZEAL to record expected credit losses on all its debt securities, loans and trade receivables, either on a 12-months or lifetime basis. ZEAL has applied a combination of the simplified and general approach to determine the expected life time losses on all its financial assets.

ZEAL has performed an assessment at the date of adoption of IAS 9 and has not adjusted the loss allowance for any financial assets held at amortised cost.

9.3.1.3 Adoption of IFRS 15

ZEAL has adopted IFRS 15 (Revenue from contracts with customers) on 1 January 2018. ZEAL performed a full impact assessment at the date of adoption of IFRS 15 and it was confirmed that there will be no change in the quantum or timing of revenue recognised under IFRS 15 as opposed to IAS 18 (Revenue).

9.3.2 Normalised Revenue and Normalised EBIT

In the Primary Lotteries on whose results ZEAL relies as regards the Secondary Lotteries offered by it, there are underlying statistical average pay-out ratios for ongoing lottery draws. For the main Primary Lotteries on whose results ZEAL offers Secondary Lotteries, this is approximately 50%. The expected pay-out ratio for Secondary Lotteries is the same as for the Primary Lotteries. However, ZEAL experiences differences between the expected pay-out ratio and actual pay-outs made, and the difference is referred to as 'normalisation' or 'normalisation adjustment'. In order to aid understanding of ZEAL's financial results, ZEAL discloses the effect of these differences between the expected and actual payout ratio by presenting 'normalised revenue' and 'normalised EBIT'.

Primarily the difference between actual 'Revenue' and actual EBIT and 'normalised revenue' and, respectively, 'normalised EBIT' is due to significant prize pay-outs which are above the expected payout ratio.

9.3.2.1 Normalised Revenue

'Normalised revenue' is defined as revenue in accordance with IFRS, which has been adjusted for the underlying statistical average pay-out ratio. Therefore, normalisation adjustments bridge the quantum of statistically expected pay-outs to consolidated results in accordance with IFRS, which include actual pay-outs. In the lotteries on whose results ZEAL relies, there are underlying statistical average pay-out ratios for ongoing lottery draws. For ZEAL's main products, this is approximately 50%. The difference between the actual pay-out including hedging effects and the expected prize pay-out before hedging effects is referred to as 'normalisation' or 'normalisation adjustment'. The following table shows a reconciliation of 'Revenue' according to IFRS to 'normalised revenue' for the periods presented:

		For the yearended 31 December
Revenue	2016	2017	2018
	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)
	TEUR	TEUR	TEUR
Actual	112,935 (1)	134,295 (1)	154,751 (1)
Normalised (2)	145,515	147,020	157,384
Normalisationadjustment (3)	32,580	12,725	2,633

(1) Audited.

____________________

(2) Actuals, adjusted for expected pay-outs.

(3) Difference between actual and normalised amounts. The financial reports use different terms, besides "normalisation adjustment", the terms "deviations" and "normalisation effect" are used.

'Normalised revenue' in the fiscal year 2018 was TEUR 157,384, an increase of TEUR 10,364 from the 'normalised revenue' in the fiscal year 2017 of TEUR 147,020. This increase was driven by a TEUR 20,456 increase in 'Revenue' and a TEUR 10,092 decrease in the normalisation adjustment. The normalisation adjustment decreased due to a fall of significant prize pay-outs, as mentioned above.

'Normalised revenue' in the fiscal year 2017 was TEUR 147,020, an increase of TEUR 1,505 from the 'normalised revenue' in the fiscal year 2016 of TEUR 145,515. This increase was driven by a TEUR 21,360 increase in 'Revenue' and a TEUR 19,855 decrease in the normalisation adjustment. The normalisation adjustment decreased due to a fall of significant prize pay-outs, as mentioned above.

9.3.2.2 Normalised EBIT

Normalised EBIT adjusts, in addition to the effects in the 'normalised revenues', the following effects: if ZEAL hedges Secondary Lotteries in the form of Physical Hedging, winnings from physically hedged lottery tickets are recognised as 'other operating income' (see "9.4.2.2 Other Operating Income"). The corresponding amount to be paid out to customers is recognised under 'Revenue', i.e. it reduces the amount of 'Revenue' in a certain period. The following table shows a reconciliation of 'result from operating activities (EBIT)' in accordance with IFRS to 'normalised EBIT' for the periods presented:

		For the yearended 31 December
EBIT	2016	2017	2018
	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)	(unaudited, unlessotherwise specified)
	TEUR	TEUR	TEUR
Actual	37,956 (1)	25,181 (1)	38,307 (1)
Normalised (2)	50,820	38,096	49,430
Normalisationadjustment (3)	12,864	12,915	2,835

(1) Audited.

(2) Actuals, adjusted for effects resulting from expected pay-outs.

(3) Difference between actual and normalised amounts. The financial reports use different terms, besides "normalisation adjustment", the terms "deviations" and "normalisation effect" are used.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

'Normalised EBIT' increased by TEUR 11,334 to TEUR 49,430 in the fiscal year 2018 from TEUR 38,096 in the fiscal year 2017. This was driven by a reduction in the value of 'Prizes' paid out in the period. The volume and value of pay-outs is dependent on the external lottery results.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

'Normalised EBIT' decreased by TEUR 12,724 to TEUR 38,096 in the fiscal year 2017 from TEUR 50,820 in the fiscal year 2016. In the fiscal year 2016, ZEAL recognised 'other operating income' attributable to a receipt from a special jackpot insurance policy of TEUR 20,000 (which related to the significant prize pay-out of TEUR 37,000).

9.3.3 Segment Reporting

The following section provides an explanation of ZEAL's business segments as described in section "9.2.5 Business Segments and Product Range" above. ZEAL's reportable operating segments reflect the management structure the way performance is evaluated and the way resources are allocated.

Performance of 'Lottery Betting' segment is based on normalised results, whereas the Lottovate segment is based on actual results. Together, the amount of both segments is presented as 'business unit total' in the following tables.

The costs attributed to the operating activities of 'ZEAL Ventures' are not separately disclosed. These costs do not meet the quantitative threshold requirements for separate identifiable segment reporting and are instead proportionally allocated to the 'Lottery Betting' and 'Lottovate' segments.

The following tables show information from ZEAL's business unit segment reporting:

9.3.3.1 Business Unit Segment Reporting for the Fiscal Years 2016, 2017 and 2018

Business unit segment reporting	Lottery		Business	Normalisationadjust	Otheradjust	According
2016	Betting	Lottovate	unit total	ments(1)	ments(2)	to IFRS
	(audited)	(audited)	(audited)	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR
Revenue	138,594	6,686	145,280	(32,580)	235	112,935
Other operating income	2,626	308	2,934	19,716	4,053	26,703
Total operating performance (TOP)	141,220	6,994	148,214	(12,864)	4,288	139,638
EBITDA	64,545	(9,782)	54,763	(12,864)	(1,777)	40,122
Depreciations/amortisation	(1,554)	(612)	(2,166)	-	-	(2,166)
EBIT	62,991	(10,394)	52,597	(12,864)	(1,777)	37,956
Financing and investing results	-	-	-	-	(1,445)	(1,445)
EBT	-	-	52,597	(12,864)	(3,222)	36,511
Income tax	-	-	-	-	(10,560)	(10,560)
Net profit/(loss)	-	-	52,597	(12,864)	(13,782)	25,951

(1) Normalisation adjustments – these adjustments bridge the quantum of statistically expected pay-outs included within the Business unit total column to consolidated results according to IFRS which include actual pay-outs.

(2) Other adjustments to the extent impacting EBIT relate to (1) other operating income of TEUR 3,397 in connection with the release of dormant customer accounts, (2) a charge associated with the acquisition of Geonomics Global Games Limited (GGGL) and Geo24 UK Limited (Geo24) amounting to approximately TEUR 1,340 and (3) other items generated/incurred by Schumann e.K (which does not form part of either the 'Lottery Betting' or 'Lottovate' segments).

Business unit segment reporting	Lottery		Business	Normalisationadjust	Otheradjust	According
2017	Betting	Lottovate	unit total	ments(1)	ments(2)	to IFRS
	(audited)	(audited)	(audited)	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR
Revenue	139,175	7,637	146,812	(12,725)	208	134,295
Other operating income	6,597	349	6,946	(190)	195	6,951
Total operating performance (TOP)	145,772	7,986	153,758	(12,915)	403	141,246
EBITDA	48,975	(9,399)	39,576	(12,915)	(225)	26,436
Depreciations/amortisation	(956)	(299)	(1,255)	-	-	(1,255)
EBIT	48,019	(9,698)	38,321	(12,915)	(225)	25,181
Financing and investing results	-	-	-	-	50	50
EBT	-	-	38,321	(12,915)	(175)	25,231
Income tax	-	-	-	-	(8,053)	(8,053)
Net profit/(loss)	-	-	38,321	(12,915)	(8,228)	17,178

(1) Normalisation adjustments – these adjustments bridge the quantum of statistically expected pay-outs included within the Business unit total column to consolidated statutory results which include actual pay-outs.

____________________

(2) Other adjustments to the extent impacting EBIT mainly relate to external revenue and other operating income generated by as well as expenses incurred by Schumann e.K. (which does not form part of either the 'Lottery Betting' or 'Lottovate' segments).

Business unit segment reporting	Lottery		Business	Normalisationadjust	Otheradjust
2018	Betting	Lottovate	unit total	ments(1)	ments (2)	Statutory
	(audited)	(audited)	(audited)	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR
Revenue	149,425	7,773	157,198	(2,633)	186	154,751
Other operating income	4,391	537	4,928	(202)	175	4,901
Total operating performance (TOP)	153,816	8,310	162,126	(2,835)	361	159,652
EBITDA	56,977	(7,706)	49,086	(2,385)	1,282	47,533
Depreciations/amortisation	(860)	(287)	(1,147)	-	-	(1,147)
Exceptional costs	(5,135)	(3,153)	(8,288)	-	-	(8,288)
EBIT	50,982	(11,146)	39,860	(2,385)	1,282	38,307
Financing and investing results	-	-	-	-	(322)	(322)
EBT	-	-	39,860	(2,385)	960	37,985
Income tax	-	-	-	-	(11,322)	(11,322)
Net profit/(loss)	-	-	39,860	(2,385)	10,362	26,663

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

Within the 'Lottery Betting' segment, 'normalised EBIT' for the fiscal year 2018 was TEUR 50,982 an increase of TEUR 2,963 from TEUR 48,019 for the fiscal year 2017. The increase was primarily driven by a 6% increase in TOP (see "9.4.2 Total Operating Performance (TOP)") from TEUR 145,772 for the fiscal year 2017 to TEUR 153,816 for the fiscal year 2018. An improvement in the jackpot environment (see "9.2.2 Jackpot Environment and Large Jackpot Pay-Outs") and the introduction of two US lotteries, 'Powerball' and 'Mega Millions' (see "9.2.5 Business Segments and Product Range") contributed to this revenue growth. The growth in TOP was offset by exceptional costs of TEUR 5,135 in the fiscal year 2018. These related primarily to costs associated to the Lotto24 acquisition and the Group restructure ahead of the acquisition.

Within the 'Lottovate' segment, 'EBIT' for the fiscal year 2018 was a TEUR 11,146 loss, an increase in loss of TEUR 1,448 from a TEUR 9,698 loss for the fiscal year 2017. This was partly driven by the TEUR 3,153 of exceptional costs associated with the closure of the consumer facing brokerage business in Ventura24, offset by reduction in operating expenses of TEUR 1,382 and a TEUR 324 increase in 'Revenue'.

Within the 'Lottery Betting' segment, 'normalised EBIT' for the fiscal year 2017 was TEUR 48,019, a decrease of TEUR 14,972 from TEUR 62,991 for the fiscal year 2016. This was primarily as result of the increase in marketing expenses due to the one-off TV-marketing campaign for the introduction of 'Danke Million' and an increase in the cost of physically hedged tickets (see "9.2.3 Hedging Costs"). Changes to the rules for 'EuroMillions' in late 2016 had the result that potential jackpots were more often not covered by the ZEAL's existing Jackpot Insurances which led to the requirement to purchase lottery tickets of that lottery to hedge the risk (see "9.2.3 Hedging Costs"). The increase in cost was partly offset by a 3% increase in TOP from TEUR 141,220 for the fiscal year 2016 to TEUR 145,772 for the fiscal year 2017.

Within the 'Lottovate' segment, 'EBIT' for the fiscal year 2017 was a TEUR 9,698 loss, a decrease of loss of TEUR 696 from a loss of TEUR 10,394 loss for the fiscal year 2016. This was primarily driven by an increase in 'Revenue'. 'Revenue' increased from TEUR 6,686 for the fiscal year 2016 to TEUR 7,637 for the fiscal year 2017, primarily driven by growth in the ONCE business.

9.4 ZEAL's Results of Operations

9.4.1 Consolidated Income Statement

The following table provides an overview of ZEAL's 'Profit attributable to the equity shareholders of the Company ' for the periods presented:

		For the year
	2016	ended 31 December2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Revenue (1)	112,935	134,295	154,751
Other operating income	26,703	6,951	4,901
Total Operating Performance (TOP)	139,638	141,246	159,652
Personnel expenses	(26,705)	(28,630)	(28,837)
Other operating expenses	(70,405)	(85,758)	(83,690)
Exchange rate differences	(1,304)	(422)	616
Amortisation/depreciation on intangibleassets and property,
plant and equipment	(2,166)	(1,255)	(1,147)
Gain/(loss) on liquidation of subsidiary	238	-	-
Loss on acquisition	(1,340)	-	-
Result from operating activities beforeexceptional items(Adjusted EBIT) (2)
	37,956	25,181	46,595
Exceptional items	-	-	(8,288)
Result from operating activities (EBIT)	37,956	25,181	38,307
Finance income	390	385	331
Finance costs	(237)	(335)	(204)
Loss on short term financial assets	-	-	(449)
Impairment of convertible loan	(1,598)	-	-
Share of loss ofassociated companies	-	-	-
Share of loss of joint ventures	-	-	-
Results from financing and
investing activities	(1,445)	50	(322)
Profit before income tax	36,511	25,231	37,985
Income tax expense	(10,560)	(8,053)	(11,322)
Profit attributable to the equity sharehold
ers of the Company	25,951	17,178	26,663

(2) Shown as Result from operating activities (EBIT) in the audited consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016 and 31 December 2017.

9.4.2 Total Operating Performance (TOP)

Total Operating Performance ("TOP") is the sum of 'Revenue' and 'other operating income' as disclosed in the consolidated income statement.

	For the yearended 31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Revenue (1)	112,935	134,295	154,751
Other operating income	26,703	6,951	4,901
Total	139,638	141,246	159,652

(1) Revenue consists of 'Stakes' from Secondary Lotteries and Instant Win Products. These products are classified as derivative financial instruments and are disclosed in the consolidated income statement net of VAT, free bets and winnings pay-outs. Revenue is also recognised from ticket fees and commissions, which ZEAL receives for placing bets on behalf of customers.

9.4.2.1 Revenue

____________________

'Revenue' consists of 'Stakes' from Secondary Lotteries and Instant Win Products. These products are classified as derivative financial instruments and are disclosed in the consolidated income statement net of VAT, free bets and winnings pay-outs. 'Revenue' is also recognised from ticket fees and commissions, which ZEAL receives for placing bets on behalf of customers.

	For the yearended 31 December
	2016(audited)	2017(audited)	2018(audited)
	TEUR	TEUR	TEUR
Stakes (1)	243,765(2)	241,306	254,538
Prizes	(153,282)(2)	(132,125)	(127,531)
Ticket Fees	16,530(2)	18,095	20,500
Commission and Other Revenue	5,922(2)	7,019	7,244
Revenue	112,935	134,295	154,751

(1) 'Stakes' is defined as amounts paid for bets from customers net of free bets (and without brokerage stakes, such as commissions and booking fees, but including associated VAT) and provides a measure of ZEAL's ability to increase the economic value of stakes from customers over a period of time.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

(2) Taken from the audited consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2017.

(ABPU)' remained broadly consistent at around EUR 57.58 in the fiscal year 2017 and around EUR 57.57 in the fiscal year 2018.

In the Lottovate business segment, 'Revenue' decreased from TEUR 7,773 for the fiscal year 2017 to TEUR 7,637 for the fiscal year 2018, primarily driven by the closure of Lotto Network Limited.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

'Revenue' for the fiscal year ended 2017 increased by 19% from TEUR 112,935 in the fiscal year ended 2016 to TEUR 134,295. The main driver for the increase in 'Revenue' was the decrease in 'Prizes' from TEUR 153,282 in the fiscal year ended 2016 to TEUR 132,125 in the fiscal year ended 2017. The decrease was largely a result of a reduction in the value of significant prize pay-outs.

In addition, according to the Company's internal reporting system, the average jackpot amounts in the lotteries 'EuroJackpot', 'EuroMillions' and 'LOTTO 6aus49' increased by around 39% in the fiscal year ended 2016 to the fiscal year ended 2017. ZEAL further contributed the increase in 'Stakes' to this development. However, ZEAL estimates that a certain part of the 'Billings' has shifted from other products in the portfolio as customers preferred to play the US lotteries, which typically promise higher jackpots.

The introduction of Secondary Lotteries of two US lotteries 'Powerball' and 'Mega Millions' in October and November 2017 resulted in an increase in the 'Average monthly active users (MAU)' by around 4.1 thousand from around 375.7 thousand in the fiscal year ended 2016 to around 379.8 thousand for the fiscal year ended 2017. This further contributed to the increase in 'Revenue' and was consistent with the increase in 'Registered customers' from around 3,265 thousand at 31 December 2016 to around 3,510 thousand at 31 December 2017. 'Average billings per user per month' remained broadly consistent at around EUR 58.03 in the fiscal year ended 2016 and around EUR 57.58 in the fiscal year ended 2017.

As a counter effect, 'Ticket Fees' and 'Commission and other revenue' increased from TEUR 22,452 in the fiscal year ended 2016 to TEUR 25,114 in the fiscal year ended 2017, primarily due to the higher levels of fees and commission being charged on 'EuroMillions', 'EuroJackpot' and Instant Win Products.

9.4.2.2 Other Operating Income

'Other operating income' comprises the following:

the fair value of considerations received or receivable from winning tickets purchased by ZEAL's wholly-owned subsidiary Ventura24 S.L.U. on draws of the lottery 'EuroMillions';
the fair value of consideration received or receivable from special insurance policies in the total amount of EUR 20 million per draw and EUR 40 million in aggregate for all draws taken out to hedge against the risk of special draw where the risk is too high for the normal hedging structure

(e.g. in the case of a compulsory pay-out of the German 'LOTTO 6aus49' whenever the jackpot has not won in twelve consecutive draws) (see "12.17.3.2 Hedging Strategy and Instruments");

the fair value of consideration received or receivable from the USD 90 million Hoplon III-Insurance, also taken out to provide cover against the risk of large pay-outs (see "12.17.3.2 Hedging Strategy and Instruments"); and
the release of dormant customers' balances to the consolidated income statement.

Funds deposited by ZEAL's customers are classified as 'other liabilities' in the consolidated statement of financial position (see "9.5.1 Consolidated Statement of Financial Position"). After a period of 24 months from the date of last activity on customers' accounts, the related 'other liabilities' are classified as "dormant". If attempts to contact the relevant customers to refund deposits held on their behalf are unsuccessful (at least 26 months from last activity), these 'other liabilities' are released to 'other operating income'.

	For the yearended 31 December201620172018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Income from hedging transactions	1,910	5,062	2,980
Release of dormant customer accounts	3,397	669	431
Income from special insurance policies (1)	20,000	-	-
Other	1,396	1,220	1,490
Other operating income	26,703	6,951	4,901

(1) In 2016, the income generated from special insurance relates to the exceptional prize pay-out of EUR 37 million in May 2016.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

____________________

In the fiscal year 2018, 'other operating income' decreased by 30%, largely due to a TEUR 2,082 decrease in 'income from hedging transactions' recognised from Secondary Lotteries hedged in the form of Physical Hedging through Ventura24.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

'Other operating income' decreased by 74% from TEUR 26,703 in the fiscal year ended 2016 to TEUR 6,951 in the fiscal year ended 2017. The decrease in 'other operating income' was mainly attributable to a receipt from a special jackpot insurance policy in the fiscal year ended 2016 of TEUR 20,000 (EUR nil in the fiscal year ended 2017) which related to the exceptional prize pay-out of TEUR 37,000 in May 2016 and the decrease in 'release of dormant customer accounts' in the fiscal year ended 2017 to TEUR 669 (TEUR 3,397 in the fiscal year ended 2016). These decreases were offset by a TEUR 3,152 increase in 'income from hedging transactions' recognised from Secondary Lotteries hedged in the form of Physical Hedging through Ventura24.

9.4.3 Result from Operating Activities before exceptional items (Adjusted EBIT)

The 'Result from operating activities before exceptional items (Adjusted EBIT)' results from the difference between TOP and expenses ('personnel expenses', 'other operating expenses') and certain other items as disclosed in the consolidated income statement.

		For the year
	2016	ended 31 December2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Total Operating Performance (TOP)	139,638	141,246	159,652
Personnel expenses	(26,705)	(28,630)	(28,837)
Other operating expenses	(70,405)	(85,758)	(83,690)
Marketing expenses	(14,830)	(19,131)	(19,666)
Direct costs of operations	(33,909)	(43,365)	(44,323)
Other costs of operations	(21,666)	(23,262)	(19,701)
Exchange rate differences	(1,304)	(422)	616
Amortisation/depreciation onintangible assets and property,
plant and equipment	(2,166)	(1,255)	(1,147)
Gain/loss on liquidation of subsidiary	238	-	-
Loss on acquisition	(1,340)	-	-
Result from operatingactivities (EBIT) (1)	37,956	25,181	46,595

(1) Shown as Result from operating activities (EBIT) in the audited consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016 and 31 December 2017.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

In the fiscal year 2018, the 'Result from operating activities before exceptional items (Adjusted EBIT)' increased from TEUR 25,181 for the fiscal year 2017 to TEUR 46,595. This was largely due to a 15% increase in 'Revenue', a result of an improved jackpot environment and the product mix.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

The 'result from operating activities (EBIT)' decreased by 34% from TEUR 37,956 for the fiscal year ended 2016 to TEUR 25,181 for the fiscal year ended 2017, largely due to a TEUR 4,301 increase in marketing costs and a TEUR 9,456 increase in direct costs of operations, displayed above. This was partly offset by a TEUR 1,608 increase in TOP.

9.4.3.1 Personnel Expenses

The following table provides a breakdown of ZEAL's 'personnel expenses' for the periods presented:

	For the yearended 31 December(1)
	2016	2017	2018
	(audited)TEUR	(audited)TEUR	(audited)TEUR
Wages and salaries	(23,718)	(25,696)	(24,572)
Pension contributions	(424)	(485)	(641)
Social security costs	(2,563)	(2,449)	(3,624)
Total	(26,705)	(28,630)	(28,837)

(1) These figures include remuneration for the Executive Board.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

In the fiscal year 2018, 'personnel expenses' increased by 0.7% from TEUR 28,630 in the fiscal year 2017 to TEUR 28,837. This was primarily driven by one-off payments made to certain employees at the end of their contract, average salary increases and an increase to the bonus provision as a result of the improved performance of ZEAL. The level of bonuses paid to employees was based on ZEAL's performance: employees receive a bonus based on ZEAL's performance against targeted 'normalised revenue' and 'normalised EBIT'.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

In the fiscal year ended 2017, 'personnel expenses' increased by 7% from TEUR 26,705 in the fiscal year ended 2016 to TEUR 28,630, primarily driven by an increase to 274 FTEs in the fiscal year ended 2017, compared to 250 FTEs (restated due to consistency purposes in the audited consolidated financial statements as of and for the year ended 31 December 2017) in the fiscal year ended 2016. As a consequence, 'wages and salaries' increased by TEUR 1,978 to TEUR 25,696 in the fiscal year ended 2017, from TEUR 23,718 in the fiscal year ended 2016.

9.4.3.2 Other Operating Expenses

The following table provides a breakdown of ZEAL's 'other operating expenses' for the periods presented:

	For the yearended 31 December
	2016(audited)	2017(audited)	2018(audited)
	TEUR	TEUR	TEUR
Marketing expenses	(14,830)	(19,131)	(19,666)
Direct costs of operations	(33,909)	(43,365)	(44,323)
Other costs of operations	(21,666)	(23,262)	(19,701)
Total	(70,405)	(85,758)	(83,690)

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

In the fiscal year 2018, 'other operating expenses' decreased by TEUR 1,860 from TEUR 85,758 in the fiscal year 2017 to TEUR 83,898. This decrease was attributable to the following movements:

'Marketing expenses' increased by TEUR 535 from TEUR 19,131 in the fiscal year 2017 to TEUR 19,666 in the fiscal year 2018. The increase in marketing spend was driven by spend in the UK and Ireland as part of the ZEAL's expansion in new international markets in addition to Germany and Spain (see "9.2.1 Regulatory Environment and Markets") and marketing spend on the launch of ZEAL's Primary Lotteries in Norway and the Netherlands (see "9.2.1 Regulatory Environment and Markets").
Direct costs of operations' increased from TEUR 43,365 in the fiscal year 2017 by TEUR 958 to TEUR 44,323 in the fiscal year 2018. The increase is due to the recording of a TEUR 1,909 provision for Austrian gaming duty (see "9.9.2.1.6 Austrian Gaming Duty") offset by a reduction in nondeductible VAT of TEUR 1,463, due to one-off costs in the fiscal year 2017.
'Other costs of operations' decreased from TEUR 23,262 in the fiscal year 2017 by TEUR 3,561 to TEUR 19,701 in the fiscal year 2018, which was primarily due to a TEUR 1,161 reduction in legal costs, as a result of a decrease in the use of external advisors, and a TEUR 875 decrease in freelancer staffing costs, a result of using internal staff to perform projects. A further reduction in external recruitment has led to TEUR 228 of cost savings and the increased use of technology has driven down travel costs by TEUR 381.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

In the fiscal year ended 2017, 'other operating expenses' increased by 22% from TEUR 70,405 in the fiscal year ended 2016 to TEUR 85,758. This increase is attributable to the following movements:

– the increase of 29% in 'marketing expenses' from TEUR 14,830 in the fiscal year ended 2016 to TEUR 19,131 in the fiscal year ended 2017 was consistent with ZEAL's strategy to increase the number of 'Registered customers' and re-activate the "dormant portion" of the 'Registered customers', which included expenses in the fiscal year ended 2017 for a one-off TV-marketing campaign for the introduction of 'Danke Million' (see "9.2.6 Marketing Activities and Expenses").

the increase of 28% in 'direct costs of operations' from TEUR 33,909 in the fiscal year ended 2016 to TEUR 43,365 in the fiscal year ended 2017 was due to a higher number of fully hedged Secondary Lotteries compared to the prior period, which was partly offset by a reduction in costs for the Jackpot Insurances.
the increase of 7% in 'other costs of operation' from TEUR 21,666 in the fiscal year ended 2016 to TEUR 23,262 in the fiscal year ended 2017 was primarily due to increased consultancy expenses associated with ZEAL's international strategy to expand its business activities to Ireland, Norway, the Netherlands and the UK (see "9.2.1 Regulatory Environment and Markets") along with the launch of the new products 'Cash4Life' and the US lotteries 'Powerball' and 'Mega Millions' (see "9.2.5.1 Lottery Betting").

9.4.3.3 Exchange Rate Differences

Items included in the financial statements of each member of ZEAL are measured using the currency of the primary economic environment in which that member operates (the functional currency). The consolidated financial statements are presented in Euros, which is ZEAL's presentational currency. The average exchange rates (calculated based on the average of the exchange rates during the fiscal year) and the closing exchange rates have been taken from the publicly available European Central Bank rates.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

In the fiscal year 2018, 'exchange rate differences' decreased from TEUR 422 expense in the fiscal year 2017 to TEUR 616 income, primarily due to movements in the US Dollar / Euro exchange rate.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

In the fiscal year ended 2017, 'exchange rate differences' decreased by 68% from an expense of TEUR 1,304 in the fiscal year ended 2016 to an expense of TEUR 422, primarily due to a weaker exchange rate of the British Pound against the Euro.

9.4.3.4 Amortisation/Depreciation on Intangible Assets and Property, Plant and Equipment (Depreciation and Amortisation of Non-current Assets)

Intangible assets with finite lives are amortised over their estimated useful economic lives, and only tested for impairment where there is a triggering event. ZEAL regularly reviews all of its amortisation rates and residual values to take account of any changes in circumstances. The Executive Board's assessment of the useful life of intangible assets is based on the nature of the asset acquired, the durability of the products to which the asset attaches and the expected future impact of competition on the business. An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset. They are recognised in profit or loss when the asset is derecognised.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

In the fiscal year 2018, 'depreciation and amortisation of non-current assets ' decreased by 9% from TEUR 1,255 in the fiscal year 2017 by TEUR 108 to TEUR 1,147, primarily due to lower amortisation of intangible assets. This was mainly due to a reduction in the carrying value of intangible assets and property, plant and equipment as fewer acquisitions were made.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

In the fiscal year ended 2017, 'amortisation/depreciation on intangible assets and property, plant and equipment' decreased by 42% from TEUR 2,166 in the fiscal year ended 2016 to TEUR 1,255, primarily due to lower amortisation of intangible assets, mainly due to the amortisation of software which ended its useful economic life in the fiscal year ended 2016 and was not replaced.

9.4.4 Exceptional items

In 2018, the Company updated its accounting policies to separately identify exceptional items on the face of the consolidated statement of income. The decision to separately identify these costs was to allow readers to understand costs which are incurred as part of the normal day-to-day business of ZEAL and those which are one-off and which may distort the reader understanding of the results of ZEAL.

		For the yearended 31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Ventura24	-	-	2,983
Transaction costs	-	-	3,852
Restructuring cost	-	-	1,453
Total	-	-	8,288

TEUR 2,983 of costs were incurred in association with the closure of Ventura24's consumer-facing brokerage business. The costs include TEUR 2,362 of costs associated with employee severance. The remainder of the balance relates to other one-off closure expenses.

On 19 November 2018, the Company announced its intention to acquire Lotto24 AG. Due to the oneoff nature of the transaction these costs are considered to be exceptional. Transaction costs of TEUR 3,852 were incurred by ZEAL. These costs include TEUR 2,947 of consulting costs, TEUR 784 of legal costs and TEUR 121 of public relations costs.

Ahead of the acquisition of Lotto24 AG, ZEAL implemented a restructuring program. The costs associated with this program include TEUR 1,253 of employee severance costs and TEUR 200 of other restructuring costs. The costs associated with this program are considered to be exceptional due to their irregularity.

9.4.5 Results from Financing and Investing Activities

The 'results from financing and investing activities' are the sum of 'finance income', 'finance costs' and the 'share of loss of associated companies'. The table below provides a breakdown of ZEAL's 'results from financing and investing activities' for the periods presented:

2016(audited)TEUR	ended 31 December2017(audited)	2018(audited)


	TEUR	TEUR
390	385	331
(237)	(335)	(204)
-	-	(449)
(1,598)	-	-

-	-	-
-	-	-
		(322)
	(1,445)	50

(1) Share of loss from investment in GGGL which was fully acquired in 10 March 2016 and after this date the results of operations were included in the consolidated results of ZEAL and not separated out.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

In the fiscal year 2018, 'results from financing and investing activities' decreased from TEUR 50 in the fiscal year 2017 to a loss of TEUR 322, as a result of the reclassification of gains and losses on short term financial assets in the income statement due to the adoption of IFRS 9.

(2) Share of loss from joint venture with GGGL, Geo24, which was fully acquired in 10 March 2016 and after this date the results of operations were included in the consolidated results of ZEAL and not separated out.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

ZEAL recorded 'results from financing and investing activities' of TEUR 50 in the fiscal year 2017, a change from a negative performance in the fiscal year ended 2016. In the fiscal year ended 2016 ZEAL impaired a convertible loan resulting in a TEUR 1,598 charge to the income statement (EUR nil in the fiscal year ended 2017). 'Finance income' remained stable between 2016 and 2017 and 'finance costs' increased by TEUR 98.

9.4.6 Income Tax Expense

Income taxes paid or payable as well as deferred taxes and withholding taxes are recognised as 'income tax expense'. The blended corporate income tax rate in the UK amounted to 19% in 2018 and 19.25% in the fiscal year ended 2017 (2016: 20.0%).

In the case of members of ZEAL registered in another country, the respective country-specific regulations and tax rates are used for the calculation of current income taxes.

'Deferred taxes' under IAS 12 are calculated at the average tax rate at the time the differences are expected to reverse. For the calculation of 'deferred taxes', the total tax rate for domestic UK tax registered companies amounted to 19% in 2018 and 17% in the fiscal year ended 2017 (2016: 17%). In the case of members of ZEAL registered in another country, the respective country-specific regulations, enacted and substantively enacted tax rates were used to calculate deferred taxes.

The following table provides a breakdown of ZEAL's 'income tax expense' for the periods presented:

	For the yearended 31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Current taxation:
Charge for the year	11,138	8,656	11,845
Adjustments in respect of prior years	784	1,140	66
Deferred taxation:
Total deferred taxation	206	537	(589)
Total	10,560	8,053	11,322

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

'Income tax expense' increased by 41% from TEUR 8,053 in the fiscal year 2017 to TEUR 11,912 in the fiscal year 2018, primarily driven by the increase in profit before tax from TEUR 25,231 in the fiscal year 2017 to TEUR 37,985 in the fiscal year 2018.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

'Income tax expense' decreased by 24% from TEUR 10,560 in the fiscal year ended 2016 to TEUR 8,053 in the fiscal year ended 2017. The main reason for this development was a significant decrease in expected tax charge at standard UK rate of 19.25% (2016: 20.00%) by TEUR 2,445 to TEUR 4,857 in the fiscal year ended 2017, from TEUR 7,302 in the fiscal year ended 2016. The decreased tax charge was mainly a result of a decrease in profit before tax from TEUR 36,511 in the fiscal year ended 2016 to TEUR 25,231 in the fiscal year ended 2017. Thereof, a tax expense of TEUR 3,818 (2016: TEUR 3,853) was incurred during 2017 and is related to tax losses carried forward for which no deferred tax asset is recognised, and which was partitally offset by the utilisation of tax losses.

9.5 Balance Sheet

____________________

9.5.1 Consolidated Statement of Financial Position

As of 31 December 2016 2017 2018 (audited) (audited) (audited) TEUR TEUR TEUR ASSETS Non-current assets Property, plant and equipment 1,901 2,607 2,425 Intangible assets 802 510 301 Deferred tax assets 575 38 627 Long-term loans - - - Other investments 1,198 3,041 3,433 Other assets and prepaid expenses 201 438 147 Total non-current assets 4,677 6,634 6,932 Current assets Trade and other receivables 755 1,803 - Income tax receivables 9 474 39 Other current assets and prepaid expenses 12,835 13,025 16,354 Short-term loan 3,075 - - Financial assets 19,682 27,123 12,894 Cash and pledged cash 94,983 92,052 132,993 Total current assets 131,339 134,477 162,280 TOTAL ASSETS 136,016 141,111 169,212 EQUITY & LIABILITIES Non-current liabilities Other liabilities 2,199 1,765 1,758 Provisions - - 2,160 Total non-current liabilities 2,199 1,765 3,918 Current liabilities Trade payables 5,052 5,510 3,427 Other liabilities 22,545 23,098 25,424 Financial liabilities 123 106 106 Deferred income 2,251 2,105 3,098 Income tax liabilities 5,952 1,074 5,702 Provisions 336 837 4,341 Total current liabilities 36,259 32,730 42,096 Equity Subscribed capital 8,385 8,385 8,385 Share premium 21,578 21,578 21,578 Treasury shares - - (1,903) Other reserves (1) (785) (560) 227 Foreign currency translation reserve 143 183 201 Retained earnings 68,237 77,030 94,710 Total equity 97,558 106,616 123,198 TOTAL EQUITY & LIABILITIES 136,016 141,111 169,212

(1) On adoption of IFRS 9, 'other reserve' was reclassified to retained earnings. This is a result of the reclassification of short term investments from fair value through other comprehensive income, recycled to the income statement on disposal, to fair value through the profit or loss. Therefore, these costs are no longer recycled to the income statement on the final sale of the underlying asset and have now been included directly in retained earnings.

9.5.2 Property, Plant and Equipment

The table below provides a breakdown of the costs, accumulated depreciation and book value of ZEAL's 'Property, plant and equipment' as of the dates presented:

	Officeequipment	Hardware	Office equipmentunder construction	TOTAL
COST	TEUR	TEUR	TEUR	TEUR
	(audited,unless otherwise specified)	(audited,unless otherwise specified)	(audited,unless otherwisespecified)	(audited,unless otherwisespecified)
Balance as at 1 January 2016	3,463	4,606	11	8,080
Additions	112	329	11	452
Transfers between classesDisposals	18-	-(120)	(18)-	-(120)
Balance as at 31 December 2016	3,593	4,815	4	8,412
Additions	842	594	-	1,436
Disposals	-	(4)	-	(4)
Balance as at 31 December 2017	4,435	5,405	4	9,844
Additions	343	379	-	722
Disposals	(10)	(12)	-	(22)
Balance as at 31 December 2018	4,768	5,772	4	10,544
	Officeequipment	Hardware	Office equipmentunder construction	TOTAL

ACCUMULATED DEPRECIATION	TEUR	TEUR	TEUR	TEUR
	(audited,unless otherwise specified)	(audited,unless otherwise specified)	(audited,unless otherwisespecified)	(audited,unless otherwisespecified)
Accumulated depreciationas at 1 January 2016	(1,656)	(4,200)	-	(5,856)
Provided during the year	(459)	(324)	-	(783)
Disposals	5	123	-	128
Accumulated depreciationas at 31 December 2016	(2,110)	(4,401)	-	(6,511)
Provided during the year	(405)	(322)	-	(727)
Disposals	-	1	-	1
Accumulated depreciation
as at 31 December 2017	(2,515)	(4,722)	-	(7,237)
Provided during the period	(471)	(423)	-	(894)
Disposals	-	12	-	12
Accumulated depreciationas at 31 December 2018	(2,986)	(5,133)	-	(8,119)
	Officeequipment	Hardware	Office equipmentunder construction	TOTAL
BOOK VALUE	TEUR	TEUR	TEUR	TEUR
	(audited,unless otherwise specified)	(audited,unless otherwise specified)	(audited,unless otherwisespecified)	(audited,unless otherwisespecified)
As at 31 December 2016	1,483	414	4	1,901
As at 31 December 2017	1,920	683	4	2,607

There are no assets held under finance leases. There are no restrictions on rights of disposal for the above mentioned tangible assets. No assets were pledged as collateral for liabilities.

As at 31 December 2018 1,782 639 4 2,425

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

As of 31 December 2018, ZEAL's non-current assets for property, plant and equipment amounted to TEUR 2,425 compared to TEUR 2,607 as of 31 December 2017. The main drivers for the increase were investments in hardware and office equipment. 'Property, plant and equipment' additions was partially offset by a depreciation charge.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

ZEAL's non-current assets for property, plant and equipment increased by TEUR 706, or 37.1%, to TEUR 2,607 as of 31 December 2017, from TEUR 1,901 as of 31 December 2016, primarily as a result of additions to office equipment and to hardware.

9.5.3 Intangible Assets

Accumulated amortisation

The table below provides a breakdown of the costs, accumulated amortisation and book value of ZEAL's 'intangible assets' as of the dates presented:

Software Other software Licences TOTAL

COST	TEUR	TEUR	TEUR	TEUR
	(audited,unless otherwise specified)	(audited,unless otherwise specified)	(audited,unless otherwisespecified)	(audited,unless otherwisespecified)
Balance as at 1 January 2016	23,792	8,281	184	32,257
Additions	-	240	-	240
Disposals	-	(755)	-	(755)
Balance as at 31 December 2016	23,792	7,766	184	31,742
Additions	-	236	-	236
Disposals	-	-	-	-
Balance as at 31 December 2017	23,792	8,002	184	31,978
Additions (unaudited)	-	44	-	44
Disposals (unaudited)	-	-	-	-
Balance as at 31 December 2018	23,792	8,046	184	32,022
	Software	Other software	Licences	TOTAL
ACCUMULATED DEPRECIATION	TEUR	TEUR	TEUR	TEUR
	(audited,unless otherwise specified)	(audited,unless otherwise specified)	(audited,unless otherwisespecified)	(audited,unless otherwisespecified)
Accumulated amortisationas at 1 January 2016	(23,392)	(6,870)	(50)	(30,312)
Provided during the year	(400)	(965)	(18)	(1,383)
Disposals	-	755	-	755
Accumulated amortisation
as at 31 December 2016	(23,792)	(7,080)	(68)	(30,940)
Provided during the year	-	(510)	(18)	(528)
Disposals	-	-	-	-
Accumulated amortisationas at 31 December 2017	(23,792)	(7,590)	(86)	(31,468)
Provided during the period (unaudited)Disposals (unaudited)	--	(235)-	(18)-	(253)-

as at 31 December 2018 (23,792) (7,825) (104) (31,721)

	Software	Other software	Licences	TOTAL
BOOK VALUE	TEUR	TEUR	TEUR	TEUR
	(audited,unless otherwise specified)	(audited,unless otherwise specified)	(audited,unless otherwisespecified)	(audited,unless otherwisespecified)
As at 31 December 2016	-	686	116	802
As at 31 December 2017	-	412	98	510
As at 31 December 2018		221	80	301

The item "Software" refers to the value of gambling software. The item "Other software" contains all other software products including gambling platforms.

There are no restrictions on rights of disposal for the above mentioned 'intangible assets'. No 'intangible assets' were pledged as collateral for liabilities. The remaining useful lives of 'intangible assets' are between one and five years.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

As of 31 December 2018, ZEAL's non-current intangible assets amounted to TEUR 301 compared to TEUR 510 as of 31 December 2017. Such decrease of TEUR 209 between 31 December 2017 and 31 December 2018 was driven by a depreciation charge, which was partly offset by 'intangible asset' additions in the fiscal year 2017.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

As of 31 December 2017, ZEAL's non-current intangible assets decreased by TEUR 292, or 36.4%, to TEUR 510 from TEUR 802 as of 31 December 2016, as a result of accumulated amortisation exceeding additions to other software.

9.5.4 Long and Short Term Loans

The short-term loan in the amount of TEUR 3,075 (as of 31 December 2016) was granted by a member of ZEAL, Smartgames Technologies Limited, in the fiscal year 2015 to a third party as part of a pre-existing platform separation agreement. The loan was due for repayment in the fiscal year 2017 and was repaid in full during 2017.

9.5.5 Other Investments

As of 31 December 2018, ZEAL's non-current assets for other investments amounted to TEUR 3,433 compared to TEUR 3,041 as of 31 December 2017. The main reason for this increase was an investment in July 2018 in the amount of TEUR 115 (GBP 100 thousand) in a 5% interest in Cloud Canyon Limited, which runs a lottery syndicate business under the brand 'wshful'. The Company made an additional investment of TEUR 345 (GBP 300 thousand) in exchange for an additional 15% interest in Cloud Canyon Limited in March 2019. A further investment of TEUR 132 (GBP 120 thousand) was made in December 2018, for a 10% interest in De Integro Limited ('Dream Makers'). The remainder of the movement (TEUR 145) is due to the revaluation to fair value of the investments in line with the requirements of IFRS 9.

As of 31 December 2017, ZEAL's non-current assets for other investments amounted to TEUR 3,041, an increase of TEUR 1,843 (USD 2,000 thousand), or 154.8%, compared to TEUR 1,198 as of 31 December 2016. This was a result of a cash investment of TEUR 1,843 (USD 2,000 thousand) into the Los Angeles based start-up Omaze on 1 May 2017. ZEAL received preferred shares representing a 2.50% interest, a board observer seat and various rights to protect and extend its shareholding. The investment of TEUR 1,843 (USD 2,000 thousand) in Omaze is held at fair value.

9.5.6 Trade and Other Receivables

As of 31 December 2018, 'trade and other receivables' have been reclassified to 'other current assets and prepaid expenses'.

As of 31 December 2017, 'trade and other receivables' had increased by 139% from TEUR 755 as of 31 December 2016 to TEUR 1,803. The increase in the balance was associated with the launch of betting on the US-lotteries 'Powerball' and 'Mega Millions'. There were no items within the trade receivable balance which are considered past due but not impaired.

9.5.7 Cash and Other Short-Term Financial Assets

____________________

The table below provides a breakdown of ZEAL's cash and other short-term financial assets for the periods presented:

	As of31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Bank balances	94,710	89,041	128,846
Cash on hand	5	5	3
Pledged cash	268	3,006	4,144
Cash and pledged cash	94,983	92,052	132,993
Financial assets (1)	19,682	27,123	12,894
Cash and cash equivalents	114,665	119,175	145,887

(1) Shown as 'Short-term financial assets' in the statement of financial position of the consolidated financial statements of the Company as of and for the fiscal years ended 31 December 2016 and 31 December 2017.

Bank balances mainly comprise term deposits on short-term call and with variable interest rates held at various major European banks and include funds to cover customer liabilities.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

As of 31 December 2018, 'cash and cash equivalents' increased by TEUR 26,712, from TEUR 119,175 as of 31 December 2017 to TEUR 145,887 as of 31 December 2018, primarily driven by a 45% increase in bank balances. This increase was mainly due to ZEAL's economic performance in the fiscal year 2018 resulting in high cash generation. This increase was partly offset by a TEUR 14,229 decrease in short term financial assets, driven by the sale of assets in June and December 2018 and a movement in the fair value of the short term financial assets.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

'Cash and cash equivalents' increased by TEUR 4,510 from TEUR 114,665 as of 31 December 2016 to TEUR 119,175 as of 31 December 2017. The main driver was the TEUR 7,441 increase in short term financial assets, partly offset by a TEUR 2,931 decrease in cash and pledged cash.

As of 31 December 2017, ZEAL 'short-term financial assets' amounted to TEUR 27,123 (TEUR 19,682 of 31 December 2016). These deposits comprised fixed-income funds and were broadly spread. The TEUR 7,441 increase in the value of 'short term financial assets' was primarily due to the purchase of assets partially offset by the sale of assets in the fiscal year ended 2017. A change in equity of a TEUR 225 gain in the fiscal year 2017 (loss of TEUR 227 in the fiscal year ended 2016) was recognised after consideration of deferred taxes.

ZEAL also recorded financial assets classified as held-to-maturity of TEUR 1,174 as of 31 December 2017 (TEUR 2,192 as of 31 December 2016). The available-for-sale short-term financial assets and held-to-maturity financial assets were included as 'short-term financial assets'.

The 'pledged cash' increased from TEUR 268 as of 31 December 2016 to TEUR 3,006 as of 31 December 2017, primarily driven by the requirements of the licences acquired in the Netherlands and Norway during 2017.

9.5.8 Other Liabilities

The table below provides a breakdown of ZEAL's 'other liabilities – current' as of the dates presented:

As of31 December
2016	2017	2018
(audited)	(audited)	(audited)
		TEUR
		10,269
		10,269
		11,429
		128
12,663	12,456	11,557
210(1)	1,038	789
1,333	2,589	2,567
		242
1,640(1)	2,877	2,809
22,545	23,098	25,424
	TEUR8,0328,03212,539124307	TEUR6,7276,72712,293163288

(1) Due to different presentation for comparison purposes taken from the audited consolidated financial statements as of and for the year ended 31 December 2017.

Comparison of the fiscal years ended 31 December 2018 and 31 December 2017

As of 31 December 2018, 'total other liabilities – current' increased by TEUR 2,326 from TEUR 23,098 as of 31 December 2017 to TEUR 25,424 as of 31 December 2018. This was primarily driven by a reduction in 'liabilities to players and game brokers' offset by an increase in the 'accrued liabilities'.

'Accrued liabilities' had increased from TEUR 6,727 as of 31 December 2017 to TEUR 10,269 as of 31 December 2018. This was primarily driven by an increase in the value of outstanding invoices as of 31 December 2018. The increase was mainly a result of the timing of invoice payments.

'Liabilities to players and game brokers' had decreased by 7% from TEUR 12,293 as of 31 December 2017 to TEUR 11,557 as of 31 December 2018. This was mainly driven by the timing of year-end draws.

Comparison of the fiscal years ended 31 December 2017 and 31 December 2016

As of 31 December 2017, 'other liabilities' had increased by 2% from TEUR 22,545 as of 31 December 2016 to TEUR 23,098. This was primarily driven by an increase in the VAT liability offset by a reduction accrued liabilities.

The VAT liability increased from TEUR 1,333 as of 31 December 2016 to TEUR 2,589 as of 31 December 2017. The increase was mainly due to a large transfer pricing credit note being raised at 31 December 2016 which reduced the amount of VAT payable, as costs were subsequently recharged to a group entity within the same VAT group.

'Accrued liabilities' decreased from TEUR 8,032 as of 31 December 2016 to TEUR 6,727 as of 31 December 2017. This was primarily driven by a reduction in the value of outstanding invoices, a due to the payment of timing runs and a reduction in the bonus accrual. The decrease in the bonus accrual was due to certain German employees being offered an option at the start of the year to receive a guaranteed monthly pay-out of 100% of their bonus rather than a one-off payment in the following fiscal year.

(2) All other liabilities included in the table above are due in less than one year.

9.5.9 Equity

The table below provides a breakdown of ZEAL's 'equity' for the periods presented:

	As of31 December
	2016	2017	2018(audited)
	(audited)	(audited)
	TEUR	TEUR	TEUR
Equity
Subscribed capital	8,385	8,385	8,385
Share premium	21,578	21,578	21,578
Treasury shares	-	-	(1,903)
Other reserves	(785)	(560)	227
Foreign currency translation reserve	143	183	201
Retained earnings	68,237	77,030	94,710
Total equity	97,558	106,616	123,198

As of 31 December 2018, 'total equity' amounted to TEUR 123,198 compared to TEUR 106,616 as of 31 December 2017. The increase of TEUR 15,783 was mainly as result of increased 'retained earnings' by TEUR 17,680 from TEUR 77,030 as of 31 December 2017 to TEUR 94,710 as of 31 December 2018, primarily due to profit for the period of TEUR 26,663 in the fiscal year 2018. This was offset by a payment of TEUR 8,341 of dividends to the shareholders of the Company. On adoption of IFRS 9, 'other reserves' of TEUR 642 had been reclassified to 'retained earnings'. The 'other reserves' relate to the gains and losses on short term financial assets which under IAS 39 were recycled to the income statement on the final sale of the financial asset. Under IFRS 9, these gains and losses are recognised directly in the income statement. As a counter effect, as of 31 December 2018, the acquisition of 43,910 'treasury shares' at a price of EUR 43.34 per share resulted in deduction from 'equity' and a reduction of distributable reserves in the amount of TEUR 1,903 (EUR nil as of 31 December 2017). This acquisition was the result of a final judgement in March 2018 by the Regional Court (Landgericht) of Hamburg in relation to a dispute raised in 2015 regarding the transfer of the registered office of ZEAL from Hamburg, Germany to London, UK. As a result, qualifying shareholders who held shares in ZEAL on the date that the transfer was resolved became entitled to sell their shares back to ZEAL.

As of 31 December 2017, 'total equity' amounted to TEUR 106,616 compared to TEUR 97,558 as of 31 December 2016, primarily due to profit for the period of TEUR 17,178 in the fiscal year 2017 partially offset by a dividend payment of TEUR 8,385.

9.6 Liquidity and Cash Flow Resources

In the periods under review, ZEAL's principal sources of funds were cash flow from operating activities. Principal uses of cash were to fund investments and working capital.

9.6.1 Cash flow

The following table provides a breakdown of ZEAL's cash flow for the periods presented:

	For the year
ended 31 December

	2016	2017	2018
	(audited, unlessotherwise specified,and restated) (1)	(audited) (1)
	TEUR	TEUR	(audited)TEUR
Profit from continuing
operations before tax	36,511	25,231	37,985
Adjustments for:
Depreciation and amortisation of noncurrent assets	2,166	1,255	1,147
Net loss on sale of non-current assets	-	1	-
Finance income	(390)	(385)	(331)
Finance costs	237	335	204
Impairment of convertible loan	1,598	-	-
Share of result of associated companies	-	-	-
Share of result of joint ventures	-	-	-
Gain on liquidation of subsidiary	(238)	-	-
Loss on acquisition	1,340	-	-
Acquisition of GGGL and Geo24,
net of cash acquired (2)	623	-	-
Other non-cash changes	461 (3)	44 (3)	240
Changes in:
Trade and other receivables	9,487	(1,048)	-
Other assets and prepaidexpenses	(641)	(427)	(1,234)
Trade payables	39	458	(2,085)
Other liabilities	(980)	119	2,319
Financial liabilities	10	(17)	-
Deferred income	(1,726)	(146)	993
Provisions	(718)	501	5,664
Interest received	390	385	331
Interest paid	(237)	(335)	(204)
Income taxes paid	(12,718)	(12,819)	(6,827)
Cash flow from operating activities	33,968 (3)	13,152 (3)	38,202
Cash flow from investing activities
(Payments for) acquisition of intangible
assets	(240)	(236)	(44)
(Payments for) acquisition of property,
plant and equipment	(460)	(1,436)	(722)
Proceeds from the sale of
property, plant and equipmentPayments for acquisition of	-	4	-
investment	(1,198)	(1,843)	(247)
Receipt/(Payments) on
liquidation of subsidiary	238	-	-
Contributions (loan) to
associated companies	(1,598)	-	-
Long term loans(advanced to other companies)		-	-
Loan receipt from other companies	-	-	-
Short term loan	-	3,000	-
Income from sale of investments in equity
funds	-	-	6,567
Net cash outflow from investing activities	(3,258)	(511)	5,554
Cash flow from financing activities
Payments to acquire
treasury shares	-	-	(1,903)
Dividends paid to
the Company's shareholders	(23,478)	(8,385)	(8,341)

For the year ended 31 December

	2016(audited, unlessotherwise specified,and restated) (1)	2017	2018
		(audited) (1)	(audited)
	TEUR	TEUR	TEUR
Net cash outflow from financing activities	(23,478)	(8,385)	(10,244)
Net increase in cash, pledged cash andshort-term financial assets	7,232 (3)	4,256	33,512
Cash, pledged cash and short-termfinancial assets at the beginning of thefinancial period	100,887 (3)	108,119	112,375
Cash, pledged cash and short-term financialassets	108,119 (3)	112,375	145,887
Composition of cash, pledged cash and shortterm financial assets
Cash and pledged cash	94,983	92,052	132,993
Short-term financial assets	13,136 (3)	20,323	12,894

(1) The cash flows for the prior periods have been restated to remove the investments in equity funds from cash and cash equivalents. For further details and the restated cash flow statement see "9.3.1 Basis of Preparation of ZEAL's Consoli dated Financial Statements".

____________________

9.6.2 Cash Flow from Operating Activities

In the fiscal year 2018, cash flow from operating activities increased from TEUR 13,152 in the fiscal year 2017 to TEUR 38,202. The difference primarily related to the increase in profit before tax of TEUR 12,754 and a decrease in the amount of income tax paid.

Cash flow from operating activities decreased from TEUR 33,968 in the fiscal year 2016 to TEUR 13,152 in the fiscal year 2017, primarily driven by a decrease in profit before tax from TEUR 36,511 in the fiscal year 2016 to TEUR 25,231 in the fiscal year 2017 and a decrease in cash inflow from working capital. This was driven by a change from a cash inflow from movements in trade receivables from TEUR 9,487 in the fiscal year 2016 to a cash outflow of TEUR 1,048 in the fiscal year 2017. This change was driven by the receipt of a receivable in the fiscal year ended 2016 from the Spanish tax authority.

9.6.3 Net Cash Flow from Investing Activities

Net cash inflow from investing activities in the fiscal year 2018 increased from a cash outflow of TEUR 511 in the fiscal year 2017 to TEUR 5,554 in the fiscal year 2018. The cash intflow in the fiscal year 2018 was mainly attributable to the income from the sale of investments in equity funds of TEUR 6,567 (2017: nil). This was offset by TEUR 247 paid to acquire investments in Cloud Canyon Limited and De Integro Limited, TEUR 722 paid to acquired property, plant and equipment and TEUR 44 paid to acquire intangibles.

In the fiscal year 2017, the net cash outflow from investing activities decreased from TEUR 3,258 in the fiscal year ended 2016 to TEUR 511 in the fiscal year 2017, primarily driven by a positive cash inflow of TEUR 3,000 from the repayment of a short-term loan in the fiscal year ended 2017, which was offset by an increase in the cash paid for property, plant and equipment (TEUR 1,436) and the amount paid to invest in Omaze (TEUR 1,843).

9.6.4 Net Cash Outflow from Financing Activities

Financing outflow in the fiscal year 2018 increased by TEUR 1,859 from TEUR 8,385 in the fiscal year 2017 to TEUR 10,244. The outflow is attributable to the acquisition in July 2018 of treasury shares. In March 2018, a final judgement was handed down by the Regional Court (Landgericht) of Hamburg in relation to a dispute originally raised in 2015 regarding the transfer of the registered office of ZEAL from Hamburg, Germany, to London, UK. As a result, qualifying shareholders who held shares in

(2) In 2016, ZEAL acquired the remaining shares of Geonomics Global Games Limited (GGGL) and Geo24 UK Limited (Geo24), to obtain 100% ownership.

(3) Unaudited and restated.

ZEAL on the date that the transfer was resolved became entitled to sell their shares back to ZEAL at a price which was set at EUR 43.34 per share. A resolution to approve the purchase of these shares by ZEAL was passed at an extraordinary general meeting on 27 July 2018. This has resulted in the acquisition of 43,910 treasury shares at a price of EUR 43.34 per share resulting in a purchase price of TEUR 1,903. The remainder of the outflow for the fiscal year 2018 is due to the payment of TEUR 8,341 of dividends to shareholders of the Company.

In the fiscal year 2017, the net cash outflow from investing activities saw a decrease from TEUR 23,478 in the fiscal year 2016 to TEUR 8,385 in the fiscal year 2017, driven by a decrease in the dividends paid per share from EUR 2.80 to EUR 1.00.

9.7 Investments

9.7.1 Overview

ZEAL's investments and their development are shown in the line items 'other investments', 'property plant and equipment' and 'intangible assets' (each as shown in the balance sheet, see "9.5.1 Consolidated Statement of Financial Position"). Prior to the adoption of IFRS 9 on 1 January 2018, 'other investments' were recognised at fair value net of any impairment losses. Where the fair value of an investment cannot be reliably measured, then it is measured at cost. Since 1 January 2018, all other investments have been recognised at fair value through other comprehensive income.

9.7.2 Ongoing and Future Investments

The Company made an investment of TEUR 345 (GBP 300 thousand) in exchange for an additional 15% interest in Cloud Canyon Limited in March 2019, leading to a total investment representing a 20% interest.

The Company intends to invest approximately TEUR 50 in a lottery business and approximately TEUR 100 additionally in Omaze. No other future investments are envisaged at the date of the Prospectus.

The main source of funding for historic investments was, and for ongoing investments is, the cash generated from the day to day operations of ZEAL.

9.7.3 Investments in the fiscal year ended 2018

Investments totalled TEUR 1,185 in the fiscal year 2018 and related to 'property plant and equipment' acquisitions of TEUR 894, 'intangible asset' acquisitions of TEUR 44, an investment in the amount of TEUR 115 (GBP 100 thousand) in a 5% interest in Cloud Canyon Limited which runs a lottery syndicate business under the brand 'wshful' and a TEUR 132 (GBP 120 thousand) acquisition of a 10% interest in De Integro Limited. Regarding the Lottery Betting segment, the major part of the investments in the fiscal year 2018 related to 'property, plant and equipment' additions in ZEAL's offices in London and Hamburg. The investment in Cloud Canyon Limited is included within the 'ZEAL Ventures' segment.

9.7.4 Investments in the fiscal year ended 2017

Investments totalled TEUR 3,515 in the fiscal year 2017 and related to 'property plant and equipment' acquisitions of TEUR 1,436, 'intangible asset' acquisitions of TEUR 236 and an investment of TEUR 1,843 in Omaze (see "9.5.5 Other Investments"). The Omaze investment is included within the 'ZEAL Ventures' segment. Regarding the 'Lottery Betting' segment, the major part of the investments in the fiscal year 2017 related to 'property, plant and equipment' additions in ZEAL's offices in London and Hamburg.

9.7.5 Investments in the fiscal year ended 2016

Investments totalled TEUR 1,890 in the fiscal year 2016 and related to 'property plant and equipment' acquisitions of TEUR 452, 'intangible asset acquisitions' of TEUR 240 and an investment of TEUR 1,198 in 10% interest in Pick Media Limited (formerly Free Postcode Lottery Ltd) located in England, UK. Regarding the 'Lottery Betting' segment, the major part of the investments in the fiscal year 2016 related to 'property, plant and equipment' additions in ZEAL's offices in London and Hamburg. The investment in Pick Media Limited is included within the 'ZEAL Ventures' segment.

9.8 Contingent Liabilities and Indirect Liabilities

9.8.1 Contingent liabilities

The contingent liability at each period end is calculated using gross gaming revenue ('Stakes' minus 'Prizes'). The contingent liability at each period end is as follows:

		As of31 December
	2016	2017	2018
	(audited)	(audited, restated)	(audited)
	EUR million	EUR million	EUR million
Contingent liability	23.3	41.3	64.6

The increase in the contingent liability between 31 December 2016 and 31 December 2018 is a result of ZEAL's continued sales to customers in Germany.

9.8.2 Operating Leases

ZEAL has operating leases for its offices in London, Hamburg and Madrid. The future minimum lease payments for the non-cancellable operating leases were as follows:

	As of31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Within one year	2,645	2,438	2,218
One to five years	8,322	7,306	7,234
Greater than five years	3,592	2,567	1,892
Total	14,559	12,311	11,344

The increase in the future minimum lease payments for the non-cancellable operating leases at 31 December 2016 is a result of ZEAL signing a lease agreement for a new office in Hamburg. This was a five-year lease term. No new significant leases have been entered into since and the future minimum lease payments are therefore reducing over the lease life.

9.8.3 Other Financial Commitments

ZEAL had significant financial commitments arising from other contracts, including cooperation agreements, insurance contracts, licence agreements and maintenance agreements. These commitments do not meet the definition of provisions in accordance with IAS 37 (Provisions, contingent assets and contingent liabilities) and have therefore been disclosed as a note to the financial statements.

Detail of the commitments together with estimated maturity dates are as follows:

	As of31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Within one year	10,369	14,764	2,200
One to five years	9,642	-	-
Greater than five years	-	-	-
Total	20,011	14,764	2,200

9.9 Significant Accounting Policies

The consolidated financial statements of ZEAL have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, and the Companies Act applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation to fair value of the available for sale financial assets as described in the accounting policies below.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying ZEAL's accounting policies. Actual results could differ from those estimates.

Under licence conditions and codes of practice published by the Gambling Commission of the United Kingdom ("UK Gambling Commission") in February 2015 (subsequently updated in April 2015), the financial statements must disclose the quantum of balances held in customer accounts representing funds not owned by the ZEAL. This information is included in note 15 to the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 (see F-41).

9.9.1 Recent Accounting Developments

9.9.1.1 New Standards, Amendments and Interpretations of Existing Standards Adopted by ZEAL with Regard to the Consolidated Financial Statements of as of and for the Fiscal Year Ended 31 December 2018

The following standards, interpretations and amendments apply for the first time to the financial reporting period commencing on 1 January 2018 but have had no material impact on the consolidated results of operations or financial position of ZEAL:

IFRS 2, "Classification and measurement of share-based payment transactions" is effective from 1 January 2018.
Annual improvement processes (AIP) 2014 2017 to IFRS 1 "First-time Adoption of International Financial Reporting Standards" concerning deletion of short-term exemptions for first-time adopters is effective from 1 January 2018.
IFRIC 22, "Foreign Currency Transactions and Advance Consideration" is effective from 1 January 2018.

The following standards, interpretations and amendments apply for the first time to the financial reporting period commencing on 1 January 2018 and have been adopted by ZEAL:

IFRS 15, "Revenue from contracts with customers"

Nature of change

IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard supersedes all revenue recognition requirements under IAS 18 and IAS 11. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Income from financial instruments will continue to be recognised under IAS 39 or IFRS 9.

Assessment

During 2017, the directors performed an assessment of the impact that the adoption of IFRS 15 would have on ZEAL's consolidated financial statements.

Revenue generated from secondary lottery betting and instant win games

For secondary lottery betting and instant win game products IFRS 15 will not have any impact on the recognition or timing of ZEAL's revenue recognition. All material revenue streams are accounted for under IFRS 9 rather than IFRS 15.

Revenue generated from commissions and fees

Ticket fee income is recognised where an affiliate entity of ZEAL acts an agent of individual customers brokering bets on the outcome of lotteries and instant win games. Under IFRS 15, ZEAL will continue to recognise revenue as an agent based on the net fair value of consideration received or receivable. The ticket fee will be recognised at the point in time when the bets have been brokered, the lottery ticket information has been sent to the bookmaker and confirmation of receipt of the information has been received. As a result, there is no change in the quantum or timing to be recognised under IAS 18 and IFRS 15.

For the Lottovate segment revenue is primarily recognised from commissions, which ZEAL receives for placing bets on behalf of customers. Under IFRS 15, ZEAL will continue to recognise revenue as an agent based on the net fair value of consideration received or receivable. Revenue will continue to be recognised at the point in time when the bets have been made, the lottery ticket information is passed on to the lottery organiser and confirmation of receipt of the information has been received. There is no change in the quantum or timing of revenue recognised under IFRS 15 as opposed to IAS 18.

Transition

ZEAL has three revenue streams; Secondary Lottery revenue, revenue generated from Instant Win Products, and revenue generated from commission and fees. The majority of ZEAL's revenue is generated from Secondary Lottery and Instant Win Products. This revenue is accounted for under IFRS 9.

ZEAL adopted the new standard on 1 January 2018 and transitioned under the modified retrospective approach, for revenue generated from commission and fees. For completed contracts, ZEAL has not restated contracts that began and ended in the same annual reporting period or contracts completed prior to the beginning of the earliest period presented. No other practical expedients have been applied.

No transition adjustments are required as revenue recognition is consistent between IAS 18 and IFRS 15.

IFRS 9, "Financial Instruments"

Nature of change

In July 2014, the IASB issued the final version of IFRS 9, "Financial Instruments" that replaces IAS 39, "Financial Instruments: Recognition and Measurement" and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting.

IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required, but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

Transition

ZEAL has initially adopted IFRS 9, Financial Instruments from 1 January 2018.

ZEAL has taken an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. There were no differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 as at 1 January 2018. On adoption, other reserves, within equity, was reclassified to retained earnings. The information presented for 2017 does not generally reflect the requirements of IFRS 9 but rather those of IAS 39.

Details of the significant changes and quantitative impact of the changes are set out below:

– Classification and measurement

Under IAS 39, ZEAL accounted for its investment in Pick Media Limited at historical cost. The investment in Omaze was held at fair value through profit or loss. On adoption of IFRS 9, all investments were remeasured at fair value in accordance with IFRS 13. As the investments are not held for trading, ZEAL has elected irrevocably to present gains and losses on other investments in Other Comprehensive Income (OCI). Under IFRS 9 all other investments are held at fair value through OCI and measured in accordance with IFRS 13.

A discounted cash flow model is utilised to determine the fair value (enterprise value) of the underlying businesses that ZEAL has invested in. The fair value of ZEAL's share of each business has been measured using an option pricing model. The option pricing model allocates the enterprise value of the investment amongst the individual shareholders.

On adoption of IFRS 9, ZEAL has classified short term financial assets (investments in fixed income funds and equity funds) previously held as available-for-sale, as investments held at fair value through profit or loss (FVPL). Under IAS 39, all gains and losses on disposal of financial assets were recognised in OCI and recycled to the income statement on disposal. Further under IFRS 9, there is no requirement to consider whether or not there is a significant or prolonged decline in the value of these assets. The adoption of IFRS 9 has resulted in the other reserves in equity being reclassified into retained earnings. At 1 January 2018 the reserve was TEUR 642.

The table below shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of ZEAL's financial assets as at 1 January 2018. ZEAL's financial liabilities have been classified at amortised cost.

1 January 2018TEUR	Originalclassificationunder IAS 39	Newclassificationunder IFRS 9	Originalcarryingamountunder IAS 39	Carryingamountunder IFRS 9
Financial assets
Trade receivables	Loans and receivables	Amortised cost	1,803	1,803
Receivables from gaming operations	Loans and receivables	Amortised cost	5,136	5,136
Other debtors	Loans and receivables	Amortised cost	1,677	1,677
Cash, cash equivalentsand pledged cash	Loans and receivables	Amortised cost	92,052	92,052
Financial assets(debt and equity instruments)	Available for sale	FVPL	25,949	25,949
Financial assets – Other	Held to maturity	Amortised cost	1,174	1,174
Other investments	Fair value through theprofit and loss	Equity instrumentsat FVOCI	3,041	3,041
Total Financial assets			130,832	130,832

– Expected credit losses

IFRS 9 requires ZEAL to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. ZEAL has applied a combination of the simplified and general approach to determine if it is required to record lifetime expected losses on its financial assets. On transition to IFRS 9, management reviewed the amount written off in previous periods and determined that no additional ECL was required.

– Hedge accounting

ZEAL does not hold any instruments which have been designated for hedge accounting. Accordingly, there is no impact on ZEAL.

9.9.1.2 New Standards, Amendments and Interpretations of Existing Standards that had not been Effective at the Time of Preparation of the Consolidated Financial Statements of as of and for the Fiscal Year Ended 31 December 2018 and had not been Early Adopted by ZEAL

The following standards and revisions listed below will be effective for future accounting periods beginning on or after 1 January 2019:

IFRIC Interpretation 23, "Uncertainty over Income Tax Treatments" is effective from 1 January 2019.
IFRS 16, "Leases" is effective from 1 January 2019.

The directors have considered the impact of the following standards in further detail, due to the potential impact these changes could have on ZEAL.

IFRS 16, "Leases"

Nature of change

IFRS 16 was issued in January 2016. It will result in almost all leases, for a lessee, being recognised in the Statement of Financial Position, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short term and low-value leases. The accounting for lessors will not significantly change.

IFRS 16 is effective for annual periods beginning on or after 1 January 2019, with early application permitted. ZEAL has adopted new standard on the required effective date using the modified retrospective method.

Preliminary Assessment

The standard will affect the accounting for ZEAL's operating leases. As at the reporting date, ZEAL had non-cancellable lease commitments of TEUR 11,344 (2017: TEUR 12,311), disclosed in note 24 to the Consolidated Financial Statements (see F-50). On initial adoption, the majority of operating leases will be disclosed in the Statement of Financial Position creating a right of use asset and a lease liability. An adjustment will be posted to retained earnings at 1 January 2019 to reflect the cumulative effect of initial adoption of IFRS 16.

At transition, lease liabilities will be measured at the present value of the remaining lease payment, discounted at ZEAL's incremental borrowing rate as at 1 January 2019. Right of use assets will be measured at their carrying amount as if IFRS 16 had been applied since the lease commencement date, discounted using the lessee's incremental borrowing rate at the date of initial application.

ZEAL will apply the following practical expedients when applying IFRS 16 to leases previously classified as operating under IAS 17 and IFRIC 4.
Applying a single discount rate to a portfolio of leases with similar characteristics.
Applying the exemption not to recognise right of use assets and liabilities for leases with less than 12 months of lease term remaining at date of initial application
Excluding initial direct costs from measuring the right of use asset at the date of initial application
Using hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
Transitioned to IFRS 16, leases which were previously identified under IAS 17 and IFRIC 4, only.

Some commitments are covered by the short-term and low-value lease recognition exemptions and will continue to be held off balance sheet.

On transition to IFRS 16, ZEAL will recognise approximately TEUR 6,935 of right of use assets and approximately TEUR 8,344 of lease liabilities, recognising the difference in retained earnings.

9.9.2 Significant Judgements and Estimates

In determining and applying accounting policies, judgement is often required where the choice of specific policy, assumption or accounting estimate to be followed could materially affect the reported results or net position of ZEAL within the next fiscal year, should it later be determined that a different choice be more appropriate.

Management considers the following to be areas of significant judgement and estimation for ZEAL due to greater complexity and/or particularly subject to the exercise of judgement.

9.9.2.1 Judgements in Applying the ZEAL's Accounting Policies

9.9.2.1.1 Basis of Consolidation

The relative complexity of ZEAL structure means that judgement is required in correctly applying the provisions of IFRS 10, "Consolidated financial statements", to ensure that all companies over which the Company has control are included and presented appropriately in the consolidated financial statements of the Company. The nature of these relationships including the power that the Company exercises over its subsidiary companies together with the Company's exposure or rights to variable returns of those companies is reviewed at least at each reporting period date to ensure that the companies included in the consolidation are appropriate (and are de-recognised where required).

9.9.2.1.2 Hoplon III Insurance

ZEAL entered into the Hoplon III-Insurance (see "12.10.1.1 Hoplon III-Insurance of USD 90 million") in 2018. Judgement is required to determine if ZEAL has control over Hoplon and should consolidate the results of operations into its financial statements. The conclusions drawn by the Directors are described in detail in note 2.4 to the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 (see F-13).

9.9.2.1.3 Exceptional Items

Management uses judgement to determine items to be classified as exceptional to enable a better understanding of the underlying financial performance of ZEAL. Further details can be found in note 7 to the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 (see F-33).

9.9.2.1.4 Taxation and Other Duties

Due to periodic changes in the tax landscape of the industry in which ZEAL operates, judgement is required in determining the provision for taxes and other duties. The treatment of these items is often by its nature complex and cannot be finally determined until a formal resolution has been reached with the relevant tax authority, which may take several years. Amounts provided are accrued based on advice from legal professionals, management's interpretation of specific tax laws and the likelihood of settlement. Actual liabilities could differ from the amount provided, which could have an impact on the results and net position of ZEAL.

The majority of tax positions taken by ZEAL are routine and not subjective. However, judgement has been exercised by the directors in certain specific tax related areas. These matters have been disclosed if appropriate in the notes to the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 in accordance with the governing financial reporting standards and include the following areas:

9.9.2.1.5 Value Added Tax (VAT)

Due to the changes in German VAT legislation introduced on 1 January 2015, there is significant uncertainty around whether certain services provided by the myLotto24 Sub-Group are subject to VAT and the tax base on which any VAT payable would be calculated. At the relevant time, the Directors considered that the likelihood of the outflow of economic benefits was not probable and, as such, no provision has been recorded in the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018. Based on a thorough legal assessment, which included a review of the existing legal framework and case law, the Directors remained confident that the outcome will be favourable for ZEAL. ZEAL will continue to closely monitor any changes in this area and ensure that the accounting for VAT continues to comply with governing legislation. The directors reported a contingent liability on this matter and a separate disclosure is included in note 24 to the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 (see F-50).

9.9.2.1.6 Austrian Gaming Duty

Although myLotto24 Sub-Group is not actively targeting this market, its products can also be purchased in Austria. In January 2011, duty became payable on a point of consumption basis in Austria. There is judgement over whether the correct Austrian gaming duty should be payable based on 2% of 'Stakes' (or 4% of 'Stakes' from 1 January 2017), which is the rate for 'betting' or 40% of gross gaming revenue, which is the rate for 'gaming' activities. Previously, the Company considered the most likely outcome was that the duty would be due based on 'Stakes' and accrued on this basis. However, correspondence with the Specialist Division (Fachbereich) of the Austrian Tax Office for Duties, Transfer Taxes and Gaming (the "Austrian Tax Office") now indicates that activities in Austria are likely to be classified as gaming. The Austrian Tax Office argues that since lotteries qualify as gaming, bets on the outcome of lotteries also qualify as gaming. This correspondence does not present legally binding statement of the view of the Austrian Tax Office. Such a legally binding view may follow in the form of a tax assessment. However, the Company now considers that it is probable that an assessment will be received on the basis of gaming activities and have begun to provide on the basis that myLotto24 Sub-Group will be assessed at 40% of gross gaming revenue. As a result, a EUR 1.9 million provision has been recorded in 2018. Further details can be found in note 18 to the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 (see F-43). This amount is provided for based on advice from legal professionals, management's interpretation of gaming duty laws and the likelihood of settlement.

9.9.2.2 Estimates and Assumptions

9.9.2.2.1 Fair value of level 3 investments

At each reporting period, the fair value of the investments in Omaze and Pick Media Limited is calculated. A discounted cash flow model is utilised to determine the fair value (enterprise value) of the underlying businesses that ZEAL has invested in. The fair value of ZEAL's share of each business has been measured using an option pricing model. The option pricing model allocates the enterprise value of the investment amongst the individual shareholders. Key estimates and assumptions in the model include; the discount rate, billings growth rate and the growth in margin. Further details can be found in note 13 to the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 (see F-39).

As investments in De Integro Limited ('Dream Makers') and Cloud Canyon Limited ('wshful') were made in 2018, the fair value of these investments is considered to be equal to the cash paid to acquire the investments.

9.9.2.2.2 Provisions for litigation

At each reporting period, management is required to estimate the expected outflow of cash resulting from ZEAL's legal cases. If it is considered probable (i.e. greater than 50%) that a case will be lost then management will estimate the expected costs to be incurred and will record a provision. The determination of if it is probable a case will be lost may be made in conjunction with external legal professionals. The expected costs to be incurred are generally a range, dictated by gambling law or courts of law and management will estimate what percentage of these costs to provide if it is determined that it is probable a case will be lost. The estimate is based on experience from similar cases and the information received from the courts and/or regulator or other third party involved in the case. Details of the year-end provisions for litigation can be found in note 18 to the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 (see F-43).

9.9.3 Provisions

Provisions are recognised when there is a present obligation, whether legal or constructive, as a result of a past event for which it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Such provisions are calculated on a discounted basis where the effect is material to the original undiscounted provision. The carrying amount of the provision increases in each period to reflect the passage of time and the unwinding of the discount and the movement is recognised in the income statement within finance costs.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

The following table provides a breakdown of ZEAL's provisions for the periods presented:

	As of31 December
	2016	2017	2018
	(audited)	(audited)	(audited)
	TEUR	TEUR	TEUR
Provisions for litigation	336	837	439
Provision for closure of Ventura24's B2C
business	-	-	2,912
Provision for severance cost	-	-	990
Total current provisions	336	837	4,341
Gaming Duty provision	-	-	1,909
Provision for dilapidation	-	-	251
Total non-current provisions	-	-	2,160
Total provisions	336	837	6,501

As of 31 December 2018, provisions have increased by TEUR 5,664 from TEUR 837 as at 31 December 2017 to TEUR 6,501 as at 31 December 2018. The main drivers of this increase are the additional provisions booked for the closure of the Ventura24 B2C business, severance costs associated with the restructure of the business prior to the Lotto24 acquisition, a provision for Austrian gaming duty and a dilapidation provision for the London office.

As of 31 December 2017, provisions for litigation amounted to TEUR 837. Additions in the amount of TEUR 501 primarily related to an increase in costs required to settle legal cases, based on management best estimate at 31 December 2017.

As of 31 December 2016, provisions for litigation amounted to TEUR 336. Utilisation/release in the amount of TEUR 718 mainly related to the settlement of legal cases.

9.9.4 Contingent Liabilities

9.10 Disclosure of Financial Risks

9.10.1 Credit Risk

ZEAL adopted IFRS 9 on 1 January 2018.

The scope of the credit risk of ZEAL equals the sum of cash, short-term financial assets, trade receivables and other receivables. The maximum credit risk at the reporting date is the carrying value of cash, short-term financial assets, receivables from gaming operations and trade receivables disclosed in note 14 to the consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 (see F-40).

Impairment losses on financial assets recognised in profit or loss were as follows:

	2017	2018
	TEUR	TEUR
Impairment loss on receivables from gaming operationsImpairment loss on trade receivables	1,569-	1,160-
Impairment loss on cash and other financial assets	-	-
Total impairment loss	1,569	1,160

9.10.1.1 Cash and Other Financial Assets

There may be a default risk both in respect of the cash and short-term financial assets themselves, as well as the related interest accrued.

Due to the high total amount of cash and short-term financial assets held by ZEAL, and the resulting absolute and relative importance, extensive management processes have been established to steer and regularly monitor ZEAL's investment strategy.

Cash and short-term financial assets are invested in a variety of short-term securities offering as much liquidity and as little volatility as possible, while ensuring broad risk diversification. The overriding objective of ZEAL's investment strategy is to preserve capital – even at the expense of expected returns.

ZEAL's investment strategy is aimed at spreading and minimising risk by means of multi-dimensional diversification. Firstly, funds are divided into differing investment products, such as sight and term deposits, highly fungible government bonds of Eurozone states and short-term investment fund units. Secondly, ZEAL restricts its choice to those investments with good credit ratings.

Impairment on cash has been measured on the 12-month expected loss basis and reflects the short maturities of the exposures. ZEAL considers that its cash has low credit risk based on the external credit ratings of the counterparties. No expected credit losses ('ECL') has been recognised for cash, as it is not material.

Financial assets are held at fair value through profit or loss and therefore not assessed for impairment.

9.10.1.2 Trade Receivables

Trade receivables primarily relate to amounts due from ZEAL's partners for services performed on their behalf. Amounts are invoiced monthly and payment is due within 30 days. Impairments on trade receivables have been considered using the simplified lifetime ECL model. An impairment analysis is performed at each reporting date based on past events. At 31 December 2018 ZEAL has TEUR 772 (2017: TEUR 1,803) of trade debtors, due from one party (2017: two parties). They are current and none is overdue (2017: nil). This is consistent with past loss patterns and no provision has been recorded.

On transition to IFRS 9, management reviewed the amount written off in previous periods and determined that no adjustment was required.

9.10.1.3 Receivables from gaming operations

ZEAL mainly collects the amounts owed by customers directly, via direct debit or credit card. Missing amounts from such returned direct debits or credit card charges are charged directly to 'other operating expenses'.

ZEAL generates receivables from lottery organisers for the winnings of its customers, which are passed on directly to the winners upon receipt. Due to the credit standing of the lottery organisers, ZEAL does not expect any significant default on payment.

Receivables from payment systems such as credit card companies entail the risk that ZEAL's customers themselves fail to meet their payment obligations. This cost is recognised directly in the income statement in the event of payment default by a customer.

At 31 December 2018 TEUR 460 (2017: TEUR 1,964) of customer direct debits or credit card payments were fully provided against. Of the TEUR 1,964 provided for at 31 December 2017, ZEAL has not recovered any of the balance and the full amount was written off during 2018. ZEAL provides against failed payments as they occur. Efforts to recover the amounts are continued for three months, if they have not been recovered after this then they are fully written off. ZEAL has considered this in determining the appropriate level of lifetime credit losses for amount owed by customers.

The movement in the allowance for impairment in respect of receivables from gaming operations during the year was as follows. Comparative amounts for 2017 represent the allowance account for impairment losses under IAS 39.

	2017	2018
	TEUR	TEUR
Balances at 1 January per IFRS 9 (2018) and IAS 39 (2017)	395	1,964
Net re-measurement of loss allowance	1,569	1,620
Amounts written off	-	(3,124)
Balance at 31 December	1,964	460

9.10.1.4 Contingent assets

There are no contingent assets.

9.10.2 Liquidity Risk

Due to the sufficiency of its liquid assets, ZEAL is not exposed to any significant liquidity risk. Even in the case of significant restrictions of business against the backdrop of regulatory developments, ZEAL has sufficient liquidity to service the liabilities at any time. Financial liabilities are mainly due immediately and do not accrue interest.

In order to limit the particular risk of high jackpot pay-outs in the 'Lottery Betting' segment, myLotto24 Limited conducts hedging transactions which transfer of payment obligation risks to the capital market (see "12.10.1.1 Hoplon III-Insurance of USD 90 million").

The table below summarises the maturity profile of ZEAL's financial liabilities based on contractual undiscounted payments:

Year ended31 December 2018(audited)	Within 1year	Within 1-3years	Within 3-5years	Over 5years	Total
	TEUR	TEUR	TEUR	TEUR	TEUR
Trade payables	3,425	–	–	–	3,425
Other liabilities	21,562	1,229	–	–	22,791
Financial liabilities	106	–	–	–	106
Total	25,093	1,229	–	–	26,322

Year ended31 December 2017(audited)	Within 1year	Within 1-3years	Within 3-5years	Over 5years	Total
	TEUR	TEUR	TEUR	TEUR	TEUR
Trade payables	5,510	–	–		–5,510
Other liabilities	20,058	1,765	–		–21,823
Financial liabilities	106	–	–		–106
Total	25,674	1,765	–		–27,439

Year ended31 December 2016(audited)	Within 1year	Within 1-3years	Within 3-5years	Over 5years	Total
	TEUR	TEUR	TEUR	TEUR	TEUR
Trade payables	5,052	–	–		–5,052
Other liabilities	20,781	2,199	–		–22,980
Financial liabilities	123	–	–		–123
Total	25,956	2,199	–		–28,155

In addition to the amounts presented in the tables above, there are items excluded from other liabilities, as they are not considered a contractual financial liability. This includes VAT of TEUR 2,567 (2017: TEUR 2,589), gaming duty of TEUR 128 (2017: TEUR 163) and payroll related taxes and social security of TEUR 242 (2017: TEUR 288).

9.10.3 Interest Rate Risk

ZEAL invests the majority of its funds in a combination of fixed term deposits. For these funds, which are mainly held in liquid or short-term investments, there is a general risk from changing interest rates. A sensitivity analysis was conducted for the portfolio of cash and financial assets held on 31 December 2018 with an interest rate increase of 100 basis points. Assuming no changes are made to the portfolio in response to the interest rate increase, there would be a rise in interest income of TEUR 1,459 (in a simplified calculation). Under consideration of the duration of those investments currently in the portfolio, there would be an expected reduction of this interest income of TEUR 1. The overall effect, therefore, would be an increase in interest income of TEUR 1,458 (2017: TEUR 1,190).

9.10.4 Currency Risk

ZEAL is exposed to a currency risk as a result of a range of exchange rates. The risk arises from payments received and made in foreign currency, which differ from ZEAL's functional currency and are not always offset by payments in the same currency of the same amount and with the same maturities.

For the presentation of currency risks, IFRS 7 requires sensitivity analyses, which display the effects of hypothetical changes of the relevant risk variables on earnings and equity. In order to determine the currency risk, a fluctuation of 10% of the Euro against currencies where the earnings of ZEAL are exposed to was assumed at 31 December 2018.

On the basis of this assumption, a 10% increase in the value of the Euro against the British Pound, Norwegian Krone, South African Rand and the US Dollar would result in a positive effect of TEUR 314 (2017: TEUR 1,012) on earnings. A devaluation of 10% would result in a negative effect of TEUR 321 (2017: TEUR 720) on earnings.

In the year ended 31 December 2018 there was a gain from foreign exchange movements on financial instruments of TEUR 617 (2017: loss of TEUR 422).

The financial assets currently held do not bear any material currency risk.

10 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF THE COMBINED GROUP

10.1 Unaudited Pro Forma Consolidated Financial Information of the Combined Group

The unaudited pro forma consolidated income statement and unaudited pro forma consolidated statement of financial position (together "Unaudited Pro Forma Consolidated Financial Information") of the Combined Group set out on the following pages have been prepared for illustrative purposes only, in accordance with item 20.2 of Annex I of the Commission Regulation (EC) No 809/2004 of 29 April 2004 (as amended) and on the basis of the notes set out below. The unaudited interim pro forma consolidated income statements for the fiscal year ended 31 December 2018 have been prepared to illustrate the effect on the consolidated income statement of the Company as if the Completion had taken place on 1 January 2018. The unaudited pro forma consolidated statement of financial position has been prepared to illustrate the effect on the consolidated statement of financial position of the Company as of 31 December 2018 as if the Completion had taken place on 31 December 2018.

The Unaudited Pro Forma Consolidated Financial Information has been prepared on the basis of the following historical financial information:

− The audited and published consolidated financial statements of the Company as of and for the fiscal year ended 31 December 2018 which were prepared in accordance with the IFRS as adopted by EU.
− The audited and published financial statements of the Target as of and for the fiscal year ended 31 December 2018 which were prepared in accordance with the IFRS as adopted by EU.

10.1.1 Reconciliation of the Historical Financial Information of the Income Statement of the Target for the Fiscal Year ended 31 December 2018

In order to adjust the historical financial information of the Target in the underlying financial information of the Unaudited Pro Forma Consolidated Financial Information to be based on the methods of presentation, recognition and measurement of the Company, the following adjustments were made to the income statement of the Target for the period from 1 January 2018 to 31 December 2018:

− Removal of TEUR 321,832 of 'Billings' and TEUR 283,543 of 'Remitted stakes' (less commissions) for the period from 1 January 2018 to 31 December 2018 from the income statement to show consistency with the presentation of the income statement of the Company.

− Reclassification of TEUR 25,038 from other operating expenses for the period from 1 January 2018 to 31 December 2018 to marketing expenses (TEUR 15,424), direct costs of operations (TEUR 3,015) and other costs of operations (TEUR 6,599) in line with the methods of presentation of the Company.
− Reclassification of TEUR 599 from impairment loss for financial assets, included in results from operating activities, to gain/(loss) on short term financial assets included in results from financing and investing activities in line with the methods of presentation of the Company.

	Target beforeadjustments (1)	Adjustment ofpresentation	Target afteradjustments
	(unaudited)	(unaudited)	(unaudited)
	TEUR	TEUR	TEUR
Billings	321,832	(321,832)	-
Remitted stakes	(283,543)	283,543	-
Revenue	38,289	-	38,289
Other operating income	246	-	246
Total Operating performance (TOP) (2)	38,535	-	38,535
Personnel expenses	(9,048)	-	(9,048)
Other operating expenses	(25,038)	-	(25,038)
Marketing expenses	-	(15,424)	(15,424)
Direct costs of operations (3)	-	(3015)	(3015)
Other costs of operations (4)	-	(6,599)	(6,599)
Exchange rate differences	-	-	-
Impairment loss for financial assets	(599)	599	-
Depreciation and amortisation of non-current assets (5)	(1,202)	-	(1,202)
Result from operating activities (EBIT)	2,648	599	3,247
Finance income (6)	-	-	-
Finance costs (7)	(118)	-	(118)
Gain/(loss) on short term financial assets (8)	-	(599)	(599)
Results from financing and investing activities (9)	(118)	(599)	(717)
Profit before income tax (10)	2,530	-	2,530
Income tax expense	5,168	-	5,168
Profit attributable to the equity shareholdersof the Company(11)	7,698	-	7,698

(1) Except for rounding differences taken from the audited financial statements of the Target as of and for the fiscal year ended 31 December 2018.

____________________

(9) Corresponds to financial result in the income statement of the Target for the fiscal year ended 31 December 2018
(10) Corresponds to net profit before taxes in the income statement of the Target for the fiscal year ended 31 December 2018
(11) Corresponds to net profit (after taxes) in the income statement of the Target for the fiscal year ended 31 December 2018

10.1.2 Reconciliation of the Historical Financial Information of the Statement of Financial Position of the Target as of 31 December 2018

In order to adjust the historical financial information of the Target in the underlying financial information of the Unaudited Pro Forma Consolidated Financial Information to be based on the methods of presentation, recognition and measurement of the Company, the following adjustments were made to the statement of financial position of the Target at 31 December 2018:

(2) Corresponds to Total Performance in the income statement of the Target for the fiscal year ended 31 December 2018.

(3) Corresponds to direct operating expenses in the notes to the audited financial statements of the Target as of and for the fiscal year ended 31 December 2018.

(4) Corresponds to indirect operating expenses in the notes to the audited financial statements of the Target as of and for the fiscal year ended 31 December 2018

(5) Corresponds to amortisation/depreciation on intangible assets and property, plant and equipment in the income statement of the Target for the fiscal year ended 31 December 2018

(6) Corresponds to revenue from financial activities in the income statement of the Target for the fiscal year ended 31 December 2018

(7) Corresponds to expenses from financial activities in the income statement of the Target for the fiscal year ended 31 December 2018

(8) Corresponds to Impairment loss for financial assets in the income statement of the Target for the fiscal year ended 31 December 2018

− Reclassification of TEUR 384 of trade receivables to trade receivables and other current assets in line with the methods of presentation of the Company.
− Reclassification of TEUR 667 of other current assets and prepaid expenses to trade receivables and other current assets in line with the methods of presentation of the Company.
− Reclassification of TEUR 7,970 of financial assets to trade receivables and other current assets in line with the methods of presentation of the Company.
− Reclassification of TEUR 8,072 of cash and cash equivalents to cash and pledged cash in line with the methods of presentation of the Company.
− Reclassification of TEUR 148 of non-current financial liabilities to other current liabilities in line with the methods of presentation of the Company.
− Reclassification of TEUR 11,435 of financial liabilities to other liabilities in line with the methods of presentation of the Company.

	Target beforeadjustments (1)	Adjustment ofpresentation	Target afteradjustments
	(unaudited)	(unaudited)	(unaudited)
	TEUR	TEUR	TEUR
Non-current assets
Property, plant and equipment	1,409	-	1,409
Intangible assets	572	-	572
Deferred tax assets	12,464	-	12,464
Goodwill	18,850	-	18,850
Other investments	-	-	-
Other assets and prepaid expenses	-	-	-
Total non-current assets	33,295	-	33,295
Current assets
Trade receivables	384	(384)	-
Income tax receivables	-	-	-
Other current assets and prepaid expenses (2)	667	(667)	-
Trade receivables and other current assets	-	9,021	9,021
Financial assets (3)	7,970	(7,970)	-
Cash and cash equivalents	8,072	(8,072)	-
Cash and pledged cash	-	8,072	8,072
Total current assets	17,093	-	17,093
Total Assets	50,388	-	50,388
Non-current liabilities
Non-current financial liabilities	148	(148)	-
Long-term provisions	1,505	-	1,505
Other liabilities (4)	85	148	233
Total non-current liabilities	1,738	-	1,738

	Target beforeadjustments (1)	Adjustment ofpresentation	Target afteradjustments
	(unaudited)	(unaudited)	(unaudited)
	TEUR	TEUR	TEUR
Current liabilities
Trade payables	1,934	-	1,934
Other liabilities (5)	573	11,435	12,008
Financial liabilities (6)	11,435	(11,435)	-
Deferred income	-	-	-
Income tax liabilities	-	-	-
Provisions (7)	2,382	-	2,382
Total current liabilities	16,324	-	16,324
Equity
Subscribed capital	24,155	-	24,155
Share premium (8)	2,415	-	2,415
Retained earnings	5,756	-	5,756
Total equity	32,326	-	32,326
Total equity & liabilities	50,388	-	50,388

(1) Except for rounding differences taken from the unaudited quarterly statement of the Target as of and for the fiscal year ended 31 December 2018.

(3) Corresponds to current financial assets in the statement of financial position of the Target as of 31 December 2018.
(4) Corresponds to non-current other liabilities in the statement of financial position of the Target as of 31 December 2018.
(5) Corresponds to other current liabilities in the statement of financial position of the Target as of 31 December 2018.
(6) Corresponds to current financial liabilities in the statement of financial position of the Target as of 31 December 2018.
(7) Corresponds to short term provisions in the statement of financial position of the Target as of 31 December 2018.
(8) Corresponds to capital reserves in the statement of financial position of the Target as of 31 December 2018.

10.1.3 Proceeding and Assumptions Used for Preparation

____________________

The Unaudited Pro Forma Consolidated Financial Information has been prepared on the assumption that the shareholders of the Target have accepted the offer for 93.04% of the shares and that the acquisition of 93.04% of the shares in the Target, including the implementation of the necessary capital increase by the Company through the contribution of the shares purchased in the Target as contributions in kind, took place on 1 January 2018 (for the unaudited pro forma consolidated income statement) and on 31 December 2018 (for the unaudited pro forma consolidated statement of financial position).

Acceptance of the Offer by the Shareholders of the Target

The transferred consideration corresponds to the equity interests to be issued by the Company for the acquisition of the shares in the Target, measured at fair value as of the acquisition date. The acquisition costs of the Company for 93.04% of the shares in the Target are assumed to be TEUR 302,357. These are based on the issuance of 14,010,982 new shares in the Company as consideration for the acquisition of 22,473,615 shares in the Target (93.04% of the shares in the Target) at an exchange rate of 1 share in the Company for each 1.604 shares in the Target and at a price of EUR 21.58 per share in the Company, which corresponds to the weighted average price in the three months ended 18 November 2018, the day before the announcement of submission of the Offer on 19 November 2018. For the purposes of the final allocation of the purchase price, the acquisition costs will be derived from the share price of the Company as of the acquisition date.

In this regard, the number of shares in the Target issued and tendered into the Offer is based on the following data and assumptions for the purposes of the Unaudited Pro Forma Consolidated Financial Information:

− The Target had issued 24,154,890 shares as of 31 December 2018

(2) Corresponds to other current assets in the statement of financial position (labelled as balance sheet in the Target's financial information) of the Target as of 31 December 2018.

− The Target will not issue any shares in addition to the subscribed capital before Completion.

10.1.4 Unaudited Pro Forma Consolidated Income Statement for the Period from 1 January 2018 to 31 December 2018

	Company(1),(4)	Target (2),(4)	Pro formaadjustments (3),(4)	Pro formaconsolidatedincomestatement (4)
	TEUR	TEUR	TEUR	TEUR
Revenue	154,751	38,289	-	193,040
Other operating income	4,901	246	-	5,147
Total Operating performance (TOP)	159,652	38,535	-	198,187
Personnel expenses	(28,837)	(9,048)	-	(37,885)
Other operating expenses	(83,690)	(25,038)	-	(108,728)
Marketing expenses	(19,666)	(15,424)	-	(35,090)
Direct costs of operations	(44,323)	(3,015)	-	(47,338)
Other costs of operations	(19,701)	(6,599)	-	(26,300)
Exchange rate differences	617	-	-	617
Amortisation/depreciation on intangibleassets and property, plant and equipment	(1,147)	(1,202)	-	(2,349)
Result from operating activities beforeexceptional items (Adjusted EBIT)	46,595	3,247	-	49,842
Exceptional items	(8,288)	-	(2,498)	(10,786)
Result from operating activities(EBIT)	38,307	3,247	(2,498)	39,056
Finance income	331	-	-	331
Finance costs	(204)	(118)	-	(322)
Gain/(loss) on short term financial assets	(449)	(599)	-	(1,048)
Results from financing and investingactivities	(322)	(717)	-	(1,039)
Profit before income tax	37,985	2,530	(2,498)	38,017
Income tax expense	(11,322)	5,168	-	(6,154)
Profit attributable to the equity shareholders of the Company	26,663	7,698	(2,498)	31,863

(1) The Company financial information has been extracted from the consolidated financial statements of the Company for the fiscal year ended 31 December 2018.

(2) The Target financial information has been extracted from the financial statements of the Target for the fiscal year ended 31 December 2018 and from the unaudited reconciliation of the Target's historical financial information in "10.1.1 Reconciliation of the Historical Financial Information of the Income Statement of the Target for the Fiscal Year ended 31 December 2018" and "10.1.2 Reconciliation of the Historical Financial Information of the Statement of Financial Position of the Target as of 31 December 2018". Presentation adjustments have been made and are described in these sections.

10.1.5 Unaudited Pro Forma Consolidated Statement of Financial Position as of 31 December 2018

	Company(1),(5)	Target (2),(5)	Pro forma adjustments(3),(4),(5),(6),(7)	Pro formaconsolidatedstatement offinancial position (7)
	TEUR	TEUR	TEUR	TEUR
Non-current assets
Property, plant and equipment	2,425	1,409	-	3,834
Intangible assets	301	572	-	873
Deferred tax assets	627	12,464	-	13,091
Goodwill	-	18,850	270,969	289,819
Other investments	3,433	-	-	3,433
Other assets and prepaid expenses	146	-	-	146
Total non-current assets	6,932	33,295	270,969	311,196
Current assets
Trade and other receivables	-	-	-	-
Income tax receivables	39	-		39
Trade receivables and other currentassets	16,354	9,021		25,375
Financial assets	12,894	-		12,894
Cash and pledged cash	132,993	8,072	(3,148)	137,917
Total current assets	162,280	17,093	(3,148)	176,225
Total Assets	169,212	50,388	267,821	487,421
Non-current liabilities
Provisions	2,160	1,505	-	3,665
Other liabilities	1,758	233	-	1,991
Total non-current liabilities	3,918	1,738	-	5,656
Current liabilities
Trade payables	3,425	1,934	-	5,359
Other liabilities	25,424	12,008	-	37,432
Financial liabilities	106	-	-	106
Deferred income	3,098	-	-	3,098
Income tax liabilities	5,702	-	-	5,702
Provisions	4,341	2,382	-	6,723
Total current liabilities	42,096	16,324	-	58,420
Equity
Subscribed capital	8,385	24,155	(10,144)	22,396
Share premium	21,578	2,415	285,282	309,275
Treasury shares	(1,903)	-	-	(1,903)
Other reserves	227	-	-	227
Foreign currency translation
reserve	201	-	-	201
Non-controlling interest	-	-	937	937
Retained earnings	94,710	5,756	(8,254)	92,212
Total equity	123,198	32,326	267,821	423,345
Total equity & liability	169,212	50,388	267,821	487,421

(1) The Company financial information has been extracted from the consolidated financial statements of the Company for the fiscal year ended 31 December 2018.

____________________

(2) The Target financial information has been extracted from the financial statements of the Target for the fiscal year ended 31 December 2018 and from the unaudited reconciliation of the Target's historical financial information in "10.1.1 Reconciliation of the Historical Financial Information of the Income Statement of the Target for the Fiscal Year ended 31 December 2018" and "10.1.2 Reconciliation of the Historical Financial Information of the Statement of Financial Position of the Target as of 31 De cember 2018". Presentation adjustments have been made and are described in these sections.

(3) Transaction costs of TEUR 6,350 are attributable to the Combination and recognised through profit or loss as execeptional items. In the Company's consolidated income statement for the fiscal year ended 31 December 2018, transaction costs of TEUR 3,852 for the Combination have already been recognised in profit or loss. Consequently, retained earnings are to

be reduced by TEUR 2,498.Transaction costs of TEUR 650 are attributable to the share issuance and are to be charged to share premium. Furthermore, for the purposes of the Unaudited Pro Forma Consolidated Financial Information and on the basis of a preliminary analysis, the Company assumes that none of the transaction costs will be tax deductible.
(4) Pro forma adjustment of TEUR 3,148 has been posted to recognise to adjust the cash balance for the transaction costs of TEUR 7,000 (TEUR 6,350 recognised in the income statement and TEUR 650 capitalised) less TEUR 3,852 of costs already paid at 31 December 2018.
(5) The unaudited pro forma consolidated statement of financial position has been prepared on the basis that the transaction will be treated as a business combination in accordance with IFRS 3. However, it does not reflect any fair value adjustments to the acquired net assets and liabilities as the fair value measurement of these items will only be performed as at the date of Completion. The fair value adjustments, when finalised, may be material. For the purposes of the unaudited pro forma consolidated statement of financial position, the estimated excess purchase consideration over the carrying amount of net assets has been presented as a single value in goodwill. The goodwill balance has been calculated as the consideration transferred of TEUR 302,357 as calculated in "10.1.3 Proceeding and Assumptions Used for Preparation" less the acquired net assets of the Target of TEUR 13,476. The goodwill included on the historical statement of financial position of the Target of TEUR 18,850 has been excluded from the acquired net assets of the Target.
(6) Pro forma adjustments have been posted to recognise the TEUR 14,011 of shares issued to acquire the Target. TEUR 288,347 of share premium and TEUR 937 of non-controlling interest have been recognised as the difference between the consideration transferred of TEUR 302,357 and the nominal value of shares issued.
(7) The Target's subscribed capital of TEUR 24,155, share premium of TEUR 2,415 and retained earnings of TEUR 5,756 have been eliminated on consolidation
(8) There have no adjustments been made to reflect the results of the operations of the Company and the Target since 31 December 2018 or other changes of their financial situation within this period of time.

10.2 Accountant's Report on the Unaudited Pro Forma Financial Information of the Combined Group

The Executive Board ZEAL Network SE 5th Floor – One New Change London EC4M 9AF

8 May 2019

Dear Sirs

We report on the unaudited pro forma consolidated income statement and pro forma consolidated statement of financial position (the "Pro Forma Financial Information") set out in section "10.1" of the Prospectus dated 8 May 2019, which has been prepared on the basis described in the notes to Pro Forma Financial Information, for illustrative purposes only, to provide information about how the completion of the voluntary public takeover offer for all shares of Lotto24 in the form of an exchange offer might have affected the financial information presented on the basis of the accounting policies adopted by ZEAL Network SE (the "Company") in preparing the financial statements for the year ended 31 December 2018. This report is required by item 7 of Annex II of Commission Regulation (EC) No 809/2004 and is given for the purpose of complying with that item and for no other purpose.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to Commission Regulation (EC) No 809/2004, consenting to its inclusion in the Prospectus.

Responsibilities

It is the responsibility of the Executive Directors of the Company to prepare the Pro Forma Financial Information in accordance with items 1 to 6 of Annex II of Commission Regulation (EC) No 809/2004.

It is our responsibility to form an opinion, as required by item 7 of Annex II of the Commission Regulation (EC) No 809/2004, as to the proper compilation of the Pro Forma Financial Information and to report that opinion to you.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro Forma Financial Information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information with the Executive Directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro Forma Financial Information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion:

the Pro Forma Financial Information has been properly compiled on the basis stated; and
such basis is consistent with the accounting policies of the Company.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of Commission Regulation (EC) No 809/2004.

Yours faithfully

Ernst & Young LLP

11 MARKETS AND COMPETITION

The statements on markets and competition provided below are based on the cited third-party sources and on ZEAL's internal market observations and estimates – some of which are, in turn, derived from various sources ZEAL believes to be reliable. Such sources include industry publications as well as surveys, data and studies published by third parties. ZEAL did not verify or modify any of the Market Data provided by third-party providers. For more information on the sources used, see "2.4 Sources of Market Data".

Due to the lack of comparable publicly available information in certain areas and due to differing methodologies, market definitions and modelling, the data on market sizes, projected growth rates and competitive position should be viewed with caution as they may be different from other publications of the used sources or similar analyses by other market research companies or competitors. Market sizes, market positions and market shares mentioned in the Prospectus may not be fully comparable with other information mentioned in the Prospectus. Additional factors which should be considered in assessing the market and competitive data and, in particular, the projected growth rates, are described elsewhere in the Prospectus, including those set out in the sections "1 Risk Factors", "2.3 Forward-looking Statements" and "9.2 Key Factors Influencing ZEAL's Results from Operating Activi ties (EBIT)".

Sources quoted at the end of a paragraph apply for the entire paragraph unless indicated otherwise.

11.1 Markets

ZEAL's business activities are influenced by numerous demographic, economic, regulatory and political factors. ZEAL is most significantly affected by developments in, and related to, the gambling markets in general and the lottery markets in particular. ZEAL is predominantly active in the online lottery markets of several European jurisdictions, notably Germany, Ireland, Norway, the Netherlands and the UK. ZEAL's business activities are divided into the three segments 'Lottery Betting', 'Lottovate' and 'ZEAL Ventures'.

ZEAL is predominantly active in a sub-sector of the gambling and lottery markets, namely the internetbased offering of Primary Lotteries and Secondary Lotteries. The market for the online offering of lottery products can be attributed to the gambling market and to the lottery market as part of the gambling market and, with regard to the form of distribution, to the e-commerce market. ZEAL's main business segment is 'Lottery Betting' which comprises the operation of Secondary Lotteries and the sale of Instant Win Products on the Internet. ZEAL intends, however, to change this business model, in particular in Germany, to the brokerage of Primary Lotteries, i.e. to the same business activity Lotto24 is already active in. The 'Lottovate' segment is focused on the operation of Primary Lotteries and the establishment of partnerships with charities, foundations and communities in order to jointly develop new sources of funding through customer-specific lottery platforms. The segment is focused on, but not limited to, regulated and licensed offers. The 'ZEAL Ventures' segment is run by the Company and focuses on external investments and internal incubation (i.e. the support of businesses primarily in their early development phase - in implementing their business concept), and supports start-ups that are developing new lottery business models or products.

ZEAL considers that the offering of lottery products competes with other games of chance. For this reason, the entire gambling market, and not only the lottery market, is of relevance for ZEAL (as well as Lotto24).

11.1.1 Gambling and Lottery Markets

The gambling market comprises products which provide the buyer with a chance of winning against payment of a certain fee, and where the winnings depends entirely or predominantly on chance, so that the occurrence of a win or the outcome of the game is uncertain. In addition to gaming machines and other casino games, the gambling market includes lotteries, sports betting, horse betting and other forms of betting.

11.1.1.1 Lotteries

Lotteries are gambling products, which are characterised as having a low chance of winning and a low pay-out ratio compared to other forms of gambling. However, lottery mechanisms are relatively simple to understand; these are highly visual with lottery balls being drawn from a barrel with full transparency, minimising concern about fraud. Lottery tickets can be purchased discreetly, and outcomes of draws typically occur at least one hour, if not several days after the purchase of the lottery ticket. The frequency of lottery draws is typically low, generally once or twice per week. Unlike most gambling products, lottery tickets can typically be purchased from a variety of retail outlets, including standalone kiosks as well as grocery and convenience stores (source: Gainsbury Report).

Despite the low probability of winning, lottery is a high-volume activity and typically one of the most popular forms of gambling (see also "11.1.3 Turnover on the Gambling and Lottery Markets"). Lotteries are often provided by a single operator under a monopoly licence. In some jurisdictions lottery operators are owned by the state and funds from lotteries are specified for 'good causes' such as education, hospital, culture, sports, or arts. This can lend a social credence towards participation. Where there is a single provider of lottery, the consequential lack of competition reduces the need for aggressive advertising and other promotions. Some lotteries are pooled across jurisdictions, allowing for larger jackpots, due to a greater number of participants. Typically, only individuals who reside in the jurisdiction offering the lottery are eligible to win prizes (source: Gainsbury Report).

For many consumers, lottery is not perceived to be a form of 'gambling', particularly for non-frequent participation. Lottery is distinct from many other forms of gambling that require specific knowledge, or travel to and entry into licensed gambling venues. Players can be informed of outcomes from their own home, as lottery draws are traditionally televised and results are often included in news programmes or featured during televised shows and in the media, including newspapers. For some consumers, lottery is a social activity, for example, entering regular numbers as a group or syndicate. Lottery winners are often featured in media stories. The lottery may be perceived as achievable, albeit unlikely, and possible for anyone, regardless of background or circumstances, to experience a lifealtering win. Subsequently, lottery players are not typically characterised as being from specific demographic segments, as a wide variety of people engage in this activity. However, some jurisdictions have reported declining lottery participation by younger age groups. Attempts are being made to make lottery more attractive to younger generations, including the launch of mobile lottery apps for smartphones and tablets, allowing consumers to check their tickets online, and set reminders to purchase tickets (source: Gainsbury Report).

11.1.1.2 Primary Lotteries

As part of the gambling market, the lottery market comprises, first of all, Primary Lotteries. These are both active and passive lotteries. While in active lotteries the player selects a limited number of lottery numbers from a finite series (for example, in the German lottery 'LOTTO 6aus49'), in the passive lottery the player acquires a ticket with a multi-digit ticket number created by the lottery operator (as in the case of tickets in German class lotteries).

11.1.1.3 Secondary Lotteries

Secondary Lotteries are online bets on the outcome of Primary Lotteries. While Primary Lottery operators are typically subject to licence conditions limiting the scope of gambling products they are permitted to offer, Secondary Lotteries can be typically be offered without those limitations. Therefore, Secondary Lotteries are typically able to give their customers the opportunity to participate in international lotteries with higher jackpots which are not offered in their home state. Customers of myLotto24 Limited, for example, which are domiciled in the UK, can place bets via the online-platform 'www.mylotto24.co.uk' on the German Primary Lottery 'LOTTO 6aus49' or the US-Primary Lotteries 'Powerball' or 'Mega Millions'. None of these Primary Lotteries are offered by their operators directly in the UK.

The drawing of the winning numbers is exclusively carried out by the operator of the Primary Lottery and a winning event in the Secondary Lottery occurs if the player has correctly predicted the numbers drawn in advance. The amount of the prize generally depends on the terms and conditions of the operator of the Secondary Lottery, and is usually based on the same prize quotas of the Primary Lottery published for the respective draw. The player of the Secondary Lottery is generally put in the same position by the operator of the Secondary Lottery as if he had played and become a winner of the Primary Lottery. The lottery prizes of Secondary Lotteries, in particular jackpots, are typically not based on ticket sales, but hedged by the operator using either established capital market instruments to cover special risks, the risk capital of which is deposited in the form of fiduciary deposits or bank guarantees, so that the pay-out of large winnings is also secured, or by purchasing lottery tickets from the Primary Lottery as a reinsurance method (see, for example, the reinsurance methods used by ZEAL in section "12.17 Risk Management and Hedging").

This model is often in direct competition with existing Primary Lotteries within a jurisdiction. A competitive advantage of Secondary Lottery operators is that they can offer bets on more lotteries than are offered or brokered as Primary Lotteries officially and under licence in a certain market. This allows lottery draws to be offered with a higher frequency than traditional Primary Lotteries. Secondary Lottery operators typically operate under a betting licence.

Secondary Lotteries also permit innovative betting products that move away from simple lottery draws. For example, players can bet on a range of numbers, the first number of the draw, whether the second number will be above or below a certain level, or side betting odds, similar to roulette (e.g., evens and odds). Some Secondary Lottery operators can use a random number generator to provide independent lottery draws, not based on any official lottery draw. However, this is likely to be classified as a casino gambling activity.

11.1.1.4 Lottery Brokerage

In lottery brokerage the broker arranges the conclusion of a sales contract between lottery players and the operator as regards Primary Lotteries. The broker typically owns the customer relationship and handles all pay-outs. The common business model is to receive a sales commission from the operator of the Primary Lottery that may be volume and product dependent. Typically, the offer (product, pricing, promotion) is comparably limited and essentially in line with the offer of the operator of the Primary Lotteries. The Company was operating as an online broker in Germany until 2009 when brokerage was prohibited in Germany, and Lotto24 succeeded as an online broker after 2012 when the State Treaty on Gambling (Glücksspielstaatsvertrag), which entered into force on 1 July 2012 ("Treaty on Gambling 2012"), once again permitted brokerage under a brokerage licence.

Lottery brokerage is less disruptive to the business of the operators of Primary Lotteries than the offering of Secondary Lotteries as lottery players still purchase tickets from a Primary Lottery operator. However, this model also allows brokers to market products provided by not only one lottery operator which typically leads to a broader portfolio of products. Accordingly, the operator of the Primary Lotteries loses control of the marketing and messaging to players as well as other important consumer protection measures. The broker remains in the possession of the lottery ticket and redeems them in the event of winnings, which are subsequently transferred to the lottery player. Lottery brokers may also offer additional services to their customers to increase the attractiveness of their business (e.g. the organisation of lottery syndicates).

As lottery brokers are not technically providing a gambling service, but merely providing access to an existing operator of Primary Lotteries, they may not need to be licensed or regulated. In some jurisdictions, however, lottery brokerage is only permitted subject to a state licence and only certain Primary Lotteries may be brokered (e.g. in Germany).

11.1.2 Online Gambling and Lottery Markets

11.1.2.1 Online Gambling

The online gambling market is the interface between the gambling market and the e-commerce market in terms of the products sold and the form of distribution. The online lottery market in turn forms a subsegment of the online gambling market.

New technologies are constantly being developed and internet technology is being used by companies and users in novel and innovative ways. Internet gambling companies are using internet technology to reach a wide range of users, including the increasing proportion of the population who access the internet through mobile devices. According to the Gainsbury Report, internet gambling is expanding internationally; the global online gambling market is estimated to reach USD 66.59 billion by 2020, more than doubling since 2009 according to the same source. The report states that casino games and sports betting make up the largest share of the online gambling market. As of April 2017, there were an estimated 3,621 online gambling sites, including 1,444 casino sites, 832 sports and racebooks, 523 bingo sites, 251 poker sites, 215 lottery sites, 130 binary options sites, 109 forex sites, 27 fantasy sports sites, 16 spread betting sites, and 10 betting exchanges (source: Gainsbury Report).

More than 80 nations have legalised online gambling, although in many jurisdictions legislation is not clearly defined and there remains a large offshore market, which includes grey market sites (which are not subject to any direct legal control and are in a legal grey area) and sites operating illegally. Although there are restrictions on marketing for gambling in most jurisdictions, it is difficult to enforce these restrictions online, and many offshore gambling sites can market directly to consumers across jurisdictions (source: Gainsbury Report).

11.1.2.2 Online Lotteries

According to the Gainsbury Report, internet gambling has impacted lotteries, with many jurisdictions now permitting the sale of lottery tickets online, although this is generally restricted to residents of specific jurisdictions. Lotteries lend themselves to the online channels; the simple mechanisms, repeated, regular play, and high popularity make online lotteries a relatively simple form of e-commerce. The online lottery market is a competitive market, albeit not as competitive as other types of online gambling. There is less drive for innovation as there has traditionally been limited consumer choice. Subsequently, many online lottery sites have not evolved to be as sophisticated as other types of online gambling. Many official online gambling sites, and mobile apps if these are available, are not particularly well-designed, and do not focus on improving the consumer experience beyond basic utilitarian functions (source: Gainsbury Report).

The same report states that the lack of innovation in the online lottery market has created a potentially attractive market for online gambling providers. There is less competition, and cost, to acquire new consumers, including existing lottery players of licensed providers. For example, online advertising through internet search engines which, when entering a relevant keyword, lead to the websites of the online lottery broker or organiser is less expensive than advertising for other games of chance due to the lack of competition. Lottery is the most popular form of gambling, representing a potentially large consumer base. Furthermore, lotteries can be offered in addition to other forms of online gambling as a complementary product (source: Gainsbury Report).

11.1.3 Turnover on the Gambling and Lottery Markets

11.1.3.1 Definitions of terms

In the following overview of the global and selected European gambling and lottery markets, the following terms are used. For information on the sources of market data used in the following overview, please refer to section "2.4 Sources of Market Data".

"CAGR"	Compound annual growth rate.
"GGT"	Gross gambling turnover, calculated by betting stakes(handle) or gambling amount played or lottery sales.
"GGW"	Gross gambling win, calculated by stakes (handle,gambling amount played or lottery sales) less prizesbut including bonuses (i.e. free credits awarded toplayers that they can bet with). Only covers amountsgenerated via gambling activities, i.e. any additionalamounts such as for lodging or food and beveragesare not included.
"GGY" or "Gross Gambling Yield"	Amount retained by operators after the payment ofwinnings but before the deduction of the costs of theoperation.

"Sales" Amount accrued through the sale of gambling products (e.g. betting slips or lottery tickets) before the payment of winnings and deduction of the costs of operation.

It should be noted that the sources of market data used in the following overview partly use the term 'gaming' and partly the term 'gambling'. In the opinion of the Company, these terms are used synonymously and the English language does not allow for a clear distinction. Section 3 of the Gambling Act 2005 (long title: "An act to make provision about gambling") as of 7 April 2005 of the UK uses the term 'gambling' as superordinate term ("In this Act "Gambling" means (a) gaming (within the meaning of section 6), (b) betting (within the meaning of section 9), and (c) participation in a lottery (within the meaning of section 14 and subject to section 15")). Following this concept, in this section, the term 'gambling' is used consistently in the Prospectus, including this overview, with one exception: devices that are specifically designed or adapted for use by individuals to gamble (whether or not it can also be used for other purposes (i.e. fruit, slot, or jackpot machines)), are named 'gaming machines' in all sources and also in the Prospectus, including this overview.

11.1.3.2 Global Gambling Market

In 2018, the global gaming market – measured by Gross Gambling Yield – was estimated by GBGC Market Data to have a volume of approximately USD 407,279 million, allocated to certain countries from the six continents as follows (source: GBGC Market Data):

Gross Gambling Yield for the annual periods ended

Region	31 December2016 (1)(in USD million)	31 December2017 (1)(in USD million)	31 December2018 (1)(in USD million)
Asia (2)	119,971	127,798	140,226
North America (3)	122,124	124,202	128,811
Europe (4)	101,287	101,643	103,143
Central and South America (5)	10,876	11,883	12,340
Australia and New Zealand	19,348	19,844	20,296
Africa (6)	1,938	2,265	2,463
TOTAL	375,544	387,635	407,279

(1) Based on total GGY for respective regions derived from GBGC Market Data for 2016 to 2018 (partly based on estimates).

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According to the GBGC Market Data, the lotteries contributed to approximately 32% of the 2018 estimate making it the largest individual gaming market segments with a total GGY estimated at approximately USD 130 billion (not including Botswana, Monaco and certain federal states of the USA).

In contrast, measuring market size by total sales in the industry, according to the La Fleur Almanac, in 2017 the global lottery market had a volume of approximately USD 304 billion (excluding certain revenue from video lottery terminals) for Africa, Australia, Asia and Middle East, Europe, Central America, South America and the Caribbean and North America (2016: around USD 275 billion). This translates to approximately EUR 270 billion total sales in the industry in 2017 (2016: around EUR 248 billion) (calculated based on the average exchange rates as announced by the European Central Bank of USD/EUR 1.1297 for 2017 and of USD/EUR 1.1069 for 2016).

11.1.3.3 German Gambling and Lottery Market

H2 Gambling Capital estimates the volume of the German gambling market – measured by GGW – to be around EUR 13.32 in 2018. According to the Goldmedia Analysis 2018, the German gambling

(2) Including China, Hong Kong, Israel, Japan, Macau, Malaysia, the Philippines, Singapore, South Korea and Taiwan.

(3) Including Canada and the USA.

(4) Including Austria, Belgium, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Monaco, the Netherlands, Norway, Poland, Portugal, Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, and UK.

(5) Including Argentina, Brazil, Chile, Peru and Uruguay.

(6) Including Botswana and South Africa.

market (comprising the market segments lotteries, betting, casino and gaming machines) had a volume – measured by Gross Gambling Yield – of around EUR 13.21 billion in 2016 and around EUR 13.49 billion in 2017 (data for 2017 partly based on estimates). The Goldmedia Analysis 2018 shows that the gambling market grew by around EUR 280 million in 2017 compared to the previous year 2016 (i.e. an annual growth rate of around 2.2%), and by around EUR 1.07 billion in a two-year comparison (i.e. CAGR of around 4.2%).

The individual gambling segments (lotteries, horse racing and sport betting, casino and gaming machines) developed differently between 2016 and 2018 (source: Goldmedia Analysis 2018 for 2016 and 2017, H2 Gambling Capital Data for 2018):

Gross Gambling Win/Gross Gambling Yield (1) for the annual periods ended

Gambling Market Segment	31 December2016 (2), (7)(in EUR billion)	31 December2017 (2), (7)(in EUR billion)	31 December2018 (2), (5), (8)(in EUR billion)
Lotteries (3)	4.74	4.63	4.71
Betting (3)	0.96	1.12	1.05
Casino	0.66	0.69	0.71
Gaming machines	6.85	7.06	6.92 (6)
TOTAL	13.21	13.49	13.39

(1) The H2 Gambling Capital Data, on which the 2018 figures are based, use the term 'Gross Gambling Win' as the relevant measure, which is calculated as stakes (handle, gambling amount played or lottery sales) less prizes but including bonuses (i.e. free credits awarded to players that they can bet with). It only covers amounts generated via gambling activities, i.e. any additional amounts such as for lodging or food and beverages are not included. The 2016 and 2017 figures are based on the Goldmedia Analysis 2018, which uses 'Gross Gambling Yield' as the relevant measure, being the amount retained by operators after the payment of winnings but before the deduction of the costs of the operation.
(2) Totals may not add up due to rounding.
(3) Gaming machines and lotteries include estimates.
(4) Figures do not include Secondary Lotteries.
(5) Estimated by H2 Gambling Capital.
(6) Disregarding gratuities.

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(7) Figures taken from the Goldmedia Analysis 2018.
(8) Figures taken from H2 Gambling Capital Data. At the date of the Prospectus, data from Goldmedia GmbH Strategy Consulting for 2018 was not available.

The Goldmedia Analysis 2018 compares the development of the German gambling market in a twoyear period between 2016 and 2017, measured by Gross Gambling Yield: in this period, gaming machines increasingly dominated the German gambling market with 51.9% in 2016 and 52.3% market share in 2017 (in 2018, based on the H2 Gambling Capital Data, measured by Gross Gambling Win, this percentage rate was 52.0%). In contrast, Primary Lotteries had a market share of 35.9% in 2016 and just 34.3% in 2017 according to the same source (in 2018, based on the H2 Gambling Capital Data, measured by Gross Gambling Win, this percentage rate was 35.4%). According to the Goldmedia Analysis 2018, the leading lottery product 'LOTTO 6aus49' alone generated a 13.8% share of the total market in 2017, however, its revenue was also decreasing as its GGY dropped to around EUR 1.86 billion – an 8.5% loss in a two-year assessment compared to 2015. The Goldmedia Analysis 2018 attributed this development to the emerging, unregulated Secondary Lotteries which, in its assessment, pose the biggest threat to the lottery industry.

Deutscher Lotto- und Totoblock ("DLTB") (for further details see below under "Lottery Segment") believes that the threat posed by Secondary Lotteries to regulated Primary Lotteries is due, in particular, to the rising advertising spending of unregulated operators of these games of chance (source: DLTB Press Release 2018), as shown in the Goldmedia Analysis 2018 for the years 2014 to 2017 (figures for 2018 are not yet available):

Gross Advertising Spending for the annual periods ended

Gambling Market Segment	31 December2014 (1)(in EUR million)	31 December2015 (1)(in EUR million)	31 December2016 (1)(in EUR million)	31 December2017 (1)(in EUR million)
Unregulated Secondary Lotteries	0.6	8	39	79
Unregulated betting and gambling	54	76	113	218
Regulated commercial distributors	45	29	27	28
State owned lotteries	79	90	82	78
TOTAL	179	203	261	403

(1) Totals may not add up due to rounding.

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The Goldmedia Analysis 2018 notes that the gross advertising spending of the operators of Secondary Lotteries has increased at a CAGR of 408.7% between 2014 and 2017, while the spending of the state owned lotteries was nearly stable (-0.4%) and the spending of the regulated commercial distributors decreased slightly by 14.6%. According to the same source, 32% of all gross advertising spending came from the regulated German charity lottery 'Aktion Mensch' and the unregulated operators of Secondary Lotteries 'Lottoland' and 'Tipp24'.

As regards ticket sales, the Goldmedia Analysis 2018 reports for the year 2017, with reference to estimates by one of the sixteen state-owned lottery operators of the German federal states (Landeslotteriegesellschaften) ("State Lottery Operators"), that 1/3 of the online lottery ticket sales generated in Germany are spent on Secondary Lotteries, and that, according to another estimate by that State Lottery Operator, the sales of Secondary Lotteries amounted to EUR 400-500 million in that year. This compared to ticket sales of the DLTB (for further details see below) in the amount of EUR 6.85 billion in 2017.

Lottery Segment

myLotto24 Limited offers Secondary Lotteries on certain German Primary Lotteries, in particular 'LOTTO 6aus49', on the internet (through Tipp24 Services Limited) and Lotto24 brokers these Primary Lotteries online.

The lottery system in Germany consists in particular of the sixteen State Lottery Operators. DTLB is the association of the State Lottery Operators. The State Lottery Operators of each Federal State operate independently from each other, but the pool of lottery prizes is mutual for all lotteries and other games of chance. In essence, it is one lottery operator split into sixteen parts (source: GBGC Analysis Germany). Even though the Primary Lotteries and other games of chance of the DLTB lotteries are operated in all sixteen German federal states (Länder) ("Federal States") under their respective own administration and licence, each of the State Lottery Operators has a quasi-monopoly in its Federal State. Besides DLTB and the State Lottery Operators, there are further minor lottery operators operating in Germany, which are either class lotteries, charity lotteries or savings banks lotteries. Class lotteries ('Norddeutsche Klassenlotterie (NKL)' and 'Süddeutsche Klassenlotterie (SKL)') are operated by the state-owned GKL Gemeinsame Klassenlotterie der Länder (Joint class lottery of the Federal States). Charities traditionally cooperate with TV stations (such as the major charity lotteries 'ARD Fernsehlotterie' or 'ZDF – Aktion Mensch') (source: ZEAL's own market expertise).

For the year 2017, the Goldmedia Analysis 2018 estimates that all German lotteries together generated 'Sales' of around EUR 8.72 billion, of which DLTB accounted for around EUR 6.85 billion and other lotteries for around EUR 1.87 billion ('Aktion Mensch' EUR 0.45 billion, class lotteries EUR 0.34 billion and 'ARD Fernsehlotterie' EUR 0.17 billion). The figures presented in the Goldmedia Analysis 2018 also demonstrate that – with respect to the regulated lotteries – the German lottery market has been virtually stagnating between 2016 and 2017. In 2017, the 'Sales' amounted to around EUR 8.80 billion, and in 2016 around EUR 8.97 billion.

DLTB offers a wide range of lottery products including number lotteries, Keno, GlücksSpirale (but also the betting products Toto football bets and 'Oddset'). The most popular and highest grossing lottery game in Germany is 'LOTTO 6aus49' which has existed for more than 60 years. The game's main attraction is its big jackpots. Other successful products are 'Spiel 77', 'EuroJackpot', 'Sofortlotterien' and 'SUPER 6'. The following table shows the 'Sales' of these lotteries and other games of chance in 2017 and 2018 (source: DLTB Press Release 2018).

	Sales 2016	Sales 2017
Lottery Product (1)	(in EUR million)	(in EUR million)
LOTTO 6aus49	3,838	3,710
Spiel 77	979	940
EuroJackpot	965	906
Instant lotteries (Sofortlotterien) (2)	438	446
SUPER 6	413	397
GlücksSpirale	242	230
KENO	129	130
BINGO	62	63
Plus 5	12	12
Sieger-Chance (3)	-	14
TOTAL	7,078	6,848

(1) Not all games of chance are offered by all State Lottery Operators, such as Bingo. DLTB also offers the gambling product 'Oddset' which is counted as a sports betting game and not recognised in the figures relating to 'Sales' and GGY of lottery products in Germany. 'Oddset's' 'Sales' were EUR 186 million in 2016 and EUR 166 million in 2017. The same applies for 'Toto' which is a soccer betting game. 'Toto's' 'Sales' were EUR 39 million in 2016 and EUR 37 million in 2017.

(2) Instant lotteries include scratch tickets, tear-off tickets and lottery letters (Losbriefe).

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(3) The additional lottery Sieger-Chance is offered in Baden-Württemberg, Bavaria, Berlin, Mecklenburg-Vorpommern, North Rhine-Westphalia, Rhineland-Palatinate, Saarland, Schleswig-Holstein. It was launched in July 2016 and DLTB has not published comparative figures for 2016.

The above figures show that the DLTB's 'Sales' stagnated in 2017 compared to 2016. In 2017, the total 'Sales' reported by DLTB were around EUR 6.85 billion (without the sports betting products 'Oddset' and 'Toto'). The 'Sales' declined by around 3.2% compared with the previous year's figure of around EUR 7.08 billion (without 'Oddset' and 'Toto'). DLTB gives two reasons for this development: firstly, "large jackpots, which inspire the joy of playing (große, die Spielfreude beflügelnde, Jackpots"), were rare in 2017 and, secondly, private, foreign gambling groups would increasingly "poach (wildern)" on the German market and not care about advertising bans and consumer protection (source: DLTB Press Release 2018). As regards the creation of jackpots in the German Primary Lottery 'LOTTO 6aus49' see "12.17.3.1 Bookmaking Risks".

According to DLTB, in 2016 there were two long jackpot phases over the maximum term of 13 draws resulting in continuously increasing jackpots in the German lottery 'LOTTO 6aus49', with compulsory pay-outs in May and September. In both draws, lottery players of the 2nd lottery prize class (Gewinnklasse 2) with six correct lottery numbers won more than EUR 30 million each. The total prizes of this lottery amounted to EUR 1.91 billion. In the European lottery 'EuroJackpot', the jackpots increased twice up to the maximum amount of EUR 90 million, the first won in October 2016 by a lottery player in Baden-Wuerttemberg (the highest win so far in Germany) and the second won in January 2017 (source: DLTB Press Release 2017). In 2017, there were only three larger jackpots which were won already in the first four months of that year: a player from Schleswig-Holstein won EUR 31 million in the lottery 'LOTTO 6aus49' in January, a winner in Finland hit the jackpot of EUR 87 million in the lottery 'EuroJackpot' and another EUR 50 million jackpot was awarded in May to a lottery player in Rhineland-Palatinate (source: DLTB Press Release 2018).

As regards the second reason, DLTB argues that any participation in foreign lotteries and Secondary Lotteries offered on the internet in Germany without a licence reduces the income and winnings that can be distributed to players in Germany. In the Press Release 2018, DLTB attributes this development in particular to the advertising activities of foreign gambling groups (see also the development of advertising spending between 2014 and 2017 at the beginning of this section "11.1.3.3"). While the State Lottery Operators had invested a total of around EUR 78 million in advertising in 2017, gross advertising expenditures for unregulated Secondary Lotteries had more than doubled compared to the previous year and amounted to EUR 79 million (sources: DLTB Press Release 2018, Goldmedia Analysis 2018).

The online share of DLTB 's market in 2017 amounted to approximately 9% according to H2 Gambling Capital Data based on online gross gambling wins (calculated by stakes (handle) or gambling amount played or lottery sales) less prizes but including bonuses (i.e. free credit awarded to players that they can bet with). This corresponds to an increase at a CAGR of approximately 17% when compared to a share of approximately 5% of DLTB's market in 2014.

ZEAL estimates that 22% of the online share of the DLTB market in 2017 can be allocated to ZEAL and 24% to Lotto24, resulting in a 46% online market share of the Combined Group.

In 2018, the DLTB's 'Sales' generated from the lottery 'LOTTO 6aus49' amounted to approximately EUR 3.5 billion (source: DLTB Press Release 2019), which represents a drop of around 5.7% compared to EUR 3.71 billion in 2017 (source: DLTB Press Release 2018).

Betting segment

The betting segment in Germany comprises, in particular, horse racing and sports betting. According to the Goldmedia Analysis 2018, the betting segment recorded a significant growth between 2016 and 2017, from 'Sales' of around EUR 6,259 million and GGY of around EUR 959 million in 2016, to 'Sales' of around EUR 7,670 million and GGY of around EUR 1,119 million in 2017. As the Goldmedia Analysis 2018 further demonstrates, the market share of the sub-segment 'horse betting' was only around 2.0% of the total 'Sales' in 2017 (around EUR 154 million), compared to around 95.3% (around EUR 7,313 million) allocated to commercial operators of other betting products (namely sports betting). State-owned operators (in particular DLTB offering the sports betting product 'Oddset') had a market share of only around 2.6% according to the Goldmedia Analysis 2018. For 2018, H2 Gambling Capital estimates that GGT in the betting segment amounted to EUR 5,907.7 million, and GGW to EUR 1,053.4 million.

Casino segment

With respect to the German casino segment, the Goldmedia Analysis 2018 reports that, after a period of stabilisation in 2015 and 2016 (with GGY – including tronc – of around EUR 641.0 million and, respectively, EUR 659.4 million), the casino market showed signs of a stable growth in 2017 of 4.1% year-on-year after a growth of 2.9% in the prior period with GGY of around EUR 686.6 million (including tronc) in 2017. The same analysis states that the main drivers for growth were gaming machines operated by casinos with GGY of around EUR 460.3 million in 2017. For 2018, H2 Gambling Capital estimates that GGT in the casino segment amounted to EUR 3,525.0 million, and GGW to EUR 634.5 million.

Gaming machines segment

The gambling market segment 'gaming machines' is the highest grossing gambling industry in Germany. According to the Goldmedia Analysis 2018, GGY was estimated to around EUR 7.06 billion in 2017, compared to around EUR 6.85 billion in 2016. For 2018, H2 Gambling Capital estimates that GGT in the gaming machines segment amounted to EUR 46.10 billion, and GGW to EUR 6.92 billion.

11.1.3.4 UK Gambling and Lottery Market

ZEAL is active in the gambling and lottery market of the UK through myLotto24 Limited, operating the 'Lottery Betting' business segment in the English language under the brand 'myLotto24' on the internet.

Similar to the German gambling market, the UK gambling market can be divided into the segments 'lotteries', 'betting', 'casino' and 'gaming machines'. In addition, the 'Bingo' segment has a certain relevance in the UK. The following table gives an overview of the UK gambling and lottery market as at 31 March 2017 for the annual term 1 April 2017 to 31 March 2018 (source: UK Gambling Commission, Facts and Figures 2019).

'Remote' gambling means gambling in which persons participate by the use of remote communication such as the internet, telephone, television, radio or any other kind of electronic or other technology for facilitating communication.

Gambling Market Segment(1)	Sales(in GBP million)	Gross Gambling Yield(in GBP million)
Lotteries	7,612	3,511
National Lottery	6,936	3,008
Society lotteries (4)	676	503
Betting	8,885	3,254
Casino	7,166	1,191
Remote (2), (3)	111,237	5,391
Gaming machines (Arcades)	n/a	418
Bingo	1,041	688
TOTAL	135,941	14,453

(1) The figures for betting, casino, gaming machines and bingo refer to the non-remote sector, the figures for lotteries include the remote and non-remote sector.

The following table gives a general overview of the development of the Gross Gambling Yield over three annual periods (source: UK Gambling Commission, Industry Statistics, November 2018):

Gross Gambling Yield for the annual periods (1) (in GBP million)

Gambling Market Segment	Apr 2015-Mar 2016	Apr 2016-Mar 2017	Apr 2017-Mar 2018
Lotteries (remote and non-remote)	380	442	503
National Lottery (remote and non-remote)	3,417	2,979	3,008
Betting (non-remote)	3,318	3,392	3,254
Casino (non-remote)	999	1,164	1,191
Remote casino, betting and bingo	4,231	4,743	5,392
Gaming machines (Arcades) (non-remote)	419	422	418
Bingo (non-remote)	693	687	688
TOTAL	13,457	13,829	14,454

(1) Based on data from UK Gambling Commission Industry Statistics November 2018.

Lottery Segment (remote and non-remote)

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The UK National Lottery was launched in 1994, under the regulation of the National Lottery Act 1993 and the National Lottery Commission (NLC), now the UK Gambling Commission, as regulator. The only operator of the National Lottery in that time has been Camelot UK Lotteries Limited ("Camelot"). Camelot won the right to run the National Lottery for a third time in August 2007. The third licence period began on 1 February 2009 and was due to run to 2019. However, in March 2012, the licence was extended by four years to 2023, following the NLC's agreement to Camelot's proposal to deliver around GBP 1.7 billion in additional National Lottery funding to society. As at 31 March 2018, there were around 45,000 retailers throughout the UK, ranging from small corner shops and newsagents to larger convenience stores and supermarkets (source: Camelot, 2017/18 Annual Report & Accounts).

(2) Remote gambling, i.e. gambling in which persons participate by the use of remote communication (the internet, telephone, television, radio or any other kind of electronic or other technology for facilitating communication).

(3) Remote casino, betting and bingo games provided to consumers in Great Britain online or through other means of remote communication.

(4) Society lotteries are lotteries promoted for the benefit of a non-commercial society. A society is non-commercial if it is established and conducted for charitable purposes, for the purpose of enabling participation in, or of supporting, sport, athletics or a cultural activity or for any other non-commercial purpose other than that of private gain.

For its fiscal years ended 31 March 2018, Camelot reports gross ticket sales of around GBP 6.95 billion (2017: GBP 6.93 billion) generating gross profits of GBP 241.3 million (2017: GBP 241.5 million) and profits attributable to owners of GBP 68.4 million (2017: GBP 70.5 million). Lottery prizes amounted to around GBP 3.93 billion (2017: GBP 3.94 billion). The following table shows the allocation of gross ticket sales to the types of games offered (source: Camelot, 2017/18 Annual Report & Accounts):

Type of Games	For the fiscal yearended 31 March 2017(in GBP million)	For the fiscal yearended 31 March 2018(in GBP million)
Draw-based games	4,023.2	4,116.8
Scratchcards and interactive instant win games	2,902.1	2,834.9

According to the GBGC Analysis for the UK, the main draw-based game is 'Lotto', which is a 6/59 draw, whose sales have been falling in the last two decades, attributed to the launch of other, new games of chance: In 1999/2000, 'Lotto' sales were around GBP 4,257 million, almost constantly decreasing to around GBP 2,573 million in 2014/2015. The UK Gambling Commission reported even lower ticket sales for 'Lotto' of just GBP 1,971 million between April 2017 and March 2018, while in the same period, the National Lottery sold tickets for 'EuroMillions' in the amount of GBP 1,623 million and for other lotteries in the amount of GBP 895 million (UK Gambling Commission, Facts and Figures 2019).

Besides the National Lottery, private companies, charities, and sports and cultural organisations can gain licences to run lotteries (Society Lotteries). As at 31 March 2017, the UK Gambling Commission had granted 650 society lottery licences, of which 475 were non-remote and 175 remote, generating society lottery sales in 2017/2018 of around GBP 676.5 million, compared to around GBP 586.7 million in 2016/2017 and around GBP 493.3 million in 2015/2016 (source: GBGC Analysis UK).

Betting segment (non-remote)

The betting industry is well established in the UK with around 8,700 licensed betting offices (LBOs), 60 racecourses and 26 greyhound tracks (source: GBGC Analysis for the UK). According to the GBGC Market Data, the UK sports betting segment recorded 'Sales' of around GBP 14.80 billion in 2016, GBP 16.53 billion in 2017 and GBP 21.89 billion in 2018, with GGY of around GBP 2.24 billion, GBP 2.36 billion and GBP 2.43 billion, respectively. As regards horse racing, 'Sales' were GBP 10.68 billion in 2016, GBP 11.61 billion in 2017 and GBP 13.99 billion in 2018, with GGY of around GBP 1.07 billion, GBP 1.15 billion and GBP 1.31 billion, respectively (source: GBGC Analysis UK).

Casino segment (non-remote)

In the casino segment, the UK market shows a continuous growth with respect to 'casino drop', i.e. the amount of money which casino players spend to buy casino chips. From 2001 to 2018, the Casino Drop increased from GBP 3.32 billion to GBP 7.17 billion, whilst the casino win, i.e. the amount left over after the players have cashed out their chips at the cashier, increased in the same period from GBP 533 million to GBP 984 million. In contrast to this positive development, the profit margins of the casino operators declined significantly. Whereas in 2001 it was 16.1%, in 2018 the margin was only 13.7% (source: GBGC Analysis UK).

Gaming machines segment (non-remote)

At the beginning of 2018, there were more than 180,000 gaming machines in premises regulated by the UK Gambling Commission. In addition, there were around 100,000 gaming machines in pubs, working men's clubs and local authority regulated "Family Entertainment Centers" which are not directly regulated by the UK Gambling Commission (source: GBGC Analysis UK). According to the GBBC Market Data, the gaming machines segment contributed GGY of around GBP 2.88 billion in 2016, GBP 2.88 billion in 2017 and GBP 2.78 billion in 2018 to the revenues of the UK gambling market.

Bingo segment (non-remote)

For the 'Bingo' segment, the UK Gambling Commission reported GGY of around GBP 688 million for the annual period between April 2017 and March 2018, of which around GBP 326 million was generated by 72,861 gaming machines (sources: UK Gambling Commission, Facts and Figures 2018).

Remote casino, betting and bingo games

Casino, betting and bingo games are also provided online (or through other means of remote communication) to consumers in Great Britain. Remote game hosts require operation licences from the UK Gambling Commission. According to the figures made available by the commission, the remote casino, betting and bingo sector had a market share in the total GGY of 37.30% and in total 'Sales' of 81.83% as at 31 March 2018. The overall remote GGY amounted to around GBP 5,391 million at that date. Of this, around GBP 2,964 million was generated through casino games, around GBP 2,262 million through betting activities and around GBP 165 million through Bingo games (source: UK Gambling Commission, Facts and Figures 2019).

11.1.3.5 Irish Gambling and Lottery Market

ZEAL is also active in the gambling and lottery market of Ireland through myLotto24 Limited, operating the 'Lottery Betting' business in the English language under the brand 'myLotto24' on the internet.

According to the GBGC Analysis for Ireland, the national lottery operator in the country is the Irish National Lottery which was established in 1987. Around 2.2 million people play the lottery every week and on a per capita basis, Ireland has the fifth highest spend on lotteries in Europe. The Irish National Lottery's product range consists of several lottery games (e.g. 'Lotto' and 'Lotto Plus' and 'EuroMillions') as well as other games of chance (e.g. 'Telly Bingo' or 'Scratchcard Games') (source: Premier Lottery Ireland, www.lottery.ie). The GBGC Analysis for Ireland notes that the draw number games are the most popular of all the lottery's products and in 2013 they accounted for 68% of all lottery sales. Online and offline 'Scratchcard Games' are also a significant contributor to lottery sales (25%) while 'Telly Bingo' and other games accounted for only 7% of sales in 2013. The charitable 'Rehab Lotteries' is another lottery operator, although its sales are insignificant compared to the sales of the Irish National Lottery (source: GBGC Analysis Ireland with reference to the latest figures published by the Irish National Lottery).

In 2016, 2017 and 2018, the Irish gambling market had a volume – measured by Gross Gambling Yield of the games of chance listed in the table below – of around EUR 1,023.40 million, EUR 1,095.97 million and EUR 1,133.48 million, respectively, allocated to the following gambling products (source: GBGC Market Data):

	For the year ended31 December 2016		For the year ended31 December 2017 (1)		For the year ended31 December 2018 (1)
	Sales	GGY	Sales	GGY	Sales	GGY
Gambling market segment (2)	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion
Lotteries	765.32	333.49	806.57	349.70	834.17	361.79
Betting	6,118.18	531.34	6,476.39	583.95	6,752.75	606.59
Horse racing	4,398.30	351.86	4,706.18	400.03	4,941.49	420.03
Sports betting (4)	1,719.88	179.48	1,770.21	183.92	1,811.26	186.56
Casino (3)	–	–	–	–	-	-
Gaming machines (Arcades)	–	138.25	–	141.70	-	144.68
Other (5)	67.72	20.32	68.74	20.62	68.05	20.42
		1,023.40		1,095.97		1,133.48

(1) Estimated by Global Betting and Gambling Consultants.

_________________________

(2) A dash ("–") signifies that the relevant figure is not available in the GBGC Market Data.

(3) Full-fledged casinos are not permitted in Ireland. Instead, the gambling venues operate as a private-member club. Currently, there are between 25 and 30 of such clubs operating in Ireland, most of them in the capital Dublin (source: GBGC Analysis for Ireland).

(4) The sports betting data includes all private companies operating under the new remote betting licence.

(5) Land-based bingo, Rehab Lotteries' online bingo. The data does not reflect the new onshore internet tax requirements due later in 2015.

11.1.3.6 Dutch Gambling and Lottery Market

At the end of 2016 Lottovate Nederland B.V., a wholly-owned subsidiary of Lottovate Limited, became the Netherlands' first new charity lottery licence holder since 1989 where, in 2018, Lottovate Nederland B.V. introduced 'Raffld – The Experience Lottery' based on this licence.

The Netherlands have a regulated offline gambling market that consists of a casino monopoly with 14 casinos (operated by Holland Casino), a state lottery, charity lotteries, a monopoly on lotto and sports betting, a monopoly on horse racing and private operators of over 33,000 gaming machines. The total GGY of the legal gambling sector was more than EUR 2 billion in 2017 (source: GBGC Analysis Netherlands).

In 2016, 2017 and 2018, the gambling market of The Netherlands had a volume – measured by Gross Gambling Yield of the games of chance listed in the table below – of approximately EUR 2,073.54 million, EUR 2,232.49 million and EUR 2,276.30 million, respectively, allocated to the following gambling products (source: GBGC Market Data):

	For the year ended31 December 2016		For the year ended31 December 2017 (1)		For the year ended31 December 2018 (1)
	Sales	GGY	Sales	GGY	Sales	GGY
Gambling market segment (2)	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion
Lotteries	1,924.56	807.18	2,003.47	941.63	2,073.59	974.59
Betting	156.85	35.38	183.17	58.85	219.53	70.89
Horse racing	22.95	5.92	22.49	5.83	21.89	5.67
Sports betting	133.90	29.46	160.68	53.02	197.64	65.22
Casino	–	558.55	–	586.48	-	604.66
Gaming machines (Arcades)	–	672.43 (1)	–	645.53	-	626.16
Other	–	–	–	–	-	-
		2,073.54		2,232.49		2,276.30

(1) Estimated by Global Betting and Gambling Consultants.

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Prior to 2016, five lottery operators had a licence to operate lottery games in the Netherlands: the State Lottery (Stichting Exploitatie Nederlandse Staatsloterij), De Lotto, Bankgiro Lottery, Sponsor/Friends Lottery and Postcode Lottery. The first two were state owned, while the latter three are charitable lotteries. In 2016, the two state-owned lotteries merged and created Nederlandse Loterij (the Netherlands Lottery). Further changes followed at the end of 2016, when the Netherlands Gambling Authority 'De Kansspelautoriteit' (KSA) awarded new charitable lottery licences, among others to Lottovate Nederland B.V. in connection with the introduction of the lottery 'Raffld – The Experience Lottery' (source: GBGC Analysis Netherlands).

(2) A dash ("–") signifies that the relevant figure is not available in the GBGC Market Data.

11.1.3.7 Norwegian Gambling and Lottery Market

In 2017, Lottovate launched Norway's first digital-only national charity lottery in partnership with UNICEF Norway. In 2016, 2017 and 2018, the gambling market of Norway had a volume – measured by Gross Gambling Yield of the games of chance listed in the table below – of approximately NOK 10,289.76 million, NOK 10,099.46 million and NOK 11,744.11 million, respectively, allocated to the following gambling products (source: GBGC Market Data):

	For the year ended31 December 2016		For the year ended31 December 2017		For the year ended31 December 2018 (1)
	Sales	GGY	Sales	GGY	Sales	GGY
Gambling market segment (2)	In NOKmillion	In NOKmillion	In NOKmillion	In NOKmillion	In EURmillion	In NOKmillion
Lotteries	11,643.28	5,900.00	11,576.49	5,647.52	14,593.36	7,296.68
Betting	7,174.06	2,134.14	7,349.63	2,131,95	7,368.29	2,233.91
Horse racing	3,880.93	1,244.14	3,894.00	1,241.67	3,971.88	1,282.92
Sports betting	3,293.13	890.00	3,281.55	890,28	3,396.41	950.99
Casino	–	–	–	–	-	-
Gaming machines (Arcades)	–	1,054.28	–	1,203.79	-	1,118.14
Other	7,246.68	1,201.34	6,985.86	1,116.20	6,846.14	1,095.38
		10,289.76		10,099.46		11,744.11

(1) Estimated by Global Betting and Gambling Consultants.

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11.1.3.8 Spanish Gambling and Lottery Market

In Spain, Ventura24 works together with ONCE, the Spanish 'National Organisation for the Blind'. In 2016, 2017 and 2018, the Spanish gambling market had a volume – measured by Gross Gambling Yield of the games of chance listed in the table below – of approximately EUR 8,697.87 million, EUR 9,247.11 million and EUR 9,293.09 million, respectively, allocated to the following gambling products (source: GBGC Market Data):

	For the year ended31 December 2016		For the year ended31 December 2017 (1)		For the year ended31 December 2018 (1)
	Sales	GGY	Sales	GGY	Sales	GGY
Gambling market segment (2), (3)	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion
Lotteries	10,674.92	4,128.13	10,147.12	4,129.49	10,426.16	4,170.46
Betting	6,348.22	533.96	8,301.20	634.69	9,896.64	740.89
Horse racing	84.65	7.21	93.63	8.79	104.08	9.38
Sports betting	6,263.57	526,75	8,207.57	625,90	9,792.56	731.51
Casino	–	548.00	–	628.50	-	690.43
Gaming machines (Arcades)	–	2,894.51	–	2,998.71	-	3,079.68
Other	1,983.85	593.27	2,063.26	604.22	2,088.22	611.63
		8,697.87		8,995.61		9,293.09

(1) Estimated by Global Betting and Gambling Consultants.

(2) A dash ("–") signifies that the relevant figure is not available in the GBGC Market Data.

(3) Spain has locally licensed internet betting and gambling and data is included in the respective segments.

11.1.4 Outlook for the Gambling and Lottery Markets

11.1.4.1 Outlook for the German Gambling and Lottery Market

Based on the estimates in the H2 Gambling Capital Data the German gambling and lottery market will develop as follows between 2019 and 2021 in terms of GGT and GGW:

	For the year ended31 December 2019e (1)		For the year ended31 December 2020e (1)		For the year ended31 December 2021e (1)
	GGT	GGW	GGT	GGW	GGT	GGW
	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion
Lotteries	9,054.1	4,743.7	9,122.4	4,777.1	9,185.6	4,807.8
Betting	6,098.9	1,086.8	6,414.7	1,140.5	6,589.6	1,169.5
Casino (2)	3,590.1	646.2	3,654.8	657.9	3,713.2	668.4
Gaming machines	44,700.0	6,710.0	43,300.0	6,490.0	41,300.0	6,200.0
Other (3)	1,988.6	80.5	2,042.9	82.7	2,097.2	85.0
TOTAL	65,431.7	13,267.2	64,534.8	13,148.2	62,885.6	12,930.7

(1) Estimated by H2 Gambling Capital according to the H2 Gambling Capital Data. Totals may not add up due to rounding.

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According to the H2 Gambling Capital Data and based on GGT or GGW, where available, the online share of the total DLTB market was 9% in 2017. ZEAL considers this share as low, compared to select other European markets (UK 27%, Finland 33% and Sweden 38%, source: H2 Gambling Capital Data). ZEAL expects, based on the same source that the online share of the total DLTB market will increase to 22% by 2023.

11.1.4.2 Outlook for other Gambling and Lottery Markets

Based on the estimates in the H2 Gambling Capital Data the gambling and lottery markets of the United Kingdom, Ireland, the Netherlands, Norway and Spain will develop as follows between 2018 and 2020 in terms of GGT and GGW:

UNITED KINGDOM		For the year ended31 December 2019e (1)		For the year ended31 December 2020e (1)		For the year ended31 December 2021e (1)
	GGT	GGW	GGT	GGW	GGT	GGW
	In GBPmillion	In GBPmillion	In GBPmillion	In GBPmillion	In GBPmillion	In GBPmillion
Lotteries	7,768.3	3,609.2	7,958.9	3,701.5	8,058.3	3,753.6
Betting	31,971.2	2,275.6	32,249.9	2,195.2	33,458.1	2,200.3
Casino (2)	8,689.8	1,006.1	8,869.3	1,026.6	9,031.4	1,045.4
Gaming machines (3)	60,476.2	2,898.9	38,810.3	2,380.6	35,154.5	2,233.1
Bingo (4)	1,010.3	351.4	988.2	343.7	969.5	337.2
Interactive Gambling (5)	427.5	18.8	471.0	20.7	512.9	22.6
TOTAL	110,343.3	10,460.0	89,347.8	9,668.4	87,184.7	9,592.2

(1) Estimated by H2 Gambling Capital according to the H2 Gambling Capital Data. Totals may not add up due to rounding.

(2) Disregarding gratuities.

(3) Interactive Live Casino (15 Federal States without Schleswig-Holstein) and Interactive Gaming (Schleswig-Holstein).

(2) Casino and casino machines.

(3) Gaming machines outside casinos, including bingo hall gaming machines.

(4) Bingo without bingo hall gaming machines.

(5) Includes internet (i.e. PC or mobile) and interactive television.

IRELAND	For the year ended31 December 2019e (1)		For the year ended31 December 2020e (1)		For the year ended31 December 2021e (1)
	GGT	GGW	GGT	GGW	GGT	GGW
	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion
Lotteries	828.9	30.1	839.4	364.3	849.0	368.2
Betting (2)	4,322.2	505.8	4,381.7	512.8	4,417.1	516.5
Casino (3)	279.4	41.9	284.8	42.7	289.7	43.4
Gaming machines	2,883.2	288.3	2,890.4	289.0	2,900.0	290.0
Bingo	132.2	39.6	132.6	39.8	133.0	39.9
Onshore Interactive Gambling (4)	1,326.4	66.3	1,397.6	69.9	1,465.5	73.3
TOTAL	9,772.2	1,302.1	9,926.6	1,318.5	10,054.3	1,331.3

(1) Estimated by H2 Gambling Capital according to the H2 Gambling Capital Data. Totals may not add up due to rounding.

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(4) Interactive gambling where the player and the operator are located in the same jurisdiction / territory.

THE NETHERLANDS	For the year ended31 December 2019e (1)		For the year ended31 December 2020e (1)		For the year ended31 December 2021e (1)
	GGT	GGW	GGT	GGW	GGT	GGW
	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion
Lotteries	2,031.3	1,159.8	2,051.0	1,174.1	2,068.2	1,186.7
Betting (2)	176.6	39.3	1,026.6	188,8	1,595.8	288.5
Casino (3)	6,512.4	627.9	6,622.9	638.6	6,725.3	648.4
Gaming machines (4)	4,347.4	651.1	4,312.6	646.9	4,288.3	643.2
Interactive gambling (5)	0.0	166.3	2,855.2	171.3	4,625.0	277.5
TOTAL	13,067.7	2,479.1	16,868.1	2,819.6	19,302.6	3,044.3

(1) Estimated by H2 Gambling Capital according to the H2 Gambling Capital Data. Totals may not add up due to rounding.

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(5) Includes internet (i.e. PC or mobile) and interactive television.

NORWAY		For the year ended31 December 2019e (1)		For the year ended31 December 2020e (1)		For the year ended31 December 2021e (1)
	GGT	GGW	GGT	GGW	GGT	GGW
	In NOKmillion	In NOKmillion	In NOKmillion	In NOKmillion	In NOKmillion	In NOKmillion
Lotteries	12,249.3	6,146.4	12,285.0	6,164.1	12,321.1	6,182.0
Betting (2)	6,784.6	1,920.9	6,846.5	1,936.6	6,877.5	1,944.8
Gaming machines (3)	10,316.6	833.1	10,400.4	840.0	10,446.8	843.8
Bingo (4)	3,871.0	1,003.4	3,874.8	1,068.2	3,878.2	780.7
Interactive Gambling (5)	14,211.2	953.2	15,184.2	1,018.5	16,021.9	1,074.7
TOTAL	47,432.6	10,633.4	48,590.8	10,739.3	49,545.5	10,826.0

(1) Estimated by H2 Gambling Capital according to the H2 Gambling Capital Data. Totals may not add up due to rounding.

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(2) On course horserace, off course horserace, sports betting and onshore interactive gambling.

(3) Private Members Clubs

(2) On course horserace, off course horse race, De Lotto Sports and all additional interactive sports betting.

(3) Tables and gaming machines (disregarding gratuities /other non-gaming revenue).

(4) Non casino gaming machines.

(2) On course horserace, off course horserace and Oddsen (sports betting).

(3) Video lottery terminals and games on ships.

(4) Commercial and non-commercial.

(5) Norsk Tipping.

SPAIN	For the year ended31 December 2019e (1)		For the year ended31 December 2020e (1)		For the year ended31 December 2021e (1)
	GGT	GGW	GGT	GGW	GGT	GGW
	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion	In EURmillion
Lotteries	10,768.5	4,109.3	10,811.5	4,125.5	10,851.6	4,140.8
Betting (2)	2,524.1	706.5	2,633.9	764.2	2,698.6	783.2
Casino (3)	1,862.5	354.2	1,889.6	359.3	1,916.7	364.4
Gaming machines (4)	8,331.3	2,470.6	8,145.2	2,415.4	7,959.0	2,360.2
Bingo	1,947.0	590.6	1,958.0	593.9	1,967.6	596.8
Interactive Gambling (5)	13,452.4	416.9	15,680.4	486.0	17,412.9	539.7
TOTAL	38,885.9	8,648.1	41,118.6	8,744.3	42,806.4	8,785.1

(1) Estimated by H2 Gambling Capital according to the H2 Gambling Capital Data. Totals may not add up due to rounding.
(2) Horserace betting and sports betting, including interactive sports.
(3) Casino tables and casino gaming machines.
(4) Without casino gaming machines.
(5) Includes internet (i.e. PC or mobile) and interactive television.

11.2 Competition

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11.2.1 Overview

ZEAL's strategy has been to concentrate business activities on selected European lottery markets, in particular in Germany, but also in Ireland, the Netherlands, Norway, Spain and the UK. Growth in these markets is to be achieved organically and through acquisitions of suitable companies (see "12.3 Strategy").

The determination of the competitive situation is customer-centric, i.e. a competitor is considered to be someone who can satisfy the same customer demand and who is competing for the same budget of customers (in the case of ZEAL, customer budgets for lottery products). ZEAL's main competitors in these markets are thus the lottery shops and the online distribution channels of State Lottery Operators as well as other online- and offline providers of lottery products. ZEAL regards not only companies as competitors that are active in an online Secondary Lottery business (such as myLotto24 Sub-Group), but all providers of Primary Lotteries, irrespective of whether they are purely brokers, bookmakers or operators of these lotteries. Other potential competitors are companies that sell other games of chance on the internet or in shops.

11.2.2 Market Entry Barriers

The individual lottery markets typically pose considerable barriers to market entry. Either the markets are fully monopolised or lotteries can only be organised on the basis of a licence, with the licensing regime putting onerous requirements on the companies attempting to enter a market. Also, the legal costs of operating in the lottery markets are comparably high, e.g. from court cases, ongoing compliance requirements and audits. The regulatory requirements applied to the technical systems can be particularly onerous when compared to other e-commerce sectors, which also create barriers to entry. A recent development that has slightly reduced the entry barriers is the permitted supply of important technical components and products that can be purchased and do not have to be developed in-house, e.g. off-the-shelf technical platforms, hedging facilities or instant lottery as a service.

According to ZEAL's own observations, there are currently not many online e-commerce companies entering the gambling market, in particular the lottery market, vertically: distributors of other products on the internet typically do not expand their product portfolio in include lottery and other gambling products. ZEAL attributes this in part to venture capital market principles, where for instance many standard venture capital fund contracts rule out investments into gambling companies.

11.2.3 Distribution via Lottery Ticket Shops

In many markets, the distribution via lottery ticket shops is the preferred seller of lottery products for most lottery players. According to ZEAL's own estimate, between 50% and 90% – depending on the market – of the Primary Lottery volume is currently purchased offline through kiosks, gas stations, news agencies, or dedicated lottery shops.

11.2.4 Online Distribution of Primary Lotteries

At the date of the Prospectus, most operators of Primary Lotteries have online outlets, either their own or in the form of licensed private companies brokering their products. While the online gambling market in Germany lags behind other European markets, ZEAL expects a significant growth rate (see "11.1.4.1 Outlook for the German Gambling and Lottery Market").

11.2.5 Main Competitors on the Gambling and Lottery Markets

ZEAL considers that its main competitors are already active in the lottery business. Currently, ZEAL is not aware of any providers of other games of chance which have recently entered, or have the intention to enter, the same markets with lottery products in which ZEAL is active in and which ZEAL regards as main competitors (see, however, the risk described under "1.2.4 ZEAL could face increased competition from providers of games of chance other than lotteries. Existing competitors could expand their business activities and new competitors could enter into the same markets in which ZEAL is active in and offer gambling products which are not included in ZEAL's product portfolio. Customers' demand could shift from lotteries to other gambling products, especially sports betting and online casinos. Increased competition and shifts in customers' demands could result in ZEAL losing market shares or being forced to significantly increase its expenses for acquiring and securing market shares."). In addition, ZEAL is currently not aware of any distributors of other products on the internet which have expanded or expressed their intention to expand their product portfolio to include lottery and other gambling products to such an extent that it has become or is likely to become a main competitor.

11.2.5.1 Main Competitors on the German Gambling and Lottery Market

ZEAL's business activities, in particular through Tipp24 Services Limited operating the internet platform www.tipp24.com, concentrate on its core market Germany. ZEAL's main competitors in Germany are essentially around 23,000 stationary lottery shops (source: GBGC Analysis Germany), the online distribution channels of the State Lottery Operators and certain private lottery brokers and provider of Secondary Lotteries. Other potential competitors are companies that sell other games of chance on the internet or stationary.

Stationary distribution of Primary Lotteries

According to ZEAL's market assessment, stationary lottery shops currently represent the most important distribution channel for lottery products in Europe. In Germany, the distribution via lottery shops is traditionally established and therefore strong. The State Lottery Operators conclude contracts which entitle them to sell their lottery products, in particular, retailers in the press and tobacco shops, but also the operators of petrol stations and large supermarket chains, thus ensuring a nationwide coverage. The lottery shops are selected by the State Lottery Operators and integrated into their sales and marketing activities. The commissions for the sale of lottery products are an important source of income for many lottery shops. In addition, the distribution of lotteries also serves as a means of generating regular customer traffic which increases the sales of other products and in turn, the offering of other products (press, tobacco, fuel) increases the sales of lotteries. Due to their market share as well as their extensive product range, the stationary lottery shops are a major competitor of ZEAL. However, ZEAL does not expect any significant growth in stationary sales in the future.

Online distribution of Primary and Secondary Lotteries

The State Lottery Operators as members of the DLTB operate their own website at www.*lotto.de*, on which customers can fill in a lottery ticket electronically and enter their postcode in order to be redirected to the relevant State Lottery Operator's regional internet site. On the regional site the registration or login takes place and the purchase is completed. The website www.lotto.de is a national offer of the State Lottery Operators which has been advertised online since April 2013 and which allows DLTB access to significant marketing investments, if necessary. Furthermore, all State Lottery Operators have regional websites, which are advertised via radio, print, poster and online. For these reasons, ZEAL considers the competitiveness of DLTB and the State Lottery Operators to be considerable.

The State Lottery Operators are:

State Lottery Operator	Brand / State
Staatliche Toto-Lotto GmbH Baden-Württemberg	Lotto Baden-Württemberg
Staatliche Lotterieverwaltung in Bayern	Lotto Bayern
Deutsche Klassenlotterie Berlin	Lotto Berlin
Land Brandenburg Lotto GmbH	Lotto Brandenburg
Bremer Toto und Lotto GmbH	Lotto Bremen
Lotto Hamburg GmbH	Lotto Hamburg
Lotterie-Treuhandgesellschaft mbH	Hessen Lotto Hessen
Verwaltungsgesellschaft Lotto und Toto in Mecklenburg-Vorpommern mbH	Lotto Mecklenburg-Vorpommern
Toto-Lotto Niedersachsen GmbH	Lotto Niedersachsen
Westdeutsche Lotterie GmbH & Co. oHG	Lotto Nordrhein-Westfalen
Lotto Rheinland-Pfalz GmbH	Lotto Rheinland-Pfalz
Saarland-Sporttoto GmbH	Lotto Saarland
Sächsische Lotto-GmbH	Lotto Sachsen
Lotto-Toto GmbH Sachsen-Anhalt	Lotto Sachsen-Anhalt
NordwestLotto Schleswig-Holstein GmbH & Co. KG	Lotto Schleswig-Holstein
Lotterie-Treuhandgesellschaft mbH Thüringen	Lotto Thüringen

A further significant competition originates from private lottery brokers operating on the basis of local state licences. As of 5 November 2018, there were fifteen licensed lottery brokers in the German market (source: Ministry of Interior in Lower-Saxony, https://www.mi.niedersachsen.de/ download/124775/Erlaubte_gewerbliche_Spielvermittler.pdf).

Company	Availability
Braun Lotto-System-Service GmbH & Co. KG	All 16 Federal States
Burda Direct GmbH	All 16 Federal States
Dr. Leise KG	All 16 Federal States
FABER Lotto GmbH & Co. KG	All 16 Federal States
Faber Lotto-Services GmbH	All 16 Federal States
G Connect GmbH	13 Federal States (not available in Baden-Württemberg,Berlin and Saarland)
Lotterie.de GmbH & Co. KG	All 16 Federal States
Lotto24 AG	All 16 Federal States
lottobay GmbH	All 16 Federal States
LOTTOWELT AG	All 16 Federal States
NeoLotto Limited	All 16 Federal States
Netlotto GmbH	15 Federal States (not available in Berlin)
OnGoing Media GmbH	15 Federal States (not available in Berlin)
12 Federal States (not available in Bremen, Saarland,Pegasus Direkt GmbHSachsen-Anhalt and Schleswig-Holstein)
Xotto Lottovermittlungsgesellschaft mbHAll 16 Federal States

Among these private lottery brokers, Lotto24 AG describes itself as the leading online provider of state-run lotteries in Germany with a market share of 34% in the fiscal year 2018 (source: Corporate News of Lotto24 AG dated 28 January 2019, http://www.dgap.de/dgap/News/corporate/lotto-lottobaut-onlinemarktanteil-on-percent-out/?newsID=1124257).

There are also several Secondary Lottery operators that either actively or passively target the German market, notably Lottoland Limited, registered in Gibraltar, operating the internet platform www.lottoland.com and, through their affiliated company Lottohelden Limited, www.lottohelden.de.

Furthermore, ZEAL regards theLotter, operated by Lotto Direct Limited, a company registered in Malta, as a relevant competitor. ZEAL considers theLotter as the most significant so-called messenger

business, which offers an independent online ticket purchasing service to customers globally, also addressing the German market.

11.2.5.2 Main Competitors on the UK Gambling and Lottery Market

In the UK, the online outlet of the National Lottery is licensed to and operated by Camelot, a private business. Lottoland Limited, operating their Secondary Lottery business also in the UK, is seen as the main direct competitor to myLotto24 Limited. With the high share of Instant Win Products being popular among UK lottery players, casino operators can also be seen as competitors in a wider sense.

11.2.5.3 Main Competitors on the Irish Lottery Market

In Ireland, myLotto24 Limited's main competitor is the private company Premier Lotteries Ireland Limited, holding the lottery licence granted by the Irish Regulator of the National Lottery until 2034. Premier Lotteries Ireland Limited provides online and in-store lottery services in Ireland. It also offers a mobile application for playing lottery games. The company was incorporated in 2013 and is headquartered in Dublin, Ireland (source: Regulator of the National Lottery, www.rnl.ie; www.bloomberg.com).

11.2.6 Competitors in the Lottovate Segment

ZEAL considers that its main competitors in Norway are 'Norsk Tipping', the state monopoly lottery operator, 'Pantelotteriet', operating a recycling lottery, and 'Novamedia', which runs a postcode lottery.

In the Netherlands, the main competitors are the Dutch Nederlandse Loterij (the Netherlands Lottery) and Novamedia, which offers a postcode lottery in this country as well.

12 BUSINESS

The following information shows the business of ZEAL at the date of the Prospectus. Following Completion, ZEAL's business will also contain the business of Lotto24. ZEAL intends to transform the business model of the 'Lottery Betting' segment into a locally-licensed model, with the intention of reducing ZEAL's exposure to operational, tax and regulatory risks, in particular as described in section "1.1 Risks Related to the Regulatory Environment, Legal and Tax Risks". The following description of ZEAL's business at the date of the Prospectus should be read considering that major parts of ZEAL's 'Lottery Betting' business are expected to be discontinued and should therefore be read together with the sections describing the anticipated change of ZEAL's business model following Completion, including, in particular, the sections "1 Risk Factors", "4 The Combination", "3 Information on the Offer Shares" and "13 Regulatory Environment".

12.1 Overview

ZEAL Network SE and its consolidated subsidiaries are a group of companies operating in the areas of online Secondary Lotteries under different brands, in particular 'Tipp24' and 'myLotto24' ('Lottery betting' segment), Primary Lotteries and charity lotteries ('Lottovate' segment), and lottery venture capital ('ZEAL Ventures' segment). As of 31 December 2018, ZEAL reported more than 3.9 million 'Registered customers'. Since the Company's incorporation in 1999 until 31 December 2018, ZEAL has generated 'Stakes' of more than EUR 3 billion, and has paid out more than EUR 1.5 billion in 'prizes'. ZEAL has also helped to generate significant amounts for charitable causes. At the date of the Prospectus, ZEAL has active businesses in six countries, with the objective to expand its business operations into other markets in the coming years (see "12.3.4 Expansion into New Lottery Markets"). ZEAL's business activities are divided into the three segments 'Lottery Betting', 'Lottovate' and 'ZEAL Ventures' (for further details see "12.4 Business Segments").

In the fiscal year ended 31 December 2018, ZEAL delivered positive results and continued to build its portfolio by introducing 'Raffld – The Experience Lottery' in the Netherlands. 'Raffld – The Experience Lottery' specifically targets 22-36-year olds by offering the chance to win travels, tickets for events and other non-monetary prizes, and thus 'experiences'. At the beginning of 2019, the lottery was paused to review the vision and strategy of the overall lottery.

12.1.1 Lottery Betting

At the date of the Prospectus, ZEAL's main business segment is 'Lottery Betting', comprising the Secondary Lottery business and the sale of Instant Win Products. ZEAL's activities in the area of 'Lottery Betting' take place within myLotto24 Sub-Group. As a bookmaker, myLotto24 Sub-Group offers its customers the opportunity to participate in Primary Lotteries, including lotteries they would not typically be eligible to participate in (such as the US lotteries 'Powerball' and 'Mega Millions' which the operators may not and do not offer in Europe). ZEAL intends to transform the business model of the 'Lottery Betting' segment into a locally-licensed model in particular in Germany (see "12.3.2 Focus on Businesses based on Local State Licences").

12.1.2 Lottovate

'Lottovate' focuses on the operation of Primary Lotteries and the establishment of partnerships with charities, foundations and communities in order to jointly develop new sources of funding through customer-specific lottery platforms. In 2017, Lottovate Limited entered into a partnership with UNICEF in Norway, where it became one of only two operators at that time, and where Lottovate/UNICEF Norway is permitted to operate 'UNICEF Lotteriet' nationwide. In addition, at the end of 2016 Lottovate Nederland B.V. became the Netherlands' first new charity lottery licence holder since 1989 which allowed it to introduce the nationwide charity lottery 'Raffld – The Experience Lottery' in 2018, which, however, is currently paused. ZEAL's 'Lottovate' segment also helped Spain's Primary Lottery 'ONCE' to increase online billings and, thus to help 'ONCE's' work supporting blind and visually-impaired people in Spain.

12.1.3 ZEAL Ventures

12.2 Strengths

The Company believes that the following competitive strengths have been the primary drivers of ZEAL's success in the past and that they will continue to distinguish it from competitors in the future:

12.2.1 Reputation, Experience and Expertise

The Company is led by an experienced management team. Dr Helmut Becker joined ZEAL Network as a Supervisory Board member in 2011 and took an active management position as Chief Marketing Officer and member of the Executive Board in 2013 until he was appointed CEO in 2015. He has broad experience in the field of e-commerce also from previous positions. Jonas Mattsson has served as CFO of the Company since the beginning of 2015. His has particular experience with technologyfocused businesses (for further information on the Executive Board members see "16.2.1 Current Composition of the Executive Board").

ZEAL has nearly 20 years of experience in the lottery sector, both in the mere brokerage of lottery tickets and in the operation of Primary and Secondary Lotteries. In particular in the area of Secondary Lotteries, ZEAL has the required knowledge and experience to identify and limit the risks arising from individual lotteries (in particular with regard to the probability and scale of lottery winnings) to an acceptable level (see "12.17 Risk Management and Hedging"). In the Company's opinion, the professional handling of these risks is a condition for the out-placement of these risks to insurance companies and the capital market on acceptable terms. In addition, ZEAL has built working relationships with national regulators, which has proved favourable within the complex regulatory environment in Germany during the spin-off and IPO of Lotto24 in 2012, where Lotto24 was one of the first German companies to receive a brokerage licence. ZEAL believes it has furthermore developed a good reputation with its customers and business partners, which is evidenced by the loyal and growing number of customers.

In 2017, myLotto24 Limited launched its business in Ireland and the UK. Ireland provides a useful testand-learn opportunity from which ZEAL can apply to the expansion into other markets. For instance, myLotto24 Limited is able to monitor which products are of particular interest to customers, to reshape the product portfolio in accordance with the identified customer demand, to internally organise the marketing efforts to launch new products more efficiently, and in general to facilitate ZEAL's cultural change from a single-market organisation to a multi-market and multi-location organisation. From the UK market, ZEAL learned more about the actual time it takes to recuperate marketing investments, which is helpful to adjust internally set targets.

12.2.2 A Diverse and International Portfolio

ZEAL sells its products on several international markets (in particular Germany, UK, Ireland, the Netherlands, Norway and Spain) and does not limit itself to offering Secondary Lotteries. Since its incorporation in 1999, the Company and its diverse subsidiaries have launched a variety of additional products. Based on ZEAL's internal assessment of Secondary Lotteries, myLotto24 Sub-Group has a product portfolio that allows customers to play lotteries to which they have no access on their national markets, for example through stationary lottery shops (see "12.4 Business Segments").

ZEAL has regularly experienced in the past, and expects to experience in the future, a substantial increase in gambling activity when large jackpot pay-outs are likely, either as a result of roll-overs of jackpots to the next draw or guaranteed minimum jackpots for special dates or events - this experience is shared by Deutscher Lotto- und Totoblock (see "11.1.3.3 German Gambling and Lottery Market", subsection "Lottery Segment"). This in turn means that the absence of large jackpots over a longer period of time, i.e. in the event that jackpots are regularly won, so that no higher amounts can accumulate, leads to a decline in gambling activities (i.e. fewer ticket sales and thus revenues). By offering several lotteries, which occasionally promise extremely high jackpots exceeding USD 1 billion (for example the US lotteries 'Powerball' and 'Mega Millions'), myLotto24 Sub-Group has at its disposal a suitable means (based on ZEAL's experience, see "9.2.5.1 Lottery Betting") to increase its customers' gambling activities by promoting these lotteries particularly prominently. In this way it may be possible to at least compensate for declines in 'Stakes' in one of its Secondary Lotteries by increasing 'Stakes' in another Secondary Lottery offered by it.

12.2.3 Product Development Tailored to Customer Needs

The creation of the diverse and international portfolio is largely based on ZEAL's strength in either developing new products itself (typically in the form of Instant Win Products, but also certain charity lotteries) or including existing lottery products in the offering. Due to its comprehensive market knowledge, ZEAL considers itself able to identify new trends and changes in customer demand at an early stage. Its profound product knowledge enables ZEAL to synthetically mirror primary lotteries and subsequently market them in the form of Secondary Lotteries. ZEAL's Instant Win Products aims to cater for a younger generation of customers which would otherwise be less interested in a lottery. Additionally, ZEAL's charity lotteries seek to help charities raise funds and add an altruistic meaning to customers' lottery playing.

12.2.4 Active Customers and Stable Billings

As at 31 December 2018, ZEAL had more than 3.9 million 'registered customers', i.e. unique users who have successfully registered for an account on a ZEAL website. A registration is considered successful after a new customer has provided the required information, before such information has been verified (e.g. as regards the customer's age and place of residence). The verification is a prerequisite for the customer to place bets or to buy other products on a ZEAL website. The qualification of a user as "registered customer" does not depend on whether the customer has actually placed a bet or purchased other products on a ZEAL website (see "9.2.6 Marketing Activities and Expenses").

In the fiscal year ended 31 December 2018, the average number of unique users (i.e. 'Registered customers') who have either purchased a bet or participated in a draw in a given month (i.e. the 'Average Monthly Active Users (MAU)') was around 404 thousand and in the same period, the average billings received from each active 'Registered customer' in a given month (d.h. the 'Average Billings per User per month (ABPU)') were at around EUR 57.57. The following table shows the development of 'Registered customers', 'MAU' and 'ABPU' for the periods presented:

	For the yearended 31 December
	2016	2017	2018
	(unaudited)	(unaudited)	(unaudited)
	EUR	EUR	EUR
Average Billings Per User per month(ABPU) (1)	58.03	57.58	57.57
	(thousands)	(thousands)	(thousands)
Registeredcustomers (2)Average Monthly Active Users (MAU) (3)	3,265376	3,510380	3,943404

(1) 'Average Billings per User per month (ABPU)' is defined as the average billings received from each active 'Registered customer' in a given month. In this context, active 'Registered customer' means a unique user who purchases a bet or participates in a draw in a month. ABPU provides a measure of ZEAL's ability to increase loyalty and value from its customers. ABPU is calculated by dividing monthly billings by Average Monthly Active Users which is defined as the average number of unique users ('Registered customers') who have either purchased a bet or participated in a draw in a given month.

(2) Registered customer means a unique user who has successfully registered for an account on a ZEAL website. A registration is considered successful after a new customer has provided the required information, before such information has been verified (e.g. as regards the customer's age and place of residence). The verification is a prerequisite for the customer to place bets or to buy other products on a ZEAL website. The qualification of a user as "registered customer" does not depend on whether it has actually placed a bet or purchased other products on a ZEAL website.
(3) 'Average Monthly Active Users (MAU)' is defined as the average number of unique users (i.e. 'Registered customers') who have either purchased a bet or participated in a draw in a given month (including free bets). MAU provides a measure of ZEAL's ability to retain and attract new customers.

The fact that ABPU has remained stable in the face of the significant increase in registered customers since 2016 demonstrates ZEAL's ability to scale its business without compromising on customer quality.

12.2.5 International Regulatory Expertise

____________________

Gambling law has not been harmonised in the European Union and national licences do not apply, in the view of many regulators, to other EU Member States. In Germany, gambling law falls within the legislative competence of each of the sixteen individual Federal States. It should also be noted that the regulatory frameworks are subject to ongoing changes. The different regulatory frameworks often provide for high barriers to market entry. While the legislators may seek to uphold these barriers to curb gambling addiction, the states also benefit from tax revenues from the sale of lotteries and other games of chance. Other objectives may be to keep the market share of brokers and other operators of such games as low as possible.

ZEAL has extensive international regulatory expertise and continuously monitors developments in the regulatory environment in order to seize business opportunities ahead of its competitors, to take appropriate measures to protect its existing businesses against adverse changes and to identify business opportunities that the regulatory environment allows. ZEAL has its own employees for this task and also retains external legal advisors who are specialised in gambling law in the different jurisdictions.

12.2.6 Scalability of the Business Model

myLotto24 Sub-Group's business model is highly scalable. The participation of its customers in Secondary Lotteries and the purchase of lottery products are handled via online platforms which are able to successfully handle very large volumes of games that go far beyond the current volumes. The large capacity of the technology used allows a significant increase in the transaction volume. The technology service provider is Smartgames Technologies Limited, a fully consolidated subsidiary of the Company; an increase of the transaction volume is only expected to incur marginal additional costs for IT services and for payment processing. Due to the extensive automation of the processes, only a disproportionately low increase in the number of employees is necessary to cope with an increasing transaction volume. In addition, the business model does not require logistics or warehousing and required comparatively low personnel overhead.

12.2.7 Flexible and Efficient Technology

In recent years, ZEAL has invested significantly in replacing its former single-market and hardware focused technology with a much more flexible and efficient platform that takes a more cloud-based approach and is built for scalability, enabling ZEAL to enter multiple markets with its diverse product portfolio and to increase capacity as it grows. ZEAL believes that this platform gives it significant competitive advantage.

ZEAL considers that the internet-based sale of lottery products by means of enhanced information technologies (see "12.6 Information Technology") has the potential to replace the stationary sale of these products as the main distribution channel. This assessment is based in particular on the fact that lotteries can be marketed in purely electronic form without the need to deliver the product in physical form to customers. In this respect, lotteries are particularly suitable for being sold exclusively via the internet. In the past decade, there have been substantial changes in the distribution channels of many entertainment and lifestyle products, as the examples 'Netflix' (subscription-based streaming media service which offers online streaming of a library of films and television programs which allows customers ease of access to these products, which they otherwise had to rent from video stores or to buy) or 'Airbnb' (an online marketplace and hospitality service) show. Such a development has not yet taken place on the lottery market, in particular due to the restrictive regulatory environment (see "13 Regulatory Environment"), however, ZEAL believes digitising lottery products is the first step, which ZEAL has already taken.

12.3 Strategy

ZEAL's aspiration is to become the industry leader in the online lottery business. Examples of market leaders in the e-commerce business demonstrate that individual companies can sooner or later achieve a market-leading position in their area of business. Based on the strengths described in section "12.2 Strengths", ZEAL considers itself to be in a promising position to play a comparable role in the online distribution of lottery products. ZEAL considers that the following strategic objectives are the foundation to achieve this overall aim.

12.3.1 Strategic Objectives

ZEAL's strategic objectives are:

− to focus on businesses based on local state licences and to discontinue the 'Lottery Betting' businesses of Secondary Lottery and Instant Win Products in Germany. ZEAL intends to transform its German Secondary Lottery business, operated by Tipp24 Services Limited, into a online brokerage business based on local state licences after reacquiring control of myLotto24 Limited and Tipp24 Services Limited (see "12.4.1.4.3 Status of myLotto24 Limited and Tipp24 Services Limited within ZEAL").
− to grow and develop the businesses based on local state licences in the individual markets by acquiring new customers through marketing measures.
− to reduce its dependency on the German market by expanding in other lottery markets.
− to develop innovative products and businesses that have the potential to expand the customer's choice and experience in the lottery sector, grow participation, and enhance the returns to good causes and the state.
− to enhance the 'Lottovate' and 'ZEAL Ventures' segments through investments in new partnerships and expansions into new markets.

12.3.2 Focus on Businesses based on Local State Licences

At the date of the Prospectus, ZEAL's business depends on its offering of Secondary Lotteries in the German online market. In Germany, the Treaty on Gambling 2012 constitutes a gambling monopoly, including a lottery monopoly, of the Federal States. This treaty prohibits the private operation of lotteries (with an exemption of certain lotteries "with a lower risk potential") and has established the principle that the operation and brokerage of public games of chance on the internet is generally prohibited. Only the online brokerage, but not the operation, of lotteries and the operation and brokerage of sports bets on the internet may be permitted by the Federal States provided that this activity does not conflict with certain legal objectives of the Treaty on Gambling 2012, and additional requirements are met in each Federal State (e.g. requirements regarding the age verification of players and, in the case of lotteries, the obligation to divide gambling revenues among all sixteen State Lottery Operators based on the player's place of residence). There is expressly no legal entitlement to the granting of a licence; rather it is a discretionary decision of the competent authority.

Against the background of a regulatory environment that has not liberalised in the way that ZEAL may offer Secondary Lotteries on a reliable legal basis without significant uncertainties, ZEAL intends to transform the business model of the 'Lottery Betting' segment into a model based on local state licences in particular in Germany, with the intention of reducing ZEAL's exposure to operational, tax and regulatory risks, in particular as described in section "1.1 Risks Related to the Regulatory Envi ronment, Legal and Tax Risks". Lotto24 already carries on a lottery brokerage business based on local state licences in Germany. The Company believes that through the Combination, an opportunity now exists for ZEAL to re-enter the German lottery brokerage market and to transition the customers of its independently managed UK associated companies, myLotto24 Limited and Tipp24 Services Limited, to a lottery brokerage business based on local state licendes. Following Completion, ZEAL intends to transform its German Secondary Lottery business, operated by Tipp24 Services Limited, into an online brokerage business by having Lotto24's existing brokerage licence expanded to include brokerage to the customers of Tipp24 Services Limited (subject to the discontinuation of ZEAL's Secondary Lottery business activities in Germany) ("Lotto24 Licence Expansion"). On 8 February 2019, the competent Ministry of the Interior of Lower Saxony granted the Lotto24 Licence Expansion, which enables Lotto24 to broker lottery tickets to the State Lottery Operators via the domains www.tipp24.de and www.tipp24.com. Tipp24 Services Limited's customers may henceforth participate in Primary Lotteries operated by the sixteen State Lottery Operators and other permitted lottery products offered by Lotto24 (class lotteries and charity lotteries).

ZEAL intends to focus on businesses based on local state licences also in other markets and consequently intends to reduce the cross-border Secondary Lottery business to a minimum. After the Business Model Change, registrations on websites offering Secondary Lotteries will not be accepted from customers resident in Germany.

The Executive Board expects that the Business Model Change will deliver significant benefits for ZEAL once the synergies have been achieved after approximately two to three years, although it is also expected that the Business Model Change will, within the initial period of three years, cause a significant reduction in net revenues. The expected benefits of the Business Model Change include:

− significant risk reduction from an operational, tax, and regulatory perspective; and

− improved growth potential, in particular from access to additional marketing channels (for example via Facebook and Google, in Apple's 'App Store' and Google's 'Play Store', on television, radio or in print media) and marketing affiliates which are only available to lottery operators and lottery brokers with state licences as they do not run the risk of being subject to immediate interim injunctions or other legal disputes as regards certain advertising measures due to a lack of licence.

In addition, the Executive Board believes that the Combination would increase the likelihood of a successful Business Model Change while at the same time delivering cost synergies (see "4.2 Rea sons for the Offer"). In particular, the benefits of the Combination include:

− expected cost synergies;
− significant reduction of the implementation risk connected with the Business Model Change; and
− strong growth potential and attractive future cash flows of the Combined Group.

The Executive Board intends that the Combined Group should seek to build on Lotto24's existing position in the German lottery market, which generated 'Sales' of EUR 8.72 billion in 2017 (see "11.1.3.3 German Gambling and Lottery Market"). The Combination of ZEAL's strengths (see "12.2 Strengths") with Lotto24's expertise in the lottery brokerage business based on local state licences in Germany should, the Executive Board believes, place the Combined Group in a strong position to accelerate its growth in that market.

12.3.3 Marketing

ZEAL considers that in particular in the German market, Tipp24 Services Limited has a well-known brand ('Tipp24'), a good reputation and, and at the date of the Prospectus, a portfolio of Secondary Lotteries and Instant Win Products which creates a significant demand in the market. ZEAL, including myLotto24 Sub-Group, intends to continue to acquire new customers, thus to expand its customer base and to replace existing but inactive customers and customers who have de-registered from its internet platforms. In addition, inactive customers shall be encouraged to resume their gambling activities. ZEAL's strategy to achieve this goal in the German market is to use its broad network of marketing affiliates, social media channels and print materials. In addition, ZEAL optimises the visibility of its websites in web search engines like Google (search engine optimisation), a measure that is competitive and leads a significant number of new customers to the relevant websites. In other markets ZEAL follows the same strategy and uses similar marketing instruments, but also benefits from additional acquisition channels, notably mobile app stores, Facebook and TV commercials.

12.3.4 Expansion into New Lottery Markets

The Executive Board also intends for ZEAL to continue to pursue its international growth ambitions in order to reduce ZEAL's dependency on the German market and to create long-term growth of its business by building and investing in online lottery businesses in existing and new markets that have the long-term potential to help diversify ZEAL's 'billings', 'revenue' and product mix. ZEAL intends to build its business outside Germany on its existing international portfolio (which already includes businesses in Ireland, Norway, the Netherlands, Spain and the UK) and to expand into new lottery markets. Market entries are planned, for example, in South Africa, the Czech Republic and Romania (where the licensing procedure is currently pending).

In general, the internationalisation is aimed to focus on markets with state licensing regimes, provided that the respective local regulation is not prohibitive. With regulations changing in many jurisdictions, the number of markets that might qualify for expansion is dynamic. ZEAL's preference is to operate in fewer markets with significant market shares rather than in many markets with low market shares. The key rationale for this approach is the substantial licensing and legal costs required to enter new markets.

12.3.5 Product Diversification

Another means to attract new customers and to increase the activity of the entire customer base is the further diversification of the product portfolio outside Germany. Experience shows that the gambling activity of customers decreases in the absence of high jackpots leading to lower revenues for the lottery operator. myLotto24 Sub-Group has in the past typically been able to compensate for this by offering Secondary Lotteries on a variety of national and international lotteries on its online platforms with special emphasis on the jackpot heights. Its customers can easily place bets on the currently more attractive lotteries without having to change providers which, in turn, stabilises myLotto24 Sub-Group's revenues. The success of the introduction of the US lotteries 'Powerball' and 'Mega Millions' in myLotto24 Sub-Group's portfolio of Secondary Lotteries in 2017, for example, demonstrates that this strategy is promising (see "9.2.5 Business Segments and Product Range").

In the future the myLotto24 Sub-Group intends to add further attractive products, such as subscription bundles (i.e. the combination of lottery bets individually made by the customer and a share in a lottery syndicate), more lottery syndicates, high-frequency draw products and high pay-out Instant Win Products, all subject to feasibility and traction with customers in early tests.

In terms of revenue, Instant Win Products have increasingly proven to be a significant contributor to ZEAL's results from operating activities (see "9.2.5.4 Billings by Product"). Over the last three years, myLotto24 Sub-Group has developed different Instant Win Products in-house. The strategy for this group of products is built on three pillars:

− Expanding and rotating the portfolio (design own Instant Win Products, outsource the development, establishing partnerships and licensing opportunities with other gambling providers, replacement of products that have reached the end of their life cycle).
− Adding generic features to existing Instant Win Products that increase their attractiveness (e.g. by means of higher jackpots, more winnings, higher return-to-player, variable pricing).
− Offering Instant Win Products to other operators on a revenue share basis as a tool for attracting their customers.

12.3.6 Enhancement of the Lottovate and ZEAL Ventures Segments

In line with the strategic objective to expand into other lottery markets besides Germany (see "12.3.4 Expansion into New Lottery Markets"), ZEAL aims to enhance the 'Lottovate' segment by expansions into further lottery markets in addition to Norway ('UNICEF Lotteriet'), the Netherlands ('Raffld – the Experience Lottery', currently paused) and Spain ('ONCE') and the Czech Republic where Lottovate Limited was awarded a licence to operate a charity lottery in March 2018, but where, at the date of the Prospectus, the operations have not yet been started. The focus shall remain unchanged on the operation of Primary Lotteries and the establishment of partnerships with charities, foundations and communities in order to jointly develop new sources of funding through customerspecific lottery platforms. In principle, Lottovate does not restrict its investments in new partnerships regionally.

The strategic objective is to diversify the portfolio in the 'Lottovate' segment and to establish partnerships particularly at early stages, i.e. to plan and implement market entries together with suitable charities, foundations and communities. Similar to venture capital companies, Lottovate intends to create a larger portfolio of partnerships in the first stage and, at the second stage, to concentrate further investments on the most promising partnerships in terms of revenues. As the establishment of partnerships at early stages are intended, ZEAL considers it as crucial that decisions to enter into partnerships or to adjust the business model if needed can be made within a short time. For this reason, ZEAL's strategy includes building small teams who work independently from other operations but are also accountable for the success of a partnership.

Lottovate manages its risk by allocating finite and fixed funding to each new partnership. These funds are determined by the amount of funding required to achieve a specific objective (e.g. winning 10,000 additional 'Average Monthly Active Users (MAU)'). This "metered funding" then serves as a measurement for the success or failure of a partnership.

The 'ZEAL Ventures' segment supports start-ups that are developing new lottery business models or products, focusing on both external investments and internal incubation. Its strategy is to build a portfolio of start-up investments which have the potential to generate value for ZEAL as a whole.

12.4 Business Segments

ZEAL's business activities are divided into the three segments 'Lottery Betting', 'Lottovate' and 'ZEAL Ventures'.

12.4.1 Lottery Betting

At the date of the Prospectus, ZEAL's main business segment is 'Lottery Betting', comprising the Secondary Lottery business and the sale of Instant Win Products. ZEAL's activities in the area of 'Lottery Betting' takes place within myLotto24 Sub-Group, an independently organised sub-group of affiliated companies, in which ZEAL holds an equity interest of 40%. As a bookmaker, myLotto24 Sub-Group offers its customers the opportunity to participate in lotteries, including lotteries they would not typically be eligible to participate in (such as the US lotteries 'Powerball' and 'Mega Millions' which the operators may not and do not offer in Europe). ZEAL intends to transform the business model of the 'Lottery Betting' segment into a locally-licensed model in particular in Germany (see "4.2 Reasons for the Offer" and "12.3.2 Focus on Businesses based on Local State Licences").

myLotto24 Sub-Group offers Secondary Lotteries and Instant Win Products under two consumer brands 'Tipp24' and 'myLotto24'. At www.*tipp24.com*, Tipp24 Services Limited provides an offer made in the German language, which is therefore first and foremost used by customers in German speaking countries, to broker Secondary Lotteries operated by myLotto24 Limited. At www.*mylotto24.co.uk* and other internet sites, myLotto24 Limited operates the 'Lottery Betting' business and offers Secondary Lotteries and Instant Win Products in the English language targeted at customers in Ireland and the UK.

Tipp24 Services Limited and myLotto24 Limited are registered in England and Wales and regulated under the Gambling Act 2005. Tipp24 Services Limited holds a licence granted by the UK Gambling Commission (licence number 000-007499-R-101718). The same applies for myLotto24 Limited holding the licence number 000-004578-R-103863 of the UK Gambling Commission. The Company considers that these licences also permit the offering of Secondary Lotteries in other jurisdictions of the EU based on the fundamental freedom to provide cross-border services from one member state of the European Union ("EU Member State") into any other EU Member State (freedom to provide services), but this view is disputed, in particular, by many German regulators and courts. myLotto24 Sub-Group also holds licences in Ireland and South Africa and is currently in the process of applying for licences in other jurisdictions such as Malta.

The wide range of Secondary Lotteries and Instant Win Products offered by myLotto24 Sub-Group, combined with additional services, had attracted more than 3.9 million 'Registered customers' as of 31 December 2018, many of whom, according to ZEAL's belief, would otherwise not be playing established national Primary Lotteries.

12.4.1.1 Secondary Lotteries

Secondary Lotteries allow customers to bet on the outcome of lottery draws of Primary Lotteries, i.e. customers bet that certain lottery numbers will be drawn in Primary Lotteries against payment of 'Stakes'. Since the lottery numbers of a Primary Lottery are unpredictable real-life events, Secondary Lotteries qualify, in ZEAL's view, as betting and not as lotteries and are therefore governed by betting regulations in all jurisdictions in which ZEAL operates.

As the bookmaker and risk managing entity (see "12.17 Risk Management and Hedging"), myLotto24 Limited offers Secondary Lotteries on its website www.mylotto24.co.uk in the English language under the brand myLotto24. Lottery bets made on the German online platform are brokered by Tipp24 Services Limited to myLotto24 Limited. When a customer places a bet on the outcome of a Primary Lottery draw on the website www.tipp24.com, the customer instructs Tipp24 Services Limited to broker the bet in its name and on its behalf to myLotto24 Limited. The actual bet is thus made between myLotto24 Limited as bookmaker and the customer. The betting agreement between myLotto24 Limited and the customer is distinct from the brokerage agreement that Tipp24 Services Limited enters into with this customer. Tipp24 Services Limited acts as a mere broker for its customers, while myLotto24 Limited acts as bookmaker and counterparty to the bet. The role of Tipp24 Services Limited is limited to the operation of the website, handling and managing of the customer accounts, the brokerage of the bets to myLotto24 Limited, the handling of the purchase of Instant Win Products from myLotto24 Limited, the organisation of lottery syndicates, the transfer of the customers' 'stakes' to myLotto24 Limited and the transfer of winnings from myLotto24 Limited to the customers.

As a lottery betting operator, myLotto24 Sub-Group mirrors the underlying Primary Lotteries in terms of the determination of winning bets, jackpot amounts and prizes in lower prize categories as well as prize quotas, however with certain modifications. The drawing of the winning numbers is exclusively carried out by the operator of the Primary Lottery and a winning event in the Secondary Lottery occurs if the player has correctly predicted the numbers drawn. The amount of the prize depends on the terms and conditions of Tipp24 Services Limited and myLotto24 Limited, and is generally based on the same prize quotas of the Primary Lottery published for the respective draw. Typically, Tipp24 Services Limited promises its customers lottery prizes in case of a winning bet equal to the quota paid out by the relevant Primary Lottery (e.g. if there is a single winner of a jackpot in the Primary Lottery worth EUR 10 million, Tipp24 Services Limited pays out the same amount to a customer who is the only winner of the jackpot in the related Secondary Lottery; if there are several winners in that Secondary Lottery, the EUR 10 million is equally shared by these winners). In contrast, customers who play Secondary Lotteries on the websites of myLotto24 Limited are treated as if they have to share a prize with the winner(s) in that Primary Lottery (e.g. if there is one winner of a EUR 10 million jackpot in the Primary Lottery and one winner in the related Secondary Lottery, myLotto24 Limited pays out EUR 5 million). Accordingly, customers playing and winning on the mylotto24.co.uk and tipp24.com websites are in principle put in the same position as if they had played and won at the Primary Lottery, subject to certain limitations put in place to manage exceptional pay-out risks.

Unlike in the case of Primary Lotteries, the amounts of lottery prizes of Secondary Lotteries operated by myLotto24 Sub-Group, in particular jackpots, are not funded from a pre-defined share of ticket sales but are hedged by a hedging reserve, Jackpot Insurances and in the form of Physical Hedging (see "12.17 Risk Management and Hedging").

ZEAL's activities in the business segment 'Lottery Betting' is in direct competition with existing Primary Lotteries, in particular in Germany. ZEAL's competitive advantage is that myLotto24 Sub-Group can offer bets on more Primary Lotteries than are offered or brokered officially and under licence in a certain market. This allows myLotto24 Sub-Group to offer Secondary Lotteries on lottery draws with a higher frequency than Primary Lotteries: the operators of Primary Lotteries usually offer only certain lottery products in their own jurisdiction. For example, in Germany, Primary Lotteries comprise only the products offered by DLTB (Deutscher Lotto- und Totoblock), the association of the sixteen independent State Lottery Operators, and certain other class lotteries and social lotteries (see "11.1.3.3 German Gambling and Lottery Market"). In contrast, myLotto24 Sub-Group offers betting on lotteries from different countries, such as the German 'LOTTO 6aus49', the Spanish Christmas lottery 'El Gordo' and the US lotteries 'Powerball' and 'Mega Millions'. This is oftentimes the only way for lottery players who do not live in Spain or the United States of America to participate in these lotteries with advertised peak jackpots of over USD 1 billion (for further information on the jackpot sizes, see "12.17.3 Management of Specific Risks – Hedging").

12.4.1.2 Instant Win Products

Another type of product offered on myLotto24 Sub-Group's internet platforms is Instant Win Products. These products do not rely on external draws by Primary Lotteries to determine a winner but – depending on the applicable legislation – are enabled by pools with predetermined winning tickets that are randomly drawn from, or by 'Random Number Generators' that generate the information if and how much a bet wins. The products range from classic digital scratch cards to instant versions of draw lotteries and instant win games which are more playful experiences featuring rich graphics and animations, sounds and music as well as interactive options. myLotto24 Sub-Group has been offering one category of Instant Win Products, namely scratch cards, for many years. The other product categories 'instant lotteries' and 'instant win games' were added to the product portfolio in 2015 (see "12.5.1.3 Instant Win Products" for the different product categories).

Instant Win Products target a comparably younger customer group than Primary Lotteries and Secondary Lotteries. In addition to the chance of winning significant amounts of money they also serve as a pastime and are more often played on mobile devices. These products are either developed by myLotto24 Sub-Group or purchased or licensed from third party developers. Tipp24 Services Limited and myLotto24 Limited offer Instant Win Products to their customers under 'remote casino online licences' granted by the UK Gambling Commission (see "13.2.1 Regulatory Environment in the United Kingdom").

In the summer of 2018, ZEAL commenced to offer self-developed Instant Win Products to other operators, for instance other lottery operators seeking to offer these products to their own customers. This business is in early stages. Typically, the other operator pays for the service on a revenue share basis. ZEAL's technical platform to run the Instant Win Products has been developed and structured in a way that it can be easily integrated in other operator's internet platforms.

12.4.1.3 Services

myLotto24 Sub-Group offers its customers services and features on its online platforms which, to ZEAL's knowledge, are usually not offered by the stationary lottery shops of Primary Lotteries, for example:

− the ability to place lottery bets on the websites of myLotto24 Sub-Group at any time and independent from shop opening hours;
− the facilitation of regular game participation through subscription offers and informing customers about upcoming jackpot draws, drawn lottery numbers and winnings via e-mail;
− virtual safekeeping of tickets, which reduces the risk of customers losing or misplacing the tickets; and
− automatic crediting of winnings to customers' accounts which reduces the customer's risk of forgetting to cash in lottery winnings.

12.4.1.4 Material subsidiaries included in the Lottery Betting Segment

The material subsidiaries included in the 'Lottery Betting' segment are described below:

12.4.1.4.1 myLotto24 Limited

myLotto24 Limited is a private limited company registered in England and Wales with Companies House under company number 6131579. The company was incorporated on 28 February 2007 under the name Tipp24 UK Limited, which was changed to myLotto24 Limited on 29 October 2007.

At www.*mylotto24.co.uk*, myLotto24 Limited operates the lottery betting model in the English language under the brand myLotto24. myLotto24 Limited also serves as the bookmaker for Tipp24 Services Limited and risk managing entity (see "12.17 Risk Management and Hedging"). myLotto24 Limited holds a betting licence granted by the UK Gambling Commission (licence number 000-004578-R-103863).

12.4.1.4.2 Tipp24 Services Limited

Tipp24 Services Limited is a private limited company registered in England and Wales with Companies House under company number 6362572. The company was incorporated on 5 September 2007. myLotto24 Limited holds 40% and Fondation enfance sans frontières holds 60% of the voting shares in Tipp24 Services Limited. At www.*tipp24.com*, Tipp24 Services Limited provides an offer in the German language, which is therefore first and foremost used by customers in the German speaking countries. Tipp24 Services Limited holds a licence granted by the UK Gambling Commission (licence number 000-007499-R-101718). Lottery bets made on the German platform are subsequently brokered by Tipp24 Services Limited to myLotto24 Limited.

12.4.1.4.3 Status of myLotto24 Limited and Tipp24 Services Limited within ZEAL

Following the implementation of the second stage of the State Treaty on Gambling 2008, which prohibited the brokering in Germany of state-run lotteries via the Internet as of 1 January 2009, ZEAL Network discontinued its lottery brokerage activities in Germany, bringing its structure in line with the regulatory environment in order to comply with the State Treaty on Gambling 2008. In the course of this realignment, on 1 January 2009 ZEAL transferred its trade and assets that were no longer required in Germany to myLotto24 Limited and its subsidiaries. This transfer included both the business of acting as an intermediary for German State Lottery Operators as well as the shares in certain subsidiaries. In addition, on 30 April 2009 the charitable foundation Fondation enfance sans frontières, Zurich, Switzerland, which had been created by the Company to distribute its income to charitable causes in accordance with its constitution, acquired 60% of the voting shares in each of the Company's UK subsidiaries, myLotto24 Limited and Tipp24 Services Limited in the form of preference shares stripped of their main economic rights (see "12.10.3 Agreements Relating to Shareholdings in myLotto24 Limited and Tipp24 Services Limited"). The purpose of the transaction was to reflect the required autonomy and individual responsibility of both subsidiaries in their respective business fields in consequence of the implementation of the second stage of the State Treaty on Gambling 2008.

As a consequence, the Company holds 40% of the voting shares in myLotto24 Limited. myLotto24 Limited itself holds 40% of the voting shares in Tipp24 Services Limited.

Both companies and their respective subsidiaries are consolidated in ZEAL's financial statements because the relevant criteria of IFRS 10 are met:

− The Company has a right to repurchase the majority of voting rights for an amount of GBP 30,000 for each company. The Company has veto rights with regard to changes in the articles of myLotto24 Limited and Tipp24 Services Limited.
− The owner of the majority of voting rights receives a preliminary annual dividend of up to GBP 15,000 for each company. In the case of liquidation, the owner of the majority of voting rights is entitled to receive previously agreed liquidation proceeds of GBP 30,000. The Company alone is entitled to the entire remaining profits and any remaining liquidation proceeds.

The annual dividend is therefore treated as an expense in the consolidated financial statements of ZEAL and the results of all entities within the myLotto24 Sub-Group are fully consolidated into ZEAL consolidated financial statements. As a result of the substance of the relationship, no non-controlling interest is recorded.

12.4.1.4.4 Other members of the myLotto24 Sub-Group

Other members of the myLotto24 Sub-Group, each of them wholly-owned direct or indirect subsidiary of myLotto24 Limited, are myLotto24 Limited (Malta) and its subsidiary myLotto24 IT Platform Limited (Ireland), myLotto24 South Africa PTY Ltd. (South Africa), myLotto24 Australia PTY Ltd. (Australia), Smartgames Technologies Limited and its subsidiary eSailors Limited (United Kingdom) as well as two subsidiaries of Tipp24 Services Limited, Gratis Lotto Limited (Vereingtes Königreich) and Tipp24 Services Limited (Malta). HSS Corp. (USA), which also belongs to the myLotto24 Sub-Group, is dissolved.

− Smartgames Technologies Limited provides services to other members of ZEAL in areas such as finance and accounting support, human resources services, marketing services and IT support. Smartgames Technologies Limited provides also the online platform for myLotto24 Limited under a 'remote gambling software licence' and certain other licences granted by the UK Gambling Commission (operating licence number 000-027795-R-309654-011).
− eSailors Limited is a service company focusing on IT consulting and software development for transaction-orientated web and online applications.
− myLotto24 South Africa Pty Ltd has been established with the intention of providing licenced Secondary Lottery products and services to customers in South Africa. myLotto South Africa Pty Ltd was awarded a licence in September 2018 and, subject to further local regulatory approvals, intends to launch customer-facing products and services in 2019.

12.4.2 Lottovate

12.4.2.1 Operation of Primary Lotteries.

In 2017, Lottovate Limited, which is a wholly-owned subsidiary of the Company, entered into a partnership with the charity UNICEF in Norway. After the Norwegian Lottery Authority had approved the Lottovate/UNICEF Norway joint application, Lottovate/UNICEF Norway became one of only two operators at that time to be granted a charity lottery licence in Norway (since then, just three other licences have been granted). This allows Lottovate/UNICEF Norway to operate UNICEF Lotteriet nationwide for a period of nine years. Lottovate Limited acts as a full service provider for UNICEF Norway and operates a charity lottery, which is played entirely online and designed to be mobile-first. UNICEF Lotteriet gives consumers in Norway the chance to win up to NOK 2 million (about TEUR 200) each week, while at the same time raising money for the children's charity. Proceeds from ticket sales are split, with 30% of each ticket sold going straight to UNICEF Norway, 40% to prize funding and 30% for the lottery's operation. UNICEF Norway uses the proceeds to fund various activities globally. The collaboration between UNICEF Norway and Lottovate combines UNICEF's reputation as a non-profit organisation and ZEAL's experience as a provider of online lotteries. ZEAL understands that charities are increasingly looking for new fundraising methods and thus considers UNICEF Lotteriet as an innovative way to fundraise at no cost for charities. ZEAL believes this form of Primary Lottery to be scalable and that it could be used as blueprint for collaboration with other charities worldwide.

In addition, at the end of 2016 Lottovate Nederland B.V., a wholly-owned subsidiary of Lottovate Limited, became the Netherlands' first new charity lottery licence holder since 1989 which is also the first full operator licence for ZEAL. This licence allows Lottovate Nederland B.V. to run a nationwide charity lottery under the Dutch regulatory framework for a period of five years. Based on this licence, in 2018 Lottovate Nederland B.V. introduced 'Raffld – The Experience Lottery' specifically targeting 22- 36-year olds by offering the chance to win travels, tickets for events and other non-monetary prizes, and thus "experiences". This new lottery product is mobile-first and aims to connect customers to social communities and good causes. By combining non-monetary prizes and social aspects, ZEAL expects this product will reach a wider demographic than traditional lottery. At the beginning of 2019, the lottery was paused to review the vision and strategy of the overall lottery.

12.4.2.2 Service Provider for Primary Lottery Operators

In Spain, Ventura24, a wholly-owned subsidiary of ZEAL Network, works together with ONCE, the Spanish 'National Organisation for the Blind' which supports people who are blind or visually impaired to lead independent lives, which generates its funding in particular in the form of lottery products. Ventura24 manages ONCE's digital sales channel, from product management to player acquisition and retention.

12.4.2.3 Online Lottery Brokerage in Spain

Ventura24 has also been operating as an online lottery broker in Spain since 2002 with more than 700,000 customers as at the date of the Prospectus. Through its internet platform www.ventura24.es, Ventura24 brokers, in particular, the lotteries 'EuroMillions', 'La Primitiva', 'El Gordo' and 'Bonoloto'. Since 2003, Cruz Roja Española (The Red Cross, Spain) has partnered with Ventura24 to manage their digital sales channel in Spain. As a part of this, Ventura24 set up a 'social lottery club', Peña Super Oro, which enables players to form syndicates and increase their chance of winning – while simultaneously contributing towards the cause of Cruz Roja Española.

Ventura24 had assessed that this business did not require a licence from the Spanish state lottery operator 'Sociedad Estatal de Loterias y Apuestas del Estado (SELAE)' to manage the online purchase of lottery products. In October 2018, in the context of a legal dispute with the Spanish Gambling Commission on Ventura24's right to operate the brokerage business in Spain, the Supreme Court of Spain (Tribunal Supremo de España) rejected an appeal of the decision of the lower court which determined that Ventura24 business does require a licence from the state lottery operator SELAE to manage the online purchase of lottery products. This decision is final and there are no further avenues to appeal. Such a licence has not been granted in the past and Ventura24 does not expect that it will be granted in the future. As a result of the decision of the Supreme Court of Spain, the Spanish Gambling Commission instructed Ventura24 to discontinue its brokerage business and Ventura24 is now in the process of ceasing these activities under a structured process in agreement with the Spanish Gambling Commission. Ventura24 has stopped offering products to its customers at the end of December 2018, and the closure of the brokerage business is anticipated to be finalised by the end of May 2019, which is currently not expected to have a material impact on ZEAL's ongoing profitability. ZEAL's current hedging strategy for the 'Lottery Betting' segment managed by Ventura24 as regards the Physical Hedging of bets on 'EuroMillions' and the service contract with ONCE are not impacted by the closure.

12.4.2.4 Lottery Platform.

Lotto Network Limited, a wholly-owned subsidiary of the Company, has been operating a digital fundraising platform that enables charities, sports clubs, local authorities and companies to set up their own, branded, lottery betting sites – at zero cost – to increase donations. Lotto Network Limited, in collaboration with myLotto24 Limited, had partnered up with several professional sports teams, including Arsenal Football Club, Aston Villa Football Club and Swansea City Association Football Club, to enable them to support the projects they care about. The Lotto Network brand had helped these professional sports clubs to raise significant funds for their community foundations. In spite of this, the business failed to meet ZEAL's growth expectations and on 11 December 2018, the business activity was discontinued. On 21 February 2019, Lotto Network Limited surrendered its 'remote betting intermediary operating licence', based on which its business had been conducted, to the UK Gambling Commission.

12.4.2.5 Companies Included in the Lottovate Segment

The material subsidiaries included in the Lottovate Segment are described below:

12.4.2.6 Lottovate Limited

Lottovate Limited was incorporated in December 2012 as Tipp24 (UK) Limited and is registered with the Registrar of Companies for England and Wales under company number 8316397. Lottovate Limited is a wholly-owned, direct subsidiary of the Company and responsible for the operation of Primary Lotteries, either by itself or through subsidiaries. Lottovate Limited operates Norway's digitalonly national lottery in partnership with UNICEF, which it launched in 2017. Lottovate Limited also provides services to the Company in areas such as finance and accounting support, legal services and lobbying.

12.4.2.7 Lottovate Nederland B.V.

Lottovate Nederland B.V. was incorporated and registered in the Netherlands in February 2014 as Tipp24 (Nederland) B.V. and is registered under the number 60088982. Lottovate Nederland B.V. is a wholly-owned, direct subsidiary of Lottovate Limited, and responsible for the operation of the charity lottery 'Raffld - The Experience Lottery' in the Netherlands, which, however, is currently paused.

12.4.2.8 Ventura24 S.L.U.

Ventura24 S.L.U. was incorporated in 2001 and is registered with the Spanish Registro Mercantil de Madrid under CIF B83139253. This company is an online lottery broker with more than 700,000 customers as at the date of the Prospectus and has been operating since 2002. It also manages the online lottery operation for ONCE (the Spanish charity that supports blind and visually-impaired people) and has worked with ONCE on further growth initiatives. In October 2018, the Spanish Gambling Commission instructed Ventura24 to cease operating its brokerage business and Ventura24 is complying with this instruction. Ventura24 has stopped offering products to its customers at the end of December 2018, and the closure of the brokerage business is anticipated to be finalised by the end of May 2019 (see "12.4.2.3 Online Lottery Brokerage in Spain").

12.4.3 ZEAL Ventures

The following provides for examples for external investments:

− On 16 December 2016, ZEAL acquired a 10% shareholding in Pick Media Limited (formerly Free Postcode Lottery Ltd), operating under the brand 'Pick My Postcode', which organises an advertising-funded, free-to-play, lottery-style game.

− On 1 May 2017, the Company bought a 2.5% stake in form of preference shares for TEUR 1,843 (USD 2,000 thousand) in the Los Angeles based start-up Omaze. Omaze is an online fundraising platform that offers certain "experiences" and exclusive merchandise in support of critical causes, such as celebrity meet-and-greets and tickets to high profile sporting occasions. ZEAL has a board observer seat and various rights to protect and extend its shareholding.
− In July 2018, ZEAL invested TEUR 115 (GBP 100 thousand) in a 5% interest and in March 2019 a further TEUR 345 (GPB 300 thousand) in an additional 15% interest in Cloud Canyon Limited, which runs a lottery syndicate business under the brand 'wshful'.
− In addition, in December 2018, the Company invested TEUR 135 (GBP 120 thousand) in a 10% interest in De Integro Limited, a private limited company registered in England and Wales, which operates an early-stage lottery product under the brand 'Dream Makers'.

12.5 Business Operations

12.5.1 Lottery Betting

The key difference between Primary and Secondary Lotteries is the way lottery prizes are built. For Primary Lotteries, the amount of a possible jackpot (as well as the total amount of all lottery prizes of a draw) generally depends on the revenues from the sale of lottery tickets (minimum jackpot amounts could be paid-out from certain reserves if the revenues from ticket sales are not sufficient). Money taken in is the only source of paying out winners. For example, in the German lottery 'LOTTO 6aus49' there is a ratio between the amount of lottery prizes and the 'Stakes' from the sale of lottery tickets ("Pay-out Ratio") of 50, which means that only 50% of the ticket sales are being paid out as lottery prizes because the State Lottery Operators are legally obligated to retain the residual 50% of the ticket sales for the payment of tax, administrative costs and fees to lottery retailers. The lottery prizes which Primary Lotteries are required to pay out to their customers is generally not greater than their revenue from the sale of lottery tickets (with the exception of minimum jackpot amounts, see above). While parts of the stakes paid for lottery tickets are used to pay out lower winning classes, a significant share goes into building the jackpot, which will be rolled over to the following draws until it is won.

Secondary Lotteries that mirror the quotas of Primary Lotteries have the income side decoupled from the pay-out side. The lottery prizes which Primary Lotteries are required to pay out to their customers generally do not exceed their stakes from the sale of lottery tickets (with the exception of minimum jackpot amounts, see above). In contrast, the 'Stakes' received by myLotto24 Sub-Group's from the sale of bets on the outcome of a particular Primary Lottery generally do not cover potential large jackpot prize pay-out obligations (i.e. the Pay-out Ratios may significantly exceed 100). In addition, Primary Lottery Operators are able to fund large jackpot prizes by accumulating stakes over several draws in phases of increasing jackpots. While single draw events without bigger wins might result in low pay-outs of Secondary Lotteries and consequently high realised margins, single big wins might be a multiple on the income of the draw. As at the date of the Prospectus, myLotto24 Sub-Group has never generated enough 'Stakes' in relation to a particular Primary Lottery draw to be able to cover the jackpot prize of that draw. Therefore insuring the pay-out is a key discipline (see "12.17 Risk Man agement and Hedging").

12.5.1.1 Game Process

The Secondary Lottery process of myLotto24 Limited and Tipp24 Services Limited is structured as follows:

− Registration of customers. New customers create an account on the websites of myLotto24 Limited or Tipp24 Services Limited, providing real name, address, e-mail address, phone number, date of birth and payment method, and accepting the general terms and conditions. In the background the customer is validated against third-party data-bases to comply with Know Your Customer requirements. Existing customers log-in by entering their e-mail address and their individual password.

− Placement of bets. A bet on a lottery product offered by myLotto24 Limited or Tipp24 Services Limited at www.*mylotto24.co.uk* or www.tipp24.com is placed by the customer first selecting the Primary Lottery on whose results he wishes to bet. The Customer then picks numbers for the bet, similar to filling in the "original" lottery ticket of the Primary Lottery (i.e. the German 'LOTTO 6aus49' or the US lottery 'Powerball') by choosing the required main numbers and additional bonus numbers. To facilitate and expedite the placing of bets, there is also a "quick pick" function to select random numbers.
− The bet goes into a basket, similar to e-commerce platforms, where the customer is prompted to log in with his credential if not done already. The customer can either purchase for a single bet or a subscription bet to play with the chosen numbers as long as the subscription has not been cancelled (what can be done at any time). Alternatively, the customer can play the numbers until the jackpot is won, unless the chosen Primary Lottery does not offer jackpots. The customer pays for the bet (e.g. by credit card or direct debit). An e-mail confirmation on the bet placement and the numbers selected is sent to the e-mail address of the customer. With confirming the purchase, the customer enters into an agreement with Tipp24 Services Limited on brokering the ticket to myLotto24 Limited as well as myLotto24 Limited to fulfil the obligation to pay out winnings.
− Bets are taken until a certain time (depending on the underlying Primary Lottery) ahead of the draw event. After the cut-off time, all bets are processed and stored in data bases specifically protected against manipulation. On rare occasions tickets need to be cancelled ahead of the draw, e.g. if a bet could not be secured in the bookmaker systems properly, or a bet could not be hedged by means of a hedging instrument (see "12.17 Risk Management and Hedging"). After the draw has taken place and the resulting numbers and quotas of the underlying Primary Lottery are published, the data is processed in the systems. All bets eligible for the past draw event are compared against winning numbers, winning amounts and quotas are calculated based on underlying results, adjusted by rules specific to tipp24 Services Limited and myLotto24 Limited.
− Winnings. If a customer has won with a bet, an e-mail or a text message is issued and the prize is credited to the digital account and can be withdrawn or reinvested into new bets. Funds on customer accounts are separated from own funds of myLotto24 Limited and Tipp24 Services Limited. In the case of bigger prizes (above EUR 2,500), customers are required to pass a due diligence process that is required by law, e.g. to comply with anti-money laundering regulations. In this process a customer is required to provide identity documents and the steps of placing the bet are carefully analysed to detect fraudulent behaviour.

12.5.1.2 Secondary Lottery Products

At the date of the Prospectus, myLotto24 Limited and Tipp24 Services Limited offer Secondary Lotteries, in particular, on the following Primary Lotteries:

− 'LOTTO 6aus49', the popular German national lottery operated by Deutscher Lotto- und Totoblock. There are two weekly draws, Wednesday and Saturday. 'LOTTO 6aus49' involves a random draw of six numbers, selected from the numbers 1 to 49 plus one bonus number, selected from the numbers 0 to 9.
− Additional German draws such as 'Spiel 77' and 'SUPER 6' that feature smaller jackpots and where winning numbers are derived from ticket numbers of the main product's ticket slip. Spiel 77 involves a random draw of one seven-digit winning number (numbers 0000000 to 9999999) and SUPER 6 involves a random draw of one six-digit winning number (numbers 000000 to 999999).
− 'EuroJackpot' and 'EuroMillions', pan-European lotteries offered in several EU Member States with jackpots up to EUR 90 million ('EuroJackpot') and EUR 190 million ('EuroMillions'). Euro-Jackpot involves a random draw of five numbers selected from the numbers 1 to 50 and two numbers selected from the numbers 1 to 10. EuroMillions involves a random draw of five numbers selected from the numbers 1 to 50 and two additional numbers selected from the numbers 1 to 12.
− 'Powerball' and 'Mega Millions', the US lotteries which occasionally promise extremely high jackpots exceeding USD 1 billion. 'Powerball' involves a random draw of five numbers, selected from the numbers 1 to 69 plus one number selected from the numbers 1 to 26. 'Mega Millions' involves

a random draw of five numbers, selected from the numbers 1 to 70 plus one number selected from the numbers 1 to 25.

− 'Keno', a game with daily draws, different keno types and jackpots according to the price per field selected. Keno involves a random draw of 20 numbers, selected from the numbers 1 to 70.
− 'Cash4life', a New York-based draw where players can win up to EUR 1,000 (Tipp24 Services Limited) or GBP 1,000 (myLotto24 Limited) per day for the rest of their lives. Cash4Life involves a random draw of five numbers, selected from the numbers 1 to 60 plus one number selected from the numbers 1 to 4.
− 'GlücksSpirale', a German draw with a main prize of EUR 10,000 per month for 20 years. 'GlücksSpirale' lottery involves a random draw of one winning number per prize category, except for prize category 6, where two winning numbers are drawn.
− 'Irish Lottery', the national product of Ireland. Irish Lottery involves a random draw of six numbers, selected from the numbers 1 to 47 plus one bonus number, selected from the remaining 41 numbers.
− 'El Gordo', the Spanish Christmas lottery 'Loteria de Navidad' which is held once a year by the Spanish state lottery 'Loterias y Apuestas del Estado. This lottery is considered the world's largest lottery – with an above-average probability of winning and up to EUR 2 billion total lottery prizes. The Spanish Christmas lottery is based on lottery tickets that have five-digit lottery numbers. Each set of numbers on each of the tickets is sold multiple times, in several so-called 'series'. The exact number of series, the exact quantity of lottery numbers as well as the prizes, the exact number of prizes and the distribution of the prizes differs each year. In a draw, two vessels are used. One vessel contains balls with unique five-digit lottery numbers; the other vessel contains balls with a prize in euros on it.

Besides direct bets on underlying lottery draws myLotto24 Sub-Group offers system draws – a selection of possible number combinations – as well as syndicates where several players share parts of a bet slip which typically leads to more chances to win but lower pay-outs in case of winning.

12.5.1.3 Instant Win Products

Other products fall within the following categories of Instant Win Products:

− Digital scratchcards, a classic instant win product that mirror the scratch-to-reveal mechanics of offline paper scratch cards.
− Instant lottery, an instant version resembling an underlying draw lottery product, e.g. "Sofort LOTTO". Instead of a draw event the win/loss decision is made by the random number generator or a random draw from a bet pool.
− Instant Win Games (IWG), i.e. a more playful and abstract gambling product that triggers a similar random event to determine win/loss as above.

12.5.1.4 Future Lottery Betting Products

In the recent years, ZEAL has expanded its 'Lottery Betting' business activities into the UK and Ireland as new markets. ZEAL intends to add further Secondary Lotteries in certain markets to its portfolio.

In general, ZEAL's Instant Win Products portfolio requires continuous innovations as these products tend to have a shorter life cycle compared to draw products that are almost timeless.

The Business Model Change of the 'Lottery Betting' segment in Germany from the sale of Secondary Lotteries to brokerage is expected to lead to restrictions in the introduction of new lottery products in the future, due to regulatory restrictions.

12.5.2 Lottovate

12.5.2.1 Operation of Primary Lotteries

In Norway, Lottovate and UNICEF Norway operate a nationwide charity lottery 'UNICEF Lotteriet' (www.uniceflotteriet.no), which gives consumers the chance to win up to NOK 2 million (about TEUR 200) each week. Lottovate also operates the lottery 'Raffld – The Experience Lottery' (www.raffld.nl) in the Netherlands. Currently there is one draw per week on a Friday for an "experience price". The prize is allocated through a "raffle draw" meaning that there is always a guaranteed winner. Players can choose to play once or via a subscription. At the beginning of 2019, the lottery was paused to review the vision and strategy of the overall lottery.

Both live operations in Norway and the Netherlands are primary charity lotteries, where a significant revenue share is distributed to good causes.

12.5.2.2 ONCE

ZEAL's Spanish team manages ONCE's digital sales channel of through 'www.juegosonce.es' from product management to player acquisition and retention. A dedicated team is working as an integrated partner within the ONCE organisation and enables ONCE to benefit from ZEAL's marketing expertise. The remuneration is based on a revenue share.

12.5.2.3 Ventura24

Ventura24 brokers, in particular, the Primary Lotteries 'EuroMillions', 'La Primitiva', 'El Gordo' and 'Bonoloto' in the Spanish market. However, in October 2018, the Spanish Gambling Commission instructed Ventura24 to cease operating its brokerage business and Ventura24 has agreed to comply with the authority's instruction. Ventura24 has stopped offering products to its customers at the end of December 2018, and the closure of the brokerage business is anticipated to be finalised by the end of May 2019 (see "12.4.2.3 Online Lottery Brokerage in Spain").

12.5.2.4 Lotto Network

Lotto Network Limited has been offering a digital fundraising platform to charities, sports clubs, local authorities and companies to set up their self-branded, lottery betting website as another source of fundraising. On 11 December 2018, the business activity was discontinued.

12.5.3 ZEAL Ventures

The 'ZEAL Ventures' segment has to date made several investments in businesses (see "12.4.3 ZEAL Ventures"). None of these investments comprise more than 10% shareholdings. ZEAL Ventures takes an advisory position with each portfolio company but does not become involved in day-to-day business operations.

12.6 Information Technology

ZEAL has invested resources and funding in recent years to upgrade the online platforms that are utilised to run its businesses.

12.6.1 Virtual IT Structure

ZEAL has deployed a virtual (software-based) IT structure of distributed systems across both onpremises and cloud-based providers. With multiple physical co-location facilities, ZEAL is strategically prepared to scale IT resources in line with customer demand and concurrent traffic increases. With three physical locations in two countries, ZEAL currently operates between 1,000 and 1,200 virtual and, to a lesser extent, physical servers that run its platforms, with an aim to ensure the satisfaction of user expectations regarding system speed and readiness.

12.6.2 Automation

A key part of ZEAL's technology strategy has been to automate processes and application development. Automation has also been applied to ZEAL's infrastructure services. ZEAL has automated its infrastructure to a point where it is able to use programming code to obtain the benefit of adding or amending infrastructure, without the need for physical changes to be made to underlying servers. This enables ZEAL to quickly and dynamically provision new systems and processes to support its business.

12.6.3 Platform Advancements

A key element of ZEAL's IT strategy has been to continuously reinvest into its internet platforms and services, with a focus on using proven open-source tools and technologies. Since open-source tools are free, they help reduce IT costs while often providing capabilities similar to or even better than commercial tools, helping additionally to reduce technical complexities.

ZEAL's internet platform was originally based on a monolithic software architecture, in which all parts of a computer application are combined into a single program from a single platform. In recent years ZEAL has moved away from this type of architecture and has developed a microservice-based software architecture, in which individual microservices are aimed at single tasks. This approach allows development teams to operate more independently with greater accountability and has improved the speed of development.

At the date of the Prospectus, ZEAL operates over 180 microservices that help run its platform and is regularly adding new microservices.

12.6.4 Continuous Delivery

ZEAL is using the continuous delivery approach in software development, in which teams produce software in short cycles, ensuring that the software can be reliably released at any time it is required.

12.7 Transaction Processing and Accounting Systems

Certain steps of the lottery betting process are automated. This initially includes the registration process for 'new registered customers' or the login of existing 'Registered customers', then the placement of the bet or purchase of an Instant Win Product by 'Registered customers' and, if applicable, the handling of payments for the 'stake' and processing fees.

Payment is made either by direct debit, debit to the customer's credit card or from the customer's game credit balance held by the myLotto24 Sub-Group. The myLotto24 Sub-Group currently uses a commercial bank for direct debit collection, and external service providers are used to process credit card payments. These service providers process the data records, authorise payments and also process the payment transactions with the credit card companies, in compliance with the Payment Card Industry Data Security Standard (PCI DSS).

Certain human intervention is generally required in regard to the financial hedging of risks, new customer verification, certain parts of the processing of bets and the calculation and pay-out of prizes.

12.8 Customers

12.8.1 Lottery Betting

myLotto24 Sub-Group has a diverse active user base: While the business has acquired a number of 'new registered customers' in the recent years (i.e. unique users who have, for the first time, become a 'Registered customer' on a ZEAL website or (from 2017 on) on a ZEAL partner website (such as the Spanish ONCE)), the majority of 'Average Monthly Active Users (MAU)' (as defined in section "12.2.4") still derives from the Company's early brokerage phase until 2008 (see "14.3 History and Develop ment"). Also between 2009 and 2012, a period when online lottery was banned in Germany, myLotto24 Sub-Group gained 'new registered customers' but to a much lesser extent. As at the date of the Prospectus, the 'Lottery Betting' segment has experienced only minor churn of these customers to competitors. There is generally a stable spending behaviour and customers typically play "classic" products such as 'LOTTO 6aus49' and 'EuroJackpot'.

In ZEAL's assessment, as from 2013 with a certain increase of competition in the market, 'new registered customers' have become of a different type: they are typically younger (39 years in average compared to 50 for customers acquired before 2013) and display less loyalty. According to ZEAL's internal records, these customers show lower 'Average Billings Per User per month (ABPU)' (as defined in section "12.2.4 Active Customers and Stable Billings"), a less stable playing frequency, and a greater interest in betting on "modern" lotteries, such as 'EuroJackpot', 'Powerball', 'Cash4Life' and Instant Win Products. The "lower customer lifetime value", i.e. the revenue expected from these customers over their expected active time as customer, is being set off by reduced customer acquisition cost (as measured by 'average costs per new customer', defined as acquisition marketing expenses per 'new registered customer' on a ZEAL website).

Internationally the demographics and behaviours of customers are strongly driven by local gambling environments. For instance in the UK, ZEAL has observed customer affinity towards Instant Win Products to be much higher than in Germany, resulting in lower long-term activity and retention of these customers, but a comparably high spend in the first months after registration.

As with other gambling products, Secondary Lotteries and Instant Win Products require "Responsible Gambling" protection measures. While the exact parameters vary between different jurisdictions, common schemes are:

− Default house limits on how much a customer can spend.
− Default pay-in limits that a customer can only increase over time.
− Cooling periods for high-frequency Instant Win Products that disrupt the customer in order to avoid problem gambling.
− Self-exclusions for defined periods of time.
− If a customer shows signs of problematic gambling behaviours, they will be inspected and consulted by ZEAL's customer operations team, and can further be blacklisted and blocked in some instances.

12.8.2 Lottovate and ZEAL Ventures

At the date of the Prospectus, the operations of 'UNICEF Lotteriet' in Norway and 'Raffld – The Experience Lottery' in the Netherlands are in the start-up phase and do not have a significant number of 'Registered customers'. 'Raffld – The Experience Lottery' was paused in the beginning of 2019 to review the vision and strategy of the overall lottery. As at the date of the Prospectus, Ventura24 has around 700,000 'Registered customers'; however, since ZEAL intends to discontinue the business, ZEAL expects to lose these customers (see "12.4.2.3 Online Lottery Brokerage in Spain"). As regards Ventura24's cooperation with ONCE and the investments of 'ZEAL Ventures', the customers are those of ONCE and the 'ZEAL Ventures' portfolio companies and, accordingly, not of ZEAL.

12.9 Marketing and Distribution

ZEAL's marketing and distribution activities are distinct for the separate business activities as well as its different business segments.

12.9.1 Lottery Betting

The primary objective of the marketing is to win new and retain existing customers.

Acquisition marketing is undertaken mainly through the use of online channels, for example video advertisements, banner ads and other forms of advertisements clearly flagged as such, as well as paid content articles that appear editorial, content websites featuring product comparison or reviews that refer to the myLotto24 Sub-Group's websites. myLotto24 Sub-Group tests to what extent television advertising can be used efficiently to win 'new registered customers', especially in markets with massive TV inventory and favourable regulation. Other traditional media, such as radio, newspapers and magazines or outdoor advertising, do not play a significant role but can be effective in high jackpot situations. According to myLotto24 Sub-Group's assessment it is not necessary to obtain prior advertising permission for these media as this would infringe European law, however publishers are frequently pressured by State Lottery Operators or authorities to refrain from advertising Tipp24 Services Limited in Germany (see "12.11 Material Litigation").

The 'Lottery Betting' segment reviews the effectiveness of all marketing measures for new customers by continuously monitoring generated customer contacts. In online marketing, click rates and the resulting registrations as well as the sales of products to newly registered customers can be evaluated and set in relation to corresponding marketing expenses in order to control the efficiency of the use of funds. In addition, the myLotto24 Sub-Group makes use of state-of-the-art targeting methods (e.g. only target certain age groups, socio-demographic parameters, intent groups etc.) to avoid spread loss and ensure more efficient use of marketing budgets. The day-to-day campaign management and budget is mainly triggered by return-on-investment expectations based on advertising channel and campaign type.

The 'Lottery Betting' segment also carries out marketing for existing 'Registered customers', which is based on extensive analyses of customer behaviour in order to optimise customer approach with regard to time and content. It addresses existing customers in dialogue marketing by means of e-mail newsletters, onsite communications, by push notifications, SMS or post. Compared to the marketing measures for the acquisition of new customers, the costs for the care of existing customers are comparatively low. All existing 'Registered customers' measures are subject to continuous testing and optimisation. With a newly introduced data management platform, there is a focus on customer personalisation, so individual customers get the right offer via the most effective channels, with the goal to further increase activity, frequency and spend.

12.9.2 Lottovate and ZEAL Ventures

In Norway to date most acquisition marketing for UNICEF Lotteriet happens via Facebook and Instagram. Other channels such as Search Engine Marketing, Programmatic Display (fully automatic and individualized purchase and sale of advertising space on the Internet in real time) and Native Advertising (advertising on the Internet and in print media that is designed by offering content in such a way that it is difficult to distinguish it from editorial articles) are being tested at small scale. In the future offline channels such as TV and Radio may form part of the mix. For 'Raffld – The Experience Lottery', which is currently paused, most acquisition marketing happens via Facebook and Instagram. Other channels such as Search Engine Marketing, Programmatic Display and Native Advertising are being tested at small scale. In the future offline channels such as TV and Radio may form part of the mix. The Spanish entity provides customer acquisition for ONCE through a portfolio of channels, including Social media, print and digital advertising and affiliates.

The 'ZEAL Ventures' segment has, at the date of the Prospectus, made four investments in businesses. ZEAL is not involved in the day-to-day marketing and distribution of any of these businesses.

12.10 Material Agreements

This section provides a summary of the material agreements to which ZEAL is a party:

12.10.1 Material Insurance Agreements

The conversion of USD amounts into EUR amounts in this section "12.10.1" is consistently calculated based on the average exchange rates as announced by the European Central Bank of USD/EUR 1.1810 for 2018.

12.10.1.1 Hoplon III-Insurance of USD 90 million

On 14 December 2017, myLotto24 Limited entered into insurance contracts ("Hoplon III-Insurance") with Hoplon III Insurance Limited, a special purpose vehicle registered in Bermuda, as the insurer ("Hoplon III"). Hoplon III provides insurance cover of, in total, USD 90 million under three insurance policies (each a "Hoplon III-Policy"), each covering a risk of USD 30 million (around EUR 25.40 million) for a term of two years from 1 January 2018 until 31 December 2019. Hoplon III is liable, in respect of each covered lottery draw during two risk periods, to indemnify myLotto24 Limited and any of its affiliates (each an "Insured") in respect of all jackpot winning lottery bets an Insured is liable to pay out on each lottery draw to the extent that a certain amount for such draw has been exceeded. This amount depends on the Hoplon III-Policy in question, and is either USD 30 million (around EUR 25.40 million), USD 60 million (around EUR 50.80 million) or USD 90 million (around EUR 76.21 million), which means that the first USD 30 million of a jackpot winning lottery bet in each risk period must be borne by the Insured as the Self-Retention. Jackpot winning lottery bets within the meaning the Hoplon III Policies are lottery prizes of the lottery class which is mathematically least likely to win (i.e. there is no insurance cover in case of a win in lower classes).

Each Hoplon III-Policy defines two risk periods, from 1 January 2018 to 31 December 2018 and from 1 January 2019 to 31 December 2019. Hoplon III's aggregate liability under each Hoplon III-Policy does not exceed the amount of USD 30 million (i.e. USD 90 million in total). Lottery draws which are covered by the Hoplon III-Insurance are Secondary Lotteries relating to the German lottery 'LOTTO 6aus49', 'EuroMillions', 'EuroJackpot', the US lotteries 'Powerball' and 'Mega Millions', the Irish National Lottery managed by Premier Lotteries Ireland as well as, under certain conditions, other lotteries.

Under certain conditions, Hoplon III is not obliged to indemnify the Insured in respect of a jackpot winning lottery bet, notably if the Insured receives the lottery prize as principal for its own accounts under other insurances, hedging instruments or other risk mitigation techniques, such as Physical Hedging. Hoplon III is not obliged to pay either in case it has a reimbursement claim against the Insured which is due and has not been repaid under any Hoplon III-Policy. Repayment obligations may arise if an Insured decides not to pay or successfully disputes the payment of all or a proportion of a prize to a customer, or if the Insured actually recovers any amount under any risk mitigation technique.

The consideration for the insurance cover consists of a quarterly payment a certain minimum premium whose amount depends on the relevant Hoplon III-Policy (i.e. the amount of the policy which takes the first loss is the highest) and an additional payment of an adjusted premium calculated on the basis of the outstanding sum insured, actually expected and the minimum expected loss for each quarterly period. In addition, myLotto24 Limited must pay a premium in the case of any covered loss actually paid or in case of an early termination of any Hoplon III-Policy.

Under certain conditions, myLotto24 Limited may terminate each Hoplon III-Policy by giving 15 business days written notice, notably in the event that Hoplon III fails to pay the relevant covered amount, a material adverse changes in myLotto24 Limited's or any other Insured's business (including a loss of a material licence) occurs, Hoplon III files for insolvency or becomes insolvent or that there has been an appreciation equal or greater than 40% in the value of the USD against the EUR. Hoplon III may terminate each Hoplon III-Policy by giving 15 business days written notice if, in particular, a claim under the insurance and a payment by Hoplon III was made, to the satisfaction of a court, as a consequence of fraudulent or dishonest act or omission of an Insured, or in case of a payment default by myLotto24 Limited.

As security for its obligations under each policy, cash in the total amount of USD 90 million (USD 30 million for each Hoplon III-Insurance) must be deposited by Hoplon III at a collateral trust account held by HSBC Bank USA, National Association, acting as the collateral agent in accordance with a trust agreement dated 14 December 2017.

Each Hoplon III-Policy is governed by English law. Exclusive place of jurisdiction is England and Wales.

In order to be able to have sufficient financial resources should an Insured Event occur, Hoplon III has placed the risk on the capital market by selling preference shares in the total nominal amount of USD 90 million ("Hoplon III Preference Shares") to a group of investors ("Hoplon Investors") in the form of a private placement. The Hoplon III Bonds are structured similar to catastrophe-bonds (used by insurance companies to cover the risks from insurance against natural disasters) to securitise and transfer myLotto24 Sub-Group's bookmaking risks to the Hoplon Investors. The "catastrophe" is the Insured Event, i.e. a jackpot winning not covered by the Self-Retention. The Hoplon III Preference Shares have a term of two years from 1 January 2018 until 31 December 2019. During this term, Hoplon III pays a preferred dividend in the form of a fixed and a variable payment to the Hoplon Investors and, at the end of the term, Hoplon III redeems the Hoplon III Preference Shares by repaying their principal amounts back to the Hoplon Investors. However, if an Insured Event occurs during the twoyears-term, then the principal would be forgiven and Hoplon III would use this money to pay the insured amount to myLotto24 Sub-Group, i.e. in this case the principal is lost to the Hoplon Investors in whole or in part. The Hoplon III Preference Shares consists of three tranches of USD 30 million each with a different risk profile. The first tranche would be to first to bear the loss in the event of an Insured Event; in return, the first tranche carries the highest dividend (the second tranche would be lost as the second and third tranche as the third).

12.10.1.2 Private Insurance of USD 30.5 million

On 19 December 2017, myLotto24 Limited and several insurance companies ("Insurance Syndicate") entered into an agreement titled "senior policy master insurance terms and conditions and schedule of insurance" ("Private Insurance"). At the date of the agreement, the Insurance Syndicate consisted of the following insurers: Dale Underwriting Partners Syndicate 1729 (22.7273%), XL Catlin Syndicate 2003 (22.7273%), Everest Syndicate 2786 (15.1515%), Allianz Global Corporate & Speciality (9.0909%), Starstone Syndicate 1301 (9.90909%), Hamilton Underwriting Ltd Syndicate 3334 (6.0606%), Beazley Syndicate 2623 and 623 (6.0606%), Liberty Syndicate 4472 (3.0303%), Markel International Insurance Company Ltd (3.0303%) and Brit Syndicate 2987 (3.0303%). The insurers are not jointly and severally liable, but only in the amount of the quota assumed by them, which is indicated in brackets after the name of the respective insurer.

Under the Private Insurance, myLotto24 Limited procures additional insurance coverage in the amount of USD 30.5 million (around EUR 25.83 million) in respect of jackpot winning lottery bets that it may be liable to pay its customers or business partners in excess of the amounts which are insured by the Hoplon III Policies. The Private Insurance has a term of one year from 1 January 2019 to 31 December 2019. The amount of a jackpot winning lottery bet which has to be exceeded in order to make a claim under the insurance is USD 120 million (around EUR 101.61 million). This amount is already covered by the Self-Retention and the three Hoplon III Policies of, in total, USD 90 million (around EUR 75.75 million) (see above).

If the coverage under the Private Insurance is wholly exhausted, then it shall reinstate against provision of a retention of at least USD 5 million (around EUR 4.23 million) such that there is further insurance coverage in an amount of USD 30.5 million (around EUR 25.83 million) (less any amount previously reinstated as a consequence of a partial exhaustion). The reinstatement shall occur no more than once during the term of the insurance and the insurance coverage does not exceed USD 30.5 million (around EUR 25.83 million) at any time. A retention of USD 5 million (around EUR 4.23 million) is required for this to happen.

The lottery draws which are covered by the Private Insurance are the same as under the Hoplon III-Insurance and, like under the Hoplon III Policies, the Insurance Syndicate is not obliged to indemnify the Insured if, in particular, the Insured receives the lottery prize as principal for its own accounts under other insurances, hedging instruments or other risk mitigation techniques. The insurance premiums comprise a fixed minimum deposit premium and a floating quarterly settlement premium (as well as a potential termination premium in the event the policy is terminated). The termination events are similar to those agreed in the Hoplon III Policies.

The Private Insurance is governed by English law. Exclusive place of jurisdiction is England and Wales.

12.10.1.3 Special Insurance of EUR 20 million per Draw / EUR 40 million in Aggregate for all Draws

myLotto24 Limited and several insurance companies ("Special Insurance Syndicate") entered into a special risk policy for a term of one year from 1 January 2019 to 31 December 2019 ("Special Insurance"). At the date of the agreement, the Special Insurance Syndicate consisted of the following insurers: Talbot Underwriting Ltd 1183 (25%), Everest Re 2786 (25%), Catlin Insurance Company (UK) Ltd (20%), Beazley Syndicate 2623 and 623 (6.25%), Liberty Specialist Markets (5%), Hamilton Underwriting Ltd (5%), Markel International Insurance Company Ltd (5%), Allianz Global Corporate & Speciality (5%) und Brit Global Speciality 2987 (3.75%). The insurers are not jointly and severally liable, but only in the amount of the quota assumed by them, which is indicated in brackets after the name of the respective insurer.

The Special Insurance serves as protection against high lottery winnings in particular events, e.g. in the case that in the German lottery 'LOTTO 6aus49' a compulsory pay-out occurs (i.e. whenever the jackpot has not been won in twelve consecutive draws resulting in a compulsory pay-out in the 13th draw) or, in the case of 'EuroJackpot' or 'EuroMillions', the total gross money payable to a lottery winner are equal to or exceed a certain cap (each a "Special Event"). The Special Insurance Syndicate is liable, in respect of each covered lottery draw during the term, to indemnify the Insured in respect of any loss caused by a Special Event incurred or payable by an Insured in relation to such lottery draw where and to the extent that any such loss exceeds EUR 5 million (or such higher amount as notified by myLotto24 Limited prior to a draw). The maximum sum insured is EUR 20 million per draw and EUR 40 million in aggregate for all draws.

The insurance premiums comprise a fixed minimum deposit premium and a floating draw settlement premium (as well as a potential termination premium in the event the policy is terminated). The termination events are similar to those agreed in the Hoplon III Policies.

The Private Insurance is governed by English law. Exclusive place of jurisdiction is England and Wales.

12.10.2 Affiliate Merchant Agreement

On 26 September 2017, myLotto24 Limited entered into a Dutch law governed agreement with ADYEN B.V. ("Ayden") according to which Ayden agreed to provide payment processing services, reconciliation support and use of standard fraud control tooling and related services (the "Affiliate Merchant Agreement"). The fees to be paid by myLotto24 Limited are calculated on the basis of a certain amount per transaction multiplied by the number of transactions, with a minimum fee of EUR 49,590 per month as from 1 February 2018.

The Affiliate Merchant Agreement has an initial term until 16 March 2020 and, unless terminated with effect as of this date, will be automatically extended for an indefinite period until it is terminated by either party giving three months prior written notice to the other party. Under certain conditions, Ayden may terminate the Merchant Agreement without notice, notably if myLotto24 Limited materially breaches any of the terms of the Affiliate Merchant Agreement, if the provision of the services or products of myLotto24 Limited is reasonably suspected by Ayden to be in breach with legislation in the country they are offered from or to, or if Ayden finds there are clear indications that myLotto24 Limited is, or is likely to become insolvent.

12.10.3 Agreements Relating to Shareholdings in myLotto24 Limited and Tipp24 Services Limited

The Company is a party to share purchase agreements dated 30 April 2009 (and subsequently amended) with the charitable foundation Fondation enfance sans frontières, Zurich, Switzerland ("FESF") relating to each of myLotto24 Limited and Tipp24 Services Limited. The Company had sold, pursuant to the share purchase agreements, preference shares representing 60% of the voting rights in each of myLotto24 Limited and Tipp24 Services Limited to FESF and has retained a right to repurchase those shares, subject to certain conditions, in each case for a total price of GBP 30,000 (plus 6% interest p.a. compounded daily since 30 April 2009). The repurchase rights will be unconditionally exercisable as of 1 October 2019, while the exercise needs to be notified at least one month in advance. The transfer of the shares is to take place within five business days after expiry of the notice period.

12.10.4 Agreements Relating to the Offer

The Company has entered into agreements with shareholders of Lotto24 regarding irrevocable undertakings to tender their Lotto24 shares into the Offer. Furthermore, the Company has entered into a business combination agreement with Lotto24.

12.10.4.1 Agreements with Shareholders Regarding Irrevocable Undertakings

The Company has entered into agreements on 19 November 2018 concerning irrevocable obligations to tender Lotto24 shares in connection with the Offer with respect to a total of 15,698,599 Lotto24 shares (corresponding to approximately 64.99% of the current share capital and voting rights in Lotto24) (each an "Irrevocable Tender Obligation") with the following four Lotto24 shareholders (the "Tendering Shareholders"):

– Othello Vier Beteiligungs GmbH & Co. KG with regard to 10,054,316 Lotto24 shares (corresponding to 41.62% of the share capital and voting rights of the Target),

Working Capital Partners, Ltd. for 2,552,901 Lotto24 shares (corresponding to 10.57% of the share capital and voting rights of the Target),
High Street Partners, Ltd. in respect of 2,208,846 Lotto24 shares (corresponding to 9.14% of the share capital and voting rights of the Target),
Jens Schumann with regard to 882,536 Lotto24 shares (corresponding to 3.65% of the share capital and voting rights of the Target).

In the Irrevocable Tender Obligations, the Tendering Shareholders have irrevocably committed themselves, among others,

to accept the Offer for the number of Lotto24 shares subject to the respective Irrevocable Tender Obligation within five Banking Days after the start of the Tender Period;
not to sell the Lotto24 shares held by them, not to accept any other offers to purchase Lotto24 shares and not to contest or withdraw acceptance of the Offer;
as shareholders of the Company, to approve a resolution of the Company's general meeting regarding the transfer of the Company's registered office to Germany following Completion.

Furthermore, the Tendering Shareholders Working Capital Partners, Ltd., High Street Partners, Ltd. and Jens Schumann as well as the sister company of Othello Vier Beteiligungs GmbH & Co. KG, Othello Drei Beteiligungs GmbH & Co. KG, all of which are also shareholders of the Company, had undertaken to approve the following resolutions of the Company's general meeting of 18 January 2019 as shareholders of the Company, which created the conditions for the Offer:

authorisation of the Executive Board of the Company to publish the offer document relating to the voluntary public takeover offer (exchange offer) by the Company to the shareholders of Lotto24 dated 31 January 2019 ("Offer Document");
acquisition of Lotto24 shares from the members of the Supervisory Board of the Company, Jens Schumann and Oliver Jaster (or persons connected with them) in pursuance of the Offer; and
authorisation of the Executive Board of the Company to allot new ZEAL shares in pursuance of the Offer (see "15.4 Further Authority to Allot Shares").

In addition, the Tendering Shareholders Working Capital Partners, Ltd., High Street Partners, Ltd. and Jens Schumann had undertaken, as shareholders of the Company, to approve the following resolution of the general meeting of the Company of 18 January 2019:

– approval of the waiver by the Panel on Takeovers and Mergers of any obligation of Othello Vier Beteiligungs GmbH & Co KG and the persons acting in concert with it from the public offer obligation under the City Code on Takeovers and Mergers otherwise triggered by the Completion,

whereas Othello Drei Beteiligungs GmbH & Co KG, the sister company of Othello Vier Beteiligungs GmbH & Co KG, had undertaken not to exercise its voting rights in this resolution.

In addition, the Irrevocable Tender Obligation entered into by Othello Vier Beteiligungs GmbH & Co KG provides for the obligation to publish a voluntary public offer for the Company's shares following a potential transfer of the Company's registered office to Germany within five years after Completion, should Othello Vier Beteiligungs GmbH & Co KG or a company affiliated with it exceed, itself or by attribution, the threshold of 45% of the voting rights in the Company except as a result of the Completion.

Furthermore, in connection with the Irrevocable Tender Obligation entered into by Othello Vier Beteiligungs GmbH & Co. KG, Othello Vier Beteiligungs GmbH & Co. KG, its sister company Othello Drei Beteiligungs GmbH & Co. KG and the Company have, amongst others, agreed to make reasonable efforts to ensure that, after Completion,

the supervisory board of Lotto24 AG will consist of the current chairman of the Company's Executive Board, Dr Helmut Becker, as chairman (whereas the Company now intends to have an independent member of the ZEAL Supervisory Board chair the Lotto24 AG supervisory board), a member proposed by Othello Vier Beteiligungs GmbH & Co. KG and an independent member;
the current member of the Company's Executive Board, Jonas Mattsson, is appointed as a further member of the management board of Lotto24 AG;
the current members of the management board of Lotto24 AG are offered appointments as additional members of the Company's Executive Board; and
the German-language Secondary Lottery offering on the www.tipp24.com website is converted into a commercial lottery brokerage business on the basis of a German commercial lottery brokerage licence within twelve months.

In addition, the Company has undertaken to Othello Vier Beteiligungs GmbH & Co KG in connection with its Irrevocable Tender Obligation, among others,

not to waive any Offer Conditions or reduce the Minimum Acceptance Rate (see "4.1 Overview") without the consent of Othello Vier Beteiligungs GmbH & Co KG;
not to acquire any Lotto24 AG shares within 24 months of Completion for a consideration that exceeds the Offer Consideration;
to provide Günther SE, a company affiliated with Othello Vier Beteiligungs GmbH & Co KG, with the information it requires for the consolidation of the Company after Completion, as long as a corresponding consolidation obligation exists;
to convene within six months after Completion a general meeting to resolve on the transfer of the registered office of the Company to Germany;
not to accept a mandatory public offer by Othello Vier Beteiligungs GmbH & Co KG or any of its affiliates for Lotto24 AG shares; and
not to propose to its shareholders a capital increase excluding subscription rights within three years of Completion or not to carry out such a capital increase if this would result in a decrease of the total holdings of Othello Vier Beteiligungs GmbH & Co. KG and its affiliated companies in the Company below the threshold of 33% (or, if the holdings of Othello Vier Beteiligungs GmbH & Co. KG and its affiliated companies after the consummation of the Offer are below 33%, below this quota).

12.10.4.2 Business Combination Agreement between the Company and Lotto24

In the period from the publication of the decision by the Company to make the Offer until the publication of the Offer Document, discussions were held between the Executive Board of the Company and the management board of Lotto24 AG regarding a cooperation within the framework of a combined company consisting of ZEAL Network and Lotto24 AG based on a de facto group relationship, in the mutual interest of ZEAL and Lotto24 AG as well as their respective shareholders, employees and customers (see "4.2 Reasons for the Offer"). The Company and the Target entered into a Business Combination Agreement (the "BCA") on 24 December 2018 in order to plan and implement future cooperations. In particular, the BCA contains agreements regarding the future business cooperation between the Company and the Target after Completion (while specific measures have not yet been agreed), the future composition of the Executive Board of the Company and the management board of the Target as well as the cooperation regarding the satisfaction of certain gambling regulatory conditions. All obligations of Lotto24 AG are, in accordance with the provisions of the BCA, subject in particular to the proviso that no duties of loyalty or duties of corporate bodies on the part of the management board or the supervisory board of Lotto24 AG or any applicable law prevent the implementation of such obligations in individual cases. If the Offer is not successfully completed, Lotto24 AG may, under certain circumstances and in accordance with the provisions of the BCA, demand reimbursement of consultancy costs incurred in connection with the Offer, such reimbursement being limited to a maximum amount of EUR 500,000. The BCA has a term of two years from the date of signature. Either party may terminate the BCA if the Offer is not completed or if the other party violates material obligations under the BCA. The main provisions of the BCA are explained below.

12.10.4.2.1 Business cooperation

The objective of the cooperation, pursuant to the BCA, is to combine and leverage the strengths of the parties in Germany and in international markets as independent entities in a de facto group (faktischer Konzern). All terms of the cooperation before and after the Completion of the Offer shall comply with arm's length principles and the statutory requirements applicable in a de facto group (the "Cooperation Principles"). Synergies among the Company and the Target are to be realised partly after Completion and partly after completion of the conversion of the ZEAL Secondary Lottery business to commercial lottery brokerage (see "4.2 Reasons for the Offer"), in particular through cooperation in accordance with the Cooperation Principles. The objective is to create added value for both parties by supporting each other in investing in new product developments, by pursuing organic growth to ensure the success of their respective businesses, and by providing each other with access to the other party's internal resources, including its experts in marketing, product development and engineering. Specific measures have not yet been agreed, but are to be mutually agreed between Lotto24 AG and ZEAL Network in accordance with the provisions of the BCA. To this end, an agreement is to be reached within a reasonable time after the date of the BCA, which will be recorded in writing ("Road Map").

12.10.4.2.2 Composition of the management bodies of the Company and Lotto24

As stipulated by the BCA, upon Completion, the Company will offer to the current members of the management board of Lotto24 AG, Petra von Strombeck and Magnus von Zitzewitz, to join the Executive Board of ZEAL Network as additional members and the Company's Executive Board member, Jonas Mattsson, will join the management board of the Target as an additional member. In order to reduce the risk of conflicts of interest resulting from dual board memberships during the phase of planning, negotiating and agreeing on the specific contents of the cooperation and Road Map, these measures are only to be implemented 180 days after Completion or at such earlier point of time at which the parties have reasonably concluded that the contents of the cooperation and Road Map have been sufficiently agreed and therefore the risk of conflicts of interest has decreased.

12.10.4.2.3 Cooperation regarding gambling permits

In compliance with the provisions of the BCA and the Cooperation Principles, Lotto24 will, in close cooperation with the Company, apply to the Lower Saxony Ministry of the Interior and Sport for the granting of permits or issuing of confirmations as specified in certain gambling regulatory conditions, to the extent legally permissible (while a corresponding application was already made on 9 January 2019 by the Target in coordination with the Company). The Company and the Target will use their best endeavours to (i) ensure the satisfaction of the gambling regulatory conditions before the expiry of the Tender Period and (ii) negotiate and – to the extent applicable, subject to the Completion – enter into all contractual agreements that provide the basis to make available the brokerage services of Lotto24 AG to the current customers of Tipp24 Services Limited, provided, however, that (a) such arrangements comply with the Cooperation Principles and (b) Lotto24 AG shall not be under any obligation to make any commitments having detrimental effects on its business, assets or results of operation unless and to the extent the Company has previously agreed to compensate Lotto24 AG for any such detrimental effects.

12.11 Material Litigation

Various companies of ZEAL are currently involved in legal disputes and administrative proceedings as a result of their ordinary business activities and ZEAL expects that this will also be the case in the future. Proceedings relating to ZEAL's operative business have in the past and could in the future include, among others, arisen and may arise from ZEAL's relationships with customers, investors, employees, other contractual counterparties, State Lottery Operators, other operators of Primary Lotteries and Secondary Lotteries and public authorities alleging breaches of contract, tort or failure to comply with applicable laws and regulations. It is impossible to determine or predict the outcome of cases pending or threatened. The Company believes that, other than the proceedings described below, there have been no governmental, legal or arbitration proceedings (including any proceedings which are pending or threatened of which the Company is aware), during the twelve months preceding the date of the Prospectus, that may have or have had in the recent past significant effects on ZEAL's financial position or profitability. Legal proceedings and administrative proceedings in which the ZEAL companies have been involved during the previous twelve months particularly include the following:

12.11.1 Administrative and Civil Court Proceedings Involving ZEAL Network

The Company applied in January 2013 at the Ministry of Interior in Lower-Saxony for a Germany-wide brokerage licence. In March 2015, the authority rejected the application. The authority reasoned this mainly with the unclear relationship between the Company and the myLotto24 Sub-Group which, in the opinion of the authority, operates unlawful Secondary Lotteries in Germany. The Company filed a complaint with the Administrative Court (Verwaltungsgericht) of Hamburg seeking annulment of the decision of the Ministry of Interior in Lower-Saxony not to grant a brokerage licence and requiring the authority to grant such a licence. The current status is that the court must decide on further proceeding.

12.11.2 Administrative Proceedings Concerning the Offer of Secondary Lotteries in Germany

Tipp24 Services Limited and myLotto24 Limited are currently involved in legal proceedings before several administrative and civil courts in Germany. Tipp24 Services Limited and myLotto24 Limited offer Secondary Lotteries in Germany on the internet. The Treaty on Gambling 2012 constitutes a gambling monopoly, including a lottery monopoly, of the state and prohibits the private operation of lotteries (with an exemption of certain lotteries "with a lower risk potential" offering no higher winnings than EUR 2 million and no jackpots). Only the brokerage, but not the operation, of lotteries and the operation and brokerage of sports bets on the internet may be permitted by the Federal States (Länder). Organising and brokerage without a licence (unauthorised gambling) as well as the participation in payments in connection with unauthorised gambling are prohibited. Some German gambling supervisory authorities (Glücksspielaufsichtsbehörden) claim that the offering of Secondary Lotteries on the Internet is an illegal activity. Thus, the gambling supervisory authorities of the Federal States of Saxony-Anhalt, Baden-Württemberg, Saarland and Hesse have issued administrative orders against Tipp24 Services Limited with the demand to discontinue the offering of Secondary Lotteries in these Federal States (each a "Prohibition Order"). In the case of Hesse, such order was also rendered to myLotto24 Limited. Tipp24 Services Limited and myLotto24 Limited have filed appeals against each Prohibition Order addressed to them to the competent administrative courts (Verwaltungsgerichte). In January 2018, also the supervisory authority of Rhineland-Palatinate started administrative proceedings against Tipp24 Services Limited and myLotto24 Limited through formal hearings. Such hearing is usually the first step before the authority may render of a Prohibition Order. Under the Treaty on Gambling 2012, appeals and legal actions against Prohibition Orders have no suspensive effect unless a court grants preliminary judicial relief.

At the date of the Prospectus, only the administrative proceedings between Tipp24 Services Limited and Saxony-Anhalt have been finally decided. In February 2014, the competent Higher Administrative Court as the court of second instance confirmed the lawfulness of the Prohibition Order. The third instance, the Federal Administrative Court (Bundesverwaltungsgericht), did not permit an appeal against this decision and the German Federal Constitutional Court (Bundesverfassungsgericht) dismissed Tipp24 Services Limited's constitutional complaint in March 2016. Therefore, the Prohibition Order is legally binding, although the supervisory authority of Saxony-Anhalt did not commence any enforcement actions against Tipp24 Services Limited. The appeals filed by Tipp24 Services Limited with the administrative courts of Karlsruhe (Baden-Württemberg) and Saarland were also unsuccessful, but further appeals to the courts of second instance have been filed which were undecided at the date of the Prospectus.

12.11.3 Civil Lawsuits Concerning the Offer of Secondary Lotteries in Germany

Tipp24 Services Limited is a party to two civil lawsuits based on competition law concerning the requests by the State Lottery Operators of North Rhine-Westphalia and Bremen, Westdeutsche Lotterie GmbH & Co. oHG and Bremer Toto und Lotto GmbH, to discontinue the offering of Secondary Lotteries. In these two legal disputes, it is also questioned whether Tipp24 Services Limited has to pay compensation for its purported unlawful business activities to these State Lottery Operators. No claim amounts have been specified. In March 2019, the court of first instance decided in favour of Westdeutsche Lotterie GmbH & Co. KG. Tipp24 Services Limited has appealed this decision. At the date of the Prospectus, no other decisions of the courts of first instance have been made.

12.11.4 Administrative Proceedings Concerning the Business Activities of in Spain

Ventura24 has been operating as an online lottery broker in Spain since 2002 with, at the date of the Prospectus, more than 700,000 customers. Ventura24 had assessed that this business did not require a licence from the Spanish state lottery operator 'Sociedad Estatal de Loterias y Apuestas del Estado (SELAE)' to manage the online purchase of lottery products. In October 2018, in the context of a legal dispute between from the Spanish Gambling Commission, the Supreme Court of Spain (Tribunal Supremo de España) confirmed – contrary to Ventura24's view – that its business may not be conducted without licence. As a result, the Spanish Gambling Commission has instructed Ventura24 to discontinue its brokerage business. Ventura24 has stopped offering products to its customers at the end of December 2018, and the closure of the brokerage business is anticipated to be finalised by the end of May 2019.

12.11.5 Fiscal Court Proceedings Against myLotto24 Limited

On 2 May 2017 myLotto24 Limited received a formal assessment based on 'Stakes' from the tax authority (Finanzamt) Hannover-Nord for unpaid VAT for 2015, 2016 and part of 2017. myLotto24 Limited has appealed all VAT assessments issued by the tax authority (Finanzamt) Hannover-Nord since the tax period January 2015 at the fiscal court (Finanzgericht) Hannover. To date, no oral hearing has taken place in this proceeding. In addition, myLotto24 Limited applied for a stay of execution regarding these VAT assessments, which the tax authority Hannover-Nord granted without a demand for security. However, the tax authority (Finanzamt) Hannover-Nord has indicated that it will only grant, as from the start of the tax period May 2018, a stay of execution for any future assessments under the condition that myLotto24 Limited provides security. Such security must be equivalent to the amount of the assessed VAT. myLotto24 Limited also appealed against the assessment of a security deposit at the fiscal court (Finanzgericht) Hannover. After a review of the facts and independent legal advice, the Company is of the opinion that, if ZEAL were unsuccessful in its appeals of the VAT assessments, VAT would at most be payable based on gross gaming revenue ('Stakes' minus 'Prizes'). Following recent discussions with the tax authority (Finanzamt) Hannover-Nord, the potential financial effect in the case that ZEAL's appeal should not be successful is estimated at EUR 70.3 million as at 31 March 2019 (31 December 2018: EUR 64.6 million, 31 December 2017: EUR 41.3 million, 31 December 2016: EUR 23.3 million), in each case including interest, plus any fines (see "1.1.7 Uncertainties and changes relating to ZEAL's regulatory tax environment for its online offerings can significantly impact its business. ZEAL could be required to pay additional taxes, including lottery taxes, and other duties as a result of tax audits, legal proceedings relating to tax assessments, changes in ZEAL's effective tax rate or the loss of its tax loss carry forwards and other tax credits.").

12.11.6 Further Material Litigation

12.11.6.1 Certain Private Individuals versus ZEAL Network and Tipp24 Deutschland GmbH

In May 2008, private individuals filed a claim against the Company and Tipp24 Deutschland GmbH with the Regional Court (Landgericht) of Hamburg. The claimants demand the payment of EUR 300,000, the employment of one of the claimants for five years at a monthly salary of EUR 8,500 and a virtual 20% stake in Tipp24 Deutschland GmbH's share capital. In December 2016 the court of first court instance, the Regional Court (Landgericht) dismissed the action. In 2017, one of the claimants filed an appeal with the Hanseatic Higher Regional Court (Hanseatisches Oberlandesgericht). In February 2019 the court decided to reject the appeal and to not grant a further appeal (Revision) to the Federal Court of Justice (Bundesgerichtshof). In March 2019, the claimant appealed against the denial of admission to appeal (Nichtzulassungsbeschwerde) to the Federal Court of Justice (Bundesgerichtshof), on which a decision is pending at the date of the Prospectus.

12.11.6.2 Lotto Hamburg GmbH versus Tipp24 Services Limited and Gratis Lotto Limited

Lotto Hamburg GmbH applied successfully for interim injunctions at the Regional Court (Landgericht) of Hamburg against Tipp24 Services Limited and Gratis Lotto Limited relating to the online advertising campaign for the lottery product 'Danke Million'. As neither Tipp24 Services Limited nor Gratis Lotto Limited accepted the injunction, Lotto Hamburg GmbH initiated the main proceedings. No claim amounts have been specified. At the date of the Prospectus, no decisions of the courts of first instance have been made.

12.12 Intellectual Property and Domains

ZEAL is the owner of a large number of trademarks registered with the European Union Intellectual Property Office (EUIPO), the German Patent and Trade Mark Office, the UK Intellectual Property Office and further registrars in other jurisdictions. The registered trademarks include the wordmarks 'ZEAL', 'myLotto24', 'tipp24' and 'Lottovate'. Furthermore, ZEAL is the registered owner of the internet domains 'www.zeal-network.co.uk', 'www.mylotto24.co.uk', 'www.tipp24.de' and 'www.lottovate.co.uk'. ZEAL also uses various other domains of its own with descriptive domain names in the lottery environment to increase the reach of its own offering.

Given the nature of its business, patents and licences are of no special significance to ZEAL. It does not depend on any patents or licenses, other than regulatory licenses granted by the UK Gambling Commission (see "13.2.1.1 Licences"), by the competent Irish Revenue Commissioners (see "13.2.2 Regulatory Environment in Ireland") as well as the licences in Norway ("13.2.3 Regulatory Environment in Norway") and the Netherlands (see "13.2.4 Regulatory Environment in the Nether lands"). In addition, ZEAL will be dependent on Lotto24's brokerage licence and advertising licence after Completion and on the Lotto24 Licence Expansion after the Business Model Change (see "12.3.2 Focus on Businesses based on Local State Licences").

12.13 Research and Development

ZEAL's development activities are focused on expanding the product range and on improving the technical systems used to provide services.

ZEAL employs teams of market and user research specialists. They run studies, surveys, user labs, tests, and more quantitative and qualitative research methods to help inform the product development and marketing strategy. Typical areas covered are value test (do customers appreciate a certain function or product), usability tests (can customers operate the product), design and understanding tests (do customers like the look and feel of products and campaigns, do they understand the message). In addition, the team runs frequent brand surveys on positioning versus competition and studies market research to influence the strategy development.

Development is done almost exclusively in-house, following common practices in strong product organisations in Europe and the United States of America. Teams are dedicated around certain parts of the product, are responsible for the outcome of their work, and are self-sufficient, which means that key resources such as user experience designers, engineers, product managers, data analysts and quality assurance engineers form part of the team to ensure direct communication and collaboration. Development teams apply agile methodology to ship products early and often, and iterate them to success.

12.14 Property, Plant and Equipment

ZEAL does not own any real estate. It currently uses office space for its business activities, which is let to it at customary market conditions. ZEAL's property, plant and equipment consists of:

− Various hardware and other computer systems for the operation of the transaction platform, consisting of servers which ensure the operation of the website, underlying transaction software, the data bank and various security systems.
− IT equipment for ZEAL's offices, which includes work stations and laptops, servers for the operation of the central data storage and email systems, telephony equipment and security systems.
− General equipment for ZEAL's offices, primarily consisting of office furniture and enhancements made to the leasehold premises.

12.15 Insurances

ZEAL has taken out insurance policies in relation to a number of risks associated with its business activities, including both group-wide and local insurance policies. ZEAL's insurance policies mainly comprise a commercial package insurance against property damage, including contents, increased cost of working, terrorism, employers' liability, public and products liability, employee fidelity, impairment of computer services by insider and outsider attack, abduction and extortion. Furthermore ZEAL has crime insurance and an injury and travel insurance.

In addition, ZEAL has entered into several insurances to hedge risks from its Secondary Lottery business (see "12.17.3 Management of Specific Risks – Hedging").

At the present time, ZEAL has no business interruption insurance coverage except for insurance coverage against increased cost of working.

ZEAL's insurance policies are subject to customary exclusions, limits and deductibles. At the same time, ZEAL has identified several risks that cannot be insured on economically feasible terms and for which, therefore, no insurance cover has been purchased. These risks include, inter alia, business interruption caused by acts of war or nuclear catastrophes.

The Company is of the opinion that ZEAL's insurance cover is adequate in light of potential future litigation and claims asserted against ZEAL. ZEAL regularly reviews its insurance programme together with its insurance broker. ZEAL cannot guarantee, however, that it will not incur losses or be subject to claims that exceed type, scope or amount of its existing insurance coverage. Furthermore, it cannot ensure that it will be able to maintain adequate insurance coverage at appropriate premiums in the future (see also "1.4.1 ZEAL is exposed to bookmaking risks through myLotto24 Sub-Group as opera tor of Secondary Lotteries. Lottery prizes owed to customers could exceed myLotto24 Sub-Group's own funds and the coverage provided under hedging arrangements, which could ultimately lead to the insolvency of members of the myLotto24 Sub-Group.", "1.4.2 Existing hedging arrangements in the form of insurances could be terminated by the insurer before the end of their respective term and ZEAL or myLotto24 Sub-Group could not be able to take out new insurance cover at all or only with a time delay. ZEAL or myLotto24 Sub-Group could not be able to renew existing insurance contracts after the end of their respective term or could only obtain significantly lower insurance coverage or insurance coverage against payment of significantly higher insurance premiums. Additional hedging arrangements may fail partly or entirely, and may not be sufficient to cover risks associated with the operation of ZEAL's business. The winning of high jackpots by customers could lead to myLotto24 Sub-Group's inability to accept further lottery bets due to insufficient cover by its hedging instru ments.", "1.4.3 Insurers providing coverage for the event of a high jackpot could be unable, unwilling or not obliged to pay out the insurance benefit." and "1.4.4 ZEAL could incur substantial losses from other damages not covered by, or exceeding the coverage limits of, its insurance policies.").

12.16 Employees

The number of employees of ZEAL (based on full-time equivalents (average over a given period), excluding members of the Executive Board) was 247 in 2016, 271 in 2017 and 259 in 2018. The following table shows the changes in ZEAL's staff size (average headcount, full-time equivalent) for the fiscal years 2016, 2017 and 2018, broken down by functions:

	As of31 December
	2016	2017	2018
	No.	No.	No.
Management (1)	11	12	11
IT	110	111	106
Marketing	65	77	68
Corporate Services (including hedging)	64	74	77
Total	250	274	262

(1) Including members of the Executive Board.

Except for a works council established at Ventura24, with which ZEAL cooperates constructively, none of ZEAL's employees falls within the scope of a collective agreement or similar contracts and there is no other works council. ZEAL' business activities have not yet been interrupted due to industrial action.

12.17 Risk Management and Hedging

12.17.1 Overview

ZEAL has delegated the day-to-day responsibility for risk management to the management teams of its two business segments 'Lottery Betting' and 'Lottovate' (for more information on the business segments, see "12.1 Overview").

As ZEAL only holds a minority shareholding in the fully consolidated myLotto24 Sub-Group, the assessment of risks within the 'Lottery Betting' segment is substantively based on risk reports provided by segment management as part of regular and ad-hoc reporting. The risk related reporting mainly focusses on any new risks identified (and their perceived impact on the operating activities of myLotto24 Sub-Group and ZEAL as a whole) together with segment management's assessment of any changes in the profile of previously identified specific risks around significant processes, controls and the wider segment governance. The completeness of the segment risk assessment is ensured through frequent meetings held between ZEAL management and segment management.

ZEAL is exposed to the typical sector and market risks associated with the economic activities of an international company operating in the internet sector. In addition, there are market-typical regulatory risks in individual lottery markets resulting from possible changes in the respective legal and political situations. Finally, there are specific risks associated with the operation of Secondary Lotteries. This concerns the risk of large pay-outs as well as the increased risk of fraud compared to the pure brokerage of lottery products. All reasonably possible risks identified by management that could have a material impact on the ongoing business activities of ZEAL, together with mitigation activities, are detailed in the risk section of the Prospectus (see "1 Risk Factors").

12.17.2 Risk Management Process

The management teams of the respective segments consider possible risks in their operating and strategic decision making processes. Both current and potential future risks are regularly monitored by segment and ZEAL management. ZEAL's risk management process operates as follows:

− Operating risks are monitored by regularly reviewing financial and other key ratios. The monitoring frequency, designated controlling responsibility and determined rules of procedure for defined deviations from target values are set out for each ratio. In the case of technology risks, emergency back-up procedures are defined and documented and can be quickly implemented if required. Security standards are regularly monitored and adjustments are regularly made to security systems.
− Legislation changes in those markets in which ZEAL operates are regularly evaluated by the Company's internal legal experts (and with assistance from external legal advisors where necessary). In this way, events which may increase risk to the ongoing operating activities of ZEAL can be swiftly recognised and suitable measures initiated.
− The statistical risks of organising Secondary Lotteries, i.e. the expected Pay-Out Ratios over the long-term are monitored by the statistical assessment of the products offered and the corresponding expected 'Stakes'. Hedging instruments, such as the Hoplon III-Insurance, are used to ensure sufficient liquidity to pay out jackpots.
− The Executive Board regularly monitors the results and effectiveness of the risk assessment procedures delegated to the business segment management teams. ZEAL considers that the early warning and risk management systems which have been implemented are well suited to quickly recognising and mitigating risks that could impact ZEAL's operating activities.
− On a regular basis, a report comprising all identified risks applicable to ZEAL is presented to the Audit Committee and the Supervisory Board (for further details concerning the various Board and Committee structures, see "16.3 Supervisory Board"), together with commentary around potential preventative measures and mitigating activities performed to respond to identified risks.

12.17.3 Management of Specific Risks – Hedging

12.17.3.1 Bookmaking Risks

myLotto24 Sub-Group organises Secondary Lotteries and, thus, operates as a bookmaker offering bets on the outcome of Primary Lotteries in Europe and North America. Typically, Tipp24 Services Limited promises its customers lottery prizes in case of a winning bet equal to the quota paid out by the relevant Primary Lottery (e.g. if there is a single winner of a jackpot in the Primary Lottery worth EUR 10 million, Tipp24 Services Limited pays out the same amount to a customer who is the only winner of the jackpot in the related Secondary Lottery; if there are several winners in that Secondary Lottery, the EUR 10 million is equally shared by these winners). In contrast, customers who play Secondary Lotteries on the websites of myLotto24 Limited are treated as they have to "share" a winning with the winner(s) in that Primary Lottery (e.g. if there is one winner of a EUR 10 million jackpot in the Primary Lottery and one winner in the related Secondary Lottery, myLotto24 Limited pays out EUR 5 million). myLotto24 Sub-Group does not act as a broker for Primary Lotteries, in contrast to Lotto24, who as an intermediary pays out lottery prizes received from the Primary Lotteries to its customer. Instead, myLotto24 Sub-Group has to use its own funds for prize pay-outs. Accordingly, myLotto24 Sub-Group – and thus ZEAL – bears the bookmaking risks for its Secondary Lottery business.

This risk can be illustrated by the jackpot-amounts of the Primary Lotteries on which results myLotto24 Sub-Group offers bets:

Primary Lottery Operator	Lottery	Jackpots (1)
Deutscher Lotto- und Totoblock (2)	LOTTO 6aus49	Limited by a compulsory pay-out whenever the jackpot has not been won in twelve consecutive draws. In this case, the jackpot must be played in the 13th draw. The highest-ever jackpot so far was around EUR 45.4 million.
Several lotteries in differentEuropean countries (3)	EuroJackpot	At least EUR 10 million and up to EUR 90 million. Any excess is pushed down to lower lottery prize classes.
Members of the MultiStateLottery Association (MUSL) (4)	Powerball	At least USD 40 million; no compulsory pay-out. The highest-ever jackpot so far was around USD 1.5 billion. In case of a winning by a customer of myLotto24 Sub-Group's, the amount will be reduced by 38% for taxes and another 40% if the amount is paid-out in one sum and not in 30 instalments over a period of 30 years.
	Mega Millions	At least USD 40 million; no compulsory pay-out. The highest-ever jackpot so far was around USD 1.6 billion (cash option: USD 904 million). In case of a winning by a customer of myLotto24 Sub-Group's, the amount will be reduced by 38% for taxes and another 40% if the amount is paid-out in one sum and not in 30 instalments over a period of 30 years.
The Spanish government lotteryLoterías y Apuestas del Estado	EuroMillions	At least EUR 17 million and up to EUR 190 million. Any excess is pushed down to lower lottery prize classes. If the jackpot is not won for over five draws, there is a compulsory pay-out in the lower lottery prize class with at least one winner.
Premier Lotteries Ireland	Irish Lotto	At least EUR 2 million with a jackpot cap at EUR 18.96 million.

(1) Many lotteries (e.g. EuroJackpot, Powerball, Mega Millions and the German lottery 'LOTTO 6aus49') feature progressive jackpots. After each drawing in which the jackpot is not won, a large amount of money is "carried forward" to the jackpot for next drawing. When the jackpot is won, the jackpot for the next play is reset to a predetermined value, and resumes increasing under the same rule.

(2) The 'Deutscher Lotto- und Totoblock' is an association of the sixteen State Lottery Operators for the operation of games of chance.

(3) The countries participating in the lottery 'EuroJackpot' are: Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Iceland, Italy, Latvia, Lithuania, the Netherlands, Norway, Slovakia, Slovenia, Spain, Sweden and Poland.

(4) The Multi-State Lottery Association (MUSL) is an American non-profit, government-benefit association owned and operated by agreement of its 34-member lotteries.

Unlike Primary Lotteries, a customer winning a jackpot is a risk for myLotto24 Sub-Group and ZEAL because myLotto24 Sub-Group can neither influence the Pay-out Ratios nor the frequency of jackpots. For Primary Lotteries, the amount of a possible jackpot in a draw (as well as the total amount of all lottery prizes of a draw) generally depends on the 'Stakes' from the sale of lottery tickets (minimum jackpot amounts could be paid-out from certain reserves if the revenues from ticket sales are not sufficient). For example, the German lottery 'LOTTO 6aus49' has a Pay-out Ratio of 50, which means that only 50% of the revenues from ticket sales are paid out as lottery prizes, as the State Lottery Operators are legally obligated to retain the residual 50% of the revenues from ticket sales for the payment of tax, administrative costs and fees to lottery retailers. The lottery prizes which Primary Lotteries are required to pay out to their customers generally do not exceed their 'Stakes' from the sale of lottery tickets (with the exception of minimum jackpot amounts, see above). In contrast, the 'Stakes' received by myLotto24 Sub-Group's from the sale of bets on the outcome of a particular Primary Lottery generally do not cover potential large jackpot prize pay-out obligations (i.e. the Pay-out Ratios may significantly exceed 100). In addition, Primary Lottery Operators are able to fund large jackpot prizes by accumulating 'Stakes' over several draws in phases of increasing jackpots, whereas myLotto24 Sub-Group faces the repeated jackpot pay-out risk described immediately below. As at the date of the Prospectus, myLotto24 Sub-Group has never generated enough 'Stakes' in relation to a particular Primary Lottery draw to be able to cover the jackpot prize of that draw.

The bookmaking-risk described above is increased by the following circumstances:

− It cannot be excluded that one or more of myLotto24 Sub-Group's customers win a jackpot, whereas in the Primary Lottery, the jackpot has not been won and, accordingly, will not be reduced to its lowest amount in the next draw. Rather, in that next draw, the jackpot will even be increased and myLotto24 Sub-Group has to offer the same jackpot-amount although it has already paid-out the jackpot in the last draw.
− myLotto24 Sub-Group organises bets on several Primary Lotteries which is why more than one jackpot may be paid-out at the same time or one after the other in a short time, so that not sufficient time remains to replenish the reserves for high lottery prizes.

12.17.3.2 Hedging Strategy and Instruments

In order to make the bookmaking risks manageable and to prevent a high lottery win from posing a threat to the existence of myLotto24 Sub-Group, a multi-layer hedging strategy was introduced, consisting of a hedging reserve of USD 24 million (TEUR 21,390) as of 31 March 2019, insurance coverage in the amount of USD 90 million and USD 33 million special insurance coverage of EUR 20 million per draw and EUR 40 million in aggregate for all draws within the term of the insurance, as well as the purchase of matching entries in Primary Lotteries with the same combination of numbers or other elements to those places by customers on myLotto24 Sub-Group's online platforms for the related Secondary Lottery.

Hedging Instrument	Description
Hedging reserve	The first layer of hedging consists of myLotto24 Limited's hedgingreserve. The hedging reserve decreased from TEUR 50,000 as of 31December 2016 to TEUR 30,000 as of 31 December 2017 due to theimplementation of the Hoplon III-Insurance (see below). It was furtherreduced to TEUR 21,627 as of 31 December 2018 and to TEUR21,390 as of 31 March 2019. At the beginning of each calendar year,the hedging reserve is replenished to the amount of USD 24 million.The Hoplon III-Insurance allows for the Self-Retention of USD 30million. If there is a high lottery win, the hedging reserve (to the extent
	available) is the first source of funds used as Self-Retention to pay outthe prize.
Hoplon III-Insurance	On 14 December 2017, myLotto24 Limited entered into insurancecontracts with Hoplon III Insurance Limited, a special purpose vehicleregistered in Bermuda, as the insurer. Hoplon III provides insurancecover of, in total, USD 90 million for a term of two years from 1 January2018 until 31 December 2019, divided into two risk periods of one year

Hedging Instrument Description

each. Hoplon III is liable, in respect of each covered lottery draw during the two risk periods, to indemnify myLotto24 Limited and any of its affiliates in respect of all jackpot winning lottery bets an Insured is liable to pay out on each lottery draw exceeding the Self-Retention in each risk period ("Insured Event"). Jackpot winning lottery bets are lottery prizes of the lottery class which is mathematically least likely to win. Lottery draws which are covered by the Hoplon III-Insurance are the German lottery 'LOTTO 6aus49', 'EuroMillions', 'EuroJackpot', the US lotteries 'Powerball' and 'Mega Millions', the Irish National Lottery as well as, under certain conditions, other lotteries (for further details see "12.10.1.1 Hoplon III-Insurance of USD 90 million").

Private Insurance myLotto24 Limited and the Insurance Syndicate entered into a private insurance agreement. Under the Private Insurance, myLotto24 Limited procures additional insurance coverage in the amount of USD 30.5 million in respect of jackpot winning lottery bets that it may be liable to pay in excess of the amounts which are covered by the Self-Retention and the Hoplon III-Insurance. The Private Insurance has a term of one year from 1 January 2019 to 31 December 2019. If the coverage under the Private Insurance is wholly exhausted, then it shall reinstate against provision of a retention of at least USD 5 million such that there is further insurance coverage in an amount of USD 30.5 million. The reinstatement shall occur no more than once during the term of the insurance and the insurance coverage does not exceed USD 30.5 million at any time. A retention of USD 5 million is required for this to happen. The lottery draws which are covered by the Private Insurance are the same as under the Hoplon III-Insurance (for further details see "12.10.1.2 Private Insurance of USD 30.5 million").

Physical Hedging The first three Hedging Instruments are sufficient to cover jackpots in the total amount of up to USD 153 million. However, in particular the lotteries 'Powerball', 'Mega Millions' and 'EuroMillions' can offer jackpots which are significantly higher than this amount. To be prepared for this case, myLotto24 Sub-Group buys lottery tickets from the Primary Lotteries on behalf of its customers with the numbers chosen by the respective customer. If a customer wins a jackpot, the jackpot will be paid-out by the Primary Lottery to the customer and myLotto24 Sub-Group will not even be required to make use of its other three hedging instruments. The purchase of lottery tickets from Primary Lotteries is at the expense of myLotto24 Sub-Group's and ZEAL's profit margin and is more expensive than the insurance premiums to be paid under the second and third layer of the hedging strategy. Accordingly, Physical Hedging is a suitable hedging instrument provided that the 'Stakes' generated through the sale of a Secondary Lottery cover at least the costs for the purchase of matching entries in the corresponding Primary Lottery (which is typically the case for 'Powerball', 'Mega Millions' and 'EuroMillions'). In order to be able to purchase the required lottery tickets in time, the cut-off time (i.e. the time at which bets are no longer accepted) for 'Powerball', 'Mega Millions' and 'EuroMillions' is up to 3.5 hours before the lottery is played.

Special Insurance myLotto24 Limited and the Special Insurance Syndicate entered into a special risk policy for a term of one year from 1 January 2019 to 31 December 2019. The Special Insurance serves as protection against high lottery winnings in particular events, e.g. in the case that in the German lottery 'LOTTO 6aus49' a compulsory pay-out occurs (i.e. whenever the jackpot has not been won in twelve consecutive draws resulting in a compulsory pay-out in the 13th draw) or, in the case of 'EuroJackpot' or 'EuroMillions', the total gross money payable to a lottery winner are equal to or exceed a certain cap (each a "Special Event"). The Special Insurance Syndicate is liable, in respect of each covered lottery draw during the term, to indemnify the Insured in respect of any loss caused by a Special Event incurred or payable by an Insured in relation to such lottery draw where and to the extent that any such loss exceeds EUR 5 million (or such higher amount as notified by myLotto24 Limited prior to a draw). The maximum sum insured is EUR 20 million per draw and EUR 40 million in aggregate for all draws.

The following examples illustrate how the hedging instruments have worked in the past:

− In May 2015, a customer of myLotto24 Limited won a jackpot of approximately EUR 48 million (Source: corporate news announcement of the Company of 13 May 2015, 15:42). The pay-out was covered by physical hedging.
− In September 2015, a customer of myLotto24 Limited won a jackpot of approximately EUR 15 million (Source: ad-hoc announcement of the Company of 2 September 2015, 18:37). The payout amount fell within the Self-Retention and was paid-out from the hedging reserve.
− In May 2016, a customer of myLotto24 Limited won a jackpot of approximately EUR 37 million (Source: ad-hoc announcement of the Company of 17 May 2016, 20:24). The majority of the prize was covered by the special insurance held by myLotto24 Limited. The part of the jackpot which was not covered by that special insurance and had to be paid out from myLotto24 Sub-Group's was around EUR 17 million.
− In March 2017, a customer of myLotto24 Limited won a jackpot of approximately EUR 15 million (Source: ad-hoc announcement of the Company of 9 March 2015, 18:37). Again, the pay-out amount fell within the Self-Retention and was paid-out from the hedging reserve.

13 REGULATORY ENVIRONMENT

ZEAL's business activities are subject to a variety of private and public laws and regulations in Germany and other jurisdictions. If ZEAL or any member of ZEAL fails to comply with any of these laws and regulations, it may be subject to civil liability, administrative orders, fines, or even criminal sanctions. The following provides a brief overview of selected federal regulations and the state regulations of Germany as well as regulations in the United Kingdom, Ireland, Norway, Spain and the Netherlands that are applicable to ZEAL's business operations.

13.1 Regulatory Environment in Germany

The regulation of gambling in Germany is not uniformly structured but is subject either to federal law or to the laws of the sixteen Federal States. The competence of the Federal States to pass legislation encompasses lotteries, sports betting, certain aspects of horse betting, casinos and, since July 2012, gambling arcades. The legal basis is provided by the Treaty on Gambling 2012 (Glücksspielstaatsvertrag) and the respective applicable state laws. The operation of gaming machines by commercial machine operators as well as horse betting by totalisers and commercial bookmakers fall within the competence of the German Federal Government and are regulated by the German Trade Regulation Act (Gewerbeordnung, GewO) and the Race Betting and Lottery Act (Rennwett- und Lotteriegesetz, RWLG).

The following table summarises the legal basis and responsibilities for the granting of licences in the individual segments as well as other licensing areas (source: Federal State of Hesse, Final Report on the Evaluation of the Treaty on Gambling 2012 (Endbericht des Landes Hessen zur Evaluierung des Glücksspielstaatsvertrags) dated 10 April 2017):

Segment	Legal basis	Responsibility
Commercial installation of gamingmachines	German Trade Regulation Act(Gewerbeordnung)	German FederalGovernment
Totalisers (for horse betting)	Race Betting and Lottery Act
Commercial bookmakers for horse betting	(Rennwett- und Lotteriegesetz)
Casinos	State Casino Laws(Spielbankengesetze)	Federal States
Gambling Arcades	State Laws on Gambling Arcades /Games of Chance (Landesspielhallen-/ Glücksspielgesetze)
State Lottery Operators	State Laws on Games of Chance
Savings lotteries	(Landesglücksspielgesetze)
Class Lotteries of the Federal States	Treaty on Gambling 2012 (Glückss	City of Hamburg (1)
Social lotteries	pielstaatsvertrag)	Rhineland-Palatinate (1)
Sports betting		Hesse (1)
Certain aspects of horse betting
Advertising for lotteries and sports bettingon the internet and television		North RhineWestphalia (1)
Commercial brokerage of lotteries (2)		Lower Saxony (1)

(1) These responsibilities are assumed by one Federal State pursuant to Section 9a of the Treaty on Gambling 2012.

____________________

In addition to the allocation of responsibilities between the German Federal Government and the sixteen Federal States, the responsible licensing authorities for the various segments within the Federal States are distributed among several administrative bodies, e.g. ministries of the Interior. In total, more than 50 authorities in Germany are responsible for licences in the field of gambling, some of which are subject to very different legal bases. This shows that the German gambling regulation is not uniform both in its structure and in the legal framework.

(2) Commercial brokers of games of chance operating in all or several Federal States.

13.1.1 State Treaty on Gambling

13.1.1.1 State Treaty on Gambling 2008

On 28 March 2006, the Federal Constitutional Court (Bundesverfassungsgericht, BVerfG) issued a fundamental ruling on German gambling law. It declared the German sports betting monopoly sanctioned by criminal law (see "13.1.3 Criminal law") to be contrary to constitutional rights because it was incompatible with the freedom of sports betting brokers to exercise their profession (BVerfG, judgment of 26 March 2006 – BvR 1054/01, 'Sportwettenurteil'). The Federal Constitutional Court applied criteria similar to those developed by the European Court of Justice ("ECJ") for the examination of the freedom to provide services guaranteed under European law (ECJ, judgment of 9 November 2003 – Case no. C-243/01 'Gambelli'). The Federal Constitutional Court ruled that a sports betting monopoly can only be maintained if the regulations establishing the sports betting monopoly are sufficiently oriented towards the then invoked objective of combating gambling addiction and not towards generating revenue for the state. The legal regulations then in force were not sufficient in this respect. In the opinion of the Federal Constitutional Court, the legislators could either opt for a liberalisation of the market at the level of each Federal State or Germany or, if they wanted to retain the monopoly on gambling, they would have to adopt a much more consistent regulation of sports betting oriented towards preventing addiction. The Federal Constitutional Court granted the legislators a transitional period until 31 December 2007 to amend the gambling law.

As a result of the ruling by the Federal Constitutional Court on sports betting, the Federal States concluded the State Treaty on Gambling 2008 (Glücksspielstaatsvertrag) which came into force on 1 January 2008. In the opinion of the Company, the actual motive for the treaty was the political wish to maintain the monopoly on gambling in the sports betting and lottery sectors and thus to secure the Federal States' revenues. However, this aim was not officially declared a legal objective because, in the opinion of the Company, such a motive would not have been legally suitable to justify the associated restrictions on the constitutional freedom to exercise one's profession (of gambling operators). Rather, under Section 1 of the Treaty on Gambling 2008, the legislative goals were declared as follows: The prevention of the development of gambling addiction (Section 1, no. 1), the limitation of gambling offers and the steering of the "natural urge to play games of chance" (Section 1, no. 2), the protection of minors and players (Section 1, no. 3) as well as the protection against fraudulent operations and the consequential and accompanying crime of gambling (Section 1, no. 4). For the first time, offline brokerage of lotteries was made subject to a permit requirement, whereas online brokerage of lotteries was not permissible at all. In addition, the Treaty on Gambling 2008 contained very tight restrictions to advertising for games of chance. Whilst the Treaty was limited to a period of four years until 31 December 2011, the legislation of all Federal States provided that it would continue to apply until it was replaced by a new law.

13.1.1.2 Treaty on Gambling 2012

From 2012 onwards, the gambling law in the Federal Republic of Germany was gradually liberalised: the first step was taken by the Federal State of Schleswig-Holstein, where the 'Law on the Reorganisation of Gambling' (Glücksspielgesetz, "Gambling Act SH") came into force on 1 January 2012. The law allowed the brokerage of state lotteries with no more than one draw per day via the internet without the broker requiring a prior permission of a supervisory authority. There was only an obligation to notify such activity. Furthermore, there were fewer restrictions for the advertisement of online brokerage of lottery products.

On 15 December 2011, the other Federal States agreed on an amendment to the State Treaty on Gambling 2008 and signed the first amendment of the interstate treaty on gambling (Erster Glücksspieländerungsstaatsvertrag, "First Amendment Treaty"). The amendment of the State Treaty on Gambling 2008 by the First Amendment Treaty resulted in the Treaty on Gambling 2012, which entered into force on 1 July 2012, initially in only fourteen Federal States, followed by the Federal State of North Rhine-Westphalia on 1 December 2012 and finally the Federal State of Schleswig-Holstein on 8 February 2013 thereby repealing the Gambling Act SH.

On 7 December 2012, the Federal States also adopted a directive on the regulation of advertising for games of chance, which came into force on 1 February 2013 (Advertising Directive) (see "13.1.5 Advertising Directive").

The main changes compared to the Treaty on Gambling 2008 relate to the revision of its legal objectives, the temporary admission of private sports betting operators in a concession model, a partial liberalisation with regard to the brokerage of public games of chance on the internet and advertising for public games of chance. In particular, online brokerage of lotteries may be permitted by the Federal States, and restrictions for advertising were partly reduced. However, the Treaty on Gambling 2012 basically retains the previous control concept of the Treaty on Gambling 2008. The definition of legal objectives now emphasises that other objectives, including the fight against crime, should be of equal importance to the objective of preventing gambling addiction. Furthermore, the different risk potentials of the respective games are to be taken into account.

Gambling and lottery monopoly of the state

The Treaty on Gambling 2012 continues to establish the gambling monopoly, including the lottery monopoly, of the state. Section 10 of the Treaty on Gambling 2012 states that, in order to achieve the aforementioned legislative objectives, the Federal States have the regulatory task of ensuring an adequate range of gambling offers. The Federal States may fulfil this public function either themselves, through a public establishment jointly managed by all states, through corporate bodies governed by public law or through companies governed by private law in which corporate bodies governed by public law have a direct or indirect controlling interest. Class lotteries may only be operated by a public-law institution jointly sponsored by all states. Other (private) operators are only allowed to organise 'lotteries with a lower risk potential' and only under strict conditions (in particular no more than two draws per week, no higher winnings of more than EUR 2 million, no scheduled jackpots). In addition, according to the so-called 'experimentation clause' in Section 10a, sports betting may be operated by private operators subject to a concession for a term of seven years as from the entry into force of the Treaty on Gambling 2012, the number of such concessions being fixed at 20.

Brokerage of games of chance

Section 4 para. 1 of the Treaty on Gambling 2012 states that the brokerage of public games of chance including lotteries requires a licence of the relevant Federal State. Organising and brokerage without licence (unauthorised gambling) as well as participation in payments in connection with unauthorised gambling are prohibited. The specific licensing requirements for brokering lotteries are not defined in the Treaty on Gambling 2012. Instead, the law only specifies the conditions under which a licence may not be granted, notably if the brokerage contravenes any of the five legal objectives of Section 1 of the Treaty on Gambling 2012 (including combating gambling addiction, channelling the existing demand for gambling products into legal offerings and combating the black market, youth and player protection, fighting crime, protecting the integrity of sport). If there is no obstacle, the licence may be granted. However, pursuant to Section 4 para. 2, 3rd sentence of the Treaty on Gambling 2012, there is expressly no legal entitlement to the granting of a licence; rather it is a discretionary decision of the competent authority.

For lottery brokers operating in all or several Federal States, the Federal State of Lower Saxony is competent to issue licences for all Federal States concerned. Under Section 19 para 1 no. 1 of the Treaty on Gambling 2012, lottery brokers have to forward at least two thirds of the amount received by players to the lottery operators as 'Stakes' for participating in lotteries.

Organisation and brokerage of games of chance on the internet

Section 4 para. 4 of the Treaty on Gambling 2012 establishes the principle that the operation and brokerage of public games of chance on the internet is generally prohibited. The brokerage of lotteries and the operation and brokerage of sports bets on the internet may be permitted by the Federal States pursuant to Section 4 para. 5 of the treaty provided that this activity does not conflict with its legal objectives and additional requirements are met in each Federal State. Here, too, no legal claim has been established. Section 4 para. 5 of the Treaty on Gambling 2012 not only enables private brokers to offer their services on the internet, but also expressly allows the State Lottery Operators ('selfdistribution') to do so.

Principle of territoriality (Regionalitätsprinzip)

The licensing requirements of Section 4 para. 1 and para. 5 of the Treaty on Gambling 2012 for the brokerage of lotteries are interpreted by the Federal States as meaning that only the brokerage of lotteries which are permitted in the individual Federal State may be brokered under a brokerage licence (so-called principle of territoriality - Regionalitätsprinzip). Accordingly, the Federal States claim that lottery tickets may only be submitted by the broker to the operator of the Primary Lottery who is seated in the same Federal State in which the lottery player is resident (i.e. Lotto24 as a lottery broker has to submit the lottery ticket submitted by a customer resident in Hamburg to the State Lottery Operator of Hamburg. Although lotteries which are offered throughout Germany are jointly organised by all State Lottery Operators, it is not permitted to submit that lottery ticket, for example, to the State Lottery Operator of Schleswig-Holstein). As a consequence a broker has to accept the brokerage fee offered by the relevant State Lottery Operator (with regard to the player's residence) without any chance to market for a higher fee of any other State Lottery Operator.

Gambling licences from other EU Member States

With regard to foreign providers who hold a formally valid gambling licence issued by a EU Member State, the legal consequences of the prohibitions and the licensing requirements under German law have not fully been clarified for the legal situation under the Treaty on Gambling 2012. In this respect, a distinction should be made between the criminal law provisions of Sections 284 et seq. StGB and the licencing requirements under Section 4 para. 1 of the Treaty on Gambling 2012. In view of the legal situation with regard to the conformity of German licensing regulations with European law, which has not yet been clarified in a reference procedure to the ECJ, it appears questionable whether providers holding EU licences can be penalised irrespective of the applicability of the treaty. Against this background, EU licences are to be accepted under criminal law at least if they correspond to the essential licensing conditions of the German market. However, with regard to the authorisation requirement under the Treaty on Gambling 2012, the ECJ has confirmed in its rulings on German gambling law of 8 September 2010 that a licence granted by the EU Member State in which an operator is established does not prevent another EU Member State from making the provision of such services in its own territory subject to a licence granted by its own authorities, provided, however, that such licence requirement is in compliance with the requirements of EU law (source: Hoeren/Sieber/Holznagel, Multimedia-Recht, January 2018).

13.1.1.3 Second Amendment of the State Treaty on Gambling

According to the State of Hesse in its final report on the evaluation of the State Treaty on Gambling 2012 (Endbericht des Landes Hessen zur Evaluierung des Glücksspielstaatsvertrags) dated 10 April 2017, the situation and the development of the German gambling market since the Treaty on Gambling 2012 came into force have led to the conclusion that its objectives have not been achieved. In view of the legislative goals of the Treaty and the actual and consistent pursuit of these objectives, the State of Hesse has developed a new version of the treaty for what it considers to be a contemporary regulation of gambling in Germany.

The new draft of the State Treaty on Gambling proposes the following:

− Regulation of casino and poker games on the internet: the Treaty on Gambling 2012 maintained the strict ban on online casino and online poker games as the legislator assumed that such games were highly susceptible to manipulation and had a high potential for gambling addiction. The demand for such games should be met in land-based casinos. Any unauthorised offers on the internet should be fought vigorously, for example by stopping payments to the operators of such games. The legislator assumed a market volume in 2009 of EUR 0.1 to 0.3 billion for casino games and EUR 0.2 to 0.3 billion for poker on the internet. In the year 2015, however, the stakes for online casino and poker games amounted to a projected EUR 30 billion. There is no legal offer of these games, so that the entire turnover is generated on the black market. For the European Commission, consumer and player protection is currently not sufficiently guaranteed in Germany. The Commission considers that a satisfactory degree of channelling towards legal gambling offers has been achieved if about 80% of the stakes in the online market are covered. That is precisely not the case in Germany. Against this background, the new draft of the State Treaty on Gambling proposes a regulation of this market segment by granting licences for casino and poker games on the internet without quantitative limitations.
− According to the so-called 'experimentation clause' in Section 10a of the Treaty on Gambling 2012, the number of concessions for the operation of sport betting is fixed at 20. The new draft of the treaty proposes to eliminate this quantitative limitation.
− Replacing of the monthly limit of EUR 1,000 on amounts wagered with a loss limit of EUR 1,000.
− Creation of a nationwide uniform central database of blocked players for all types of games of chance, which also includes gambling arcades.
− Establishment of a Joint Supervisory Authority by the Federal States to ensure their cooperation. The institution would be responsible for the granting of all licences under gambling law for the operation, brokerage and distribution of public online games of chance on the internet (with the exception of land-based games of chance, which remain the responsibility of the respective Federal States), the supervision of licence holders (including money laundering supervision), the management of the central database of blocked players, prohibition of unauthorised online gambling and related advertising and the cooperation with other authorities in Germany and abroad (e.g. regulatory authorities and ministries of the Federal States, the BaFin, supervisory authorities of other EU Member States as well as EU bodies).

On 16 March 2017, the prime ministers of the Federal States signed the draft of the second amendment of the interstate treaty on gambling (Zweiter Glücksspieländerungsstaatsvertrag, "Second Amendment Treaty"). As suggested by the Federal State of Hesse, the limitations of concessions for the operation of sport betting should be deleted, and sports bets concessions can be granted in a new application procedure until 2021 (or 2024 if the Federal States vote to extend the Treaty on Gambling 2012). Operators who have successfully applied for a sports bets concession in the (suspended) tender procedure under the Treaty on Gambling 2012 are regarded to be permitted until new concessions are granted. There are, however, no new regulations as regards online casino and poker games. The responsibility for the granting of sports bet licences should be assumed by North Rhine-Westphalia. The Second Amendment Treaty does not include the establishment of a Joint Supervisory Authority either.

However, the Treaty on Gambling 2012 as amended by the Second Amendment Treaty was not endorsed by the newly elected government in Schleswig-Holstein. In June 2017, the new government declared that it will adopt a new law, similar to the previously introduced more liberal Gambling Act SH (see "13.1.1.1 State Treaty on Gambling 2008"), which would, apart from sports betting, also award new online casino and poker licences. In September 2017, the government of Schleswig-Holstein voted to reject the Second Amendment Treaty. Subsequently, the Federal States of North Rhine-Westphalia, Rhineland-Palatinate and Hesse have not ratified the Second Amendment Treaty either.

The sixteen German Federal States had until 31 December 2017 to ratify the Second Amendment Treaty and since several Federal States refused to do so, the Second Amendment Treaty has become obsolete. In March 2019 the prime ministers of the Federal States agreed on an amendment of the Treaty on Gambling 2012 with respect to sports betting. The prime ministers approved changes that would set up an interim sports-betting licensing programme starting 1 January 2020 and remove limitations on the number of licences to be granted. The Federal States also agreed in March 2019 to continue with the consultation and negiotation of a new interstate treaty on gambling to take effect from June 2021. To the Company's knowledge, the outcome of these discussions is currently open.

13.1.2 Compatibility of the Treaty on Gambling 2012 with Higher-Ranking Laws

There are considerable concerns regarding the compatibility of the Treaty on Gambling 2012 with German constitutional law and EU law. These concerns relate to essential conceptual aspects of this gambling regulation. The Treaty on Gambling 2012 does not appear to be compatible with the requirements of the German constitution and EU law, in particular with regard to the following four points, and can therefore be seen as incoherent and thus unlawful and (in case of a violation of EU law) suspended:

− The ECJ ruled in its judgments of 8 September 2010 (joint cases no. C-316/07, C-358/07 to C-360/07, C-409/07 and C-410/07, 'Markus Stoß' and case no. C-46/08 'Carmen Media') that in view of the fact that – according to the findings of the submitting German courts – the risk of addictive gambling is considerably higher in the area of commercial gaming machines, but also in other areas of gambling, and that advertising measures from the state owned or state-controlled lottery operators holding a monopoly are not limited to what is necessary in order to channel consumers towards the regulated offer but are designed to stimulate participation and maximise the revenue for the state, a monopoly in the less addictive area of sports betting cannot be justified by the fight against addictive gambling if it is not consistently pursued in all areas of gambling. The ECJ ruled that all gambling sectors should be considered and that there should be overall coherence. The ECJ further clarified that the so-called primacy of application of EU law has a direct effect and that national law is therefore immediately inapplicable if it contradicts European law. Based on this judgement, in ZEAL's view, the "hard" regulation (in particular the state lottery monopoly) of less addictive lotteries by the Treaty on Gambling 2012 cannot be justified on the basis of the requirements formulated by the ECJ. In addition, in its judgement of 9 November 2003 (case no C-243/01 'Gambelli'), the ECJ ruled that state monopolies and comparable restrictions for private operators to access a certain gambling market are not compatible with the fundamental freedom to provide cross-border services from one EU Member State into any other EU Member State (Dienstleistungsfreiheit) and the freedom of establishment (Niederlassungsfreiheit) if the state – in that case Italy – "is not pursuing a consistent policy whose aim is to restrict, or indeed abolish, gambling activities". The ECJ further observes that the 'concerns cited by the national authorities relating to the protection of bettors against the risk of fraud, the preservation of public order and reducing both opportunities for gambling in order to avoid the damaging consequences of betting at both individual and social level and the incitement to spend inherent therein are groundless because Italy is increasing the range of betting and gambling available, and even inciting people to engage in such activities by facilitating collection in order to increase tax revenue.'

− The Treaty on Gambling 2012 partially liberalises the sports betting sector by also allowing a temporary admission of the operation of sports bets by private operators, while the state monopoly in the lottery sector is being maintained. This regulation could prove to be unlawful because there is no justification for the state monopoly in the lottery sector based on the prevention of gambling addiction. For example, the introduction of the 'EuroJackpot' lottery (offering jackpots of up to EUR 90 million) in the year 2012, contradicts, in ZEAL's view, the legal objective of the Treaty on Gambling to 'limit gambling offers and to steer the natural urge to play games of chance into organised and monitored paths'. This example shows that the Federal States are holding on to their monopoly primarily because of fiscal interests, in contradiction to the above-mentioned "Gambelli" decision of the ECJ. Moreover, the limits of permissible advertising are systematically disregarded, especially by state-owned or state-controlled lottery operators.
− Unlike under the Treaty on Gambling 2008, the internet ban for games of chance is no longer absolute. There are now exemptions for lotteries, sports betting and horse betting. Nevertheless, the legislator has maintained the absolute internet ban for poker and casino games. This proves to be unjustifiable, particularly in view of the proven lack of practicability and enforceability in recent years and in an overall view of the German constitutional and EU law requirements to be met but not fulfilled by the legislator. However, the German Federal Administrative Court (Bundesverwaltungsgericht, decisions of 26 October 2016, 8 C 14.16 and 8 C 18.16) has decided that the internet ban complies with German constitutional and EU law. Neither the ECJ nor the German Federal Constitutional Court has decided these questions so far.
− The Treaty on Gambling 2012 permits a maximum of 20 licences for the operation of sports betting or private operators. However, the underlying assumption that the restriction of the number of providers could limit the potential risk associated with this form of gambling does not appear to be valid. Both the European Commission and the German Monopolies Commission have stated that it is not clear how the restriction of the total number of licences in Germany is likely to achieve the objectives of the Treaty on Gambling 2012, as it does not lead to a reduction of the frequency of play of the individual player. The lack of conclusiveness of the definition of a maximum number of licences is particularly apparent in the area of the regulation of the internet as a distribution channel: on the internet, the offers are only a "mouse click" away from each other, so that competition can be classified as correspondingly intense. Finally, in the previous tender procedure, it has proven to be impossible to make a legally valid choice between operators equally qualified to offer sports bets in order to appoint 20 concession holders. Thus, even the Ministry of the Interior of the Federal State of Hesse, which is responsible for the tendering procedure for the granting of the 20 sports betting licences, has finally recommended to lift the numerical limit (source: Federal State of Hesse, final report on the evaluation of the State Treaty on Gambling 2012 (Endbericht des Landes Hessen zur Evaluierung des Glücksspielstaatsvertrags), final version dated 10 April 2017) (see "13.1.1.3 Second Amendment of the State Treaty on Gambling").

Against this background, it is not surprising that the European Commission has expressed doubts as to the conformity of the Treaty on Gambling 2012 with EU law (source: Detailed Opinion of 18 July 2011 issued by the European Commission in the notification procedure 2011/188/D under the Directive 98/34/EC). This criticism has been shared by the Federal State of Hesse (see "13.1.1.3 Second Amendment of the State Treaty on Gambling"). Taking into account the critical remarks of the European Commission, in particular the implementation of the objectives of the Treaty on Gambling 2012 is considered to be incoherent, so that the current treaty as a whole is regarded as a failure in the German legal literature (source: Kudlich/Berberich, Zur strafrechtlichen Bewertung von Online-Zweitlotterien, ZfWG 2016, 1, 7). However, administrative courts in Germany currently tend to rule otherwise (cf. German Federal Administrative Court (Bundesverwaltungsgericht), decisions of 26 October 2016, 8 C 14.16 and 8 C 18.16). It should also be noted that no infringement procedure have been initiated by the European Commission.

13.1.3 Criminal law

German Federal criminal law prohibits the operation, holding and advertising of illegal gambling without official permission in Section 284 of the German Criminal Code (Strafgesetzbuch, "StGB") and pursuant to Section 285 StGB, it is a criminal offence to participate in unauthorised games of chance. Section 287 StGB criminalises the operation of public lotteries or raffles (Ausspielungen) of goods as well as advertising for public lotteries or draws without the permission of a public authority. There is no provision sanctioning the mere participation in unauthorised lotteries.

Since the rulings of the European Court of Justice (ECJ) on German gambling law of 8 September 2010 (joint cases no. C-316/07, C-358/07 to C-360/07, C-409/07 and C-410/07, 'Markus Stoß' and case no. C-46/08 'Carmen Media'), the applicability of these criminal provisions has been disputed because the framework of German gambling law may not be in accordance with EU law, which in this case would take precedence over the laws of Germany. Large parts of German gambling law, in particular the monopoly of the state to organise games of chance, were contrary to EU law until 2012 according to prevailing opinion in literature and case law. In addition, there are serious doubts whether the current legal framework is compatible with European law and with German constitutional law (see "1.1.1 Uncertainties relating to the regulatory environments in the countries in which ZEAL operates could have a negative impact on ZEAL's business activities.").

13.1.4 Secondary Lotteries

Secondary Lotteries are typically offered on the internet. Their prize scheme is based on the Primary Lottery, i.e. the Secondary Lotteries operators promise their customers to pay out the same amount in case of a correct bet on the combination of drawn numbers as if the customers had participated in the Primary Lottery.

As the providers of such Secondary Lotteries are usually located abroad and do not have a German lottery licence – but a permission to operate from another EU Member State – the question of criminal liability under Sections 284 et seqq. StGB arises. Tipp24 Services Limited, a member of the myLotto24 Sub-Group and operator of the German-language online-platform www.tipp24.com especially designed for the German market, is located and regulated in the UK. Tipp24 Services Limited holds a licence granted by the UK Gambling Commission (licence number 000-007499-R-101718). The same applies for myLotto24 Limited, the operator of the English-language online-platform www.mylotto24.co.uk, holding the licence number 000-004578-R-103863 of the UK Gambling Commission. Both internet sites – as well as other online offerings of myLotto24 Sub-Group – are accessible in Germany. However, neither Tipp24 Services Limited nor myLotto24 Limited nor any other member of myLotto24 Sub-Group has been licensed in Germany to offer lottery products and other games of chance.

However, it is already questionable whether German Criminal Law is applicable at all. Following a recent judgement of the German Federal Court of Justice (Bundesgerichtshof) on Section 86a StGB (BGH 3 StR 88/14) – which is considered as structurally comparable to Sections 284 and Section 287 StGB by also declaring the creation of a mere abstract danger (in that case the usage of signs of illegal organisations) a criminal offence – an argument can be made for rejecting such applicability. This, however, is not in line with the previously prevailing opinion on online gambling. Nevertheless, when looking closely at the criminal liability, the applicable provision is Section 287 StGB rather than Section 284 StGB, provided that Secondary Lotteries can be qualified as 'lotteries' within the meaning of Section 287 StGB. It can be argued that the gambling process of the Secondary Lotteries, their risks and potential addictions are linked to the Primary Lotteries (see also section "13.1.3 Criminal law"). However, there is no final judgment by German courts on this question.

Section 287 StGB requires the operation of public lotteries or raffles (Ausspielungen) of goods without the permission of a public authority. Regarding the element of the offence "without permission of a public authority" it could be concluded that the lack of such a permission (i.e. licence) cannot be held against the providers of Secondary Lotteries if the permission cannot be obtained with reasonable efforts due to an unlawful regulatory situation. Such an unlawful legal situation in Germany could be seen for the gambling industry as a whole, given that the compatibility of the German regulatory framework for games of chance with the higher-ranking EU law (in particular the fundamental freedom to provide cross-border services from one EU Member State into any other EU Member State) and German constitutional law is disputed. The reasons are, in particular, the insufficient enforcement of appropriate measures regarding the regulation of highly addictive gaming machines, the strict state monopoly for the operation of lotteries, the incoherent regulation on the ban of online offerings of games of chance and the arbitrary determination of the maximum number of licences for sports betting (see "13.1.2 Compatibility of the Treaty on Gambling 2012 with Higher-Ranking Laws"). If, for these reasons, impunity of the operator is assumed, this also applies to business and marketing partners of the operator and to the players due to the accessoriness of participation, especially as there is no provision for the area of lotteries that equals Section 285 StGB (source: Kudlich/Berberich, Zur strafrechtlichen Bewertung von Online-Zweitlotterien, ZfWG 2016, 1, 7).

13.1.5 Advertising Directive

13.1.5.1 Overview

Pursuant to Section 5 para 3, sentence 1 of the Treaty on Gambling 2012, advertising for public gambling on television, the internet and telecommunications systems is prohibited. Deviating from this, the Federal States may permit advertising, in particular for lotteries on the internet and on television, in order to better achieve the objectives of the treaty. These objectives are, among others, to prevent and effectively fight gambling addiction, to channel the "natural urge to play games of chance" of the public into "orderly and controlled" channels by a limited offer of gambling products which represents a suitable alternative to illegal gambling and to counteract the development and spread of illegal gambling in black markets, to ensure the protection of minors and players and to ensure that games of chance are carried out properly, that players are protected from fraudulent activities, and that the consequences and accompanying crimes associated with games of chance are fended off. Moreover, advertising must not be aimed at minors or similarly vulnerable target groups. Misleading advertising for public gambling, in particular those which contain inaccurate statements about the chances of winning or the nature of the winnings, is prohibited (Section 5 para. 2 of the Treaty on Gambling 2012).

Section 5 para 4, sentence 1 of the Treaty on Gambling 2012 stipulates that the Federal States shall issue common guidelines to specify the type and scope of permitted advertising. The Advertising Directive was adopted on 7 December 2012 and entered into force on 1 February 2013. The scope of the Advertising Directive covers advertising for all types of public games of chance that fall under the Treaty on Gambling 2012. For the purposes of this Directive, 'advertising' means any statement made in the course of the exercise of a commercial, craft or professional activity with the aim of promoting the sale of goods or the provision of services. The following provisions of the Advertising Directive are of central importance for the advertising of lottery products:

− The type and scope of advertising for public gambling must be aligned with the above-mentioned objectives of the treaty, taking into account the specific risks of the individual gambling products (Section 3 para. 2 of the Advertising Directive).
− Only licensed providers and products of games of chance may be advertised (Section 3 para 3 of the Advertising Directive). The advertisement may contain information about the company, game offerings and rules, as well as prevention of addiction and protection of minors. In addition, information about changes in the advertised gambling product or its distribution is permissible. Image advertising for the company and advertising for the name, company name or brand of a company are permitted, unless illegal games of chance are included. Information of the company about the promotion of charitable purposes is allowed.
− Advertising to increase the attractiveness of the gambling offer is also permissible under special conditions (Section 3 para. 4 in conjunction with Sections 5 et seq. of the Advertising Directive). Pursuant to Section 5 no. 1 of the Advertising Directive, for example, lotteries which are not operated more than twice per week and lotteries with a low risk potential within the meaning of the third Section of the Treaty on Gambling 2012 (charity lotteries) may be reasonably attractively advertised.
− Advertising for public gambling must inform about its risks of addiction, the prohibition of the participation of minors as well as the possibilities of advice and therapy, unless it is advertising for lotteries with a low risk potential, image advertising or advertising for the name, company or brand of a company. Information on maximum gains must also include an explanation of the probability of profit and loss. The mandatory information must be provided in a clear, easily perceptible form and size (Section 13 of the Advertising Directive).

In addition, the Advertising Directive differentiates according to the type of advertising medium:

− Advertising for public gambling in media whose editorial content is predominantly aimed at minors, as well as advertising designs that primarily appeal to minors, are not permitted (Section 6 of the Advertising Directive). In principle, advertising via telecommunications equipment is also prohibited (Section 7 Advertising Directive).
− In addition, advertising for public gambling on television and the internet is generally prohibited unless an exemption is granted for advertising for lotteries (or sports and horse betting), Section 8 para. 1 and Section 11 para 1 of the Advertising Directive.
− Advertising in cinemas is permitted for public gambling after 6 p.m. (Section 9 of the Advertising Directive) as well as advertising on sport tricots and banners for the name, company or brand with the exception of sport tricots for children's or youth teams and banners at sports competitions for minors (Section 12 Advertising Directive).

Article 4 para. 1 of the Advertising Directive states that the following advertising measures are not permitted: advertising for public games of chance which is aimed at minors or similarly vulnerable target groups, which is misleading (in particular contains inaccurate statements about the chances of winning or the nature and amount of winnings or about the games of chance offered), which exclusively and unilaterally emphasises the benefits of gambling, which at the same time advertises for unauthorised games of chance or suggests that gambling could be a reasonable strategy for improving the financial situation. Advertising that conveys that gambling can counteract problems such as, in particular, financial difficulties, social problems and psychosocial conflicts, encourages the recovery of losses or reinvestment of profits, inappropriately portrays the random character of gambling, degrades the renunciation of gambling or conveys it, promotes one's own social success or makes gambling appear a commodity of daily life is also prohibited.

The advertising licence must be applied for at the District Government of North Rhine-Westphalia in Düsseldorf as the responsible gambling supervisory authority (Section 14 para. 1 of the Advertising Directive in connection with Section 9a para. 2 no. 1 of the Treaty on Gambling 2012 and Section 19 para. 4 no. 2 of the North-Rhine Westphalian act on the execution of the interstate treaty on gambling of 13 November 2012). Generally, permission is required for every single advertising measure. Deviating from this, however, a so-called framework permit can also be applied for. The application must contain an advertising concept with a description of the gambling products to be advertised and the intended advertising measures, with the frequency and duration of advertising broadcasts and measures and the target group as well as the planned advertising period. In the advertising concept, the applicant must conclusively state how compliance with the Advertising Directive is to be met. Material changes to the advertising concept must be submitted to the gambling supervisory authority for approval (Section 14 para. 2 of the Advertising Directive). The gambling supervisory authority shall determine the details of the permit, in particular the ancillary provisions of the permit. In particular, the authorisation may be limited in time and contain a reservation of revocation in the event of noncompliance with the provisions of the Advertising Directive (Section 14 para. 4 of the Advertising Directive).

13.1.5.2 Compatibility of the Advertising Directive with Higher-Ranking Laws

The prevailing opinion in the German legal literature regards the requirement according to which advertising measures must be, as an exception to their general ban, approved before they are implemented as incompatible with EU law and German constitutional law. This, inter alia, holds true, with regard to the prohibition of pre-censorship under Article 5 para.1, 3rd sentence of the German Constitution (Grundgesetz). According to the permanent jurisprudence of the German Federal Constitutional Court (Bundesverfassungsgericht), pre-censorship is the preventive prior imposition of an official procedure before a certain opinion may be published. The constitutional prohibition of pre-censorship covers all restrictive measures prior to the production or distribution of media content which is protected by Article 5 para. 1 of the German Constitution, in particular "the requirement of an administrative pre- examination and approval of its content". The obligation to submit a specific advertising concept in advance as stipulated in the Advertising Directive is comparable to such a prior review of the advertising content (source: Hoeren/Sieber/Holznagel, Multimedia-Recht, January 2016). However, the German Federal Administrative Court has decided that Section 5 para 3, sentence 1 of the Treaty on Gambling 2012, which prohibits advertising for public gambling on television, the internet and telecommunications systems under the Treaty on Gambling, complies with German constitutional and EU law. Neither the German Federal Constitutional Court nor the ECJ have yet decided on these questions so far regarding the Treaty on Gambling 2012.

13.1.6 Protection of Minors and General Player Protection Against Gambling Addiction

Under Section 4 para. 3 of the Treaty on Gambling 2012, minors are not allowed to participate in public games of chance, and operators and brokers have to exclude minors from playing. Pursuant to Section 4 para. 5 no. 1 of the Treaty on Gambling 2012, operators and brokers offering games of chance online must ensure the exclusion of minors or (depending on the kind of games of chance offered) blocked players through identification and authentication. This obligation is further specified in a memorandum of the Gambling Committee (Glücksspielkollegium) of the sixteen Federal States, which refers to the legally non-binding official explanations on the Treaty on Gambling 2012 and to the requirements published by the German Commission for Youth and Media Protection (Kommission für Jugendmedienschutz, KJM) or equivalent technical solutions in terms of player protection.

myLotto24 Sub-Group has strong youth protection guidelines and controls in place, including third party identity and age check. In addition, the company has implemented general player protection measures such as deposit limits, time outs and self-exclusions. The company permanently analyses customer data on spend, activity, winning patterns and product split to monitor gambling behaviour and identify problem gambling.

13.1.7 Anti Money-Laundering

The German Money Laundering Act (Geldwäschegesetz, "GWG") imposes certain obligations on companies to cooperate with the state in detecting the laundering of money, especially by their customers. In the first place, it applies to banks and other financial institutions, but its scope has been extended to other companies, as well. Pursuant to Section 2 para. 1 no. 15 GWG, operators and brokers of games of chance belong to the group of obligated parties unless they are operators of gaming machines pursuant to Section 33c of the German Trade Regulation Act (Gewerbeordnung, GewO), clubs which operate the business of a totaliser pursuant to Section 1 of the and the Race Betting and Lottery Act (Rennwett- und Lotteriegesetz, RWLG), or operators or brokers of lotteries which are not operated on the internet, who have been granted a licence from the competent authority in Germany, and of social lotteries.

13.1.8 Payment Services

Over time German authorities have challenged payment processing on behalf of foreign operators of games of chance within Germany not holding a licence under German law a number of times, none of which was successful.

Earlier in 2018, the Ministry of the Interior of Lower Saxony approached local banks and other financial institutions regarding the processing of payments relating to unauthorised gambling. This was a response to the critical press coverage in Germany after the so-called 'Paradise Papers' were published. The same Ministry also contacted credit card companies (e.g. Mastercard) with the question as to whether they support 'illegal gambling'. For this reason, Mastercard approached certain banks to inquire regarding the grounds for processing payments for gambling operations. The response from most banks was to provide their legal position while a few decided to change their internal policies towards processing gambling payments in general, the concern being that the continuation may jeopardize their financial licenses and expose them to fines. In August 2018, the Ministry formally heard certain payment providers on a planned prohibition to support payment for unlicensed offers of games of chance of certain operators. It is currently unclear whether and when the Ministry will follow up further on these proceedings. In addition, respective prohibition orders towards payment service providers have not been challenged before German courts so far.

A holistic 'payment blocking' under Section 9 para. 1, sentence 3, no. 4 of the Treaty on Gambling 2012, covering all types of financial transactions, would only be possible with supervision of all banking activities (which would, however, raise serious concerns under data protection law). In addition, recommendations would need to be made to financial services to disengage partnerships with all gambling operators which are not licenced in Germany.

The Company is not aware that the BaFin has ever imposed any restrictions on banks or other payment service providers so far. The Company regards this as a sign that BaFin considers the German gambling regulatory framework is not compliant with EU laws and therefore suspended.

13.1.9 Financial Services

There have recently been press articles published in Germany indicating that an expert opinion has been obtained by one of the sixteen State Lottery Operators stating that Secondary Lotteries constitute financial products, i.e. derivatives, and that this State Lottery Operator intends to request from the BaFin to commence investigations. The Company is not aware of whether it, any entities of the myLotto24 Sub-Group or the Secondary Lotteries operated by myLotto24 Limited are also within the scope of this expert opinion and whether this expert opinion has actually been submitted to the BaFin. The Company is further not aware of any officially published guidance (veröffentlichte Verwaltungspraxis) by the BaFin of whether it considers the Secondary Lotteries (or contracts similar to them) to constitute derivatives or whether the BaFin has already initiated investigations. The Company is of the view that Secondary Lotteries constitute games of chance rather than financial investments and that although games of chance and derivatives may to a certain extent have similar features, games of chance should not fall within the financial markets regulation neither in the European Union nor in Germany. Should the BaFin come to the conclusion that the Secondary Lotteries constitute derivatives, entities of the myLotto24 Sub-Group might need to be licensed in order to provide the services in connection with the Lottery Betting in Germany and would, generally, be subject to further obligations under the financial markets regulation applicable in respect of derivatives, including obligations under the Regulation (EU) No. 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR) and the Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurancebased investment products (PRIIPs-Regulation) as well as supporting legislation. In absence of the requisite licence, the BaFin could issue orders against the entities of the myLotto24 Sub-Group involved in the Secondary Lotteries as well as against their directors and employees, including orders to cease their business activities in relation to the Secondary Lotteries or hold them, i.e. their directors and their delegees, criminally liable.

In Germany, the Directive (EU) 2015/2366 on payment services in the internal market (also known as PSD2) has been implemented by the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz, "ZAG"). Section 10 para. 1 ZAG provides that only authorised payment institutions are permitted to provide payment services in Germany. Some of the activities of Tipp24 Services Limited, a member of the myLotto24 Sub-Group, such as the keeping of the gambling accounts (Spielkonto) for its customers or the receipt of payments by the customers or by myLotto24 Limited to the gambling accounts, or to the remittance of payments to the customers or to myLotto24 Limited from the gambling accounts may constitute payment services, in particular money remittance services (Finanztransfergeschäft). However, Section 16 GWG imposes the obligations on brokers of games of chance (Vermittler von Glücksspielen) of legal gambling activities in Germany who are subject to the GWG pursuant to Section 2 para. 1, 15 GWG to set up gambling accounts for their customers and to permit any payment transaction by, or to, the customer in connection with the gambling activities only through the gambling account. In view of the Company, this implies that any payment services solely in connection with the Lottery Betting are outside the scope of the ZAG. In the event that Tipp24 Services Limited was nevertheless considered to provide payment services in Germany, it would need to obtain a licence as payment service institution from the competent authority. In absence of the requisite licence, in Germany, the BaFin could issue orders against the entities of the myLotto24 Sub-Group involved in the payment services as well as their shareholders and directors, including orders to cease the business activities in relation to payment services or hold them, i.e. their directors and their delegees, criminally liable.

This risk applies, or will apply, to a lesser extent to Lotto24 and to ZEAL after the Business Model Change. Although the BaFin specifically confirmed to Lotto24 in 2014 that its lottery brokerage activities did not fall under the scope of the ZAG, there is no certainty that the BaFin will not change its view in the future.

In Germany, the Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (also known as CRD IV) has been implemented by the German Banking Act (Kreditwesengesetz, "KWG"). Section 32 para. 1 of the KWG provides that only persons with the requisite licence are permitted to conduct banking business in Germany. Amongst other business activities, banking business includes deposit business, i.e. the acceptance of funds from others as deposits or of other unconditionally repayable funds from the public, unless the claim to repayment is securitised in the form of bearer or order bonds, irrespective of whether or not interest is paid. The services provided by Tipp24 Services Limited in connection with the Lottery Betting include that customers can charge their gambling accounts (by means of direct debit or by debiting their credit card) not only with amounts required for the purpose of specific lottery bets, but also with amounts in excess thereof and use them for the purpose of future lottery bets, or leave any lottery wins on their gambling account. However, Section 16 para. 3 sentence 3 GWG in connection with Section 3 para. 3 sentence 3 ZAG provides that funds received in the gambling account by brokers of games of chance solely for the purpose of the Lottery Betting do not constitute deposits. Irrespective of that, BaFin draws the dividing line between deposit business subject to licensing and the business of providing services without licensing in other cases by means of a comprehensive assessment based on an assessment of all relevant circumstances of the individual case. It is of particular importance whether the custody of the funds and the amount at which credit balances can build up, as well as the length of the intervals at the end of which the balances are to be settled in full or in part, are proportionate to the amount of the funds typically used by a customer for the brokerage of games of chance by Tipp24 Services Limited. To this end, Tipp24 Services Limited is entitled, according to its terms and conditions, to determine maximum amounts that may stand to the credit of a gambling account and maximum amounts that may be used by a customer within a specific period of time for gambling purposes. In the event that the maximum amounts should be exceeded, Tipp24 Services Limited returns the amounts in excess thereof to the customers. Similarly, any lottery wins will be credited to the gambling account only if the maximum amount determined by Tipp24 Services Limited is not exceeded. The customer may then choose whether he would like to use the funds credited to the gambling account for further gambling activities to be brokered by Tipp24 Services Limited or request any lottery wins to be transferred to his bank account. Otherwise, Tipp24 Services Limited will transfer the lottery wins directly to a bank account specified by the customer. Should the BaFin come to the conclusion that these arrangements should nevertheless constitute deposit business, Tipp24 Services Limited would need to obtain a licence as credit institution from the competent authority. In absence of the requisite licence, in Germany, the BaFin could issue orders against the entities of the myLotto24 Sub-Group involved in the deposit business as well as against their directors and employees, including orders to cease their business activities in relation to the deposit business or hold them, i.e. their directors and their delegees, criminally liable.

13.1.10 Data Protection

On 25 May 2018, the General Data Protection Regulation (GDPR) came into force across the European Union. Pursuant to Article 2 para. 1, the GDPR applies to the processing of personal data wholly or partly by automated means and to the processing other than by automated means of personal data which form part of a filing system or are intended to form part of a filing system. The addressees of the regulation include all companies established in the European Union or which process personal data of persons located in the European Union and to whom goods or services are offered.

Pursuant to Article 5 GDPR, the following principles must be observed when processing personal data:

− lawfulness, fairness and transparency;

− purpose limitation;
− data minimisation;
− accuracy;
− storage limitation;
− integrity and confidentiality;
− and accountability.

In particular, any data processing requires a legal basis pursuant to Article 6 GDPR. Moreover, data processing is generally limited to the purpose for which the data were originally collected and there are extensive obligations concerning transparency in the processing of personal d2ata. There are also farreaching obligations for companies to document, for example, their data processing processes and data protection measures.

With the enactment of the Federal Data Protection Act (2018, BDSG), the German federal legislator has used opening clauses within the GDPR which leave the EU Member States to regulate some specific areas of data protection. For companies under private law, Section 26 BDSG, which regulates data protection in the employment relationship, is particularly relevant here.

Infringements of GDPR and BDSG provisions can be subject to administrative fines. Depending on the violation, these can amount to up to EUR 10 million or EUR 20 million or up to 2% or 4% of the total worldwide annual turnover of the preceding fiscal year, whichever is higher. Compliance with data protection regulations by companies in Germany is supervised by the locally responsible data protection supervisory authorities of the Federal States.

13.2 Regulatory Environment in Other Jurisdictions

13.2.1 Regulatory Environment in the United Kingdom

The Gambling Act 2005 (long title: 'An act to make provision about gambling') of the UK as of 7 April 2005 ("UK Gambling Act" or, but only in this section "13.2", "Act") applies to England and Wales as well as Scotland and is aimed at controlling all forms of gambling, including lotteries, betting, casino games, gaming machines, bingo and remote gambling, i.e. gambling in which persons participate by the use of remote communication (the internet, telephone, television, radio or any other kind of electronic or other technology for facilitating communication).

The Gambling Act 2005 is the main legislation on gambling in the UK and governs the provision of all gambling, other than the National Lottery and gambling in Northern Ireland. The regulation and operation of the National Lottery are set out in several separate acts, and in Northern Ireland, gambling (other the National Lottery) is regulated under the 'Betting, Gaming, Lotteries & Amusement (Northern Ireland) Order 1985'.

Section 1 of the UK Gambling Act describes its objectives as follows:

− preventing gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime,
− ensuring that gambling is conducted in a fair and open way, and
− protecting children and other vulnerable persons from being harmed or exploited by gambling.

Section 20 of the UK Gambling Act establishes the UK Gambling Commission, whose principal duty it is to pursue, and wherever appropriate to have regard to, the objectives described above, and to permit gambling, insofar as the UK Gambling Commission thinks it reasonably consistent with pursuit of the objectives.

The UK Gambling Act recognises and accommodates the significant technological changes that have taken place in the last decades. It regulates gambling where the player is not present on the operator's premises, e.g. operators based in Great Britain must obtain an operating licence to authorise the provision of gambling via remote communication, such as via interactive television or the internet. Moreover, the licensing system has been designed to keep pace with technological developments, so that, subject to appropriate Parliamentary approval, gambling delivered by new, unforeseen, methods can be regulated in the future.

13.2.1.1 Licences

The UK Gambling Commission is responsible for granting operating licences in accordance with the provisions set out in Sections 65 et seqq. of the Act, and personal licences for commercial gambling operators and personnel working in the industry in accordance with Sections 127 et seqq. of the Act.

The UK Gambling Act sets out different types of operating licences that cover the full spectrum of commercial gambling activities conducted in Great Britain. According to Section 65 para. 2, lit (a), (c), (e) and (i) of the Act, an operating licence may state that it authorises the licensee to operate a casino ('casino operating licence'), to provide facilities for betting other than pool betting ('general betting operating licence') to act as a betting intermediary ('betting intermediary operation licence'), or to manufacture, supply, install or adapt gambling software ('gambling software operation licence'). A 'betting intermediary' means a person who provides a service designated to facilitate the making or acceptance of bets between others, Section 13 para. 1 of the Act, and 'gambling software' means computer software for use in connection with remote gambling but does not include anything for use solely in connection with a gaming machine, Section 41 para. 2 of the Act. Operating licences may be granted As non-remote or remote licences. An operating licence qualifies as "remote" operating licence – and must state whether it is a remote operating licence or not – if it authorises activity to be carried out on in respect of remote gambling or by means of remote communication (Section 67 para. 1, 3 of the UK Gambling Act).

Tipp24 Services Limited and myLotto24 Limited are located in the UK and regulated under the Gambling Act 2005. Tipp24 Services Limited holds a licence granted by the UK Gambling Commission (licence number 000-007499-R-101718), comprising a 'remote betting intermediary operating licence' and a 'remote casino operating licence':

− 'Remote betting intermediary operating licences' allows the licensee to bring two or more betting parties together online in circumstances where the licensee does not have liability for their bets. In the case of Tipp24 Services Limited, the betting parties are, on the one hand, its customers, and on the other hand, myLotto24 Limited.
− 'Remote casino operating licences' allows to offer casino games to customers via a website, mobile phone, TV or other online service. This includes poker, roulette, blackjack and other casino games, as well as online slot games, and also covers the offering of Instant Win Products.

− 'Remote gambling software licence' allows the licensee to manufacture, supply, install or adapt gambling software by means of remote communication. For example, it allows to supply gambling software via methods of secure file transmission or to make gambling software available for download by operators from the licensee's server.
− 'Remote general betting operating licence entitles the licensee to provide facilities for betting on the outcome of real events (whether or not the licensee also provide betting on virtual events, e.g. virtual games or virtual races) by means of remote communication.

According to Section 95 of the Act, 'general betting operating licences' and 'betting intermediary operating licences' are subject to the condition that nothing may be done in reliance on the licence in relation to a bet on the outcome of a lottery which forms part of the National Lottery. myLotto24 Sub-Group does not offer any bets on the outcome of any lottery product offered by the National Lottery.

13.2.1.2 Duration of Licences

However, operating licences cease to have effect under, among others, the following circumstances (Section 110 et seqq. of the Act):

− The UK Gambling Commission may determine that operating licences, or a specified class of operating licence, shall cease of have effect at the end of a specified period (Section 111 of the Act);
− Upon surrender of the licence by the licensee (Section 113 of the Act), or where the holder of an operating licence is convicted of a relevant offence by or before a court in Great Britain and the court orders forfeiture of the licence (Section 115 of the Act); or
− upon suspension or revocation by the UK Gambling Commissions if, in particular, the licenced activity is being or has been carried on in a manner which is inconsistent with the licensing objectives, a conditions of a licence has been breached or the licensee is unsuitable to carry on the licensed activities (Sections 118 and 119 in connection with Sections 116 and 120 of the Act).

13.2.1.3 Offences

The UK Gambling Commission has the power to investigate whether an offence has been committed under the UK Gambling Act, and may institute criminal proceedings in respect of an offence thereunder, Section 28 of the Act. Two comprehensive offences are established under the Act: providing facilities for gambling (Sections 33 et seqq. of the Act) or using premises for gambling (Sections 37 of the Act), in either case without the appropriate permission. Such permission may come from a licence, permit, or registration granted pursuant to UK Gambling Act or from an exemption given by the Act. Where the authority to provide facilities for gambling is obtained under UK Gambling Act, it will be subject to varying degrees of regulation, depending on the type of gambling, the means by which it is conducted, and the people by whom and to whom it is offered.

13.2.1.4 Advertising

Part 16 of the UK Gambling Act makes provision for the advertising of gambling, creating offences relating to the advertising of unlawful gambling and providing powers for the Secretary of State to make regulations controlling the content of gambling advertisements. The term "advertising" is legally defined in Section 327 and comprises, in particular, anything to encourage another person to take advantage of facilities for gambling or to bring facilities for gambling or information about these facilities to the attention of another person with a view to increase the use of such facilities.

13.2.1.5 Protection of minors and general player protection against gambling addiction

The UK Gambling Act provides protection for children, young persons and vulnerable adults from the effects of harmful gambling. It does this through a number of specific offences that will prevent them from being given access to inappropriate or harmful gambling opportunities. In particular, it is an offence to invite, cause or permit a child or a young person to gamble, except for the participation in private or non-commercial gaming or betting, the participation in a lottery and certain other gaming activities listed in Section 46 para. 2 of the Act. The UK Gambling Commission is required to promote socially responsible gambling through licence conditions and codes of practice directed at those providing facilities for gambling. Section 336 of the UK Gambling Act also provides powers for the UK Gambling Commission to void bets that are unfair, for example due to cheating.

13.2.1.6 Anti-Money Laundering

The UK has implemented the 'Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing', being the fourth directive to address the threat of money laundering ("4MLD"), into the UK Sanctions and Anti-Money Laundering Act 2018. This legislation also applies to gambling operations and players associated with UK residents. The UK fully implements UN, EU and UK domestic sanctions and the UK Gambling Commission issued in March 2018 an update to the Prevention of Money Laundering and Combating the Financing of Terrorism Guidance for Remote and non-remote casinos.

13.2.1.7 Financial Services

In the UK, certain gambling activities, or activities ancillary to gambling activities, may fall within the scope of UK financial services legislation. This includes in particular the Financial Services and Markets Act 2000, the Financial Services and Markets Act 2000 (Regulated Activities) Order and the Payment Services Regulations 2017. This legislation is complex and it can often be difficult to determine whether any particular activity falls within the scope of it. Determinations can often turn on small nuances in the factual situation. Amongst other things, the activities of money remittance, deposit acceptance and the issuance of e-money are regulated under UK financial services legislation. Certain activities commonly considered gambling activities are recognised as being within the scope of UK financial services legislation including spread betting and binary options both of which are considered "contracts for differences" under UK financial services legislation. Others may be outside the scope of UK financial services legislation because of regulator interpretations and guidance which can change, and is in any event not binding on the Courts.

13.2.2 Regulatory Environment in Ireland

The Irish 'Gaming and Lotteries Act, 1956' and the Irish 'Betting Act 1931' govern gambling activities in Ireland. Whilst a significant part of the Irish gambling market is unregulated, there are a few established regulated sectors that are either open to licensing or under a state monopoly. These regulated sectors comprise the Irish National Lottery, betting, gaming machines and betting on horse and greyhound races. The 'Betting Act 1931' was amended in 2015 to regulate online betting and the offerings of online betting intermediaries.

myLotto24 Limited holds a 'remote bookmakers licence' granted by the competent Irish Revenue Commissioners in Ireland. This licence was granted as part of the scheme to licence remote betting operators introduced by the amendment of the 'Betting Act 1931' in Act 2015. As a licensed operator, myLotto24 Limited accounts to the Revenue Commissioners for betting duty and is subject to the requirements of the 'Betting Act 1931' (as amended). The licence is required for businesses entering into bets with persons in Ireland by remote means, i.e. communication by any electronic means, including the internet.

The licensing period is a two-year fixed period. The current period is from 1 July 2017 to 30 June 2019. The new period begins on 1 July 2019. Licences will expire at the end of the licensing period regardless of the issue date. The cost of renewal is based on turnover. The renewal requires the filing of a renewal application, the submission of a 'Certificate of Personal Fitness' issued by the Irish Department of Justice and Equality, and the payment of the licence fee. The 'Certificate of Personal Fitness' confirms that an individual, or the relevant officer of a partnership or body corporate, is a fit and proper person to hold a 'remote bookmaker's licence'. Each relevant officer must obtain a certificate.

13.2.3 Regulatory Environment in Norway

Lotteries in Norway are governed by the 'Lottery Act (1995)' and regulated by the Norwegian Gambling and Foundation Authority which was established in 2001. 'Norsk Tipping', a state-owned company, has the exclusive rights to offer gambling in this country, including lottery games.

Norway has traditionally taken a restrictive approach to gambling regulation and the offering, intermediation or marketing of gambling activities without a Norwegian licence is prohibited. Norway became one of the first countries to introduce payment blocking measures in an attempt to restrict foreign online operators' access to the Norwegian market. Under Norwegian legislation that came into force in June 2010, and it is an offence for financial institutions to process payments associated with unlicensed operators. The Norwegian Gambling Authority's use of payment blocking is being challenged in court proceedings, although the authority has been pursuing plans to further strengthen its approach.

Under legislative amendments passed in 2015, a limited number of charity lottery licences were made available to private operators that partnered with charities. The prerequisites are that the annual turnover of the charity lottery is limited to NOK 300 million (about EUR 30.7 million at the date of the Prospectus). At the date of the Prospectus, five licences have been granted. Partnering together with Lottovate Limited, UNICEF Norway was able to secure one of the licences in 2017 which enables them to operate a charity lottery until 2026. Under the terms of the licence, proceeds from ticket sales must be split three ways, with 30% of each ticket sold going straight to UNICEF Norway, 40% to prize funding and 30% for the lottery's operation.

13.2.4 Regulatory Environment in the Netherlands

The Dutch gambling market has a long history of regulation and is currently governed by the Dutch 'Gambling Act of 1964'. Online gambling is not accounted for in the current legislation. In 2011, the Dutch State Secretary of Justice decided to modernise the 'Gambling Act of 1964'. A 'Remote Gambling Bill' was approved by the Dutch House of Representatives in 2016 and is currently debated in the Senate. The 'Remote Gambling Bill' would enable the provision of online games of chance in the Netherlands, provided that a licence had been obtained.

Until recently, the market consisted of primarily state-owned monopoly operators: 'Holland Casino' (casinos), 'State Lottery' (lottery) and 'Lotto' (lotto and sports betting). In 2016, against a backdrop of a decreasing number of players, 'State Lottery' and 'Lotto' merged into the 'Nederlandse Loterij'. The 'Gambling Act of 1964' prohibits other organisations from offering these games of chance in the Netherlands.

In 1989 though, private company 'Novamedia' was given permission to offer the country's first charity lottery (the 'National Postcode Lottery'). In the meantime, two other charity lottery brands entered the market, the 'Friends Lottery' in 1998 and the 'BankGiro Lottery' in 2002. However, no other charity lottery operators were allowed, thereby giving 'Novamedia' a de facto private monopoly. In 2011, the so-called 'Betfair Judgement' of the European Court of Justice changed the situation. The ECJ ruled that the existing monopolies were only sustainable if they could limit gambling addiction and fraud and acted accordingly and consistently. This judgement stated that in all other cases, licenses should be awarded openly and transparently. Although a fierce lobby persisted against the market opening for new providers, in 2016 'Lottovate Nederland B.V.' successfully secured a court ruling that opened up the charity lottery market to new operators: the Court of Amsterdam ruled that there were no grounds to limit charity lottery licenses to the lotteries of 'Novamedia'. The Dutch Gambling Authority subsequently decided not to appeal the decision. 'Lottovate Nederland B.V.' was granted, and currently holds, a licence enabling it to operate the online charity lottery 'Raffld' until 2021.

By law, charity lotteries in the Netherlands are obliged to give a minimum of 50% of their sales to charities. This essentially means that half of the price for each lottery ticket sold goes to charity. There is no limit on price ranges or jackpot sizes. Mid 2018 the Dutch Government confirmed that once the 'Remote Gambling Bill' has become law, the percentage will be lowered to 40% in order to stimulate innovation.

13.2.5 Regulatory Environment in Spain

Spain has a comprehensive gambling regulation in force and effect, covering slot machines, lotteries, casinos, betting services and bingo games. Online gambling services have been regulated at the national level since 2011, and by some of the autonomous communities thereafter. In 2018 the Spanish government held public consultations on different parts of the legislation such as responsible gambling or the different types of online games with the objective to review and modernise regulation.

The state-owned company 'Sociedad Estatal de Loterias y Apuestas del Estado (SELAE)' operates the national lottery monopoly in Spain. In addition, the non-profit-organisation 'ONCE' runs the only nation-wide charity lottery.

13.2.6 Regulatory Environment in Malta

The Malta Gaming Authority ("MGA") is the single, independent, regulatory body responsible for the governance of all gaming activities in Malta, both online and land-based. Gaming legislation is based on a three-tier framework:

Legislation as the first tier (Gaming Act, 2018 – Chapter 583 of the Laws of Malta), regulating all forms of gaming in Malta and establishes the regulatory authority and the general principles of specific sectors of gaming.

Regulations as the Second tier, which are issued by the minister responsible for the MGA, on the MGA's advice and wich outline the detailed requirements for licence grants and relate to specific horizontal matters.

Directives as the third tier, together with other binding and non-binding instruments, which set forth the detailed processes and requirements and which are published by the MGA and amended from time to time in order to respond to technological advancements in a timely manner.

13.2.6.1 Licences

MyLotto24 Limited has applied for B2B and B2C licences, also for the benefit of myLotto24 Limited (Malta), and Tipp24 Services Limited has applied for a B2C licence, also for the benefit of Tipp24 Services Limited (Malta). The licences are expected to be issued by 1 June 2019 for a term of 10 years.

13.2.6.2 Offences

License holders are subject to the Gaming Compliance and Enforcement Regulations, 2018 (L.N. 244 of 2018 GAMING ACT (CAP. 583)) in conjunction with the Gaming Authorisations and Compliance Directive 3.

The MGA can, where it deems necessary, initiate a compliance review of all or part of the conduct and, or operations of an authorised person. If, in conducting such review, the MGA discovers conduct and/or operations which are not, or may not be, in accordance with the applicable regulatory instruments, it notifies the authorised person of this fact, giving it a reasonable time to make any relevant submissions. If the authorised person fails to make submissions or, in its submissions, does not address any concerns which the MGA may have, the MGA may initiate a formal investigation and/or take such other measures, including enforcement measures, as it may deem appropriate, including orders, warnings, penalties and the suspension or cancellation of a licence.

13.2.6.3 Advertising

License holders are subject to the Gaming Commercial Communications Regulations, 2018 (L.N. 247 of 2018 GAMING ACT (CAP. 583)) and Subsidiary Legislation 350.25 Requirements as to Advertisements, Methods of Advertising and Directions applicable to Gambling Advertisements, 2077 and its amendments.

In essence, commercial communications must be socially responsible, with particular regard to the protection of minors and other vulnerable persons from harm or exploitation. Advertisements must not portray gaming as socially attractive, personally enhancing status or admiration, taking priority over life, encouraging solitary gaming, criminal behaviour, an alternative to employment or a resolution to personal problems.

13.2.6.4 Protection of minors and general player protection against gambling addiction

License holders are subject to the Gaming Player Protection Regulations, 2018 (L.N. 246 of 2018 GAMING ACT (CAP. 583)), and the Player Protection Directive 2.

License holders must ensure that they have responsible gaming controls, policies and procedures in place to prevent gaming by minors. License holders must also provide sufficient information to players regarding the gaming system, the disputes process and the availability of responsible gaming tools including player limits.

13.2.6.5 Anti-Money-Laundering

Malta has not fully implemented the 4MLD. License holders are subject to the Prevention of Money Laundering Act, 1994 (CAP.373) and its various amendments to 2018 as well as the Criminal Code (CAP 9) and the Victims of Crime Act (CAP 539).

14 GENERAL INFORMATION ON THE COMPANY AND ZEAL

14.1 Formation, Incorporation, Commercial Name, Fiscal Year and Registered Office

The Company was formed in 1999 as a limited liability company (Gesellschaft mit beschränkter Haftung) under German law, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) Hamburg under registration number HR B 72469 and with registered seat (Sitz) in Hamburg, Germany. Its original legal name was Einundneunzigste Verwaltungsgesellschaft Alster mbH, re-named to Jamany GmbH.

On 19 March 2001, Jamany GmbH was transformed into a stock corporation (Aktiengesellschaft) under German law and re-named Tipp24 AG, registered in the commercial register of the local court (Amtsgericht) Hamburg under registration number HR B 80808 and with registered seat (Sitz) in Hamburg, Germany. Since its initial public offering October 2005, the company has been traded in the regulated market (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional postadmission obligations (Prime Standard). With effect as from 28 December 2009, Tipp24 AG was transformed into a European public limited liability company (Societas Europaea, 'SE') under the name Tipp24 SE, registered in the commercial register of the local court (Amtsgericht) Hamburg under registration number HR B 112099.

In 7 February 2014, Tipp24 SE completed the relocation of its seat (Sitz) from Hamburg, Germany, to London, UK, with its registration with the Companies House, Cardiff, UK, under company number SE000078. On 20 November 2014, Tipp24 SE was renamed as ZEAL Network SE. The Company kept its legal form as a Societas Europaea, 'SE' after the relocation and also retained its listing in the Prime Standard segment of the Frankfurt Stock Exchange.

The Company is the parent company of ZEAL. The Company's legal and commercial name is ZEAL Network SE.

The Company's fiscal year is the calendar year.

The Company's registered office is at 5th Floor, One New Change, London EC4M 9AF, United Kingdom (phone: +44 203 739 7000).

14.2 Duration of the Company and Corporate Purpose

The Company was established for an unlimited period of time.

Pursuant to Statute 7 of the Company, nothing in the Statutes shall constitute a restriction on the objects of the Company and, in accordance with Section 31(1) of the Companies Act, the Company's objects are unrestricted. The United Kingdom Standard Industrial Classification of Economic Activities (UK SIC) as used by the Companies House classifies the nature of the Company's business as '92000 – Gaming and betting activities'.

14.3 History and Development

The Company was active in the online brokerage of lottery products in Germany from 2000 to 2008 and thus had a business model comparable to that of Lotto24 AG. As from 1 January 2009, the Company temporarily discontinued its business activities in Germany.

Subsequently, assets no longer required by the Company were transferred to myLotto24 Limited (formerly Tipp24 UK Limited), which has been operating in the UK since 2007, and its subsidiaries. Since 8 January 2009, lottery bets have been brokered via the website www.tipp24.com, which is operated by the UK-based minority shareholding Tipp24 Services Limited, to myLotto24 Limited. In January 2012, the online brokerage of German lottery products resumed through the Company's subsidiary Lotto24 AG (formerly Tipp24 Deutschland GmbH). Lotto24 AG was spun off Tipp24 SE and floated on the stock exchange in July 2012.

The history and development of ZEAL is as follows: 21 July 1999 .......................... Incorporation of the Company as "Einundneunzigste Verwaltungsgesellschaft Alster mbH" and registered with the commercial register (Handelsregister) of the local court (Amtsgericht) Hamburg, Germany. 14 December 1999 ................ Registration of the new Company's name 'Jamany GmbH'. Beginning of 2000 .................. Start of business activities as an intermediary for participation in almost all games of chance of the state-run German lotteries on the internet. 19 March 2001 ....................... Transformation of Jamany GmbH into a stock corporation (Aktiengesellschaft) under German law and re-named 'Tipp24 AG'. 12 October 2005 .................... Initial public offering of the shares in Tipp24 AG at an issue price of EUR 20.50 per share with proceeds of EUR 40.1 million. Admission for trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard). 1 January 2009 ...................... Temporary discontinuation of Tipp24 AG's business activities in Germany due to the entry into force of the second stage of the State Treaty on Gambling 2008 which completely prohibited the brokerage of state-run lotteries on the internet as of 1 January 2009. Transfer of assets not longer required for the business in Germany to myLotto24 Sub-Group, including the online brokerage of state-run German lottery products and the subsidiaries Ventura 24 S.L.U. in Spain and Puntogioco24 in Italy. 30 April 2009 ......................... Transfer of the majority voting rights of 60% in myLotto24 Limited and Tipp24 Services Limited to a Swiss foundation set up by the Company. 28 December 2009 ................ Transformation of Tipp24 AG into a European public limited liability company (Societas Europaea, 'SE') under the name 'Tipp24 SE'. 20 February 2012 .................. Re-launch of lottery brokerage activities in Germany by the Company's subsidiary Tipp24 Deutschland GmbH (since 16. Mai 2012 'Lotto24 AG'). 3 July 2012 ............................ Spin-off of Lotto24 AG and initial public offering of the shares in Lotto24 AG at an issue price of EUR 2.50 per share. Admission for trading on the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard). 7 February 2014 .................... Completion of Tipp24 SE's relocation to London, UK, with its registration as a Societas Europaea at Companies House. Conversion of the German registered shares (Namensaktien) into registered shares under the laws of England and Wales (see "15.1 Current Share Capi tal; Shares"). 10 February 2014 .................. Commencement of trading of the Company's registered shares at the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) (see "15.2 Special Aspects of the Shares").

20 November 2014 ................ Change of company name to 'ZEAL Network SE'.

2017	Launch of 'UNICEF Lotteriet', Norway's first digital-only national lottery,in partnership with UNICEF Norway (see "12.5.2.1 Operation of Primary Lotteries").
2018	Launch of 'Raffld – The Experience Lottery', the Netherlands' first newcharity lottery in nearly 30 years (see "12.5.2.1 Operation of PrimaryLotteries"), currently paused.
31 January 2019	Publication of the voluntary public takeover offer for all shares ofLotto24 AG.

14.4 Impact of the Withdrawal of the United Kingdom from the European Union

As a result of the United Kingdom's referendum on its membership in the European Union, which took place on 23 June 2016, the Government of the United Kingdom invoked Article 50 of the Treaty on European Union on 29 March 2017, thereby formally notifying the European Council of the UK's intention to withdraw from the European Union (a process commonly known as "Brexit"). This commenced the process of negotiating and concluding an agreement between the EU and the UK, setting out the arrangements for the withdrawal, taking into account of the framework for its future relationship with the EU.

14.5 Intended Transfer of the Company's Registered Office

In the context of the Combination and the intended Business Model Change (see "12.3.2 Focus on Businesses based on Local State Licences"), ZEAL Network intends, in due course, to transfer the registered office of the Company to Germany. After the transfer, the Company intends to keep its legal form as a European public limited liability company (Societas Europaea, 'SE'). A relocation of other members of ZEAL, in particular myLotto24 Limited and Tipp24 Services Limited, is currently not intended.

14.6 Group Structure

The Company is the parent company of ZEAL. The Company's consolidated financial statements include the financial information of the subsidiary interests owned by the Company. Subsidiaries are entities controlled by the Company. Control is where the Company has power to vary the returns from its investment, and exposure to the variability of those returns. The equity interests of all subsidiary companies included in the consolidated financial statements of the Company are 100% owned by it with the exception of the Company's interests in myLotto24 Limited and its subsidiaries and associated companies. At the date of the Prospectus, the group of consolidated companies includes 10 direct and 15 indirect subsidiaries of the Company.

The following provides an overview of ZEAL's group structure, specifying the percentages of ownership interest and voting power:

14.7 Key Subsidiaries

The following table provides further information on the Company's key subsidiaries:

Principal field of activity	Percentage of ownershipinterest and voting power(direct or indirect)
Secondary Lotteriesoperation	40%
Secondary Lotteriesbrokerage	16%
Provider of finance and accounting support, human resources services, marketingservices and IT support services to othermembers of ZEAL	40%
IT consulting and software development	40%
Primary lotteries operation	100%

(1) Held directly.

14.8 Statutory Auditor

The auditor of the Company for the fiscal years ended 31 December 2016, 2017 and 2018 was Ernst & Young LLP, 1 More London Place, London SE1 2AF, United Kingdom. Ernst & Young LLP is registered to carry out audit work by the Institute of the Chartered Accountants in England and Wales, One Moorgate Place, London EC2R 6EA, United Kingdom.

14.9 Paying Agent

The Company's paying agent is M.M.Warburg & CO (AG & Co.) KGaA. The mailing address of the paying agent is Ferdinandstraße 75, 20095 Hamburg, Germany.

14.10 Designated Sponsor and Listing Agent

M.M.Warburg & CO (AG & Co.) KGaA has been appointed as designated sponsor for the Company's shares. Designated sponsors place limited buy and sell orders for the Company's shares and thereby achieve greater liquidity in the market for the shares.

M.M.Warburg & CO (AG & Co.) KGaA is also acting as listing agent ("Listing Agent") in connection with the application for the Admission. No representation or warranty, express or implied, is made or given by or on behalf of the Listing Agent or any of its affiliates or any of their respective directors, officers or employees or any other person, as to the accuracy, completeness or fairness of the information or opinions contained in the Prospectus, and nothing contained in the Prospectus, is, or shall be relied upon as, a promise or representation by the Listing Agent or any of its affiliates as to the past or future. Apart from the responsibilities and liabilities, if any, which may be applicable under mandatory law or imposed by the FCA, the Frankfurt Stock Exchange and/or the BaFin, the Listing Agent does not accept any responsibility for, or authorise the contents of, the Prospectus or its issue or any other statements made or purported to be made by either itself or on its behalf in connection with the Company or the Admission. Accordingly, the Listing Agent disclaims all and any liability, whether arising in tort or contract or otherwise in respect of this Prospectus and/or any such statement.

(2) On 30 April 2009, the Company sold and transferred 60% of the shares and voting rights in both myLotto24 Limited and Tipp24 Services Limited to a charitable foundation set up by the Company. The inclusion of this affiliated company and their respective subsidiary in the consolidated financial statements is based in an economic view of their situation, whereby the significant opportunities and risks are still born by the Company. The Company has a conditional right to repurchase the sold shares (see "12.4.1.4.3 Status of myLotto24 Limited and Tipp24 Services Limited within ZEAL" and "12.10.3 Agreements Relating to Shareholdings in myLotto24 Limited and Tipp24 Services Limited").

15 DESCRIPTION OF THE SHARE CAPITAL OF ZEAL NETWORK AND APPLICABLE REGULATIONS

15.1 Current Share Capital; Shares

At the date of the Prospectus, the Company's share capital amounts to EUR 8,385,088. It is divided into 8,385,088 registered shares of a nominal value of EUR 1.00 each. At the date of the Prospectus, the Company holds 43,910 shares in treasury. Therefore, the total number of voting rights in the Company as at the date of the Prospectus is 8,341,178. The ZEAL shares were originally created as German registered shares (Namensaktien). In connection with the relocation of the Company's seat to the UK in 2014, the ZEAL shares became registered shares under the laws of England and Wales. All amounts to be paid for the ZEAL shares have been paid in full.

All ZEAL shares are represented by a global certificate deposited with Clearstream for collective safe custody.

15.2 Special Aspects of the Shares

The ZEAL shares are traded on the regulated market (Regulierter Markt) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) under ISIN GB00BHD66J44 / WKN TPP024. All of the ZEAL shares confer the same voting rights.

Computershare Deutschland GmbH & Co KG maintains a register of the beneficial owners of ZEAL shares ("CI Register") for ZEAL Network in Germany. The CI Register specifies the names and addresses of the ZEAL shareholders, the number of fractional co-ownership interests held by the individual ZEAL shareholders in the collective holding created at Clearstream in respect to the ZEAL Network share certificate, respectively the number of ZEAL shares corresponding to these co-ownership interests.

The CI Register is updated daily, through Clearstream's clearing and settlement system, CASCADE-RS (Central Application for Settlement, Clearing and Depository Expansion – Registered Shares). Along with the number of units traded each day on the Frankfurt Stock Exchange, the CI Register reflects the current status of the ZEAL shareholders. This is similar to the way registered shares are traded under German law.

Clearstream has irrevocably authorised each ZEAL shareholder entered in the CI Register to exercise in its own name all legal or statutory rights of any ZEAL shareholder with respect to the co-ownership interest entered in its name in the Cl Register on the relevant Effective Date, pursuant to an agreement with ZEAL Network ("Custody Agreement").

As a result, the ZEAL shareholders are entitled to all rights attaching to the ZEAL shares (including dividend and subscription rights) as well as to receive all information the Company provides to its shareholders under the Custody Agreement. Accordingly, ZEAL shareholders are entitled to attend and vote at general meetings and to issue voting instructions, and the Company sends meeting notices and proxy forms directly to the ZEAL shareholders. Clearstream has undertaken not to exercise the voting rights attaching to the ZEAL shares unless the respective ZEAL shareholders have issued instructions to that effect. Dividend payments are made to ZEAL shareholders via Clearstream and the individual custodian banks.

In order to simplify the exercise of shareholder rights, in particular voting rights, and the participation in shareholders' meetings for ZEAL shareholders, ZEAL Network has additionally commissioned Computershare Deutschland GmbH & Co. KG, acting as registrar, with administrative tasks in connection with the organisation of participation and voting at shareholders' meetings.

In the event that the admission of the ZEAL shares to trading on the regulated market of the Frankfurt Stock Exchange is terminated or in case of the insolvency of Clearstream, each ZEAL shareholder is entitled to instruct Clearstream to take such measures and to issue such documents as are necessary to register the ZEAL shareholder in its own name in the share register in respect of the ZEAL shares of which it is the holder.

15.3 Development of the Share Capital since the Company's Foundation

The share capital of the Company has developed as follows:

− On 21 July 1999, the Company was incorporated in the legal form of a German limited liability company (Gesellschaft mit beschränkter Haftung, GmbH) with an original registered share capital (Stammkapital) of EUR 25,000. By a shareholders' resolution of 23 September 1999, the Company's registered share capital was increased by EUR 25,000 to EUR 50,000 against contribution in cash. The capital increase was registered in the commercial register on 14 December 1999. A further capital increase against cash contributions of EUR 20,850 to EUR 70,850 was resolved on 20/21 September 2000 and entered in the commercial register on 30 January 2001.
− On 19 March 2001, the shareholders' meeting resolved the transformation of the Company into a German stock corporation (Aktiengesellschaft, AktG) with a share capital (Grundkapital) of EUR 70,850, which was entered in the commercial register on 24 July 2001.
− By resolution of the extraordinary general meeting (außerordentliche Hauptversammlung) of the Company on 27 August 2001, the share capital was increased to EUR 2,054,650 by converting EUR 1,983,800, being a partial amount of the capital reserves shown in the balance sheet as of 31 December 2000, into registered share capital. The Company was registered in the commercial register as a stock corporation with a share capital of EUR 2,054,650 on 20 November 2001.
− On 14 May 2004, the Executive Board of the Company, with the approval of the Supervisory Board, resolved two capital increases against cash contributions from the former 'Authorised Capital II (Genehmigtes Kapital II)' in the amount of EUR 156,479 as well as from the former 'Authorised Capital III (Genehmigtes Kapital III) in the amount of EUR 20,962. These increases of the share capital from originally EUR 2,054,650 to, in total, EUR 2,232,091 were registered in the commercial register on 17 June 2004.
− On 10 August 2005, the extraordinary general meeting (außerordentliche Hauptversammlung) of the Company resolved a total of three capital measures: (1) firstly – in view of the fact that it could not be ruled out that the issue of 4,417 shares originating from the capital increase out of the former 'Authorised Capital II (Genehmigtes Kapital II)' of 14 May 2004 suffered from a legal defect – to cancel the aforementioned 4,417 shares in a simplified form pursuant to Section 237 Para 3 No. 1 AktG with the consequence that the share capital of the Company was reduced by EUR 4,417 to EUR 2,227,674, (2) secondly, to increase the share capital of the Company by the same amount of EUR 4,417 to EUR 2,227,674 and (3) thirdly, to increase the share capital by EUR 4,464,182 to EUR 6,696,273 by converting an amount of EUR 4,464,182 of the capital reserve, being a partial amount of the capital reserves shown in the balance sheet as of 31 December 2004, into registered share capital. The second capital increase described under (3) above was carried out by issuing 4,464,182 new registered no-par value shares, which were issued to the shareholders of the company at a ratio of 1:2. These capital measures were entered in the commercial register on 24 August 2005, such entry being corrected on 15 September 2005.
− The extraordinary general meeting (außerordentliche Hauptversammlung) on 7 September 2005 resolved to increase the share capital against cash contributions by up to EUR 2,160,000 to up to EUR 8,856,273 for the purpose of the initial public offering of the shares in Tipp24 AG. The capital increase was implemented in the maximum amount of EUR 2,160,000. Furthermore, on 10 October 2005, the Executive Board, with the approval of the Supervisory Board, resolved to increase the share capital against cash contributions out of the former 'Authorised Capital II (Genehmigtes Kapital II)' in the amount of EUR 16,046. Both capital increases were entered in the commercial register on 10 October 2005. At that time, the registered share capital amounted to EUR 8,872,319.
− On 16 January 2009, the Executive Board of the Company resolved to reduce the share capital from EUR 8,872,318 by EUR 887,231 to EUR 7,985,088 through the redemption of own shares acquired by the Company on the basis of the authorisation resolved by the annual general meet-

ing (ordentliche Hauptversammlung) on 18 May 2006 and 24 May 2007. Such board resolution was passed in accordance with a resolution of the General Meeting of 29 May 2008 and implemented by means of a simplified capital reduction (Section 71 para. 1 No. 8, 6th sentence AktG). The capital reduction was entered into the commercial register on 5 February 2009.

− On 16 June 2009, the annual general meeting (ordentliche Hauptversammlung) resolved (1) to increase the share capital by EUR 42,120,000 to EUR 50,105,088 by converting an amount of EUR 42,120,000 of the capital reserves into registered share capital and (2) to reduce the share capital by EUR 42,120,000 to EUR 7,985,088. The capital increase, followed the by the capital decrease, were entered in the commercial register on 15 December 2009.
− On 16 April 2013, the Executive Board of the Company, with the approval of the Supervisory Board, resolved a capital increase against cash contributions from the former 'Authorised Capital 2011/I (Genehmigtes Kapital 2011/I)' in the amount of EUR 400,000. The increase of the share capital to EUR 8,385,088 was registered in the commercial register on 17 April 2013.

The current share capital is fully paid up.

15.4 Further Authority to Allot Shares

Pursuant to Statute 14, subject to the provisions of the Companies Act, the Statutes and to any resolution of the Company, and without prejudice to any rights attached to any existing shares, the Executive Board may, with and subject to the approval of the Supervisory Board in each case and subject to any necessary authority and/or power being conferred on the Executive Board by resolution of the Company in general meeting, offer, allot (with or without conferring a right of renunciation), grant options over or otherwise deal with or dispose of any shares to such persons, at such times, for such consideration and upon such terms as the Executive Board may decide provided always that no share shall be issued at a discount to its nominal value.

On 22 June 2016, the general meeting authorised the Executive Board of the Company, subject to the consent of the Supervisory Board, to allot shares with a nominal value of up to EUR 1,197,000 on one or more occasions, in whole or in part, in return for cash or contribution in kind, such authority to expire on 21 June 2021.

On 18 January 2019, the Company's general meeting resolved to authorise the Executive Board (subject to the consent of the Supervisory Board) to allot up to 16,428,173 shares of EUR 1.00 each in the capital of the Company in pursuance of the Offer, provided that (a) the maximum aggregate nominal value of shares that may be allotted pursuant to this authority shall be EUR 16,428,173; and (b) the authority conferred by this resolution shall, unless previously revoked, varied or renewed, expire on 31 December 2019. Based on this authorisation, the Executive Board will, with the consent of the Supervisory Board, on or about the date hereof allot a total of 14,010,982 shares to Lotto24 shareholders in exchange for their tendered Lotto24 shares.

The Company has no conditional capital.

15.5 Purchase of Own Shares

The Company may only purchase its own shares in accordance with the provisions of the Companies Act, which requires the consent of the shareholders as well as the specification of a maximum number of shares authorised to be acquired, the determination of both the maximum and minimum prices that may be paid for the shares as well as the specification of a date on which it is to expire, which must not be later than five years after the date on which the resolution is passed.

Pursuant to Statute 66 and Statue 67, the Executive Board may, with and subject to the approval of the Supervisory Board, exercise all of the powers of the Company pursuant to Part 18 of the Companies Act to cause the Company to purchase its own shares (including any redeemable shares) subject to such purchase being duly authorised or approved in accordance with the Companies Act and provided that any such purchase shall, even if it is a market purchase (as defined in the Companies Act), require prior approval by special resolution. This restriction shall not apply to any purchase of redeemable shares.

The Company currently holds 43,910 own ZEAL shares. No ZEAL shares are held on behalf of the Company or by any of the Company's subsidiaries.

15.6 General Provisions Governing the Winding-Up of the Company

On a winding-up, the liquidator may, with the sanction of a special resolution of the members and any other sanction required by the Insolvency Act 1986, divide among the members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members in proportion to their respective holdings. The liquidator may also vest the whole or any part of the assets in trustees for the benefit of the members and determine the scope and terms of those trusts. No member shall be compelled to accept any asset on which there is a liability.

The power of sale of a liquidator shall include a power to sell wholly or partially for shares or debentures or other obligations of another body corporate, either then already constituted or about to be constituted for the purpose of carrying out the sale.

15.7 General Provisions Regarding the Company's Share Capital

Subject to the provisions of the Companies Act and without prejudice to any rights attached to any existing shares or class of shares, any share may be issued with such rights or restrictions as the Company may by ordinary resolution determine or, subject to and in default of such determination, as the Executive Board shall determine, with and subject to the approval of the Supervisory Board. Subject to the provisions of the Companies Act, and without prejudice to any rights attached to any existing shares or class of shares, shares may be issued which are to be redeemed or are to be liable to be redeemed at the option of the Company or the holder. The Executive Board (with and subject to the approval of the Supervisory Board) may determine the terms, conditions and manner of redemption of shares provided that it does so before the shares are allotted.

Subject to the provisions of the Companies Act relating to authority, pre-emption rights or otherwise and of any resolution of members in general meeting passed pursuant to those provisions, and, in the case of redeemable shares, the provisions of Statute 19, and subject to the approval of the Supervisory Board, all shares for the time being in the capital of the Company shall be at the disposal of the Executive Board, and the Executive Board may allot (with or without conferring a right of renunciation), grant options over, or otherwise dispose of them to such persons on such terms and conditions and at such times as it thinks fit.

The Company may by ordinary resolution increase, consolidate or, subject to the provisions of the Companies Act, sub-divide its share capital. The Company may, by ordinary resolution, also cancel shares which, at the date of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled. Subject to the provisions of the Companies Act, the Company may by special resolution reduce its share capital and its capital redemption reserve in any way. Subject to and in accordance with the provisions of the Companies Act and without prejudice to any relevant special rights attached to any class of shares, the Company may purchase any of its own shares of any class in any way and at any price (whether at par or above or below par).

For a description of general provisions governing subscription rights for ZEAL shares, see "19 Comparison of Shareholder Rights in Relation to Lotto24 and ZEAL Network".

For a description of measures relating to the exclusion of minority shareholders of the Company, see "15.8.2 Takeovers".

15.8 Shareholder Notification Requirements; Takeovers; Managers' Transactions

15.8.1 Shareholder Notification Requirements

The provisions of the UK Disclosure and Transparency Rules ("DTR") require that any person or fund acquiring a direct or indirect interest of 3% or more of any class of shares issued by the Company that give voting rights at the Company's annual general meeting must inform the Company of its interest within two working days. If the shareholding subsequently changes from 3% through purchase of additional shares or sale of shares held, the shareholder must inform the Company of any increase or decrease leading to a change of one percentage point in its interest.

In accordance with DTR 5.1.5, scheme operators and investment companies with variable capital ("ICVC") who hold voting shares in the Company are required to notify the Company when certain thresholds are met as follows:

− when an ICVC holds 5% of shares issued by the Company;
− when the ICVC reaches a shareholding of 10%; and
− for every percentage point above 10% of the issued shares of the Company.

Once the Company has received a voting rights notification, it must promptly notify the BaFin and the FCA and publish the notification in accordance with simultaneously applicable UK and German regulations.

Clearstream is the legal owner of 100% of the Company's listed shares. Due to its position as a nominee, Clearstream does not exercise any control over the Company or ZEAL (see "15.2 Special As pects of the Shares"), and instead of it, the ZEAL shareholders are subject to voting rights and directors' dealings notification obligations.

15.8.2 Takeovers

15.8.2.1 Shared Regulation of Takeover Bids

Any bid for the takeover of the Company will be subject to shared regulation by the Panel on Takeovers and Mergers (the "Panel") in the UK and the BaFin in Germany. This is because the Company is registered in the UK but has its shares admitted to trading on the Frankfurt Stock Exchange. Under the shared regulation regime, the BaFin would be responsible for the supervision of the bid including matters relating to the consideration offered, the bid procedure, the contents of the offer document and the disclosure of the bid.

The Panel would determine which provisions of the UK City Code on Takeovers and Mergers ("City Code") would apply in relation to information to be provided to employees and for matters relating to company law, in particular the percentage of voting rights which confers control and any derogation from the obligation to launch an offer, the circumstances in which a successful bidder may compulsorily acquire minority shares in the Company from shareholders that have not accepted the takeover offer and provisions relating to what action (if any) may be taken by the Executive Board to frustrate an approach by an unwelcome bidder.

15.8.2.2 Frustrating Action, Mandatory Bids and Compulsory Acquisition

Under the City Code rules which are applicable to the Company, during the course of an offer, or even before the date of the offer, if the Executive Board has reason to believe that a bona fide offer might be imminent, the Executive Board must not, without the approval of the shareholders of the Company in a general meeting, take any action which may result in any offer or bona fide possible offer being frustrated or in shareholders of the Company being denied the opportunity to decide on the merits of the offer. The rule will expressly prevent the Executive Board, either during the course of an offer or in circumstances where they believe a bona fide offer to be imminent, from issuing shares, granting options over shares, creating securities convertible into shares, disposing of or acquiring assets of a material amount or entering into contracts otherwise than in the ordinary course of business, without the approval of the shareholders of the Company.

The City Code rules require any person (a "Significant Shareholder") who acquires, whether by a series of transactions over a period of time or not, shares in a company (the "Target Company") which carry 30% or more of the voting rights of the Target to make a mandatory bid for the Target.

The Significant Shareholder's stake is calculated not only on the basis of Target Company shares owned by it but includes Target Company shares owned by any party who is acting in concert with the Significant Shareholder. A person is acting in concert with the Significant Shareholder if he cooperates to help the Significant Shareholder to achieve control of the Target Company or has an interest in the outcome of the offer for the Target Company. Certain parties will be presumed to be acting in concert with the Significant Shareholder including the directors of the Significant Shareholder, all companies in the same group as the Significant Shareholder, the Significant Shareholder's financial adviser/broker and all persons controlling or controlled by these advisers.

If a Significant Shareholder is required to make a mandatory bid, it will be required to make a cash offer for the Target at the highest price paid by the Significant Shareholder (or any person acting in concert with it) for any Target Company shares in the previous twelve months.

The City Code rules will also limit the terms and conditions that the Significant Shareholder imposes on its offer. Most significantly, a mandatory bid may only be conditional on the Significant Shareholder obtaining 50% or more of the voting rights in the Target Company.

The Panel may grant exemptions from the requirement to make a mandatory bid in certain circumstances.

Certain rules of the Takeover Act are also applicable to mandatory bids, unless the rules of the City Code or the Companies Act would require any deviation. These rules include matters relating to the disclosure that a person has acquired control, as well as to the obligation to submit and publish an offer document.

The Companies Act (in Sections 974 to 991) allows an offeror who satisfies various requirements to compulsorily acquire shares held by minority shareholders, following a successful takeover offer. Broadly speaking, the offeror must acquire 90% of the shares to which the offer relates within three months beginning with the day after the last day on which the offer can be accepted. There is also a right for a minority shareholder to require the offeror to buy him out in broadly similar circumstances.

15.8.2.3 Takeover by Way of Scheme of Arrangement

A scheme of arrangement is a statutory procedure pursuant to Part 26 of the Companies Act whereby a company may make a compromise or arrangement with its members or creditors (or any class of them). Takeovers in the UK may be effected by a scheme of arrangement, subject to the necessary shareholder and court approvals. However, neither the City Code nor the Takeover Act would apply to a takeover of the Company that was implemented by way of a scheme of arrangement under the Companies Act. This is because the provisions of the Takeover Directive (as implemented in the UK and Germany) do not apply to schemes of arrangement and German law does not recognise the concept of a scheme of arrangement. Shareholders will therefore not receive the protections provided by the UK and German takeover rules if a person or persons seek to implement a takeover of the Company by way of a scheme of arrangement.

15.8.3 Transactions Undertaken for the Own Account of a Person with Management Duties

Under Article 19 of the Market Abuse Regulation, transactions in the Company's shares executed by persons discharging managerial responsibilities, as well as persons closely associated with them (directors' dealings), in particular members of the Executive Board and Supervisory Board and their family members, must generally be notified promptly to the Company and the FCA and published promptly by the Company after it has been notified of a respective transaction.

15.9 Brexit Implications on Corporate Legal Aspects of the Company

Should the United Kingdom and the European Union not agree on a transitional period during which EU law will continue to apply to the United Kingdom after its withdrawal from the European Union scheduled at the latest for 31 October 2019 at 24:00 CET (the "Withdrawal Date" – see also "14.4 Impact of the Withdrawal of the United Kingdom from the European Union"), the SE Regulation, as one of the legal bases of the Company, would cease to apply from the Withdrawal Date. Although the European Union (Withdrawal) Act 2018 provides for the relevant EU law to be retained as part of UK law, such retained EU law would, without changes, contain deficiencies which will have no practical application, and contain reciprocal arrangements and EU references which are no longer appropriate, for those SEs which remain registered in the UK. For this reason, the UK has proposed the European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2018 (the "SE EU Exit Regulations").

The SE EU Exit Regulations provide for an automatic conversion of all European Public Limited-Liability Companies registered in the UK, such as the Company, to a new UK corporate form: a UK Societas. This would provide a domestic framework for any SEs registered in the UK to operate as UK Societates on and after the Withdrawal Date. As much of the existing SE framework as is possible is proposed to be retained for the domestic entity framework. The parts of the framework which no longer have practical application or are no longer appropriate would be removed.

As a consequence, the name of the Company would be changed to ZEAL Network UK Societas. Otherwise, current corporate law provisions that do not rely on the laws of other EU Member States would continue to apply to the Company as part of UK law, such as the two-tier management and control system, consisting of the Executive Board and the Supervisory Board. To the extent that current corporate law relating to the Company relies on the application of the respective provisions of other EU Member States, such as the provisions on the cross-border transfer of the corporate office, it would cease to apply to the Company as of the Withdrawal Date.

16 GOVERNING BODIES OF ZEAL NETWORK SE

16.1 Overview

The Company's governing bodies are the Executive Board (as the Company's management organ), the Supervisory Board (as the Company's supervisory organ) and the General Meeting. The Company is a European public limited liability company (Societas Europaea, 'SE') and has a two-tier management and control system, consisting of the Executive Board and the Supervisory Board. The responsibilities and powers of the governing bodies are determined by the SE Regulation, the Companies Act, the UK Regulations and the Statutes of the Company.

Members of the Executive Board ("Executive Directors") are appointed by the Supervisory Board for a fixed period of no more than five years. Executive Directors are eligible for reappointment after the end of the fixed period. The Supervisory Board is entitled to remove any member of the Executive Board.

Pursuant to Article 39(3) SE Regulation, no person may at the same time be a member of both the Executive Board and the Supervisory Board of the Company as the Supervisory Board's duty is to supervise the Executive Board and not to manage the Company. Also pursuant to Article 39(3) SE Regulation, the Supervisory Board may, however, nominate one of its members to act as a member of the management organ in the event of a vacancy. During such a period the functions of the person concerned as a member of the Supervisory Board shall be suspended. The UK has not imposed a specific limit on such a period.

Unless otherwise determined by ordinary resolution of the general meeting, being a resolution taken with a simple majority of votes, the number of Executive Directors (other than alternate Executive Directors) is determined by the Supervisory Board. The minimum number of Executive Directors is two.

The Executive Board is responsible for managing the Company in accordance with the applicable European law, the laws of England and Wales as well as the Statutes. The Executive Board represents the Company in dealings with third parties. As set out in Article 40 of the SE Regulation in conjunction with paragraph 78 of the UK Regulations and Statute 156, the Supervisory Board supervises the work of the Executive Board, but is not itself permitted or required to exercise the power to manage the Company.

The Statutes, however, designate certain matters which generally require the consent of the Supervisory Board to the extent such matters have not been specified in a budget previously approved by the Supervisory Board. Such matters currently include:

− determining the budget for the following fiscal year or taking any actions resulting in a budget overrun of 10% or more of total costs;
− making any investments, including development projects, or taking loans (excluding intra-group loans), in each case exceeding the value of EUR 250,000, or granting intra-group loans exceeding an amount of EUR 1 million;
− acquiring, selling or encumbering real estate and equivalent titles or titles to real estate, as well as disposing of intellectual property rights, selling all or substantially all of the Company's assets, establishing or winding up companies or undertakings, acquiring or selling interests in other companies, establishing, acquiring, winding up or selling independent branch establishments, (to the extent an acquisition or sale relates to a holding of more than 5% of another company's capital or if the consideration exceeds EUR 1 million), excluding where this relates to a dormant entity or non-trading business; and
− initiating legal disputes exceeding a value of EUR 500,000 or entering into any settlements or waiving claims exceeding a value of EUR 250,000.

The Executive Board is also required to obtain the consent of the Supervisory Board to any of these matters carried out at the level of subsidiaries being controlled by the Company, if and to the extent the Executive Board or one or more members thereof participate in such matters by giving instructions, providing consents, voting or other means. In the case of a subsidiary which is not wholly owned by the Company, this requirement shall apply only so far as the Company may procure.

In addition, there are certain matters which are the sole preserve of the Supervisory Board, namely service agreements and all other legal transactions between the Company and members of the Executive Board as well as retaining and instructing the auditors of the Company as appointed by the shareholders.

Pursuant to the Companies Act, the general duties of the members of both the Executive and Supervisory Board are:

− to act within their powers;
− to promote the success of the company;
− to exercise independent judgment;
− to exercise reasonable care, skill and diligence;
− to avoid conflicts of interest;
− not to accept benefits from third parties; and
− to declare an interest in a proposed transaction or arrangement.

These duties are owed to the Company and can only be enforced by it, expect for certain cases defined by the Companies Act in which shareholders are entitled to bring a derivative action on the Company's behalf.

16.2 Executive Board

Pursuant to Statute 141 to Statute 143, the Executive Board consists of at least two members. The Supervisory Board determines the exact number of the Executive Directors. Each member of the Executive Board is appointed by the Supervisory Board for a fixed period of no more than five years, following which period such Executive Director shall resign. Unless the Supervisory Board determines otherwise, an Executive Director who has retired at the end of the fixed period is eligible for reappointment. The Supervisory Board may appoint a chairman of the Executive Board and a deputy chairman of the Executive Board, and may lay down by-laws for the Executive Board which shall include a schedule of responsibilities for the Executive Board and determine its powers, subject to these Statutes. At the date of the Prospectus, there are no by-laws for the Executive Board other than that the Supervisory Board has determined the responsibilities of the Executive Board members.

Statute 196 determines that a person ceases to be an Executive Director as soon as:

− that person ceases to be an Executive Director by virtue of any provision of the Companies Act or is prohibited from being an Executive Director by law;
− a bankruptcy order is made against that person or a composition is made with that person's creditors generally in satisfaction of that person's debts, that person becomes insolvent (unable to pay his debts as they become due), threatens to become insolvent or makes any arrangement or composition with his creditors generally;
− a registered medical practitioner who is treating that person gives a written opinion to the Company stating that that person has become physically or mentally incapable of acting as an Executive Director and may remain so for more than three months, or, by reason of that person's mental health, a court makes an order which wholly or partly prevents that person from personally exercising any powers or rights which that person would otherwise have;
− notification is received by the Company from the Executive Director that the Executive Director is resigning or retiring from office, and such resignation or retirement has taken effect in accordance with its terms; or
− that person has been absent for more than six consecutive months without permission of the relevant Board from meetings of the relevant Board held during that period and his alternate Executive Director (if any) has not attended in his place during that period and the Supervisory Board resolves that his office be vacated.

The Executive Board is required to report to the Supervisory Board at least once every three months on the progress and foreseeable development of the Company's business and to promptly pass to the Supervisory Board any information on events likely to have an appreciable effect on the Company.

Each member of the Executive Board may call a meeting of the Executive Board by giving notice of the meeting to each other member of the Executive Board. The quorum for the transaction of the business of the Executive Board may be fixed by the Supervisory Board and unless so fixed at any other number shall be two. Questions arising at the meeting are decided by a majority of votes and, in the case of an equality of votes, the chairman has a second or casting vote. An Executive Director may not vote at a meeting on any resolution concerning a matter in which he has an interest (other than by virtue of his interests in shares or debentures or other securities of, or otherwise in or through, the Company) which can reasonably be regarded as likely to give rise to a conflict with the interests of the Company, unless its interest arises only because the resolution concerns certain matters as specified in Statute 179, in particular those beneficial for the Company.

16.2.1 Current Composition of the Executive Board

The following table shows the current members of the Executive Board, their respective age and responsibilities and the duration of their respective current term:

Name	Age	Responsibilities	Member since	Appointed until
Dr Helmut Becker	50	Chief Executive Officer; CorporateStrategy, Communication, HumanResources, IT, Legal Affairs andCompliance, Lottovate EmergingMarkets	1 June 2013(1)	31 May 2022
Jonas Mattsson	53	Chief Financial Officer; Finance,Accounting, Taxes, Business Controlling, Risk Management, Asset Management, Banking Relations, ExternalAuditing, Financial Reporting to theSupervisory Board, Investor Relations,Lottovate Spain	1 February 2015	31 January 2021

(1) Dr Helmut Becker served as Chief Marketing Officer of the Company from 1 June 2013 to 31 August 2015 before he became Chief Executive Officer on 1 September 2015.

The following description provides summaries of the curricula vitae of the current members of the Executive Board and indicates their principal activities outside of ZEAL to the extent that those activities are significant with respect to ZEAL. With the exception of the following, no member of the Executive Board has held any directorships, management or supervisory board mandates or partner positions outside of ZEAL in the last five years:

− Dr Helmut Becker, born 16 February 1969 in Hamburg. Helmut Becker has been Chief Executive Officer of the Company since 1 September 2015. Previously, Dr Becker served as Chief Marketing Officer of the Company from 1 June 2013 to 31 August 2015. Prior to that he served as a member of the Supervisory Board of the Company for two years. From 2009 to 2013, Dr Becker was the Chief Commercial Officer (2009-2013) of XING AG, Hamburg, Germany, where he was responsible for its Product, Marketing and Revenue divisions. Dr Becker has previously held leadership roles at eBay Germany, eBay Advertising AG, and eBay's subsidiary shopping.com Deutschland after beginning his career at McKinsey. Dr Becker studied physics at the University of Hamburg before gaining his PhD at the University of Cambridge. Dr Becker is a member of the supervisory board of Apleonex AG, Berlin, Germany.

− Jonas Mattsson, born 23 December 1965 in Järfälla, Sweden. Jonas Mattsson has been Chief Financial Officer of the Company since 1 February 2015. He has more than a decade of senior management experience with particular focus on the telecommunications and technology sectors. Prior to joining the Company, he was Chief Financial Officer and Executive Vice President of the network communications company O3b Networks, where he played a key role in raising USD 1.3 billion for the company and in establishing a global organisation. Mr Mattsson has served as Chief Financial Officer of various entities of SES, a world-leading satellite operator, as well as working with management teams across Ericsson, including an assignment in Japan and within the start-up Ericsson Microsoft Mobile Venture. Mr Mattsson holds an Engineering degree as well as a Bachelor of Science degree in Business Administration from the University of Stockholm.

The members of the Executive Board can be reached at the Company's registered office at ZEAL Network SE, 5th Floor, One New Change, London EC4M 9AF, United Kingdom.

Apart from their function as Executive Board members, the members of the Executive Board have no significant business or legal relations with the Company or any other member of ZEAL.

16.2.2 Management Service Agreements

Service contracts govern the Company's relationship with the Executive Directors. Supervisory Board Members are appointed by shareholder resolution and their compensation is set by the Statutes.

All Executive Directors' service contracts are available for inspection at the Company's registered office during normal hours of business, and at the Company's annual general meetings ("AGM").

The current management service contracts between the Company and the members of the Executive Board, Dr Helmut Becker and Jonas Mattsson, have commenced on 1 January 2016 and have no fixed terms.

16.2.3 Remuneration and Other Benefits of the Members of the Executive Board

One of the Company's key strategic aims is to deliver a high return to its shareholders. This strategic aim is embodied in the determination of the remuneration and other benefits for each Executive Director under short-term and long-term incentive plans.

16.2.3.1 Remuneration Policy

The Company intends that the remuneration policy will be put to shareholder vote every three years unless there are changes in the policy, which require separate approval. The current remuneration policy introduced in the 2015 Annual Report was approved by the Supervisory Board in December 2015 and took effect from 1 January 2016. The policy was ratified by the shareholders at the annual general meeting on 22 June 2016 when it was approved with 96.32% share of the votes (votes for: 2,973,400; votes against: 113,661; abstentions: 1,051). The current remuneration policy is detailed below.

16.2.3.2 Role of the Remuneration Committee

The Chairman's Committee, in its function as remuneration committee, regularly reviews the Executive Board compensation system, as laid out in the remuneration policy, and the individual compensation of the Executive Board members, and submits its proposals to the full Supervisory Board, which resolves on any amendments. The Chairman's Committee and the full Supervisory Board aim to ensure that remuneration arrangements for the Executive Board members enable their recruitment, motivation and retention as well as support the strategic aims of the Company. Any proposed changes to the remuneration policy are submitted for approval at the next annual general meeting.

The Chairman's Committee is responsible for recommending the compensation each Executive Director receives for its services to the Company. The Chairman's Committee is also responsible for setting the Company's remuneration strategy together with the structure of Executive Directors' remuneration including the split of compensation between fixed and variable elements. From 1 January 2016, the remuneration of the Executive Board will be reviewed every two years. In reviewing the pay arrangements of the Executive Board, the Chairman's Committee takes into account:

− the growth of the Company during the preceding period together with forecasted growth in future periods,
− the Company's performance relative to other companies operating within the same sector,
− the Company's place of incorporation (UK) and associated stakeholder expectations,
− the general external environment and the market context for executive pay.

The Company's remuneration policy is not designed to reward inappropriate outcomes or excessive risk.

16.2.3.3 Remuneration Philosophy

The Company's remuneration philosophy is to ensure that all employees are rewarded fairly based on the contribution they make to the Company's success. The Chairman's Committee believes that setting remuneration levels based on employees' performance is the most effective method of fulfilling the Company's objective of attracting, retaining and motivating its individuals. The key elements of executive remuneration are fixed pay – including base salary and certain benefits – and short-term (one year performance period) and long-term incentives (three year performance period).

Base pay and benefits are generally fixed costs for the Company. These elements of executive remuneration are set at the market median and are not subject to in-year fluctuation resulting from employee or Company performance. Short-term incentives are paid following each fiscal year end and are designed to reward achievement of pre-determined financial and other performance targets including achievement of each individual's personal performance targets (which are normally linked to delivery of the Company's strategic aims). Long term incentives are paid at the end of each three-year interval and are based on the achievement of a pre-determined average share price over a pre-defined period.

As certain elements of Executive Director variable compensation are based on adjusted key performance indicators (such as 'normalised revenue' and 'normalised EBIT'), extensive diligence is performed on the financial results in advance of any pay-out to ensure that compensation is accurately computed. The results of this diligence are compared to the expected levels of pay to ensure that payments are appropriate when compared to business performance and expected shareholder returns.

16.2.3.4 Remuneration Policy effective 1 January 2016

The remuneration policy described below was approved by the Supervisory Board in December 2015 and took effect from 1 January 2016. The policy was ratified by the shareholders at the annual general meeting on 22 June 2016. Contracts representing acceptance of the changes were signed by all Executive Directors in advance of 31 December 2015.

− Base salaries will be reviewed every two years. Separately, the Chairman's Committee has authorised an automatic 10% increase in base salary to all Executive Directors if 10% of the Director's base salary is invested in the Company's shares. The Executive Directors undertake to hold the investment for a minimum period of three fiscal years commencing on 1 January of the fiscal year.
− Short-term incentives ("STI") represent 25% of the overall remuneration package for all Executive Directors (based on 100% achievement of short-term incentive targets). Target achievement is measured based on pre-determined financial and non-financial targets. Assessment of target achievement will be reviewed on an annual basis (January or February of the following period) and equal weighting will be given to the targets noted above. Over-achievement of targets is permitted under the policy but any short term incentive will be capped at the total base salary level (if 200% STI target incentive is obtained).
− Long-term incentives ("LTI") have been designed to represent 25% of the overall remuneration package for all Executive Directors (based on 100% achievement of long term-incentive targets). Target achievement will be measured based on pre-determined Earnings per Share (EPS) and Total Shareholder Return (TSR) levels. Assessment of target achievement will be reviewed at the

end of every three-year cycle (January or February of the following period) and equal weighting will be placed on the targets noted above. A monetary value will be computed based on average achievement of the pre-defined LTI targets over the three year performance period. This monetary value will be converted into an associated number of shares based on the average share price during a pre-determined period (generally a three month period immediately preceding the commencement of the three year performance period). The LTI payment made to each Executive Director following completion of the three year performance period will amount to the cash equivalent of the number of notional shares granted multiplied by an average share price during a separate pre-defined time period towards the end of the performance period. This method of remuneration allows each Executive Director to be fairly compensated based on the performance of ZEAL over the performance period. Over-achievement of targets is permitted under the policy and the quantum of LTI payment will be based on the performance of ZEAL as a whole over the three year period.

In addition to the remuneration earned from 1 January 2016 on, the remuneration policy recommends Executive Directors to invest 10% of their base salary in the Company's listed shares. This recommendation ensures that Executive Director's compensation is aligned with shareholder returns. While this requirement is not mandatory, all Executive Directors have committed to such an investment from 1 January 2016 for a minimum of two years and have since renewed their commitments up to and including 2019.

16.2.3.5 Remuneration Policy Table

The following tables give an overview of Company's current remuneration policy for Executive Directors:

Base Salary	Remuneration policy
Purpose and link to strategy	Facilitate recruitment and retention of the best executive talent globally.Executives with the experience and expertise to deliver ZEAL's strategicobjectives at an appropriate level of cost.
Maximum opportunity	Base salary increases will not ordinarily exceed those for other UK-basedZEAL employees with comparable levels of individual performance andpotential. In cases where an Executive Director's base salary lies materiallybelow the appropriate market competitive level, and where such positioningis not sustainable in the view of the Supervisory Board, annual increasesmay exceed those for other employees described above. The rationale forany such increase will be described in the annual report on remuneration forthe relevant year.
Operation	Base salary levels of Executive Directors will be reviewed every two years. Anumber of factors are considered including, but not limited to, market paylevels among international industry peers, and base salary increases forother ZEAL employees.
	Additionally, an increase of 10% of base salary will be automatically appliedif the Executive Director purchases shares in the Company totalling at least10% of base salary.
Performance measures	None

Retirement and other benefits	Remuneration policy
Purpose and link to strategy	Provide market competitive benefits at an appropriate cost, which help fosterloyalty and retention. Relocation benefits and sign-on bonuses may also beprovided based on business need, individual circumstances and location ofemployment.
Maximum opportunity	The Supervisory Board retains discretion to approve a higher cost in exceptional circumstances or where factors outside the Company's control havechanged materially. In the case of relocation, additional benefits may beprovided, including but not limited to, cost of relocation expenses, real estatefees, tax equalisation to home country and tax return filing assistance. TheSupervisory Board has discretion to determine the value of such benefitsand details of any such benefits provided will be disclosed in the AnnualReport on remuneration covering the year in which they were provided.
Operation	Executive Directors are eligible to receive benefits in line with those for otherUK employees, including, but not limited to, services to assist with preparation of tax returns where necessary due to the international nature of workcompleted.
Performance measures	None
Short-term and long-termincentive plans	Remuneration policy
Purpose and link to strategy	Motivate Executive Directors to achieve stretched financial and commercialobjectives consistent with and supportive of the Company's growth plans.Create a tangible link between annual performance and individual pay opportunity.
Maximum opportunity	The Supervisory Board retains discretion to adjust the overall incentives totake account of performance over and above expectations.
	Short-term incentive
	Awards of up to 200% can be granted (based on pre-defined criteria andratification of successful completion by the Supervisory Board) in respect ofany fiscal year. The annual STI bonus will be limited to a maximum equal toeach Executive Director's annual base salary.
	Long-term incentiveThe annual LTI bonus entitlement has been designed to be limited to amaximum equal to each Executive Director's annual base salary. Where theshare price at vesting is greater than 100% of the base salary divided by thenumber of shares granted under the LTI scheme, the amount paid to eachExecutive could exceed 100% of base salary. As such, the LTI bonus pay-outat the end of each three year period has been designed to not exceed threetimes the Executive Director's base salary at date of grant apart from thecircumstances described above.
Operation	Awards in respect of performance up to 100% above target are paid in cash.
Performance measures	Performance metrics include:
	−financial goals (which determine a significant portion of the bonus eachyear),
	−commercial goals, and
	−organisational goals.The annual bonus performance measures are chosen to provide an appropriate balance between incentivising Executive Directors to meet financial targetsfor the year and to deliver specific strategic, operational and individual goals.This balance allows the Chairman's Committee to effectively reward performance against key elements of ZEAL's strategy.
	The precise bonus targets are set by the Supervisory Board each year in thecase of the STI scheme to ensure that Executive Directors are appropriatelyfocused on the key objectives for the next twelve months. For the LTIschemes, targets are set by the Supervisory Board for at least the followingthree years. In doing so, the Supervisory Board takes into account a number ofinternal and external reference points, including the Company's business plan.For financial metrics, performance is set in line with the annual budget. Fulldetails of performance measures and targets are disclosed in the AnnualReport on remuneration following expiration of the relevant performanceperiod, except where the Supervisory Board considers them to be commercially sensitive. In cases where details are commercially sensitive, the SupervisoryBoard will explain its rationale and commit to disclosure in the future whereappropriate.

Termination agreements	Remuneration policy
Purpose and link to strategy	To limit the Company's liability for payments in cases of termination, and toprovide a fair and equitable settlement where appropriate.
Maximum opportunity	The Company will provide twelve months' notice of termination or payment inlieu of notice. Termination payments will be limited to base salary that wouldhave been received during the twelve month notice period, any STI bonus thatthe Director would have received during or in respect of the notice period oftwelve months, any transition payments that would have been payable duringthe notice period, any LTI bonuses that would have matured during the noticeperiod, any LTI bonuses that would have been awarded but had not yetmatured making the assumption that the targets thereunder would have beenachieved 100%. In addition to the payments above, each Director is entitled to

agreement is entered into by both parties.

Effective 1 January 2016, change of control clauses have been removed from all Executive Directors' contracts.

a further severance payment of two times his/her annual salary if a settlement

16.2.4 Termination; Change of Control

The service agreements of the members of the Executive Board have no fixed term and may be terminated by either party giving not less than 12 months' prior notice or for due cause. The Company can release an Executive Director from its duties under the respective service agreement for the remaining term of the service agreement, provided it continues to pay the compensation.

The service agreements do not contain any change-of-control clauses.

16.2.5 Historical Remuneration and Other Benefits of the Members of the Executive Board

The remuneration of the members of the Executive Board consists of a fixed part, including the base salary and certain benefits, a short-term incentive (based on a one-year performance period) and a long-term incentive (based on a rolling three-year performance period).

Short-term incentives are paid following each fiscal year end and are designed to reward achievement of pre-determined financial and other performance targets including achievement of each individual's personal performance targets (which are normally linked to delivery of the Company's strategic aims). Long-term incentives are paid at the end of each three-year interval and are based on the achievement of a pre-determined average share price over a pre-defined period.

The following table sets out the remuneration of the Executive Board members in relation to the 2016, 2017 and 2018 fiscal years.

In addition, the Company provides the Executive Board members with mobile phones and contributions to health insurance. The Company also provides a D&O insurance policy for the Executive Board members.

2016	Base salary	Retirementand otherbenefits	Otherpayments –nonrecurring	STI award	Transitionalawards	Total	LTI awardaccruedduring theyear
	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR
Dr Helmut Becker	605	12	–	386	276	1,279	92
Jonas Mattsson	425	12	–	274	202	913	164
Susan Standiford	399	12	–	258	157	826	193
		Retirement	Otherpayments –

2017	Base salaryTEUR	and otherbenefitsTEUR	nonrecurringTEUR	LTI awardTEUR	STI awardTEUR	TransitionalawardsTEUR	TotalTEUR
Dr Helmut Becker	605	11	–	–	409	292	1,317
Jonas Mattsson	396	11	38	136	264	213	1,058
Susan Standiford	373	11	85	172	249	157	1,047

2018	Base salaryTEUR	Retirementand otherbenefitsTEUR	Otherpayments –nonrecurringTEUR	LTI awardTEUR	STI awardTEUR	TransitionalawardsTEUR	TotalTEUR
Dr Helmut Becker	651	11	-	240	481	255	1,638
Jonas Mattsson	443	11	-	155	337	-	947 (1)
Susan Standiford (2)	288	8	-	-	-	-	297 (1)

(1) Including taxable benefits of TEUR 1, representing costs for health care and gym membership.

16.2.6 Shareholdings of the Members of the Executive Board

The following table shows the number of ZEAL shares currently held by members of the Executive Board on the basis of the 8,385,088 ordinary shares issued on the date of the Prospectus.

Name	Number ofshares	% of issued shares(1)
Dr Helmut Becker	11,066	0.13%
Jonas Mattsson	7,000	0.08%

(1) Percentages are rounded according to established commercial standards.

16.2.7 Loans and Guarantees for the Benefit of Members of the Executive Board

The company has currently neither granted loans to the members of the Executive Board nor assumed any guarantees of any kind for them.

16.3 Supervisory Board

____________________

Pursuant to Statute 147, the Supervisory Board consists of six members ("Supervisory Directors"), who, pursuant to Article 40(2) of the SE Regulation, are appointed by the general meeting. According to Statute 149, the appointment of Supervisory Directors by the general meeting requires an ordinary resolution. Pursuant to Statute 152, the appointment of the Supervisory Directors in the Supervisory Board lasts until the close of the annual general meeting of members for the fourth year after the beginning of their term of office, excluding the year of appointment. Where a successor is appointed in place of a member of the Supervisory Board who has resigned or otherwise ceased to be a Supervisory Director prior to the end of the fixed term, the successor's appointment is for the remaining term of the Director who has left office. The general meeting may resolve to specify a shorter term of office or terminate or vary the terms of the appointment of any Supervisory Director. The Supervisory Board has adopted by-laws dated August 2010.

(2) Ms Standiford resigned from her office during 2018. She received an additional loss-of-office payment of TEUR 611.

16.3.1 Current Composition of the Supervisory Board

The current members of the Supervisory Board and their mandates in administrative, management and supervisory bodies or partnerships outside of ZEAL during the last five years are listed in the following overview. Unless otherwise stated, these mandates continue to exist.

Name	Commencement ofservice	Expiry ofservice	Position	Principal occupationoutside of ZEAL
Peter Steiner	28 June 2013	2019 AGM	Chairman	Self-employed auditor and adviserof company owners, large corporations and financial investors
Leslie-Ann Reed	14 July 2017	2019 AGM	Vice-Chair	Chartered accountant
Thorsten H. Hehl	28 June 2013	2019 AGM	Member	Managing director at GüntherGroup
Oliver Jaster	29 May 2008	2019 AGM	Member	Chairman (Vorsitzender desVerwaltungsrats) of multiplecompanies of Günther Group
Bernd Schiphorst	28 June 2013	2019 AGM	Member	Chairman of the board of directorsof Hertha BSC Stiftung
Jens Schumann	29 June 2011	2019 AGM	Member	Private Investor/Business Angel

Peter Steiner, born 16 July 1959 in Ludwigshafen am Rhein, Germany. Peter Steiner has been a member of the Supervisory Board of the Company since 28 June 2013. He is a self-employed auditor and advises company owners, large corporations and financial investors. He was previously a partner of the investment company One Equity Partners LLC. He worked for MG Technologies AG as chief financial officer. At Dyckerhoff AG, he was successively chief financial officer, chief operating officer and finally chief executive officer. Following his many years as an auditor for Arthur Andersen & Co., he was appointed chief financial officer of Süba Bau AG. Peter Steiner studied business administration in Mannheim and Cologne. Peter Steiner succeeded Andreas de Maizière as chairman of the Supervisory Board at the conclusion of the annual general meeting in June 2017.

In addition to his position as chairman of the Supervisory Board, Mr Steiner is, or has been within the last five years, a member of the administrative, management or supervisory bodies of and/or a partner in the following companies and partnerships outside of ZEAL:

Current:

− Non-executive member of the board of directors of Clariant AG, Muttenz, Switzerland.
− Member of the supervisory board of JM Holding GmbH & Co. KGaA, Worms, Germany.
− Member of the supervisory board of RENOLIT SE, Worms, Germany.
− Member of the supervisory board of Wienerberger AG, Wien, Austria.

− Chairman of the supervisory board of Caldiv B.V., Rotterdam, The Netherlands (until 2019)
− Chairman of the board of directors of Xella International S.A., Luxembourg (until 2017).
− Non-executive member of the board of directors of Fixit Trockenmörtel Holding AG, Baar, Switzerland (until 2016).

Leslie-Ann Reed, born 16 May 1959 in London, UK. Leslie-Ann Reed has been a member of the Supervisory Board since 14 July 2017. Ms Reed is a chartered accountant who has served in both executive and non-executive roles in publicly listed entertainment media and professional services companies. Ms Reed is currently non-executive director and chair of the audit committee for Learning Technologies Group plc which is listed on the London Stock Exchange, and Optionis Limited. From 2010 to 2012, she was chief financial officer of the global, online B2B auctioneer Go Industry plc, and ultimately, led the successful sale of the business. Between 2007 and 2010, Ms Reed was as an adviser to Marwyn Investment Management, a private equity company, overseeing its acquisitions strategy. Prior to this she served as chief financial officer of global commodities and economic research media group Metal Bulletin plc, helping to lead its transition from printed products to an online data and news service. After a career at Arthur Andersen, Ms Reed held senior finance leadership positions at Universal Pictures, Polygram Music, EMI Music and Warner Communications Inc.

In addition to her position as vice-chair of the Supervisory Board, Ms Reed is, or has been within the last five years, a member of the administrative, management or supervisory bodies of and/or a partner in the following companies and partnerships outside of ZEAL:

Current:

− Non-Executive Director of Learning Technologies Group plc, London.

− Non-Executive Director of Quarto Group, Inc., London.
− Non-Executive Director of Optionis Limited, Hemel Hempstead.

Thorsten Hauke Hehl, born 31 December 1972 in Hanau, Germany. Thorsten H. Hehl has been a member of the Supervisory Board of the Company since 28 June 2013. Since 2 May 2012, Mr Hehl is a member of the supervisory board of Lotto24 AG. He is managing director of several companies of the Günther Group and chief financial officer of Günther Group, has been working for Günther Group since 2008. Prior to this, he worked for Bankhaus Metzler and HSH Nordbank in the field of corporate finance. After completing his vocational bank training, Mr Hehl studied business administration in Giessen and Atlanta (USA) as well as at Handelshochschule Leipzig (HHL).

In addition to his position as member of the Supervisory Board, Mr Hehl is, or has been within the last five years, a member of the administrative, management or supervisory bodies of and/or a partner in the following companies and partnerships outside of ZEAL:

Current:

− Managing director (Geschäftsführender Direktor) of Günther SE (Bamberg, Germany) and Günther Holding SE (Hamburg, Germany).
− Managing director (Geschäftsführer) of GO-Beteiligungs GmbH (Bamberg, Germany), Günther Alpha Management GmbH (Hamburg, Germany), Günther Consulting GmbH (Hamburg, Germany), Günther Holding Immobilien Management GmbH (Hamburg, Germany), Günther Services GmbH (Hamburg, Germany), Ophelia GmbH (Paderborn, Germany), Orpheus Capital II Management GmbH (Hamburg, Germany), Orpheus Capital II Real Estate GmbH (Hamburg, Germany), and Othello Drei Beteiligungs-Management GmbH (Hamburg, Germany).
− Member of the supervisory board of Lotto24 AG (Hamburg, Germany).
− Member of the advisory board of Günther Direct Services GmbH (Bamberg, Germany), Langenscheidt Digital GmbH & Co. KG (Munich, Germany), Langenscheidt GmbH & Co. KG (Munich, Germany) and Langenscheidt Management GmbH (Munich, Germany).

Oliver Jaster, born 14 January 1970 in Erlangen, Germany. Oliver Jaster has been a member of the Supervisory Board of the Company since 29 May 2008. He has been a managing director of the Günther Group since 2004 and is currently the controlling shareholder of Günther SE and chairman (Vorsitzender des Verwaltungsrats) of multiple companies in the Günther Group. Previously he held various positions in the banking sector. Oliver Jaster studied banking and business administration at the Hochschule für Bankwirtschaft in Frankfurt am Main and in Edinburgh.

In addition to his position as member of the Supervisory Board, Mr Jaster is, or has been within the last five years, a member of the administrative, management or supervisory bodies of and/or a partner in the following companies and partnerships outside of ZEAL:

Current:

− Member of the administrative board (Verwaltungsrat) of Günther SE (Bamberg, Germany), Günther Holding SE (Hamburg, Germany) and MAX Automation SE (Düsseldorf, Germany).
− Member of the advisory board of all4cloud GmbH & Co. KG (Viernheim, Germany), all4cloud Management GmbH (Hamburg, Germany), G Connect GmbH (Munich, Germany), Günther Direct Services GmbH (Bamberg, Germany), Langenscheidt Digital GmbH & Co. KG (Munich, Germany), Langenscheidt GmbH & Co. KG (Munich, Germany) and Langenscheidt Management GmbH (Munich, Germany).

− Managing director (Geschäftsführer / Vorstand) of Günther Beta-Beteiligungs Management GmbH (now all4cloud Management GmbH) (Hamburg, Germany), GO-Beteiligungs GmbH (Bamberg, Germany), Günther Holding Immobilien Management GmbH (Hamburg, Germany), Günther Consulting GmbH (Hamburg, Germany), Orpheus Capital II Real Estate GmbH (Hamburg, Germany), Orpheus Capital II Management GmbH (Hamburg, Germany), Othello Eins Beteiligungs-Management GmbH (Hamburg, Germany), Othello Zwei Beteiligungs-Management GmbH (Hamburg, Germany), Othello Drei Beteiligungs-Management GmbH (Hamburg, Germany), Orga Systems Beteiligungs GmbH (Paderborn, Germany), Günther Services GmbH (Hamburg, Germany), Günther Alpha Management GmbH (Hamburg, Germany), Günther Delta Management GmbH (Hamburg, Germany), Günther Holding GmbH (Hamburg, Germany), Günther Holding AG (Hamburg, Germany), Günther GmbH (Hamburg, Germany) and Günther AG (Hamburg, Germany).

Bernd Schiphorst, born 29 January 1943 in Oldenburg, Germany. Bernd Schiphorst has been a member of the Supervisory Board of the Company since 28 June 2013. He was previously an executive board member and senior consultant of WMP EuroCom AG in Berlin. From 1979 onwards, he spent over two decades working for Bertelsmann, initially as head of the executive affairs office and press spokesperson of the magazine subsidiary Gruner + Jahr AG & Co. Mr Schiphorst was then involved as head of Ufa Film- und Fernseh GmbH with the establishment of commercial television (including RTL, Vox, Sky, Sportfive) and radio (Antenne Bayern, Radio Hamburg, Klassik Radio) and as president and chief executive officer of AOL Europe and Bertelsmann New Media with the introduction of digital media. In 2000, he briefly entered the world of politics as media representative (Medienbeauftragter) of the states of Berlin and Brandenburg. After completing his studies in economics, politics and publishing in Berlin, Mr Schiphorst began his career as managing editor and member of the executive board of märkte & medien Verlag in Hamburg.

In addition to his position as member of the Supervisory Board, Mr Schiphorst is, or has been within the last five years, a member of the administrative, management or supervisory bodies of and/or a partner in the following companies and partnerships outside of ZEAL:

Current:

− Chairman of the board of directors of Hertha BSC Stiftung
− Chairman of the supervisory board of media.net berlinbrandenburg e.V., Berlin, Germany
− Member of the supervisory board of Hertha, Berliner Sport-Club e. V., Berlin, Germany

Jens Schumann, born 6 June 1973 in Essen, Germany. Jens Schumann has been a member of the Supervisory Board of ZEAL since 29 June 2011. He is a co-founder of the Company and was managing director and an Executive Board member from 1999 to 2009. In March 2008, Mr Schumann was appointed chairman of the Executive Board. Since 2 May 2012, Mr Schumann is the vice-chairman of the supervisory board of Lotto24 AG. From December 1998 to the formation of the Company, he worked as a business consultant at Icon Medialab AG. Mr Schumann studied law at the University of Münster from 1993 to 1998 and finished his studies with the first state exam.

In addition to his position as member of the Supervisory Board, Mr Schumann is, or has been within the last five years, a member of the administrative, management or supervisory bodies of and/or a partner in the following companies and partnerships outside of ZEAL:

Current:

− Vice-Chairman of the supervisory board of Lotto24 AG, Hamburg, Germany
− Member of the advisory board of next media accelerator GmbH, Hamburg, Germany
− Member of the advisory board of Contentflow GmbH, Berlin, Germany
− Member of the advisory board of LemonSwan GmbH, Hamburg, Germany

− Member of the supervisory board of Fyber N.V., Amsterdam, The Netherlands
− Member of the supervisory board of youvestor AG, Frankfurt am Main, Germany

Each member of the Supervisory Board has been elected until the close of the annual general meeting of the Company receiving the reports and accounts for the year ended 31 December 2018.

The members of the Supervisory Board can be reached at the Company's business address at ZEAL Network SE, 5th Floor, One New Change, London EC4M 9AF, United Kingdom.

16.3.2 Supervisory Board Committees

Pursuant to Statute 190, the Supervisory Board may delegate any of its powers to any committees consisting of one or more of its members. The Supervisory Board has established a Chairman's Committee, an Audit Committee and a Special Committee, each consisting of three members of the Supervisory Board. The respective committee chairperson reports regularly to the Supervisory Board on the work of the committees. The Supervisory Board periodically reviews the adequacy of the committee structure with a view to setting up additional committees if the need arises.

16.3.2.1 Chairman's Committee

The Chairman's Committee is responsible for the preparation of Supervisory Board meetings, coordination of committee meetings and ongoing exchanges with the Executive Board on behalf of the Chairman of the Supervisory Board. The Chairman's Committee also performs the functions of nomination and remuneration committees (see "16.2.3.2 Role of the Remuneration Committee"). The Committee meets as required.

The members of the Chairman's Committee are listed in the following overview

Name	Appointment Date	Committee Role
Peter Steiner	14 July 2017	Chair
Oliver Jaster	28 June 2013	Member
Jens Schumann	28 June 2013	Member

16.3.2.2 Audit Committee

The Audit Committee's overarching responsibilities are to oversee the external audit and to monitor the effectiveness of the Company's framework of internal control. The Audit Committee oversees the monitoring of the Company's financial reporting process, the effectiveness of its internal control and risk management systems and the audit of ZEAL's financial statements.

In addition, the Audit Committee is responsible for ensuring that the external auditor maintains independence by approving any additional services proposed by the external auditor, reviewing the areas of increased audit focus proposed by the auditor and agreeing the audit fee. The external auditor can only be replaced and reappointed by the Audit Committee.

The members of the Audit Committee are listed in the following overview:

Name	Appointment Date	Committee Role
Leslie-Ann Reed	14 July 2017	Chair (1)
Peter Steiner	28 June 2013	Member
Thorsten H. Hehl	28 June 2013	Member

(1) Leslie-Ann Reed is the Chair of the Audit Committee, having replaced Peter Steiner as Chair on 14 July 2017. The Chair has the required specialist knowledge and experience in both the application of accounting principles and internal control procedures. She is independent and has not previously been a Member of the Executive Board.

The Audit Committee meets as required. The Chief Financial Officer attends the Audit Committee meetings. Members of the Supervisory Board and other members of the Executive Board or senior executives may attend meetings upon invitation from the committee. The meetings in which the committee reviews and discusses the audit plans, interim audit updates and the annual accounts are also attended by representatives of the current external auditor, Ernst & Young LLP.

16.3.2.3 Investment Committee

The Investment Committee is authorised to approve investments of the Company in the business segment 'ZEAL Ventures' to the extent that the total amount (or the value of any contribution in kind) of such investments does not exceed EUR 1 million per fiscal year or the amount approved by the Supervisory Board for all investments to be made within the annual budget in any fiscal year. The Committee shall meet as necessary.

The members of the Investment Committee are listed in the following overview:

Name	Appointment Date	Committee Role
Peter Steiner	13 September 2016	Member
Oliver Jaster	13 September 2016	Member
Jens Schumann	13 September 2016	Member

16.3.2.4 Special Committee

The Special Committee comprises the members of the Supervisory Board who have no personal interest in the Offer. The powers delegated to the Special Committee are to resolve on any matters within the responsibility of the Supervisory Board that relate to the Offer, including the approval of the issuing of any shares of the Company in relation to such offer. The Committee meets as required.

The members of the Special Committee are listed in the following overview:

Name	Appointment Date	Committee Role
Peter Steiner	18 November 2018	Chair
Leslie-Ann Reed	18 November 2018	Member
Bernd Schiphorst	18 November 2018	Member

16.3.3 Remuneration of the Members of the Supervisory Board

In addition to the reimbursement of their expenses, the members of the Supervisory Board receive a fixed annual remuneration of TEUR 45.5 for every full fiscal year served in that capacity (TEUR 136.5 for the Chairman and TEUR 91.0 for the deputy Chairman).

For every membership of a committee of the Supervisory Board, members of the Supervisory Board receive an additional annual remuneration of TEUR 17.5 (TEUR 35.0 for the Chair).

The following tables give an overview of Company's current remuneration policy for members of the Supervisory Board:

Chairman's Fee	Remuneration policyThe Chairman of the Supervisory Board has the appropriate balanceof skills, experience, independence and knowledge of the Company todischarge his respective duties and responsibilities effectively.
Purpose and link to strategy
Maximum opportunity	The Chairman of the Supervisory Board receives for every full fiscalyear a fixed annual remuneration of TEUR 136.5 and for membershipof one or several committees of the Supervisory Board, the Chairmanof the Supervisory Board receives an additional annual remunerationup to TEUR 35.
Operation	Fees are provided entirely in cash. The Supervisory Board remuneration is set in the Statutes of the Company and is subject to amendment by shareholder resolution.
Performance measures	None
Member's Fee	Remuneration policy
Purpose and link to strategy	The Supervisory Board and its committees should have the appropriate balance of skills, experience, independence and knowledge of theCompany to enable them to discharge their respective duties andresponsibilities effectively.
Maximum opportunity	The members of the Supervisory Board receive for every full fiscalyear a fixed annual remuneration of EUR 45.5. The remuneration ismultiplied by 2 in respect of the deputy Chairman of the SupervisoryBoard. For their membership of one or several committees of theSupervisory Board, members of the Supervisory Board receive anadditional annual remuneration of EUR 17.5. The remuneration ismultiplied by 2 in respect of a Chairman of a committee.
Operation	Fees are provided entirely in cash. The Supervisory Board remuneration is set in the Statutes of the Company and is subject to amendment by shareholder resolution.
Performance measures	None

The remuneration of the Supervisory Board members in the year 2018 is set out in the following table:

Name	Amount(1) (TEUR)
Thorsten Hehl	60
Oliver Jaster	63
Leslie-Ann Reed	126
Bernd Schiphorst	46
Jens Schumann	63
Peter Steiner	186

(1) Remuneration comprises total fees paid to the Supervisory Board members in 2018. Other remuneration relates to reimbursed cost and does not form part of the Supervisory Board remuneration and is therefore not reflected in the above table.

____________________

16.3.4 Shareholdings of the Supervisory Board Members

The following table shows the number of ZEAL shares currently held by members of the Supervisory Board on the basis of the 8,385,088 ordinary shares issued on the date of the Prospectus.

Name	Number ofShares	% of issued shares(1)
Oliver Jaster	857,334	10.22(2)
Jens Schumann	250,000	2.98
Peter Steiner	5,000	0.06

(1) Percentages are rounded according to established commercial standards

16.3.5 Loans and Guarantees for the Benefit of Members of the Supervisory Board

The Company has currently neither granted loans to the members of the Supervisory Board nor assumed any guarantees of any kind for them.

16.4 Certain Information Regarding the Members of the Executive Board and Supervisory Board

In the last five years, no member of the Executive Board or the Supervisory Board has been convicted of fraudulent offences. In the last five years, no member of the Executive Board or the Supervisory Board has been associated with any bankruptcy, receivership or liquidation acting in its capacity as a member of any administrative, management or supervisory body or as a senior manager. In the last five years, no official public incriminations and/or sanctions have been made by statutory or legal authorities (including designated professional bodies) against the members of the Executive Board or the Supervisory Board, nor have sanctions been imposed by the aforementioned authorities. No court has ever disqualified any of the members of the Executive Board or the Supervisory Board from acting as a member of the administrative, management or supervisory body of an issuer, or from acting in the management or conduct of the affairs of any issuer for at least the previous five years.

No member of the Executive Board or the Supervisory Board has entered into a service agreement with a company of ZEAL that provides for special benefits, such as severance pay, at the end of the business relationship (other than pensions or compensation in the case of an early termination of the service agreement, which is determined on the basis of the remaining term of the agreement and the contractually agreed compensation). The members of the Executive Board are not bound by restrictive covenants and may therefore engage in competing activities following the end of their office.

There are no family relationships between the members of the Executive Board and those of the Supervisory Board, either among themselves or in relation to the members of the other body.

16.5 Conflicts of Interest of the Members of the Executive Board and Supervisory Board

The Supervisory Board member Oliver Jaster is attributed the voting rights relating to 10.22% of the shares and voting rights in the Company directly held by Othello Drei Beteiligungs GmbH & Co. KG. Furthermore, 41.62% of the shares and voting rights in Lotto24 AG, held directly by Othello Vier Beteiligungs GmbH & Co. KG, are attributed to Mr Jaster, both of which could give rise to conflicts of interest for him as regards the Offer.

The Supervisory Board member Thorsten H. Hehl is also a member of the Supervisory Board of Lotto24 AG. In addition, Mr Hehl is a managing director Günther Group. His position as a member of the Supervisory Boards of the Company and Lotto24 as well as a managing director of certain Günther Group companies could give rise to conflicts of interest for Mr Hehl as regards the Offer.

(2) Held indirectly through a chain of controlled undertakings: Günther SE, Günther Holding SE, Othello Drei Beteiligungs-Management GmbH, Othello Drei Beteiligungs GmbH & Co. KG.

The Supervisory Board member Jens Schumann is also a member of the Supervisory Board of Lotto24 AG. Mr Schumann holds 2.98% of the shares in the Company and 3.65% of the shares in Lotto24 AG, which could give rise to conflicts of interest for Mr Schumann as regards the Offer.

There are currently no other potential conflicts of interest between the members of the Executive Board and the Supervisory Board of the Company and their obligations to the Company or their private interests or other obligations.

16.6 General Meeting

16.6.1 Annual General Meeting

An annual general meeting shall be held in accordance with the Companies Act and other applicable legislation, at such place or places, date and time as may be decided by the Executive Board.

16.6.2 Convening of General Meetings

The Executive Board or the Supervisory Board may, whenever its members think fit, call a general meeting. They are required to call a general meeting once the Company has received requests from its members to do so in accordance with the Companies Act.

The statutory notice period for convening an annual general meeting of the Company is 21 days. This notice period, as a general rule, also applies to general meetings other than annual general meetings, unless (i) the shareholders approved a resolution in the most recent annual general meeting (or all other general meetings held after such annual general meeting) according to which the notice period may be shortened to not less than 14 days, and (ii) the Company offers the shareholders to facilitate participation in the voting by electronic means. In the past, the Company has in no case presented its shareholders with a corresponding authorisation to shorten the notice period for resolutions. The Company will only make use of this possibility in the future if the corresponding flexibility is justified and in the interest of all shareholders.

16.6.3 Notice of General Meetings, etc.

Notice of general meetings shall include all information required to be included by the Companies Act and shall be given to all members other than those members who are not entitled to receive such notices from the Company under the provisions of the Articles. The Company may determine that only those persons entered on the register of members or the CI Register at the close of business on a day decided by the Company, such day being no more than 21 days before the day that notice of the meeting is sent, shall be entitled to receive such a notice.

For the purposes of determining which persons are entitled to attend or vote at a meeting, and how many votes such persons may cast, the Company must specify in the notice of the meeting a time, not more than 48 hours before the time fixed for the meeting, by which a person must be entered on the register of members or the CI Register in order to have the right to attend or vote at the meeting. In calculating such period, no account shall be taken of any part of any day that is not a working day.

16.6.4 Quorum and Voting

No business other than the appointment of a chairman shall be transacted at any general meeting unless a quorum is present at the time when the meeting proceeds to business. At any general meeting, a resolution put to the vote shall be decided on a show of hands unless a poll is demanded by:

− the chairman of the meeting;
− not less than five members or shareholders present in person or by proxy and entitled to vote;
− a member or members present in person or by proxy and representing not less than 10% of the total voting rights of all the members having the right to vote at the meeting, excluding the rights attaching to any shares held as treasury shares; or

− a member or members present in person or by proxy and holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than 10% of the total sum paid up on all the shares conferring that right, excluding any such shares held as treasury shares,

either before the resolution is put to the vote on a show of hands or immediately after the declaration of the result of the show of hands on that resolution. In the Company's practice, voting takes place by means of a poll according to a demand of the chairman of the meeting.

16.6.5 Conditions of Admission

The Executive Board and, at any general meeting, the chairman may make any arrangement and impose any requirement or restriction it or he considers appropriate to ensure the security of a general meeting including, without limitation, requirements for evidence of identity to be produced by those attending the meeting, the searching of their personal property and the restriction of items that may be taken into the meeting place. The Executive Board and, at any general meeting, the chairman are entitled to refuse entry to a person who refuses to comply with these arrangements, requirements or restrictions.

16.7 Corporate Governance

The Company does not follow the UK Corporate Governance Code 2018, which is its country's of incorporation corporate governance regime, because the regime only applies to companies with a premium listing on the London Stock Exchange, whereas the Company's shares are admitted solely to trading on the regulated market (Regulierter Markt) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse).

16.8 Provisions for Pension Obligations

ZEAL has not made any commitments for pensions or similar benefits to current or former employees or members of the Executive Board and Supervisory Board. Accordingly, the provisions made for pension liabilities amount to EUR 0.00.

17 SHAREHOLDER STRUCTURE

At the date of the Prospectus, the Company's share capital amounts to EUR 8,385,088. It is divided into 8,385,088 registered shares of a nominal value of EUR 1.00 each.

Shareholder (1)	Percentage of voting rights (2)
Oliver Jaster (Bamberg)	10.278% (3)
Working Capital Management Pte., Ltd. (Singapore)	7.377% (4)
Lottoland Holdings Limited (Gibraltar)	5.557% (*)
Bram Cornelisse	3.954% (5)
Marc Peters (Hamburg)	3.273% (6)(*)

(*) Held directly.
(1) The ZEAL shares attributed to Schroders plc were sold in December 2018 as notified to the Company (without a TR-1 notification). Prior to the sale, Schroders plc had most recently notified in 2017 that it held 4.996% of the voting rights via the controlled undertakings Schroder Investment Management Limited and Schroder Investment Management North America Limited.
(2) Percentage of the 8,341,178 voting rights of the Company, deducting the 43,910 ZEAL shares held by the Company in treasury (see "15.5 Purchase of Own Shares") from the total number of ZEAL shares. Percentages are rounded to the third decimal place in accordance with accepted commercial standards.
(3) Held indirectly through a chain of controlled undertakings: Günther SE, Günther Holding SE, Othello Drei Beteiligungs-Management GmbH, Othello Drei Beteiligungs GmbH & Co. KG. Held indirectly through a chain of controlled undertakings: Günther SE (Bamberg), Günther Holding SE (Hamburg), Othello Drei Beteiligungs-Management GmbH (Hamburg), Othello Drei Beteiligungs GmbH & Co. KG (Hamburg). To the Company's knowledge, Othello Drei Beteiligungs GmbH & Co. KG directly holds 10.278% of the Company's voting rights at the date of the Prospectus.
(4) Voting rights as stated in the irrevocable undertaking dated 19 November 2018 between the Company and Working Capital Partners, Ltd. (Grand Cayman, Cayman Islands) and High Street Partners, Ltd. (Grand Cayman, Cayman Islands) (see "12.10.4.1 Agreements with Shareholders Regarding Irrevocable Undertak ings") both controlled by Working Capital Management Pte., Ltd. (Singapore). To the knowledge of the Company, Working Capital Partners directly holds 4.273% and High Street Partners, Ltd. directly holds 3.104% of the voting rights of the Company at the date of the Prospectus.
(5) Held indirectly through a chain of controlled undertakings: Farringdon Capital Management (Amsterdam, The Netherlands), Farringdon Netherlands BV, Farringdon I - SICAV and Blackwell Partners LLC. To the knowledge of the Company, Farringdon Netherlands BV indirectly holds 3.954% of the voting rights of the Company at the date of publication of the Prospectus.
(6) Percentage of voting rights at the date of the Prospectus to the knowledge of the Company, based on a confirmation by Marc Peters (Hamburg) in January 2019.

18 CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

The following legal relationships existed between the companies of ZEAL and related parties in the fiscal years ended 31 December 2016, 2017 and 2018, respectively, and until the date of the Prospectus. Relationships between the Company and other members of ZEAL (the effects of which have been eliminated as part of the consolidation in connection with the preparation of the Company's audited consolidated financial statements prepared in accordance with IFRS as of and for the fiscal years ended 31 December 2016, 2017 and 2018, respectively) are not included.

In accordance with IAS 24, transactions with persons or companies which are, inter alia, members of the same group as the Company or which are in control of or controlled by the Company must be disclosed, unless they are already included as consolidated companies in the audited consolidated financial statements. Control exists if a shareholder owns more than one half of the voting rights in the Company or, by virtue of an agreement, has the power to control the financial and operating policies of the Company's management. The disclosure requirements under IAS 24 also extend to transactions with associated companies (including joint ventures) as well as transactions with persons who have significant influence on the Company's financial and operating policies, including close family members and intermediate entities. This includes the members of the Executive Board and Supervisory Board and close members of their families, as well as those entities over which the members of the Executive Board and Supervisory Board or their close family members are able to exercise a significant influence or in which they hold a significant share of the voting rights.

Certain relationships with such related parties, including the service and other agreements concluded with the members of the Company's Executive Board and compensation arrangements for the members of the Supervisory Board are described under "16.2.2 Management Service Agreements", "16.2.3 Remuneration and Other Benefits of the Members of the Executive Board", "16.2.5 Historical Remuneration and Other Benefits of the Members of the Executive Board" and "16.3.3 Remuneration of the Members of the Supervisory Board". Further information, including quantitative information, of related party transactions is contained in the notes to the Company's audited consolidated financial statements prepared in accordance with IFRS as of and for the fiscal year ended 31 December 2016, 2017 and 2018, respectively, which are included in section "22 Financial Information".

Oliver Jaster is a Member of the Supervisory Board. The operating business of Schumann e.K. was outsourced to a related company of Oliver Jaster, Günther Direct Services GmbH. In return, Günther Direct Services GmbH received compensation of TEUR 114 in 2016, TEUR 115 in 2017 and TEUR 114 in 2018.

In connection with the Offer, the Company entered into an agreement on mutual undertakings (see "12.10.4.1 Agreements with Shareholders Regarding Irrevocable Undertakings") with Othello Vier Beteiligungs GmbH & Co. KG and Othello Drei Beteiligungs GmbH & Co. KG, both of which are related companies of Oliver Jaster.

Jens Schumann is a Member of the Supervisory Board. Jens Schumann is the owner of Schumann e.K. This structure has existed in comparable form since 2002 and was chosen because class lotteries only issue sales licences at present to natural persons or companies in which neither the liability of the company or its direct and indirect partners is limited. A cooperation agreement is in place between ZEAL and Schumann e.K., which governs the processing of game participation of class lottery customers by Schumann e.K. Under the terms of the agreement, Schumann e.K. must pay all commissions and other brokerage fees collected in this context to ZEAL. ZEAL provides Schumann e.K. with services in the field of controlling, bookkeeping, marketing and technical services and bears the costs incurred by Schumann e.K. in running its operations. As Schumann e.K. is included in the consolidated financial statements of the Company, all charges and income eliminate in full in the consolidated financial statements. As Jens Schumann operates Schumann e.K. in the interest of ZEAL, ZEAL has undertaken to indemnify him in the event of any personal claims by third parties arising from or in connection with the operation of Schumann e.K. Indemnification is limited to the extent that fulfilment of this indemnification may not cause ZEAL to become insolvent or over-indebted. In his capacity as owner of Schumann e.K., Mr. Schumann did not receive any remuneration during the relevant periods.

The charitable foundation Fondation enfance sans frontières, Zurich, Switzerland, is the owner of the preference shares of myLotto24 Limited and Tipp24 Services Limited (see "12.4.1.4.1 myLotto24 Limited" and*"12.10.3 Agreements Relating to Shareholdings in myLotto24 Limited and Tipp24 Ser-* vices Limited"). In each of 2016, 2017 and 2018, dividends of GBP 30 thousand were paid to Fondation enfance sans frontières. In addition, Fondation enfance sans frontières received donations of TEUR 38 in 2016 and TEUR 40 in 2018, while no donations were made in 2017.

19 COMPARISON OF SHAREHOLDER RIGHTS IN RELATION TO LOTTO24 AND ZEAL NETWORK

This section describes the material differences between the rights of shareholders of Lotto24 and shareholders of ZEAL Network. The differences between the rights of these respective shareholders result from the differences among German and UK Law.

This section does not include a complete description of all differences among the rights of the respective shareholders, nor does it include a complete description of their specific rights.

Furthermore, the identification of some of the differences of these rights as material is not intended to indicate that other differences that may be equally important do not exist. Shareholders of Lotto24 are urged to carefully read the relevant provisions of applicable laws, the Lotto24 articles of incorporation, and the Statutes of ZEAL Network.

The following discussion of the rights of shareholders of ZEAL Network relates to the rights of tendering Lotto24 shareholders upon Completion and of ZEAL shareholders. By means of Clearstream crediting ZEAL shares to the account of the Settlement Agent at Clearstream and the transfer through Clearstream to the custodian banks, the former Lotto24 shareholders will obtain the rights in the Company's shares as described below.

The rights of ZEAL shareholders would be subject to change should the Company implement its intention to transfer its corporate office to Germany (see "14.5 Intended Transfer of the Company's Registered Office").

Lotto24 shareholders ZEAL shareholders

Share Capital

Common Shares: The share capital (Grundkapital) of Lotto24 AG amounts to EUR 24,154,890 and consists of 24,154,890 no-par value registered shares.

Under the German Stock Corporation Act (Aktiengesetz), a German stock corporation requires a shareholders' meeting resolution passed by a majority of at least 75% of the share capital represented at the vote to increase its share capital. However, the articles of association can provide – as the Lotto24 AG articles of association do – that, instead of the 75% majority of the share capital represented at the vote, a simple majority of the share capital represented at the vote suffices to increase the share capital.

The shareholders' meeting can also create an authorised capital. This requires a resolution passed by a majority of at least 75% of the share capital represented at the vote, authorising the management board to issue a specific quantity of shares within a period not exceeding five years. The nominal amount may not exceed 50% of the share capital existing at the time the authorisation is granted.

In principle, the German Stock Corporation Act (Aktiengesetz) grants all shareholders the right to subscribe for new shares to be issued in a capital increase. The same applies to convertible bonds, bonds with warrants, profit participaCommon Shares: The share capital of ZEAL Network amounts to EUR 8,385,088 and consists of 8,385,088 registered shares of a nominal value of EUR 1.00 each. The Company holds 43,910 shares in treasury.

The Company does not have an authorised capital or a contingent capital comparable to such instruments under German law.

In advance of a general meeting proposing to authorise the directors to allot shares, a company will be required to publish a circular to shareholders, including a statement of the maximum number of shares which can be allotted tion rights and participating bonds. Subscription rights are freely transferable and may be traded on German stock exchanges for a prescribed period before the deadline for subscription expires.

However, shareholders do not have a right to request admission to trading of subscription rights. The shareholders' meeting may, subject to a majority of at least 75% of the share capital represented at the vote, resolve to exclude subscription rights. Exclusion of shareholders' subscription rights, wholly or in part, also requires a written report from the management board, justifying the exclusion to the shareholders' meeting; the report must substantiate the proposed issuing price. Excluding shareholders' subscription rights when new shares are issued is specifically permissible where:

the company is increasing share capital against cash contributions;
the amount of the capital increase of the issued shares with no subscription rights does not exceed 10% of the share capital at issue, neither at the time when the authorisation takes effect nor at the time when it is authorised; and
the price at which the new shares are being issued is not materially lower than the stock exchange price.

In addition, the shareholders' meeting can create contingent capital by a resolution passed with a majority of at least 75% of the share capital represented at the vote for the purposes of: (i) granting conversion or subscription rights to holders of convertible bonds or other securities granting a right to subscribe for shares; (ii) issuing shares as consideration to prepare for a merger with other companies; or (iii) granting subscription rights to managers and employees of the Company or an affiliated company by way of an approval resolution or authorisation resolution. The nominal amount of contingent capital may not exceed 10% of the share capital at the time the resolution is passed in cases where it is being created to issue shares to managers and employees of the Company or an affiliated company, and may not exceed 50% in all other cases.

Resolutions to reduce the share capital require a 75% majority of the share capital represented at the vote.

Authorised Capital. Subject to the supervisory board's approval, the Lotto24 management board may increase Lotto24 AG's share capital, and the date on which the authority expires. Such resolutions will be contained in the notice of the general meeting prepared by the company to convene the meeting.

A company may not, without the approval of shareholders, allot equity securities for cash unless it also makes an offer to all existing shareholders of the company on the same or more favourable terms as those offered to the public. Breach of this provision renders the company, and every officer who knowingly authorised or permitted the breach, jointly and severally liable to compensate any person to whom the offer should have been made for losses suffered as a result of the breach. Proceedings to recover such losses must be brought within two years of (i) the delivery to the registrar of companies of the return of allotment or (ii) where equity securities apart from shares are granted, from the date of grant.

Where non-cash consideration is to be received by a public company on the allotment of shares, the consideration must have been individually valued and the valuers' report must have been made to the company during the six months' before allotment and sent to the proposed allottee. An exception is available where the noncash consideration comprises all or part of the share capital of another body corporate, as is the case with regard to the Offer.

As described in Pre-Emption Rights below, a public company may disapply the operation of these statutory pre-emption provisions, by special resolution of the shareholders. Such disapplication must be limited in time to the length of the directors' corresponding authority to allot shares (for cash or otherwise).

On 18 January 2019, the Company's general meeting resolved to authorise the Executive Board (subject to the consent of the Supervisory Board) to allot up to 16,428,173 shares of EUR 1.00 each in the capital of the Company in pursuance of the Offer, provided that (a) the maximum aggregate nominal value of shares that may be allotted pursuant to this authority shall be EUR 16,428,173; and (b) the authority conferred by this resolution shall, unless previously revoked, varied or renewed, expire on 31 December 2019. Based on this authorisation, exercising the authorisation granted by the shareholder meeting of 12 May 2015. On this basis, up to 2,195,899 new shares may be issued in exchange for cash or payment in kind The management board may, under certain conditions and with the consent of the supervisory board, exclude subscription rights of shareholders in connection with any such issuance.

the Executive Board will, with the consent of the Supervisory Board, on or about the date hereof allot a total of 14,010,982 shares to Lotto24 shareholders in exchange for their tendered Lotto24 shares.

Purchase of own shares

Lotto24 AG may acquire own shares, among others, on the basis of an authorisation by the general meeting of shareholders which sets forth the lowest and the highest price for the shares, so long as it acquires no more than 10% of its issued shares. Such authorisation can be granted for a period of up to five years. The purpose of the acquisition of own shares may not be the trading in own shares.

The Company may only purchase its own shares in accordance with the provisions of the Companies Act, which require the consent of the shareholders as well as the specification of a maximum number of shares authorised to be acquired, the determination of both the maximum and minimum prices that may be paid for the shares as well as the specification of a date on which it is to expire, which must not be later than five years after the date on which the resolution is passed.

Dividends/Distributions

Dividends may only be paid out of a company's distributable profits as determined by a resolution of the shareholders at the general meeting of shareholders for the preceding fiscal year. Lotto24 AG has so far not paid any dividends, yet, for lack of distributable profits.

Directors must have regard to their statutory duties, including their duty to act with reasonable care, skill and diligence and in a way likely to promote the success of the company, when deciding whether to declare a dividend and when deciding how much such dividend should be.

Annual Meeting of Shareholders

Under German law, an annual meeting of shareholders is held to exonerate (entlasten) Lotto24 AG's management board and supervisory board. The annual shareholders' meeting also resolves on the use of the company's distributable profits and elects the members of the supervisory board upon expiration of their office. The meeting is convened by the manThe Company is required to give notice of a resolution if requested to do so by (i) one or more shareholders representing at least 5% of the total voting rights of all shareholders who having a right to vote on such resolution at the annual general meeting or (ii) at least 100 shareholders which have a right to vote on such resolution and hold shares on which there has agement board.

To the extent that no shorter period is admissible by law, the convening of the shareholders' meeting must be published in the German Federal Gazette (Bundesanzeiger) no less than 30 days prior to the conclusion of the date by which shareholders are required to register to attend the meeting (no less than six days prior to the shareholders' meeting). The date on which the convening notice was published is not included in this 30-day period. This does not exclude any other forms of convocation permitted by law.

A shareholders' meeting may also be called if shareholders, whose holding in the aggregate equals or exceeds 5% of the share capital, demand such meeting in writing, stating the purpose of and reasons for such meeting.

been paid up an average sum, per shareholder, of at least GBP 100.

The Company is required to include in the business to be dealt with at an annual general meeting any matter which may be properly included in the business if requested to do so by (i) one or more shareholders representing at least 5% of the total voting rights of all shareholders who having a right to vote on such resolution at that meeting or (ii) at least 100 shareholders which have a right to vote on such resolution and hold shares on which there has been paid up an average sum, per shareholder, of at least GBP 100.

Shareholders meetings are called by the directors or by the holders of shares representing at least 5% of the ordinary share capital of the company.

Under English law, shareholders of a public company must be given at least 21 clear days' notice of an annual general meeting and at least 14 clear days' notice of any other general meetings.

Voting Rights – General

The right to participate in and vote at the shareholders' meeting is extended to all shareholders having registered in due time whose shares are registered in the share register. Each no-par value share entitles the holder to cast one vote at a shareholders' meeting.

Unless mandatory rules of the German Stock Corporation Act provide to the contrary, resolutions of the shareholders' meeting are adopted with a simple majority of the votes cast. Voting rights may be exercised by proxy.

Each ordinary share shall confer on each shareholder of the Company the right to receive notice of and to attend, speak and vote at all general meetings of the company. Each ordinary share carries the right to one vote on a poll unless a vote shall be decided on a show of hands. In the Company's practice, voting takes place by means of a poll according to a demand of the chairman of the meeting. The right to vote is determined by reference to the register of members, respectively the CI Register, at a time specified in the notice of general meeting, being not more than 48 hours (disregarding non-working days) before the general meeting in question.

Ordinary resolutions at a general meeting will be adopted if passed by a simple majority of the votes cast and Special Resolutions will require at least 75% of the votes cast at a general meeting. Voting rights may be exercised by proxy.

Quorums

Neither the German Stock Corporation Act nor Lotto24 AG's articles of incorporation have any minimum quorum requirement applicable to shareholders meetings.

A general meeting of shareholders shall be quorate if two qualifying persons, being a shareholder, a person authorised to act as the representative of a corporation in relation to the meeting or a person appointed as proxy of a shareholder at the meeting, are present. However, the general meeting will not be quorate if

there are only two qualifying persons and each is (i) representatives of the same corporation or (ii) proxies of the same member.

Approval of Extraordinary Transactions

According to German law, certain resolutions of fundamental importance require a majority of at least 75% of the votes cast.

Such resolutions include in particular:

capital increases, including the exclusion of the shareholders' subscription rights;
measures according to the German Act on Corporate Transformations;
entering into a domination and/or profit and loss transfer agreement;
approval of management measures to which the supervisory board denied its approval;
dissolution of Lotto24 AG; and
asset disposals which may jeopardize the company's business objectives.

Under English law, shareholder resolutions require the approval of either (i) a simple majority of the votes cast or (ii) a majority of not less than 75% of the votes cast. Matters requiring the approval of not less than 75% of the votes cast by those entitled to vote include in particular resolutions to:

amend the Statutes;
re-registering the company as a private company;
dis-applying shareholders' pre-emption rights; and
reducing the company's share capital, share premium account, capital redemption reserve or redenomination reserve.

In addition,

arrangements under which a company buys or sells a substantial non-cash asset from or to a director or a person connected to a director; or
loans and related guarantees or security made by a company for a director

generally require shareholder approval by a simple majority of votes cast.

Shareholders Rights to Requisition a General Meeting

One or more shareholders holding shares representing an aggregate of at least 5% of the issued share capital of Lotto24 AG are entitled to request a general shareholders' meeting be called. Shareholders holding ordinary shares representing an aggregate of at least 5% of the issued share capital or holding shares in an aggregate nominal amount of at least EUR 500,000 are entitled to require that a matter be placed on the agenda of the general shareholders' meeting for resolution. The requests must be made in writing stating the purpose and the reasons for the request and must be addressed to the Lotto24 AG management board. A proper request will be published together with the notice of the shareholders' meeting and the agenda in the German Federal Gazette (Bundesanzeiger), or, if a request was made after the publication of the notice and agenda, will be published without

One or more shareholders representing at least 5% of the paid-up share capital of the Company as carries the right of voting at general meetings may require the directors to call a general meeting of the Company. The request (i) must state the general nature of the business to be dealt with at the meeting, (ii) may include the text of a resolution that may properly be moved and is intended to be moved at the meeting, (iii) may be in hard copy or electronic form and (iv) must be authenticated by the person or persons making it.

See also Annual General Meeting above in respect of rights of shareholders to request that an item is put on the agenda of, or that a resolution is proposed at, an annual general meeting.

Additionally, (i) one or more shareholders rep-

undue delay.

Additionally, each shareholder may submit, at or prior to the shareholders' meeting, counter proposals to the proposals submitted by the Lotto24 AG management board and the Lotto24 AG supervisory board. Under certain circumstances, such counter proposals must be published in the German Federal Gazette prior to such shareholders' meeting.

resenting at least 5% of the total voting rights of all members with a relevant right to vote or (ii) at least 100 shareholders which have a relevant right to vote and hold shares on which there has been paid up an average sum, per member, of at least GBP 100, are entitled to request that the Company circulates to shareholders a statement of not more than 1000 words relating to a proposed resolution or business to be dealt with at a general meeting.

Pre-emption Rights

Under the German Stock Corporation Act, an existing shareholder in a stock corporation has a preferential right to subscribe for issues of new shares in proportion to the number of shares such shareholder holds in the corporation's existing share capital (pre-emption rights or subscription rights; Bezugsrechte). The German Stock Corporation Act allows companies to exclude this preferential subscription right in limited circumstances and only if so provided in the same shareholder resolution that authorises the accompanying capital increase or share issuance. At least 75% of the share capital represented at the meeting must vote to authorise the exclusion of subscription rights. The exclusion of subscription rights requires the Lotto24 AG Management Board to report on the reasons for the exclusion to the shareholders in writing prior to approval by the shareholders.

Similar pre-emption rights apply under English law. A public company may disapply the operation of these statutory pre-emption provisions, by special resolution of the shareholders. Such disapplication must be limited in time to the length of the directors' general authority to allot shares (for cash or otherwise).

Pre-emption rights can be dis-applied if at least 75% of the votes cast at a general meeting are in favour of their disapplication.

Shareholder Suits

In particular each shareholder who was present at the general meeting of the shareholders and has objected to individual resolutions or all of the resolutions in the minutes may, within one month after adoption of the resolutions by the shareholders' meeting, take action against Lotto24 AG to contest such resolutions (Anfechtungsklage).

However, German law does not provide for class actions and does not generally permit shareholder derivative suits, even in the case of a breach of duty by the members of the Lotto24 AG management board or the Lotto24 AG supervisory board. Company claims for compensatory damages against members of the Lotto24 AG management board or the Lotto24 AG supervisory board may, as a rule, only be asserted by Lotto24 AG itself, in which case Lotto24 AG is represented by the Lotto24 AG supervisory board when claims are made against members of the Lotto24 AG management board and by the Lotto24 AG manageIn certain circumstances shareholders may bring an action against a director on behalf of the company. This is not a right for shareholders to recover damages themselves – it is a right to pursue an action on behalf of the company where the company has suffered or may suffer from a director's negligence or breach. Any financial benefit from the litigation would go to the company, not directly to the shareholders conducting it.

Claims may be brought in respect of any actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director. A claim can be brought by any shareholder (even if they were not a shareholder at the time the actions complained of took place); and there is no need for a particular number of members, nor a percentage threshold of shareholding, to launch a claim.

There is no need to demonstrate any actual loss suffered by the company, or any benefit ment board when claims are made against members of the Lotto24 AG supervisory board.

According to a ruling by the German Federal Court of Justice (Bundesgerichtshof), the supervisory board is obligated to assert claims for compensatory damages against the Lotto24 AG management board that are likely to be successful, unless important company interests would conflict with such an assertion of claims and such grounds outweigh, or are at least comparable to, the grounds in favour of asserting claims. In the event that the relevant entity with powers of representation decides not to pursue such claims, then such claims of Lotto24 AG for compensatory damages must nevertheless be asserted against members of the management board or the supervisory board if the general shareholders' meeting passes a resolution to this effect by a simple majority vote. Any claims for damages must be brought within six months from the date of the shareholders' meeting. The shareholders' meeting may appoint a special representative to assert a claim for damages. The court will, upon petition by shareholders whose aggregate holdings amount to at least 10% of the share capital or a portion of the share capital of EUR 1,000,000, appoint persons other than those appointed to represent Lotto24 AG to assert the claim for damages, if in the opinion of the court such appointment is appropriate for the proper assertion of such claim.

Additionally, shareholders whose aggregate holdings amount to at least 1% of the share capital or EUR 100,000 are entitled to request admission to file a claim for damages on behalf of Lotto24 AG. The court will admit the claim if:

the shareholders exercising the right to file a claim for damages establish that (1) they have acquired the shares prior to the alleged breach of duty; and (2) they have demanded, to no avail, that Lotto24 AG file the claim within a reasonable period of time;
facts have been presented that justify a suspicion that Lotto24 AG has been damaged by improprieties or serious breaches of the law or the articles of association; and
no overriding interests of Lotto24 AG prevent the enforcement of the compensation claim.

gained by the directors, before commencing a claim.

Permission to bring a claim must be granted by the court. A court must refuse permission to carry out a claim where it considers that a person acting in accordance with the duty to promote the success of the company would not seek to continue the claim, or where the act or omission has been authorised or subsequently ratified by the company.

The Companies Act affords protection to minority shareholders by giving shareholders the right to petition the court for relief if the affairs of the company are being conducted in a manner that is unfairly prejudicial to the interests of shareholders generally or to the interests of certain shareholders. The unfairly prejudicial conduct must be in respect of the company's affairs and must relate to the shareholders' interest as members of the company.

Rights of Inspection

German law does not permit shareholders to inspect corporate books and records. However, Under the Statutes, the ZEAL shareholders have no right to inspect the accounts and recSection 131 of the German Stock Corporation Act provides each shareholder with a right to information at the general meeting of the shareholders, to the extent that such information is necessary to permit a proper evaluation of the relevant item on the agenda.

The right to information is a right only to oral information at a general meeting of the shareholders. Information may be given in writing to shareholders, but they are neither entitled to receive written information nor to inspect any documents of Lotto24 AG. As a practical matter, shareholders may receive certain written information about Lotto24 AG through its public filings with the commercial register (Handelsregister), the company register (Untemehmensregister) and the German Federal Gazette and other places where documents of Lotto24 AG are made publicly available.

ords of ZEAL Network, except as provided by law, ordered by court or authorised by the ZEAL Network Executive Board. The Company is required under the Companies Act as well as under the DTR to publish annual and interim accounts and to comply with certain disclosure and filings requirements. The annual accounts of the Company must be laid before shareholders at annual general meetings.

Under the Companies Act, shareholders have the right to inspect the company's statutory registers, copies of directors' service contracts and minutes of general meetings.

Under the Companies Act, ZEAL Network is required to make statutory filings of certain information with the registrar of companies, including its Statutes, annual accounts, special resolutions adopted at general meetings and notices relating to changes in share capital and its directors.

20 MATERIAL TAX CONSIDERATIONS

The following section contains a summary of material German and UK tax consequences of the Offer, which may be or may become relevant to holders of shares in the Target and/or shares in the Company. This summary is of a general nature only and is not and does not purport to be a comprehensive or exhaustive description of all tax considerations that may be relevant to holders of shares in the Target or in the Company. In particular, this summary does not address tax considerations that may apply to a shareholder that is a tax resident of a jurisdiction other than Germany or the UK unless specifically stated otherwise. The statements below are based on current UK and German legislation respectively, and what is understood to be current HM Revenue & Customs ("HMRC"), and German tax authorities' practice, all of which are subject to change, possibly with retrospective effect.

Where reference is made to the tax residence of a shareholder, it is assumed that the tax residence for the purposes of the respective domestic tax law and for the purposes of any applicable income tax treaty is the same. However, exceptions may apply in certain cases.

THIS SUMMARY IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED AS LEGAL OR TAX ADVICE. SHAREHOLDERS OF LOTTO24 AG AND/OR PROSPECTIVE SHAREHOLDERS OF ZEAL NETWORK ARE THEREFORE STRONGLY ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE RECEIPT, OWNERSHIP OR DISPOSITION OF THE SHARES IN THE COMPANY ACQUIRED IN THE OFFER. THE SPECIFIC TAX SITUATION OF EACH SHAREHOLDER CAN ONLY BE ADEQUATELY ADDRESSED BY INDIVIDUAL TAX ADVICE.

20.1 Taxation of Lotto24 Shareholders in Connection with the Exchange of Shares in Lotto24 for Shares in the Company

The following description outlines the tax consequences of the exchange of shares in Lotto24 for shares in the Company in the course of the Offer. It is assumed that the respective shares in Lotto24 are not tainted or subject to any clawback periods under German tax laws.

20.1.1 Taxation of Lotto24 Shareholders Tax-Resident in Germany

20.1.1.1 Shareholders holding (or having held at any time within five years prior to the exchange of shares) at least 1% of the shares in Lotto24)

20.1.1.1.1 Lotto24 Shares Held by Individual Shareholders

For individuals holding (or having held at any time within five years prior to the exchange of shares) at least 1% of the shares in Lotto24, the exchange of Lotto24 shares for shares in the Company in the Offer will constitute a taxable event. Generally, 60% of capital gains derived from the exchange of Lotto24 shares (i.e., the market value of the shares in the Company (plus the cash component for any fractional share) minus the disposal and acquisition costs) are taxable at the personal income tax rate (plus solidarity surcharge of 5.5% thereon and church tax, if any).

Correspondingly, only 60% of the business expenses related to such a gain (subject to general restrictions on deductions, if any) and only 60% of any capital loss are tax deductible.

If the Lotto24 shares are attributable to a permanent establishment of a trade or business in Germany, 60% of the capital gains are also subject to trade tax (Gewerbesteuer). However, up to a certain threshold and depending on the local trade tax rate of the municipality in which the trade or business is operated all or part of the trade tax is credited against the shareholder's personal income tax liability.

20.1.1.1.2 Lotto24 Shares Held by Corporations

Capital gains recognised by corporations on the exchange of Lotto24 shares for shares in the Company in the course of the Offer (i.e., the market value of the shares in the Company plus the cash component for any fractional share minus the disposal and acquisition costs) generally are exempt from corporate income tax and trade tax if the Lotto24 shares are held as business assets attributable to a permanent establishment in Germany. However, 5% of such capital gain is treated as non-deductible business expenses and, as such, subject to corporate income tax at a rate of 15% (plus solidarity surcharge of 5.5% thereon) and trade tax at a rate between 7% and 17.5%, depending on the local trade tax rate of the municipality in which the trade or business is operated. Losses from the exchange of Lotto24 shares and any other profit reductions related to the exchange are generally not tax deductible.

20.1.1.1.3 Lotto24 Shares Held by Partnerships

If the shareholder is a partnership engaged (gewerblich tätige Personengesellschaft) or deemed to be engaged (gewerblich geprägte Personengesellschaft) in a trade or business (commercial partnership (Mitunternehmerschaft)), income tax or corporate income tax, as the case may be, is assessed at the level of each partner rather than at the level of the partnership. The taxation of each partner depends on whether the partner is subject to income tax or corporate income tax.

If the partner is subject to corporate income tax, capital gains from the exchange of Lotto24 shares are, in general, effectively 95% tax-exempt (see "20.1.1.1.2 Lotto24 Shares Held by Corporations").

If the partner is subject to income tax, 60% of the capital gains from the exchange of the Lotto24 shares are taxable (see "20.1.1.1.1 Lotto24 Shares Held by Individual Shareholders").

In addition, if the Lotto24 shares are attributable to a permanent establishment of the commercial partnership in Germany, any capital gain from their exchange is subject to trade tax at the level of the partnership, with 60% of the gain being subject to trade tax to the extent that the partners are individuals and, effectively, with 5% of the gain being subject to trade tax to the extent that the partners are corporations. In the case of partners who are individuals, up to a certain threshold, and depending on the local trade tax rate of the municipality in which the trade or business is operated, all or part of the trade tax is credited against their personal income tax liability.

With respect to the deductibility of business expenses related to the capital gains and the deductibility of capital losses for income tax or corporate income tax purposes, as the case may be, the rules outlined above apply to the partners accordingly (see "20.1.1.1.2 Lotto24 Shares Held by Corpora tions" and "20.1.1.1.1 Lotto24 Shares Held by Individual Shareholders").

If the shareholder is a partnership which is neither engaged (gewerblich tätige Personengesellschaft) nor deemed to be engaged (gewerblich geprägte Personengesellschaft) in a trade or business (vermögensverwaltende Personengesellschaft), each partner is taxed as though he held his share directly (see "20.1.1.1.1 Lotto24 Shares Held by Individual Shareholders", "20.1.1.1.2 Lotto24 Shares Held by Corporations" and "20.1.1.3 Shareholders Holding Less than 1% of the Shares in Lotto24 as Private Assets").

20.1.1.1.4 Application for a Tax-Neutral Roll Over of Shares

No taxable gain should be realised upon the exchange, or contribution, of Lotto24 shares for shares in the Company if the requirements for a tax-neutral roll over of shares pursuant to the German Reorganisation Tax Act (Umwandlungsteuergesetz) are met. In this case, the following requirements must be fulfilled at the tax-effective date of the contribution:

(i) The German taxation right with regard to the newly issued shares in the Company in the hands of Lotto24 shareholders must neither be excluded nor limited;
(ii) The contribution is performed in exchange for newly issued ordinary shares in the Company by way of a capital increase and the Fair Market Value of any other consideration may not exceed
- a. 25% of the book value of the contributed shares, or
- b. TEUR 500 (or the lower book value of the contributed shares, respectively);
(iii) The Company directly holds more than 50% of the shares respectively voting rights in Lotto24 post contribution (qualifizierter Anteilstausch).

An application for a tax-neutral roll-over needs to be filed by Lotto24 shareholders with the competent German local tax office. From a timing point of view the application needs to be filed prior to or at the latest with the filing of Lotto24 shareholders' personal income (Einkommensteuer) / corporate income (Körperschaftsteuer) tax return for the tax-effective fiscal year of the share-for-share exchange.

If Lotto24 shareholders opt to perform the share-for-share exchange at tax book value, the Company's shares in Lotto24 would be tainted for a clawback period of seven years (Einbringungsgewinn II). No tainted shares should be created to the extent the respective Lotto24 shareholders are corporations eligible to the 95% participation exemption regime for capital gains (see "20.1.1.1.2 Lotto24 Shares Held by Corporations").

For Lotto24 shareholders the shares of which give rise to the creation of tainted shares, any sale of the tainted shares in Lotto24 (or a similar triggering event pursuant to the German Reorganisation Tax Act (Umwandlungsteuergesetz)) within the seven year clawback period would trigger a retroactive clawback taxation of the built-in gains in the contributed shares in the hands of the Lotto24 shareholders. Any clawback gain decreases by 1/7th for each expired time-year following the initial contribution date.

The following events are examples of similar triggering events pursuant to the German Reorganisation Tax Act (Umwandlungsteuergesetz):

(i) direct or indirect transfer of tainted shares in Lotto24 against or without remuneration, except where the transfer is performed by way of a share-for-share exchange in the sense of the German Reorganisation Tax Act (Umwandlungsteuergesetz) (or a similar foreign event) at tax book value;
(ii) liquidation of Lotto24;
(iii) a decrease of Lotto24's nominal capital and subsequent repayment of the nominal capital to the shareholder(s);
(iv) dividend payments and repayments of capital, however only if at least EUR 1 of such payment was sourced from Lotto24's capital contribution account for tax purposes (steuerliches Einlagekonto);
(v) transfer of tainted shares in Lotto24 by way of a share-for-share exchange in the sense of the German Reorganisation Tax Act (Umwandlungsteuergesetz) (or a similar foreign event) at tax book value and subsequent direct or indirect transfer of these shares against or without remuneration, except where the transfer is performed by way of a share-forshare exchange in the sense of the German Reorganisation Tax Act (Umwandlungsteuergesetz) (or a similar foreign event) at tax book value and the Fair Market Value of any other consideration may not exceed
- a. 25% of the book value of the contributed shares, or
- b. TEUR 500 (or the lower book value of the contributed shares, respectively);
(vi) transfer of tainted shares in Lotto24 by way of a share-for-share exchange in the sense of the German Reorganisation Tax Act (Umwandlungsteuergesetz) (or a similar foreign event) at tax book value and subsequent direct or indirect transfer of received shares against or without remuneration, except where the transfer is performed by way of a share-for-share exchange in the sense of the German Reorganisation Tax Act (Umwandlungsteuergesetz) (or a similar foreign event) at tax book value and the Fair Market Value of any other consideration may not exceed
- a. 25% of the book value of the contributed shares, or
- b. TEUR 500 (or the lower book value of the contributed shares, respectively);
(vii) the Company moves its legal seat or effective place of management to a country outside the European Union / European Economic Area (note: According to the German Brexit Tax Accompanying Act (Gesetz über steuerliche Begleitregelungen zum Austritt des Vereinigten Königreichs Großbritannien und Nordirland aus der Europäischen Union) published on 28 March 2019, Brexit or the end of the transition period should not qualify as a triggering event pursuant to the German Reorganisation Tax Act (Umwandlungsteuergesetz), provided that the share-for-share exchange became effective pre the later of Brexit and the end of the transition period).

The acquisition costs of Lotto24 shareholders in regard of the newly issued shares in the Company correspond with the tax basis of the contributed shares in Lotto24.

If Lotto24 shareholders apply for a tax-neutral roll over of the shares in Lotto24, it is further required that the Lotto24 shareholders duly notify (the notification deadline being 31 May) the competent tax office within each of the seven years following the tax-effective date of the contribution that the Company still owns the shares in Lotto24 and that no other triggering event occurred with regard to any of the tainted shares. If the notification requirements are not duly fulfilled, retroactive clawback taxation would be triggered. No notification requirements should arise to the extent Lotto24 shareholders are corporations eligible to the 95% participation exemption regime for capital gains (see "20.1.1.1.2 Lotto24 Shares Held by Corporations").

20.1.1.2 Shareholders Holding Less than 1% of the Shares in Lotto24 as Business Assets

In such cases, the rules applicable to the taxation of the exchange of Lotto24 shares that are held by shareholders holding (or having held at any time within five years prior to the exchange of shares) at least 1% of the shares in Lotto24 will apply correspondingly (see "20.1.1.1 Shareholders holding (or having held at any time within five years prior to the exchange of shares) at least 1% of the shares in Lotto24").

20.1.1.3 Shareholders Holding Less than 1% of the Shares in Lotto24 as Private Assets

As a general rule, if Lotto24 shareholders holding their shares as private assets (Privatvermögen) tender their Lotto24 shares into the Offer, such exchange constitutes a taxable disposal of the tendered Lotto24 shares. The consideration offered in the Offer, i.e., the market value of the Lotto24 shares, constitutes the gross capital income. From this tax base the disposal costs and the acquisition costs for the Lotto24 shares are deducted. The difference, i.e., the capital gain, is subject to taxation. The final withholding tax rate (Abgeltungsteuertarif) of 25% plus solidarity surcharge of 5.5% thereon, resulting in an aggregate withholding tax of 26.375% (plus church tax, if any), applies for investors whose participation amounted to less than 1% throughout at least a five year period preceding the exchange of Lotto24 shares for shares in the Company.

However, if the requirements of the special rule of Section 20 para. 4a sentence 1 of the German Income Tax Act (Einkommensteuergesetz) are met, the share Offer should remain, in general, tax neutral for German tax resident holders of Lotto24 shares who hold their shares as private assets.

In accordance with this special rule, the requirements for a tax neutral exchange should be satisfied with respect to a holder of Lotto24 shares if

(i) the shares in Lotto24 are held as private assets, and
(ii) the shareholding represented less than 1% of shares of Lotto24 throughout at least a fiveyear period preceding the exchange of Lotto24 shares for shares in the Company, and
(iii) the shares in the Company issued in the course of the public tender offer in exchange for the Lotto24 shares are new shares, i.e., shares resulting from a capital increase at the level of the Company, so that the exchange is executed on the basis of company law measures of the entities involved in the exchange (which condition is fulfilled by the Offer).

To the extent that Section 20 para. 4a sentence 1 of the German Income Tax Act (Einkommensteuergesetz) applies, the shares in the Company received in exchange for Lotto24 shares take the place of such Lotto24 shares and principally have the same tax status. Thus, the acquisition costs of the Lotto24 shares will then continue to be the acquisition costs for the exchanged shares in the Company.

Any cash component paid in connection with the disposition of fractional Lotto24 shares not exchanged in the course of the Offer would not be covered by the tax neutrality of Section 20 para. 4a sentence 1 of the German Income Tax Act (Einkommensteuergesetz) and, as such, give rise to taxable dividend income (see "20.3.1.1.2 ZEAL Shares Held by Individuals as Private Assets").

Even if Section 20 para. 4a sentence 1 of the German Income Tax Act (Einkommensteuergesetz) does not apply, the share consideration of the Offer consideration would not be taxable to Lotto24 shareholders if cumulatively:

(i) the shares in Lotto24 are held as private assets, and
(ii) the shareholding represented less than 1% of shares of Lotto24 throughout at least a fiveyear period preceding the exchange of Lotto24 shares for shares in the Company, and
(iii) the shares in Lotto24 have been acquired prior to 1 January 2009.

To the extent that the share exchange is tax neutral pursuant to Section 20 para. 4a sentence 1 of the German Income Tax Act (Einkommensteuergesetz), no German withholding tax will be withheld upon the share exchange. To the extent that the share exchange is not tax neutral as described above, the general rules of German withholding tax (see above) will apply.

20.1.2 Taxation of Lotto24 Shareholders Tax-Resident in the UK (Chargeable Gains Taxation)

A disposal, or deemed disposal, of Lotto24 shares may, depending on the particular circumstances of the Lotto24 shareholder and subject to any available exemptions or reliefs, give rise to a chargeable gain or an allowable loss for Capital Gains Tax ("CGT") purposes.

The Offer should qualify as a 'Reorganisation of share capital' in Lotto24, subject to fulfilment of certain conditions. To the extent conditions are met, Lotto24 shareholders shall be treated as not having made a disposal of Lotto24 shares (the "original shares") for CGT purposes and no chargeable gain or allowable loss shall arise.

On the basis that no consideration, other than newly issued shares in the Company (the "new holding"), will be paid to Lotto24 shareholders, the reorganisation shall not be treated as involving any disposal of the original shares or any acquisition of the new holding or any part of it. The original shares (taken as a single asset) and the new holding (taken as a single asset) shall be treated as the same asset and treated as having been acquired at the same time as the original shares were acquired, i.e. the new holding will be held with the same tax basis and acquisition date of the original shares.

20.2 Taxation of ZEAL Shareholders in Connection with the Exchange of Shares in Lotto24 for Shares in the Company

20.2.1 Taxation of ZEAL Shareholders Tax-Resident in Germany

Assuming that the shares of the Company's shareholders carry exactly the same value before and after the exchange of shares in Lotto24 for shares in the Company (i.e. no value increase or decline as a result of the Offer), the exchange of shares in Lotto24 for shares in the Company should not qualify as disguised sale of shares and, thus, should not trigger any capital gain subject to taxation in the hands of the Company's shareholders.

20.2.2 Taxation of ZEAL Shareholders Tax-Resident in the UK

On the basis that the Offer shall be treated as a reorganisation and therefore should not involve any disposal of shares or any acquisition of the new holding or any part of it as (see "20.1.2 Taxation of Lotto24 Shareholders Tax-Resident in the UK (Chargeable Gains Taxation)"), there should be no adverse tax consequences for UK Resident ZEAL shareholders as a result of the Offer.

UK Resident ZEAL shareholders' shareholding in the Company will be diluted by the transaction. However, to the extent there is no disposal of the Company's shares (i.e. the dilution occurs as a result of the issue of new share capital as consideration for the acquisition of Lotto24 shares), no chargeable gain or allowable loss would arise for CGT purposes.

20.3 Taxation of Dividend Income on Resulting ZEAL Shares after the Exchange of Shares in Lotto24 for Shares in the Company

20.3.1 Taxation of Resultant ZEAL Shareholders Tax-Resident in Germany

The following description outlines the general principles of taxation of dividend income on ZEAL shares after the exchange of shares in Lotto24 for shares in the Company to the extent the dividend income does not qualify as repayment from the capital contribution account for tax purposes (Steuerliches Einlagekonto) in the meaning of Section 27 para. 1 sentence 3 of the German Corporate Income Tax Act (Körperschaftsteuergesetz) or repayment of nominal capital.

20.3.1.1 ZEAL Shares Held by Individuals

20.3.1.1.1 ZEAL Shares Held by Individuals as Business Asset

For individuals holding shares in ZEAL Network as Business Asset, dividend distributions will generally constitute a taxable event. Generally, 60% of the gross dividend income is taxable at the personal income tax rate (plus solidarity surcharge of 5.5% thereon and church tax, if any).

Correspondingly, only 60% of the business expenses related to such income (subject to general restrictions on deductions, if any) are tax deductible.

If the ZEAL shares are attributable to a permanent establishment of a trade or business in Germany, the dividend income would also be subject to trade tax (Gewerbesteuer), however full participation relief for trade tax purposes is granted if the shareholding amounts to at least 10% of the shares at the beginning of the respective calendar year in which the dividend is received. Subsequent to the later of Brexit and the end of the transition period, full participation relief for trade tax purposes would only be granted if the shareholding amounts to at least 15% at the beginning of the respective calendar year.

However, up to a certain threshold and depending on the local trade tax rate of the municipality in which the trade or business is operated all or part of the trade tax is credited against the shareholder's personal income tax liability.

20.3.1.1.2 ZEAL Shares Held by Individuals as Private Assets

As a general principle, if ZEAL shareholders holding their shares as private assets (Privatvermögen) dividend distributions will generally constitute a taxable event. The gross dividend income is subject to a final withholding tax rate (Abgeltungsteuertarif) of 25% plus solidarity surcharge of 5.5% thereon, resulting in an aggregate withholding tax of 26.375% (plus church tax, if any). A lump sum expense of EUR 801 (EUR 1,602 for spouses filing their tax return jointly) can be deducted from the dividend income received.

Individual shareholders holding

At least 25% of the shares in the Company or
at least 1% of the shares in the Company and are professionally active with significant entrepreneurial influence in the Company,

can opt to tax the dividend income in accordance with the principles depicted in section "20.3.1.1.1 ZEAL Shares Held by Individuals as Business Asset" (taxation of 60% of the gross dividend income receive at the individuals personal income tax rate plus solidarity surcharge of 5.5% thereon and church tax, if any).

20.3.1.2 ZEAL Shares Held by Corporations

Generally, dividend income by corporations on ZEAL shares is exempt from corporate income tax and trade tax, if the ZEAL shares are held as business assets attributable to a permanent establishment in Germany. However, 5% of such dividend income is treated as non-deductible business expenses and, as such, subject to corporate income tax at a rate of 15% (plus solidarity surcharge of 5.5% thereon) and trade tax at a rate between 7% and 17.5%, depending on the local trade tax rate of the municipality in which the trade or business is operated.

For corporate income tax (and solidarity surcharge) purposes, the 95% participation relief is only available for corporations holding 10% or more of the shares in the Company when receiving the dividend income. For trade tax purposes, the 95% participation relief is only available for corporations holding 10% or more of the shares in the Company at the beginning of the respective calendar year. Where the 10% minimum shareholding is not fulfilled on the relevant date, the dividend income would be fully taxable for corporate income tax (plus solidarity surcharge of 5.5% thereon) and/or trade tax purposes. Subsequent to the later of Brexit and the end of the transition period, the 95% participation relief for trade tax purposes would only be granted if the shareholding amounts to at least 15% at the beginning of the respective calendar year.

20.3.1.3 ZEAL Shares Held by Partnerships

If and to the extent the shareholder is an engaged partnership (gewerblich tätige Personengesellschaft) or deemed to be engaged (gewerblich geprägte Personengesellschaft) in a trade or business (commercial partnership (Mitunternehmerschaft)), income tax or corporate income tax, as the case may be, is assessed at the level of each partner rather than at the level of the partnership. The taxation of each partner depends on whether the partner is subject to income tax or corporate income tax (for further details see "20.3.1.2 ZEAL Shares Held by Corporations" and "20.3.1.1.1 ZEAL Shares Held by Individuals as Business Asset").

In addition, if the ZEAL shares are attributable to a permanent establishment of the commercial partnership in Germany, any dividend income is subject to trade tax at the level of the partnership. Where the partnership holds at least 10% of the shares in the Company at the beginning of the respective calendar year, the dividend would be 100% exempt from trade tax to the extent the partners are individuals (see "20.3.1.1.1 ZEAL Shares Held by Individuals as Business Asset") and, effectively, 95% exempt from trade tax to the extent the partners are corporations (see "20.3.1.2 ZEAL Shares Held by Corporations"). Where the partnership does not hold at least 10% of the shares in the Company at the beginning of the respective calendar year, the dividend would be fully subject to trade tax at the level of the partnership, regardless of the legal form of its partners. Subsequent to the later of Brexit and the end of the transition period, the 95% respectively full participation relief for trade tax purposes would only be granted if the shareholding amounts to at least 15% at the beginning of the respective calendar year.

With respect to the deductibility of business expenses related to the dividend income for income tax or corporate income tax purposes, as the case may be, the rules outlined above apply to the partners accordingly (see "20.3.1.2 ZEAL Shares Held by Corporations" and "20.3.1.1.1 ZEAL Shares Held by Individuals as Business Asset").

If the shareholder is a partnership which is neither engaged (gewerblich tätige Personengesellschaft) nor deemed to be engaged (gewerblich geprägte Personengesellschaft) in a trade or business (vermögensverwaltende Personengesellschaft), each partner is taxed as though he held his share directly (see "20.3.1.1 ZEAL Shares Held by Individuals" and "20.3.1.2 ZEAL Shares Held by Corporations").

20.3.1.4 UK-German Double Tax Treaty

According to the German-UK Double Tax Treaty, the taxation right for the dividend income should lie with Germany (Article 10 para. 1 German-UK Double Tax Treaty). The treaty provides for reduced withholding tax rates on dividends from the UK and for certain persons to receive a credit for any withholding taxes levied, however the UK does not currently levy a withholding tax on dividends.

20.3.2 Taxation of Resultant ZEAL Shareholders Tax-Resident in the UK

20.3.2.1 ZEAL Shares Held by Individuals

To the extent dividends received by a UK tax resident individual do not exceed either the 'Personal Allowance' (variable based on the income of the individual) or 'Dividend Allowance' (GBP 2,000 in the year ended 5 April 2019) no Income Tax charge shall apply. Any proceeds received exceeding the individual's allowance will constitute taxable income in the UK, subject to income tax at the relevant tax band (7.5%/32.5%/38.1% for basic rate, higher rate and additional rate taxpayers respectively).

20.3.2.2 ZEAL Shares Held by Corporations

UK tax resident corporate shareholders will not be subject to tax on dividend distributions by ZEAL to the extent the dividend falls within an exempt class and certain conditions are met. It is expected any dividend income received should be exempt from UK tax by virtue of the ordinary shares exemption.

20.4 Taxation of Capital Gains on ZEAL Shares

The following description outlines the tax consequences of sale of shares in ZEAL Network.

20.4.1 Taxation of ZEAL Shareholders Tax-Resident in Germany

20.4.1.1 Shareholders holding (or having held at any time within five years prior to the sale of shares) at least 1% of the shares in ZEAL

20.4.1.1.1 ZEAL Shares Held by Individual Shareholders

For individuals holding (or having held at any time within five years prior to the sale of shares) at least 1% of the shares in ZEAL Network, the sale of ZEAL shares will constitute a taxable event. Generally, 60% of capital gains derived from the sale of ZEAL shares (i.e., sales price minus the disposal and acquisition costs) are taxable at the personal income tax rate (plus solidarity surcharge of 5.5% thereon and church tax, if any).

Correspondingly, only 60% of the business expenses related to such a gain (subject to general restrictions on deductions, if any) and only 60% of any capital loss are tax deductible.

If the ZEAL shares are attributable to a permanent establishment of a trade or business in Germany, 60% of the capital gains are also subject to trade tax (Gewerbesteuer). However, up to a certain threshold and depending on the local trade tax rate of the municipality in which the trade or business is operated all or part of the trade tax is credited against the shareholder's personal income tax liability.

20.4.1.1.2 ZEAL Shares Held by Corporations

Capital gains recognised by corporations on the sale of ZEAL shares (i.e., sales price minus the disposal and acquisition costs) generally are exempt from corporate income tax and trade tax if the ZEAL shares are held as business assets attributable to a permanent establishment in Germany. However, 5% of such capital gain is treated as non-deductible business expenses and, as such, subject to corporate income tax at a rate of 15% (plus solidarity surcharge of 5.5% thereon) and trade tax at a rate between 7% and 17.5%, depending on the local trade tax rate of the municipality in which the trade or business is operated. Losses from the sale of ZEAL shares and any other profit reductions related to the sale are generally not tax deductible.

20.4.1.1.3 ZEAL Shares Held by Partnerships

If the partner is subject to corporate income tax, capital gains from the sale of ZEAL shares are, in general, effectively 95% tax-exempt (see "20.4.1.1.2 ZEAL Shares Held by Corporations").

If the partner is subject to income tax, 60% of the capital gains from the sale of the ZEAL shares are taxable (see "20.4.1.1.1 ZEAL Shares Held by Individual Shareholders").

In addition, if the ZEAL shares are attributable to a permanent establishment of the commercial partnership in Germany, any capital gain from the sale is subject to trade tax at the level of the partnership, with 60% of the gain being subject to trade tax to the extent that the partners are individuals and, effectively, with 5% of the gain being subject to trade tax to the extent that the partners are corporations. In the case of partners who are individuals, up to a certain threshold, and depending on the local trade tax rate of the municipality in which the trade or business is operated, all or part of the trade tax is credited against their personal income tax liability.

With respect to the deductibility of business expenses related to the capital gains and the deductibility of capital losses for income tax or corporate income tax purposes, as the case may be, the rules outlined above apply to the partners accordingly (see "20.4.1.1.2 ZEAL Shares Held by Corporations", "20.4.1.1.1 ZEAL Shares Held by Individual Shareholders").

If the shareholder is a partnership which is neither engaged (gewerblich tätige Personengesellschaft) nor deemed to be engaged (gewerblich geprägte Personengesellschaft) in a trade or business (vermögensverwaltende Personengesellschaft), each partner is taxed as though he held his share directly (see "20.4.1.1.1 ZEAL Shares Held by Individual Shareholders", "20.4.1.1.2 ZEAL Shares Held by Corporations" and "20.4.1.3 Shareholders Holding Less Than 1% of the Shares in ZEAL Network as Private Assets").

20.4.1.2 Shareholders Holding Less Than 1% of the Shares in ZEAL Network as Business Assets

In such cases, the rules applicable to the taxation of the sale ZEAL shares that are held by Shareholders holding (or having held at any time within five years prior to the sale of shares) at least 1% of the shares in ZEAL Network will apply correspondingly (see "20.4.1.1 Shareholders holding (or having held at any time within five years prior to the sale of shares) at least 1% of the shares in ZEAL").

20.4.1.3 Shareholders Holding Less Than 1% of the Shares in ZEAL Network as Private Assets

Capital gains recognised by ZEAL shareholders holding (or having held at all time within five years prior to the sale of shares) less than 1% of the shares in the Company on the sale of ZEAL shares (i.e., sales price minus the disposal and acquisition costs) should be subject to a final withholding tax rate (Abgeltungsteuertarif) of 25% plus solidarity surcharge of 5.5% thereon, resulting in an aggregate withholding tax of 26.375% (plus church tax, if any).

20.4.1.4 German-UK Double Tax Treaty

According to the German-UK Double Tax Treaty the taxation right for the capital gain should lie with Germany (Article 13 para. 5 German-UK Double Tax Treaty).

20.4.2 Taxation of ZEAL Shareholders Tax-Resident in the UK (Chargeable Gains Taxation)

A disposal of ZEAL shares may, depending on the particular circumstances of the ZEAL shareholder and subject to any available exemptions or reliefs, give rise to a chargeable gain or an allowable loss for CGT purposes.

20.4.2.1 ZEAL Shares Held by Corporations

The sale of ZEAL shares by a UK Tax-Resident body corporate would be a disposal event, with the entity subject to a chargeable gain or loss calculated as the difference between proceeds vs tax base of the shares. Tax base of the shares will consist of the original 'base' cost of shares purchased (or Lotto24 shares exchanged) inflated by any indexation allowance to 31 December 2017. Any gain or loss on disposal will be included in the entity's UK tax computation and subject to corporation tax (currently 19%).

To the extent the shareholder holds more than 10% of ZEAL shares prior to disposal, any gain (or loss) arising on disposal may be disregarded should the UK Substantial Shareholding Exemption ('SSE') conditions be met. Broadly, SSE would apply where:

(i) The disposal is by a company;
(ii) The disposal is of shares or an interest in shares;
(iii) The shareholder has held a "substantial shareholding" (broadly at least 10% of the ordinary share capital) in the Company for at least 12 consecutive months, beginning no longer than six years prior to disposal (where shares were acquired by virtue of the Offer constituting a 'reorganisation of share capital', the holding period condition may be met in relation to the holding of Lotto24 shares prior to exchange, see "20.1.2 Taxation of Lot to24 Shareholders Tax-Resident in the UK (Chargeable Gains Taxation)"); and
(iv) The Company was a trading company or the holding company of a trading group, or subgroup, throughout the qualifying period i.e. the start of the latest 12-month period in rela-

tion to which the company passed the substantial shareholding test and ending with the time of the disposal.

20.4.2.2 ZEAL Shares Held by Individuals

Individual shareholders will be subject to CGT where the gain on disposals exceeds the annual exempt amount (GBP 11,700 in the year to 5 April 2019) and is not otherwise exempt (i.e. sale to a spouse or civil partner). CGT will apply at a rate of 20% (10% for basic rate tax payers) on the net capital gain during the year of disposal. On the basis the Company continues to be quoted on a recognised stock exchange no tax reliefs are expected to be available in respect of a disposal of shares.

20.5 Inheritance and Gift Tax Considerations for Resulting ZEAL Network Individual Shareholders Post-transaction

20.5.1 German Taxation of Resultant ZEAL Shareholders

The transfer of shares in the Company to another person upon death or as a gift is generally subject to German inheritance or gift tax in the following circumstances:

(i) the place of residence, customary place of abode, place of management or registered seat of the testator, the donor, the heir, the donee or another acquirer is, at the time of the asset transfer, in Germany, or such person, as a German citizen, has not spent more than five consecutive years outside of Germany without having a place of residence in Germany (this term is extended to ten years for German expatriates under specific circumstances); or
(ii) the testator's or donor's shares in the company were part of his domestic assets in Germany (e.g. business assets for which there was a permanent establishment in Germany or for which a permanent representative was appointed in Germany).

Smaller inheritances or gifts are tax-exempt by virtue of general allowances. These general allowances vary by degree of kinship from TEUR 500 on transfers between spouses, TEUR 400 on settlements on children to TEUR 20 on gifts to unrelated persons. As a general rule these general allowances can be used every ten years (all inheritances and gifts between these persons shall be taken into consideration). Besides these general allowances a special pension allowance in the amount of max. TEUR 256 is granted.

The small number of double taxation treaties regarding inheritance and gift tax that Germany has concluded to date generally provide for German inheritance or gift tax only to be levied in the cases under (i) and, subject to certain restrictions, in the cases under (ii). Special arrangements apply to certain German citizens and former German citizens living outside of Germany.

In case the German Inheritance and Grift Tax is not exempt, the tax rate is between 7% and 50% depending on the degree of kinship and value of taxable base.

20.5.2 UK Taxation of Resultant ZEAL Shareholders

20.5.2.1 General Remarks

The UK does not levy gift tax.

No UK inheritance tax ("IHT") charge would arise on the share-for-share exchange. However, IHT implications may arise in the event of a future chargeable transfer.

The implications will be dependent on the situs of the shares to which the holder is beneficially entitled and the circumstances of the individual shareholder (I.e. the individual's domicile, or deemed domicile status under UK Law).

Broadly, for IHT purposes the situs of shares is determined by virtue of the place where the title and ownership of the shares must be registered and where the shares are effectively dealt with.

If this place is in the UK, then the shares may be considered UK situs for IHT purposes. However if this place is outside of the UK then the shares may be considered non-UK situs assets for IHT purposes.

If, following migration of the Company from the UK to Germany, shares in the Company are registered and inscribed solely on a single share register located outside the UK these shares may be considered non-UK situate. No IHT charge would arise by virtue of the migration alone.

20.5.2.2 Impact on UK Domiciled or Deemed Domiciled Shareholders

The value of their shareholding will be considered part of the individual's estate for UK IHT purposes, and potentially subject to UK IHT, irrespective of whether the shares are UK or non-UK situate.

UK inheritance tax may apply at 40% on the value of the shares held in the estate upon death. A charge would only apply to the extent that:

− the value of the death estate exceeds the available IHT nil rate band (currently GBP 325,000 but reduced for other gifts in the seven years prior to death); or
− the transfer of shares on death is not otherwise considered to be exempt, (i.e. the IHT spouse exemption unless the transferor spouse is UK domiciled and the transferee spouse is non UK domiciled) or the shares qualify for relief (i.e. business property relief).

Where shares are gifted during an individual's lifetime and the value exceeds the donors annual exempt allowance (currently GBP 3,000) the tax treatment will be dependent on whether the transfer is categorised as a potentially exempt transfer ('PET') or a chargeable lifetime transfer ('CLT'). No IHT charge will arise at the point of transfer of a PET, however the value of the shares transferred will be included as part of the donors estate if they were to pass away within 7 years of the transfer. A CLT (i.e. a transfer to a trust) during the shareholders lifetime would be subject to UK IHT at a rate of 20% (or 25% if the donor also paid the IHT due) subject again to the annual allowance/nil rate band.

On the basis that ZEAL Network continues to be quoted on a recognised stock exchange (in any country) only a controlling interest in the Company (i.e. a shareholding of >50%) could potentially qualify for business property relief either in respect of lifetime transfers or on death.

Should a shareholder be subject to inheritance/capital transfer taxes in respect of their shareholding in another jurisdiction as well as in the UK, relief may be available through the relevant Double Tax Treaty, or by way of unilateral relief.

20.5.2.3 Impact on Non UK domiciled or Non-Deemed Domiciled Shareholders

If shares are UK situs their value will be considered part of the shareholder's estate for UK IHT purposes, and potentially subject to UK IHT as outlined within section "20.5.2.2 Impact on UK Domiciled or Deemed Domiciled Shareholders" regardless of the domicile of the shareholder. Where shares are transferred between spouses during lifetime or on death and the donor spouse is UK domiciled and the surviving spouse who receives the shares is non UK domiciled and not deemed domiciled the spousal exemption is restricted to GBP 325,000. It is possible for the non-domiciled spouse to elect to be UK domiciled to benefit from full spouse exemption but advice should be taken on this point to understand all the implications.

As outlined above for a UK domiciled/deemed domiciled shareholder, should the non UK domiciled shareholder be subject to UK IHT as well as inheritance/capital transfer taxes in respect of their shareholding in another jurisdiction, relief may be available through the relevant Double Tax Treaty, or by way of unilateral relief.

If shares are both non-UK situs and owned by a non UK domiciled (and not deemed domiciled) shareholder then the shares are excluded property for UK IHT purposes i.e. not subject to UK IHT. Non-UK IHT charges may arise dependent on relevant tax legislation in the jurisdiction of the shareholders residence/domicile, or where the assets are situate.

The IHT position of any shares held in a trust has not been covered and professional advice should be taken on this point if relevant.

20.6 Taxation of Dividend Income on Lotto24 shares

20.6.1 Current Period / pre-Brexit

According to Article 50 of the Treaty on European Union, the UK's European Union membership was to end on 29 March 2019. However, the European Union and the UK agreed upon an extension of the withdrawal date until 31 October 2019, or the first day of the month following the one in which the Draft Withdrawal Agreement is passed, whichever comes first. The extension is subject to the UK holding European Parliament elections in May 2019; otherwise it will leave on 1 June 2019. Until Brexit, the Company should qualify as UK Resident Corporation. As such, dividends from Lotto24 to the Company should be fully exempt from German withholding tax in accordance with the European Union Parent Subsidiary Directive (0% withholding tax rate), subject to the fulfilment of a minimum shareholding in Lotto24 of 10% and a minimum holding period of 12 months.

20.6.2 Transition Period

On 22 November 2018 the European Union and the UK reached agreement on the Draft Withdrawal Agreement which provides for a subsequent transition period from the date of effectiveness of the Draft Withdrawal Agreement until 31 December 2020, during which European Union law should generally continue to apply to and within the UK. On 14 November 2018, the Draft Withdrawal Agreement was endorsed by the UK Government and on 25 November 2018 by the leaders of the remaining EU Member State (EU27). On 15 January 2019 and 12 March 2019, the British Parliament voted against the Draft Withdrawal Agreement.

Correspondingly, the German legislator published the 'Brexit Transition Period Act' (Gesetz für den Übergangszeitraum nach dem Austritt des Vereinigten Königreichs Großbritannien und Nordirland aus der Europäischen Union) on 3 April 2019. Pursuant to sec. 1 of the Brexit Transition Period Act, the UK continues to be deemed a member of the European Union for the transition period according to the Draft Withdrawal Agreement. The Brexit Transition Period Act is subject to the final ratification (i.e. endorsement by the British Parliament) of the Draft Withdrawal Agreement.

If the Brexit Transition Period Act comes into effect, the UK would continue to be deemed a member of the European Union. Thus, the principles outlined in section "20.6.1 Current Period / pre-Brexit" would apply accordingly (0% withholding tax rate until 31 December 2020).

20.6.3 Post Brexit

By the end of the proposed transition period on 31 December 2020 or on 1 November 2019 at the latest (if the United Kingdom leaves the EU without withdrawal agreement and the withdrawal is neither postponed nor cancelled altogether) or on 1 June 2019 (if the United Kingdom has not ratified the Withdrawal Agreement by 22 May 2019 and subsequently does not participate in European Parliament elections), the Company would cease to be a European Union resident corporation. As such, dividends from Lotto24 to the Company should be subject to a withholding tax rate of 5% in accordance with Article 10 of the UK-German Double Tax Treaty, subject to the fulfilment of a direct minimum shareholding in Lotto24 of 10%.

20.6.4 UK Taxation on Dividend Income on Lotto24 shares

Following the Offer it is anticipated that the Company, which is expected to be within the charge to UK corporation tax, will own at least 50% plus one of the shares in Lotto24. As a result, the Company will not be subject to tax on dividend distributions by Lotto24 so long as the dividend falls within an exempt class and certain conditions are met. It is expected any dividend income on Lotto24 will be received by ZEAL Network from a 'controlled company' over which it controls the majority of voting rights, such that the distributions should be exempt from UK tax by virtue of the control exemption.

20.7 Impact of the Exchange of Shares in Lotto24 for Shares in the Company on Carried Forward Tax Losses

20.7.1 Impact on UK Carried Forward Tax Losses of ZEAL Network and ZEAL Network Subsidiaries

As at 31 December 2018, ZEAL Network and its subsidiaries held significant carried forward tax losses, both trade and non-trade in nature.

Based on the terms of the Offer and publicly available information in relation to the shareholdings in Lotto24 and ZEAL Network, the conditions of a Change in Ownership ("CIO") are not expected to be met under the Offer. If a CIO does not occur, there should be no restriction of UK carried forward tax losses of ZEAL Network or ZEAL Network subsidiaries. However, as both entities are publicly traded entities whose shareholder base may be continually changing, both the shareholding structure and their relative market capitalisations should be reconsidered at the date of the transaction and going forward as any change may result in a CIO.

In the event of a CIO, there is a risk the anticipated change in the services provided by ZEAL and its subsidiaries, alongside a likely increase in the size of the customer base, specifically arising as a result of ceasing to operate a Secondary Lottery coupled with increased lottery brokerage activities to be undertaken by ZEAL Network, may well be considered a 'major change in nature or conduct of trade' ("MCINOCOT") by HMRC. To the extent both a CIO and MCINOCOT occur within a period of three years of each other utilisation of UK carried forward tax trading losses in ZEAL Network and ZEAL Network subsidiaries would be restricted.

Pursuant to irrevocable tender agreements with Lotto24 major shareholders, the Offer will increase ZEAL Network's capital to at least 125% of the Company's pre-CIO capital (a 'significant increase in capital'). To the extent a CIO is deemed to have occurred, coupled with a significant increase in capital, UK non-trading deficits, management expenses and non-trading losses on intangible fixed assets carried forward would be restricted such that only profits arising from pre-CIO activities may be relieved.

20.7.2 Impact on German Carried Forward Tax Losses of ZEAL Network and ZEAL Network Subsidiaries

If the exchange of Lotto24 shares for shares in the Company results in a transfer of more than 50% of the shares in the Company or the Company's German subsidiaries to a single acquirer (or a group of acquirers acting in concert) within a period of five years, the carried forward tax losses (as well as interest carry forwards, if any; EBITDA carry forwards, if any, may not be impacted) at year end of the calendar year prior to the transaction date (including any year-to-date tax losses incurred until the transfer date, if any) should forfeit entirely, unless either of the built-in gains exception (see "20.7.2.1 Built-in Gains Exception") or the business continuity exception (see "20.7.2.2 Business Continuity Exception") were applicable.

For determining whether more than 50% of the shares in the company were transferred to a single acquirer (or a group of acquirers acting in concert), any prior transfer of shares in the Company to Lotto24 shareholders within the relevant five year period would need to be considered cumulatively with the acquisition of the shares in the Company by way of the exchange of Lotto24 shares for shares in the Company in the course of the Offer.

Further exceptions on the basis of which carried forward tax losses may be preserved (group exception or restructuring exception) should not apply according to the actual facts and circumstances of the Offer since (i) the Company and Lotto24 are currently not 100% owned by a single shareholder (which would be a requirement for the group exception to apply) and (ii) the Company or the Company's German subsidiaries are not in a financially distressed position (which would be a requirement for the restructuring exception to apply).

The Company does not expect the carried forward tax losses (as well as interest carry forwards, if any) to forfeit. This conclusion is based on the assumption that the exchange of shares in Lotto24 for shares in the Company in the course of the Offer does not result in a transfer of more than 50% of the shares in the Company or the Company's German subsidiaries to a single acquirer (or a group of acquirers acting in concert) within a period of five years.

20.7.2.1 Built-in Gains Exception

Carried forward tax losses (as well as interest carry forwards, if any) would be preserved if and to the extent the Company respectively the Company's German subsidiaries carry taxable built-in gains on the transfer date. The amount of taxable built-in gains is determined as follows:

Fair market value of shares at the transfer date minus tax equity at the transfer date

= Built-in gains

Built in gains minus built-in gains not subject to German taxation at the transfer date

= Taxable built-in gains

20.7.2.2 Business Continuity Exception

If and to the extent that the Company respectively the Company's German subsidiaries do not carry taxable built-in gains on the transfer date (as calculated above), carried forward tax losses (as well as interest carry forwards, if any) may still be preserved by virtue of the business continuity exception, subject to the following prerequisites:

(i) The business activity (especially products, customers, suppliers, market coverage, qualification of FTEs) continues unchanged during the "monitoring period"; the monitoring period begins three calendar years before the calendar year in which the 'harmful' change of control occurs, and ends when the preserved carried forward tax losses are fully utilised.

In addition to a change of the business activity within the monitoring period, each of the following events would mean a harmful event for purposes of the business continuity exception:

− a temporary or permanent discontinuance of the business activity;
− a change of the business purpose;
− carrying out an additional business activity;
− becoming a partner in a trading partnership;
− becoming a controlling entity in a German tax group (Organschaft);
− assuming assets at a value below fair market value.
(ii) The business continuity exception may also not be applied for where, at the beginning of the monitoring period, (i) the Company respectively the Company's German subsidiaries are tax group parents in a tax group (Organschaft) or (ii) hold an interest in a trading or deemed trading partnership.

If the above prerequisites were met, the Company respectively the Company's German subsidiaries must formally apply for the business continuity escape.

20.7.3 Impact on German Carried Forward Tax Losses of Lotto24

The exchange of all Lotto24 shares for shares in the Company in the course of the Offer should result in a change of control in Lotto24 of more than 50% by a single acquirer within a period of five years. As a consequence, the entire carried forward tax losses (as well as interest carry forwards, if any; EBITDA carry forwards, if any, may not be impacted) as at year end 2018 (including any 2019 year-todate tax losses incurred until Completion, if any) by Lotto24 should forfeit, unless either of the built-in gains exception (see "20.7.2.1 Built-in Gains Exception") or the business continuity exception (see "20.7.2.2 Business Continuity Exception") applies.

The Company expects Lotto24's carried forward tax losses (as well as interest carry forwards, if any) to be fully preserved by virtue of the built-in gains exception. This conclusion is based on management's expectation that the delta between (i) Lotto24's prospective market capitalisation at Completion and (ii) Lotto24's tax equity at Completion will provide for sufficient taxable built-in gains to shelter Lotto24's carried forward tax losses from forfeiture by virtue of the built-in gains exception.

20.8 German Real Estate Transfer Tax (Grunderwerbsteuer) in Connection with the Exchange of Shares in Lotto24 for Shares in the Company

Provided that Lotto24 does not own German real estate or similar, no German real estate transfer tax (Grunderwerbsteuer) should be triggered upon the exchange of shares in Lotto24 for shares in the Company.

20.9 Stamp Duty and Stamp Duty Reserve Tax in Connection with the Offer

Any exposure to UK stamp duty may be deferred, potentially indefinitely, on the basis that all documentation relating to the transfer of shares in Lotto24 is both executed and retained outside the UK.

The issue of new shares by ZEAL Network as consideration should be outside the scope of UK Stamp Taxes.

20.10 Tax Implications of a Potential Migration of Tax Residency of ZEAL Network from the UK to Germany

20.10.1 UK Corporate Tax Implications of Migration

The Company considers itself not holding any valuable capital assets other than shares in subsidiaries which would be subject to a UK exit charge on migration from the UK to Germany. Any gain arising from the deemed disposal, and subsequent reacquisition, of shares held in subsidiaries should qualify for SSE under UK tax laws and as such would be exempt from UK tax.

Should valuable capital assets, including any 'off balance sheet' assets other than shares in subsidiaries exist, an exit charge could be mitigated by either

− creating a UK branch of German resident ZEAL Network, and ensuring the assets are attributed to the UK branch, or
− by transferring the valuable assets out of ZEAL Network into another UK group company prior to migration.

Upon migration, any tax losses incurred from the date of migration onwards would not be able to be offset against UK group profits, with the exception of any losses directly attributable to the UK branch post migration.

Whilst the migration of ZEAL Network to Germany should have no impact on the historic group relief position in the UK, and HMRC have no basis on which to deny a claim because of a later migration, there is a risk that the group may come under pressure from HMRC to abandon the historic group relief claim as a result of the change in residence as part of any discussions to agree whether there are any outstanding tax liabilities in the UK as part of the pre-migration procedures.

20.10.2 German Corporate Tax Implications of a Migration of the Company from the UK to Germany (before the later of Brexit and the end the of Transition Period)

Upon transferring its corporate office and place of management to Germany, the Company will become subject to German corporate income tax (Körperschaftsteuer) at a rate of 15% (plus solidarity surcharge of 5.5% thereon) and trade tax (Gewerbesteuer) at a rate between 7% and 17.5% on its taxable income. To the extent the German taxation right in the Company's assets would be initially established in the course of the migration, the Company would achieve a tax-free step-up in basis. To the extent the assets had already been subject to German taxation before the relocation (if any), no step-up would be realised, though.

The Company expects the migration not to affect the Company's legal status under any applicable company law (identitätswahrende Sitzverlegung). As such, the relocation should not qualify as a change of control within the meaning of German loss forfeiture rules. Thus, any German tax attributes (if any) residing at the level of the Company's subsidiaries including, without limitation branches/permanent establishments should not be affected by the relocation.

Also, the Company expects no German Real Estate Transfer Tax (Grunderwerbsteuer) to be triggered upon relocation based on the understanding that the migration does not affect the Company's legal status under any applicable company law (identitätswahrende Sitzverlegung).

20.10.3 Tax Implications in Relation to Cash Extraction Post-migration from the UK to Germany

The UK does not impose withholding tax on dividends distributed out of UK companies. As a result, there should be no tax impact or restriction on making a dividend from a UK subsidiary to ZEAL Network, regardless of whether ZEAL Network is a UK or German company. On receipt of a dividend, if ZEAL Network remains a UK resident company, the dividend receipt should not be taxable in the UK (see "20.6.4 UK Taxation on Dividend Income on Lotto24 shares").

On the basis that ZEAL Network becomes a German resident company, received dividends would be 95% exempted and, thus, 5% of such dividend income would be treated as non-deductible business expenses and, as such, be subject to corporate income tax at a rate of 15% (plus solidarity surcharge of 5.5% thereon) and trade tax at a rate between 7% and 17.5%, depending on the local trade tax rate of the municipality in which the trade or business is operated. This holds true both for ZEAL Network's German and EU subsidiaries, subject to a minimum shareholding in the respective subsidiary of 10% at the beginning of the respective calendar year in which the dividend income is received.

To the extent dividends stem from non-EU subsidiaries, or dividends from EU subsidiaries stem from lower tier non-EU companies, for trade tax purposes the 95% participation exemption would be subject to a minimum shareholding in the respective subsidiary of 15% at the beginning of the respective calendar year in which the dividend income is received. This would also apply to dividends received from UK subsidiaries subsequent to the later of Brexit and the end of the transition period.

It may be possible to mitigate any tax leakage that may arise in respect of German and overseas subsidiaries by:

(i) forming a German tax group post migration; and
(ii) converting foreign entities into partnerships / branches (potentially incurring a one-off tax charge).

21 RECENT DEVELOPMENTS AND OUTLOOK

On 31 January 2019, the Company launched the Offer. The Offer was accepted for 22,473,615 Target Shares, representing 93.04% of the total number of Target Shares issued.

The following table shows selected financial information from ZEAL's unaudited interim consolidated income statement for the periods presented:

For the three months ended 31 March

	2018	2019
	(unaudited, restated)	(unaudited)
	TEUR	TEUR
Revenue (1)	38,700	36,462
Other operating income	1,130	911
Total Operating Performance (TOP)	39,830	37,373
Personnel expenses	(7,741)	(5,508)
Other operating expenses	(22,481)	(19,511)
Exchange rate differences	(150)	(153)
Depreciation and amortisation of
non-current assets	(299)	(269)
Depreciation of right of use assets	_	(364)
Result from operating activities beforeExceptional Items (Adjusted EBIT)	9,159	11,568
Exceptional items	_	(1,792)
Result from operating activities (EBIT)	9,159	9,776
Finance income	20	30
Finance costs	(84)	(142)
Gain/(loss) on financial assets	(87) (2)	173
Results from financing and	(0)
investing activities	(151) (2)	61
Profit before income tax	9,008 (2)	9,837
Income tax expense	(2,727)	(2,951)
Profit attributable to the equity shareholders of the Company	6,281 (2)	6,886

The following table shows selected financial information from ZEAL's unaudited interim consolidated statement of financial position as of the effective dates presented:

	As of
	31 December 2018	31 March 2019(unaudited)
	(audited)
	TEUR	TEUR
Property, plant and equipment	2,425	2,130
Right of use asset	-	6,560
Other investments	3,433	3,455
Total non-current assets	6,932	13,371
Trade receivables and other current assets	16,354	10,406
Financial assets	12,894	16,048
Cash and pledged cash	132,993	131,981
Total current assets	162,280	158,474
TOTAL ASSETS	169.212	171.845

	As of
	31 December 2018	31 March 2019
	(audited)	(unaudited)
	TEUR	TEUR
Total non-current liabilities	3,918	9,126
Other liabilities	25,424	18,844
Deferred income	3,098	1,908
Income tax liabilities	5,702	4,546
Provisions	4,341	2,597
Total current liabilities	42,096	32,793
Subscribed capital	8,385	8,385
Share premium	21,578	21,578
Retained earnings	94,710	101,304
Total equity	123,198	129,926

The following table shows selected financial information from ZEAL's unaudited interim consolidated statement of cash flows for the periods presented:

TOTAL EQUITY & LIABILITIES 169,212 171,845

For the three months
ended 31 March

(unaudited, restated (1))	(unaudited)
TEUR	TEUR
6,553	2,994
(226)	(3,349)
–	(494)
	(849)
	145,038

	131,981
	13,057
	6,327118,70298,42620,276

The average number of employees of ZEAL (full-time equivalents) for the three-month period ended 31 March 2019 was 192 (2018: 272).

Except for the developments mentioned above, no significant changes in ZEAL's financial or trading position have occurred between 31 December 2018 and the date of the Prospectus.

22 FINANCIAL INFORMATION

Audited Consolidated Financial Statements of ZEAL Network SE as of and for the fiscal year ended 31 December 2018 (prepared in accordance with IFRS)

Consolidated Income Statement F-3
Consolidated Statement of Comprehensive Income F-4
Consolidated Statement of Financial Position F-5
Consolidated Statement of Cash Flows F-7
Consolidated Statement of Changes in Equity F-9
Notes to the Consolidated Financial Statements F-10
Independent Auditors' Report F-56
Audited Consolidated Financial Statements of ZEAL Network SE as of and for thefiscal year ended 31 December 2017 (prepared in accordance with IFRS)
Consolidated Income Statement F-66
Consolidated Statement of Comprehensive Income F-67
Consolidated Statement of Financial Position F-68
Consolidated Statement of Cash Flows F-70
Consolidated Statement of Changes in Equity F-72
Notes to the Consolidated Financial Statements F-73
Independent Auditors' Report F-114
Audited Consolidated Financial Statements of ZEAL Network SE as of and for thefiscal year ended 31 December 2016 (prepared in accordance with IFRS)
Consolidated Income Statement F-124
Consolidated Statement of Comprehensive Income F-125
Consolidated Statement of Financial Position F-126
Consolidated Statement of Cash Flows F-128
Consolidated Statement of Changes in Equity F-130
Notes to the Consolidated Financial Statements F-131
Independent Auditors' Report F-172

Audited Consolidated Financial Statements of ZEAL Network SE as of and for the fiscal year ended 31 December 2018 (prepared in accordance with IFRS)

CONSOLIDATED INCOME STATEMENT FOR THE PERIOD 1 JANUARY TO 31 DECEMBER

		2018	2017
in €k	Note
Revenue	4	154,751	134,295
Other operating income	5	4,901	6,951
Total operating performance (TOP)		159,652	141,246
Personnel expenses	21	(28,837)	(28,630)
Other operating expenses	6	(83,690)	(85,758)
Marketing expenses		(19,666)	(19,131)
Direct costs of operations		(44,323)	(43,365)
Other costs of operations		(19,701)	(23,262)
Exchange rate differences		617	(422)
Amortisation/depreciation on intangible assetsand property, plant and equipment		(1,147)	(1,255)
Result from operating activities beforeExceptional items (Adjusted EBIT)		46,595	25,181
Exceptional items	7	(8,288)	–
Result from operating activities (EBIT)		38,307	25,181
Finance income	8	331	385
Finance costs	8	(204)	(335)
Loss on financial assets	15	(449)	–
Result from financing and investing activities		(322)	50
Profit before income tax		37,985	25,231
Income tax expense	9	(11,322)	(8,053)
Profit attributable to the equity shareholders of theCompany		26,663	17,178
Earnings per share for profit attributableto ordinary equity holders of the Company		€	€
Basic and diluted earnings per share (in €/share) ¹	19	3.18	2.04

The above Consolidated Income Statement should be read in conjunction with the accompanying notes 1 to 28.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD 1 JANUARY TO 31 DECEMBER

		2018	2017
in €k	Note
Profit for the year		26,663	17,178
Other comprehensive income
Items that will not be reclassified to profit or loss
Changes in fair value of financial assets at fair valuethrough other comprehensive income, net of tax	13	145	–
Items that may be reclassified to profit or lossin subsequent periods
Changes in the fair value of available-for-sale financial assets,net of tax		–	225
Exchange differences on translation of foreign operations,net of tax		18	40
Other comprehensive income for the year, net of tax		163	265
Total comprehensive income attributableto the equity shareholders of the Company		26,826	17,443

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes 1 to 28.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER

		2018	2017
ASSETS in €k	Note
Non-current assets
Property, plant and equipment	10	2,425	2,607
Intangible assets	11	301	510
Deferred tax assets	12	627	38
Other investments	13	3,433	3,041
Other assets and prepaid expenses		146	438
Total non-current assets		6,932	6,634
Current assets
Income tax receivable		39	474
Trade receivables and other current assets	14	16,354	14,828
Financial assets	15	12,894	27,123
Cash and pledged cash	15	132,993	92,052
Total current assets		162,280	134,477
TOTAL ASSETS		169,212	141,111

		2018	2017
EQUITY & LIABILITIES in €k	Note
Non-current liabilities
Other liabilities	16	1,758	1,765
Provisions	18	2,160	–
Total non-current liabilities		3,918	1,765
Current liabilities
Trade payables		3,425	5,510
Other liabilities	16	25,424	23,098
Financial liabilities		106	106
Deferred income	17	3,098	2,105
Income tax liabilities		5,702	1,074
Provisions	18	4,341	837
Total current liabilities		42,096	32,730
Equity
Subscribed capital	19	8,385	8,385
Share premium	19	21,578	21,578
Treasury shares	19	(1,903)	–
Other reserves	19	227	(560)
Foreign currency translation reserve	19	201	183
Retained earnings	19	94,710	77,030
Total equity		123,198	106,616
TOTAL EQUITY & LIABILITIES		169,212	141,111

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes 1 to 28. These financial statements were approved by the Board of Directors on 20 March 2019 and were signed on its behalf by:

Dr. Helmut Becker Jonas Mattsson Member of Executive Board Member of Executive Board

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD 1 JANUARY TO 31 DECEMBER

	2018	2017
in €k		Restated¹
Profit from continuing operations before tax	37,985	25,231
Adjustments for
Depreciation and amortisation of non-current assets	1,147	1,255
Net loss on sale of non-current assets	–	1
Finance income	(331)	(385)
Finance costs	204	335
Other non-cash changes ²	240	44
Changes in
Trade receivables and other current assets	(1,234)	(1,475)
Trade payables	(2,085)	458
Other liabilities	2,319	119
Financial liabilities	–	(17)
Deferred income	993	(146)
Provisions	5,664	501
Interest received	331	385
Interest paid	(204)	(335)
Income taxes paid	(6,827)	(12,819)
Cash flow from operating activities	38,202	13,152

¹ Comparative information has been restated. Further details can be found in note 2.23

2 Other non-cash changes include foreign exchange movements of approximately €383k in 2018.

	2018	2017
in €k		Restated¹
Cash flow from investing activities
Acquisition of intangible assets	(44)	(236)
Acquisition of property, plant and equipment	(722)	(1,436)
Proceeds from the sale of property, plant and equipment	–	4
Payments for acquisition of investment	(247)	(1,843)
Short-term loan	–	3,000
Income from sale of investments in equity funds	6,567	–
Net cash outflow from investing activities	5,554	(511)
Cash flow from financing activities
Purchase of treasury shares	(1,903)	–
Dividends paid to the Company's shareholders	(8,341)	(8,385)
Net cash outflow from financing activities	(10,244)	(8,385)
Net increase in cash, pledged cash and financial assets	33,512	4,256
Cash, pledged cash and financial assetsat the beginning of the year	112,375	108,119
Cash, pledged cash and financial assets at the end of thefinancial year	145,887	112,375
Composition of cash, pledged cash and financial assets
Cash and pledged cash	132,993	92,052
Financial assets	12,894	20,323
Cash, pledged cash and financial assets at the end of thefinancial year	145,887	112,375

¹ Comparative information has been restated. Further details can be found in note 2.23

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes 1 to 28.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD 1 JANUARY TO 31 DECEMBER

	Subscribedcapital	Sharepremium	Treasuryshares	Otherreserves	Retainedearnings	Currencytranslationadjustments	Totalequity
in €k
Balance at 1 January2017	8,385	21,578	–	(785)	68,237	143	97,558
Profit for the year	–	–	–	–	17,178	–	17,178
Other comprehensiveincome	–	–	–	225	–	40	265
Total comprehensiveincomefor the year	–	–	–	225	17,178	40	17,443
Transactions withowners in theircapacity as owners
Dividends paid	–	–	–	–	(8,385)	–	(8,385)
As at 31 December 2017	8,385	21,578	–	(560)	77,030	183	106,616
Reclassification onadoption of IFRS 9	–	–	–	642	(642)	–	–
Balance at 1 January2018	8,385	21,578	–	82	76,388	183	106,616
Profit for the year	–	–	–	–	26,663	–	26,663
Other comprehensiveincome	–	–	–	145	–	18	163
Total comprehensiveincome for the year	–	–	–	145	26,663	18	26,826
Transactions withownersin their capacity asowners
Treasury shares acquired	–	–	(1,903)	–	–	–	(1,903)
Dividends paid	–	–	–	–	(8,341)	–	(8,341)
As at 31 December 2018	8,385	21,578	(1,903)	227	94,710	201	123,198

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 1 to 28.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

ZEAL Network SE ('the Company' or 'ZEAL Network') was founded in Germany in 1999. It subsequently transferred its registration to the United Kingdom in February 2014 under the Company Number SE000078. The Company's shares are listed in the Prime Standard segment of the Frankfurt Stock Exchange.

The Consolidated Financial Statements of ZEAL Network SE (collectively 'ZEAL Group' or 'the Group') for the year ended 31 December 2018 were authorised for issue in accordance with a resolution of the Executive Board and subsequently forwarded to the Supervisory Board for examination and adoption on 20 March 2019.

The date of the Statement of Financial Position is 31 December 2018. The financial year ended 31 December 2018 covers the period from 1 January 2018 to 31 December 2018.

2 ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of ZEAL Group's Consolidated Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 BASIS OF PREPARATION

The Consolidated Financial Statements of ZEAL Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), and the Companies Act 2006 applicable to companies reporting under IFRS. The Consolidated Financial Statements have been prepared under the historical cost convention, except for the revaluation to fair value of the financial assets and other investments as described in the accounting policies below.

The comparative Statement of Cash Flows has been restated. Details can be found in note 2.23. The Group has initially adopted IFRS 15 Revenue from contracts with customers and IFRS 9 Financial Instruments from 1 January 2018. The Group has taken the exemption not to restate prior periods and further details of the transition can be found in notes 2.24 and 2.25. Financial assets, previously held to maturity, on adoption of IFRS 9 are held at amortised cost. Financial assets, previously held as available for sale, on adoption of IFRS 9 are held at fair value through profit or loss.

The financial statements are prepared on a going concern basis. The Directors have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that ZEAL Group has adequate resources to continue in operation for the foreseeable future. This assessment is based on the fact that the Group held €132,993k in cash and €12,894k in financial assets at the year-end (2017: €92,052k and €27,123k in cash and financial assets, respectively). As the Group expects to deliver revenue, positive cash inflows and profit growth in the years ahead, the Directors have adopted the going concern basis in preparing the Consolidated Financial Statements. The Directors have considered the Brexit options being contemplated in the UK parliament and do not consider any of them to have an impact on the ability of the Group to continue in operation for the foreseeable future.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. Actual results could differ from those estimates.

Under licence conditions and codes of practice published by the UK Gambling Commission in February 2015 (subsequently updated in April 2015), the financial statements must disclose the quantum of balances held in customer accounts representing funds not owned by the ZEAL Group. This information is included in note 15 to the Consolidated Financial Statements.

Unless otherwise stated monetary amounts are denominated in Euros rounded to the nearest thousand.

2.2 RECENT ACCOUNTING DEVELOPMENTS

New standards, amendments and interpretations of existing standards adopted by the Group

IFRS 2, 'Classification and measurement of share-based payment transactions' is effective from 1 January 2018.
Annual improvement processes (AIP) 2014–2017 to IFRS 1 'First-time Adoption of International Financial Reporting Standards' concerning deletion of short-term exemptions for first-time adopters is effective from 1 January 2018.
IFRIC 22, 'Foreign Currency Transactions and Advance Consideration' is effective from 1 January 2018.

The following standards, interpretations and amendments apply for the first time to the financial reporting period commencing on 1 January 2018 and have been adopted by the Group:

IFRS 15, 'Revenue from contracts with customers'
IFRS 9, 'Financial Instruments'

Further details on the transition to IFRS 15 and IFRS 9 can be found in notes 2.24 and 2.25, respectively.

New standards, amendments and interpretations of existing standards that are not yet effective and have not been early adopted by the Group

The following standards and revisions listed below will be effective for future accounting periods beginning on or after 1 January 2019:

IFRIC Interpretation 23, 'Uncertainty over Income Tax Treatments' is effective from 1 January 2019.
IFRS 16, 'Leases' is effective from 1 January 2019.

The Directors have considered the impact of the following standards in further detail, due to the potential impact these changes could have on the Group.

IFRS 16, 'Leases'.

Nature of change

IFRS 16 is effective for annual periods beginning on or after 1 January 2019, with early application permitted. The Group has adopted the new standard on the required effective date using the modified retrospective method.

Preliminary Assessment

The standard will affect the accounting for the Group's operating leases. As at the reporting date, the Group had non-cancellable lease commitments of €11,344k (2017: €12,311k), disclosed in note 24 to the Consolidated Financial Statements. On initial adoption, the majority of operating leases will be disclosed in the Statement of Financial Position creating a right of use asset and a lease liability. An adjustment will be posted to retained earnings at 1 January 2019 to reflect the cumulative effect of initial adoption of IFRS 16.

At transition, lease liabilities will be measured at the present value of the remaining lease payment, discounted at the Group's incremental borrowing rate as at 1 January 2019. Right of use assets will be measured at their carrying amount as if IFRS 16 had been applied since the lease commencement date, discounted using the lessee's incremental borrowing rate at the date of initial application.

The Group will apply the following practical expedients when applying IFRS 16 to leases previously classified as operating under IAS 17 and IFRIC 4:

Applying a single discount rate to a portfolio of leases with similar characteristics.
Applying the exemption not to recognise right of use assets and liabilities for leases with less than 12 months of lease term remaining at date of initial application
Excluding initial direct costs from measuring the right of use asset at the date of initial application
Using hindsight when determining the lease term if the contract contains options to extend or terminate the

lease.

Transitioned to IFRS 16, leases which were previously identified under IAS 17 and IFRIC 4, only.

Some commitments are covered by the short-term and low-value lease recognition exemptions and will continue to be held off balance sheet.

On transition to IFRS 16, the Group will recognise approximately €6,935k of right of use assets and approximately €8,344k of lease liabilities, recognising the difference in retained earnings.

2.3 SIGNIFICANT JUDGEMENTS AND ESTIMATES

In determining and applying accounting policies, judgement is often required where the choice of specific policy, assumption or accounting estimate to be followed could materially affect the reported results or net position of the Group within the next financial year, should it later be determined that a different choice be more appropriate.

Management considers the following to be areas of significant judgement and estimation for the Group due to greater complexity and/or due to being particularly subject to the exercise of judgement.

Judgements in applying the Group's accounting policies

Basis of consolidation

The relative complexity of the Group structure means that judgement is required in correctly applying the provisions of IFRS 10, 'Consolidated Financial Statements', to ensure that all companies over which the Company has control are included and presented appropriately in the Consolidated Financial Statements. The nature of these relationships including the power that the Company exercises over its subsidiary companies together with the Company's exposure or rights to variable returns of those companies is reviewed at least at each reporting period date to ensure that the companies included in the consolidation are appropriate (and are de-recognised where required). The basis of consolidation is described in detail in section 2.4.

Insurance Linked Security ('ILS')

The Group entered into a new ILS vehicle, Hoplon III ('Hoplon'), in 2018. Judgement is required to determine if the Group has control over Hoplon and should consolidate the results of operations into its financial statements. The conclusions drawn by the Directors are described in detail in section 2.4.

Exceptional items

Management uses judgement to determine items to be classified as exceptional to enable a better understanding of the underlying financial performance of the Group. Further details can be found in note 7.

Taxation and other duties

Due to periodic changes in the tax landscape of the industry in which the Group operates, judgement is required in determining the provision for certain taxes and other duties. The treatment of these items is often by its nature complex and cannot be finally determined until a formal resolution has been reached with the relevant tax authority, which may take several years. Amounts provided are accrued based on advice from legal professionals and tax professionals, management's interpretation of specific tax laws and the likelihood of settlement. Actual liabilities could differ from the amount provided, which could have an impact on the results and net position of the Group.

The majority of tax and other duty positions taken by the Group are routine and not subjective. However, judgement has been exercised by the Directors in certain specific tax and duty related areas. These matters have been disclosed if appropriate in the notes to the Consolidated Financial Statements in accordance with the governing financial reporting standards and include the following areas:

Value added tax (VAT)

Due to the changes in German VAT legislation introduced on 1 January 2015, there is significant uncertainty around whether certain services provided by the myLotto24 Sub-Group are subject to VAT and the tax base on which any VAT payable would be calculated. At this stage, the Directors of the Group consider that the likelihood of the outflow of economic benefits is not probable and, as such, no liability has been recorded in the Consolidated Financial Statements. Based on a thorough legal assessment, which included a review of the existing legal framework and case law, the Directors remain confident that the outcome will be favourable for the Group. The Group will continue to closely monitor any changes in this area and ensure that the accounting for VAT continues to comply with

governing legislation. The Directors have reported a contingent liability on this matter and a separate disclosure is included in note 24 to the Consolidated Financial Statements.

Austrian Gaming Duty

In January 2011, gaming duty became payable on a point of consumption basis in Austria. There is judgement over whether the correct Austrian gaming duty should be payable based on 4% of stakes from 1 January 2017 (2% prior to 1 January 2017), which is the rate for 'betting' or 40% of gross gaming revenue, which is the rate for 'gaming' activities.

Previously, the Directors considered the most likely outcome was that the duty would be due based on stakes and accrued on this basis. However, correspondence with the Specialist Division (Fachbereich) of the Tax Office for Duties, Transfer Taxes and Gaming (the 'Austrian Tax Office') now indicates that activities in Austria are likely to be classified as gaming. The Austrian Tax Office argues that since lotteries qualify as gaming, bets on the outcome of lotteries also qualify as gaming. This correspondence does not present legally binding statement of the view of the Austrian Tax Office. Such a legally binding view may follow in the form of a tax assessment. However, the Directors now consider that it is probable that an assessment will be received on the basis of gaming activities and have begun to provide on the basis that ZEAL will be assessed at 40% of gross gaming revenue. As a result, a €1.9m provision has been recorded in 2018 (note 18). This amount is provided for based on advice from legal professionals, management's interpretation of gaming duty laws and the likelihood of settlement.

Estimates and assumptions

Fair value of level 3 investments

At each reporting period, the fair value of the investments in Omaze and PMP is calculated. A discounted cash flow model is utilised to determine the fair value (enterprise value) of the under-lying businesses that ZEAL has invested in. The fair value of ZEAL's share of each business has been measured using an option pricing model. The option pricing model allocates the enterprise value of the investment amongst the individual shareholders. Key estimates and assumptions in the model include; the discount rate, billings growth rate and the growth in margin. Further details can be found in note 13.

As investments in The Dream Makers and Wshful were made in 2018, the fair value of these investments is considered to be equal to the cash paid to acquire the investments.

Provisions for litigation

At each reporting period, management is required to estimate the expected outflow of cash resulting from the Group's legal cases. If it is considered probable (i.e. greater than 50%) that a case will be lost then management will estimate the expected costs to be incurred and will record a provision. The determination of if it is probable a case will be lost may be made in conjunction with external legal professionals. The expected costs to be incurred are generally a range, dictated by gambling law or courts of law and management will estimate what percentage of these costs to provide if it is determined that it is probable a case will be lost. The estimate is based on experience from similar cases and the information received from the courts and/or regulator or other third party involved in the case. Details of the year-end provisions for litigation can be found in note 18.

2.4 BASIS OF CONSOLIDATION

The Consolidated Financial Statements include the financial information of the subsidiaries owned by the Company:

Initial consolidation of subsidiary companies

Subsidiaries are entities controlled by the Company. Control is where the Company has power to vary the returns from its investment, and exposure to the variability of those returns. Subsidiaries are included in the Consolidated Financial Statements from the date control commences until the date control ceases.

The equity interests of all subsidiary companies included in the Consolidated Financial Statements are 100% owned by ZEAL Network SE with the exception of the Company's interests in myLotto24 Limited and its subsidiary (full details are set out within the Subsidiaries section note 20).

ZEAL Network holds 40% of the voting shares in myLotto24 Limited. myLotto24 Limited is the parent of the myLotto24 Sub-Group in which it itself holds the majority of the voting shares except for Tipp24 Services Limited in which it holds 40% of the voting shares. Fondation enfance sans frontières holds the remaining 60% of Tipp24 Services Limited.

On 30 April 2009, ZEAL Network sold 60% of the voting shares in both myLotto24 Limited and Tipp24 Services Limited to a Swiss foundation set up by ZEAL Network in the form of preference shares stripped of their main economic rights. As a consequence, ZEAL Network owns no more than half the voting rights in myLotto24 Limited, while myLotto24 Limited owns no more than half the voting rights in Tipp24 Services Limited. The affiliate companies and their respective subsidiaries are consolidated in the ZEAL Network SE Group financial statements because the relevant criteria of IFRS 10 are met:

ZEAL Network has a right to repurchase the majority of voting rights for an amount of £30k for each company. ZEAL Network has veto rights with regard to changes in the articles of myLotto24 Limited and Tipp24 Services Limited.
The owner of the majority of voting rights receives an annual dividend of up to £15k for each company. In the case of liquidation, the owner of the majority of voting rights is entitled to receive previously agreed liquidation proceeds of £30k. ZEAL Network alone is entitled to the entire remaining profits and any remaining liquidation proceeds.

The annual dividend is therefore treated as an expense in the Consolidated Financial Statements of ZEAL Group and the results of all entities within the myLotto24 Sub-Group are fully consolidated into the ZEAL Group Consolidated Financial Statements. As a result of the substance of the relationship, no non-controlling interest is recorded.

Subsequent disposal of subsidiary companies

On the subsequent disposal or termination of a business, the results of the business are included in the Group's results up to the effective date of disposal. The profit or loss on disposal or termination is calculated after charging the amount of any related goodwill to the extent that it has not previously been taken to the income statement. Dividends received on liquidation of subsidiaries, representing the residual value attributable to the owner, are recorded in the period in which the liquidation is finalised.

Transactions, balances and ILS vehicles not included in the consolidated results

Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The Group manages its risk exposure to large jackpots through the use of an Insurance Linked Security (ILS) vehicle set up specifically to provide insurance cover to the myLotto24 Sub-Group. The ILS vehicle does not meet the definition of a structured entity and therefore the IFRS 12 disclosures requirement have not been applied. The ILS vehicle is not consolidated as the relevant criteria around control under IFRS 10 are not met.

In 2011, an ILS vehicle was created to partially transfer the Group's jackpot payment risk to the capital market, with the ILS cover placed with institutional investors outside the Group. In 2014 and again in 2017, the Group renewed the transaction when it matured with no fundamental differences. The new ILS was effective from 2018 and is called Hoplon III. The Group has no power over the ILS and has no exposure, or rights, to variable returns from its involvement as they rest with third party investors.

In forming the view that the relevant IFRS 10 criteria are not met, the Directors have considered the following points:

The Group has no voting rights or potential voting rights, or the ability to appoint, reassign or remove members of the key management personnel of the ILS vehicle. In addition the Group has no rights to direct relevant activities which it could subsequently benefit from.
The Group does not have any rights to returns from the ILS vehicle in the form of earnings, and has no rights to any of ILS vehicle assets on liquidation.
The exposure to and right to variable returns is limited to the Preference Shareholders of the ILS vehicle, who are not related parties to the Group.

Based on the Directors assessment the Group does not control the ILS vehicle and therefore does not consolidate its results in its own financial statements, the Directors consider the transaction to be insurance cover, in consideration for which the Group has agreed to pay to the ILS vehicle premiums in accordance with the agreement between the parties.

2.5 CLASSIFICATION OF CURRENT AND NON-CURRENT ASSETS AND LIABILITIES

ZEAL Group presents assets and liabilities in the Statement of Financial Position based on the Group's assessment of whether they meet the classification as current or non-current balances.

An asset is a current asset when:

the asset is expected to be realised or intended to be sold or consumed in the normal operating cycle;
the asset is held primarily for the purpose of trading;
the asset is expected to be realised within twelve months after the reporting period; or
the asset is cash or a cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period date.

All other assets are classified as non-current.

A liability is a current liability when:

the liability is expected to be settled in the normal operating cycle;
the liability is held primarily for the purpose of trading;
the liability is due to be settled within twelve months after the reporting period; or
the Company has no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period date.

All other liabilities are classified as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities in accordance with IAS 1, 'Presentation of financial statements'.

2.6 REVENUE

The Group has the following revenue streams: secondary lottery revenue, revenue generated from Instant Win Games, revenue generated from commission and fees.

Following the adoption of IFRS 9 on 1 January 2018, secondary lottery revenue and revenue generated from Instant Win Games is accounted for under this standard. In the comparative period it was accounted for under IAS 39. Further detail of the transition can be found in note 2.25.

Revenue generated from commission and fees is accounted for under IFRS 15. The Group transitioned to IFRS 15 on 1 January 2018. The Group has chosen to apply IFRS 15 using the cumulative effect method and therefore the comparative information has not been restated and continues to be reported under IAS 18. Further detail of the transition can be found in note 2.24.

(I) Secondary lottery revenue

Accounting policy prior to 1 January 2018

Revenue that myLotto24 Limited generates as the organiser of secondary lotteries, where myLotto24 Limited bears the bookmaking risk, is recognised at the moment the draw results of the respective lotteries are announced. Stakes received as of the Statement of Financial Position date, but which are intended for games whose draw results are not available until after the Statement of Financial Position date, are deferred.

A contract to participate in a secondary lottery is treated as a derivative. The definition of a derivative is applied to contracts:

where payments are linked to the outcome of an event;
where the value of the contract, compared to the potential pay-out, is relatively low;
where contracts are in place before the event has occurred and, in the case of a win, the pay-out is made in the future after the event has occurred.

Profits or losses from a change in the fair value of derivatives are recognised in the income statement. Stakes and pay-outs are therefore not regarded as separate income and expenditure, but are aggregated to determine the total fair value.

A possible term for such items in the income statement could be 'Changes in the fair value of contracts for participation in secondary lotteries'. Throughout the sector, however, this item is generally termed 'Revenue', as it refers to the ordinary activity of a company in the gaming industry.

In line with industry practice gaming duties are recorded as 'Other operating expenses' and not as sales tax within revenue.

Accounting policy post 1 January 2018

Following adoption of IFRS 9, management has reviewed the revenue recognition policy and no adjustments are required.

(II) Revenue generated from Instant Win Games

Accounting policy prior to 1 January 2018

Revenue that myLotto24 Limited generates from the sale of Instant Win Game products is recognised in the same way as revenue generated on secondary lottery activities. Revenue on Instant Win Games is recorded at the point which the game is purchased. The quantum of revenue recorded represents the amount of bets, less free bets, placed by the customers less amounts won.

Accounting policy post 1 January 2018

Following adoption of IFRS 9, management has reviewed the revenue recognition policy and no adjustments are required.

(III) Revenue generated from commissions and fees

Accounting policy prior to 1 January 2018

Revenue also results from commissions and fees, which the Group receives for placing bets on behalf of customers. Revenue is recognised when the bets have been made, the lottery ticket information passed on to the lottery organiser and confirmation of receipt of the information has been received. Where advanced payments are received from customers for subscriptions, payments received are deferred and the related revenue is only recognised when the lottery ticket information has been passed on to the lottery organiser and confirmation of receipt of the information has been obtained.

Accounting policy post 1 January 2018

Revenue also results from commissions and fees, which the Group receives for placing bets on behalf of customers. Revenue is recognised at the point in time when control of the goods or services are transferred to the customer. This occurs when: the bets have been made, the lottery ticket information passed on to the lottery organiser and confirmation of receipt of the information has been received. Where advanced payments are received from customers for subscriptions, payments received are deferred and the related revenue is only recognised at the point in time, when the lottery ticket information has been passed on to the lottery organiser and confirmation of receipt of the information has been obtained.

Under IFRS 15, the Group is considered to be agent based on the following points:

another third party is responsible for fulfilling the contract and this is stipulated in the terms and conditions agreed with the customer,
the book making risk is held by another party,
the Group does not have discretion in establishing prices, and
the revenue received is in the form of fees and commission.

2.7 OTHER INCOME

(I) Interest income

Interest income is recognised on an accruals basis using the effective interest rate method.

(II) Other operating income

Other operating income comprises the following:

The fair value of consideration received or receivable from winning tickets purchased by myLotto24 Limited on Spanish EuroMillions draws
The fair value of consideration received or receivable from special insurance policies taken out to hedge against the risk of special draw pay-outs
The fair value of consideration received or receivable from the use of an ILS vehicle taken out to provide cover against the risk of large pay-outs
The release of dormant customer balances to the Consoli-dated Income Statement. Funds deposited by the Group's customers are classified as other liabilities in the financial statements. After a period of 24 months from the date of last activity on customer accounts, the related customer liabilities are classified as dormant. If attempts to contact the customer to refund deposits held on their behalf are unsuccessful (at least 26 months from last activity), these customer liabilities are released to other operating income.

2.8 INCOME TAXES

(I) Current and deferred taxes

The tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or directly in equity, respectively.

Current tax expense is based on the results for the year as adjusted for items that are not taxable or not deductible. The Group's liability for current taxation is calculated using tax rates and laws that have been enacted or substantively enacted by the Statement of Financial Position date.

Deferred tax is provided in full in respect of all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the Consolidated Financial Statements, except where the temporary difference arises from goodwill (in the case of deferred tax liabilities) or from the initial recognition (other than a business combination) of other assets and liabilities in a transaction that affects neither accounting nor taxable profit.

Deferred tax liabilities are recognised where the carrying value of an asset is greater than its tax base, or where the carrying value of a liability is less than its tax base. Deferred tax is recognised in full on temporary differences arising from investment in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. This includes taxation in respect of the retained earnings of overseas subsidiaries only to the extent that, at the Statement of Financial Position date, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future periods has been entered into by the subsidiary.

A net deferred tax asset is regarded as recoverable and there--fore recognised only when, on the basis of all available evidence, it is expected that sufficient existing taxable temporary differences will reverse in the future or there will be sufficient taxable profit available against which the temporary differences (including carried forward tax losses) can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is measured, on an undiscounted basis, at the tax rates expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at Statement of Financial Position date.

(II) Withholding and similar taxes

Withholding taxes suffered relate specifically to amounts withheld from gross pay-outs on winning tickets purchased from the Spanish National Lottery (SELAE) by myLotto24 Limited. As a result of lottery tax legislation brought in by the Spanish Government in 2013, SELAE is required to withhold 20% of gross winnings and transfer this directly to the Spanish Tax Authorities on behalf of the winner. A receivable for taxes withheld at source will be recorded only when there is persuasive evidence to confirm that a refund will be received.

2.9 OPERATING EXPENSES

Operating expenses are recognised when goods and services have been provided to the Group. Any goods or services that have been provided during the period where no invoice has been received from the supplier are accrued for. Where it is probable that future economic benefits will flow as a result of a good or service provided and the cost can be reliably measured, the costs are capitalised and amortised over the duration of the expected economic benefit. Non-deductible VAT is included within other operating expenses as opposed to being included in the attributable cost line item.

2.10 EXCEPTIONAL ITEMS

To improve the understanding of the Group's financial performance, items which are not considered to reflect the underlying performance are presented as exceptional items. Items classified as exceptional are disclosed separately due to their size or nature to enable a better understanding of year on year performance. These include, but are not limited to, significant impairments, significant restructuring of the activities of an entity including employee associated severance costs, acquisition and disposal related transaction costs, integration costs, and synergy delivery costs, as these are irregular in nature.

2.11 FOREIGN EXCHANGE

(I) Foreign exchange translation

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Consolidated Financial Statements are presented in Euros, which is the Group's presentational currency. The average exchange rates (calculated based on the average of the exchange rates during the financial year) and the closing exchange rates have been taken from the publicly available European Central Bank rates. Translation differences on non-monetary assets such as equity investments classified as available for sale assets are included in other comprehensive income.

(II) Transactions and balances

The financial statements for each Group company have been prepared on the basis that transactions in foreign currencies are recorded in their functional currency at the rate of exchange ruling at the date of the transaction. Monetary items denominated in foreign currencies are retranslated at the rate of exchange ruling at the Statement of Financial Position date. The resultant translation differences are included in operating profit in the income statement other than those arising on financial assets and liabilities, which are recorded within financial income or expense, or foreign exchange on tax balances, which are recorded in the income tax expense line item.

2.12 INTANGIBLE ASSETS

Intangible assets are stated at cost less accumulated amortisation on a straight-line basis (if applicable) and impairment losses. Cost is usually determined as the amount paid by the Group, unless the asset has been acquired as part of a business combination. Intangible assets acquired as part of a business combination are recognised at their fair value at the date of acquisition. Amortisation is included within depreciation and amortisation separately identified in the income statement. Internally generated intangibles are not recognised except for computer software and development costs referred to under computer software and research and development below.

Intangible assets with finite lives are amortised over their estimated useful economic lives, and only tested for impairment where there is a triggering event. The Group regularly reviews all of its amortisation rates and residual values to take account of any changes in circumstances.

The Directors' assessment of the useful life of intangible assets is based on the nature of the asset acquired, the durability of the products to which the asset attaches and the expected future impact of competition on the business.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset. They are recognised in profit or loss when the asset is derecognised.

(I) Computer software and licences

Where computer software is not an integral part of a related item of property, plant and equipment, the software is capitalised as an intangible asset.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring them to use. Direct costs associated with the production of identifiable and unique internally generated software controlled by the Group that will probably generate economic benefits exceeding costs beyond one year are capitalised. Direct costs include software development employment costs (including those of contractors used) and an appropriate portion of overheads that are directly attributable to the development of the asset. Capitalised computer software, licence and development costs are amortised over their useful economic lives of between three and five years.

(II) Research and development

Research and general development expenditure is written off in the period in which it is incurred.

Certain development costs are capitalised as internally generated intangible assets in the following circumstances:

where there is a clearly defined project;
where there is separately identifiable expenditure;
where expenditure can be reliably measured;
where an outcome can be assessed with reasonable certainty (in terms of feasibility and commerciality);
when expected revenue exceeds expected costs and the Group has the resources to complete the task.

Such assets are amortised on a straight-line basis over their useful lives once the project is complete.

2.13 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost net of accumulated depreciation and any impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the asset's carrying value or recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the specific asset will flow to the Group and the cost can be measured reliably.

Repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying value of the asset and is recognised in the income statement.

(I) Assets in the course of construction

Assets in the course of construction are carried at cost less any impairment loss. Cost includes professional fees and for qualifying assets certain borrowing costs. When these assets are ready for their intended use, they are transferred into the appropriate category. At this point, depreciation commences on the same basis as on other property, plant and equipment.

(II) Depreciation

Depreciation is provided on a straight-line basis at rates calculated to write off the cost, less the estimated residual value, of each asset over its expected useful life as follows:

	years
Technicalequipment/hardware	2–6
Office equipment and fit-out	3–12

Leasehold improvements are depreciated over the lower of the lease term and 3-12 years.

Each financial year the Group reviews all of its depreciation rates and residual values to take account of any changes in circumstances. When setting useful economic lives, the principal factors the Group takes into account are the expected rate of technological developments, expected market requirements for the equipment and the intensity at which the assets are expected to be used.

2.14 IMPAIRMENT

This policy covers all assets except financial assets and deferred tax assets.

A review of all non-financial assets is carried out on each reporting date to ascertain whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. Impairment reviews are performed by comparing the carrying value of the non-current asset with its recoverable amount, being the higher of the fair value less costs of disposal and value in use. The fair value less costs of disposal is considered to be the amount that could be obtained on disposal of the asset, and therefore is determined from a market participant perspective. The recoverable amount under both calculations is determined by discounting the future pre-tax cash

flows generated from continuing use of the cash generating unit (CGU) using a pre-tax discount rate. Fair value less costs of disposal calculations are prepared on a post-tax basis, and are classified as level 3 in the fair value hierarchy.

Where the asset does not generate cash flows that are independent from the cash flows of other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs. For the purpose of conducting impairment reviews, CGUs are considered to be groups of assets that have separately identifiable cash flows. They also include those assets and liabilities directly involved in producing the income and a suitable proportion of those used to produce more than one income stream.

An impairment loss is taken first against any specifically impaired assets.

Where an impairment is recognised against a CGU, the impairment is first taken against goodwill balances and if there is a remaining loss it is set against the remaining intangible and tangible assets on a pro-rata basis.

Should circumstances or events change and give rise to a reversal of a previous impairment loss, the reversal is recognised in the income statement in the period in which it occurs and the carrying value of the asset is increased. The increase in the carrying value of the asset is restricted to the amount that it would have been had the original impairment not occurred. Impairment losses in respect of goodwill are irreversible.

2.15 OTHER INVESTMENTS

Prior to the adoption of IFRS 9, other investments were recognised at fair value net of any impairment losses. Where the fair value of an investment could not be reliably measured, then it was measured at cost. Cost included expenditure that was directly attributable to the acquisition of the investment. Subsequent costs were included in the investment's carrying value or recognised as a separate investment as appropriate, only when it is probable that future economic benefits associated with the specific investment would flow to the Group and the cost could be measured reliably.

Other investments are held as long term strategic investments, as such following adoption of IFRS 9, on 1 January 2018, management elected to hold them at fair value through other comprehensive income (FVOCI).

Each investment is initially recognised at fair value plus trans-action costs. A discounted cash flow model is utilised to determine the fair value (enterprise value) of the underlying businesses that ZEAL has invested in. The fair value of ZEAL's share of each business has been measured using an option pricing model. The option pricing model allocates the enterprise value of the investment amongst the individual shareholders. Gains and losses on disposal will be recognised in Other Comprehensive Income (OCI).

2.16 LEASING

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Operating leases

Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term.

Finance leases

ZEAL Group does not have any finance leases.

2.17 BUSINESS COMBINATIONS

The acquisition method is used to account for business combinations.

The identifiable net assets (including intangibles) are incorporated into the financial statements on the basis of their fair value from the effective date of control, and the results of subsidiary undertakings acquired during the financial year are included in the Group's results from that date.

On the acquisition of a company or business, fair values reflecting conditions at the date of acquisition are attributed to the identifiable assets (including intangibles), liabilities and contingent liabilities acquired.

Fair values of these assets and liabilities are determined by reference to market values, where available, or by reference to the current price at which similar assets could be exited or similar obligations entered into, or by

discounting expected future cash flows to present value, using either market rates or the risk-free rates and riskadjusted expected future cash flows.

The consideration transferred is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of the acquisition, and also includes the Group's estimate of the fair value of any deferred consideration payable. Acquisition-related costs are expensed as incurred.

Where the business combination is achieved in stages and results in a change in control, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.

Where the business combination agreement provides for an adjustment to the cost that is contingent on future events, the consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets.

2.18 FINANCIAL ASSETS AND LIABILITIES

The Group adopted IFRS 9 on 1 January 2018. No prior period restatements have been made and the comparative period continues to be prepared under IAS 39. As such the accounting policies for the current and comparative period, are disclosed below.

Accounting policy prior to 1 January 2018

Financial assets and financial liabilities are initially recorded at fair value (plus any directly attributable transaction costs, except in the case of those classified at fair value through profit or loss). For those financial instruments that are not subsequently held at fair value, the Group assesses whether there is any objective evidence of impairment at each Statement of Financial Position date.

Financial assets are recognised when the Group has rights or other access to economic benefits. Such assets consist of cash, equity instruments, a contractual right to receive cash or another financial asset, or a contractual right to exchange financial instruments with another entity on potentially favourable terms. Financial assets are derecognised when the right to receive cash flows from the asset have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Financial liabilities are recognised when there is an obligation to transfer benefits and that obligation is a contractual liability to deliver cash or another financial asset or to exchange financial instruments with another entity on potentially unfavourable terms. Financial liabilities are derecognised when they are discharged, cancelled or expired.

If a legally enforceable right exists to set off recognised amounts of financial assets and liabilities, which are in determinable monetary amounts, and there is the intention to settle net, the relevant financial assets and liabilities are offset.

Interest costs are charged to the income statement in the year in which they accrue. Premiums or discounts arising from the difference between the net proceeds of financial instruments purchased or issued and the amounts receivable or repayable at maturity are included in the effective interest calculation and taken to net finance costs over the life of the instrument.

There are five categories of financial assets and financial liabilities. These are described as follows:

(I) Financial assets and financial liabilities at fair value through profit or loss

Financial assets and financial liabilities at fair value through profit or loss include derivative assets and derivative liabilities not designated as effective hedging instruments. All gains or losses arising from changes in the fair value of financial assets or financial liabilities within this category are recognised in the income statement.

Derivative financial assets and financial liabilities

Derivative financial assets and financial liabilities are financial instruments whose value changes in response to an underlying variable that, require little or no initial investment and are settled in the future.

These include derivatives embedded in host contracts. An embedded derivative need not be accounted for separately if the host contract is already fair valued; if it is not considered as a derivative if it was freestanding; or if it can be demonstrated that it is closely related to the host contract. There are certain currency exemptions which the Group has applied to these rules, which limit the need to account for certain potential embedded foreign exchange derivatives. These are:

if a contract is denominated in the functional currency of either party;
where that currency is commonly used in international trade of the good traded; or
if it is commonly used for local transactions in an economic environment.

Derivative financial assets and liabilities are analysed between current and non-current assets and liabilities on the face of the Statement of Financial Position, depending on when they are expected to mature.

(II) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities of greater than twelve months after the Statement of Financial Position date, which are classified as non-current assets. Loans and receivables are initially recognised at fair value including originating fees and transaction costs, and subsequently measured at amortised cost using the effective interest method less any provision for impairment.

Loans and receivables include trade receivables, accrued income and cash and cash equivalents.

When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount by discounting the estimated future cash flows at the original effective interest rate and continuing to unwind the discount as interest income.

Trade receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the receivables. The amount of the provision is the difference between the asset's carrying value and the present value of the estimated future cash flows discounted at the original effective interest rate. This provision is recognised in the income statement.

Cash, cash equivalents and pledged cash

In the Consolidated Statement of Financial Position, cash and cash equivalents includes cash in hand, pledged cash, bank deposits repayable on demand and other short-term highly liquid investments with original maturities of three months or less.

(III) Available-for-sale investments

Available-for-sale investments are non-derivative financial assets that are either designated in this category or not classified as financial assets at fair value through profit or loss, or loans and receivables. Investments in this category are included in non--current assets unless management intends to dispose of the investment within twelve months of the Statement of Financial Position date. They are initially recognised at fair value plus transaction costs and are subsequently remeasured at fair value and tested for impairment. Where it is not possible to reliably measure the fair value of the investment, the investment is carried at cost and measured for impairment at each reporting date. Gains and losses arising from changes in fair value including any related foreign exchange movements are recognised in other comprehensive income. On disposal or impairment of available-for-sale investments, any gains or losses in other comprehensive income are reclassified to the income statement.

Purchases and sales of investments are recognised on the date on which the Group commits to purchase or sell the asset. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

(IV) Held to maturity financial assets

Held-to-maturity financial assets are recognised initially at fair value. These assets are then re-measured at amortised cost, using the effective interest method, less any impairment.

(V) Financial liabilities held at amortised cost

Financial liabilities held at amortised cost include trade payables, accruals, other payables, and borrowings.

Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. Trade payables are analysed between current and non-current liabilities on the face of the Statement of Financial Position, depending on when the obligation to settle will be realised.

Accounting policy post 1 January 2018

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

i) Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through OCI, and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables the Group initially measures a financial asset at its fair value plus transaction costs. Trade receivables are measured at the transaction price determined under IFRS 15.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in three categories:

(I) Fair value through profit or loss (FVPL)

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

Financial assets

Financial assets include investments in fixed income funds and equity funds. Financial assets have cash flows that are not solely payments of principal and interest and as such are classified and measured at fair value through profit or loss. These are initially recognised at fair value. Movements in fair value are recognised in gains/losses from financial assets within the income statement.

(II) Financial assets at amortised cost

The Group measures financial assets at amortised cost if both of the following conditions are met:

1)The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows, and
1. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

Trade receivables

Trade receivables are initially recognised at transaction price and subsequently measured at amortised cost less provision for impairment.

Cash, cash equivalents and pledged cash

In the Consolidated Statement of Financial Position, cash and cash equivalents includes cash in hand, pledged cash, and bank deposits repayable on demand and other short-term highly liquid investments with original maturities of three months or less.

(III) Equity instruments at fair value through other comprehensive income (FVOCI)

Upon initial recognition, the Group can elect to classify irrev-ocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument--by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

Other investments

The Group elected to classify irrevocably its non-listed equity investments, held for long term strategic purposes, under this category. As the investments are not traded on active markets a discounted cash flow model is utilised to determine the fair value (enterprise value) of the underlying businesses that ZEAL has invested in. The fair value of ZEAL's share of each business has been measured using an option pricing model. The option pricing model allocates the enterprise value of the investment amongst the individual shareholders

Impairment of financial assets

The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables, the Group applies a simplified approach to calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The simplified approach uses the amounts historically written off for each customer, adjusted for forward-looking factors and the economic environment and uses this as the basis for the ECL. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.

ii) Financial liabilities

Financial liabilities held at amortised cost include trade payables, accruals, and other payables, and borrowings.

Trade payables

Trade payables are initially recognised at fair value and subsequently remeasured at amortised cost. Trade payables are analysed between current and non-current liabilities on the face of the Statement of Financial Position, depending on when the obligation to settle will be realised.

2.19 EQUITY AND DISTRIBUTIONS

(I) Share capital, debt and equity instruments issued

Ordinary shares are classified as equity. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by ZEAL Network SE are recognised when the proceeds have been received, net of direct issue costs. Issue costs are those costs which would not have been incurred if the equity instrument had not been issued.

Treasury shares are a repurchase of the Company's own equity instruments and recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

Debt and equity instruments issued by a Group company are classified as financial liabilities or equity depending on the economic substance of the contractual agreement.

(II) Dividend distributions

Dividend distributions to equity holders of ZEAL Network SE are recognised as a liability in the Group's financial

statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid. Dividends declared after the Statement of Financial Position date are not recognised as there is no present obligation at the Statement of Financial Position date.

2.20 PROVISIONS

2.21 CONTINGENT LIABILITIES

Contingent liabilities are not recognised in the consolidated financial statements. Contingent liabilities are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Details of contingent liabilities recorded at 31 December 2018 are included in note 24 to the consolidated financial statements.

2.22 EMPLOYEE BENEFITS

The Group operates various employee benefits including profit--sharing, bonus plans and Long-term Incentives as well as other post-employment schemes including termination benefits, cash settled share based payments and defined contribution pension plans.

(I) Profit sharing, bonus plans and Long-term Incentives

The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company's shareholders after certain adjustments. The Group recognises a liability where there is a present obligation (legal or constructive) that has arisen as a result of a past event.

(II) Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for restructuring within the scope of IAS 37, which involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of months employees worked for the Group.

(III) Defined contribution pension plans

The contributions to defined contribution plans are recognised as an expense as the costs become payable. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(IV) Cash-settled share-based payments

For cash-settled share-based payment schemes, a liability is recognised based on the fair value of the payment award at the Statement of Financial Position date. The fair value of the phantom share options granted is recognised over the vesting period to reflect the value of the employee services received. The charge relating to grants to employees is recognised as an expense in the income statement.

The fair value of options granted, excluding the impact of any non-market vesting conditions, is calculated using the Monte-Carlo model. The probability of meeting non-market vesting conditions, which include profitability targets, is used to estimate the number of phantom share options that are likely to vest.

2.23 PRIOR PERIOD RESTATEMENT

In preparing these financial statements, it was determined that the financial asset balance contains investment in

both fixed income funds and equity funds. Under IAS 7, equity instruments cannot be classified as cash and cash equivalents. This has resulted in the cash flow statement for the year ended 31 December 2017 being restated. The Group held €6,800k and €6,546k of equity funds at 31 December 2017 and 31 December 2016, respectively.

The opening cash and cash equivalents balance in the 2017 Statement of Cash Flows has been reduced from €114,665k to €108,119k to reflect the removal of the 31 December 2016 equity funds. The financial assets balance, in the consolidated statement of cash flows, has been reduced from €27,123k to €20,323k to reflect the removal of the 31 December 2017 equity investments. Other non-cash charges have been restated from €298k to €44k to remove the fair value movement in equity funds in the period.

There is no impact on the classification of financial assets in the Consolidated Statement of Financial Position or the Consolidated Income Statement, as a result of this restatement.

2.24 IFRS 15, 'REVENUE FROM CONTRACTS WITH CUSTOMERS', TRANSITION

Nature of change

Assessment

During 2017, the Directors performed an assessment of the impact that the adoption of IFRS 15 would have on the Group's Consolidated Financial Statements.

Revenue generated from secondary lottery betting and Instant Win Games

For secondary lottery betting and instant win game products IFRS 15 will not have any impact on the recognition or timing of the Group's revenue recognition. All material revenue streams are accounted for under IFRS 9 rather than IFRS 15.

Revenue generated from commissions and fees

Ticket fee income is recognised where an affiliate entity of the Group acts an agent of individual customers brokering bets on the outcome of lotteries and Instant Win Games. Under IFRS 15, the Group will continue to recognise revenue as an agent based on the net fair value of consideration received or receivable. The ticket fee will be recognised at the point in time when the bets have been brokered, the lottery ticket information has been sent to the bookmaker and confirmation of receipt of the information has been received. As a result, there is no change in the quantum or timing to be recognised under IAS 18 and IFRS 15.

For the Lottovate segment revenue is primarily recognised from commissions, which the Group receives for placing bets on behalf of customers. Under IFRS 15, the Group will continue to recognise revenue as an agent based on the net fair value of consideration received or receivable. Revenue will continue to be recognised at the point in time when the bets have been made, the lottery ticket information is passed on to the lottery organiser and confirmation of receipt of the information has been received. There is no change in the quantum or timing of revenue recognised under IFRS 15 as opposed to IAS 18.

Transition

The Group has three revenue streams: secondary lottery revenue, revenue generated from Instant Win Games, and revenue generated from commission and fees. The majority of the Groups revenue is generated from secondary lottery and Instant Win Games. This revenue is accounted for under IFRS 9.

The Group adopted the new standard on 1 January 2018 and transitioned under the modified retrospective approach, for revenue generated from commission and fees. For completed contracts, the Group has not restated contracts that began and ended in the same annual reporting period or contracts completed prior to the beginning of the earliest period presented. No other practical expedients have been applied.

No transition adjustments are required as revenue recognition is consistent between IAS 18 and IFRS 15. In line with the requirements of IFRS 15, note 4 has been updated to disclose the receivables, contract assets and contract liabilities from contracts with customers.

2.25 IFRS 9, 'FINANCIAL INSTRUMENTS', TRANSITION

Nature of change

In July 2014, the IASB issued the final version of IFRS 9, 'Financial Instruments' that replaces IAS 39, 'Financial Instruments: Recognition and Measurement' and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting.

Transition

The Group has initially adopted IFRS 9, 'Financial Instruments' from 1 January 2018.

The Group has taken an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. There were no differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 as at 1 January 2018. On adoption, other reserves, within equity, was reclassified to retained earnings. The information presented for 2017 does not generally reflect the requirements of IFRS 9 but rather those of IAS 39.

Details of the significant changes and quantitative impact of the changes are set out below:

1. Classification and measurement

Under IAS 39, the Group accounted for its investment in PMP at historical cost. The investment in Omaze was held at fair value through profit or loss. On adoption of IFRS 9, all investments were re-measured at fair value in accordance with IFRS 13. As the investments are not held for trading, the Group has elected irrevocably to present gains and losses on other investments in OCI. Under IFRS 9 all other investments are held at fair value through OCI and measured in accordance with IFRS 13.

On adoption of IFRS 9, the Group has classified short term financial assets (investments in fixed income funds and equity funds) previously held as available-for-sale, as investments held at fair value through profit or loss (FVPL). Under IAS 39, all gains and losses on disposal of financial assets were recognised in OCI and recycled to the income statement on disposal. Further under IFRS 9, there is no requirement to consider whether or not there is a significant or prolonged decline in the value of these assets. The adoption of IFRS 9 has resulted in the other reserves in equity being reclassified into retained earnings. At 1 January 2018 the reserve was €642k.

The table below shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group's financial assets as at 1 January 2018. The Group's financial liabilities have been classified at amortised cost.

1 January 2018

In €k	Note	Original classificationunder IAS 39	New classificationunder IFRS 9	Original carryingamount under IAS 39	Carrying amountunder IFRS 9
Financial assets
Trade receivables	14	Loans andreceivables	Amortised cost	1,803	1,803
Receivables fromgaming operations	14	Loans andreceivables	Amortised cost	5,136	5,136
Other debtors	14	Loans andreceivables	Amortised cost	1,677	1,677

1 January 2018

In €k	Note	Original classificationunder IAS 39	New classificationunder IFRS 9	Original carryingamount under IAS 39	Carrying amountunder IFRS 9
Cash, cash equivalentsand pledged cash	15	Loans andreceivables	Amortised cost	92,052	92,052
Financial assets(debt and equityinstruments)	15	Available for sale	FVPL	25,949	25,949
Financial assets – Other	15	Held to maturity	Amortised cost	1,174	1,174
Other investments	13	Fair value throughthe profit and loss	Equity instrumentsat FVOCI	3,041	3,041
Total financial assets				130,832	130,832

2. Expected credit losses

IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Group has applied a combination of the simplified and general approach to determine if it is required to record lifetime expected losses on its financial assets. On transition to IFRS 9, management reviewed the amount written off in previous periods and determined that no additional ECL was required.

3. Hedge accounting

The Group does not hold any instruments which have been designated for hedge accounting. Accordingly, there is no impact on the Group.

3 SEGMENT REPORTING

SEGMENTAL DISCLOSURE PRESENTATION

The Group's reportable operating segments reflect the management structure of the Group, the way performance is evaluated and the way resources are allocated by the Chief Operating Decision Maker (CODM), being the Executive Board of Directors.

We monitor the performance of the Lottery Betting segment based on 'normalised' revenue and EBIT (statutory revenue and adjusted EBIT adjusted for statistically expected prize pay-outs) and actual results for the Lottovate segment. The disclosures included in the operating segment note below are consistent with the Group's internal reporting and 'normalised' performance is given due prominence in the disclosure as this is the way in which we analyse the Group. A fuller description of 'normalisation' is included in the business review section of this report. Included within the note below is a reconciliation between the segmental results used to assess the business units and our consolidated statutory performance where statistically expected pay-outs are replaced with actual pay-outs. Inter-segment transactions are also eliminated as part of this process. Descriptions of the significant reconciling items are also included below the relevant tables.

We have described the composition of the segments in more detail below:

Lottery Betting Segment

The Lottery Betting segment comprises our secondary lottery betting business (secondary lottery), and sales of Instant Win Games products. Its cost base includes direct costs and an allocation of the shared cost base.

We monitor the performance of the Lottery Betting segment based on 'normalised' revenue and EBIT (statutory revenue and adjusted EBIT adjusted for statistically expected prize pay-outs). The disclosures included in the operating segment note are consistent with our internal reporting. 'Normalised' performance is given due prominence in the disclosure as this is the way we analyse our business internally. Included within our note on operating segments is a reconciliation between the segmental results used to assess the lines of business and our consolidated statutory performance where statistically expected pay-outs are replaced with actual cash outflows.

Inter-segment transactions are also eliminated as part of this process.

Lottovate Segment

The Lottovate segment comprises the elements of our business which are focused on the reinvention of the digital lottery experience, operating primary lotteries and helping charities, foundations and communities to unlock new sources of funding through bespoke lottery platforms.

These include our lottery brokerage business in Spain (Ventura24) and our international services business for lottery operators including online operation of the lottery games for charitable organisations, such as ONCE. The B2C business of Ventrua24 was closed in December 2018. In addition, the international business offers digital services to business partners (such as UNICEF Norway) and state lotteries as well as operating its own licensed lotteries through Lottovate. Finally, our Lotto Network brand has helped professional sports clubs and other organisations to raise funds through lottery operations. The Lotto Network brand was closed in 2018. The Lottovate segment's results comprise revenues and costs attributable to the operating activities of Lottovate together with an allocation of the shared cost base.

The Group has considered the requirements of IFRS 5 and concluded that the closed operations in Lotto Network and Ventura24's B2C business do not meet the definition of discontinued operations.

We monitor the performance of the Lottovate segment based on actual results.

ZEAL Ventures

The costs attributable to the operating activities of ZEAL Ventures are not separately disclosed. These costs do not meet the quantitative threshold requirements for separately identifiable segment reporting and are instead proportionally allocated to the Lottery Betting and Lottovate segments.

Business unit segment reporting

2018	LotteryBetting	Lottovate	Businessunit total	Normalisation adjustments	Other adjustments	Statutory
in €k
Revenue from secondary lottery	119,646	_	119,646	(4,377)	186	115,455
Revenue from Instant Win Games	13,562	_	13,562	1,744	_	15,306
Revenue from ticket sales and commission	16,217	7,773	23,990	_	_	23,990
Other operating income	4,391	537	4,928	(202)	175	4,901
Total Operating Performance	153,816	8,310	162,126	(2,835)	361	159,652
EBITDA	56,977	(7,682)	49,295	(2,835)	1,282	47,742
Depreciation/amortisation	(860)	(287)	(1,147)	-	-	(1,147)
Adjusted EBIT	56,117	(7,969)	48,148	(2,835)	1,282	46,595
Exceptional costs	_	_	(8,288)	_	-	(8,288)
EBIT	_	-	39,860	(2,835)	1,282	38,307
Financial result	_	_	_	_	(322)	(322)
ЕВТ	-	-	39,860	(2,835)	960	37,985
Income tax	_	_	_	_	(11,322)	(11,322)
Net profit/(loss)	_	_	39,860	(2,835)	(10,362)	26,663

The principal reconciling items between the aggregated business unit results and the consolidated statutory results are attributable to two main categories:

'Normalisation' adjustments, which bridge the quantum of statistically expected pay-outs, included within the Business unit column to consolidated statutory results (which include actual pay-outs).
Other' adjustments include external revenue generated by Schumann e.K. (which does not form part of either the Lottery Betting or Lottovate segments) and €331k finance income, €204k of finance costs and €449k loss on financial assets.

Business unit segment reporting

2017	LotteryBetting	Lottovate		Normalisation adjustments	Other adjustments	Statutory
in €k
Revenue	139,175	7,637	146,812	(12,725)	208	134,295
Other operating income	6,597	349	6,946	(190)	195	6,951
Total Operating Performance	145,772	7,986	153,758	(12,915)	403	141,246
EBITDA	48,975	(9,399)	39,576	(12,915)	(225)	26,436
Depreciation/amortisation	(956)	(299)	(1,255)	_	-	(1,255)
EBIT	48,019	(9,698)	38,321	(12,915)	(225)	25,181
Financial result	-	_	-	_	50	50
ЕВТ	-	-	38,321	(12,915)	(175)	25,231
Income tax	_	_	_	_	(8,053)	(8,053)
Net profit/(loss)	-	-	38,321	(12,915)	(8,228)	17,178

The principal reconciling items between the aggregated business unit results and the consolidated statutory results are attributable to two main categories:

'Normalisation' adjustments, which bridge the quantum of statistically expected pay-outs, included within the Business unit column to consolidated statutory results (which include actual pay-outs).
'Other' adjustments which include external revenue generated by Schumann e.K. (which does not form part of either the Lottery Betting or Lottovate segments) and €385k finance income and €335k of finance costs.

4 REVENUE

	2018	2017
in €k
Stakes	254,538	241,306
Prizes	(127,531)	(132,125)
Revenue from secondary lottery betting and Instant Win Games	127,007	109,181
Ticket fees	20,500	18,095
Commission	7,244	7,019
Revenue	154,751	134,295

Revenue consists of secondary lottery betting and Instant Win Games products. These products are classified as derivative financial instruments and are disclosed in the Consolidated Income Statement net of VAT, free bets and prizes.

Revenue is also recognised from ticket fees and commissions, which the Group receives for placing bets on behalf of customers. For periods starting 1 January 2018, this revenue is accounted for under IFRS 15, 'Revenue from contracts with customers'.

4.1 CONTRACT BALANCES

The following table provides information about receivables, contract assets and contract liabilities from ticket fees and commission.

	Note	31 December2018	1 January2018
in €k
Trade receivables	14	772	1,803
Contract assets	14	6,852	4,984
Contract liabilities	17	–	(122)

Trade receivables are non-interest bearing and are generally received on terms of 30 days.

Contract assets primarily relate to amounts due from customers, payments systems and lottery companies. They are included within receivables from gaming operations in note 14.

The contract liabilities primarily relate to advanced consideration received from customers in advance of draw results being available or subscription payments received in advance of lottery ticket information being passed on to the lottery organiser. The amount of revenue recognised in the year, which was included in the contract liabilities balance at the beginning of the year was €122k.

The amount of revenue recognised in 2018 from performance obligations satisfied in previous periods was nil.

The increase in the contract asset balance from €4,984k at 1 January 2018 to €6,852k is due to the increase in billings in December 2018 compared to December 2017. This resulted in an increase in the amount due from lottery companies, payment systems and players.

The contract liabilities balance at 1 January 2018 reflects deferred revenue in Ventura24. Ventura24's customer-

facing brokerage business was closed in December 2018 and no more tickets were sold to customers resulting in a nil contract liabilities balance at 31 December 2018. Ventura24 continues to process customer refunds and the Group will continue to hold customer cash not claimed until it meets the definition of a dormant balance per the Groups' accounting policies.

4.2 PERFORMANCE OBLIGATIONS

Ticket Fees

The performance obligation is satisfied when the bet has been placed on behalf of customers. Customer payments are received in advance of the bet being placed.

Commission

The performance obligation is satisfied when the lottery ticket is purchased, the lottery ticket information passed on to the lottery organiser and confirmation of receipt of the information received. Customer payments are received in advance and amounts received are deferred until the performance obligations are met.

5 OTHER OPERATING INCOME

	2018	2017
in €k
Income from hedging transactions	2,980	5,062
Release of dormant customer accounts	431	669
Other	1,490	1,220
Other operating income	4,901	6,951

Income from hedging activities relates to income generated from tickets hedged through the Group's wholly owned subsidiary Ventura24.

The release of dormant customer accounts of €431k (2017: €669k) relates to customer account balances where no activity had been recorded at least in the last 26 months and all procedures have been completed to contact the customer.

The other income, which relates mainly to sublease income for office space, increased due to an increase in income received on the sub lease of the London office. The total amount due under non-cancellable subleases at 31 December 2018 is €1,318k (2017: €1,513k).

6 OTHER OPERATING EXPENSES

	2018	2017
in €k
Marketing expenses	19,666	19,131
Direct costs of operations	44,323	43,365
Other costs of operations	19,701	23,262
Other operating expenses	83,690	85,758

The decrease in other operating expenses is attributable to the following movements in cost categories:

Increase in marketing expenses of €535k. The increased investment in marketing is consistent with our strategy to grow our international business via customer acquisition, specific-ally in the UK.
The €958k increase in direct costs of operations is due to the booking of the €1,909k provision for Austrian gaming duty offset by a reduction in non-deductible VAT of €1,463k, due to one off costs in 2017.
The decrease in other costs of operation of €3,561k, which is primarily due to a €1,161k decrease in legal cost, a result of a reduction in the use of external advisors, and a €875k decrease in freelancer staffing costs, a result of using internal staff to perform projects. A reduction in external recruitment has resulted in €228k of cost savings and the increased use of technology has driven down travel costs by €381k.
The remaining movement is attributable to other movements that are individually immaterial.
Other costs of operations includes fees charged by the auditor, Ernst & Young, LLP, and its affiliates are summarised in the table below.

Auditor's remuneration	2018	2017
in €k
Audit of the financial report of the Group	447	449
Audit of the financial report of the Group's subsidiaries	63	58
Total audit services	510	507
Audit related assurance services¹	35	–
Total audit and audit related assurance services	35	–
Other services relating to corporate finance transactions¹	767	–
Other non-audit services	–	4
Total non-audit related services	767	4
Total auditor remuneration	1,312	511

¹ These costs relate to additional one-off services in relation to the proposed acquisition of Lotto24.

7 EXCEPTIONAL ITEMS

	2018	2017
in €k
Costs associated with closure of operations in Ventura24's B2C business	2,983	–
Transaction costs	3,852	–
Restructuring costs	1,453	–
	8,288	–

COSTS ASSOCIATED WITH CLOSURE OF OPERATIONS IN VENTURA24'S B2C BUSINESS

€2,983k (2017: nil) of costs were incurred in association with the closure of Ventura24's consumer-facing brokerage business. The costs include €2,362k of costs associated with employee severance. The closure of the consumerfacing brokerage business is an event which will not recur and was not expected by management, as such all costs associated with the closure are considered to be exceptional in nature.

TRANSACTION COSTS

On 19 November 2018, the Group announced its intention to acquire Lotto24. Due to the irregular nature of the transaction these costs are considered to be exceptional. Transaction costs of €3,852k (2017: nil) were incurred by the Group. These costs include €2,156k of consulting costs, €767k of non-audit fees, €808k of legal costs, and €121k of public relations costs.

RESTRUCTURING COSTS

Ahead of the acquisition of Lotto24, the Group implemented a restructuring program. The costs include €1,253k of employee severance costs and €200k of other restructuring costs. The costs associated with this program are considered to be exceptional due to them being irregular.

8 FINANCE INCOME AND COSTS

	2018	2017
in €k
Finance income
Other interest and similar income	–	2
Income from other long-term securities and loans	331	383
	331	385
Finance costs
Interest expense and similar charges	(204)	(335)
	(204)	(335)

9 INCOME TAX EXPENSE

Income taxes paid or payable as well as deferred taxes and withholding taxes are recognised within the income taxes line item. The corporate income tax rate in the UK amounts to 19.00% (2017: 19.25%).

In the case of foreign companies, the respective country-specific regulations and tax rates are used for the calculation of current income taxes. The impact of higher foreign tax rates is included as a reconciling item in the reconciliation below.

Deferred taxes under IAS 12 are calculated at the average tax rate at the time the differences are expected to reverse. For the calculation of deferred taxes, the total tax rate for domestic UK tax registered companies amounted to 17% (2017: 17%). In the case of foreign companies, the respective country-specific regulations, enacted and substantively enacted tax rates were used to calculate deferred taxes.

Income statement	2018	2017
in €k
Current taxation
Charge for the year	11,845	8,656
Adjustments in respect of prior years	66	(1,140)
Total current taxation	11,911	7,516
Deferred taxation
Charge for the year	(589)	150
Adjustments in respect of prior years	–	387
Total deferred taxation	(589)	537

Total taxation expense (income statement)	11,322	8,053
Tax rate reconciliation	2018	2017
in €k
Profit before taxation	37,985	25,231
Expected tax charge at standard UK rate of 19.00% (2017: 19.25%)	7,217	4,857
Non-deductible expenses	222	41
Adjustments in foreign tax rates	(38)	292
Adjustments in respect of prior years	66	(753)
Tax loss utilisation	(307)	(128)
Unrecognised tax losses carried forward	4,162	3,946
Recognition of previously unrecognised tax losses carried forward	(250)	–
Foreign exchange	–	(202)

A tax expense of €4,162k (2017: €3,818k) has been incurred during 2018 and is related to tax losses carried forward for which no deferred tax asset is recognised.

Total taxation expense 11,322 8,053

10 PROPERTY, PLANT AND EQUIPMENT

Cost	Officeequipment	Hardware	Office equipmentunder construction	Total
in €k
Balance as at 1 January 2017	3,593	4,815	4	8,412
Additions	842	594	–	1,436
Disposals	–	(4)	–	(4)
Balance as at 31 December 2017	4,435	5,405	4	9,844
Additions	343	379	–	722
Disposals	(10)	(12)	–	(22)
Balance as at 31 December 2018	4,768	5,772	4	10,544

Accumulated depreciation	Officeequipment	Hardware	Office equipmentunderconstruction	Total
in €k
Accumulated depreciation as at 1 January 2017	(2,110)	(4,401)	–	(6,511)
Provided during the year	(405)	(322)	–	(727)
Disposals	–	1	–	1
Accumulated depreciation as at 31 December 2017	(2,515)	(4,722)	–	(7,237)
Provided during the year	(471)	(423)	–	(894)
Disposals	–	12	–	12
Accumulated depreciation as at 31 December 2018	(2,986)	(5,133)	–	(8,119)

Book value	Officeequipment	Hardware	Office equipmentunderconstruction	Total
in €k
As at 31 December 2017	1,920	683	4	2,607
As at 31 December 2018	1,782	639	4	2,425

There are no assets held under finance leases (2017: none).

There are no restrictions on rights of disposal for the above mentioned tangible assets. No assets were pledged as collateral for liabilities.

11 INTANGIBLE ASSETS

Cost	Software	Other software	Licences	Total
in €k
Balance as at 1 January 2017	23,792	7,766	184	31,742
Additions	–	236	–	236
Disposals	–	–	–	–
Balance as at 31 December 2017	23,792	8,002	184	31,978
Additions	–	44	–	44
Disposals	–	–	–	–
Balance as at 31 December 2018	23,792	8,046	184	32,022

Accumulated amortisation	Software	Other software	Licences	Total
in €k
Accumulated amortisation as at 1 January 2017	(23,792)	(7,080)	(68)	(30,940)
Provided during the year	–	(510)	(18)	(528)
Disposals	–	–	–	–
Accumulated amortisation as at 31 December 2017	(23,792)	(7,590)	(86)	(31,468)
Provided during the year	–	(235)	(18)	(253)
Disposals	–	–	–	–
Accumulated amortisation as at 31 December 2018	(23,792)	(7,825)	(104)	(31,721)

Book value	Software	Other software	Licences	Total
in €k
As at 31 December 2017	–	412	98	510
As at 31 December 2018	–	221	80	301

The item 'Software' refers to the value of gaming software. The item 'Other software' contains all other software products including gaming platforms.

There are no restrictions on rights of disposal for the above mentioned intangible assets. No assets were pledged as collateral for liabilities. The remaining useful lives of intangible assets are between one and five years.

12 DEFERRED TAXATION

Deferred taxation movement schedule	2018	2017
in €k
At 1 January	38	575
Credited/(charged) to income statement	589	(537)
At 31 December	627	38

Deferred tax assets	Fixed assetallowances	Tax losses carriedforward	Other temporarydifferences	Total
in €k
At 1 January 2017	415	–	160	575
Charged to income statement	(377)	–	(160)	(537)
At 1 January 2018	38	–	–	38
Credited/(charged) to income statement	(1)	250	340	589
At 31 December 2018	37	250	340	627

The main rate of UK corporation tax was reduced from 20% to 19% from 1 April 2017 and was due to be reduced to 18% from 1 April 2020. These changes were substantively enacted on 26 October 2015. In the 2016 Finance Act, the main rate of Corporation tax was reduced to 17% from 1 April 2020. Royal Assent was received on 15 September 2016. The Group has therefore recognised its deferred tax balances at 17% as this is the rate expected to be in place when the deferred tax asset balances are forecast to be reversed.

Of the deferred tax assets carried by the Group, an amount of €250k (2017: €nil) refers to tax losses carried forward, and an amount of €377k (2017: €38k) to temporary differences.

Total tax losses carried forward amount to €105,584k as of 31 December 2018 (2017: €83,656k). The tax losses predominately arose in the UK, Germany and Spain. The tax losses do not expire. With the exception of €250k relating to Ventura24, deferred tax assets have not been recognised in respect of these losses as there is currently uncertainty as to whether the related entities will generate sufficient taxable profit in the future against which the losses could be utilised.

At 31 December 2018, there were no recognised or unrecognised deferred tax liabilities (2017: €nil) for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries, associates or joint ventures. Management has determined that undistributed profits of its subsidiaries that will be distributed in the foreseeable future are unlikely to have any tax consequences therefore no deferred tax liability has been recorded.

	2018	2017
in €k
Balance as at 1 January	3,041	1,198
Additions	247	1,843
Fair value adjustment through OCI	145	–
Balance as at 31 December	3,433	3,041

ZEAL holds investments in Omaze Inc ('Omaze'), Pick Media Limited ('Pick my Postcode' or 'PMP') (formerly The Free Postcode Lottery), Cloud Canyon Limited ('Wshful') and De Integro Limited ('The Dream Makers'). On adoption of IFRS 9, as the investments are held for long term strategic purposes, they have been designated as fair value through other comprehensive income. In 2017, PMP was held at cost and Omaze was held at fair value through profit or loss.

The Dream Makers

On 19 December 2018, the Group acquired a 10% interest in The Dream Makers which is located in England, United Kingdom. Cash consideration of €132k (£120k) was paid for 10% of the ordinary shares. The Dream Makers is a travel-deal subscription business which gives customers the chance to win amazing holiday experience.

At 31 December 2018, the Group has determined that the cash paid to acquire the investment is equal to the fair value of the business due to the timing of the investment.

Wshful

On 26 July 2018, ZEAL invested €115k (£100k) for a 5% interest in Wshful. Wshful is a lottery syndicator based in London. ZEAL holds an anti-dilution call option to purchase an extra 10% of the shares at any time within five years from the date of the investment.

At 31 December 2018, the Group has determined that the cash paid to acquire the investment is equal to the fair value of the investment and call option due to the timing of the investment.

Omaze

On 1 May 2017, ZEAL secured a cash investment of €1,843k (USD $2,000k) in Los Angeles based start-up Omaze. Omaze is disrupting charitable giving by offering once-in-a-lifetime experiences and exclusive merchandise in support of critical causes. ZEAL received preferred shares representing a 2.5% interest, a Board Observer seat and various rights to protect and extend its shareholding.

Pick My Postcode

In December 2016 the Group acquired for €1,198k (£1,000k), a 10% interest in PMP and an anti-dilution call option to purchase an extra 20% of the shares at any time within five years from the date of the investment.

Valuation of investments

For Omaze and PMP, the fair value of the investments was calculated using a discounted cash flow model to determine the fair value (enterprise value) of the underlying businesses that ZEAL has invested in. The fair value of ZEAL's share of each business has been measured using an option pricing model. The option pricing model allocates the enterprise value of the investment amongst the individual shareholders, to determine the fair value of their investment.

The discounted cash flow uses budgets, provided by our external investments, which show the forecasted earnings before interest and tax for the next 5 years to generate cash flow projections. These budgets are based on past experience and historic trends. The underlying growth rate varies between the investments and is detailed below. After year five a long-term growth rate has been applied in perpetuity. This growth rate is based on estimated longterm growth rates for the markets in which the investments operate. Accordingly, a terminal value has been applied using an underlying long-term growth rate of 1%. The cash flows are discounted to present value using a weighted

average cost of capital ('WACC'). This WACC is considered to appropriately account for the uncertainty of how early start-up businesses will develop.

The key inputs in the Omaze valuation and their sensitivity are shown below:

Valuation technique	Significantunobservable input	Range	Sensitivity of the input to fair value
OPM	WACC	25%	5% increase (decrease) in the WACCwould result in an increase (decrease) infair value of €569k.
	Margin growth	6% to 1% per annum	2% increase (decrease) in the margingrowth would result in an increase(decrease) in fair value of €391k.

The key inputs in the PMP valuation and their sensitivity are shown below:

Valuation technique	Significantunobservable input	Range	Sensitivity of the input to fair value
OPM	WACC	20%	5% increase (decrease) in the WACCwould result in a (decrease) increase infair value of €32k.
	Billings growth	5% to 10% perannum	4% annual change in billings would resultin a (decrease) increase in fair value of€28k.

There was no dividend income from any investment in 2018 (2017: nil). No investments were disposed of during 2018, and there were no transfers of any cumulative gains or losses within equity relating to these investments.

14 TRADE RECEIVABLES AND OTHER CURRENT ASSETS

	2018	2017
in €k
Trade receivables	772	1,803
Total trade receivables	772	1,803
Receivables from lottery companies, payment systems and players	7,312	6,948
Provision for expected credit loss/doubtful debt	(460)	(1,964)
Security retainers	210	152
Receivables from gaming operations	7,062	5,136
Other debtors	1,298	1,677
Prepayments and accrued income	6,554	5,818
VAT receivable	668	394
Other receivables	8,520	7,889
Trade receivables and other current assets	16,354	14,828

All trade receivables, other assets and prepaid expenses are due in less than one year.

At 31 December 2018, an amount of €460k (2017: €1,964k) was provided against player receivables where the initial direct debit transaction failed. The decrease in the provision is due to the Group writing off failed direct debit balances after a period of 3 months.

See note 27.2 for an explanation of the ECL models applied to the trade receivables and other current asset balances, were appropriate.

15 CASH AND FINANCIAL ASSETS

	2018	2017
in €k		Restated
Bank balances	128,846	89,041
Cash on hand	3	5
Pledged cash	4,144	3,006
Cash and pledged cash	132,993	92,052
Equity funds	–	6,800
Fixed income funds	12,894	19,149
Other financial assets	–	1,174
Financial assets	12,894	27,123

In line with IAS 7, investment in equity funds are excluded from the cash and cash equivalents balance. Total cash and cash equivalents at 31 December 2018 is €145,887k (2017 restated: €112,375k). The prior year comparative has been restated to exclude equity funds from cash and cash equivalents. Details of the restatement can be found in note 2.23.

Bank balances mainly comprise term deposits on short-term call and with variable interest rates held at various major European banks.

Included within the bank balances of €128,846k (2017: €89,041k) is an amount of €10,888k (2017: €12,001k) to cover customer liabilities. Pledged cash is €4,144k (2017: €3,006k). This cash is pledged as a requirement of our Spanish, Czech and Norwegian gambling licences.

15.1 FINANCIAL ASSETS

At 31 December 2018, ZEAL held financial assets amounting to €12,894k (2017: €27,123k). These deposits comprised fixed-income funds and equity funds and are broadly spread and of high quality. A change in fair value of a €449k loss (2017: gain of €225k) was recognised in the income statement. Prior to the adoption of IFRS 9, gains and losses on financial assets were recognised in other comprehensive income.

At 31 December 2017 the Group also recorded other financial assets of €1,174k. These have been reclassified to pledged cash at 31 December 2018. The equity funds, fixed income funds and other financial assets are included as 'financial assets' above.

Movements in financial assets in the period are as follows:

	2018	2017
in €k
Balance at 1 January	27,123	19,682
Acquired	–	18,885
Sold	(13,780)	(11,669)
Fair value movement	(449)	225
Balance at 31 December	12,894	27,123

16 OTHER LIABILITIES

Current	2018	2017
in €k
Accrued liabilities	10,133	6,727
Accrued liabilities	10,133	6,727
Liabilities to players and game brokers	11,429	12,293
Liabilities from gaming duty	128	163
Liabilities from gaming operations	11,557	12,456
Employee benefits	925	1,038
VAT	2,567	2,589
Payroll related taxes and social security payable	242	288
Tax and social security payable	2,809	2,877
Total other liabilities – current	25,424	23,098

All other liabilities included in the table above are due in less than one year.

Non-current	2018	2017
in €k
Accrued rent	1,194	1,535
Employee benefits	529	195
Other non-current liabilities	35	35
Total other liabilities – non-current	1,758	1,765

Employee benefits

The Group operates a Long-term Incentive plan arrangement for certain employees. Further details have been disclosed in note 22 to the Consolidated Financial Statements.

All other liabilities included in the table above are due after more than one year.

17 DEFERRED INCOME

Deferred income of €3,098k (2017: €2,105k) relates to payments for gaming orders and stakes received prior to 31 December 2018. In accordance with the Group's accounting policies, revenue can only be recognised on these stakes on the date of the respective draw. Of the deferred income recognised none (2017: €122k) relates to revenue transactions accounted for under IFRS 15.

The Directors expect that all deferred revenue will be released to the Consolidated Income Statement during 2019.

18 PROVISIONS

Current	Opening balance1 January 2018	Utilisation/release	Additions	Closingbalance31 December2018
in €k
Provisions for litigation	837	(657)	259	439
Provisions for closure of Ventura24's B2C business	–	–	2,912	2,912
Provision for severance costs	–	–	990	990
Total current provisions	837	(657)	4,161	4,341
Provision for Austrian gaming duty	–	–	1,909	1,909
Provision for dilapidation	–	–	251	251
Total non-current provisions	–	–	2,160	2,160
Total provisions	837	(657)	6,321	6,501

Provisions for litigation

Provisions for litigation amounting to €439k at 31 December 2018 (2017: €837k) represent management's best estimate of the probable eventual cash outflow that will result from resolution of ongoing legal cases at 31 December 2018. Individual provisions included in provisions for litigation relate to cases that have been in progress for a number of years. It is difficult to predict the timing of any cash outflow that might result from cases awarded against the Group. As such, provisions for litigation have been classified as current liabilities as there is no certainty that any

judgement against the Group (leading to an outflow of cash) would take place in annual periods commencing after 2019.

Provisions for closure of Ventura24's B2C Business

Provisions amount to €2,912k at 31 December 2018 (2017: nil) and represent managements best estimate of the probable eventual cash outflow resulting from the closure of Ventura24's B2C Business. The provision can be broken down between: employee related expenses including redundancy packages and other closure costs. At 31 December 2018, the provision is expected to be spent in the following year as affected employees leave the business.

Provision for severance costs

The severance provision relates to redundancy and other costs associated with the Group's decision to restructure the business ahead of the potential acquisition of Lotto24. At 31 December 2018, the provision is expected to be spent in the following year as affected employees leave the business.

Provision for Austrian gaming duty

The provision for €1,909k at 31 December 2018 (2017: nil) represents management's best estimate of the probable eventual cash outflow resulting from tax investigations. Management expects the outflow of cash to occur after more than one year and has therefore classified the amount as non-current.

Provision for dilapidation

The provision for €251k at 31 December 2018 (2017: nil) represents management's best estimate of the probable eventual cash outflow resulting from the expiry of the Group's office leases. The provision covers the estimated cost of the contractual obligation to return the offices to their state at the origination of the lease.

19 EQUITY

19.1 SHARE CAPITAL

The Company's share capital consists of 8,385,088 ordinary shares issued and fully paid (2017: 8,385,088). Shares have a €1 par value. Each share has the right to dividends and there are no preference shares or restrictions.

19.2 AUTHORISED CAPITAL

On 22 June 2016, the Statutes of the Company were amended such that the Executive Board of ZEAL Network – with the approval of the Supervisory Board – can approve allotment of additional share capital up to a nominal amount of €1,197k. This increase in share capital can be effected by issuing, on one or more occasions, in whole or in part, new €1 par value shares in return for cash or contribution in kind (allotment of shares). The approval to issue additional share capital expires on 21 June 2021.

19.3 SHARE PREMIUM

The balance on the share premium account represents the amounts received in excess of the nominal amount of the ordinary and preference shares. Share premium amounted to €21,578k at 31 December 2018 (2017: €21,578k).

19.4 TREASURY SHARES

In March 2018, a final judgement was handed down by the Hamburg Regional Court in relation to a dispute originally raised in 2015 regarding the transfer of the registered office of ZEAL from Hamburg, Germany, to London, United Kingdom. As a result, qualifying shareholders who held shares in ZEAL on the date that the transfer was resolved became entitled to sell their shares back to ZEAL at a price which was set at €43.34 per share. A Resolution to approve the purchase of these shares by ZEAL was passed at an Extraordinary General Meeting on 27 July 2018. This has resulted in the acquisition of 43,910 treasury shares at a price of €43.34 per share resulting in a purchase price of €1,903k. The acquired treasury shares are treated as a deduction from equity and have reduced distributable reserves.

19.5 EARNINGS PER SHARE

Earnings per share (basic and diluted) was €3.18 (2017: €2.04) per share for the year ended 31 December 2018. In line with the requirements of IFRS, the 2017 EPS has been restated from €2.05 to €2.04 as a result of the purchase of treasury shares by the Group in July 2018, at above market value.

The weighted average number of shares was 8,366,792 (2017: 8,385,088), as a result of the purchase of 43,910 treasury shares in July 2018. In order to calculate the restated 2017 EPS an adjustment factor of 1.0036 was used.

Basic earnings per share is calculated by dividing loss or profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated by dividing loss or profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year (increased to account for the diluting effects from stock options, warrant agreements or any other plans in place at the Statement of Financial Position date, which may lead to the issuance of an additional number of shares in the future). In fiscal year 2018, there was no dilutive effect as there were no such programs (2017: no dilutive effect).

19.6 OTHER RESERVES

Other reserves amount at 31 December 2018 is €227k (2017: (€560k)). In 2017 other reserves represented the cumulative gains and losses (including any related foreign exchange movements) arising from changes in the fair value of available for sale financial assets. On disposal or impairment of available for sale assets, any gains or losses in other comprehensive income were reclassified to the income statement.

On transition to IFRS 9, the Group's financial assets were classified as investments held at fair value through profit or loss (FVPL). As a result, the gains and losses will no longer by recycled to the income statement on disposal and the reserve of €642k has been reclassified to retained earnings.

Other reserves includes; the legal reserve in Ventura24 of €82k (2017: €82k) and the fair value movement in equity instruments (as recorded within other investments) of €145k (2017: nil).

19.7 FOREIGN CURRENCY TRANSLATION RESERVE

The foreign currency translation reserve records amount to €201k (2017: €183k) and relates to exchange differences arising from the translation of the financial statements of foreign operations.

19.8 RETAINED EARNINGS

Retained earnings represent the cumulative income and expenses recorded by the Group since inception. Cumulative net income generated since inception has been derived from transactions settled with qualifying consideration, with the exception of un-realised gains and losses due to foreign exchange.

20 SUBSIDIARIES

The list below includes all subsidiary undertakings. The principal country in which each of the below subsidiary undertakings operates is the same as the country in which each is incorporated. Effective interest is the Group's interest in the equity of the associated entity.

Name and registered office	Country	Principal activities	Nature ofrelationship withZEAL Network	% effective interest
				2018	2017
myLotto24 Limited 1Suite 1, 3rd Floor 11–12 St.James's Square, London,SW1Y 4LB	UnitedKingdom	Bookmaker	Subsidiary	40	40
Tipp24 Services Limited49 Clerkenwell GreenLondon, EC1R 0EB	UnitedKingdom	Lottery	Subsidiary	16	16
Tipp24 Deutschland GmbH1Burchardstrasse 22MBE 31120095 Hamburg	Germany	Lottery	Subsidiary	100	100

Nature of relationship with

Name and registered office	Country	Principal activities	relationship withZEAL Network		% effective interest
Lottovate Deutschland GmbH
Kurze Muehren 1
20095 Hamburg	Germany	Lottery	Subsidiary	100	100
Ventura24 S.L.U. 1
Leganitos 47
28013 Madrid	Spain	Lottery	Subsidiary	100	100
Ventura24 Games S.A. 1
Leganitos 47
28013 Madrid	Spain	Lottery	Subsidiary	100	100
Smartgames Technologies
Limited
Suite 1, 3rd Floor 11–12 St.
James's Square, London,SW1Y 4LB	UnitedKingdom	Technologyservices	Subsidiary	40	40

Lottovate Limited 1
5th Floor One New Change,London, EC4M 9AF	UnitedKingdom	Lottovatebusiness	Subsidiary	100	100

ZEAL International Limited1
5th Floor One New Change,	United			100	100
London, EC4M 9AF	Kingdom	Lottery	Subsidiary
Lottovate Nederland B.V.
Herengracht 1241015 BT Amsterdam	Netherland	Lottovatebusiness	Subsidiary	100	100
Lottovate United States Inc22711 Centerville Road, Suite 400Wilmington,County of New Castle19808 Delaware	United Statesof America	Lottovatebusiness	Subsidiary	100	100

Tipp24 Investment 1 Limited 15th Floor One New Change,	United	Holding
London, EC4M 9AF	Kingdom	company	Subsidiary	100	100
Tipp24 Investment 2 Limited 1
5th Floor One New Change,	United	Holding
London, EC4M 9AF	Kingdom	company	Subsidiary	100	100
Lotto Network Limited 1
5th Floor One New Change,	United	Lottovate
London, EC4M 9AF	Kingdom	business	Subsidiary	100	100
eSailors Limited3
Suite 1, 3rd Floor 11-12 St.James's Square, London, SW1Y	United	Holding
4LB	Kingdom	company	Subsidiary	40	40
Schumann e.K.
Strassenbahnring 11
20251 Hamburg	Germany	Lottery	Subsidiary	–	–
Geonomics Global GamesLimited¹
5th Floor One New Change,	United	Holding
London, EC4M 9AF	Kingdom	company	Subsidiary	100	100

Nature of relationship with

Name and registered office	Country	Principal activities	ZEAL Network	% effec	ctive interest
Geo24 UK Limited5th Floor One New Change,London, EC4M 9AF	UnitedKingdom	Lottery	Subsidiary	100	100
Gratis Lotto LimitedSuite 1, 3rd Floor 11–12 St.James's Square, London,SW1Y 4LB	UnitedKingdom	Lottery	Subsidiary	16	16
myLotto24 Australia PTY LtdOffice 4, Building 5356-366 Bagot Road Millner,Northern Territory, 0812	Australia	Lottery	Subsidiary	40	40
HSS Corp. 4 702 S. Carson Street, Suite 200, Carson City, Nevada 89701	United Statesof America	Lottery	Subsidiary	40	40
myLotto24 South Africa Pty Ltd7 Martin Hammerschlag Way,Foreshore, Cape Town, 8001	South Africa	Lottery	Subsidiary	40	40
myLotto24 IT Platform Ltd 5One Spencer Dock, North WallQuay, Dublin 1	Ireland	Technologyservices	Subsidiary	40	-
Tipp24 Services Ltd (Malta) 693 Mill Street,QORMI QRM 3102	Malta	Supportservices	Subsidiary	16	_
myLotto24 Ltd (Malta) 793 Mill Street,QORMI QRM 3102	Malta	Supportservices	Subsidiary	40	_
ZEAL International Limited (Malta)85 St John Street,Valletta, VLT 1165	8Malta	Lottery	Subsidiary	100	_

<sup>1 These subsidiaries are held directly by ZEAL Network.

2 This subsidiary was dissolved on 27 February 2018.

3 In 2017 eSailors IT Solutions Limited changed its name to eSailors Limited.

4 This subsidiary was dissolved on 9 April 2018. ZEAL Network SE had an indirect interest of 40%.

5 This subsidiary was incorporated on 30 January 2018. ZEAL Network SE has an indirect interest of 40%.

6 This subsidiary was incorporated on 22 January 2018. ZEAL Network SE has an indirect interest of 40%.

7 This subsidiary was incorporated on 22 January 2018. ZEAL Network SE has an indirect interest of 40%.

8 This subsidiary was incorporated on 22 August 2018.

Section 479A audit exemption

Tipp24 Investment 1 Limited, Tipp24 Investment 2 Limited, Lotto Network Limited, Geonomics Global Games Limited, Geo24 UK Limited, eSailors Limited, Gratis Lotto Limited and ZEAL International Limited will take the exemption available by virtue of section 479A of the Companies Act 2006, which exempts them of the requirements of an audit of their individual accounts.

21 PERSONNEL EXPENSES

The table below shows the full time equivalent average number of employees over the year.

SEGMENTAL ANALYSIS

Director and employee numbers	Lottery Betting	Lottovate	Total
2018
Executive Board	–	–	3
General Managers	6	2	8
Employees	160	84	244
Trainees	2	–	2
Temporary personnel	4	1	5
Total	172	87	262

Director and employee numbers	Lottery Betting	Lottovate	Total
2017
Executive Board	–	–	3
General Managers	6	3	9
Employees	163	93	256
Trainees	3	–	3
Temporary personnel	2	1	3
Total	174	97	274

The Executive Board members are not allocated to a particular segment of the Group as they perform work across both the Lottery Betting and Lottovate segment.

During the current and prior year the Group had on average fewer than 250 employees working wholly or mainly in the UK.

Personnel expenses incurred during 2018 are included in the table below:

	2018	2017
in €k
Wages and salaries	24,572	25,696
Pension contributions	641	485
Social security costs	3,624	2,449
Total employee benefit expense	28,837	28,630

These figures include remuneration for the Executive Board, further details of which are included in the Directors' Remuneration Report on pages 45 to[57.

Personnel costs associated with the closure of Ventura24's B2C business and the Group restructure have been disclosed in exceptional items and further detail can be found in note 7. During 2018, €254k of these severance costs were paid and €8k of social security costs paid. The remainder will be paid to employees during 2019.

22 SHARE BASED PAYMENTS

The Group operates a Long-term Incentive plan arrangement for certain employees. The scheme provides a cash payment to the employee based on a specific number of phantom shares at grant date and the share price of ZEAL Network SE at the vesting date. The cash payment is dependent on the achievement of internal and external profitability targets over the two and three-year performance periods and continued employment until the end of the vesting period. The cash payment has no exercise price and therefore the weighted average exercise price in all cases is €nil.

The carrying amount of the liability relating to the Long-term Incentive plan at 31 December 2018 was €1,289k (2017: €1,233k). The total expense recognised for the Long-term Incentive plan was €510k (2017: €825k). Movements in the number of phantom shares awarded can be found below.

	2018	2017
in €k
Outstanding at the beginning of the year	53,148	35,199
Granted during the year	22,305	17,949
Exercised in the year	(14,046)	–
Forfeited in the year	(20,519)	–
Outstanding at the end of the year	40,888	53,148
Exercisable at 31 December	5,217	14,046

The weighted average remaining contractual life of the outstanding awards is 1.42 years (2017: 0.82 years).

The fair value of the awards was calculated using a Monte-Carlo model at the grant date. The fair value is updated at each reporting date as the awards are accounted for as cash settled under IFRS 2 Share-based Payments. External market conditions are incorporated into inputs into the model. The dividend yield and share price volatility is based on ZEAL Network SE historic data and the risk-free rate calculation is based on government bond rates. The inputs used are:

	2018	2017
Risk-free rate	(0.65%)	(0.65%)
Dividend yield	5.0%	4.7%
Share Price Volatility	38.0%	37.0%
Weighted average fair value per phantom share (€)	19.84	21.42

The share price volatility of the Group's TSR is calculated using daily data over a period commensurate to the remaining performance period for the awards.

23 DIVIDENDS

During 2018, a dividend of €1.00 per share (€8,341k) was declared and paid (2017: €8,385k).

Following the announcement of the acquisition of Lotto24, the Executive Board and Supervisory Board are reviewing the Group's dividend policy.

Cash flows from dividends paid are classified under financing activities in the cash flow statement and the dividends paid are deducted from retained earnings in the statement of changes in equity.

24 COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

During 2018, ZEAL expensed rental payments for offices amounting to €2,771k (2017: €3,120k). The future minimum lease payments for the non-cancellable operating leases are as follows:

Minimum lease payment	2018	2017
in €k
Within 1 year	2,218	2,438
>1–5 years	7,234	7,306
>5 years	1,892	2,567
Minimum lease obligations	11,344	12,311

OTHER FINANCIAL COMMITMENTS

In addition, the Group had significant financial commitments arising from other contracts, including cooperation agreements, and insurance contracts. These commitments do not meet the definition of provisions in accordance with IAS 37 'Provisions, contingent assets and contingent liabilities' and have therefore been disclosed as a note to the financial statements. At 31 December 2018 the Group had other commitments payable within one year of €2,200k (€14,764k).

The Group had no financial commitments with a maturity date greater than one year.

CONTINGENT LIABILITIES

There is significant uncertainty as to whether VAT is due in respect of certain services provided by the myLotto24 Sub-Group to customers domiciled in the European Union from 1 January 2015. Furthermore, there is uncertainty in respect of the tax base to be applied in the event that it is ultimately determined that VAT is due on any of these services. Based on a thorough legal assessment, which included a review of the existing legal framework of relevant Member States and existing case law, the Directors consider that the likelihood of outflow of economic resources is not probable and timing of associated financial impact is uncertain. Accordingly, the Directors have not recorded any liability in the Consolidated Financial Statements. It is estimated that in the event that ZEAL is unsuccessful in its defence, the potential financial effect would be €64.6m (2017: €41.3m) exclusive of tax impact. The Group considers its position to be strong. This view has been formed with consideration to independent legal opinions and likely outcomes. Although uncertain, it's expected that an outcome will be known within two to four years. In respect of other taxes and duties, with the exception of those provided in the Group financial statements, the Directors consider it unlikely that any further liability will arise from the final settlement of any such assessments. The Directors will continue to closely monitor any changes.

25 RELATED PARTIES

The members of the Executive Board and Supervisory Board of ZEAL Network, as well as their immediate relatives are regarded as related parties in accordance with IAS 24 'Related party dis-closures'.

Note 20 to the Consolidated Financial Statements provides in-formation about the Group's structure, including details of each subsidiary.

Oliver Jaster is a Member of the Supervisory Board. The operating business of Schumann e.K. was outsourced to a related company of Oliver Jaster, Günther Direct Services GmbH, Bamberg. In return, Günther Direct Services GmbH, Bamberg, received compensation of €114k for the year (2017: €115k). An amount of €41k (2018: nil) was owed to Günther Direct Services GmbH at 31 December 2017, which was paid in full in January 2018.

Jens Schumann is a Member of the Supervisory Board. Jens Schumann is the sole shareholder of Schumann e.K. This structure has existed in comparable form since 2002 and was chosen because class lotteries only issue sales licences at present to natural persons or companies in which neither the liability of the company nor its direct and indirect partners is limited. A cooperation agreement is in place between ZEAL and Schumann e.K., which governs the processing of game participation of class lottery customers by Schumann e.K. Under the terms of the agreement, Schumann e.K. must pay all commissions and other brokerage fees collected in this context to ZEAL. ZEAL provides Schumann e.K. with services in the field of controlling, bookkeeping, marketing and technical services and bears the costs incurred by Schumann e.K. in running its operations. As Schumann e.K. forms part of the ZEAL Group, all charges and income eliminate in full in the Consolidated Financial Statements.

As Jens Schumann operates Schumann e.K. in the interest of ZEAL, ZEAL has undertaken to indemnify him in the event of any personal claims by third parties arising from or in connection with the operation of Schumann e.K. Indemnification is limited to the extent that fulfilment of this indemnification may not cause ZEAL to become insolvent or over-indebted. In his capacity as shareholder of Schumann e.K., Mr Schumann did not receive any remuneration during the year.

The charitable foundation 'Fondation enfance sans frontières', Zurich, owner of the preference shares of myLotto24 Limited and Tipp24 Services Limited, has been identified as a related party. In 2018, dividends of £15k (2017: £15k) were paid by myLotto24 Limited and €15k by Tipp24 Services Limited (2017: £45k) to the Swiss Foundation. An amount of £15k has been accrued by both Tipp24 Services Limited and €15k by myLotto24 Limited relating to the 2018 dividend payable to this Swiss foundation. This is likely to be paid during 2019. Donations were paid by the Group to the Swiss Foundation of €20k by myLotto24 Limited and €20k by Tipp24 Services Limited, during the year (2017: nil).

Please refer to the Remuneration Report for details on Executive Board and Supervisory Board remuneration. A charge of €434k (2017: €562k) has been recognised in the consolidated income statement for the Director's long term incentives.

Key Management Personnel disclosures have been made in the Remuneration Report and note 22 to the Consolidated Financial Statements. Dividends paid to the Directors in the year are disclosed on page 55.

There were no other significant transactions with related parties in the year.

ZEAL operates a decentralised capital management system. All major decisions concerning the financial structure of the Lottovate segment are taken by the Executive Board of ZEAL Network. Capital management activities of the Lottery Betting segment are handled by myLotto24 Limited, with the exception of Tipp24 Services, which operates its own capital management system.

Neither the segments nor the Group as a whole have any externally imposed capital requirements other than the minimum capitalisation rules that apply to subsidiaries in Germany and Spain.

The objective of the capital management policy of all individual segments, and of the Group as a whole, is to maintain investor, creditor and market confidence and sustain future development of the business. Specific principles and objectives of capital management are as follows:

The capital structures of the Lottovate segment and the Lottery Betting segment (together 'the segments') consist of shareholders' equity as none of these segments holds any external debt.
The amount of each segment's surplus equity (i.e. the quantum of equity that exceeds the amount required to secure each segment's stable financial position) is to be used for inorganic acquisitions and the funding of further organic growth in line with the strategic objectives.
ZEAL Network also monitors the capital structure of all segments to ensure that sufficient equity is available to service external dividend payments.
While none of the segments currently holds external debt, in the medium-term, ZEAL Network may also leverage its financial position to secure funding to finance growth or future acquisitions.

The capital capacity and requirements of each segment is reviewed on at least a quarterly basis by the Executive Board and Supervisory Board. The objective of these reviews is to ensure that there is sufficient capital available to ensure that external dividend payments can be made and each segment has sufficient resources available to fund ongoing working capital, investment and acquisition plans.

The risks to which ZEAL is exposed are described in the risk report.

The Group's dividend policy is disclosed on page 116.

27 DISCLOSURES RELATING TO FINANCIAL INSTRUMENTS

27.1 FAIR VALUE

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole:

level 1 quoted (unadjusted) market prices in active markets for identical assets or liabilities;
level 2 valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
level 3 valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

All financial instruments held by the Group at 31 December 2018 are classified as level 1, with the exception of other investments, which are classified as level 3. Other investments have been designated as fair value through other comprehensive income. At 31 December 2018, the fair value of these investments was €3,433k (2017: €3,041k). A discounted cash flow model is utilised to determine the fair value (enterprise value) of the underlying businesses that ZEAL has invested in. The fair value of ZEAL's share of each business has been measured using an option pricing model. The option pricing model allocates the enterprise value of the investment amongst the individual shareholders. Further details can be found in note 13.

For all level 1 financial instruments the carrying amount approximates the fair value and are classified as held at amortised cost, with the exception of financial assets. Financial assets have been designated as fair value through profit or loss. At 31 December 2018, the fair value of these financial assets was €12,894k (2017: €27,123k). Financial assets are quoted and their fair value is based on the price quotations at the reporting date.

During 2018, there were no transfers between level 1 and level 2 fair value measurements. On adoption of IFRS 9, the investment in PMP was transferred into level 3 fair value measurements. On acquisition the investments in Wshful and The Dream Makers were designated as level 3.

27.2 CREDIT RISK

The Group adopted IFRS 9 on 1 January 2018

The scope of the credit risk of ZEAL equals the sum of cash, financial assets, trade receivables and other receivables. The maximum credit risk at the reporting date is the carrying value of cash, short-term financial assets, receivables from gaming operations and trade receivables disclosed in note 14.

Impairment losses on financial assets recognised in profit or loss were as follows:

	2018	2017
in €k
Impairment loss on receivables from gaming operations	1,160	1,569
Impairment loss on trade receivables	–	–
Impairment loss on cash and other financial assets	–	–
Total impairment loss	1,160	1,569

Cash and other financial assets

There may be a default risk both in respect of the cash and financial assets themselves, as well as the related interest accrued.

Due to the high total amount of cash and financial assets held by ZEAL, and the resulting absolute and relative importance, extensive management processes have been established to steer and regularly monitor the Company's investment strategy.

Cash and financial assets are invested in a variety of short-term securities offering as much liquidity and as little volatility as possible, while ensuring broad risk diversification. The overriding objective of the Group's investment strategy is to preserve capital – even at the expense of expected returns.

ZEAL's investment strategy is aimed at spreading and minimising risk by means of multi-dimensional diversification. Firstly, funds are divided into differing investment products, such as short term deposits, highly fungible government bonds of eurozone states and short-term investment fund units. Secondly, we restrict our choice to those investments with good credit ratings.

Impairment on cash has been measured on the 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers that its cash has low credit risk based on the external credit ratings of the counterparties. No expected credit losses ('ECL') has been recognised for cash, as it is not material.

Financial assets are held at fair value through profit or loss and therefore not assessed for impairment.

Trade receivables

Trade receivables primarily relate to amounts due from our partners for services performed on their behalf. Amounts are invoiced monthly and payment is due within 30 days. Impairments on trade receivables have been considered using the simplified lifetime ECL model. An impairment analysis is performed at each reporting date based on past events. At 31 December 2018 the Group has €772k (2017: €1,803k) of trade debtors, due from one party (2017: two parties). They are current and none is overdue (2017: nil). This is consistent with past loss patterns and no provision has been recorded.

On transition to IFRS 9, management reviewed the amount written off in previous periods and determined that no adjustment was required.

Receivables from gaming operations

The Group mainly collects the amounts owed by customers directly, via direct debit or credit card. Missing amounts from such returned direct debits or credit card charges are charged directly to 'Other operating expenses'.

The Group generates receivables from lottery organisers for the winnings of its customers, which are passed on directly to the winners upon receipt. Due to the credit standing of the lottery organisers, the Group does not expect any significant default on payment.

Receivables from payment systems such as credit card companies entail the risk that the Group's customers themselves fail to meet their payment obligations. This cost is recognised directly in the income statement in the event of payment default by a customer.

At 31 December 2018 €460k (2017: €1,964k) of customer direct debits or credit card payments were fully provided against. Of the €1,964k provided for at 31 December 2017, the Group has not recovered any of the balance and the full amount was written off during 2018. The Group provides against failed payments as they occur. Efforts to recover the amounts are continued for 3 months, if they not been recovered after this then they are fully written off. The Group has considered this in determining the appropriate level of lifetime credit losses for amount owed by customers.

	2018	2017
in €k
Balances at 1 January per IFRS 9 (2018) and IAS 39 (2017)	1,964	395
Net re-measurement of loss allowance	1,620	1,569
Amounts written off	(3,124)	–
Balance at 31 December	460	1,964

Contingent assets

There are no contingent assets.

27.3 LIQUIDITY RISK

Due to the sufficiency of its liquid assets, ZEAL is not exposed to any significant liquidity risk. Even in the case of significant restrictions of business against the backdrop of regulatory developments, ZEAL has sufficient liquidity to service its liabilities at any time. Financial liabilities are mainly due immediately and do not accrue interest.

In order to limit the particular risk of high jackpot pay-outs in the Lottery Betting segment, myLotto24 Limited conducts hedging transactions which transfer of payment obligation risks to catastrophe bonds/preference shares via an ILS vehicle.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments:

Year ended 31 December 2018	Within 1 year	Within 1-3 years	Within 3-5 years	Over 5 years	Total
in €k
Trade payables	3,425	–	–	–	3,425
Other liabilities	21,562	1,229	–	–	22,791
Financial liabilities	106	–	–	–	106
Total	25,093	1,229	–	–	26,322

Year ended 31 December 2017	Within 1 year	Within 1-3 years	Within 3-5 years	Over 5 years	Total
in €k
Trade payables	5,510	–	–	–	5,510
Other liabilities	20,058	1,765	–	–	21,823
Financial liabilities	106	–	–	–	106
	25,674	1,765	–	–	27,439

In addition to the amounts presented in the tables above, there are items excluded from other liabilities, as they are not considered a contractual financial liability. This includes VAT of €2,567k (2017: €2,589k), gaming duty of €128k (2017: €163k) and payroll related taxes and social security of €242k (2017: €288k).

27.4 INTEREST RATE RISK

ZEAL invests the majority of its funds in a combination of fixed term deposits. For these funds, which are mainly held in liquid or short-term investments, there is a general risk from changing interest rates. A sensitivity analysis was conducted for the portfolio of cash and financial assets held on 31 December 2018 with an interest rate increase of 100 basis points. Assuming no changes are made to the portfolio in response to the interest rate increase, there would be a rise in interest income of €1,459k (in a simplified calculation). Under consideration of the duration of those investments currently in the portfolio, there would be an expected reduction of this interest income of €1k. The overall effect, therefore, would be an increase in interest income of €1,458k (2017: €1,190k).

27.5 CURRENCY RISK

The Company is exposed to a currency risk as a result of a range of exchange rates. The risk arises from payments received and made in foreign currency, which differ from the Company's functional currency and are not always offset by payments in the same currency of the same amount and with the same maturities.

For the presentation of currency risks, IFRS 7 requires sensitivity analyses, which display the effects of hypothetical changes of the relevant risk variables on earnings and equity. In order to determine the currency risk, a fluctuation of 10% of the Euro against currencies where the earnings of the Company are exposed to was assumed at 31 December 2018.

On the basis of this assumption, a 10% increase in the value of the Euro against the British Pound, Norwegian Krone, South African Rand and the US Dollar would result in a positive effect of €314k (2017: €1,012k) on earnings. A devaluation of 10% would result in a negative effect of €321k (2017: €720k) on earnings.

In the year ended 31 December 2018 there was a gain from foreign exchange movements on financial instruments of €617k (2017: loss of €422k).

The financial assets currently held do not bear any material currency risk.

28 EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE

The Group published its offer document for the voluntary public takeover offer of the shares of Lotto24 on 31 January 2019. The acceptance period started on that date and Lotto24 shareholders have until 10 April 2019 to tender their shares. In February 2019, the Group announced that the Lower Saxony Ministry of the Interior had granted Lotto24 a supplement to its existing brokerage permit. This supplement allows for lottery tickets to be sold via the domains of Tipp24 on behalf of the German state lottery companies. This means a significant condition of the completion of the public takeover offer of Lotto24 has now been satisfied.

There were no other material subsequent events that require adjustment or disclosure in the financial statements for the financial year ended 31 December 2018 to the date of issue of this report.

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ZEAL NETWORK SE

OPINION

In our opinion:

ZEAL Network SE's Group financial statements and Parent Company financial statements (the 'financial statements') give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 December 2018 and of the Group's profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the Group financial statements, Article 4 of the IAS Regulation.

We have audited the financial statements of ZEAL Network SE which comprise:

Group	Parent company
Consolidated income statement for the year to 31 December2018	Statement of financial position as at 31December 2018
Consolidated statement of comprehensive income for the yearthen ended	Statement of cash flows for the year then ended
Consolidated statement of financial position as at 31December 2018	Statement of changes in equity for the year thenended
Consolidated statement of cash flows for the year then ended	Related notes A to K to the financial statements
Consolidated statement of changes in equity for the year theended
Related notes 1 to 28 to the consolidated financial statementsincluding a summary of significant accounting policies

The financial reporting framework that has been applied in the preparation of the Group and Parent Company financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report below. We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

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

CONCLUSIONS RELATING TO GOING CONCERN

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group's or the Parent Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date of approval when the financial statements are authorised for issue.

OVERVIEW OF OUR AUDIT APPROACH

Materiality	Overall Group materiality of €1,260k, which represents 0.5% of the Group's stakes.Materiality for our 2017 audit was €1,206k, also based on 0.5% of the Group's stakes.
Audit scope	The components where we performed full or specific scope audit procedures accounted for99.9% of the Group's stakes, 99.7% of the Group's revenue and 95.7% of the Group's totalassets.
Key auditmatters	German VATLegal and regulatory riskInappropriate revenue recognition

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Risk	Our response to the risk	Key observations communicated
		to the Audit Committee

German VAT

There is significant uncertainty as to whether VAT in Germany is due in respect of certain of the Group's products. This matter is subject to an ongoing tax dispute to determine whether VAT is due and on what basis it would be calculated. The amount could be material and there is a risk it is not appropriately provided for or disclosed in the financial statements.

Management judgement is required to determine the likely outcome of the ongoing tax dispute in relation to this matter.

For further details refer to the Audit

We obtained and read the Group's correspondence with relevant tax authorities to understand the Group's position on this matter.

We obtained and read the opinions of the Group's legal advisers on the likelihood of VAT in Germany being due, the basis for calculating any VAT, and the likely outcome of the ongoing tax dispute in relation to this matter.

We discussed the above with management and its legal advisers, with support from our German tax specialists. Based on our experience of the Group and the betting and

Management has performed sufficient, appropriate procedures to conclude on the likelihood of the Group's products being subject to VAT in Germany.

We agreed with management's conclusions that whilst it is not considered probable the Group's products are subject to VAT in Germany, it is possible.

An appropriate contingent liability disclosure has been made in the financial statements

Committee Report (page 42-44); Accounting policies (page 79-95); and Note 24 of the Consolidated Financial Statements (page 116- 117)

gaming industry, and after consideration of the correspondence referred to above and similar cases, we challenged the assumptions made by management.

We assessed the appropriateness of amounts presented in the contingent liability disclosure in the financial statements and whether this disclosure was compliant with the requirements of IAS 37.

Scope of our procedures We performed full scope audit procedures over all the Group's products that could be subject to VAT in Germany.

Risk Our response to the risk Key observations communicated to the Audit Committee

Legal and regulatory risk

Betting and gaming is a highly regulated industry in which compliance with legislation and licensing requirements is critical to the continued operation of the business. The Group holds licences in a number of countries. The Group's cross border operations expose it to regulations across several jurisdictions.

This regulation is developing on an ongoing basis and can often also be subject to interpretation. The Group is subject to various legal cases in Germany from lottery operators, challenging the Group's marketing activities and its right to operate its businesses. Given the legal cases relating to the Group's operations in Germany, management judgement is required to determine the impact on the viability of the business. Judgement is also required in calculating the amount of any provisions related to these cases.

The Group's subsidiary Ventura24 S.L.U. (Ventura24), was subject to a legal case in Spain, resulting from a challenge by the Spanish Gambling Commission (DGOJ) that it required a licence to manage the online purchase of lottery products. The Spanish Supreme Court determined, We understood the Group's processes and related controls for the identification and mitigation of legal and regulatory risks and assessed the design and operation of the controls.

We read key correspondence and legal opinions received by the Group on legal and regulatory matters, including the Group's external lawyers' assessments on the legality of the Group's continuing operations, to understand any impact on the consolidated financial statements and the viability of the Group's operations.

For the legal cases in Germany we involved our legal specialists to assist us in under-standing and challenging management's judgements on the expected outcome.

We involved our legal specialists in Spain to assist us in understanding the impact of the Supreme Court ruling.

We assessed the appropriateness of any provisions recognised by the Group in relation to this risk.

Scope of our procedures Our procedures to address this risk We agree with management that there is no material impact on the Group's ability to continue its operations for a period of at least 12 months from the date of approval of the financial statements. Sufficient provisions were recognised by the Group and the disclosures in the financial statements are appropriate.

in October 2018, that a licence is required. As such a licence has not been granted in the past and is unlikely to be granted in the future, Ventura24 closed its consumer facing business on 26 December 2018. The DGOJ has the right to start sanction proceedings against Ventura24 and potentially fine the Company for operating without a licence, and management judgement is therefore required to determine the likelihood of such proceedings and the appropriate provision for a potential fine.

For further details refer to the Audit Committee Report (page 42-44); Accounting policies (page 79-95) and Note 18 of the Consolidated Financial Statements (page 110)

related to the legal cases in Germany from lottery operators and the legal case in Spain resulting from the challenge by the DGOJ.

Risk Our response to the risk Key observations communicated to the Audit Committee

Inappropriate revenue recognition

Total operating performance ('TOP'), comprising revenue and other operating income, is one of the Group's key performance indicators and is material to the financial statements.

Whilst the vast majority of the Group's TOP involves little or no management judgement there is a risk that manual journal adjustments to revenue or other operating income could be recorded.

There is also a risk that free bets are not appropriately classified as a deduction from revenue.

For further details refer to the Audit Committee Report (page 42-44); Accounting policies (page 79-95); and Note 4 of the Consolidated Financial Statements (page 98-99). We gained an understanding of and tested the processes and controls management has in place around the recording of revenue, including recording manual journal adjustments and classification of free bets.

We gained an understanding of, with support from our IT specialists, the key IT controls over the recording of revenue.

We tested the appropriateness of journal entries impacting revenue with a focus on unusual journals such as those posted manually or with unexpected account pairings.

We identified and verified the classification, quantum and completeness of free bets given by the Group through testing of relevant financial and IT controls and through journal entry testing.

We performed correlation data analysis over the Group's revenue journals to identify how much of the revenue is converted to cash, to isolate and assess any non-standard revenue transactions, and to assess if all revenue transactions have been recorded.

Scope of our procedures

We performed audit procedures over revenue in all of the Group's full scope components.

Based on the procedures we performed, we did not identify any evidence of material misstatements in the revenue recognised in the year and no matters in respect of inappropriate manual journals were identified.

TAILORING THE SCOPE

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment and other factors such as the legal and regulatory environment when assessing the level of work to be performed at each entity.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the 26 reporting components of the Group, we determined that six components covering activities within the United Kingdom and Germany, represented the principal business units within the Group.

Of the six components selected, we performed an audit of the complete financial information of four components ('full scope components') which were selected based on their size or risk characteristics. For the remaining two components ('specific scope component'), we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile.

The reporting components where we performed audit procedures accounted for 99.9% (2017: 99.9%) of the Group's stakes, 99.7% (2017: 94.8%) of the Group's revenue and 96.0% (2017: 91.4%) of the Group's total assets. For the current year, the full scope components contributed 99.9% (2017: 99.9%) of the Group's stakes, 95.1% (2017: 94.8%) of the Group's revenue and 90.7% (2017: 89.6%) of the Group's total assets. The specific scope components contributed 0.0% (2017: 0.0%) of the Group's stakes, 4.6% (2017: 0.0%) of the Group's revenue and 5.3% (2017: 1.8%) of the Group's total assets. The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group.

The remaining 20 components together represent less than 1% of the Group's stakes. For these components ('review scope components'), we performed other procedures, including analytical review, testing of consolidation journals and intercompany eliminations and foreign currency translation recalculations to respond to any potential risks of material misstatement to the Group financial statements.

The charts aside illustrate the coverage obtained from the work performed by our audit team.

CHANGES FROM THE PRIOR YEAR

We have one additional specific scope component compared to the prior year. We brought this component into scope to ensure appropriate coverage of matters relating to the legal and regulatory risk described above.

INVOLVEMENT WITH COMPONENT TEAMS

All audit work on full and specific scope components performed for the purposes of the audit was undertaken by the Group audit team.

OUR APPLICATION OF MATERIALITY

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

MATERIALITY

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Group to be €1,260k (2017: €1,206k), which is 0.5% (2017: 0.5%) of stakes. We used stakes as it is considered to be the primary area of focus of the Group's stakeholders.

We determined materiality for the Parent Company to be €1.260k (2017: €568k), which is 0.5% of the Group's stakes (2017: 1% of total assets). Group materiality is appropriate for the Parent Company as its primary activity is being the holding Company for the overall Group activities.

PERFORMANCE MATERIALITY

The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality

On the basis of our risk assessments, together with our assessment of the Group's overall control environment, our judgement was that performance materiality was 75% (2017: 75%) of our planning materiality, namely €945k (2017: €904k). We have maintained performance materiality at this percentage reflecting the results of our testing of the Group's systems and processes and historical audit findings

REPORTING THRESHOLD

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of €63k (2017: €60k), which is set at 5% of materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

OTHER INFORMATION

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion, the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal requirements

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit

RESPONSIBILITIES OF DIRECTORS

As explained more fully in the directors' responsibilities statement set out on page 61, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group and Parent Company's abilities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD

The objectives of our audit, in respect to fraud, are: to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.

Our approach was as follows:

We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant frameworks which are directly relevant to specific assertions in the financial statements are those that relate to the reporting framework (IFRS and the Companies Act 2006) and the relevant tax compliance regulations in the jurisdictions in which the Group operates. In addition, we concluded that there are certain significant laws and regulations which may have an effect on the determination of the amounts and disclosures in the financial statements being the listing requirements of the Frankfurt Stock Exchange, online gaming regulation in the jurisdictions in which the Group operates and money laundering regulations.
We understood how ZEAL Network SE is complying with those frameworks by making enquiries of management and those responsible for legal and compliance procedures. We corroborated our enquiries through our review of board minutes, papers provided to the Audit Committee and correspondence with regulatory bodies.
We assessed the susceptibility of the Group's financial statements to material misstatement, including how fraud might occur by meeting with management from various parts of the business to understand where it considered there was susceptibility to fraud. We also considered performance targets and their influence on efforts made by management to manage earnings or influence the perceptions of analysts. We considered the programs and controls that the Group has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those programs and controls. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk.
Based on this understanding we designed our audit procedures to identify non-compliance with relevant laws and regulations. Our procedures involved journal entry testing, with a focus on manual consolidation journals and journals indicating large or unusual transactions, taking into account our understanding of the business; enquiries of those at all full and specific scope locations responsible for legal and compliance procedures, Group management and all full and specific scope management; and focused testing, as referred to in the key audit matters section above.
The Group operates in the gaming industry which is a highly regulated environment. The senior statutory auditor reviewed the experience and expertise of the engagement team to ensure that the team had the appropriate competence and capabilities, which included the use of a specialist where appropriate.
As the gaming industry is highly regulated, we have obtained an understanding of the regulations and the potential impact on the Group and in assessing the control environment we have considered the compliance of the Group with these regulations. These audit procedures included reading correspondence between the Group and regulatory bodies.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

OTHER MATTERS WE ARE REQUIRED TO ADDRESS

Ernst and Young Germany was appointed by the Company on 17 March 2003 to audit the financial statements for the year ending 31 December 2002 until 18 November 2014, when Ernst & Young UK was appointed to audit the 31 December 2014 year end and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments since ZEAL Network SE became a Public Interest Entity for Ernst & Young UK is 5 years (a combined total of 13 years for Ernst & Young Germany and Ernst & Young UK).
The non-audit services prohibited by the FRC's Ethical Standard were not provided to the Group or the Parent Company and we remain independent of the Group and the Parent Company in conducting the audit.
The audit opinion is consistent with the additional report to the Audit Committee.

USE OF OUR REPORT

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Cameron Cartmell (Senior statutory auditor) for and on behalf of Ernst & Young LLP Statutory Auditor London 20 March 2019

Notes:

1. The maintenance and integrity of the ZEAL Network SE website is the responsibility of the directors; the work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Audited Consolidated Financial Statements of ZEAL Network SE as of and for the fiscal year ended 31 December 2017 (prepared in accordance with IFRS)

CONSOLIDATED INCOME STATEMENT FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2017

		2017	2016
in €k	Note
Revenue	4	134,295	112,935
Other operating income	5	6,951	26,703
Total Operating Performance (TOP)		141,246	139,638
Personnel expenses	23	(28,630)	(26,705)
Other operating expenses	6	(85,758)	(70,405)
Marketing expenses		(19,131)	(14,830)
Direct costs of operations		(43,365)	(33,909)
Other costs of operations		(23,262)	(21,666)
Exchange rate differences		(422)	(1,304)
Amortisation/depreciation on intangible assetsand property, plant and equipment		(1,255)	(2,166)
Gain on liquidation of subsidiary		–	238
Loss on acquisition	7.2	–	(1,340)
Result from operating activities (EBIT)		25,181	37,956
Finance income	8	385	390
Finance costs	8	(335)	(237)
Impairment of convertible loan	7.1	-	(1,598)
Results from financing and investing activities		50	(1,445)
Profit before income tax		25,231	36,511
Income tax expense	9	(8,053)	(10,560)
Profit attributable to the equity shareholders of theCompany		17,178	25,951
Earnings Per share for profit attributableto ordinary equity holders of the Company		€	€
Basic and diluted Earnings Per Share (in €/share)	21	2.05	3.09

The above Consolidated Income Statement should be read in conjunction with the accompanying notes 1 to 30.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2017

	2017	2016
in €k
Profit for the year	17,178	25,951
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of available-for-sale financialassets	225	(227)
Exchange differences on translation of foreignoperations	40	143
Other comprehensive income/(loss) for the year,net of tax	265	(84)
Total comprehensive income attributable to theequity shareholders of the Company	17,443	25,867

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes 1 to 30.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

		2017	2016
ASSETS in €k	Note
Non-current assets
Property, plant and equipment	10	2,607	1,901
Intangible assets	11	510	802
Deferred tax assets	12	38	575
Other investments	13	3,041	1,198
Other assets and prepaid expenses		438	201
Total non-current assets		6,634	4,677
Current assets
Trade and other receivables	14	1,803	755
Income tax receivables		474	9
Other current assets and prepaid expenses	15	13,025	12,835
Short-term loan	16	–	3,075
Financial assets	17	27,123	19,682
Cash and pledged cash	17	92,052	94,983
Total current assets		134,477	131,339
TOTAL ASSETS		141,111	136,016

	2017	2016
Note

18	1,765	2,199
	1,765	2,199

	5,510	5,052
18	23,098	22,545
	106	123
19	2,105	2,251
	1,074	5,952
20	837	336
	32,730	36,259

21	8,385	8,385
21	21,578	21,578
21	(560)	(785)
21	183	143
21	77,030	68,237
	106,616	97,558
		136,016
		141,111

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes 1 to 30. These financial statements were approved by the Board of Directors on 21 March 2018 and were signed on its behalf by:

Dr. Helmut Becker Jonas Mattsson Susan Standiford Member of Executive Board Member of Executive Board Member of Executive Board

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2017

	2017	2016
in €k
Profit from continuing operations before tax	25,231	36,511
Adjustments for
Depreciation and amortisation of non-current assets	1,255	2,166
Net loss on sale of non-current assets	1	–
Finance income	(385)	(390)
Finance costs	335	237
Impairment of convertible loan	–	1,598
Gain on liquidation of subsidiary	–	(238)
Loss on acquisition	–	1,340
Acquisition of GGGL and Geo24, net of cashacquired	–	(623)
Other non-cash changes	298	234
Changes in
Trade and other receivables	(1,048)	9,487
Other assets and prepaid expenses	(427)	(641)
Trade payables	458	39
Other liabilities	119	(980)
Financial liabilities	(17)	10
Deferred income	(146)	(1,726)
Provisions	501	(718)
Interest received	385	390
Interest paid	(335)	(237)
Income taxes paid	(12,819)	(12,718)
Cash flow from operating activities	13,406	33,741

	2017	2016
in €k
Cash flow from investing activities
Acquisition of intangible assets	(236)	(240)
Acquisition of property, plant and equipment	(1,436)	(460)
Proceeds from the sale of property, plant andequipment	4	–
Payments for acquisition of investment	(1,843)	(1,198)
Receipt on liquidation of subsidiary	–	238
Contributions to associated companies	–	(1,598)
Short-term loan	3,000	–
Net cash outflow from investing activities	(511)	(3,258)

Cash flow from financing activities
Dividends paid to the Company's shareholders	(8,385)	(23,478)
Net cash outflow from financing activities	(8,385)	(23,478)
Net increase in cash, pledged cash and short-termfinancial assets	4,510	7,005
Cash, pledged cash and short-term financial assetsat the beginning of the year	114,665	107,660
Cash and cash equivalents at the end of thefinancial year	119,175	114,665
Composition of cash and cash equivalents
Cash and pledged cash	92,052	94,777
Short-term financial assets	27,123	12,883
Cash and cash equivalents at the end of thefinancial year	119,175	107,660

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes 1 to 30.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD 1 JANUARY TO 31 DECEMBER

					Currencytranslation
	Subscribedcapital	Sharepremium	Otherreserves	Retainedearnings	adjustments	Totalequity
in €k
Balance at 1 January 2016	8,385	21,578	(558)	65,764	–	95,169
Profit for the year	–	–	–	25,951	–	25,951
Other comprehensiveincome	–	–	(227)	–	143	(84)
Total comprehensiveincome for the year	–	–	(227)	25,951	143	25,867
Transactions with owners intheir capacity as owners
Dividends paid	–	–	–	(23,478)	–	(23,478)
As at 31 December 2016	8,385	21,578	(785)	68,237	143	97,558
Balance at 1 January 2017	8,385	21,578	(785)	68,237	143	97,558
Profit for the year	–	–	–	17,178	–	17,178
Other comprehensiveincome	–	–	225	–	40	265
Total comprehensiveincome for the year	–	–	225	17,178	40	17,443
Transactions with owners intheir capacity as owners
Dividends paid	–	–	–	(8,385)	–	(8,385)
As at 31 December 2017	8,385	21,578	(560)	77,030	183	106,616

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes 1 to 30.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

ZEAL Network SE ('the Company' or 'ZEAL Network') was founded in Germany in 1999. It subsequently transferred its registration to the UK in February 2014 under the Company Number SE000078. The Company's shares are listed in the Prime Standard segment of the Frankfurt Stock Exchange.

The consolidated financial statements of ZEAL Network SE (collectively 'ZEAL Group' or 'the Group') for the year ended 31 December 2017 were authorised for issue in accordance with a resolution of the Executive Board and subsequently forwarded to the Supervisory Board for examination and adoption on 21 March 2018.

The date of the statement of financial position is 31 December 2017. The financial year ended 31 December 2017 covers the period from 1 January 2017 to 31 December 2017.

2 ACCOUNTING POLICIES

2.1 BASIS OF PREPARATION

The consolidated financial statements of ZEAL Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), and the Companies Act 2006 applicable to companies reporting under IFRS. The Consolidated Financial Statements have been prepared under the historical cost convention, except for the revaluation to fair value of the available-for-sale financial assets as described in the accounting policies below.

The financial statements are prepared on a going concern basis. The Directors have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that ZEAL Group has adequate resources to continue in operation for the foreseeable future. This assessment is based on the fact that the Group held €92.1m in cash and €27.1m in short-term financial assets at the year-end (2016: €95.0m and €19.7m in cash and short-term deposits, respectively). As the Group expects to deliver revenue, positive cash inflows and profit growth in the years ahead, the Directors have adopted the going concern basis in preparing the Consolidated Financial Statements.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. Actual results could differ from those estimates.

Unless otherwise stated monetary amounts are denominated in Euros rounded to the nearest thousand.

2.2 RECENT ACCOUNTING DEVELOPMENTS

New standards, amendments and interpretations of existing standards adopted by the Group The following standards, interpretations and amendments apply for the first time to the financial reporting period commending on or after 1 January 2017 but have had no material impact on the consolidated results of operations or financial position of the Group:

Amendments to IAS 12, 'Income Taxes' – Recognition of Deferred Tax Assets for Unrealised Losses.

Amendments to IAS 7, 'Statement of Cash Flows' Disclosure Initiative.
Annual improvement processes (AIP) 2014–2016 IFRS 12, 'Disclosure of Interest in Other Entities'.

New standards, amendments and interpretations of existing standards that are not yet effective and have not been early adopted by the Group

The following standards and revisions listed below will be effective for future accounting periods beginning on or after 1 January 2018:

FRS 2, 'Classification and measurement of share-based payment transactions' is effective from 1 January 2018.
Annual improvement processes (AIP) 2014–2016 to IFRS 1 'First-time Adoption of International Financial Reporting Standards' concerning deletion of short-term exemptions for first-time adopters is effective from 1 January 2018.
IFRIC 22, 'Foreign Currency Transactions and Advance Consideration' is effective from 1 January 2018.
IFRIC Interpretation 23, 'Uncertainty over Income Tax Treatments' is effective from 1 January 2019.

The Directors have considered the impact of the following standards in further detail, due to the potential impact these changes could have on the Group.

IFRS 15, 'Revenue from contracts with customers'

Nature of change

IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IAS 18 and IAS 11. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Income from financial instruments will continue to be recognised under IAS 39 or IFRS 9.

Assessment

The Group has adopted the new standard on the required effective date. During 2017, the Directors performed an assessment of the impact that the adoption of IFRS 15 will have on the Group's Consolidated Financial Statements.

Revenue generated from secondary lottery betting and instant win games For secondary lottery betting and instant win game products IFRS 15 will not have any impact on the recognition or timing of the Group's revenue recognition. All material revenue streams are accounted for under IAS 39 (to be replaced by IFRS 9) rather than IFRS 15.

Revenue generated from commissions and fees

Ticket fee income is recognised where an affiliate entity of the Group acts an agent of individual customers brokering bets on the outcome of lotteries and instant win games. Under IFRS 15, the Group will continue to recognise revenue as an agent based on the net fair value of consideration received or receivable. The ticket fee will be recognised at the point in time when the bets have been brokered, the lottery ticket information has been sent to the bookmaker and confirmation of receipt of the information has been received. As a result there is no change in the quantum or timing to be recognised under IAS 18 and IFRS 15.

For the Lottovate segment revenue is primarily recognised from commissions, which the Group receives for placing bets on behalf of customers. Under IFRS 15, the Group will continue to recognise revenue as an agent based on the net fair value of consideration received or receivable. Revenue will continue to be recognised at the point in time when the bets have been made, the lottery ticket information is passed on to the lottery organiser and confirmation of receipt of the information has been received. There will be no change in the quantum or timing of revenue recognised under IFRS 15 as opposed to IAS 18.

IFRS 15 also provides presentation and disclosure requirements, which are more detailed than under IAS 18 and IAS 11. The presentation requirements represent a change from current practice and increase the volume of potential disclosures required in financial statements. The Group has assessed that with the exception of additional disclosures on first time application, there will be no significant changes in the level of disclosure following the adoption of this standard.

IFRS 9, 'Financial Instruments'

Nature of change

Assessment

The Group has adopted the new standard on the required effective date. During 2017, the Directors performed an assessment of all three aspects of IFRS 9.

The impact on the Group is broadly split into three areas:

1.Classification and measurement

The Group accounts for one of its Other Investments at historical cost under IAS 39. On adoption of IFRS 9, this investment will be measured at fair value in accordance with IFRS 13. As this investment is not held for trading, the Group is permitted to elect irrevocably to present gains and losses on Other Investments in Other Comprehensive Income (OCI).

At 31 December 2017, the Group had €26.0m (2016: €17.5m) of available-for-sale financial assets, which are not held for trading. On adoption of IFRS 9, the Group plans to elect irrevocably to present gains and losses on these assets in OCI. Presently under IAS 39, all gains and losses on these assets are recycled to the Income Statement on disposal. Further under IFRS 9, there is no requirement to consider whether or not there is a significant or prolonged decline in the value of these assets. If the fair value of the investment were to decline, this decrease would be recorded as a reduction in equity through OCI.

There will be no impact on the Group's accounting for financial liabilities as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss. The Group does not have (and does not expect to have) any such liabilities.

2.Expected credit losses

IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Group expects to apply a combination of the simplified and general approach and record lifetime expected losses on all of its financial assets. Based on the assessments undertaken, the Group does not expect an increase in the loss allowance for any financial assets held at amortised cost.

3.Hedge accounting

The Group does not hold any instruments which have been designated for hedge accounting. Accordingly, there will be no impact on the Group.

The new standard also introduces expanded disclosure requirements and changes in presentation. These changes will alter the nature and extent of the Group's disclosures about its financial instruments, particularly in the year of the adoption of the new standard. Disclosure requirements on transition include:

The original measurement category and carrying amount determined in accordance with IAS 39.
The new measurement category and carrying amount determined in accordance with IFRS 9.
Qualitative information to provide an understanding of how the classification requirements in IFRS 9 were applied to those financial assets whose classification has changed as a result of applying IFRS 9.

IFRS 16, 'Leases'

Nature of change

IFRS 16 was issued in February 2016. It will result in almost all leases being recognised in the Statement of Financial Position, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change.

IFRS 16 is effective for annual periods beginning on or after 1 January 2019, with early application permitted. The Group plans to adopt the new standard on the required effective date using the full retrospective method.

Preliminary Assessment

The standard will affect primarily the accounting for the Group's operating leases. As at the reporting date, the Group had non-cancellable operating lease commitments of €12.3m (2016: €14.6m), disclosed in note 26 to the Consolidated

Financial Statements. On initial adoption, it is expected that the majority of rental and leasing obligations currently disclosed in note 26 will be disclosed in the Statement of Financial Position. Some of the commitments may be covered by the exception for short-term and low-value leases. A full assessment will be performed during 2018.

There are no other standards that are not yet effective and that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

2.3 SIGNIFICANT JUDGEMENTS AND ESTIMATES

In determining and applying accounting policies, judgement is often required where the choice of specific policy, assumption or accounting estimate to be followed could materially affect the reported results or net position of the Group, within the next financial year, should it later be determined that a different choice be more appropriate.

Management considers the following to be areas of significant judgement and estimation for the Group due to greater complexity and/or particularly subject to the exercise of judgement.

Basis of consolidation

The relative complexity of the Group structure means that judgement is required in correctly applying the provisions of IFRS 10, 'Consolidated financial statements', to ensure that all companies over which the parent company has control are included and presented appropriately in the Consolidated Financial Statements. The nature of these relationships including the power that the Company exercises over its subsidiary companies together with the Company's exposure or rights to variable returns of those companies is reviewed at least at each reporting period date to ensure that the companies included in the consolidation are appropriate (and are de-recognised where required). The basis of consolidation is described in detail in section 2.4 below.

Impairment considerations for available-for-sale investments

Impairment reviews in respect of the Group's available-for-sale investments are performed at least annually or more regularly if events indicate that this is necessary. An impairment model is prepared if there is objective evidence of a significant or prolonged decline in fair value of the available-for-sale investments. Impairment models are based on future cash flows discounted using the weighted average cost of capital with terminal values calculated applying a long-term growth rate. The future cash flows, which are based on business forecasts, the long-term growth rates and the discount rates used are dependent on management estimates. Future events could cause the assumptions used in these impairment reviews to change with a consequent adverse impact on the results and net position of the Group.

The Group performs impairment reviews on its available-for-sale assets on 31 December each year. There is no objective evidence that a financial asset or group of financial assets is impaired. No impairment charges were therefore recorded in the Consolidated Income Statement for the year ended 31 December 2017.

Taxation and other duties

Due to periodic changes in the tax landscape of the industry in which the Group operates, judgement is required in determining the provision for taxes and other duties. The treatment of these items is often by its nature complex and cannot be finally determined until a formal resolution has been reached with the relevant tax authority, which may take several years. Amounts provided are accrued based on advice from legal professionals, management's interpretation of specific tax laws and the likelihood of settlement. Actual liabilities could differ from the amount provided, which could have an impact on the results and net position of the Group.

The majority of tax positions taken by the Group are routine and not subjective. However, judgement has been exercised by the Directors in certain specific tax related areas. These matters have been disclosed if appropriate in the notes to the Consolidated Financial Statements in accordance with the governing financial reporting standards and include the following areas:

Value added tax (VAT)

Due to the changes in German VAT legislation introduced on 1 January 2015, there is significant uncertainty around whether certain services provided by the myLotto24 sub group are subject to VAT and the tax base on which any VAT payable would be calculated. At this stage, the Directors of the Group consider that the likelihood of the outflow of economic benefits is not probable and, as such, no provision has been recorded in the Consolidated Financial Statements. Based on a thorough legal assessment, which included a review of the existing legal framework and case law, the Directors remain confident that the outcome will be favourable for the Group. The Group will continue to closely monitor any changes in this area and ensure that the accounting for VAT continues to comply with governing legislation. The Directors have reported a contingent liability on this matter and a separate disclosure is included in note 26 to the consolidated financial statements. In accordance with IAS 37 'Provisions, contingent assets and contingent liabilities', the Directors have estimated the potential financial impact (if any) and the associated timings in note 26 to the Consolidated Financial Statements.

Austrian Gaming Duty

In January 2011, duty became payable on a point of consumption basis in Austria. There is judgement over whether the correct Austrian Gaming Duty should be payable based on 2% of stakes (or 4% of stakes from 1 January 2017), which is the rate for betting or 40% of Gross Gaming Revenue, which is the rate for lotteries.

The Directors consider the most likely outcome is that the duty will be due based on stakes and has accrued on this basis. Amounts are accrued based on advice from legal professionals, management's interpretation of Gaming Duty laws and the likelihood of settlement.

Tax audits

During 2017, the German tax office commenced a tax audit related to the tax years 2012 to 2014. Management has provided the tax office with all available information and there have been no further communications. The Directors are satisfied that no future obligation exists and no related cash outflows or provisions are anticipated.

2.4 BASIS OF CONSOLIDATION

The Consolidated Financial Statements include the financial information of the subsidiary, associate and joint venture interests owned by the Company:

(I) Subsidiaries Initial consolidation of subsidiary companies

The equity interests of all subsidiary companies included in the Consolidated Financial Statements are 100% owned by ZEAL Network SE with the exception of the Company's interests in myLotto24 Limited and its subsidiary and associated companies (full details are set out within the Subsidiaries, Associates and Joint Ventures section (note 22 to the Consolidated Financial Statements).

ZEAL Network holds 40% of the voting shares in myLotto24 Limited. myLotto24 Limited is the parent of the myLotto24 sub group in which it itself holds the majority of the voting shares except for Tipp24 Services Limited in which it holds 40% of the voting shares. Fondation enfance sans frontières holds the remaining 60% of Tipp24 Services Limited.

ZEAL Network has a right to repurchase the majority of voting rights for an amount of £30.0k for each company. ZEAL Network has veto rights with regard to changes in the articles of myLotto24 and Tipp24 Services.
The owner of the majority of voting rights receives a preliminary annual dividend of up to £15.0k for each company. In the case of liquidation, the owner of the majority of voting rights is entitled to receive previously agreed liquidation proceeds of £30k. ZEAL Network alone is entitled to the entire remaining profits and any remaining liquidation proceeds.

The annual dividend is therefore treated as an expense in the Consolidated Financial Statements of ZEAL Group and the results of all entities within the myLotto24 sub group are fully consolidated into the ZEAL Group Consolidated Financial Statements. As a result of the substance of the relationship, no non-controlling interest is recorded.

Subsequent disposal of subsidiary companies

Transactions, balances and ILS vehicles not included in the consolidated results Intra-group balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the Consolidated Financial Statements. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The Group manages its risk exposure to large jackpots through the use of an ILS vehicle set up specifically to provide insurance cover to the myLotto24 sub group. The ILS vehicle is not consolidated as the relevant criteria around control under IFRS 10 are not met. Further details are available in the Risk Management section of the Strategic Report.

(II) Associates and joint ventures

Associates are entities in which the Group has a long-term interest and over which the Group has, directly or indirectly, significant influence, where significant influence is the ability to influence the financial and operating policies of the entity. Joint ventures are a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A joint venture is a joint arrangement whereby the parties have rights to the net assets of the arrangement.

The Group's share of the recognised income and expenses of associates and joint ventures is accounted for using the equity method, from the date significant influence or joint control commences to the date it ceases, based on present ownership interests. The Group recognises its share of the associate's and joint venture's post-tax results as a one line entry before profit before taxation in the income statement and, to the extent relevant, its share of associate's and joint venture's equity movements as one line entries under each of items of other comprehensive income that will not be reclassified to profit or loss, and items of other comprehensive income that may be reclassified to profit or loss, in the statement of comprehensive income (no such entries in the current or prior year).

Unrealised gains and losses resulting from transactions between ZEAL Group and its associated company or joint venture are eliminated to the extent of ZEAL Group's interest in the associated company or joint venture.

When the Group's interest in an associate or joint venture has been reduced to nil because the Group's share of losses exceeds its interest in the associate or joint venture, the Group only provides for additional losses to the extent that it has incurred legal or constructive obligations to fund such losses, or make payments on behalf of the associate or joint venture. Where the investment in an associate or joint venture is disposed, the investment ceases to be equity accounted.

Previously, the Group accounted for its relationships with Geonomics Global Games Limited (GGGL) and Geo24 UK Limited (Geo24) as an investment in an associate and an investment in a joint venture respectively. On 30 March 2016, the Group acquired the remaining issued shares of GGGL leading to full ownership of both GGGL and Geo24. As such, these companies are now accounted for as wholly owned subsidiaries. Further information in respect of the acquisition of these companies is included in note 7 to the Consolidated Financial Statements.

2.5 CLASSIFICATION OF CURRENT AND NON-CURRENT ASSETS AND LIABILITIES

ZEAL Group presents assets and liabilities in the statement of financial position based on the Company's assessment of whether they meet the classification as current or non-current balances.

An asset is a current asset when:

the asset is expected to be realised or intended to be sold or consumed in the normal operating cycle;
the asset is held primarily for the purpose of trading;
the asset is expected to be realised within twelve months after the reporting period; or
the asset is cash or a cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period date.

All other assets are classified as non-current.

A liability is current when:

the liability is expected to be settled in the normal operating cycle;
the liability is held primarily for the purpose of trading;
the liability is due to be settled within twelve months after the reporting period; or
the Company has no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period date.

All other liabilities are classified as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities in accordance with IAS 1, 'Presentation of financial statements'.

2.6 REVENUE

Revenue represents the fair value of consideration received or receivable for goods and services provided to third parties and is recognised when the risks and rewards of ownership are substantially transferred. Revenue is disclosed net of VAT, free bets, winnings pay-outs, discounts, customer bonuses and rebates.

(I) Secondary lottery revenue

A contract to participate in a secondary lottery is treated as a derivative. The definition of a derivative is applied to contracts:

where payments are linked to the outcome of an event;
where the value of the contract, compared to the potential pay-out, is relatively low;
where contracts are in place before the event has occurred and, in the case of a win, the payout is made in the future after the event has occurred.

In line with industry practice gaming duties are recorded as 'Other operating expenses' and not as sales tax within revenue.

(II) Revenue generated from Instant Win Games

(III) Revenue generated from commissions and fees

(IV) Other revenue

The Group receives revenue from servicing lottery operators. Insofar as this revenue is related to end consumer bets, it is recognised when the bets are made.

2.7 OTHER INCOME

(I) Interest income

Interest income is recognised on an accruals basis using the effective interest rate method.

(II) Other operating income

Other operating income comprises the following:

the fair value of consideration received or receivable from winning tickets purchased by myLotto24 Limited on Spanish EuroMillions draws;
the fair value of consideration received or receivable from special insurance policies taken out to hedge against the risk of special draw pay-outs;
the fair value of consideration received or receivable from the use of an ILS vehicle taken out to provide cover against the risk of large pay-outs;
the release of dormant customer balances to the Consolidated Income Statement. Funds deposited by the Group's customers are classified as other liabilities in the financial statements. After a period of 24 months from the date of last activity on customer accounts, the related customer liabilities are classified as dormant. If attempts to contact the customer to refund deposits held on their behalf are unsuccessful (at least 26 months from last activity), these customer liabilities are released to other operating income. This is consistent with the terms and conditions included on the Group's websites.

2.8 INCOME TAXES

(I) Current and deferred taxes

probable that the temporary difference will not reverse in the foreseeable future. This includes taxation in respect of the retained earnings of overseas subsidiaries only to the extent that, at the Statement of Financial Position date, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future periods has been entered into by the subsidiary.

A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it is expected that sufficient existing taxable temporary differences will reverse in the future or there will be sufficient taxable profit available against which the temporary differences (including carried forward tax losses) can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

(II) Withholding and similar taxes

2.9 OPERATING EXPENSES

2.10 FOREIGN EXCHANGE

(I) Foreign exchange translation

(II) Transactions and balances

The financial statements for each Group company have been prepared on the basis that transactions in foreign currencies are recorded in their functional currency at the rate of exchange ruling at the date of the transaction. Monetary items denominated in foreign currencies are retranslated at the rate of exchange ruling at the Statement of Financial Position date. The resultant translation differences are included in operating profit in the income statement other than those arising on financial assets and liabilities, which are recorded within financial income or expense, or foreign exchange on tax balances which are recorded in the income tax expense line item.

2.11 INTANGIBLE ASSETS

(I) Computer software and licences

Where computer software is not an integral part of a related item of property, plant and equipment, the software is capitalised as an intangible asset.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring them to use. Direct costs associated with the production of identifiable and unique internally generated software controlled by the Group that will probably generate economic benefits exceeding costs beyond one year are capitalised. Direct costs include software development employment costs (including those of contractors used) and an appropriate portion of overheads. Capitalised computer software, licence and development costs are amortised over their useful economic lives of between three and five years.

Internally generated costs associated with maintaining computer software programmes are expensed as incurred.

(II) Research and development

Research and general development expenditure is written off in the period in which it is incurred.

Certain development costs are capitalised as internally generated intangible assets in the following circumstances:

where there is a clearly defined project;
where there is separately identifiable expenditure;
where an outcome can be assessed with reasonable certainty (in terms of feasibility and commerciality);
when expected revenues exceed expected costs and the Group has the resources to complete the task.

Such assets are amortised on a straight-line basis over their useful lives once the project is complete.

2.12 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost net of accumulated depreciation and any impairment losses.

Repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

(I) Assets in the course of construction

(II) Depreciation

Depreciation is provided on a straight-line basis at rates calculated to write off the cost, less the estimated residual value, of each asset over its expected useful life as follows:

	years
Technical
equipment/hardware	2–6
Office equipment and fit
out	3–12

Leasehold improvements are depreciated over the lower of the lease term and 3–12 years.

2.13 IMPAIRMENT

This policy covers all assets except financial assets and deferred tax assets.

An impairment loss is taken first against any specifically impaired assets.

2.14 OTHER INVESTMENTS

Other investments are recognised at fair value net of any impairment losses. Where the fair value of an investment cannot be reliably measured, then it is measured at cost.

Cost includes expenditure that is directly attributable to the acquisition of the investment. Subsequent costs are included in the investment's carrying value or recognised as a separate investment as appropriate, only when it is probable that future economic benefits associated with the specific investment will flow to the Group and the cost can be measured reliably.

2.15 LEASING

Operating leases

Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term.

Finance leases

ZEAL Group does not have any finance leases.

2.16 BUSINESS COMBINATIONS

(I) Subsidiaries

The acquisition method is used to account for business combinations.

Fair values of these assets and liabilities are determined by reference to market values, where available, or by reference to the current price at which similar assets could be acquired or similar obligations entered into, or by discounting expected future cash flows to present value, using either market rates or the risk-free rates and risk-adjusted expected future cash flows.

Where the business combination is achieved in stages and results in a change in control, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

(II) Associates and joint ventures

On acquisition the investment in associates and joint ventures is recorded initially at cost. Subsequently, the carrying amount is increased or decreased to recognise the Group's share of the associates' and joint ventures' income and expenses after the date of acquisition. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.

Fair values reflecting conditions at the date of acquisition are attributed to the Group's share of identifiable assets (including intangibles), liabilities and contingent liabilities acquired. The consideration transferred is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of the acquisition, and also includes the Group's estimate of the fair value of any deferred consideration payable.

The date significant influence or joint control commences is not necessarily the same as the closing date or any other date named in the contract.

Investments in associates and joint ventures are reviewed for impairment if an impairment trigger is identified. Refer to 2.13 for further detail.

2.17 FINANCIAL ASSETS AND LIABILITIES

Financial assets and financial liabilities are initially recorded at fair value (plus any directly attributable

transaction costs, except in the case of those classified at fair value through profit or loss). For those financial instruments that are not subsequently held at fair value, the Group assesses whether there is any objective evidence of impairment at each Statement of Financial Position date.

There are five categories of financial assets and financial liabilities. These are described as follows:

(I) Financial assets and financial liabilities at fair value through profit or loss

Derivative financial assets and financial liabilities

Derivative financial assets and financial liabilities are financial instruments whose value changes in response to an underlying variable that require little or no initial investment and are settled in the future.

if a contract is denominated in the functional currency of either party;
where that currency is commonly used in international trade of the good traded; or if it is commonly used for local transactions in an economic environment.

(II) Loans and receivables

Loans and receivables include trade receivables, amounts owed by associates, amounts owed by joint ventures, accrued income and cash and cash equivalents.

When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount by discounting the estimated future cash flows at the original effective interest rate and continuing to

unwind the discount as interest income.

a. Trade receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment.

b. Cash, cash equivalents and pledged cash

In the consolidated Statement of Financial Position, cash and cash equivalents includes cash in hand, pledged cash, bank deposits repayable on demand and other short-term highly liquid investments with original maturities of three months or less. Where investments have a maturity of greater than three months but if there is no penalty for withdrawal these are considered to be cash equivalents.

(III) Available-for-sale investments

Available-for-sale investments are non-derivative financial assets that are either designated in this category or not classified as financial assets at fair value through profit or loss, or loans and receivables. Investments in this category are included in non-current assets unless management intends to dispose of the investment within twelve months of the Statement of Financial Position date. They are initially recognised at fair value plus transaction costs and are subsequently remeasured at fair value and tested for impairment. Where it is not possible to reliably measure the fair value of the investment, the investment is carried at cost and measured for impairment at each reporting date. Gains and losses arising from changes in fair value including any related foreign exchange movements are recognised in other comprehensive income. On disposal or impairment of availablefor-sale investments, any gains or losses in other comprehensive income are reclassified to the income statement.

(IV) Held-to-maturity financial assets

Held-to-maturity financial assets are recognised initially at fair value. These assets are then remeasured at amortised cost, using the effective interest method, less any impairment.

(V) Financial liabilities held at amortised cost

Financial liabilities held at amortised cost include trade payables, accruals, amounts owed to associates, amounts owed to joint ventures and other payables, and borrowings.

Trade payables

2.18 EQUITY AND DISTRIBUTIONS

(I) Share capital, debt and equity instruments issued

A repurchase of the Company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

Debt and equity instruments issued by a Group company are classified as financial liabilities or equity depending on the economic substance of the contractual agreement.

(II) Dividend distributions

Dividend distributions to equity holders of ZEAL Network SE re recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid. Dividends declared after the Statement of Financial Position date are not recognised as there is no present obligation at the Statement of Financial Position date.

2.19 PROVISIONS

2.20 CONTINGENT LIABILITIES

Contingent liabilities are not recognised in the Consolidated Financial Statements. Contingent liabilities are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Details of contingent liabilities recorded at 31 December 2017 are included in note 26 to the Consolidated Financial Statements.

2.21 EMPLOYEE BENEFITS

The Group operates various employee benefits including profit--sharing, bonus plans and long-term incentives as well as other post-employment schemes including termination benefits, cash settled share based payments and defined contribution pension plans.

(I) Profit-sharing, bonus plans and long-term incentives

The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company's shareholders after certain adjustments. The Group recognises a provision where there is a present obligation (legal or constructive) that has arisen as a result of a past event

(II) Termination benefits

(III) Defined contribution pension plans

(IV) Cash-settled share-based payments

For cash-settled share-based payment schemes, a liability is recognised based on the fair value of the payment award at Statement of Financial Position date. The fair value of the phantom share options granted is recognised over the vesting period to reflect the value of the employee services received. The charge relating to grants to employees is recognised as an expense in the income statement.

3 SEGMENT REPORTING

SEGMENTAL DISCLOSURE PRESENTATION

We monitor the performance of the Lottery Betting segment based on 'normalised' revenue and EBIT (statutory revenue and EBIT adjusted to the statistically expected prize pay-outs) and actual results for the Lottovate segment. The disclosures included in the operating segment note below are consistent with the Group's internal reporting and 'normalised' performance is given due prominence in the disclosure as this is the way in which we analyse the Group. A fuller description of 'normalisation' is included in the business review section of this report. Included within the note below is a reconciliation between the segmental results used to assess the Business units and our consolidated statutory performance where statistically expected pay-outs are replaced with actual pay-outs. Inter-segment transactions are also eliminated as part of this process. Descriptions of the significant reconciling items are also included below the relevant tables.

The Group's operating segment names have changed to Lottery Betting, Lottovate and ZEAL Ventures. This is consistent with the internal reporting provided to the chief operating decision maker. There has been no change in the results of the individual segments or comparative figures. We have described the composition of the segments in more detail below:

Lottery Betting Segment (formerly known as Business-to-Consumer)

We monitor the performance of the Lottery Betting segment based on 'normalised' revenue and EBIT (statutory revenue and EBIT adjusted for statistically expected prize pay-outs). The disclosures included in the operating segment note are consistent with our internal reporting. 'Normalised' performance is given due prominence in the disclosure as this is the way we analyse our business internally. Included within our note on operating segments is a reconciliation between the segmental results used to assess the lines of business and our consolidated statutory performance where statistically expected pay-outs are replaced with actual cash outflows. Inter-segment transactions are also eliminated as part of this process.

Lottovate Segment (formerly known as Business-to-Business/Business-to-Government)

These include our lottery brokerage business in Spain (Ventura24) and our international services business for lottery operators including online operation of the lottery games for charitable organisations, such as ONCE. In addition, the international business offers digital services to business partners (such as UNICEF Norway) and state lotteries as well as operating its own licensed lotteries through Lottovate. Finally, our Lotto Network brand helps professional sports clubs and other organisations to raise funds through lottery operations.

The Lottovate segment's results comprise revenues and costs attributable to the operating activities of Lottovate together with an allocation of the shared cost base.

We monitor the performance of the Lottovate segment based on actual results.

ZEAL Ventures

Business unit segment reporting

2017	Lotteryg	Lottovate	Businessunit total	Normalisationadjustments	Otheradjustments Statutory
in €k	A	B	A+B=C	D	E	C+D+E
Revenue	139,175	7,637	146,812	(12,725)	208	134,295
Other operating income	6,597	349	6,946	(190)	195	6,951
Total OperatingPerformance	145,772	7,986	153,758	(12,915)	403	141,246
EBITDA	48,975	(9,399)	39,576	(12,915)	(225)	26,436
Depreciation/amortisation	(956)	(299)	(1,255)	–	–	(1,255)
EBIT	48,019	(9,698)	38,321	(12,915)	(225)	25,181
Financial result	–	–	–	–	50	50
EBT	–	–	38,321	(12,915)	(175)	25,231
Income tax	–	–	–	–	(8,053)	(8,053)
Net profit/loss	–	–	38,321	(12,915)	(8,228)	17,178

The principal reconciling items between the aggregated business unit results and the consolidated statutory results are attributable to two main categories:

'Normalisation' adjustments, which bridge the quantum of statistically expected pay-outs, included within the Business unit column to consolidated statutory results (which include actual pay-outs).
'Other' adjustments which include external revenue generated by Schumann e.K. (which does not form part of either the Lottery Betting or Lottovate segments) and €385k finance income and €335k of finance costs.

Business unit segment reporting

2016	LotteryBetting	Lottovate	Businessunit total	Normalisationadjustments	Otheradjustments Statutory
in €k	A	B	A+B=C	D	E	C+D+E
Revenue	138,594	6,686	145,280	(32,580)	235	112,935
Other operating income	2,626	308	2,934	19,716	4,053	26,703
Total OperatingPerformance	141,220	6,994	148,214	(12,864)	4,288	139,638
EBITDA	64,545	(9,782)	54,763	(12,864)	(1,777)	40,122
Depreciation/amortisation	(1,554)	(612)	(2,166)	–	–	(2,166)
EBIT	62,991	(10,394)	52,597	(12,864)	(1,777)	37,956
Financial result	–	–	–	–	(1,445)	(1,445)
EBT	–	–	52,597	(12,864)	(3,222)	36,511
Income tax	–	–	–	–	(10,560)	(10,560)
Net profit/loss	–	–	52,597	(12,864)	(13,782)	25,951

'Other' adjustments include:

Other operating income of €3,397k related to the release of dormant customer accounts.

A charge associated with the acquisition of GGGL and Geo24 amounting to approximately €1,340k recorded within EBITDA and EBIT described in detail in note 7 to the Consolidated Financial Statements.
An impairment charge on amounts drawn by GGGL on the convertible loan facility of €1,598k recorded within financial result (described in the business review section above). The remaining gain of €153k included within this category relates to net income receivable accrued in the normal course of business.
Other items impacting revenue and other operating income relate to external revenue and other operating income generated by Schumann e.K (which does not form part of either the Lottery Betting or Lottovate segments) and €390k finance income and €237k of finance costs.

4 REVENUE

	2017	2016
in €k
Stakes	241,306	243,765
Prizes	(132,125)	(153,282)
Ticket Fees	18,095	16,530
Commission and Other Revenue	7,019	5,922
Revenue	134,295	112,935

Revenue consists of secondary lottery betting and instant win games products. These products are classified as derivative financial instruments and are disclosed in the Consolidated Income Statement net of VAT, free bets and winnings pay-outs.

Revenue is also recognised from ticket fees and commissions, which the Group receives for placing bets on behalf of customers.

5 OTHER OPERATING INCOME

	2017	2016
in €k
Income from hedging transactions	5,062	1,910
Release of dormant customer accounts	669	3,397
Income from special insurance	–	20,000
Other	1,220	1,396
Other operating income	6,951	26,703

Income from hedging activities relates to income generated from tickets hedged through the Group's wholly owned subsidiary Ventura24.

The release of dormant customer accounts of €669k (2016: €3,397k) relates to customer account balances where no activity had been recorded at least in the last 26 months and all procedures have been completed to contact the customer. The release of these account balances is in full compliance with publicly available terms and conditions included on the Group's websites and significant diligence was performed prior to the authorisation of this release.

In 2016, the income generated from special insurance relates to the exceptional prize pay-out of €37,000k in May 2016. The special insurance held by myLotto24 was independent of the ILS hedging structure.

6 OTHER OPERATING EXPENSES

	2017	2016
in €k
Marketing expenses	19,131	14,830
Direct costs of operations	43,365	33,909
Other costs of operations	23,262	21,666
Other operating expenses	85,758	70,405

The increase in other operating expenses is attributable to the following movements in cost categories:

The increase in marketing expenses of €4,301k. The increased investment in marketing is consistent with our strategy to drive customer acquisition and re-activate the dormant proportion of the Lottery Betting customer base.
The increase in direct costs of operations of €9,456k, which is due to the €10,589k increase in physical hedged ticket costs due to a higher number of fully hedged draws compared to the prior period. This has been offset by a reduction in jackpot insurance costs of €1,214k.
The increase in other costs of operation of €1,596k, which is primarily due to increased consultancy expenses of €855k. This is associated with the Group's international expansion strategy in both the Lottery Betting and Lottovate segment along with the launch of new products: Cash4Life, US Powerball and US Mega Millions.
The remaining movement is attributable other movements that are individually immaterial.
Other costs of operations include fees charged by the auditor, Ernst & Young, LLP and its affiliates are summarised in the table below.

Auditor's remuneration	2017	2016
in €k
Audit of the financial report of the Group and any other entity in theconsolidated group	507	509
Tax advisory	–	251
Tax compliance	–	20
Other non-audit services	4	19
Total auditor remuneration	511	799

7 ACQUISITION OF GEONOMICS GLOBAL GAMES LIMITED (GGGL) AND GEO24 UK LIMITED (GEO24)

During Q1 2016, ZEAL Group entered into a number of separate transactions with GGGL and Geo24 in advance of and as part of the purchase of the non-ZEAL owned shareholdings. The nature of these transactions together with the accounting impact for each is set out below:

7.1 IMPAIRMENT OF LOANS ADVANCED TO GGGL UNDER THE CONVERTIBLE LOAN FACILITY

In July 2015, Tipp24 Investment 1 Limited entered into an agreement with GGGL to provide a convertible loan facility amounting to £2,600k (with a further £400k available if certain targets were met) to fund the working capital of GGGL.

The first draw-downs totalling £1,250k occurred in January 2016 and February 2016. The Group provided against these amounts in full on the date of each draw down as the Group believed that there was significant uncertainty over whether the funds would be repaid. All draw-downs were effected well in advance of the completion date and, as such, did not form part of the cost of acquisition of GGGL and Geo24. A charge of €1,598k relating to the amounts drawn on the facility was separately recorded within the Consolidated Income Statement in 2016 as an impairment of convertible loan.

7.2 ACQUISITION OF NON-ZEAL OWNED SHARES IN GGGL AND GEO24

At 31 December 2015, Tipp24 Investment 1 Limited, a wholly owned subsidiary of ZEAL Network SE, held 104,965 ordinary shares in Geonomics Global Games Limited (GGGL). GGGL is a software licensing and development company incorporated in the UK. On 29 January 2016, ZEAL Group exercised 37,738 warrants and was granted 37,738 new ordinary shares in exchange for consideration of £377. Post warrant exercise, ZEAL Group owned 142,703 shares in GGGL or 32.13% of the total shares in issue at that date (444,081 ordinary shares).

The Directors made the decision to purchase the non-ZEAL owned shares of GGGL during Q1 2016 as both parties believed that the technical know-how and expertise of the personnel employed by GGGL and its joint venture Geo24 UK Limited (Geo24) would fit well with ZEAL Group's wider growth aspirations. On 10 March 2016, the Group signed a share purchase agreement (SPA) with the shareholders of GGGL to acquire the remaining issued share capital of GGGL that was not owned by ZEAL Group at 29 January 2016.

The remaining shares in GGGL that were in issue at the SPA signing date, but not owned or beneficially owned by ZEAL Group (301,378 ordinary shares), were acquired from the non-ZEAL shareholders on 30 March 2016 for consideration of £814k (€1,041k) (representing a value of £2.70 (€3.45) per share). The excess of the purchase consideration over the fair value of net liabilities acquired in GGGL and Geo24, resulting in a charge of €1,340k, was written off to the Consolidated Income Statement in March 2016. This charge, effectively representing recruitment costs, was recorded as a loss on acquisition.

8 FINANCE INCOME AND COSTS

	2017	2016
in €k
Finance income
Other interest and similar income	2	52
Income from other long-term securities and loans	383	338
	385	390
Finance costs
Interest expense and similar charges	(335)	(237)
	(335)	(237)

9 INCOME TAX EXPENSE

Income taxes paid or payable as well as deferred taxes and withholding taxes are recognised within the income taxes line item. The blended corporate income tax rate in the UK amounts to 19.25% (2016: 20.0%).

Deferred taxes under IAS 12 are calculated at the average tax rate at the time the differences are expected to reverse. For the calculation of deferred taxes, the total tax rate for domestic UK tax registered companies amounted to 17% (2016: 17%). In the case of foreign companies, the respective country-specific regulations, enacted and substantively enacted tax rates were used to calculate deferred taxes.

Income statement	2017	2016
in €k
Current taxation:
Charge for the year	8,656	11,138
Adjustments in respect of prior years	(1,140)	(784)
Total current taxation	7,516	10,354
Deferred taxation:
Charge for the year	150	206
Adjustments in respect of prior years	387	–
Total deferred taxation	537	206
Total taxation expense (income statement)	8,053	10,560

Tax rate reconciliation	2017	2016
in €k
Profit before taxation	25,231	36,511
Expected tax charge at standard UK rate of 19.25% (2016: 20.0%)	4,857	7,302
Exempt income	–	(33)
Other non-deductible expenses:	41
Adjustments in foreign tax rates	292	233
Adjustments in respect of prior years	(753)	(104)
Tax loss utilisation	(128)	(305)
Unrecognised tax losses carried forward	3,946	4,158
Foreign exchange	(202)	–
Other tax items	–	(757)
Total taxation expense	8,053	10,560

A tax expense of €3,818k (2016: €3,853k) has been incurred during 2017 and is related to tax losses carried forward for which no deferred tax asset is recognised. This is partially offset by tax losses utilised during the year.

Included within other tax items for the year ended 31 December 2016 is a credit of €680k relating to the partial release of a provision recorded at 31 December 2015, concerning a tax audit of business years 2008 to 2011. This audit was ongoing at 31 December 2015 and the provision of €3,000k recorded was the Directors' best estimate of the outflow of economic benefits at that time. During 2016, the case was settled and an amount of €2,320k was paid to the relevant tax authority leading to the release of the remaining provision. There are no similar items for the year ended 31 December 2017.

10 PROPERTY, PLANT AND EQUIPMENT

Costin €k	Officeequipment	Hardware	Officeequipmentunderconstruction	Total
Balance as at 1 January 2016	3,463	4,606	11	8,080
Additions	112	329	11	452
Transfer between classes	18	–	(18)	–
Disposals	–	(120)	–	(120)

Balance as at 31 December 2016	3,593	4,815	4	8,412
Additions	842	594	–	1,436
Disposals	–	(4)	–	(4)
Balance as at 31 December 2017	4,435	5,405	4	9,844

			Officeequipment
Accumulated depreciation	Officeequipment	Hardware	underconstruction	Total
in €k
Accumulated depreciation as at 1 January2016	(1,656)	(4,200)	–	(5,856)
Provided during the year	(459)	(324)	–	(783)
Disposals	5	123	–	128
Accumulated depreciation as at 31December 2016	(2,110)	(4,401)	–	(6,511)
Provided during the year	(405)	(322)	–	(727)
Disposals	–	1	–	1
Accumulated depreciation as at 31December 2017	(2,515)	(4,722)	–	(7,237)

Book value	Officeequipment	Hardware	Officeequipmentunderconstruction	Total
in €k
As at 31 December 2016	1,483	414	4	1,901
As at 31 December 2017	1,920	683	4	2,607

There are no assets held under finance leases (2016: none).

There are no restrictions on rights of disposal for the above mentioned tangible assets. No assets were pledged as collateral for liabilities.

11 INTANGIBLE ASSETS

Cost	Software Other software		Licences	Total
in €k
Balance as at 1 January 2016	23,792	8,281	184	32,257
Additions	–	240	–	240
Disposals	–	(755)	–	(755)
Balance as at 31 December 2016	23,792	7,766	184	31,742
Additions	–	236	–	236
Disposals	–	–	–	–
Balance as at 31 December 2017	23,792	8,002	184	31,978

Accumulated amortisation	Software Other software		Licences	Total
in €k
Accumulated amortisation as at 1 January2016	(23,392)	(6,870)	(50)	(30,312)
Provided during the year	(400)	(965)	(18)	(1,383)
Disposals	–	755	–	755
Accumulated amortisation as at 31December 2016	(23,792)	(7,080)	(68)	(30,940)
Provided during the year	–	(510)	(18)	(528)
Disposals	–	–	–	–
Accumulated amortisation as at 31December 2017	(23,792)	(7,590)	(86)	(31,468)

Book value	Software Other softwareLicences		Total
in €k
As at 31 December 2016	–686	116	802
As at 31 December 2017	–412	98	510

The item 'Software' refers to the value of gaming software. The item 'Other software' contains all other software products including gaming platforms.

12 DEFERRED TAXATION

Deferred taxation movement schedule	2017	2016
in €k
At 1 January	575	781
Charged to income statement	(537)	(206)
At 31 December	38	575

Deferred tax assets	Fixed assetallowances	Othertemporarydifferences	Total
in €k
At 1 January 2016	435	346	781
Charged to income statement	(20)	(186)	(206)
At 1 January 2017	415	160	575
Charged to income statement	(377)	(160)	(537)
At 31 December 2017	38	–	38

The main rate of UK corporation tax was reduced from 20% to 19% from 1 April 2017 and was due to be reduced to 18% from 1 April 2020. These changes were substantively enacted on 26 October 2015. In the 2016 Finance Act, the main rate of Corporation tax was reduced to 17% from 1 April 2020. Royal Assent was received on 15 September 2016. The Group has therefore recognised its deferred tax balances at 17% as this is the rate expected to be in place prevailing when the deferred tax asset balances are forecast to be reversed.

Of the deferred tax assets carried by the Group, an amount of €nil (2016: €nil) refers to tax losses carried forward, and an amount of €38k (2016: €575k) to temporary differences.

Total tax losses carried forward amount to €83,656k as of 31 December 2017 (2016: €64,827k). The tax losses predominately arose in the UK, Germany and Spain. The tax losses do not expire. Deferred tax assets have not been recognised in respect of these losses as there is currently uncertainty as to whether the related entities will generate sufficient taxable profit in the future against which the losses could reverse.

At 31 December 2017, there were no recognised or unrecognised deferred tax liabilities (2016: €nil) for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries, associates or joint ventures. Management has determined that undistributed profits of its subsidiaries, joint ventures or associates will not be distributed in the foreseeable future.

13 OTHER INVESTMENTS

	2017	2016
in €k
Balance as at 1 January	1,198	–
Additions	1,843	1,198
Impairment	–	–
Balance as at 31 December	3,041	1,198

On 1 May 2017, ZEAL Network SE secured a cash investment of €1,843k (USD $2,000k) in Los Angeles based start-up Omaze Inc. Omaze is disrupting charitable giving by offering once-in-a-lifetime experiences and exclusive merchandise in support of critical causes. Omaze already has significant traction in the US market. ZEAL received preferred shares representing a 2.50% interest, a Board observer seat and various rights to protect and extend its shareholding. The investment of €1,843k in Omaze Inc. is held at fair value.

The Group continues to hold at historic cost a 10% interest in FPL and an anti-dilution call option to purchase an extra 20% of the shares at any time within five years from the date of the investment.

14 TRADE AND OTHER RECEIVABLES

At 31 December 2017, trade and other receivables comprised trade receivables of €1,803k (2016: €755k). The increase in the balance is associated with the launch of betting on major US lotteries, Powerball and Mega Millions. There are no items within the trade receivable balance which are considered past due but not impaired.

15 OTHER CURRENT ASSETS AND PREPAID EXPENSES

	2017	2016
in €k
Receivables from lottery companies, payment systems and players	6,948	4,551
Provision for doubtful debt	(1,964)	(395)
Security retainers	152	54
Receivables from gaming operations	5,136	4,210
Other debtors	1,677	931
Prepayments and accrued income	5,818	5,067
VAT receivable	394	1,754

Other current and prepaid expenses	13,025	12,835
Other receivables	7,889	8,625
Receivables from associated undertakings	–	27
Payroll taxes and social security receivable	–	846

All other assets and prepaid expenses are due in less than one year.

At 31 December 2017, an amount of €1,964k (2016: €395k) was provided against player receivables where the initial direct debit transaction failed. The increase in the provision is due to the Group providing against all failed direct debit balances in 2017. Whilst the Group continues to seek payment from each customer for all outstanding balances, the Directors have concluded that non--recovery of these amounts is more likely than not and have therefore recorded this provision. Other than the provision recorded above, none of the other receivable balances has been impaired.

16 SHORT-TERM LOANS

The short-term loan balance of €3,075k at 31 December 2016, including interest incurred was repaid in full during 2017. The loan related to an amount advanced to a third party as part of a pre-existing platform separation agreement and held an interest rate of 10% per annum.

17 CASH AND SHORT-TERM FINANCIAL ASSETS

	2017	2016
in €k
Bank balances	89,041	94,710
Cash on hand	5	5
Pledged cash	3,006	268
Cash and pledged cash	92,052	94,983
Short-term financial assets	27,123	19,682
Cash and cash equivalents	119,175	114,665

Bank balances mainly comprise term deposits on short-term call and with variable interest rates held at various major European banks. At 31 December 2017, ZEAL held available-for-sale short-term financial assets amounting to €25,949k (2016: €17,490k). These deposits comprised fixed-income funds and are broadly spread and of high quality. A change in equity of a €225k gain (2016: loss of €227k) was recognised after consideration of deferred taxes.

For the Group's short-term financial assets management assesses if there is objective evidence of a significant or prolonged decline in fair value to determine if any impairment is required. There is no objective evidence that a financial asset or group of financial assets is impaired. No impairment charges were therefore recorded in the Consolidated Income Statement for the year ended 31 December 2017 (2016: €nil).

The Group also recorded financial assets classified as held-to-maturity of €1,174k as of the Statement of Financial Position date (2016: €2,192k). The available-for-sale short-term financial assets and heldto-maturity financial assets are included as 'short-term financial assets' above.

Included within the bank balances of €89,041k (2016: €94,710k) is an amount of €12,001k (2016: €12,222k) to cover customer liabilities.

18 OTHER LIABILITIES

Current	2017	2016
in €k
Accrued liabilities	6,727	8,032
Accrued liabilities	6,727	8,032
Liabilities to players and game brokers	12,293	12,539
Liabilities from gaming duty	163	124
Liabilities from gaming operations	12,456	12,663
Employee benefits	1,038	210
VAT	2,589	1,333
Payroll related taxes and social security payable	288	307
Tax and social security payable	2,877	1,640
Total other liabilities – current	23,098	22,545

All other liabilities included in the table above are due in less than one year.

Non-current	2017	2016
in €k
Accrued rent and dilapidations	1,535	1,514
Employee benefits	195	685
Other non-current liabilities	35	–
Total other liabilities – non-current	1,765	2,199

Employee benefits

The Group operates a long-term incentive plan arrangement for certain employees. Further details have been disclosed in note 24 to the Consolidated Financial Statements.

All other liabilities included in the table above are due after more than one year.

19 DEFERRED INCOME

Deferred income of €2,105k (2016: €2,251k) relates to payments for gaming orders and stakes received prior to 31 December 2017. In accordance with the Group's accounting policies, revenue can only be recognised on these stakes on the date of the respective draw. The Directors expect that all deferred revenue will be released to the Consolidated Income Statement during 2018.

20 PROVISIONS

Current	Opening balance01/01/2017	Utilisation/release	Additions	Closingbalance31/12/2017
in €k
Provisions for litigation	336	–	501	837
Total	336	–	501	837

Provisions for litigation

Provisions for litigation amounting to €837k at 31 December 2017 (2016: €336k) represent management's best estimate of the probable eventual cash outflow that will result from resolution of ongoing legal cases at 31 December 2017. Individual provisions included in provisions for litigation relate to cases that have been in progress for a number of years. It is difficult to predict the timing of any cash outflow that might result from cases awarded against the Group. As such, provisions for litigation have been classified as current liabilities as there is no certainty that any judgement against the Group (leading to an outflow of cash) would take place in annual periods commencing after 2018.

21 EQUITY

21.1 SHARE CAPITAL

The Company's share capital consists of 8,385,088 ordinary shares issued and fully paid (2016: 8,385,088). Shares have no par value. Each share has the right to dividends and there are no preference shares or restrictions.

21.2 AUTHORISED CAPITAL

On 22 June 2016, the Statutes of the Company were amended such that the Executive Board of ZEAL Network – with the approval of the Supervisory Board – can approve allotment of additional share capital up to a nominal amount of €1,197k. This increase in share capital can be effected by issuing, on one or more occasions, in whole or in part, new no-par value shares in return for cash or contribution in kind (allotment of shares). The approval to issue additional share capital expires on 21 June 2021.

21.3 SHARE PREMIUM

21.4 EARNINGS PER SHARE

Earnings Per Share (basic and diluted) was €2.05 (2016: €3.09) per share for the year ended 31

December 2017. The weighted average number of shares in issue remained equal during 2016 and 2017 at 8,385,088.

Basic Earnings Per Share are calculated by dividing loss or profit for the year attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares outstanding during the year.

Diluted Earnings Per Share are calculated by dividing loss or profit for the year attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares outstanding during the year (increased to account for the diluting effects from stock options, warrant agreements or any other plans in place at the Statement of Financial Position date, which may lead to the issuance of an additional number of shares in the future). In fiscal year 2017, there was no dilutive effect as there were no such programs (2016: no dilutive effect).

21.5 OTHER RESERVES

Other reserves amount to (€560k) (2016: (€785k)) and re-present cumulative gains and losses (including any related foreign exchange movements) arising from changes in the fair value of available-for-sale financial assets. On disposal or impairment of available-for-sale assets, any gains or losses in other comprehensive income are reclassified to the income statement.

21.6 FOREIGN CURRENCY TRANSLATION RESERVE

The foreign currency translation reserve records amounts to €183k (2016: €143k) and relates to exchange differences arising from the translation of the financial statements of foreign operations.

21.7 RETAINED EARNINGS

22 SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

The list below includes all subsidiary, associate and joint venture undertakings. The principal country in which each of the below subsidiary undertakings operates is the same as the country in which each is incorporated. Effective interest is the Group's interest in the equity of the associated entity.

Name and registeredoffice	Country	Principalactivities	Nature ofrelationshipwith ZEALNetwork		% effective interest
				2017	2016
myLotto24 Limited 1Suite 1, 3rd Floor 11–12St. James's Square,London, SW1Y 4LB	UK	Bookmaker	Subsidiary	40	40
Tipp24 Services Limited49 Clerkenwell GreenLondon EC1R 0EB	UK	Lottery	Subsidiary	16	16
Tipp24 DeutschlandGmbH1Kurze Muehren 120095 Hamburg	Germany	Lottery	Subsidiary	100	100

Lottovate DeutschlandGmbHKurze Muehren 120095 Hamburg	Germany	Lottery	Subsidiary	100	100
Ventura 24 S.L. 1Leganitos 47
28013 MadridVentura24 Games S.A. 1Leganitos 4728013 Madrid	SpainSpain	LotteryLottery	SubsidiarySubsidiary	100100	100100
SmartgamesTechnologies LimitedSuite 1, 3rd Floor 11–12St. James's Square,London, SW1Y 4LB	UK	Technologyservices	Subsidiary	40	40
Lottovate Limited 15th Floor One NewChange, London,EC4M 9AF	UK	Lottovatebusiness	Subsidiary	100	100
ZEAL InternationalLimited15th Floor One NewChange, London, EC4M9AF	UK	Lottery	Subsidiary	100	100
Lottovate NederlandB.V.Herengracht 1241015 BT Amsterdam	Netherland	Lottovatebusiness	Subsidiary	100	100
Lottovate United StatesInc22711 Centerville Road,Suite 400Wilmington, County ofNew Castle19808 Delaware	United Statesof America	Lottovatebusiness	Subsidiary	100	100

Name and registeredoffice	Country	Principalactivities	Nature ofrelationshipwith ZEALNetwork		% effective interest
				2017	2016
Tipp24 Investment 1Limited 15th Floor One NewChange, London, EC4M9AF	UK	Holdingcompany	Subsidiary	100	100
Tipp24 Investment 2Limited 15th Floor One New	UK	Holdingcompany	Subsidiary	100	100

Change, London, EC4M9AF
Lotto Network Limited 15th Floor One NewChange, London, EC4M9AF	UK	Lottovatebusiness	Subsidiary	100	100
eSailors Limited3Suite 1, 3rd Floor 11–12St. James's Square,London, SW1Y 4LB	UK	Holdingcompany	Subsidiary	40	40
Geonomics GlobalGames Limited5th Floor One NewChange, London, EC4M9AF	UK	Holdingcompany	Subsidiary	100	100
Geo24 UK Limited5th Floor One NewChange, London, EC4M9AF	UK	Lottery	Subsidiary	100	100
Gratis Lotto LtdSuite 1, 3rd Floor 11–12St. James's Square,London, SW1Y 4LB	UK	Lottery	Subsidiary	16	16
myLotto24 Australia PTYLtdOffice 4, Building 5 356–366 Bagot Road Millner,Northern Territory, 0812	Australia	Lottery	Subsidiary	40	40
HSS Corp.4702 S. Carson Street,Suite 200, Carson City,Nevada 89701	United Statesof America	Lottery	Subsidiary	40	–
myLotto24 South AfricaPty Ltd57 Martin HammerschlagWay, Foreshore, CapeTown, 8001.	South Africa	Lottery	Subsidiary	40	–

Section 479A audit exemption

1 These subsidiaries are held directly by ZEAL Network. 2 This subsidiary was dissolved on 27 February 2018. 3 During the year, eSailors IT Solutions Limited changed its name to eSailors Limited. 4 This subsidiary was incorporated on 10 January 2017. ZEAL Network SE has an indirect interest of 40%. 5 This subsidiary was incorporated on 20 November 2017. ZEAL Network SE has an indirect interest of 40%.

23 PERSONNEL EXPENSES

The table below shows the full time equivalent average number of employees over the year.

SEGMENTAL ANALYSIS

Director and employeenumbers	Lottery BettingLottovate		Total
2017
Executive Board	–	–	3
General Managers	6	3	9
Employees	163	93	256
Trainees	3	–	3
Temporary personnel	2	1	3
Total	177	97	274

Director and employeenumbers	Lottery Betting	Lottovate	Total
2016
Executive Board	–	–	3
General Managers	5	3	8
Employees	139	95	234
Trainees	3	–	3
Temporary personnel	2	–	2
Total	152	98	2501

1 The 2016 full time equivalent average number of employees has been restated to ensure consistency with 2017.

The Executive Board members are not allocated to a particular segment of the Group as they perform work across both the Lottery Betting and Lottovate segment.

During the current and prior year the Group had an average fewer than 250 employees working wholly or mainly in the UK.

Personnel expenses incurred during 2017 are included in the table below:

	2017	2016
in €k
Wages and salaries	25,696	23,718
Pension contributions	485	424
Social security costs	2,449	2,563
Total employee benefit expense	28,630	26,705

These figures include remuneration for the Executive Board, further details of which are included in the Directors' Remuneration Report on pages 41 to 53.

24 SHARE BASED PAYMENTS

The Group operates a long-term incentive plan arrangement for certain employees. The scheme provides a cash payment to the employee based on a specific number of phantom shares at grant date and the share price of ZEAL Network SE at the vesting date. The cash payment is dependent on the achievement of internal and external profitability targets over the two- and three-year performance periods and continued employment until the end of the vesting period. The cash payment has no exercise price and therefore the weighted average exercise price in all cases is €nil.

	2017	2016
in €k
Outstanding at the beginning of the year	895	–
Granted during the year	559	895
Vested in the year	–	–
Forfeited in the year	(221)	–
Outstanding at the end of the year	1,233	895

The weighted average remaining contractual life of the outstanding awards is 0.82 years (2016: 1.47 years).

	2017	2016
Risk-free rate	(0.65%)	(0.80%)
Dividend yield	4.7%	7.6%
Share Price Volatility	37.0%	37.0%
Weighted average fair value per phantom share (€)	21.42	36.89

The Share price volatility of the Group's TSR is calculated by using the daily data, over a period commensurate to the remaining performance period for the awards.

25 DIVIDENDS

During 2017, a dividend of €1.00 per share (€8,385k) was declared and paid (2016: 23,478k). For future periods, the Executive Board has proposed, and the Supervisory Board has approved, a dividend policy under which the Company intends to pay annual dividends, which are expected to amount to a total of at least €1.00 per share, subject to financial performance. An announcement of the amount of each dividend, and the record date for entitlement to the dividend, will be made in advance of payment of the dividend.

Cash flows from dividends paid are classified under financing activities in the cash flow statement and the dividends paid are deducted from retained earnings in the statement of changes in equity.

26 COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

During 2017, ZEAL expensed rental payments for offices amounting to €3,120k (2016: €2,375k). The future minimum lease payments for the above non-cancellable operating leases are as follows:

Minimum lease payment	2017	2016
in €k
Within 1 year	2,438	2,645
>1 – 5 years	7,306	8,322
>5 years	2,567	3,592
Minimum lease obligations	12,311	14,559

OTHER FINANCIAL COMMITMENTS

In addition, the Group had significant financial commitments arising from other contracts, including cooperation agreements, insurance contracts, licence agreements and maintenance agreements. These commitments do not meet the definition of provisions in accordance with IAS 37 'Provisions, contingent assets and contingent liabilities' and have therefore been disclosed as a note to the financial statements. Detail of the commitments together with estimated maturity dates are as follows:

	2018	2019	2020	2021	2022and beyond	Total
in €k
Othercontracts	14,764	–	–	–	–	14,764

CONTINGENT LIABILITIES

There is significant uncertainty as to whether VAT is due in respect of certain services provided by the myLotto24 sub group to customers domiciled in the European Union from 1 January 2015. Furthermore, there is uncertainty in respect of the tax base to be applied in the event that it is ultimately determined that VAT is due on any of these services. Based on a thorough legal assessment, which included a review of the existing legal framework and case law, the Directors consider, that the likelihood of outflow of economic resources is not probable and timings of associated financial impact is uncertain. Accordingly, the Directors have not recorded any liability in the Consolidated Financial Statements. Following recent dialogue with the tax authority in Germany it is estimated that in the event that ZEAL is un-successful in its defence, the potential financial effect is €41.3m (2016: €23.3m which has been restated to reflect a reduction of €5.7m following clarity over the expected basis of calculation). Although uncertain, it is expected that an outcome will be known within two to four years. In respect of other taxes and duties, with the exception of those provided in the Group financial statements, the Directors consider it unlikely that any further liability will arise from the final settlement of any such assessments. The Directors will continue to closely monitor any changes.

27 RELATED PARTIES

The members of Executive Board and Supervisory Board of ZEAL Network, as well as their immediate relatives, are regarded as related parties in accordance with IAS 24 'Related party disclosures'.

Note 22 to the Consolidated Financial Statements provides information about the Group's structure, including details of each subsidiary.

Oliver Jaster is a Member of the Supervisory Board. The operating business of Schumann e.K. was outsourced to a related company of Oliver Jaster, Günther Direct Services GmbH, Bamberg. In return, Günther Direct Services GmbH, Bamberg, received compensation of €115k for the year (2016: €114k). An amount of €41k (2016: €9k) was owed to Günther Direct Services GmbH at 31 December 2017, which was paid in full in January 2018.

Jens Schumann is a Member of the Supervisory Board. Jens Schumann is the sole shareholder of Schumann e.K. This structure has existed in comparable form since 2002 and was chosen because class lotteries only issue sales licences at present to natural persons or companies in which neither the liability of the company or its direct and indirect partners is limited. A cooperation agreement is in place between ZEAL and Schumann e.K., which governs the processing of game participation of class lottery customers by Schumann e.K. Under the terms of the agreement, Schumann e.K. must pay all commissions and other brokerage fees collected in this context to ZEAL. ZEAL provides Schumann e.K. with services in the field of controlling, bookkeeping, marketing and technical services and bears the costs incurred by Schumann e.K. in running its operations. As Schumann e.K. forms part of the ZEAL Group, all charges and income eliminate in full in the Consolidated Financial Statements.

The charitable foundation 'Fondation enfance sans frontières' Zurich, owner of the preference shares of myLotto24 Limited and Tipp24 Services Limited, has been identified as a related party. In 2017, dividends of £15.0k (2016: £15k) were paid by myLotto24 Limited to the Swiss Foundation. In addition £45.0k was paid by Tipp24 Services Limited to the Swiss foundation relating to the period 2014–2016. An amount of €15.0k has been accrued by Tipp24 Services Limited and myLotto24 Limited relating to the 2017 dividend payable to this Swiss Foundation. This is likely to be paid during 2018. No donations were paid by the Group to the Swiss Foundation during the year (2016: €38.0k).

Please refer to Remuneration Report for details on Executive Board and Supervisory Board remuneration.

Key management personnel disclosures have been made in the Remuneration Report and note 24 to the Consolidated Financial Statements.

There were no other significant transactions with related parties in the year.

28 CAPITAL MANAGEMENT

Neither the segments nor the Group as a whole has any externally imposed capital requirements other than the minimum capitalisation rules that apply to subsidiaries in Germany and Spain.

The capital structures of the Lottovate segment and the Lottery Betting segment (together 'the segments') consist of shareholders' equity as none of these segments holds any external debt.
The amount of each segment's surplus equity (i.e. the quantum of equity that exceeds the amount required to secure each segment's stable financial position) is to be used for inorganic acquisitions and the funding of further organic growth in line with the strategic objectives.
ZEAL Network also monitors the capital structure of all segments to ensure that sufficient equity is available to service external dividend payments.
While none of the segments currently hold external debt, in the medium-term, ZEAL Network may also leverage its financial position to secure funding to finance growth or future acquisitions.

The risks to which ZEAL is exposed are described in the risk report.

29 DISCLOSURES RELATING TO FINANCIAL INSTRUMENTS

29.1 FAIR VALUE

level 1 quoted (unadjusted) market prices in active markets for identical assets or liabilities;
level 2 valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
level 3 valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

All financial instruments held by the Group at 31 December 2017 are classified as level 1, with the exception of the Omaze Investment, which is classified as level 3. This investment occurred on 1 May 2017 and is measured as a financial asset at a fair value of €1,843k. At 31 December 2017, the Directors consider the purchase price to be the best indicator of the fair value of this investment. There have been no changes in the fair value since the date of the investment.

For all level 1 financial instruments the carrying amount approximates the fair value. Of the short-term financial assets held at 31 December 2017 amounting to €27,123k (2016: €19,682k), €25,949k were available-for-sale financial assets (2016: €17,490k) and €1,174k were held-to-maturity financial assets (2016: €2,192k).

During 2017, there were no transfers between level 1 and level 2 fair value measurements and no transfers into or out of level 3 fair value measurements.

29.2 CREDIT RISK

The scope of the credit risk of ZEAL equals the sum of cash, short-term financial assets, trade receivables and other receiv-ables.

Cash and other financial assets

There may be a default risk both in respect of the cash and short-term financial assets themselves, as well as the related interest accrued.

Cash and short-term financial assets are invested in a variety of short-term securities offering as much liquidity and as little volatility as possible, while ensuring broad risk diversification. The overriding objective of the Group's investment strategy is to preserve capital – even at the expense of expected returns.

ZEAL's investment strategy is aimed at spreading and minimising risk by means of multi-dimensional diversification. Firstly, funds are divided into differing investment products, such as sight and term deposits, highly fungible government bonds of eurozone states and short-term investment fund units. Secondly, we restrict our choice to those investments with good credit ratings. Following regular monitoring, there were no specific default risks in the portfolio as of the Statement of Financial Position date.

Trade and other receivables

The Company mainly collects the amounts owed by customers directly, via direct debit or credit card. On the basis of many years of collected data, the risk of returned direct debits or credit card charges is regarded as limited. Missing amounts from such cancellations are charged directly to 'Other operating expenses'.

Receivables from payment systems such as credit card companies entail the risk that the Group's customers themselves fail to meet their payment obligations. This cost is recognised directly in income statement in the event of payment default by a customer.

Contingent assets

There are no contingent assets.

29.3 LIQUIDITY RISK

Due to the sufficiency of its liquid assets, ZEAL is not exposed to any significant liquidity risk. Even in the case of significant restrictions of business against the backdrop of regulatory developments, ZEAL has sufficient liquidity to service the Company's liabilities at any time. Financial liabilities are mainly due immediately and do not accrue interest.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments:

Year ended 31 December 2017	Within 1 year	Within 1 – 3years	Within 3 – 5Over 5 yearsyears	Total
in €k
Trade payables	5,510	–	––	5,510
Other liabilities	20,058	1,765	––	21,823
Financial liabilities	106	–	––	106
Total	25,674	1,765	––	27,439

Year ended 31 December 2016	Within 1 year	Within 1 – 3years	Within 3 – 5Over 5 yearsyears	Total
in €k
Trade payables	5,052	–	––	5,052
Other liabilities	20,781	2,199	––	22,980
Financial liabilities	123	–	––	123
Total	25,956	2,199	––	28,155

In addition to the amounts presented in the tables above, there are items excluded from Other liabilities, as they are not considered a contractual financial liability. This includes VAT in 2017 of €2,589k (2016: €1,333k), gaming duty of €163k (2016: €124k) and payroll related taxes and social security of €288k (2016: €307k).

29.4 INTEREST RATE RISK

ZEAL invests the majority of its funds in a combination of fixed term deposits. For these funds, which are mainly held in liquid or short-term investments, there is a general risk from changing interest rates. A sensitivity analysis was conducted for the portfolio of cash and short-term financial assets held on 31 December 2017 with an interest rate increase of 10 basis points. Assuming no changes are made to the portfolio in response to the interest rate increase, there would be a rise in interest income of €1,191k (in a simplified calculation). Under consideration of the duration of those investments currently in the portfolio, there would be an expected reduction of this interest income of €1k. The overall effect, therefore, would be an increase in interest income of €1,190k (2016: €1,145k).

29.5 CURRENCY RISK

For the presentation of currency risks, IFRS 7 requires sensitivity analyses, which display the effects of hypothetical changes of the relevant risk variables on earnings and equity. In order to determine the currency risk, a fluctuation of 10% of the Euro against currencies where the earnings of the Company are exposed to was assumed at 31 December 2017.

On the basis of this assumption, a 10% increase in the value of the Euro against the British Pound, Norwegian Krone, Czech Koruna, Australian Dollar and the US Dollar would result in a positive effect of €1,012k (2016: €952k) on earnings. A devaluation of 10% would result in a negative effect of €720k (2016: €1,167k) on earnings.

In the year ended 31 December 2017 there was a loss from foreign exchange movements on financial instruments of €422k (2016: loss of €1,304k).

The financial assets currently held do not bear any material currency risk.

30 EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE

There were no material subsequent events that require adjustment or disclosure in the financial statements for the financial year ended 31 December 2017 to the date of issue of this report.

COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

		2017	2016
ASSETS in €k	Note
Non-current assets
Property, plant and equipment		8	9
Deferred tax assets	A	–	–
Investments in subsidiaries	B	31,659	31,282
Loans to Group undertakings	C	964	11,243
Other investments	D	3,041	1,198
Total non-current assets		35,672	43,732
Current assets
Trade and other receivables	E	205	2,368
Intercompany receivables		934	278
Other current assets and prepaid expenses		34	68
Cash and pledged cash		24,085	1,537
Total current assets		25,258	4,251
TOTAL ASSETS		60,930	47,983

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ZEAL NETWORK SE

OPINION

In our opinion:

ZEAL Network SE's Group and Parent company financial statements ('the financial statements') give a true and fair view of the state of the Group's and of the Parent company's affairs as at 31 December 2017 and of the Group's profit for the year then ended;

the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the Parent company financial statements been properly prepared in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the Group financial statements, Article 4 of the IAS Regulation.

We have audited the financial statements of ZEAL Network SE which comprise:

Group	Parent company
Consolidated income statement for the year then	Statement of financial position as at 31
ended	December 2017
Consolidated statement of comprehensive income	Statement of cash flows for the year
for the year then ended	then ended
Consolidated statement of financial position as at 31	Statement of changes in equity for the
December 2017	year then ended
Consolidated statement of cash flows for the year	Related notes A to K to the financial
then ended	statements
Consolidated statement of changes in equity for theyear then ended
Related notes 1 to 30 to the consolidated financialstatements including a summary of significantaccounting policies

The financial reporting framework that has been applied in the preparation of the Group and Parent company financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent company financial statements, as applied in accordance with the provisions of the Com-panies Act 2006.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report below. We are independent of the Group and Parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

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

USE OF OUR REPORT

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

CONCLUSIONS RELATING TO GOING CONCERN

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group's or the Parent com-pany's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date of approval when the financial statements are authorised for issue.

OVERVIEW OF OUR AUDIT APPROACH

Materiality	Overall Group materiality of €1,206k, which represents 0.5% of the Group'sstakes. Materiality for our 2016 audit was €1,876k, based on the Group's earningsbefore interest and tax ('EBIT').
Audit scope	The components where we performed full or specific scope audit proceduresaccounted for 100% of the Group's stakes, 95% of the Group's revenue and 90%of the Group's total assets.
Key auditmatters	German VATLegal and regulatory riskInappropriate revenue recognition

OUR KEY AUDIT MATTERS

Risk	Our response to the risk	Key observationscommunicated to the AuditCommittee
German VATThere is significant uncertaintyas to whether VAT in Germany isdue in respect of certain of the	We obtained and read theGroup's correspondence withrelevant tax authorities to	Management has performedsufficient, appropriateprocedures to conclude on

Group's products. This matter is subject to an ongoing tax dispute to determine whether VAT is due and on what basis it would be calculated. The amount could be material and there is a risk it is not appropriately provided for or disclosed in the financial statements.

Management judgement is required to determine the likely outcome of the ongoing tax dispute in relation to this matter.

For further details refer to the Audit Committee Report (page 38); Accounting policies (pages 80 and 89); and Note 26 of the Consolidated Financial Statements (page 110)

understand the Group's position on this matter.

We discussed the above with management and its legal advisers, with support from our German tax specialists. Based on our experience of the Group and the betting and gaming industry, and after consideration of the correspondence referred to above and similar cases, we challenged the assumptions made by management.

We assessed the appropriateness of amounts presented in the contingent liability disclosure in the financial statements and whether this disclosure was compliant with the requirements of IAS 37.

Scope of our procedures We performed full scope audit procedures over all the Group's products that could be subject to VAT in Germany.

the likelihood of the Group's products being subject to VAT in Germany.

We agreed with management's conclusions that whilst it is not considered probable the Group's products are subject to VAT in Germany, it is possible.

An appropriate contingent liability disclosure has been made in the financial statements.

No audit differences were identified during our procedures.

Risk Our response to the risk

Key observations communicated to the Audit Committee

Legal and regulatory risk Betting and gaming is a highly regulated industry in which compliance with legislation and licensing requirements is critical to the continued operation of the business. The Group holds licences in a number of countries. The Group's cross border operations expose it to regulations across several jurisdictions. This regulation is developing on an ongoing

We understood the Group's processes and related controls for the identification and mitigation of legal and regulatory risks and assessed whether the design and operation of the controls.

We read key correspondence and legal opinions received by the Group on legal and regulatory matters, including the Group's external lawyers'

We agree with management that there is no material impact on the Group's ability to continue its operations for a period of at least 12 months from the date of approval of the Financial Statements. Sufficient legal provisions were recognised by the Group and the disclosures in the financial statements are appropriate.

basis and can often also be subject to interpretation.The Group is subject to various challenges and legal cases in Germany and Spain from local authorities or lottery operators, challenging the Group's marketing activities and its right to operate its businesses.

Given the ongoing legal cases relating to the Group's operations in Germany and Spain, management judgement is required to determine the impact on the viability of the business. Judgement is also required in calculating the amount of any provisions related to these matters.

For further details refer to the Audit Committee Report (page 39); Accounting policies (page 89); and Note 20 of the Consolidated Financial Statements (page 104)

Group's Total operating performance involves little or no management judgement there is a risk that manual journal adjustments to revenue or other operating income could be recorded. There is also a risk that free bets are not appropriately classified as a deduction from

revenue.

assessments on the legality of the Group's continuing operations, to understand any impact on the financial statements and its viability.

For legal and regulatory risks where there was a higher degree of management judgement, we involved our legal specialists to assist us in understanding and challenging management's judgements on the expected outcome of any legal cases.

We inquired of management including in-house legal specialists about any known instances of material breaches in regulatory or licence compliance that needed to be disclosed or required provisions to be recorded.

We assessed the appropriateness of the legal provisions recognised by the Group, aided by third party legal confirmations on those matters.

Risk Our response to the risk Key observations communicated to the Audit Committee Inappropriate revenue recognition Total operating performance ('TOP'), comprising revenue and other operating income, is one of the Group's key performance indicators and is material to the financial statements. Whilst the vast majority of the We gained an understanding of and tested the processes and controls management has in place around the recording of revenue, including recording manual journal adjustments and classification of free bets. We gained an understanding of and tested, with support from Revenue was recognised in accordancewith the Group's accounting policies andno matters in respect of inappropriate manual journals were identified.

our IT specialists, the key IT controls over the recording of

We tested the appropriateness of journal entries impacting revenue with a focus on unusual journals such as those

posted manually or with unexpected account pairings. We identified and verified the classification, quantum and

revenue.

For further details refer to the Audit Committee Report (page 38); Accounting policies (page 83); and Note 4 of the Consolidated Financial Statements (page 93).

completeness of free bets given by the Group through testing of relevant financial and IT controls and through journal entry testing.

Scope of our procedures We performed audit procedures over revenue in all of the Group's full scope components.

OVERVIEW OF THE SCOPE OF OUR AUDIT

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the Group and effectiveness of group-wide controls, changes in the business environment and other factors such as the legal and regulatory environment when assessing the level of work to be performed at each entity.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the 22 reporting components of the Group, we determined that five components covering activities within the United Kingdom and Germany, represented the principal business units within the Group.

Of the five components selected, we performed an audit of the complete financial information of four components ('full scope components') which were selected based on their size or risk characteristics. For the remaining one component ('specific scope component'), we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile.

The reporting components where we performed audit procedures accounted for 100% (2016: 100%) of the Group's stakes, 95% (2016: 94%) of the Group's revenue and 92% (2016: 94%) of the Group's total assets. For the current year, the full scope components contributed 100% (2016: 100%) of the Group's stakes, 95% (2016: 94%) of the Group's revenue and 90% (2016: 93%) of the Group's total assets. The specific scope component contributed 0% (2016: 0%) of the Group's stakes, 0% (2016: 0%) of the Group's revenue and 2% (2016: 1%) of the Group's total assets. The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group.

The remaining 17 components together represent nil% of the Group's stakes. For these components ('review scope components'), we performed other procedures, including analytical review, testing of consolidation journals and intercompany eliminations and foreign currency translation recalculations to respond to any potential risks of material misstatement to the Group financial statements.

The charts below illustrate the coverage obtained from the work performed by our audit team.

Involvement with component teams

All audit work performed for the purposes of the audit was undertaken by the Group audit team.

OUR APPLICATION OF MATERIALITY

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

MATERIALITY

We determined materiality for the Group to be €1,206k (2016: €1,876k), which is 0.5% of stakes.

We used stakes as it is considered to be the primary area of focus of the Group's stakeholders. In the prior year and during our planning for the 2017 audit we used the Group's earnings before interest and tax ('EBIT') as our basis for materiality. Our view, which we have validated with the Audit Committee, is that the area of focus of the Group's shareholders has since developed and that stakes is more reflective of the underlying performance of the business.

We determined materiality for the Parent company to be €568k (2016: €423k), which is 1% (2016: 1%) of total assets.

PERFORMANCE MATERIALITY

On the basis of our risk assessments, together with our assessment of the Group's overall control environment, our judgement was that performance materiality was 75% (2016: 75%) of our planning materiality, namely €904k (2016: €1,407k). We have maintained performance materiality at this percentage reflecting the results of our testing of the Group's systems and processes and historical audit findings.

REPORTING THRESHOLD

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of €60k (2016: €94k), which is set at 5% of materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality

discussed above and in light of other relevant qualitative considerations in forming our opinion.

OTHER INFORMATION

We have nothing to report in this regard.

OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion, the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and directors' report have been prepared in accordance with applicable legal requirements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

In the light of the knowledge and understanding of the Group and the Parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept by the Parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the Parent company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.

RESPONSIBILITIES OF DIRECTORS

As explained more fully in the directors' responsibilities statement set out on page 59, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group and Parent company's abilities to continue as going concerns, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or the Parent company or to cease operations, or has no realistic alternative but to do so.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reason-able assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD

Our approach was as follows:

We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant frameworks which are directly relevant to specific assertions in the financial statements are those that relate to the reporting framework (IFRS and the Companies Act 2006) and the relevant tax compliance regulations in the jurisdictions in which the Group operates. In addition, we concluded that there are certain significant laws and regulations which may have an effect on the determination of the amounts and disclosures in the financial statements being the listing requirements of the Frankfurt Stock exchange, online gaming regulation in the jurisdictions in which the Group operates and money laundering regulations.
We understood how ZEAL Network SE complies with those frameworks by making enquiries of management and those responsible for legal and compliance procedures. We corroborated our enquiries through our review of board minutes, papers provided to the Audit Committee and correspondence with regulatory bodies.
We assessed the susceptibility of the Group's financial statements to material misstatement, including how fraud might occur by meeting with management from various parts of the business to understand where it considered there was susceptibility to fraud. We also considered performance targets and their influence on efforts made by management to manage earnings or influence the perceptions of analysts. We considered the programs and controls that the Group has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those programs and controls. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk.
Based on this understanding we designed our audit procedures to identify non-compliance with relevant laws and regulations. Our procedures involved journal entry testing, with a focus on manual consolidation journals and journals indicating large or unusual transactions, taking into account our understanding of the business; enquiries of those at all full and specific scope locations responsible for legal and compliance procedures, Group management and all full and specific scope management; and focused testing, as referred to in the key audit matters section above.
The Group operates in the gaming industry which is a highly regulated environment. The Senior statutory auditor re-viewed the experience and expertise of the engagement team to ensure that the team had the appropriate competence and capabilities, which included the use of a specialist where appropriate.
As the gaming industry is highly regulated, we have obtained an understanding of the regulations and the potential impact on the Group and in assessing the control environment we have considered the compliance of the Group with these regulations. These audit procedures included reading correspondence between the Group and regulatory bodies.

OTHER MATTERS WE ARE REQUIRED TO ADDRESS

Ernst & Young Germany was appointed by the company on 17 March 2003 to audit the financial statements for the year ending 31 December 2002 until 18 November 2014, when Ernst & Young UK was appointed to audit the 31 December 2014 year end and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments since ZEAL Network SE became a Public Interest Entity for Ernst & Young UK is 4 years (a combined total of 12 years for Ernst & Young Germany and Ernst & Young UK).
The non-audit services prohibited by the FRC's Ethical Standard were not provided to the Group or the Parent company and we remain independent of the Group and the Parent company in conducting the audit.
The audit opinion is consistent with the additional report to the Audit Committee.

Cameron Cartmell (Senior statutory auditor) for and on behalf of Ernst & Young LLP Statutory Auditor London 21 March 2018

Notes:

1. The maintenance and integrity of the ZEAL Network SE website is the responsibility of the directors; the work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Audited Consolidated Financial Statements of ZEAL Network SE as of and for the fiscal year ended 31 December 2016 (prepared in accordance with IFRS)

CONSOLIDATED INCOME STATEMENT FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2016

	2016	2015
Note
3	112,935	88,962
4	26,703	52,024
	139,638	140,986
24	(26,705)	(25,434)
	(2,166)	(7,153)
	(1,304)	1,433
5	(70,405)	(66,878)
	(14,830)	(9,958)
	(33,909)	(31,362)
	(21,666)	(25,558)
	238	(95)
6	(1,340)	–
	37,956	42,859
7	390	258
7	(237)	(1,120)
6	(1,598)	–
	–	(14,965)
	–	(7,428)
	(1,445)	(23,255)
	36,511	19,604
8	(10,560)	(18,258)
	25,951	1,346
	€	€

The above consolidated income statement should be read in conjunction with the accompanying notes 1 to 31.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2016

	2016	2015
in €k
Profit for the year	25,951	1,346
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of available-for-sale financialassets	(227)	48
Income tax relating to these items	–	–
Exchange differences on translation of foreign operations	143	–
Other comprehensive (loss)/income for the year,net of tax	(84)	48
Total comprehensive income attributableto the equity shareholders of the Company	25,867	1,394

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes 1 to 31.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016

		2016	2015
ASSETS in €k	Note
Non-current assets
Property, plant and equipment	9	1,901	2,224
Intangible assets	10	802	1,945
Deferred tax assets	11	575	781
Investments in associated companies	12	–	–
Investments in joint ventures	13	–	–
Long-term loans	14	–	3,075
Other investments	15	1,198	–
Other assets and prepaid expenses		201	173
Total non-current assets		4,677	8,198
Current assets
Trade and other receivables	16	755	10,005
Income tax receivables		9	2,269
Other current assets and prepaid expenses	17	12,835	12,222
Short-term loan	14	3,075	–
Financial assets	18	19,682	12,883
Cash and pledged cash	18	94,983	94,777
Total current assets		131,339	132,156
TOTAL ASSETS		136,016	140,354

		2016	2015
EQUITY & LIABILITIES in €k	Note
Non-current liabilities
Other liabilities	19	2,199	1,474
Total non-current liabilities		2,199	1,474
Current liabilities
Trade payables		5,052	5,013
Other liabilities	19	22,545	22,978
Financial liabilities		123	113
Deferred income	21	2,251	3,977
Income tax liabilities		5,952	10,576
Provisions	20	336	1,054
Total current liabilities		36,259	43,711
Equity
Subscribed capital	22	8,385	8,385
Share premium	22	21,578	21,578
Other reserves	22	(785)	(558)
Foreign currency translation reserve	22	143	–
Retained earnings	22	68,237	65,764
Total equity		97,558	95,169

TOTAL EQUITY & LIABILITIES		136,016	140,354

The above consolidated balance sheet should be read in conjunction with the accompanying notes 1 to 31. These financial statements were approved by the Board of Directors on 23 March 2017 and were signed on its behalf by:

Member of Executive Board Member of Executive Board Member of Executive Board

Dr. Helmut Becker Jonas Mattsson Susan Standiford

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 2016

	2016	2015
in €k
Profit from continuing operations before tax	36,511	19,604
Adjustments for
Depreciation and amortisation of non-current assets	2,166	7,153
Net loss on sale of non-current assets	–	137
Finance income	(390)	(258)
Finance costs	237	1,120
Impairment of convertible loan	1,598	–
Share of result of associated companies	–	14,965
Share of result of joint ventures	–	7,428
(Profit)/loss on liquidation of subsidiary	(238)	95
Loss on acquisition of Geo24 & GGGL	1,340	–
Acquisition of GGGL and Geo24, net of cash acquired	(623)	–
Other non-cash changes	234	262
Changes in
Trade and other receivables	9,487	(8,195)
Other assets and prepaid expenses	(641)	(1,738)
Trade payables	39	(2,492)
Other liabilities	(980)	2,364
Financial liabilities	10	4
Deferred income	(1,726)	1,082
Provisions	(718)	360
Interest received	390	258
Interest paid	(237)	(1,120)
Income taxes paid	(12,718)	(13,744)
Cash flow from operating activities	33,741	27,285

	2016	2015
in €k
Cash flow from investing activities
Loan to associated companies	(1,598)	–
Acquisition of intangible assets	(240)	(331)
Acquisition of property, plant and equipment	(460)	(650)
Payments for acquisition of investment	(1,198)	–
Receipt/(Payment) on liquidation of subsidiary	238	(231)
Long-term loans	–	(3,075)
Net cash outflow from investing activities	(3,258)	(4,287)
Cash flow from financing activities
Dividends paid to the Company's shareholders	(23,478)	(23,478)
Net cash outflow from financing activities	(23,478)	(23,478)
Net increase/(decrease) in cash, pledged cashand short-term financial assets	7,005	(480)
Cash, pledged cash and short-term financial assetsat the beginning of the year	107,660	108,140
Cash and cash equivalentsat the end of the financial year	114,665	107,660
Composition of cash and cash equivalents
Cash and pledged cash	94,983	94,777
Short-term financial assets	19,682	12,883
Cash and cash equivalentsat the end of the financial year	114,665	107,660

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 1 to 31.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD 1 JANUARY TO 31 DECEMBER

	Subscribedcapital	Sharepremium	Otherreserves	Retainedearnings	Currencytranslation adjustments	Totalequity
in €k
Balance at 1 January 2015	8,385	21,578	(606)	87,896	–	117,253
Profit for the year	–	–	–	1,346	–	1,346
Other comprehensive income	–	–	48	–	–	48
Total comprehensive incomefor the year	–	–	48	1,346	–	1,394
Transactions with ownersin their capacity as owners
Dividends paid	–	–	–	(23,478)	–	(23,478)
As at 31 December 2015	8,385	21,578	(558)	65,764	–	95,169
As at 1 January 2016	8,385	21,578	(558)	65,764	–	95,169
Profit for the year	–	–	–	25,951	–	25,951
Other comprehensive income	–	_	(227)	–	143	(84)
Total comprehensive incomefor the year	_	_	(227)	25,951	143	25,867
Transactions with ownersin their capacity as owners
Dividends paid	–	–	–	(23,478)	–	(23,478)
As at 31 December 2016	8,385	21,578	(785)	68,237	143	97,558

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 1 to 31.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

The consolidated financial statements of ZEAL Network SE (collectively 'ZEAL Group' or 'the Group') for the year ended 31 December 2016 were authorised for issue in accordance with a resolution of the Executive Board and subsequently forwarded to the Supervisory Board for examination and adoption on 23 March 2017.

The date of the statement of financial position is 31 December 2016. The financial year ended 31 December 2016 covers the period from 1 January 2016 to 31 December 2016.

2 ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of ZEAL Group's consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 BASIS OF PREPARATION

The consolidated financial statements of ZEAL Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation to fair value of the available for sale financial assets as described in the accounting policies below.

The financial statements are prepared on a going concern basis. The Directors have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that ZEAL Group has adequate resources to continue in oper-ation for the foreseeable future. This assessment is based on the fact that the Group holds approximately €95.0m in cash and approximately €19.7m in short-term financial assets at the year-end (2015: €94.8m and €12.9m in cash and shortterm deposits, respectively). As the Group expects to deliver revenue, positive cash inflows and profit growth in the years ahead, the Directors have adopted the going concern basis in preparing the consolidated financial statements.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. Actual results could differ from those estimates.

Under licence conditions and codes of practice published by the UK Gambling Commission in February 2015 (subsequently updated in April 2015), the financial statements must disclose the quantum of balances held in customer accounts representing funds not owned by the ZEAL Group. This information is in-cluded in note 18 to the consolidated financial statements.

Unless otherwise stated monetary amounts are denominated in Euros rounded to the nearest thousand.

2.2 RECENT ACCOUNTING DEVELOPMENTS

New standards, amendments and interpretations of existing standards adopted by the Group There were no new accounting standards issued during 2016, only amendments to existing standards. The following standards, interpretations and amendments have been adopted by the Group for the first time as of 1 January 2016 but have had no material impact on the consolidated results of operations of financial position of the Group:

Amendments to IFRS 10, 'Consolidated financial statements', IFRS 12, 'Disclosure of interests in other entities' and IAS 28, 'Investments in associates and joint ventures' on investment enti-

ties applying the consolidation exemption.
Amendment to IFRS 11, 'Joint arrangements', on acquisition of an interest in a joint operation.
Amendment to IAS 1, 'Presentation of financial statements' on the disclosure initiative.
Amendments to IAS 27, 'Separate financial statements' on the equity method in separate financial statements.
Amendments to IAS 16, 'Property, plant and equipment', and IAS 38, 'Intangible assets' on clarification of acceptable methods of depreciation and amortisation.
Annual improvement processes (AIP) to IFRS 5, 'Non-current assets held for sale and discontinued operations' – changes in the method of disposal; IFRS 7, 'Financial instruments – disclosures' regarding servicing contracts and the applicability of the offsetting disclosures in condensed interim financial statements, IAS 19, 'Employee benefits' regarding the discount rates in regional markets and IAS 34, 'Interim financial reporting' regarding the disclosure of information elsewhere in the interim financial report.

New standards, amendments and interpretations of existing standards that are not yet effective and have not been early adopted by the Group

The following standards and revisions listed below will be effective for future accounting periods beginning on or after 1 January 2017:
IAS 7, 'Disclosure initiative' is effective from 1 January 2017.
IAS 12, 'Recognition of deferred tax assets for unrealised losses' is effective from 1 January 2017.
IFRS 2, 'Classification and measurement of share-based payment transactions' is effective from 1 January 2018.
Amendments to IFRS 4, 'Insurance contracts' through application of IFRS 9 'Financial instruments' is effective from 1 January 2018.
IAS 40, 'Transfers of Investment Property' is effective from 1 January 2018.
IFRIC 22, 'Foreign Currency Transactions and Advance Consideration' is effective from 1 January 2018.
Annual improvement processes (AIP) 2014–2016 to IFRS, 1 'First-time Adoption of International Financial Reporting Standards' – Deletion of short-term exemptions for first-time adopters' is effective from 1 January 2018.
AIP IAS 28, 'Investments in Associates and Joint Ventures' Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice is effective from 1 January 2018.
AIP IFRS 12, 'Disclosure of Interests in Other Entities' is effective from 1 January 2017.

The Directors have considered the impact of the following standards in further detail, due to the potential impact these changes could have on the Group.

IFRS 15, 'Revenue from contracts with customers'

Nature of change

IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Income from financial instruments will continue to be recognised under IAS 39 or IFRS 9.

Preliminary Assessment

The Group plans to adopt the new standard on the required effective date using the full retrospective method. During 2016, the Directors performed a preliminary assessment of the impact that the adoption of IFRS 15 will have on the Group's consolidated financial statements. As a result of clarifications issued by the IASB in April 2016, it is anticipated that the preliminary assessment will require minor revision in advance of full adoption. The Group will continue to monitor any further developments in this area.

The Group specialises in the area of secondary lottery betting. The Group has assessed that IFRS 15 is unlikely to have a material impact on the way in which the Group recognises revenue. All material revenue streams are accounted for under IAS 39 rather than IFRS 15.

IFRS 15 provides presentation and disclosure requirements, which are more detailed than under

current IFRS. The presentation requirements represent a change from current practice and increase the volume of disclosures required in Group's financial statements. Based on our assessment of the requirements outlined in IFRS 15, we do not anticipate any significant changes in the level of disclosure following adoption of this standard.

IFRS 9, 'Financial Instruments'

Nature of change

In July 2014, the IASB issued the final version of IFRS 9

Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for the financial instruments project: classification and measurement, impairment and hedge accounting.

IFRS 9 is effective for annual periods beginning on or after

1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required, but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

Preliminary Assessment

The Group plans to adopt the new standard on the required effective date. During 2016, the Group performed a high-level impact assessment of all three aspects of IFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analysis.

The new standard is broadly split into three areas:

1.Classification and measurement

The Group does not expect a significant impact on its balance sheet or equity balances on application of the classification and measurement principles of IFRS 9. It expects to continue to measure at fair value all financial assets currently held at fair value. Gains and losses recorded on movements in the fair value of Other Investments are currently recorded through other comprehensive income. On adoption of IFRS 9, all period end fair value re-measurements will be recorded through the income statement. The change in accounting treatment will increase volatility in the recorded profit or loss. The AFS reserve currently presented as accumulated OCI will be recycled through the opening retained earnings position. There is also a fair value through other comprehensive income election available for equity instruments, which are currently classified as available for sale.

There will be no impact on the Group's accounting for fi-nancial liabilities as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss. The Group does not have (or does not expect to have) any such liabilities.

2.Expected credit losses (ECL)

3.Hedge accounting

Presently, the Group does not hold any instruments which have been designated for hedge accounting. Accordingly, the Group does not expect a significant impact.

The new standard also introduces expanded disclosure requirements and changes in presentation. These changes are expected to alter the nature and extent of the Group's disclosures about its financial instruments particularly in the year of the adoption of the new standard.

IFRS 16, 'Leases'

Nature of change

IFRS 16 was issued in February 2016. It will result in almost all leases being recognised on the Statement of Financial Position, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change.

IFRS 16 is effective for annual periods beginning on or after

1 January 2019, with early application permitted. The Group plans to adopt the new standard on

the required effective date using the full retrospective method.

Preliminary Assessment

The standard will affect primarily the accounting for the Group's operating leases. As at the reporting date, the Group has non--cancellable operating lease commitments of €14.6m (2015: €12.3m), disclosed in note 27 to the consolidated financial statements. However, the Group has not yet determined to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group's profit and classification of cash flows. Some of the commitments may be covered by the exception for short-term and low value leases and some commitments may relate to arrangements that will not qualify as leases under IFRS 16.

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

2.3 SIGNIFICANT JUDGEMENTS AND ESTIMATES

In determining and applying accounting policies, judgement is often required where the choice of specific policy, assumption or accounting estimate to be followed could materially affect the reported results or net position of the Group, should it later be determined that a different choice be more appropriate.

Management considers the following to be areas of significant judgement and estimation for the Group due to greater complexity and/or particularly subject to the exercise of judgement.

Basis of consolidation

The relative complexity of the Group structure means that judgement is required in correctly applying the provisions of IFRS 10, 'Consolidated financial statements', to ensure that all companies over which ZEAL Network SE has control are included and presented appropriately in the consolidated financial statements. The nature of these relationships including the power that the Company exercises over its subsidiary companies together with the Company's exposure or rights to variable returns of those companies is reviewed at least at each reporting period date to ensure that the companies included in the consolidation are appropriate (and are de-recognised where required). The basis of consolidation is described in detail in section 2.4 below.

Impairment considerations for available-for-sale investments

Impairment reviews in respect of the Company's available-for-sale investments are performed at least annually or more regularly if events indicate that this is necessary. Impairment reviews are based on future cash flows discounted using the weighted average cost of capital with terminal values calculated applying a long-term growth rate. The future cash flows, which are based on business forecasts, the long-term growth rates and the discount rates used are dependent on management estimates and judgements. Future events could cause the assumptions used in these impairment reviews to change with a consequent adverse impact on the results and net position of the Group.

The Company performs impairment reviews on its available-for--sale assets on 31 December each year. There is no objective evidence that a financial asset or group of financial assets is impaired. No impairment charges were therefore recorded in the consolidated income statement for the year ended 31 December 2016.

Taxation and other duties

The majority of tax positions taken by the Group are routine and not subjective. However, judgement has been exercised by the Directors in certain specific tax related areas. These matters have been disclosed if appropriate in the notes to the consolidated financial statements in accordance with the governing financial reporting standards and include the following areas:

Value added tax ('VAT')

Due to the changes in EU VAT legislation introduced on 1 January 2015, there is significant uncertainty around whether certain services provided by the MyLotto24 sub group are subject to VAT and the tax base on which any VAT payable would be calculated. At this stage, the Directors of the Group consider that the likelihood of the outflow of economic benefits is not probable and, as such, no provision has been recorded in the consolidated financial statements. Based on a thorough legal assessment, which included a review of the existing legal framework of relevant Member States and existing case law, The Directors remain confident that the outcome will be favourable for the Group. The Group will continue to closely monitor any changes in this area and ensure that the accounting for VAT continues to comply with governing legislation. The Direct-ors have reported a contingent liability on this matter and a separate disclosure is included in note 27 to the consolidated financial statements. In accordance with IAS 37 'Provisions, contingent assets and contingent liabilities', the Directors have estimated the potential financial impact (if any) and the associated timings in note 27 to the consolidated financial statements.

Tax audits

As noted in the 2015 Annual Report, there was a dispute regarding the validity of the tax treatment of two items included in returns filed during inspection period (business years 2005 to 2007 inclusive). Whilst one of the items was settled in the Group's favour, the second item remained open at 31 December 2015. After the filing for a stay of execution was denied by the Fiscal Court of Hamburg, an amount of €3.6m was paid during 2015 (€2.3m tax charge and €1.3m interest and penalties). During 2016, the Dir-ect-ors discontinued the appeal against the tax authority's assessment and settled the remaining interest for €0.2m. The case is now fully closed and no further cash outflows are anticipated.

During 2016, a separate case brought by the same tax authority in respect of business years 2008 to 2011 was settled for €2.3m. The best estimate of the expected outflow of economic benefits at 31 December 2015 resulted in the recording of a provision of €3.0 m in the 2015 financial statements. The overprovision of €0.7m was released to the consolidated income statement through the tax line in Q4 2016 when the Directors were satisfied that no future obligation from the tax case was anticipated. The Directors consider this case closed as there have been no further communications from the tax authorities. No related cash outflows or provisions are anticipated and there is no contingent liability.

2.4 BASIS OF CONSOLIDATION

The consolidated financial statements include the financial information of the subsidiary, associate and joint venture interests owned by the Company:

(I) Subsidiaries

Initial consolidation of subsidiary companies

Subsidiaries are entities controlled by the Company. Control is where the Company has power to vary the returns from its investment, and exposure to the variability of those returns. Subsidiaries are included in the consolidated financial statements from the date control commences until the date control ceases.

The equity interests of all subsidiary companies included in the consolidated financial statements are 100% owned by ZEAL Network with the exception of the Company's interests in MyLotto24 Limited and its subsidiary and associated companies (full details are set out within the Subsidiaries, Associates and Joint Ventures section (note 23) to the consolidated financial statements).

ZEAL Network holds 40% of the voting shares in MyLotto24 Limited. MyLotto24 Limited is the parent of the MyLotto24 sub group in which it itself holds the majority of the voting shares except for Tipp24 Services Limited in which it holds 40% of the voting shares. Fondation enfance sans frontières holds the remaining 60% of Tipp24 Services Limited, on the same basis as MyLotto24 Limited.

On 30 April 2009, ZEAL Network sold 60% of the voting shares in both MyLotto24 Limited and Tipp24 Services Limited to a Swiss foundation set up by ZEAL Network in the form of preference shares stripped of their main economic rights. As a consequence, ZEAL Network owns no more than half the voting rights in MyLotto24 Limited, while MyLotto24 Limited owns no more than half the voting rights in Tipp24 Services Limited. The affiliate companies and their respective subsidiaries are consolidated in the ZEAL Network SE Group financial statements because the relevant criteria of IFRS 10 are met:

ZEAL Network has a right to repurchase the majority of voting rights for an amount of £30k for each company. ZEAL Network has veto rights with regard to changes in the articles of MyLotto24 and Tipp24 Services.

The owner of the majority of voting rights receives a preliminary annual dividend of up to £15k for each company. In the case of liquidation, the owner of the majority of voting rights is entitled to receive previously agreed liquidation proceeds of £30k. ZEAL Network alone is entitled to the entire remaining profits and any remaining liquidation proceeds.

The annual dividend is therefore treated as an expense in the consolidated financial statements of ZEAL Group and the results of all entities within the MyLotto24 sub group are fully consolidated into the ZEAL Group consolidated financial statements. As a result of the substance of the relationship, no non-controlling interest is recorded.

Subsequent disposal of subsidiary companies

Transactions, balances and vehicles not included

in the consolidated resultsIntra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.The Group manages its risk exposure to large jackpots through the use of an insurance-linked-security (ILS) vehicle set up specifically to provide insurance cover to the MyLotto24 sub group. The ILS vehicle is not consolidated as the relevant criteria around control under IFRS 10 are not met.

(II) Associates and joint ventures

The Group's share of the recognised income and expenses of associates and joint ventures are accounted for using the equity method, from the date significant influence or joint control commences to the date it ceases, based on present ownership interests. The Group recognises its share of the associate's and joint venture's post-tax results as a one line entry before profit before taxation in the income statement and, to the extent relevant, its share of associate's and joint venture's equity movements as one line entries under each of items of other comprehensive income that will not be reclassified to profit or loss, and items of other comprehensive income that may be reclassified to profit or loss, in the statement of comprehensive income (no such entries in the current or prior year).

2.5 CLASSIFICATION OF CURRENT AND NON-CURRENT ASSETS AND LIABILITIES

ZEAL Group presents assets and liabilities in the statement of financial position based on the Company's assessment of whether they meet the classification as current or non-current balances.

An asset is a current asset when:

The asset is expected to be realised or intended to be sold or consumed in the normal operating cycle;
The asset is held primarily for the purpose of trading;
The asset is expected to be realised within twelve months after the reporting period; or
The asset is cash or a cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period date.
All other assets are classified as non-current.
A liability is current when:
The liability is expected to be settled in the normal operating cycle;
The liability is held primarily for the purpose of trading;
The liability is due to be settled within twelve months after the reporting period; or
The Company has no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period date.

All other liabilities are classified as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities in accordance with IAS 1 'Presentation of financial statements'.

2.6 REVENUE

(I) Secondary lottery revenue

Revenue that MyLotto24 Limited generates as the organiser of secondary lotteries, where MyLotto24 Limited bears the bookmaking risk, is recognised at the moment the draw results of the respective lotteries are announced. Stakes received as of the balance sheet date, but which are intended for games whose draw results are not available until after the balance sheet date, are deferred.

A contract to participate in a secondary lottery is treated as a derivative. The definition of a derivative is applied to contracts:

Where payments are linked to the outcome of an event;
Where the value of the contract, compared to the potential pay-out, is relatively low;
Where contracts are in place before the event has occurred and, in the case of a win, the pay-out is made in the future after the event has occurred.

In line with industry practice gaming duties are recorded as 'Other operating expenses' and not as sales tax within revenue.

(II) Revenue generated from Instant Win Games

Revenue that MyLotto24 Limited generates from the sale of Instant Win Game products is recognised in the same way as revenue generated on secondary lottery activities. Revenue on Instant Win Games is recorded at the point which the game is purchased. The quantum of revenue recorded represents the amount of bets placed by the customers less amounts won.

(III) Revenue generated from commissions and fees

Revenue also results from commissions and fees, which ZEAL receives for placing bets on behalf of customers. Revenue is recognised when the bets have been made, the lottery ticket information passed on to the lottery organiser and confirmation of receipt of the information has been received.

Ventura24 S.L. receives advance payments from some of its customers for subscriptions. Payments received are deferred and the related revenue is only recognised when the lottery ticket information has been passed on to the lottery organiser and confirmation of receipt of the information has been obtained (pursuant to IAS 18 'Revenue').

(IV) Other revenue

ZEAL receives revenue from servicing lottery operators. Insofar as this revenue is related to end consumer bets, it is recognised when the bets are made.

2.7 OTHER INCOME

(I) Interest income

Interest income is recognised on an accruals basis using the effective interest rate method.

(II) Other operating income

Other operating income comprises the following:

The fair value of consideration received or receivable from winning tickets purchased by MyLotto24 Limited on Spanish Euromillones draws.
The fair value of consideration received or receivable from special insurance policies taken out to hedge against the risk of special draw pay-outs.
The fair value of consideration received or receivable from the use of an insurance-linkedsecurity (ILS) vehicle taken out to provide cover against the risk of large pay-outs.
The release of dormant customer balances to the consolidated income statement. Funds deposited by the Group's customers are classified as other liabilities in the financial statements. After a period of 24 months from the date of last activity on customer accounts, the related customer liabilities are classified as dormant. If attempts to contact the customer to refund deposits held on their behalf are unsuccessful (at least 26 months from last activity), these customer liabilities are released to other operating income. This is consistent with the terms and conditions included on the Group's websites.

2.8 INCOME TAXES

(I) Current and deferred taxes

Deferred tax is provided in full in respect of all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the consolidated financial statements, except where the temporary difference arises from goodwill (in the case of deferred tax liabilities) or from the initial recognition (other than a business combination) of other assets and liabilities in a transaction that affects neither accounting nor taxable profit.

Deferred tax liabilities are recognised where the carrying value of an asset is greater than its tax base, or where the carrying value of a liability is less than its tax base. Deferred tax is recognised in full on temporary differences arising from investment in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. This includes taxation in respect of the retained earnings of overseas subsidiaries only to the extent that, at the balance sheet date, dividends have been accrued as receiv-able or a binding agreement to distribute past earnings in future periods has been entered into by the subsidiary.

Deferred tax is measured, on an undiscounted basis, at the tax rates expected to apply in the periods

in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at balance sheet date.

(II) Withholding and similar taxes

Withholding taxes suffered relate specifically to amounts withheld from gross pay-outs on winning tickets purchased from the Spanish National Lottery (SELAE) by MyLotto24 Limited. As a result of lottery tax legislation brought in by the Spanish Government in 2013, SELAE is required to withhold 20% of gross winnings and transfer this directly to the Spanish Tax Authorities on behalf of the winner. Until 30 September 2015, taxes on winnings were treated as deductions from other operating income. A receivable for taxes withheld at source will be recorded only when there is persuasive evidence to confirm that a refund will be received.

2.9 OPERATING EXPENSES

2.10 FOREIGN EXCHANGE

(I) Foreign exchange translation

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Euros, which is the Group's presentational currency. The average exchange rates (calculated based on the average of the exchange rates during the financial year) and the closing exchange rates have been taken from the publicly available European Central Bank rates. All exchange rate difference, which are in a currency different from the Group's presentational currency are recognised in other comprehensive income.

(II) Transactions and balances

The financial statements for each Group company have been prepared on the basis that transactions in foreign currencies are recorded in their functional currency at the rate of exchange ruling at the date of the transaction. Monetary items denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date with the resultant translation differences being included in operating profit in the income statement other than those arising on financial assets and liabilities, which are recorded within financial income or expense. Translation differences on non-monetary assets such as equity investments classified as available for sale assets are included in other comprehensive income.

2.11 INTANGIBLE ASSETS

(I) Computer software and licences

Where computer software is not an integral part of a related item of property, plant and equipment, the software is capitalised as an intangible asset.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring them to use. Direct costs associated with the production of identifiable and unique internally generated software controlled by the Group that will probably generate economic benefits exceeding costs beyond one year are capitalised. Direct costs include software development employment costs (including those of contractors used) and an appropriate portion of overheads. Capitalised computer software, licence and development costs are amortised over their useful economic lives of between three and five years.

Internally generated costs associated with maintaining computer software programmes are expensed as incurred.

(II) Research and development

Research and general development expenditure is written off in the period in which it is incurred.

Certain development costs are capitalised as internally generated intangible assets in the following circumstances:

Where there is a clearly defined project;
Where there is separately identifiable expenditure;
Where an outcome can be assessed with reasonable certainty (in terms of feasibility and commerciality);
When expected revenues exceed expected costs and the Group has the resources to complete the task.

Such assets are amortised on a straight-line basis over their useful lives once the project is complete.

2.12 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost net of accumulated depreciation and any impairment losses.

Repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the residual amount of the asset and is recognised in profit or loss.

(I) Assets in the course of construction

Assets in the course of construction are carried at cost less any impairment loss. Cost includes professional fees and for qualifying assets certain borrowing costs as determined below. When these assets are ready for their intended use, they are transferred into the appropriate category. At this point, depreciation commences on the same basis as on other property, plant and equipment.

(II) Depreciation

Depreciation is provided on a straight-line basis at rates calculated to write off the cost, less the estimated residual value, of each asset over its expected useful life as follows:

	years
Technical equipment/hardware	2–6
Office equipment and fit-out	3–12

2.13 IMPAIRMENT

This policy covers all assets except financial assets and deferred tax assets.

Where the asset does not generate cash flows that are independent from the cash flows of other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs. For the purpose of conducting impairment reviews, CGUs are considered to be groups of assets that have separately identifiable cash flows. They also include those assets and liabilities directly involv-ed in producing the income and a suitable proportion of those used to produce more than one income stream.

An impairment loss is taken first against any specifically impaired assets.

2.14 OTHER INVESTMENTS

Other investments are recognised at cost net of any impairment losses. Where the fair value of an investment cannot be reliably measured, then is should be measured at cost.

2.15 LEASING

Operating leases

Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term.

Finance leases

ZEAL Group does not have any finance leases.

2.16 BUSINESS COMBINATIONS

(I) Subsidiaries

The acquisition method is used to account for business combinations.

Where the business combination is achieved in stages and results in a change in control, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

(II) Associates and joint ventures

The date significant influence or joint control commences is not necessarily the same as the closing date or any other date named in the contract.

Investments in associates and joint ventures are reviewed for impairment if an impairment trigger is identified. Refer to 2.13 for further detail.

2.17 FINANCIAL ASSETS AND LIABILITIES

There are five categories of financial assets and financial liabilities. These are described as follows:

(I) Financial assets and financial liabilities at fair value through profit or loss

Derivative financial assets and financial liabilities

Derivative financial assets and financial liabilities are financial instruments whose value changes in response to an underlying variable, require little or no initial investment and are settled in the future.

These include derivatives embedded in host contracts. Such embedded derivatives need not be accounted for separately if the host contract is already fair valued; if it is not considered as a derivative if it was freestanding; or if it can be demonstrated that it is closely related to the host contract. There are certain currency exemptions which the Group has applied to these rules which limit the need to account for certain potential embedded foreign exchange derivatives. These are:

If a contract is denominated in the functional currency of either party;
Where that currency is commonly used in international trade of the good traded; or if it is commonly used for local transactions in an economic environment.

Derivative financial assets and liabilities are analysed between current and non-current assets and liabilities on the face of the balance sheet, depending on when they are expected to mature.

(II) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities of greater than twelve months after the balance sheet date which are classified as non-current assets. Loans and receivables are initially recognised at fair value including originating fees and transaction costs, and subsequently measured at amortised cost using the effective interest method less any provision for impairment.

Loans and receivables include trade receivables, amounts owed by associates, amounts owed by joint ventures, accrued income and cash and cash equivalents.

a. Trade receivables

Trade receivables are initially recognised at fair value and sub-sequently measured at amortised cost less provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the receiv-ables. The amount of the provision is the difference between the asset's carrying value and the present value of the estimated future cash flows discounted at the original effective interest rate. This provision is recognised in the income statement.

b. Cash, cash equivalents and pledged cash

In the consolidated balance sheet, cash and cash equivalents includes cash in hand, pledged cash, bank deposits repayable on demand and other short-term highly liquid investments with original maturities of three months or less. Where investments have a maturity of greater than three months but if there is no penalty for withdrawal these are considered to be cash equivalents.

(III) Available for sale investments

Available for sale investments are non-derivative financial assets that are either designated in this category or not classified as financial assets at fair value through profit or loss, or loans and receivables. Investments in this category are included in non-current assets unless management intends to dispose of the invest-ment within twelve months of the balance sheet date. They are initially recognised at fair value plus transaction costs and are subsequently remeasured at fair value and tested for impairment. Where it is not possible to reliably measure the fair value of the investment, the investment is carried at cost and measured for impairment at each reporting date. Gains and losses arising from changes in fair value including any related foreign exchange movements are recognised in other comprehensive income. On disposal or impairment of available for sale investments, any gains or losses in other comprehensive income are reclassified to the income statement.

(IV) Held-to-maturity financial assets

Held-to-maturity financial assets are recognised initially at fair value. These assets are then remeasured at amortised cost, using the effective interest method, less any impairment.

(V) Financial liabilities held at amortised cost

Financial liabilities held at amortised cost include trade payables, accruals, amounts owed to associates, amounts owed to joint ventures and other payables, and borrowings.

Trade payables

Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. Trade payables are analysed between current and noncurrent liabilities on the face of the balance sheet, depending on when the obligation to settle will be realised.

2.18 EQUITY AND DISTRIBUTIONS

(I) Share capital, debt and equity instruments issued

Ordinary shares are classified as equity. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by ZEAL are recognised when the proceeds have been received, net of direct issue costs. Issue costs are those costs which would not have been incurred if the equity instrument had not been issued.

A repurchase of the Company's own equity instruments is rec-ognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

Debt and equity instruments issued by a Group company are classified as financial liabilities or equity depending on the economic substance of the contractual agreement.

(II) Dividend distributions

Dividend distributions to equity holders of ZEAL Network SE are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid. Dividends declared after the balance sheet date are not recognised as there is no present obligation at the balance sheet date.

2.19 PROVISIONS

2.20 CONTINGENT LIABILITIES

Contingent liabilities are not recognised in the consolidated financial statements. Contingent liabilities are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Details of contingent liabilities recorded at 31 December 2016 are included in note 27 to the consolidated financial statements.

2.21 EMPLOYEE BENEFITS

The Group operates various employee benefits including profit-sharing, bonus plans and long-term incentives as well as other post-employment schemes including termination benefits and defined contribution pension plans.

(I) Profit sharing, bonus plans and long-term incentives

The Group recognises a liability and an expense for bonuses and

profit-sharing, based on a formula that takes into consideration the profit attributable to the Company's shareholders after certain adjustments. The Group recognises a provision contractually obliged or where there is a past practice that has created a constructive obligation.

(II) Termination benefits

involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of months employees worked for the Group. Benefits falling due more than twelve months after the end of the reporting period are discounted to their present value.

(III) Defined contribution pension plans

(IV) Cash-settled share-based payments

For cash-settled share-based payment schemes, a liability is recognised based on the fair value of the payment earned by the balance sheet date. The fair value of the phantom share options granted is recognised over the vesting period to reflect the value of the employee services received. The charge relating to grants to employees is recognised as an expense in the income statement.

3 SEGMENT REPORTING

SEGMENTAL DISCLOSURE PRESENTATION

We monitor the performance of the B2C segment based on 'normalised' revenue and EBIT (statutory revenue and EBIT adjusted to the statistically expected prize pay-outs) and actual results for the B2B/B2G segment. The disclosures included in the operating segment note below are consistent with the Group's internal reporting and 'normalised' performance is given due prominence in the disclosure as this is the way in which we analyse the Group. A fuller description of 'normalisation' is in-cluded in the business review section of this report. Included within the note below is a reconciliation between the segmental results used to assess the lines of business and our consolidated statutory performance where statistically expected pay-outs are replaced with actual cash outflows. Inter-segment transactions are also eliminated as part of this process. Descriptions of the significant reconciling items are also includ-ed below the relevant tables.

The operating segments are Business-to-Consumer (B2C) and Business-to-Business/Business-to-

Government (B2B/B2G). We have described the composition of the segments in more detail below:

B2C Segment

B2C's operating results comprise the secondary lottery betting business ('secondary lottery'), sales of Instant Win Games products, direct costs and an allocation of the shared cost base.

B2B/B2G Segment

The B2B/B2G segment comprises the remainder of the Group's core operating activities including:

The lottery brokerage business in Spain.
The international services business for lottery operators including online operation of the lottery games of the Spanish lottery operator ONCE (a national organisation for blind and disabled people).
The international business that offers digital services to private business partners or state lotteries.
Segmental results presented are attributable to the operating activities of the B2B/B2G segment together with an allocation of shared costs.

Business unit segment reporting 2016

	B2C	B2B/B2G	Businessunit total	Reconciliationto stats	– thereofnormalisationadjustments	– thereof	other Statutory
in €k	A	B	A+B=C	D+E=F	D	E	C+F
Revenue	138,594	6,686	145,280	(32,345)	(32,580)	235	112,935
Other operating income	2,626	308	2,934	23,769	19,716	4,053	26,703
Total Operating Performance	141,220	6,994	148,214	(8,576)	(12,864)	4,288	139,638
EBITDA	64,545	(9,782)	54,763	(14,641)	(12,864)	(1,777)	40,122
Depreciation/amortisation	(1,554)	(612)	(2,166)	–	–	–	(2,166)
EBIT	62,991	(10,394)	52,597	(14,641)	(12,864)	(1,777)	37,956
Financial result	–	–	–	(1,445)	–	(1,445)	(1,445)
EBT	–	–	52,597	(16,086)	(12,864)	(3,222)	36,511
Income tax	–	–	–	(10,560)	–	(10,560)	(10,560)
Net profit/loss	–	–	52,597	(26,646)	(12,864)	(13,782)	25,951

The principal reconciling items between the aggregated business unit results and the consolidated statutory results are attributable to two main categories being:

'Normalisation' adjustments (column 'thereof normalisation adjustments') these adjustments bridge the quantum of statistically expected pay-outs included within the business unit column to consolidated statutory results which include actual cash outflows.
'Other' adjustments (column 'thereof other') the most significant adjustments in 2016 relate to the following items:
Other operating income of €3.4m related to the release of dormant customer accounts.
A charge associated with the acquisition of GGGL and Geo24 amounting to approximately €1,340k recorded within EBITDA and EBIT described in detail in note 6 to the consolidated financial statements.
An impairment charge on amounts drawn by GGGL on the convertible loan facility of €1,598k recorded within financial result (described in the business review section above). The remaining gain of €153k included within this category relates to net income receivable accrued in the normal course of business.
Other items impacting revenue and other operating income relate to external revenue and other operating income generated by Schumann e.K. This company does not form part of either the B2C or B2B/B2G segments.
Remaining reconciling items do not warrant further commentary.

Business unit segment reporting 2015

	B2C	B2B/B2G	Businessunit total	Reconciliationto stats	– thereofnormalisationadjustments	– thereof	other Statutory
in €k	A	B	A+B=C	D+E=F	D	E	C+F
Revenue	132,521	6,277	138,798	(49,836)	(52,227)	2,391	88,962
Other operating income	3,607	307	3,914	48,110	47,951	159	52,024
Total Operating Performance	136,128	6,584	142,712	(1,726)	(4,276)	2,550	140,986
EBITDA	62,357	(8,134)	54,223	(4,211)	(4,276)	65	50,012
Depreciation/amortisation	(6,380)	(575)	(6,955)	(198)	–	(198)	(7,153)
EBIT	55,977	(8,709)	47,268	(4,409)	(4,276)	133	42,859
Financial result	–	–	–	(23,255)	–	(23,255)	(23,255)
EBT	–	–	47,268	(27,664)	(4,276)	(23,388)	19,604
Income tax	–	–	–	(18,258)	–	(18,258)	(18,258)
Net profit/loss	–	–	47,268	(45,922)	(4,276)	(41,646)	1,346

'Other' adjustments (column 'thereof other') – the most significant adjustments in 2015 relate to the following items:

External revenue and other operating income generated by Schumann e.K. This company does not form part of either the B2C or B2B/B2G segments.
Investments in GGGL were written down to €nil at 31 December 2015, with an impairment charge of €14,965k recorded within financial result.
Investments in Geo24 were written down to €nil at 31 December 2015, with an impairment charge of €7,428k recorded within financial result.
Remaining reconciling items do not warrant further commentary.

4 OTHER OPERATING INCOME

	2016	2015
in €k
Income from hedging transactions	1,910	50,788
Income from special insurance policies	20,000	–
Release of dormant customer accounts	3,397	–
Other	1,396	1,236
Other operating income	26,703	52,024

Income from hedging activities relates to income generated from tickets hedged through the Group's wholly owned subsidiary Ventura24 S.L.U (Ventura24).

The income generated from special insurance policies relates to the pay-out on an insurance policy taken out on a large draw on the German Lotto in May 2016.

The release of dormant customer accounts of €3.4m was authorised by the Directors of Tipp24 Services Limited. The release related specifically to customer account balances where no activity had been recorded at least in the last 26 months and all procedures have been completed to contact the customer. The release of these account balances is in full compliance with publicly available terms and conditions included on the tipp24.com website and significant diligence was performed prior to the authorisation of this release.

5 OTHER OPERATING EXPENSES

	2016	2015
in €k
Marketing expenses	14,830	9,958
Direct costs of operations	33,909	31,362
Other costs of operations	21,666	25,558
Other operating expenses	70,405	66,878

The increase in the operating expenses balance is attributable to the following movements in cost categories:

Increase of €4.9m in marketing investment to drive customer acquisition and re-activation of B2C's customer base.
The main drivers of the increase in direct cost of operations are as follows:
The cost of hedging transactions increased from €19.6m in 2015 to €21.3m in 2016, representing a year-on-year movement of €1.7m. This was driven by an increase in special jackpot insurance to hedge against the Group's exposure to special draws.
Increase in non-deductible VAT of €1.4m resulting from a change in the Group's UK VAT structure.
The decrease in other cost of operations from €25.6m in 2015 to €21.7m in 2016 is mainly attributable to savings of:
€1.2m in consultancy expenses due to projects being completed in 2015.
The remaining movement is attributable other movements that are individually immaterial.

Other costs of operations include fees charged by the auditor, Ernst & Young, LLP, and its affiliates summarised in the table below.

Auditor's remuneration	2016	2015
in €k
Audit of the financial report of the Group and any other entity in theconsolidated group	509	494
Tax advisory	251	50
Tax compliance	20	18
Other non-audit services	19	–
Total auditor remuneration	799	562

6 ACQUISITION OF GEONOMICS GLOBAL GAMES LIMITED (GGGL) AND GEO24 UKLIMITED (GEO24)

6.1 IMPAIRMENT OF LOANS ADVANCED TO GGGL UNDER THE CONVERTIBLE LOAN FACILITY

As noted in the 2015 Annual Report, in July 2015, Tipp24 Investment 1 Limited entered into an agreement with GGGL to provide a convertible loan facility amounting to £2.6m (with a further £0.4m available if certain targets were met) to fund the working capital of GGGL. The loan facility bears an interest rate of 50% per annum if KPIs included in the facility are met and 70% per annum if the KPIs are not met.

At 31 December 2015, the loan facility remained undrawn and the required KPIs had not been met. There was therefore no impact on the consolidated financial statements for the year ended 31 December 2015. The first draw-downs totalling £1.25m occurred in January 2016 and February 2016. The Group provided against these amounts in full on the date of each draw-down as the Group believed that there was significant uncertainty over whether the funds would be repaid. All draw-downs were effected well in advance of the completion date and, as such, do not form part of the cost of acquisition of GGGL and Geo24 (set out at 6.2 below). A charge of €1,598k relating to the amounts drawn on the facility has been separately recorded within the consolidated income statement as an impairment of convertible loan. No interest income was recognised on the loan draw-downs as there was insufficient uncertainty that any interest income accrued would be recovered.

6.2 ACQUISITION OF NON-ZEAL OWNED SHARES IN GGGL AND GEO24

As noted in the 2015 Annual Report, the Directors made the decision to purchase the non-ZEAL owned shares of GGGL during Q1 2016 as both parties believed that the technical know-how and expertise of the personnel employed by GGGL and its joint venture Geo24 UK Limited (Geo24) would fit well with ZEAL Group's wider growth aspirations. On 10 March 2016, the Group signed a share purchase agreement (SPA) with the shareholders of GGGL to acquire the remaining issued share capital of GGGL that was not owned by ZEAL Group at 29 January 2016. As GGGL owned the non-ZEAL owned shares of Geo24 at the acquisition date, ownership of 100% of the issued share capital

of GGGL lead to full control of Geo24 passing to the ZEAL Group.

The remaining shares in GGGL that were in issue at the SPA signing date, but not owned or beneficially owned by ZEAL Group (301,378 ordinary shares), were acquired from the non-ZEAL shareholders on 30 March 2016 for consideration of £814k (€1,041k) (representing a value of £2.70 (€3.45) per share). The excess of the purchase consideration over the fair value of net liabilities acquired in GGGL and Geo24, resulting in a charge of €1,340k, was written off to the consolidated income statement in March 2016. This charge, effectively representing recruitment costs, was recorded as a loss on acquisition.

Immediately following the acquisition ZEAL management im-plemented the decisions made prior to the acquisition in relation to the technical staff and the Geo24 websites. The technical staff employed by GGGL were assigned to existing B2B/B2G projects developed by the ZEAL Group. Furthermore, before the end of Q1 2016, the websites run by Geo24 prior to acquisition were shut down. As neither the business of GGGL nor the business of Geo24 was capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors, the Directors of the Company concluded that neither GGGL nor Geo24 constituted 'businesses' as defined in IFRS 3 – Business Combinations.

Although neither GGGL nor Geo24 constituted businesses as defined by IFRS 3 – Business Combinations and the related disclosure requirements are therefore not required, the Directors believe that details of the assets and liabilities acquired and consideration transferred would be informative to users of the financial statements. The following table summarises the consideration transferred for control of GGGL and details of the assets acquired and liabilities assumed at the acquisition date in GGGL and Geo24. No goodwill was recorded on acquisition.

Recognised amounts of identifiable assets acquired andliabilities assumed	GGGL	Geo24	Total
in €k
Cash and cash equivalents	278	140	418
Trade receivables	3	–	3
Other current assets and prepaid expenses	231	3	234
Trade payables	(8)	–	(8)
Other liabilities and short-term provisions	(752)	(56)	(808)
Income tax liabilities	(138)	–	(138)
Total identifiable net liabilities			(299)
Consideration transferred for 67.87% of GGGL (301,378shares)1	(1,041)
Consideration transferred			(1,041)
Total loss on acquisition			(1,340)

1 Consideration transferred on acquisition of Geo24 UK Limited was €nil.

Net cash outflow arising on acquisition

Acquisition, net of cash	(623)
Less: cash and cash equivalents balances acquired	418
Cash consideration	(1,041)
in €k

No contingent consideration is payable in relation to the acquisition.

7 FINANCE INCOME AND COSTS

	2016	2015
in €k
Finance income
Other interest and similar income	52	5
Income from other long-term securities and loans	338	253
	390	258
Finance costs
Interest expense and similar charges	(237)	(1,120)
	(237)	(1,120)

8 INCOME TAX EXPENSE

In the case of foreign companies, the respective country-specific regulations and tax rates are used for the calculation of current income taxes.

Deferred taxes under IAS 12 are calculated at the anticipated average tax rate at the time the differences are reversed. For the calculation of deferred taxes, the total tax rate for domestic UK tax registered companies amounted to 17% (2015: 20%). In the case of foreign companies, the respective country-specific regulations and tax rates were used to calculate deferred taxes.

Income statement	2016	2015

in €k
Current taxation:
Charge for the year	11,138	18,406
Adjustments in respect of prior years	(784)	(507)
Withholding taxes and other remittance taxes	–	–
Total current taxation	10,354	17,899
Deferred taxation:
Charge for the year	206	278
Adjustments in respect of prior years	–	81
Total deferred taxation	206	359
Total taxation expense (income statement)	10,560	18,258

Included within other tax items is a credit of €0.7m relating to the partial release of a provision recorded at 31 December 2015, concerning a tax audit of business years 2008 to 2011. This audit was ongoing at 31 December 2015 and the provision of €3.0m recorded was the Directors' best estimate of the outflow of economic benefits at that time. During 2016, the case was settled and an amount of €2.3m was paid to the relevant tax authority leading to the release of the remaining provision (€0.7m).

9 PROPERTY, PLANT AND EQUIPMENT

Costin €k	OfficeEquipment	Hardware	Office equipment underconstruction	Total
Balance as at 1 January 2015	3,055	4,445	159	7,659
Additions	440	169	15	624
Disposals	(32)	(8)	(163)	(203)
Balance as at 31 December 2015	3,463	4,606	11	8,080
Additions	112	329	11	452
Transfer between classes	18	–	(18)	–
Disposals	–	(120)	–	(120)
Balance as at 31 December 2016	3,593	4,815	4	8,412

Accumulated depreciation	OfficeEquipment	Hardware	Office equipment underconstruction	Total
in €k
Accumulated depreciation as at 1 January2015	(1,021)	(3,702)	–	(4,723)
Provided during the year	(646)	(506)	–	(1,152)
Disposals	11	8	–	19
Accumulated depreciation as at 31 December 2015	(1,656)	(4,200)	–	(5,856)
Provided during the year	(459)	(324)	–	(783)
Disposals	5	123	–	128
Accumulated depreciation as at 31 December 2016	(2,110)	(4,401)	–	(6,511)

Book value	OfficeEquipment	Hardware	Office equipment underconstruction	Total
in €k
As at 31 December 2015	1,807	406	11	2,224
As at 31 December 2016	1,483	414	4	1,901

There are no assets held under finance leases (2015: none).

10 INTANGIBLE ASSETS

Cost	Software Other software		Licences	Total
in €k
Balance as at 1 January 2015	23,792	7,949	184	31,925
Additions	–	332	–	332
Disposals	–	–	–	–
Balance as at 31 December 2015	23,792	8,281	184	32,257
Additions	–	240	–	240
Disposals	–	(755)	–	(755)
Balance as at 31 December 2016	23,792	7,766	184	31,742

Accumulated amortisation	Software Other softwareLicences		Total
in €k
Accumulated amortisation as at 1 January2015	(18,594)	(5,685)	(32)	(24,311)
Provided during the year	(4,798)	(1,185)	(18)	(6,001)
Disposals	–	–	–	–
Accumulated amortisation as at 31 December 2015	(23,392)	(6,870)	(50)	(30,312)
Provided during the year	(400)	(965)	(18)	(1,383)
Disposals	–	755	–	755
Accumulated amortisation as at 31 December 2016	(23,792)	(7,080)	(68)	(30,940)

Book value	Software Other software		Licences	Total
in €k
As at 31 December 2015	400	1,411	134	1,945
As at 31 December 2016	–	686	116	802

The item 'Software' refers to the value of gaming software. The item 'Other software' contains all other software products including gaming platforms.

11 DEFERRED TAXATION

Deferred taxation movement schedule	2016	2015
in €k
At 1 January	781	1,140
Charged to income statement	(206)	(359)
Deferred tax on items charged to other comprehensive income	–	–
At 31 December	575	781

Deferred tax assets Fixed asset Other tempo- Tax losses Total

allowances rary differencesandother credits
in €k
At 1 January 2015	523	536	81	1,140
Charged to income statement	(88)	(190)	(81)	(359)
At 1 January 2016	435	346	–	781
Charged to income statement	(20)	(186)	–	(206)
At 31 December 2016	415	160	–	575

The main rate of UK corporation tax will be reduced from 20% to 19% from 1 April 2017 and was due to be reduced to 18% from 1 April 2020. These changes were substantively enacted on 26 October 2015. In the 2016 Finance Act, the main rate of corporation tax was reduced to 17% from 1 April 2020. Royal ascent was received on 15 September 2016. The Group has therefore recognised its deferred tax balances at 17% as this is the rate expected to be in place prevailing when the deferred tax asset balances are forecast to be reversed.

Of the deferred tax assets carried by the Group, an amount of €nil (2015: €nil) refers to tax loss carryforwards, and an amount of €575k (2015: €781k) to temporary differences. Deferred tax assets recognised will be utilised over the useful life of each asset – useful lives are set out in the accounting policy above. The utilisation of deferred tax assets recorded is not dependent on future tax-able profits in excess of the profits arising from the reversal of existing taxable temporary differences.

Of total tax loss carry forwards amounting to €64,827k as of 31 December 2016 (2015: €46,178k), the Group did not recognise related deferred tax assets amounting to €12,449k (2015: €10,475k). A significant part of the tax losses arose in Germany and Spain and the value of the unrecognised deferred tax asset has been calculated at the substantively enacted rates of these countries. The tax losses do not expire.

Deferred tax assets have not been recognised in respect of these losses as there is currently uncertainty as to whether the related entities will generate sufficient taxable profit in the future against which any deferred tax asset created could be reversed.

Deferred tax assets in respect of tax credits arising which are carried forward for offset against future profits are not recognised unless it is probable that future profits will arise. The tax credits do not expire.

At 31 December 2016, there were no recognised or unrecognised deferred tax liabilities (2015: €nil) for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries, associates or joint ventures. Management has determined that undistributed profits of its subsidiaries, joint ventures or associates will not be distributed in the foreseeable future.

There are no income tax consequences attached to the payment of dividends by the Group to its shareholders in 2016 and 2015.

12 INVESTMENT IN AN ASSOCIATE

At 31 December 2015, the Group owned 25.7% of the shares issued by GGGL. On 29 January 2016, the Group exercised vested warrants that increased its shareholding to 32.13%. On 30 March 2016, the Group completed the purchase of the remaining 67.87% of the issued share capital of GGGL in exchange for consideration of £0.8m (€1.0m).

Further explanation is included in note 6 to the consolidated financial statements.

Investments in GGGL were written down to €nil at 31 December 2015. No share of GGGL's loss was therefore accounted for in the year ended 31 December 2016.

SUMMARISED FINANCIAL INFORMATION

Summarised financial information of GGGL is as follows:

	2016	2015
in €k
Net assets	–	49,899
25.7% share of the net assets	–	12,824
Group's carrying amount of the investment	–	12,824
Impairment to carrying amount of investment	–	(12,824)
Group's carrying value of investment post impairment	–	–

	2016	2015
in €k
Loss from continuing operations	–	(6,842)
Total comprehensive loss	–	(6,842)
Group's share of loss (25.7%)	–	(1,758)
Group's share of amortisation of fair value adjustments on initialacquisition	–	(383)
Result from associated company recorded	–	(2,141)

13 INTEREST IN A JOINT VENTURE

At 31 December 2015, the Group had a 50% interest in Geo24 UK Limited (Geo24). On the 30th March 2016, the Group completed the purchase of the remaining 67.87% of the issued share capital of GGGL. As GGGL owned 50% of the shares issued by Geo24 at the acquisition date, ownership of 100% of the issued share capital of GGGL, led to full control of Geo24 passing to ZEAL Group.

Further explanation is included in note 6 to the consolidated financial statements.

Investments in Geo24 were written down to €nil at 31 December 2015. No share of Geo24's loss was therefore accounted for in the year ended 31 December 2016.

SUMMARISED FINANCIAL INFORMATION

Summarised financial information of Geo24 is as follows:

	2016	2015
in €k
Net assets	–	8,454
50% share of the net assets	–	4,227
Impairment to carrying value of investment	–	(4,227)
Group's carrying amount of the investment	–	–

	2016	2015
in €k
Loss from continuing operations	–	(6,402)
Total comprehensive loss	–	(6,402)
Group's share of loss (50%)	–	(3,201)
Result from joint venture recorded	–	(3,201)

14 SHORT-TERM LOANS

The loan balance of €3,075k (2015: €3,075k) relates to an amount advanced to a third party as part of a pre-existing platform separation agreement. The loan bears an interest rate of 10% per annum. The loan is due to be paid in 2017 and has therefore been classified as current. The fair value of this loan at 31 December 2016 was €3,075k (2015: €2,541k). The Directors are satisfied there is no impairment of this loan. This assessment is undertaken each financial year through examining the financial position of the third party and the market in which the third party operates.

15 OTHER INVESTMENTS

On 16 December 2016, the Group acquired a 10% interest in The Free Postcode Lottery Limited (FPL) located in England, United Kingdom. Cash consideration of €1,198k was paid for 10% of the ordinary shares. FPL is involved in reinventing lotteries for the digital age and is a private entity that is not listed on any public exchange.

	2016	2015
in €k
Balance as at 1 January 2016	–	–
Additions	1,198	–
Impairment	–	–
Balance as at 31 December 2016	1,198	–

The Group has an anti-dilution call option to purchase an extra 20% of the shares at any time within five years from the date of the investment. Both the initial investment and derivative is measured at cost. The carrying value of the derivative at 31 December 2016 is €nil.

16 TRADE AND OTHER RECEIVABLES

At 31 December 2016, trade and other receivables comprised trade receivables of €755k (2015: €430k). The 2015 balance included a €9.6m receivable from the Spanish Tax authority.

17 OTHER CURRENT ASSETS AND PREPAID EXPENSES

	2016	2015
in €k
Receivables from lottery companies, payment systems and players	4,551	3,588
Provision for doubtful debt	(395)	(193)
Security retainers	54	39
Receivables from gaming operations	4,210	3,434
Receivables from associated undertakings	27	24
Other debtors	931	1,864
Prepayments and accrued income	5,067	5,068
Payroll taxes and social security receivable	846	846
VAT receivable	1,754	986
Other receivables	8,625	8,788
Other current and prepaid expenses	12,835	12,222

All other assets and prepaid expenses are due in less than one year.

At 31 December 2016, an amount of €395k (2015: €193k) was provided against player receivables where the initial direct debit transaction failed. While we continue to seek payment from each customer for all outstanding balances, the Directors have concluded that non-recovery of these amounts is more likely than not and have therefore recorded this provision. Other than the provision recorded above, none of the other receivable balances has been impaired.

18 CASH AND SHORT-TERM FINANCIAL ASSETS

	2016	2015
in €k
Bank balances	94,710	94,412
Cash on hand	5	8
Pledged cash	268	357
Cash and pledged cash	94,983	94,777
Short-term financial assets	19,682	12,883
Cash and cash equivalents	114,665	107,660

Bank balances mainly comprise term deposits on short-term call and with variable interest rates held at various major European banks. At 31 December 2016, ZEAL held available-for-sale short-term financial assets amounting to €17,490k (2015: €7,766k). These deposits comprised fixed-income funds and are broadly spread and of high quality. A change in equity of (€227k) (2015: €48k) was recognised after consideration of deferred taxes.

For the Group's short-term financial assets management assesses if there is objective evidence of a significant or prolonged decline in fair value to determine if any impairment is required. There is no objective evidence that a financial asset or group of financial assets is impaired. No impairment charges were therefore re-corded in the consolidated income statement for the year ended 31 December 2016.

The Group also recorded financial assets classified as held-to-maturity of €2,192k as of the balance sheet date (2015: €5,117k). The available-for-sale short-term financial assets and held-to-maturity financial assets are included as 'short-term financial assets' above.

Included within the bank balances of €94,710k (2015: €94,412k) is an amount of €12,222k (2015: €10,778k) to cover customer liabilities.

19 OTHER LIABILITIES

Current	2016	2015
in €k
Accrued liabilities	8,032	5,926
Accrued liabilities	8,032	5,926
Liabilities to players and game brokers	12,539	14,024
Liabilities from gaming duty	124	141
Liabilities from gaming operations	12,663	14,165
Employee benefits	210	–
VAT	1,333	2,510
Payroll related taxes and social security payable	307	377
Tax and social security payable	1,850	2,887
Total other liabilities – current	22,545	22,978

All other liabilities – current included in the table above are due in less than one year.

Non-current	2016	2015
in €k
Accrued rent	1,514	1,474
Employee benefits	685	–
Total other liabilities – non-current	2,199	1,474

Employee benefits

The Group operates a long-term incentive plan arrangement for certain employees. Further details have been disclosed in note 25 to the consolidated financial statements.

All other liabilities – non-current included in the table above are due after more than one year.

20 PROVISIONS

Current	Opening balance01/01/2016	Utilisation/release	ClosingbalanceAdditions31/12/2016
in €k
Provisions for litigation	1,054	(718)	–336
Total	1,054	(718)	–336

Provisions for litigation

Provisions for litigation amounting to €336k at 31 December 2016 (2015: €1,054k) represent management's best estimate of the probable eventual cash outflow that will result from resolution of ongoing legal cases at 31 December 2016. Individual provisions included in provisions for litigation relate to cases that have been in progress for a number of years. It is difficult to predict the timing of any cash outflow that might result from cases awarded against the Group. As such, provisions for litigation have been classified as current liabilities as there is no certainty that any judgement against the Group (leading to an outflow of cash) would take place in annual periods commencing after 2017. No further information has been disclosed on the grounds that this would be seriously prejudicial to the outcome of the disputes.

21 DEFERRED INCOME

Deferred income of €2,251k (2015: €3,977) relates to payments for gaming orders and stakes received prior to 31 December 2016. In accordance with the Group's accounting policies, revenue can only be recognised on these stakes on the date of the respective draw. The Directors expect that all deferred revenue will be released to the consolidated income statement during 2017.

22 EQUITY

22.1 SHARE CAPITAL

The Company's share capital consists of 8,385,088 ordinary shares issued and fully paid (2015: 8,385,088). Shares have no par value. Each share has the right to dividends and there are no preference shares or restrictions.

22.2 AUTHORISED CAPITAL

On 22 June 2016, the Statutes of the Company were amended such that the Executive Board of ZEAL Network – with the approval of the Supervisory Board – can approve allotment of additional share capital up to a value of €1,197k. This increase in share capital can be effected by issuing, on one or more occasions, in whole or in part, new no-par value shares in return for cash or contribution in kind (allotment of shares). The approval to issue additional share capital expires on 21 June 2021.

22.3 SHARE PREMIUM

The balance on the share premium account represents the amounts received in excess of the nominal value of the ordinary and preference shares. Share premium amounted to €21,578k at 31 December 2016 (2015: €21,578k).

22.4 EARNINGS PER SHARE

Earnings per share (basic and diluted) increased from €0.16 per share for the year ended 31 December 2015 to €3.09 for the year ended 31 December 2016. The weighted average number of shares in issue remained equal during 2015 and 2016 at a number of 8,385,088.

Basic earnings per share are calculated by dividing loss or profit for the year attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing loss or profit for the year attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares outstanding during the year (increased to account for the diluting effects from stock options, warrant agreement or any other plans in place at the balance sheet date, which may lead to the issuance of an additional number of shares in the future). In fiscal year 2016, there was no dilutive effect as there were no such programs (2015: no dilutive effect).

22.5 OTHER RESERVES

Other reserves amount to €785k (2015: €558k) and represent cumulative gains and losses (including any related foreign exchange movements) arising from changes in the fair value of available for sale financial assets. On disposal or impairment of available for sale assets, any gains or losses in other comprehensive income are reclassified to the income statement.

22.6 FOREIGN CURRENCY TRANSLATION RESERVE

The foreign currency translation reserve records amounts to €143k (2015: €nil) and relates to exchange differences arising from the translation of the financial statements of foreign operations.

22.7 RETAINED EARNINGS

23 SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

Name and registeredoffice	Country	Principal activities	Nature of relationship withZEAL Network		% effective interest
				2016	2015
MyLotto24 Limited 120–22 Bedford RowLondon WC1R 4JS	United Kingdom	Bookmaker	Subsidiary	40	40
Tipp24 Services Limited49 Clerkenwell GreenLondon EC1R 0EB	United Kingdom	Lottery	Subsidiary	16	16
Tipp24 DeutschlandGmbH 1Kurze Muehren 120095 Hamburg	Germany	Lottery	Subsidiary	100	100
Lottovate DeutschlandGmbHKurze Muehren 120095 Hamburg	Germany	Lottery	Subsidiary	100	100
Ventura 24 S.L. 1Leganitos 4728013 Madrid	Spain	Lottery	Subsidiary	100	100
Ventura24 Games S.A. 1	Spain	Lottery	Subsidiary	100	100

Leganitos 4728013 Madrid
Smartgames Technologies Limited20–22 Bedford RowLondon WC1R 4JS	United Kingdom	Technologyservices	Subsidiary	40	40
Lottovate Limited 1One New ChangeLondon EC4M 9AF	United Kingdom	B2B/B2G business	Subsidiary	100	100
ZEAL International Limited1One New ChangeLondon EC4M 9AF	United Kingdom	Lottery	Subsidiary	100	–
Lottovate NederlandB.V.Herengracht 1241015 BT Amsterdam	Netherland	B2B/B2G business	Subsidiary	100	100
Lottovate United StatesInc2711 Centerville Road,Suite 400Wilmington, County ofNew Castle19808 Delaware	United Statesof America	B2B/B2G business	Subsidiary	100	100
Tipp24 Investment 1Limited 1One New ChangeLondon EC4M 9AF	United Kingdom	Holding company	Subsidiary	100	100
Tipp24 Investment 2Limited 1One New ChangeLondon EC4M 9AF	United Kingdom	Holding company	Subsidiary	100	100

1 These subsidiaries are held directly by ZEAL Network.

Name and registered		Principal activi	Nature of relationship with
office	Country	ties	ZEAL Network		% effective interest
				2016	2015
Lotto Network Limited 120–22 Bedford Row		B2B/B2G busi
London WC1R 4JS	United Kingdom	ness	Subsidiary	100	100
eSailors IT SolutionsGmbH2
Kurze Muehren 1		Technology
20095 Hamburg	Germany	Services	Subsidiary	–	40
eSailors IT SolutionsLimited
20–22 Bedford Row		Holding compa
London WC1R 4JS	United Kingdom	ny	Subsidiary	40	40

Geonomics GlobalGames LimitedOne New ChangeLondon EC4M 9AF	United Kingdom	Holding compa-ny	Subsidiary	100	25.7
Geo24 UK LimitedOne New ChangeLondon EC4M 9AF	United Kingdom	Lottery	Subsidiary	100	50.5
Gratis Lotto Ltd20–22 Bedford Row,London, United King-dom, WC1R 4JS	United Kingdom	Lottery	Subsidiary	16	_
MyLotto24 Australia PTYLtd525 Collins Street, Mel-bourne, Victoria 3000	,Australia	Lottery	Subsidiary	40	-
HSS Corp. 3 702 S. Carson Street, Suite 200, Carson City, Nevada 89701	United Statesof America	Lottery	Subsidiary	_	-

Section 479A audit exemption

Tipp24 Investment 1 Limited, Tipp24 Investment 2 Limited, Lotto Network Limited, Geonomics Global Games Limited, Geo24 UK Limited, eSailors IT Solutions Limited, Gratis Lotto Limited and ZEAL International Limited will take the exemption available by virtue of section 479A of the Companies Act 2006, which exempts them of the requirements of an audit for the individual accounts.

24 PERSONNEL EXPENSES

The table below shows the full time equivalent average number of employees over the year.

SEGMENTAL ANALYSIS

Director and employee numbers	B2C	B2B/B2G	Total
2016
Executive Board	3	-	3
General Managers	5	3	8
Employees	155	83	238
Trainees	3	-	3
Temporary personnel	3	-	3
Total	169	86	255

Director and employee num-	B2C	B2B/B2G	Total
Director and employee num.	BZC	DZD/DZG	i Olai

<sup>1 These subsidiaries are held directly by ZEAL Network. 2 During the year eSailors IT Solutions GmbH merged with eSailors IT Solutions Limited.

<sup>3 This subsidiary was incorporated on 10 January 2017. ZEAL Network SE has an indirect interest of 40%.

bers
2015
Executive Board	3	–	3
General Managers	3	2	5
Employees	158	86	244
Trainees	2	–	2
Temporary personnel	2	1	3
Total	168	89	257

Personnel expenses incurred during 2016 are included in the table below:

	2016	2015
in €k
Wages and salaries	23,718	22,103
Pension contributions	424	307
Social security costs	2,563	3,024
Total employee benefit expenses	26,705	25,434

These figures include remuneration for the Executive Board, further details of which are included in the Directors' Remuneration Report on pages 40 to 54.

25 SHARE-BASED-PAYMENTS

The Group operates a long-term incentive plan arrangement for certain employees. The scheme provides a cash payment to the employee based on a specific number of phantom shares at grant date and the share price of ZEAL Network SE at the vesting date. The cash payment is dependent on the achievement of internal and external profi-tability targets over the two- and three-year performance periods and continued employment until the end of the vesting period. The cash payment has no exercise price and therefore the weighted average exercise price in all cases is €nil.

2016	2015

–	–
895	–
–	–
-	-
895	-

The weighted average remaining contractual life of the outstanding awards is 1.47 years. The amount

charged in the year in relation to the long-term incentive plan was €895k.

The fair value of the awards was calculated using a Monte-Carlo model at the grant date. The fair value is updated at each reporting date as the awards are accounted for as cash settled under IFRS 2 Share-based Payments. The inputs into the model are based on the ZEAL Network SE historic data and the risk-free rate is calculated on government bond rates. The inputs used are:

	2016	2015
Risk-free rate (%)	0%	–
Dividend yield (%)	7.6%	–
Share Price Volatility (%)	37.0%	–
Weighted average fair value per phantom share	€36.89	–

The Share price volatility of the Group's TSR is calculated by using the daily data, over a period commensurate to the remaining performance period for the awards

26 DIVIDENDS

During 2016, dividends of €2.80 per share (€23,478k) were declared and paid on a quarterly basis (€0.70 per share at the end of each quarter). For proceeding periods, the Executive Board has proposed, and the Supervisory Board has approved, a dividend policy under which the Company will pay annual dividends which are expected to amount to a total of at least €1.00 per share in 2017. An announcement of the amount of each dividend, and the record date for entitlement to the dividend, will be made in advance of payment of the dividend.

Cash flows from dividends paid are classified under financing activities in the cash flow statement and the dividends paid are deducted from retained earnings in the statement of changes in equity.

27 COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

During 2016, ZEAL expensed rental payments for offices amoun-ting to €2,375k (2015: €2,522k). The future minimum lease payments for the above non-cancellable operating leases are as follows:

Minimum lease payment	2016	2015
in €k
Within 1 year	2,645	1,338
>1 – 5 years	8,322	6,305
>5 years	3,592	4,617
Minimum lease obligations	14,559	12,260

OTHER FINANCIAL COMMITMENTS

In addition, the Group had significant financial commitments arising from other contracts, including cooperation agreements, insurance contracts, licence agreements and maintenance agreements. These commitments do not meet the definition of provisions in accordance with IAS 37 'Provisions, contingent assets and contingent liabilities' and have therefore been disclosed as together with estimated maturity dates are as follows:

	2017	2018	2019	2020	2021and beyond	Total
in €k
Other contracts	10,369	9,642	–	–	–	20,011

CONTINGENT LIABILITIES

There is significant uncertainty as to whether VAT is due in respect of certain services provided by the MyLotto24 sub group to customers domiciled in the European Union from 1 January 2015. Furthermore, there is uncertainty in respect of the tax base to be applied in the event that it is ultimately determined that VAT is due on any of these services. Based on a thorough legal assessment, which included a review of the existing legal framework of relevant Member States and existing case law, the Directors consider, that the likelihood of outflow of economic resources is not probable and timings of associated financial impact is uncertain. Accordingly, the Directors have not recorded any liability in the consolidated financial statements. Following recent dialogue with the tax authority in Germany it is estimated that in the event that ZEAL is unsuccessful in its defence, the potential financial effect is €29.0m. The Group is likely to receive a stay of execution once the appeal has been launched and considers its position to be strong. This view has been formed with consideration to independent legal opinions and likely outcomes. Although uncertain, it's expected that an outcome will be known within three to five years. In respect of other taxes and duties, with the exception of those provided in the Group financial statements, the Directors considers it unlikely that any further liability will arise from the final settlement of any such assessments. The Directors will continue to closely monitor any changes.

28 RELATED PARTIES

The Members of Executive Board and Supervisory Board of ZEAL Network, as well as their immediate relatives, are regarded as related parties in accordance with IAS 24 'Related party disclosures'.

Note 23 to the consolidated financial statements provides information about the Group's structure, including details of each subsidiary.

Oliver Jaster is a Member of the Supervisory Board. The operating business of Schumann e.K. was outsourced to a related company of Oliver Jaster, Günther Direct Services GmbH, Bamberg. In return, Günther Direct Services GmbH, Bamberg, received compensation of €114k for the year (2015: €110k). An amount of €9k (2015: €nil) was owed to Günther Direct Services GmbH at 31 December 2016, which was paid in full in January 2017.

Jens Schumann is a Member of the Supervisory Board. Jens Schumann is the sole shareholder of Schumann e.K. This structure has existed in comparable form since 2002 and was chosen because class lotteries only issue sales licences at present to natural persons or companies in which neither the liability of the company or its direct and indirect partners is limited. A cooper-ation agreement is in place between ZEAL and Schumann e.K., which governs the processing of game participation of class lottery customers by Schumann e.K. Under the terms of the agreement, Schumann e.K. must pay all commissions and other brokerage fees collected in this context to ZEAL. ZEAL provides Schumann e.K. with services in the field of controlling, bookkeeping, marketing and technical services and bears the costs incurred by Schumann e.K. in running its operations. As Schumann e.K. forms part of the ZEAL Group, all charges and income eliminate in full in the consolidated financial statements.

As Jens Schumann operates Schumann e.K. in the interest of ZEAL, ZEAL has undertaken to indem-

nify him in the event of any personal claims by third parties arising from or in connection with the operation of Schumann e.K. Indemnification is limited to the extent that fulfilment of this indemnification may not cause ZEAL to become insolvent or over-indebted. In his capacity as shareholder of Schumann e.K., Mr. Schumann did not receive any remuneration during the year.

The charitable foundation 'Fondation enfance sans frontières', Zurich, owner of the preference shares of MyLotto24 Limited and Tipp24 Services Limited, has been identified as a related party. In 2016, dividends of £15k (2015: £15k) and donations of €38k (2015: €60k) were paid to the charitable foundation.

Please refer to Remuneration Report for details on Executive Board and Supervisory Board remuneration.

Key Management Personnel disclosures have been made in the Remuneration Report and note 25 to the consolidated financial statements.

There were no other significant transactions with related parties in the year.

29 CAPITAL MANAGEMENT

ZEAL operates a decentralised capital management system. All major decisions concerning the financial structure of the B2B/B2G segment are taken by the Executive Board of ZEAL Network. Capital management activities of the B2C segment are handled by MyLotto24 Limited, with the exception of Tipp24 Services, which operates its own capital management system.

Neither the segments nor the Group as a whole has any externally imposed capital requirements other than the minimum capitalisation rules that apply to subsidiaries in Germany and Spain.

The capital structures of the B2B/B2G segment and the B2C segment (together 'the segments') consist of shareholders' equity as none of these segments holds any external debt.
The amount of each segment's surplus equity (i.e. the quantum of equity that exceeds the amount required to secure each segment's stable financial position) is to be used for inorganic acquisitions and the funding of further organic growth in line with the strategic objectives.
ZEAL Network also monitors the capital structure of all segments to ensure that sufficient equity is available to service external dividend payments.
While none of the segments currently hold external debt, in the medium-term, ZEAL Network may also leverage its financial position to secure funding to finance growth or future acquisitions.

The risks to which ZEAL is exposed are described in the risk report.

30 DISCLOSURES RELATING TO FINANCIAL INSTRUMENTS

30.1 FAIR VALUE

Level 1 quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;

Level 3 – valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

All financial instruments held by the Group at 31 December 2016 are classified as level 1. For all financial instruments the carrying amount approximates the fair value. Of the short-term financial assets held at 31 December 2016 amounting to €19,682k (2015: €12,883k), €17,490k were available-for-sale financial assets (2015: €7,766k) and €2,192k were held-to-maturity financial assets (€5,117k).

During 2016, there were no transfers between level 1 and level 2 fair value measurements and no transfers into or out of level 3 fair value measurements.

30.2 CREDIT RISK

The scope of the credit risk of ZEAL equals the sum of cash, short-term financial assets, trade receivables and other receiv-ables.

Cash and other financial assets

There may be a default risk both in respect of the cash and short-term financial assets themselves, as well as the related interest accrued.

Cash and short-term financial assets are invested in a variety of short-term securities offering as much liquidity and as little volatility as possible, while ensuring broad risk diversification. The overriding objective of the Group's investment strategy is to preserve capital – even at the expense of expected returns.

ZEAL's investment strategy is aimed at spreading and minimising risk by means of multi-dimensional diversification. Firstly, funds are divided into differing investment products, such as sight and term deposits, highly fungible government bonds of Eurozone states and short-term investment fund units. Secondly, we restrict our choice to those investments with good credit ratings. Following regular monitoring, there were no specific default risks in the portfolio as of the balance sheet date.

Trade and other receivables

Receivables from payment systems such as credit card companies entail the risk that the Group's customers themselves fail to meet their payment obligations. This cost is recognised directly in income statement in the event of payment default by a customer.

Contingent assets

There are no contingent assets.

30.3 LIQUIDITY RISK

Due to the sufficiency of its liquid assets, ZEAL is not exposed

to any significant liquidity risk. Even in the case of significant restrictions of business against the backdrop of regulatory developments, ZEAL has sufficient liquidity to service the Company's liabilities at any time. Financial liabilities are mainly due immediately and do not accrue interest.

In order to limit the particular risk of high jackpot pay-outs in the B2C segment, MyLotto24 Limited conducts hedging transactions – such as the transfer of payment obligation risks to a so-called catastrophe bond (CAT bond) via an ILS vehicle.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments:

Year ended 31 December 2016	Within 1 year	Within 1 – 3years	Within 3 – 5Over 5 yearsyears	Total
in €k
Trade payables	5,052	–	––	5,052
Other liabilities	20,905	2,199	––	23,104
Financial liabilities	123	–	––	123
Total	26,080	2,199	––	28,279

Year ended 31 December 2015	Within 1 year	Within 1 – 3years	Within 3 – 5Over 5 yearsyears	Total
in €k
Trade payables	5,013	–	––	5,013
Other liabilities	20,091	1,474	––	21,565
Financial liabilities	113	–	––	113
Total	25,217	1,474	––	26,691

In addition to the amounts presented in the tables above, there are items excluded from Other liabilities, as they are not considered a contractual financial liability. This includes VAT in 2016 of €1,333k (2015: €2,510k) and payroll related taxes and social security of €307k (2015: €377k).

30.4 INTEREST RATE RISK

ZEAL invests the majority of its funds in a combination of fixed term deposits. For these funds, which are mainly held in liquid or short-term investments, there is a general risk from changing interest rates. A sensitivity analysis was conducted for the port-folio of cash and short-term financial assets held on 31 December 2016 with an interest rate increase of 10 basis points. Assuming no changes are made to the portfolio in response to the interest rate increase, there would be a rise in interest income of €1,146k (in a simplified calculation). Under consideration of the duration of those investments currently in the portfolio, there would be an expected reduction of this interest income of €1k. The overall effect, therefore, would be an increase in interest income of €1,145k (2015: €1,074k).

30.5 CURRENCY RISK

The Company is exposed to a currency risk as a result of the GBP exchange rates. The risk arises from payments received and made in foreign currency, which differ from the Company's functional currency and are not always offset by payments in the same currency of the same amount and with the same maturities.

For the presentation of currency risks, IFRS 7 requires sensitivity analyses, which display the effects of hypothetical changes of the relevant risk variables on earnings and equity. In order to determine the currency risk, a fluctuation of the Euro to British Pound exchange rate of 10% was assumed as of 31 December 2016.

On the basis of this assumption, a 10% increase in the value of the Euro against the British Pound would result in a positive effect of €952k (2015: €943k) on earnings. A devaluation of the Euro against the British Pound of 10% would result in a negative effect of €1,167k (2015: €1,921k) on earnings.

In the year ended 31 December 2016 there was a loss from the change in fair value of financial in-

struments measured at fair value through profit or loss of €1,304k (2015: gain of €1,433k).

The financial assets currently held do not bear any material currency risk.

31 EVENTS AFTER THE BALANCE SHEET DATE

On 25 January 2017, it was resolved that Peter Steiner will be appointed as Chairman of the Supervisory Board with effect from the resignation of Andreas de Maizière as member and Chairman of the Supervisory Board as of the 2017 AGM.

In March 2017, in a secondary lottery held by MyLotto24 Limited, a fully consolidated minority shareholding of ZEAL Network SE, a player has won a prize of approximately €15m. The pay-out amount falls within the self-retention specified in MyLotto24's hedging instruments.

There were no other material subsequent events that required adjustment or disclosure in the financial statements for the financial year ended 31 December 2016 to the date of issue of this report.

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ZEAL NETWORK SE

We have audited the financial statements of ZEAL Network SE for the year ended 31 December 2016 which comprise the Consolidated and Company statements of financial position, the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated and Company statements of cash flows and the Consolidated and Company statements of changes in equity, the related notes to Consolidated financial statements, 1 to 31 and the related notes to the Company financial statements, A to K. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

As explained more fully in the Statement of Directors' Responsibilities set out on page 59, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and the Parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

OPINION ON FINANCIAL STATEMENTS

In our opinion:

The financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 December 2016 and of the Group's profit for the year then ended;
The Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Com-panies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion:

The part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006;
Based on the work undertaken in the course of the audit:
the information given in the Strategic Report and the Directors' Report for the financial year
for which the financial statements are prepared is consistent with the financial statements;
the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements;
Based on the work undertaken in the course of the audit, the information given in the Corporate Governance statement set out on pages 36 and 37 with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have identified no material misstatements in the Strategic Report or Directors' Report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

Adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
The Parent Company financial statements and the part of the Directors' remuneration report to be audited are not in agreement with the accounting records and returns; or
Certain disclosures of Directors' remuneration specified by law are not made; or
We have not received all the information and explanations we require for our audit; or
A Corporate Governance statement has not been prepared by the Company.

Cameron Cartmell (Senior Statutory Auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor London 23 March 2017

Notes:

The maintenance and integrity of the ZEAL Network SE website is the responsibility of the Directors; the work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes

that may have occurred to the financial statements since they were initially presented on the website. 2.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from

legislation in other jurisdictions.

23 STATEMENT BY ZEAL NETWORK ON QUANTIFIED FINANCIAL BENEFITS

The following statement on quantified financial benefits (the "Quantified Financial Benefits Statement") contains statements on estimated cost savings, revenue synergies and dis-synergies arising from the Completion of the Exchange Offer (the "Combination"). The Quantified Financial Benefits Statement was made as of 31 January 2019 and has not been updated since that date. The statements contained herein should therefore not be read as reflecting a current estimate of cost savings, revenue synergies and dis-synergies arising from the Combination.

'The Executive Board of ZEAL Network (the "ZEAL Board") believes the following:

Cost synergies

The quantified recurring pre-tax cost synergies expected to result from the Combination principally arise from:

a) Business model change (non-personnel costs): Savings in direct costs of operations account for around 60% of the overall cost synergies:
- all costs covering the bookmaking risks for the German market (hedging costs) will not be required after the transformation to an online brokerage business;
- reduction of non-deductible VAT within the myLotto24 sub-group.
b) Organisational efficiency: Reduction of personnel and other operating expenses within the Combined Group, which represents around 40% of the overall cost synergies and will arise from:
- removing business related duplicated roles enabled by the migration of the German broker businesses of the Combined Group onto one technology platform;
- removing duplication of central functions roles;
- removing duplicates in senior management structure;
- rationalisation of the Combined Group's locations;
- removing roles related to hedging activities; and
- reduction of consultancy expenses / professional fees based on de-duplication and changed requirements due to business model change.

The total anticipated cost synergies of EUR 57 million per annum are equivalent to approximately 41% of the Combined Group operating expenses (including personnel expenses) from continuing operations of EUR 138 million, calculated based on the consolidated audited accounts of ZEAL and the audited annual accounts of Lotto24 AG, each for the fiscal year ended 31 December 2017.

The ZEAL Board expects that the cost synergy realisation will take place progressively, with approximately 80% of the total cost synergies achieved by the end of year one, rising to 100% achieved by the end of year two.

Revenue synergies and dis-synergies

For the Combined Group it is envisaged that there will be overall net revenue dis-synergies of approximately EUR 107 million, mainly caused by the business model change of ZEAL's myLotto24 subsidiary into a German licensed online lottery brokerage business.

This represents the loss of approximately 67% of the Combined Group's revenue of EUR 160 million, calculated based on the consolidated audited accounts of ZEAL and the audited annual accounts of Lotto24 AG, each for the fiscal year ended 31 December 2017.

The revenue synergies and dis-synergies will principally comprise:

a) Business model-related revenue dis-synergies of EUR 120 million will be generated mainly from:
- billings loss: An overall billings loss due to the customer loss which will be caused by the transition into an online brokerage business, and reduced average billings per user, due to the restriction to the DLTB product portfolio; and
- margin reduction: A reduction in the margin applied to the Combined Group's reduced billings, as a result of the lower margin of an online brokerage business, relative to the higher margin enjoyed by ZEAL's current secondary lottery business.
b) Revenue synergies of EUR 13 million: The revenue dis-synergies will be offset to some extent by increased billings generated by the Combined Group mainly arising from:
- reduced customer acquisition costs due to improved access to and optimization of marketing channels within the Combined Group, which leads to more newly registered & active customers; and
- decreased legal restrictions and improved customer quality, leading to a higher number of active customers and / or higher average spend per user.

The ZEAL Board expects the transformation of the business model to be implemented within the first full year following completion of the Combination. Revenue dis-synergies will take effect at the same time as the business model change with a full run-rate by the end of year one following completion of the Combination.

The revenue synergies realisation will take place progressively, with approximately 40% of the total revenue synergies achieved by the end of year one, approximately 70% achieved by the end of year two and with full the run-rate effect achieved by the end of year three after the completion of the Combination.

Costs to achieve

The ZEAL Board expects that implementation of the business model change and realisation of the cost and revenue synergies would result in total non-recurring costs in the range of approximately EUR 15 million to EUR 20 million incurred within the first two years following completion of the Combination. These costs consist mainly of employee restructuring costs and IT migration costs.'

Bases of belief for the Quantified Financial Benefits Statement

Following initial discussions regarding the Combination, a synergy development team was established at ZEAL to evaluate and assess the potential synergies available from the Combination.

The team, which comprised senior strategy, financial, technology and business personnel at ZEAL, worked to identify and quantify potential synergies as well as estimate any associated costs. The team engaged with the relevant functional heads and other personnel at ZEAL to provide input into the development process and to agree on the nature and quantum of the identified synergy initiatives.

In preparing the Quantified Financial Benefits Statement and to estimate the merger benefits relating to the Combination, the ZEAL Board has made use of publicly available information about Lotto24 AG along with knowledge it continues to have from the period prior to Lotto24 AG's spin-off from ZEAL in 2012 and as a result of the separation of the technology platform in 2015. In circumstances where data has been limited for commercial or other reasons, the team has made estimates and assumptions to aid the development of individual synergy initiatives. ZEAL did not have access to the Lotto24 AG senior management or any current non-public information about Lotto24 AG and its business during the preparation of the Quantified Financial Benefits Statement.

The bases used for the quantified exercises are:

– ZEAL: Full year 2018 P&L forecast data from ZEAL's financial planning contains 6 months actuals and 6 months forecast. Revenues and resultant synergies / dis-synergies are based on normalised revenue, which has been adjusted to match the statistically expected prize pay-out ratio;

– Lotto24 AG: Rolling 12 months actual P&L data for the period July 2017 to June 2018 has been used as a baseline, as no full year 2018 forecast is publicly available.

In arriving at the estimate of synergies set out herein, the ZEAL Board made the following operational assumptions:

the Combined Group will migrate the two broker businesses onto one technology platform;
policies and procedures will be harmonised according to best practices at ZEAL and Lotto24 AG; and
the Combined Group will, wherever possible, utilise existing resource and capabilities within ZEAL and Lotto24 AG to deliver the revenue synergies.

The ZEAL Board has, in addition, made the following assumptions, all of which are outside its control:

there will be no change to macroeconomic, political, regulatory or legal conditions in the markets or regions in which Lotto24 AG and ZEAL operate that materially impact the implementation or costs to achieve the proposed cost and revenue synergies;
there will be no material change in current foreign exchange rates; and
there will be no change in tax legislation or tax rates or other legislation or regulation in the countries in which Lotto24 AG and ZEAL operate that could materially impact the ability to achieve any benefits.

Further synergies and savings not contingent on the Combination and separate to the Quantified Financial Benefits Statement

Separately, ZEAL Network plans to achieve, and has already started to implement recurring cost savings of approximately EUR 4 million per annum as a result of an internal cost saving initiative, which will be delivered by end of 2018. These additional cost savings are not contingent on the Combination and so do not form part of the Quantified Financial Benefits Statement.

Furthermore, the ZEAL Board believes that additional synergy opportunities in revenue and costs can be achieved related to the Combination, which are not quantified and do not form part of this Quantified Financial Benefits Statement.

Notes

The Quantified Financial Benefits Statement relates to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the cost savings and synergies referred to may not be achieved, or may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated.

Due to the scale of the Combined Group, there may be additional changes to the Combined Group's operations. As a result, and given the fact that the changes relate to the future, the resulting synergies may be materially greater or less than those estimated.

No statement should be construed as a profit forecast or interpreted to mean that the Combined Group's earnings in the first full year following implementation of the Combination, or in any subsequent period, would necessarily match or be greater than or be less than those of ZEAL and / or Lotto24 AG for the relevant preceding financial period or any other period.

24 GLOSSARY

Act Gambling Act 2005 (long title: 'An act to make provision about gam-

bling') of the UK as of 7 April 2005.

Additional Tender Period The period of two weeks after the publication of the result of the Offer

by the Company pursuant to Section 23 para. 1 sentence 1 no. 2 of the

Takeover Act.

Admission Admission of the Offer Shares to trading on the regulated market

segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations

(Prime Standard).

AktG German Stock Corporation Act (Aktiengesetz).

Austrian Tax Office Specialist Division (Fachbereich) of the Austrian Tax Office for Duties,

Transfer Taxes and Gaming.

BaFin German Financial Supervisory Authority (Bundesanstalt für Finanz-

dienstleistungsaufsicht).

Banking Day A day which is not a Saturday, Sunday or other day on which banks in

Frankfurt am Main, Germany, are generally closed.

Brexit UK's withdrawal from the European Union.

Business Model Change Transformation of the business model of the 'Lottery Betting' segment

into a model based on local state licences.

CASCADE-RS Cascade electronic clearing and settlement system operated by Clear-

stream facilitating the trading, clearing and settlement of securities traded on the Frankfurt Stock Exchange and any successor to such

system.

CET Central European Time.

CI Register Register of the beneficial owners of ZEAL shares maintained by Com-

putershare Deutschland GmbH & Co KG.

City Code UK City Code on Takeovers and Mergers.

Clearstream Clearstream Banking AG, Frankfurt am Main, Germany.

Combination Combination of the business of ZEAL and Lotto24 following successful

completion of the Offer.

Combined Group Combined group of companies consisting of Lotto24 and ZEAL.

Companies Act Companies Act 2006 including any modification or re-enactment of it for

the time being in force, as applied to the Company by virtue of the UK

Regulations.

Company ZEAL Network SE.

Completion Completion of the Offer.

CRD IV Directive 2013/36/EU on access to the activity of credit institutions and

the prudential supervision of credit institutions and investment firms.

Custody Agreement Has the meaning ascribed thereto in section "15.2 Special Aspects of

the Shares".

Director An Executive Director or a member of the Supervisory Board.

DLTB Deutscher Lotto- und Totoblock, the association of the sixteen inde-

pendent lottery operators of the German Federal States.

Draft Withdrawal Agree-

ment

'Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the Europe-

an Atomic Energy Community.

DTR UK Disclosure and Transparency Rules.

ESS VAT liabilities on electronically-supplied services.

EU Member States Member states of the European Union.

EU Prospectus Regula-

tion

Commission Regulation (EC) No 809/2004 of 29 April 2004, as amend-

ed.

EU VAT Directive Directive (EU) 2006/112/EC of 28 November 2006 on the common

system of value added tax.

Euro, EUR Single European currency adopted by certain, participating member

states of the European Union.

Executive Board The Company's executive board.

Executive Director A Director on the Executive Board.

FCA Financial Conduct Authority.

Federal States German federal states (Länder).

FESF Fondation enfance sans frontières, Zurich, Switzerland.

First Amendment Treaty First amendment of the interstate treaty on gambling (Zweiter Glücks-

spieländerungsstaatsvertrag).

FSMA Financial Services and Markets Act 2000 (as amended).

FTEs Average number of full time equivalent employees.

Gambling Act SH Law on the Reorganisation of Gambling (Glücksspielgesetz) of Schles-

wig-Holstein.

GBP Official currency of the UK.

GDPR Regulation (EU) 2016/679 on data privacy of 27 April 2016.

Geo24 Geo24 UK Limited.

Germany Federal Republic of Germany.

GGGL Geonomics Global Games Limited.

Günther Group The group of companies controlled by Oliver Jaster, which holds a

share of approximately 10.22% in the Company and a share of approx-

imately 41.62% share in Lotto24 AG.

GWG German Money Laundering Act (Geldwäschegesetz).

Hoplon III Hoplon III Insurance Limited, a special purpose vehicle registered in

Bermuda.

Hoplon III-Insurance Insurance of USD 90 million provided by Hoplon III Insurance Limited.

IFRS International Financial Reporting Standards as adopted by the EU.

Instant Win Products Gambling products for which winnings are determined by random-

number generators that generate the information of and how much a

bet wins.

Insurance Syndicate Insurance companies providing insurance cover under the Private

Insurance.

Investments Establishmnt of cooperations and partnerships, incorporatios of new

subsidiaries to offer Primary Lotteries and investments in and acquisitions of existing companies (including start ups) in order to further

expand ZAL's business in a targeted manner.

IPO Initial public offering.

Ireland Republic of Ireland.

ISIN International Securities Identification Number.

Jackpot Insurances Insurance coverage in the amounts of USD 90 million, USD 30.5 million

and EUR 20 million per draw and EUR 40 million in aggregate for all

draws within the term of the insurance.

KWG German Banking Act (Kreditwesengesetz).

Lazard Lazard & Co. GmbH, Frankfurt am Main, Germany.

Listing Agent M.M.Warburg & CO (AG & Co.) KGaA.

Lotto24 Lotto24 AG.

Lotto24 Licence Expan-

sion

Expansion of Lotto24's existing brokerage licence to include brokerage to the customers of Tipp24 Services Limited granted on 8 February 2019 (subject to the discontinuation of ZEAL's Secondary Lottery

business activities in Germany).

Market Abuse Reulation Regulation (EU) No 596/2014 of the European Parliament and of the

Council of 16 April 2014 on market abuse.

Market Studies GBGC Analysis Germany, GBGC Analysis Ireland, GBGC Analysis

Netherlands, GBGC Analysis Spain, GBGC Analysis UK, GBGC Market Data, Goldmedia Analysis 2018, La Fleur Almanac and H2 Gambling Capital Data (each as defined in "2.4 Sources of Market Data").

Member States Member states of the European Union.

myLotto24 Sub-Group myLotto24 Limited and its subsidiaries, an independently organised

sub-group of affiliated companies, in which ZEAL holds an equity

interest of 40%.

NOK Norsk Krone, the currency of Norway and its dependent territories.

Norway The Kingdom of Norway.

OCI Other Comprehensive Income.

Offer Voluntary public takeover offer for all shares of Lotto24 in the form of

an exchange offer.

Offer Condition Condition precedent under the Offer.

Offer Consideration One Offer Share for each 1.604 shares of the Target validly tendered

into the Offer.

Offer Document Offer document relating to the voluntary public takeover offer (ex-

change offer) by the Company to the shareholders of Lotto24 dated

31 January 2019.

Offer Shares 14,010,982 new registered shares of the Company of a nominal value

of EUR 1.00 each.

Omaze Omaze Inc., Los Angeles, United States of America.

Pay-out Ratio Amount of lottery prizes in relation to 'Stakes' from the sale of lottery

tickets.

Physical Hedging Purchase of tickets in Primary Lotteries with the same combination of

numbers or other elements as the bets placed by customers on myLot-

to24 Sub-Group's online platforms.

Primary Lottery Lotteries offered by states or state-licenced operators.

Private Insurance USD 30.5 million private insurance provided by the Insurance Syndi-

cate.

Prospectus The prospectus.

Prospectus Directive European Parliament and Council Directive 2003/71/EC of 4 November

PSD2 Directive (EU) 2015/2366 on payment services in the internal market.

SE Regulation Council Regulation (EC) No 2157/2001 of 8 October 2001 on the

Statute for a European company (SE).

Second Amendment

Treaty

Second amendment to the interstate treaty on gambling (Zweiter

Glücksspieländerungsstaatsvertrag).

Secondary Lotteries Bets on the outcome of Primary Lotteries.

Self-Retention Self-retention of USD 30 million required under the Hoplon III-

Insurance.

Settlement Agent M.M.Warburg & CO (AG & Co.) KGaA in its capacity as settlement

agent with respect to the Offer.

Spain Kingdom of Spain.

Spanish Gambling

Commission

Spanish Directorate General for the Regulation of Gambling (Dirección

General de Ordenación del Juego).

Special Insurance Special insurance of EUR 20 million per draw and EUR 40 million in

aggregate for all draws provided by the Special Insurance Syndicate.

Special Insurance Syndi-

cate

Several insurance companies providing insurance cover under the

Special Insurance.

State Lottery Operators The sixteen state-owned lottery operators of the Federal States

(Landeslotteriegesellschaften).

Statutes The Company's statutes.

StGB German Criminal Code (Strafgesetzbuch).

Supervisory Board The Company's supervisory board.

Supervisory Director A member of the Company's Supervisory Board.

Takeover Act German Securities Acquisition and Takeover Act (Wertpapiererwerbs-

und Übernahmegesetz).

Target Lotto24 AG.

Target Shares Shares in the Target.

Tender Period The period for acceptance of the Offer.

The Netherlands Kingdom of the Netherlands.

Treaty on Gambling 2008 German State Treaty on Gambling (Glücksspielstaatsvertrag) entered

into force on 1 January 2008.

Treaty on Gambling 2012 German State Treaty on Gambling (Glücksspielstaatsvertrag) entered

into force on 1 July 2012.

UK / United Kingdom United Kingdom of Great Britain and Northern Ireland.

UK Gambling Act Gambling Act 2005 (long title: 'An act to make provision about gam-

bling') of the UK as of 7 April 2005.

UK Gambling Commis-

sion

Gambling Commission of the United Kingdom.

UK Regulations United Kingdom European Public Limited-Liability Company Regula-

tions 2004 (SI 2004/2326) as may be, or have been, amended or re-

enacted from time to time.

Unaudited Pro Forma Consolidated Financial

Information

unaudited pro forma consolidated income statements and unaudited

pro forma consolidated statement of financial position.

UNICEF United Nations Children's Fund.

UNICEF Lotteriet Charity lottery operated by UNICEF Norway and Lottovate Limited.

US Dollar, USD Official currency of the United States of America.

VAT Value-added tax.

Ventura24 Ventura 24 S.L.U.

WKN German Securities Identification Number (Wertpapierkennnummer).

ZAG German Payment Services Supervision Act (Zahlungsdiensteauf-

sichtsgesetz).

ZEAL ZEAL Network and its consolidated subsidiaries at the respective time,

including, following completion of the voluntary public takeover offer for all shares of Lotto24 AG in the form of an exchange offer, Lotto24.

ZEAL Network ZEAL Network SE.

ZEAL shareholder Beneficial owners of shares in the Company.

ZEAL shares Shares in the Company.

AI assistant

Zeal Network SE — Capital/Financing Update 2019

500_prs_2019-05-08_5b1c01f4-5c00-4670-a49f-fc364147faa8.pdf

TABLE OF CONTENTS

SUMMARY OF THE PROSPECTUS

A – Introduction and Warnings

A.2 Information regarding the subsequent use of the prospectus

B.1 Legal and commercial name

B.5 Description of the group and the issuer's position within the group

B.6 Persons who, directly or indirectly, have a (notifiable) interest in the issuer's capital and voting rights

B.7 Selected key historical financial information

Selected Consolidated Financial Information

Consolidated Income Statement

Consolidated Statement of Financial Position

Consolidated Statement of Cash Flows

Selected Other Consolidated Key Financial and Operating Data

For the year ended 31 December

Developments since 31 December 2018

For the three months ended 31 March

For the three months ended 31 March

Fiscal Years Ended 31 December 2018 and 2017

Fiscal Years Ended 31 December 2017 and 2016

B.8 Selected key pro forma financial information

Unaudited Pro Forma Consolidated Income Statement for the Period from 1 January 2018 to 31 December 2018

Unaudited Pro Forma Consolidated Statement of Financial Position as of 31 December 2018

B.9 Profit forecast or estimate Not applicable.

B.10 Qualifications in the audit report on the historical financial information

B.11 Insufficiency of the issuer's working capital

C – Securities

C.1 Type and class of the securities being admitted to trading

Security identification number

C.2 Currency Euro.

C.3 The number of shares issued and fully paid

C.4 Rights attached to the securities

C.5 Restrictions on the free transferability of the securities

C.6 Application for admission to trading on a regulated market and identity of regulated markets where the securities are to be traded

D – Risks

Key risks specific to the issuer and its industry

Risks Related to the Regulatory Environment, Legal and Tax Risks

Risks Related to the Market

Risks Related to the Business

Risks Related to the Financial Situation

Risks Related to the Offer

D.3 Key risks specific to the securities

Risks Related to the Company's Shares

E – Offer

Estimate of the total expenses

Estimated expenses charged to the investor

E.2a Reasons for the offer, use of proceeds, estimated net amount of the proceeds

E.3 Terms and conditions of the offer

E.4 Any interest that is material to the issue including conflicting interests

1 RISK FACTORS

1.1 Risks Related to the Regulatory Environment, Legal and Tax Risks

1.1.1 Uncertainties relating to the regulatory environments in the countries in which ZEAL operates could have a negative impact on ZEAL's business activities.

Business segments

Licences in the UK

Licences in Germany

1.1.5 The conduct of ZEAL's business activities in the 'Lottery Betting' segment in Germany by means of offering Secondary Lotteries could be considered as a criminal offense.

1.1.9 ZEAL's compliance structure may not have been, or may not be, sufficient to adequately protect ZEAL from all legal or financial risks.

1.1.10 ZEAL relies to a large extent on standardised contractual conditions and general business terms and could be exposed to risks from such standardised conditions and general business terms.

1.2 Risks Related to the Market

Product dependency

Market dependency

1.2.6 ZEAL is exposed to currency risks, in particular due to the exchange rate of the British pound sterling and the US Dollar against the euro.

1.3 Risks Related to the Business

1.3.6 ZEAL may fail to adopt and apply technological advances in a timely manner and to anticipate trends in the online lottery market and thus lose market shares.

1.3.7 Unauthorised persons could gain access to customer data and misuse this data for their own purposes. Customers and employees could commit fraud for the detriment of ZEAL.

1.3.8 ZEAL's organisational and risk monitoring system may be inadequate or may not keep pace with growth.

1.3.14 Failure to adequately protect the reputation of the brands under which ZEAL operates could negatively affect its business.

1.4 Risks Related to the Financial Situation

Hedging Instrument Description

Hedging Instrument Description

1.4.3 Insurers providing coverage for the event of a high jackpot could be unable, unwilling or not obliged to pay out the insurance benefit.

1.4.4 ZEAL could incur substantial losses from other damages not covered by, or exceeding the coverage limits of, its insurance policies.

1.4.5 Forward-looking statements as contained in the Prospectus involve known and unknown risks, uncertainties and other factors that may cause the actual future results, financial position, development or performance of ZEAL to differ materially from those expressed or implied by such statements.

1.4.6 ZEAL's historical earnings and other historical financial figures are not predictive of earnings and other financial figures of ZEAL going forward and the Company could decide to reduce its dividend payments.

1.4.7 ZEAL may not be in a position to raise sufficient debt and equity capital for the establishment and expansion of its business activities and the exploitation of future business opportunities.

1.4.8 ZEAL could be required to write-down its assets, including goodwill, and such assets could be impaired.

1.5 Risks Related to the Offer

1.5.2 The expected dis-synergies and non-recurring cost in connection with the Combination may be higher than anticipated and expected synergies may not be fully realised, or at all.

Zeal Network SE Capital/Financing Update 2019