DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT 62 63 DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT 63 62 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 25. EQUITY – RESERVES CONSOLIDATED 2018 2017 $ $ Revaluation surplus reserve 1,855,327 1,855,327 Foreign currency reserve 17,875,486 4,275,055 Employee share option reserve 2,809,651 3,295,396 22,540,464 9,425,778 REVALUATION SURPLUS RESERVE SHARE-BASED PAYMENT RESERVE FOREIGN CURRENCY RESERVE TOTAL Consolidated $ $ $ $ Balance at 1 July 2016 1,855,327 3,021,680 19,697,748 24,574,755 Foreign currency translation – – (15,422,693) (15,422,693) Employee share option expense – 273,716 – 273,716 Balance at 30 June 2017 1,855,327 3,295,396 4,275,055 9,425,778 Foreign currency translation 13,600,431 13,600,431 Shares allocated to employees – (766,014) – (766,014) Employee share options – 280,269 – 280,269 Balance at 30 June 2018 1,855,327 2,809,651 17,875,486 22,540,464 NOTE 24. EQUITY – ISSUED CAPITAL CONSOLIDATED 2018 2017 2018 2017 Shares Shares $ $ Ordinary shares – fully paid 823,592,773 831,211,424 358,656,945 359,968,884 DETAILS SHARES ISSUE PRICE $ Balance at 30 June 2016 831,211,424 360,968,368 Acquisition of shares for employee share scheme – 999,484) Balance at 30 June 2017 831,211,424 359,968,884 Employee short term incentive – 766,014 Share buybacks (7,618,651) (2,077,953) Balance at 30 June 2018 823,592,773 358,656,945 ORDINARY SHARES Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. CAPITAL RISK MANAGEMENT The consolidated entity’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current parent entity’s share price at the time of the investment. The consolidated entity is subject to certain financing arrangements and meeting these is given priority in all capital risk management decisions. The financing arrangements contain certain covenants relating to interest cover (the ratio of consolidated EBITDA to consolidated finance charges), and debt ratio (the ratio of consolidated net debt to EBITDA), which apply to Donaco Hong Kong Limited. In addition, covenants relating to the debt equity ratio (the ratio of consolidated total debt to consolidated total equity), and minimum cash holdings, apply to the consolidated entity. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 2017 financial statements. Treasury shares are shares in Donaco International Limited that are held by Smartequity EIS Pty Ltd for the purpose of issuing shares under the employee share scheme. Shares issued to employees are recognised on a first-in-first-out basis. NATURE AND PURPOSE OF EQUITY RESERVES Revaluation surplus The revaluation surplus reserve is used to record increments and decrements in the fair value of net assets of disposed entities. Share-based payment The reserve is used to recognise: • the grant date fair value of options issued to key management personnel but not exercised • the issue of options held by the Employee Share Option Trust to key management personnel. Foreign currency Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 1 and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. DETAILS NUMBER OF SHARES $ Opening balance 1 July 2016 – – Acquisition of shares by the Trust (average price: $0.4199 per share) 2,376,653 999,484 Balance 30 June 2017 2,376,653 999,484 Shares issued to employees (1,781,429) (766,014) Balance 30 June 2018 595,224 233,470