Donaco International Limited / 2017 Annual Report Donaco International Limited / 2017 Annual Report 64 65 65 Donaco International Limited / 2017 Annual Report Donaco International Limited / 2017 Annual Report 64 Notes to the Financial Statements for the year ended 30 June 2017 Notes to the Financial Statements for the year ended 30 June 2017 Note 26. Equity – retained profits Consolidated 2017 2016 $ $ Retained profits at the beginning of the financial year 92,630,958 13,907,457 Profit/(loss) after income tax expense/(benefit) for the year 30,990,298 78,723,501 Dividends paid (8,246,843) – Retained profits at the end of the financial year 115,374,413 92,630,958 Revaluation surplus reserve Employee share option reserve Foreign currency Total Consolidated $ $ $ $ Balance at 1 July 2016 1,855,327 1,967,750 11,934,445 15,757,522 Foreign currency translation – – 7,763,303 7,763,303 Employee share option expense – 1,324,730 – 1,324,730 Transfer to retained earnings – (270,800) – (270,800) Balance at 30 June 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 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. Employee share option The employee share option reserve is used to recognise: • the grant date fair value of options issued to key management personnel but not exercised; and • 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. A dividend of $8,246,843 (1 cent per ordinary share) was paid on 19 October 2016. The dividend was 100% conduit foreign income and was unfranked. On 29 August 2017, the consolidated entity announced a final unfranked dividend of 0.5 cents per share, amounting to $4,156,057. The planned record date for the dividend is 6 October 2017 and planned payment date is 20 October 2017. A new dividend policy was announced on 29 August 2017, which stated that the consolidated entity intends to pay out 10–30% of net profit after tax as dividends to shareholders, with the intention to provide regular half-yearly dividend payments, subject to the consolidated entity’s then current working capital requirements and growth plans. shareholders should note that the payment of dividends is not guaranteed. Franking credit balance The dividend recommended after 30 June 2017 is fully unfranked and 100% conduit foreign income. Consolidated 2017 2016 $ $ Franking credits available for subsequent reporting periods after payment of tax liability based on a tax rate of 30% (2016: 30%) 501,543 501,543 Financial risk management objectives The consolidated entity’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk. Risk management is carried out by senior finance executives (finance) under policies approved by the Board. These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the consolidated entity’s operating units. Finance reports to the Board on a monthly basis. Market risk Market risk is the risk that changes in market prices, such as interest rate and foreign exchange rate will affect the consolidated entity’s income. Note 27. Equity – dividends Note 28. Financial instruments