annual report 2013
Donaco was founded in 2002 by Mr Joey Lim and his late grandfather,
Tan Sri Lim Goh Tong, who was also the founder of the Genting Group
of Companies
Donaco has a 75% stake (with an MOU signed to move to 95%) in the
Lao Cai International Hotel joint venture, which owns and operates a
boutique Hotel & Casino in Vietnam (remaining stake is held by the
Government of Vietnam)
New hotel with 428 rooms and expanded casino business currently
under construction; due to open in early 2014
Strong demand from Chinese “high rollers” who are sourced by junket
operators
Lao Cai province is bordered by the Chinese province of Yunnan which
has a population of ~46m people
Cover: Concept images of the new Lao Cai International Hotel, currently under construction
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2013
CONTENTS
CHAIRMAN’S MESSAGE
MANAGING DIRECTOR’S MESSAGE
BOARD OF DIRECTORS
CORPORATE GOVERNANCE STATEMENT
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
FINANCIAL STATEMENTS
DIRECTORS DECLARATION
INDEPENDENT AUDIT REPORT TO MEMBERS
SHAREHOLDER INFORMATION
2
3
6
8
13
26
27
72
73
75
ANNUAL GENERAL MEETING
The Annual General Meeting of Donaco International Limited will be
held at Four Points by Sheraton Hotel, Sydney on 21 November 2013
at 11:00 am.
Annual Report 2013 | 1
DONACO INTERNATIONAL LIMITED
FROM THE CHAIRMAN
Dear Fellow Shareholders
The 2013 financial year has been one of great
change for your Company.
During the year, the Board actively pursued a
corporate restructure and merger proposal with
Donaco Singapore Pte Ltd. Donaco Singapore
owns a 75% interest in the Lao Cai International
Hotel, a successful boutique casino in northern
Vietnam, under a joint venture arrangement with
the Government of Vietnam. Mr Joey Lim co-
founded the company with his late grandfather,
Tan Sri Lim Goh Tong, who was also the founder of
the Genting Group of Companies.
Following the successful completion of the corporate restructure, your Company was reinstated to the
Australian Securities Exchange on 1 February 2013, under its new name of Donaco International Limited.
This transaction completed the reverse takeover of the former Two Way Limited business.
Mr Joey Lim was appointed as Managing Director and Chief Executive Officer with effect from 1
February 2013. In addition Mr Benjamin Lim and Mr Mak Siew Wei joined the Board as non-executive
directors.
A successful placement of $25 million was completed in two tranches in March and May 2013, resulting
in strong institutional support to the share register. These funds are being used to finance the
completion of the development of the new five star, 428 room hotel and casino at Lao Cai in Vietnam,
which is currently on time for an opening prior to Chinese New Year in late January 2014.
A further acquisition of the Malaysian based business iSentric Sdn Bhd was completed on 1 June 2013.
iSentric is a successful and profitable mobile services business operating in South East Asia, and now
forms the core of our Gaming Technology division, together with the successful Way2Bet marketing
portal for wagering operators in Australia.
The financial year concluded with the sale of the TV wagering service, known as “TAB Active”, to
Tabcorp Holdings Limited.
The financial results for the year reflect the very strong growth at the Company’s flagship Lao Cai casino
property, with a 41% increase in both revenue and net profit after tax (on a like for like basis). With the
refocused business, your directors are very confident that a powerful foundation has been put in place
to take advantage of further growth opportunities in the Asian region.
The Company now provides shareholders with direct exposure to the substantial gaming industry growth
that is taking place in Asia Pacific, with a unique offering setting it aside from the existing mature
Australian based gaming operators.
Stuart McGregor
Chairman
Annual Report 2013 | 2
DONACO INTERNATIONAL LIMITED
FROM THE MANAGING DIRECTOR
Dear Fellow Shareholders
I am pleased to present this first annual report
for Donaco International Limited.
By listing the Company on the ASX, my family
and I sought to offer gaming industry investors
direct access to growth markets in Asia
Pacific.
For many years now, we have seen the
enormous potential of our casino operations
in Vietnam, which are perfectly positioned to
ride the wave of Chinese growth.
This
potential
realised, with all
financial metrics at the Lao Cai International
Hotel reaching record highs during FY13.
is now being
The graph below shows quarterly revenue and net profit after tax (NPAT) for the Lao Cai International
Hotel, and also shows the percentage growth in revenue in each quarter, compared to the previous
corresponding quarter.
Lao Cai International Hotel – Strong Growth in FY13
3 | Annual Report 2013
This improvement in financial performance is due to the excellent efforts of our marketing and casino
management teams, who have successfully worked with junket operators in our target market of the
Yunnan Province of China to increase visitation to the property. At the same time, the ongoing
improvements in highway and rail infrastructure in China have brought the target market closer to us.
The map below shows the location of our hotel and casino property in north Vietnam. The inset map
also shows the new railway line from Kunming, the capital city of Yunnan, which is now carrying
passengers as far as the city of Mengzi (1.5 hours drive from Lao Cai). In addition, the new highway
from Kunming to the border town of Hekou, across the river from our property, is now 90% open, which
has reduced the driving time from 8 hours to 5 hours. We expect that the highway will be fully open in
late 2013.
The Board and management team has positioned the Company for a favourable financial
performance in the year ahead, with our new five star resort hotel due to open in January 2014. This will
allow us to cater to the strong demand for gaming entertainment from our target market in the Yunnan
Province.
Equally significant is our recent agreement to increase our stake in the Lao Cai International Hotel joint
venture to 95%. The additional 20% stake will allow us to capture an even greater share of the revenue
and profit potential from our magnificent new hotel property.
Annual Report 2013 | 4
When we brought the Company to the market, we promised to do certain things. I am pleased to
confirm that we have delivered, as per below:
Strong financial results for FY13, with ongoing growth.
•
• Maintaining our focus on the construction of our new hotel and casino property in Lao Cai. This
project continues to be on track.
• Reshaping and strengthening the Board. This process is well under way, with the recent
announcement that gaming industry veteran Mr Rob Hines will join our Board in November 2013.
In conclusion, the prospects for your Company in the gaming and wagering space in Asia are exciting.
We continue to see multiple opportunities, as a number of countries in the region seek to open up and
regulate their gaming industries in order to attract tourism. The Company is well positioned to take
advantage of the growth in the gaming and wagering sector in Vietnam, and more broadly in Asia.
We are looking forward to the year ahead.
Mr Joey Lim Keong Yew
Managing Director & CEO
5 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
BOARD OF DIRECTORS
Stuart James McGregor
B.Com, LLB, MBA
Non-executive Chairman
Joey Lim Keong Yew
B. Computer Science
Managing Director & CEO
(appointed 1st February 2013)
Benedict Paul Reichel
BA, LLB (Hons), LLM (Hons)
Executive Director,
Group General Counsel,
Company Secretary
Ltd
across
involvement
Over the last 30 years, Mr McGregor has
had a wide-ranging business career with
the
active
Australasian and Asian Region.
In
business, he has been Company
Secretary of Carlton United Breweries,
Managing Director of Cascade Brewery
Company
Tasmania and
in
Managing Director of San Miguel
Brewery Hong Kong Ltd, a publicly listed
Hong Kong based company with
subsidiary businesses in China. In the
public sector, he served as Chief of Staff
to a Minister for Industry and commerce
in the Federal Government and as Chief
Tasmanian
Executive
Government’s economic development
agency.
the
of
Mr McGregor was formerly a director of
Primelife Limited from 1 December 2001
to 31 March 2004, and is currently a
director of
Limited
(NZX:EBO).
EBOS Group
Mr McGregor is Chair of the Audit & Risk
and
Management
Nominations,
&
Corporate Governance Committee.
Committee
Remuneration
Mr J Lim is the managing director and
chief executive officer of Donaco
International Limited. He is also a director
of Malahon Securities Limited, a stock
brokerage company founded in 1984,
and is a member and participant of the
Hong Kong Exchange. He is also the
the Slingshot Group of
principal of
Companies, which are
investment
companies based in Hong Kong.
for
responsible
Relevant experience includes:
• working as an executive director to
M3 Technologies (Asia) Bhd where he
was
strategic
investments and corporate affairs;
• working at VXL Capital, China, a
company whose business was
focused on
in and
restructuring companies in Malaysia,
Beijing, Shanghai and Hong Kong;
and
investing
Mr Reichel is a company director and
executive in the gaming, media, and
technology sectors, with more than
twenty years’ experience
in major
Australian listed public companies and
law firms.
Mr Reichel held the position of Chief
Executive Officer and Managing
Director of the Company (then called
Two Way Limited) from July 2007 to
January 2012, and has remained on
the Board since then.
Previously, Mr Reichel was General
Counsel of Tab Limited, a $2 billion ASX
listed company with operations
in
wagering, gaming and media. Prior to
that, he was General Counsel of racing
broadcaster Sky Channel Pty Limited,
and held a number of executive
positions
and
Broadcasting Limited.
Publishing
at
• working as Project Manager for Glaxo
Wellcome, London, UK.
Mr J Lim is a member of the Nominations,
Remuneration & Corporate Governance
Committee.
Mr
Reichel was appointed as
Company Secretary on 4 March 2013,
and was appointed as an Executive
Director on 1 July 2013.
Annual Report 2013 | 6
DONACO INTERNATIONAL LIMITED
BOARD OF DIRECTORS
Gerald Nicholas Tan Eng Hoe
B.Econ, MBA
Mak Siew Wei
B.Bus (Info Sys)
Benjamin Lim Keong Hoe
B.International Business
Non-executive Director
(resigned 6 September 2013)
Non-executive Director
(appointed 1st February 2013)
Non-executive Director
(appointed 1st February 2013)
Mr B Lim is a director of Donaco
Singapore Pte Ltd, and a major
shareholder of Genting Development
Sdn Bhd, a
substantial property
development business in Malaysia.
He has a Bachelors Degree
in
International Business with Design
Management from Regent Business
School, United Kingdom.
Mr Mak served as Business Development
Manager of Marvic International (NY) Ltd
from 1998 to 2000. He has been an
independent non-executive director of
Jotech Holdings Bhd since August 2006,
Nakamichi Corp. Bhd since August 2008,
and Av Ventures Corp. Bhd since April
2006. He has been an Executive Director of
Advance
Information Marketing Berhad
since September 2010, and of SCAN
Associates Berhad since August 2012.
Mr Mak also served as Manager of Low Yat
Holdings Sdn Bhd from 2001 to 2002.
Mr Mak is a member of the Audit & Risk
Management
and
Nominations, Remunerations & Corporate
Governance Committee.
Committee
Mr Tan is a serial entrepreneur who has
the
founded numerous companies
digital and interactive media space. He is
the Managing Partner of Nuetree Capital,
with over 19 years of experience on both
the sell and buy side of the venture capital
and private equity business.
in
Prior to joining Nuetree, Mr Tan was the
Group Managing Director and Co-
Investment Global
Founder of Phoenix
Limited, a leading pan-Asian interactive
new media company. Prior to Phoenix, he
interactive
founded N-Visio
television
that
time 3-D
developed Asia’s
interactive TV system. This solution was
used extensively in Malaysia, Indonesia
and China.
technologies company
first
Ltd, an
real
Mr Tan is a member of the Audit & Risk
Management
and
Nominations, Remunerations & Corporate
Governance Committee.
Committee
7 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
CORPORATE GOVERNANCE STATEMENT
Donaco International Limited (the Company) is committed to good corporate governance practices through its established
corporate governance framework. This framework is reflected in the Company’s policies, and is designed to ensure that there
are appropriate levels of disclosure and accountability. Copies of the Company’s policies are available from the “Corporate
Governance” section of our website, www.donacointernational.com.
The Company has endorsed the updated Corporate Governance Principles and Recommendations released by the ASX
Corporate Governance Council, and seeks to follow them to the extent that it is practicable having regard to the size and nature
of its operations.
The Board regularly reviews all corporate governance policies and practices to ensure that they remain current and in
accordance with good practice appropriate for the Company’s business environment. The Board and senior management
ensure that employees are aware of the requirements for corporate compliance as it applies to their specific roles within the
organisation.
Unless otherwise stated, the Board's corporate governance policies comply with the recommendations of the ASX Corporate
Governance Council's 2nd edition Corporate Governance Principles and Recommendations (including the 2010 amendments).
The table below summarises the ASX Corporate Governance Council's Corporate Principles and Recommendations and cross
references these to the Company’s Corporate Governance Policies.
ASX Corporate Governance Principles and
Recommendations
Compliance
Donaco International Limited
Corporate Governance Policy
Principle 1: Lay solid foundations for management and oversight
1.1 Companies should establish the functions reserved to
the Board and those delegated to senior executives
and disclose those functions.
Complies
1.2 Companies should disclose the process for evaluating
Complies
the performance of senior executives.
those delegated
The Company’s Board Charter sets out
the specific responsibilities of the Board
and
senior
executives.
The Company’s Board
Charter is available on the Company’s
website.
to
Company’s
Nominations,
The
Remuneration
Corporate
Governance Committee Charter sets
out the process for evaluating the
performance of senior executives.
&
Company’s
Nominations,
The
Corporate
Remuneration
Governance Committee Charter
is
available on the Company’s website.
and
1.3
Companies should provide the information indicated in
the Guide to reporting on Principle 1.
Complies
The Company will provide an
explanation of any departures from
Recommendations 1.1 to 1.2 (if any) in
future annual reports.
Annual Report 2013 | 8
DONACO INTERNATIONAL LIMITED
ASX Corporate Governance Principles and
Recommendations
Compliance
Donaco International Limited
Corporate Governance Policy
Principle 2: Structure the Board to add value
2.1 A majority of the Board should be independent
Complies
directors.
2.2
The chair should be an independent director.
Complies
The Company’s
Board Charter,
specifically clause 5, sets out the policy
regarding independent directors. The
Company’s Board Charter is available
on the Company’s website. Since 1
February 2013, the Board has had 3
independent members.
The Chairman
director.
is an
independent
2.3
The roles of the chair and chief executive officer should
not be exercised by the same individual.
Complies
The Chairman and CEO are not the
same person.
2.4
The Board should establish a Nominations Committee.
Complies
2.5
Companies should disclose the process for evaluating
the performance of the Board, its committees and
individual directors.
Complies
2.6
Companies should provide information indicated in
Guide to reporting on Principle 2.
Complies
Principle 3: Promote ethical and responsible decision-making
3.1
Companies should establish a code of conduct and
disclose the code or a summary as to:
• the practices necessary to maintain confidence in
the company’s integrity;
• the practices necessary to take into account the
company’s legal obligations and the reasonable
expectations of its stakeholders; and
Complies
• the responsibility and accountability of individuals for
reports of unethical
investigating
reporting and
practices.
The Company has established a
Nomination Committee in accordance
with Clause 8 of its Board Charter.
The Company’s Board Committee
Standing Rules and Nominations,
Corporate
Remuneration
Governance Committee Charter sets
out the process for evaluating the
performance of the Board.
&
The Company will provide an
explanation of any departures from
Recommendations 2.1 to 2.5 (if any) in
future annual reports.
the Company’s
The Company has
implemented a
number of policies and procedures
including
Board
Charter, Directors’ Code of Conduct
and Audit and Risk Management
Committee Charter
that maintain
confidence in the Company’s integrity,
take into account the Company’s legal
the
obligations
responsibility and accountability of
for
individuals
and
investigating
reports of unethical
practices. These policies are available
on the Company’s website.
reporting
govern
and
3.2 Companies should establish a policy concerning
diversity and disclose the policy or a summary of that
policy. The policy should include requirements for the
board to establish measurable objectives for achieving
gender diversity for the board to assess annually both
the objectives and progress in achieving them.
Does not comply
Board will determine
policy
the
The
concerning
appropriate
diversity. This policy will
include a
recommendation as to whether it is
appropriate for the Board to establish
measureable objectives for achieving
gender diversity for the Board to assess
annually.
9 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
ASX Corporate Governance Principles and
Recommendations
Compliance Donaco International Limited
Corporate Governance Policy
3.3
3.4
Companies should disclose in each annual report the
measurable objectives for achieving gender diversity
set by the board in accordance with the diversity
policy and progress towards achieving them.
Companies should disclose in each annual report the
proportion of women employees
the whole
organisation, women in senior executive positions and
women on the Board.
in
Does not
comply
See 3.2 above
Complies
3.5
Companies should provide the information indicated in
Guide to reporting on Principle 3.
Complies
Principle 4: Safeguard integrity in financial reporting
4.1
The Board should establish an audit committee.
Complies
4.2
The audit committee should be structured so that it:
• consists only of non-executive directors;
• consists of a majority of independent directors;
• is chaired by an independent chair, who is not the
Complies except
for point 3
chair of the Board; and
• has at least three members.
The proportion of women employees is
as follows: Board, nil; senior executive
positions, 8%; and
the whole
organisation, 55%.
in
an
provide
The Company will
explanation of any departures
from
Recommendations 3.1 to 3.4 in future
annual reports.
The Company has an Audit Committee
(referred
the “Audit & Risk
to as
Management Committee").
implemented an
The Company has
Audit and Risk Management Committee
Charter which governs the operation of
the Audit and Risk Management
Committee. This charter is available on
the Company’s website. The Audit and
Risk Management Committee consists
only of independent directors, but it is
chaired by the Chairman of the Board.
The Company believes
is
optimal having regard to the current
operations of the Company.
that
this
4.3
The audit committee should have a formal Charter.
Complies
See 4.2 above
4.4
Companies should provide the information indicated in
Guide to reporting on Principle 4.
Complies
Principle 5: Make timely and balanced disclosure
5.1
Companies should establish written policies and
procedures designed to ensure compliance with ASX
Listing Rule disclosure requirements and to ensure
accountability at senior executive
for that
compliance and disclose those policies or a summary
of those policies.
level
Complies
5.2
Companies should provide the information indicated in
Guide to reporting on Principle 5.
Complies
The Company will
provide
an
from
explanation of any departures
Recommendations 4.1 to 4.3 (if any) in
future annual reports.
The Company has
implemented a
Directors’ Code of Conduct, Market
Disclosure Policy, Directors’ Disclosure
Policy and Policy for Handling Conflicts
of Interest which are designed to ensure
compliance with the ASX Listing Rule
disclosure requirements and to ensure
accountability at senior executive level
for compliance and disclosure. These
policies are available on the Company’s
website.
an
The Company will
provide
explanation of any departures
from
Recommendations 5.1 (if any) in future
annual reports.
Annual Report 2013 | 10
DONACO INTERNATIONAL LIMITED
ASX Corporate Governance Principles and
Recommendations
Compliance
Donaco International Limited
Corporate Governance Policy
The Company has
implemented a
Market Disclosure Policy which ensures
that there is fully and timely disclosure of
to
the
shareholders. The Company’s Market
Disclosure Policy
is available on the
Company’s website.
Company’s
activities
an
provide
The Company will
explanation of any departures
from
Recommendation 6.1 (if any) in future
annual reports.
The Company has
implemented an
Audit & Risk Management Committee
Charter. The Audit & Risk Management
Committee Charter outlines the powers
and duties of
the Audit and Risk
Management Committee. The Audit &
Risk Management Committee Charter is
available on the Company’s website.
The Company’s Board Charter requires
that an Audit and Risk Management
Committee be established. The Audit
and Risk Management Committee has
been established and reports to the
Board in respect of material business risks
and their management. The Company
has also implemented an Audit and Risk
Management Committee Charter which
governs the operation of the Audit and
Risk Committee.
from
statement
Pursuant to clause 4 of the Company’s
Board Charter, the Board must ensure
that it is provided with an additional
the chief
written
executive officer and chief financial
officer in relation to the Company’s risk
and management systems and controls,
stating that the declaration provided in
accordance with section 295A of the
Corporations Act is founded on a sound
system of risk management and internal
control and that the system is operating
effectively in all material respects in
relation to financial reporting risks.
Principle 6: Respect the rights of shareholders
6.1
Companies should design a communications policy for
promoting effective communication with shareholders
and encourage their participation at general meeting
and disclose the policy or a summary of the policy.
Complies
6.2
Companies should provide the information indicated in
Guide to reporting on Principle 6.
Complies
Principle 7: Recognise and manage risk
7.1 Companies should establish policies for oversight and
management of material business risks and disclose a
summary of those policies.
Complies
7.2
7.3
The Board should require management to design and
implement the risk management and internal control
system to manage the company’s material business
risks and report to it on whether those risks are being
managed effectively. The Board should disclose that
management has reported to it as to the effectiveness
of the company’s management of its material business
risks.
the chief executive officer
the chief
financial officer
the declaration provided
The Board should disclose whether it has received
(or
assurance
from
equivalent) and
(or
in
that
equivalent)
accordance with section 295A of the Corporations Act
is founded on a sound system of risk management and
internal control and that the system is operating
effectively in all material respects in relation to financial
reporting risks.
Complies
Complies
11 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
ASX Corporate Governance Principles and
Recommendations
Compliance
Donaco International Limited
Corporate Governance Policy
Principle 8: Remunerate fairly and responsibly
8.1
The Board should establish a remuneration committee.
Complies
8.2
The remuneration committee should be structured so
that it:
• consists of a majority of independent directors,
•
• has at least three members.
is chaired by an independent chair; and
Complies except
for point 2
8.3
Companies should clearly distinguish the structure of
non-executive directors’ remuneration from that of
executive directors and senior executives.
Complies
The Company has a
committee
“Nominations,
Corporate Governance Committee").
remuneration
the
to
as
&
Remuneration
(referred
The Nominations, Remuneration &
Corporate Governance Committee is
comprised of a majority of independent
the
directors, but
Chairman of the Board. The Company
believes
is optimal having
regard to the current operations of the
Company.
is chaired by
that
this
it
must
review
to clause 4.1(k) of
Pursuant
the
Company’s Nominations, Remuneration
& Corporate Governance Committee
Charter, the Company’s Nominations,
Remuneration & Corporate Governance
Committee
the
remuneration of non-executive directors
annually and ensure that the structure of
non-executive director’s remuneration is
that of
clearly distinguished
executives by ensuring
that non-
executive directors are remunerated by
in
way of
schemes designed for the remuneration
of executives, do not receive options or
bonus payments and are not provided
with
than
retirement benefits other
statutory superannuation.
fees, do not participate
from
8.4
Companies should provide the information indicated in
Guide to reporting on Principle 8.
Complies
an
The Company will
provide
from
explanation of any departures
Recommendations 8.1 to 8.3 (if any) in
future annual reports.
Annual Report 2013 | 12
DONACO INTERNATIONAL LIMITED
DIRECTORS’ REPORT
Definitions
It is important to read the following definitions in order to assist with understanding this report.
For the purposes of this report:
Donaco Singapore Pte Ltd or Parent Entity refers to the company purchased by Donaco International Limited on 1 February 2013.
As required by Australian Accounting Standard AASB3: Business Combinations, Donaco International Limited is deemed to have
been acquired by Donaco Singapore as at 1 February 2013 under the reverse acquisition rules.
Donaco International Limited or Listed Entity or Company means only the legal entity of Donaco International Limited, which is
listed on the Australian Securities Exchange (ASX: DNA). Donaco International Limited is the legal parent of Donaco Singapore Pte
Ltd.
Two Way Limited (ASX: TTV) means Donaco International Limited and all its subsidiaries prior to the purchase of Donaco Singapore
Pte Ltd. On 19 December 2012, shareholders approved to change the company's name from Two Way Limited to Donaco
International Limited and the ASX code was subsequently changed from TTV to DNA.
Consolidated Entity for the year ended 30 June 2013 means Donaco International Limited and its subsidiaries and Donaco
Singapore and its subsidiaries combined, where Donaco International Limited is deemed to be acquired by Donaco Singapore
Pte Ltd as required by Australian Accounting Standard AASB3.
Consolidated Entity for the year ended 30 June 2012 means Donaco Singapore and its subsidiaries.
The directors present their report, together with the financial statements, on the Consolidated Entity for the year ended 30 June
2013.
Directors
The following persons have been directors of Donaco International Limited during or since the end of the financial year to the
date of this report:
Stuart James McGregor
Joey Lim Keong Yew
Benedict Paul Reichel
Gerald Nicholas Tan Eng Hoe
Mak Siew Wei
Benjamin Lim Keong Hoe
Mr McGregor and Mr Reichel have been directors at all times during and since the end of the financial year. Mr J Lim, Mr Mak
and Mr B Lim were appointed as directors on 1 February 2013. Mr Tan resigned on 6 September 2013.
Particulars of their qualifications, experience, special responsibilities and any directorships of other listed companies are set out in
the Annual Report under the heading “Board of Directors” and form part of this report.
Company Secretary
Mr Benedict Reichel was appointed as company secretary on 4 March 2013. Mr Reichel was previously a non-executive director
of the Company, and was appointed as an Executive Director on 1 July 2013. His qualifications and experience are set out in the
Annual Report under the heading “Board of Directors” and form part of this report.
Prior to 4 March 2013, Mr Rointon Nugara was the company secretary. Mr Nugara holds a Bachelor of Business (Accounting) from
the University of Western Sydney, and is a qualified CPA with 24 years’ experience in finance and accounting.
Principal Activities and Significant Changes in Nature of Activities
The principal activities of the Consolidated Entity during the financial year consisted of:
(a) operation of a hotel and casino in northern Vietnam, and
(b) operation and development of gaming technology, including mobile payment gateways and interactive media and
gambling applications for deployment on television, mobile and internet.
The following significant changes in the nature of the activities of the Consolidated Entity occurred during the year:
(a) the reverse acquisition of the Company by Donaco Singapore Pte Ltd;
13 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
(b) the change of name of the Company to Donaco International Limited;
(c) the raising of $25 million in equity capital;
(d) the acquisition of iSentric Sdn Bhd; and
(e) the sale of the Company’s TV wagering service to Tabcorp Holdings Limited.
Full details of these changes are set out under the heading “Significant Changes in State of Affairs” on page 15.
Operating Results
The net amount of the consolidated profit of the Consolidated Entity for the financial year, after providing for income tax and
eliminating non-controlled equity interests, was $7,026,199 (an increase of 41% on the 2012 profit of $5,000,327).
Review of Operations, Financial Position, Business Strategies and Prospects
Casino Operations
The strong growth in the Consolidated Entity’s revenue and net profit after tax were underpinned by an 18% increase in casino
patrons at the Lao Cai International Hotel. Total visitation increased to 69,560 persons in FY13, from 59,078 persons in FY12.
The increase in visitation was due to the effective junket marketing program instituted by the Consolidated Entity, and to the road
and rail improvements on the Chinese side of the border, which have continued at pace in recent months. The highway from
Kunming, the capital of Yunnan Province in China, is now 90% complete, with total driving time to Lao Cai now reduced to five
hours, from the previous 7-8 hrs. The new train line from Kunming now carries passengers as far as Mengzi, which is 1.5 hours drive
from Lao Cai.
These infrastructure improvements make the Consolidated Entity’s gaming business more accessible for the target market in
Yunnan Province. This supports the strong future prospects for the Consolidated Entity’s new five-star casino property, which is
currently under construction.
During FY13, main hall table games revenue increased by 10% to $3.60m, from $3.27m in FY12. VIP table games revenue
increased by 43% to $10.05m, from $7.05m in FY12. The dramatic growth in VIP revenue again reflects the success of the
Consolidated Entity’s junket marketing program.
The Consolidated Entity does not normalise its reported results based on a theoretical win rate. This is due to the relatively small
size of the current property; the rapid growth it is experiencing; and the construction of the new much larger casino and hotel,
which will open in FY14. Accordingly, reported results may fluctuate based on normal fluctuations in the win rate. For FY13, the
gross win rate (before gaming tax) experienced across all table games in the property was 3.03%.
In February 2013, the Lao Cai International Hotel introduced 12 new high quality slot machines at the property, adding to an
installed base of 24 much older machines. This improvement in slot machine inventory saw slot machine revenues jump by 71% to
$296k, from $173k in FY12. The increase in the June 2013 month was 333%, compared to June 2012.
It should be noted that slot machines contributed only a very small share of total gaming revenue (2.1% in FY13). This is due to the
overwhelming popularity of card games, especially baccarat, amongst the hotel’s patrons from China. However, the very
positive reaction to better quality machines suggests that there is a good opportunity for the Consolidated Entity to grow slot
machine revenues, once the new hotel property is completed and more space is available to house them. The Consolidated
Entity’s existing casino licence allows for 150 slot machines, and 150 electronic gaming tables.
The Board and management team were particularly pleased to see the phenomenal growth at the Lao Cai casino in the half-
year to June 2013. Total revenue rose to $8.58m, an increase of 72% on the previous corresponding half (to June 2012), while net
profit after tax rose to $4.75m, an increase of 85% on the previous corresponding half.
Gaming Technology Operations
The Gaming Technology division consists of the former Two Way Limited business operating in Australia and New Zealand, which
was acquired on 1 February 2013, together with the iSentric mobile technology business acquired on 1 June 2013.
The former Two Way Limited business as a whole contributed revenue of $537k for the five months from 1 February to 30 June
2013. The “TAB Active” TV wagering service was sold to Tabcorp Holdings Limited on 30 June 2013, with the sale proceeds of
$863k booked as a one-off gain.
The Consolidated Entity continues to operate the Way2Bet marketing portal for wagering operators, which has all of the major
corporate bookmakers in Australia as clients. Total revenue for this business in the 12 months to 30 June 2013 was $501k, which
was an increase of 60% on the previous year.
Technical support for the Way2Bet business is now being provided from Malaysia by the iSentric gaming technology team. In
addition, the iSentric team has been engaged to develop customer relationship management and loyalty systems for the new
Lao Cai International Hotel. The iSentric mobile payments business contributed revenue of $470k and net profit after tax of $61k
for the June 2013 month.
Annual Report 2013 | 14
DONACO INTERNATIONAL LIMITED
Financial Position
The net assets of the Consolidated Entity at 30 June 2013 were $52,002,457 (2012: $7,415,780). The increase was due to the capital
raising of $25 million undertaken by the Consolidated Entity, together with significant investments in construction of the new Lao
Cai International Hotel.
The Consolidated Entity’s working capital, being current assets less current liabilities was $15,816,006 (2012: ($1,309,377)). The
increased cash from the capital raising noted above, plus an increase in trade receivables, contributed to the increase.
Business Strategies and Prospects
The Consolidated Entity operates leisure, entertainment and associated technology businesses across the Asia Pacific region.
Our flagship business is the Lao Cai International Hotel, a successful boutique casino in northern Vietnam. The Lao Cai
International Hotel was established in 2002, and is located on the border with Yunnan Province, China. The Consolidated Entity
operates the business and owns a 75% interest, in a joint venture with the Government of Vietnam. A memorandum of
understanding has been signed to increase our stake to 95%.
The Lao Cai International Hotel is a pioneer casino operator in Vietnam. The property is currently being expanded from a 3-star 34
room hotel, to a brand new resort complex with 428 hotel rooms.
The Consolidated Entity also owns and operates successful gaming technology businesses, including secure mobile payment
gateways across South East Asia, and the Way2Bet wagering portal, whose customers include all major corporate bookmakers in
Australia.
Our strategy is to focus on opportunities in the gaming and wagering space in the Asia Pacific region. The construction and
opening of our new resort hotel in Lao Cai will underpin our growth during the next 12 months.
Except as noted above, information on the Consolidated Entity’s business strategies and prospects for future years has not been
included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the Consolidated
Entity.
Dividends
No dividends were paid during the financial year by either Donaco International Limited or Donaco Singapore Pte Ltd (2012: $nil).
The directors do not recommend the payment of a dividend.
Significant Changes in State of Affairs
Significant changes in the state of affairs of the Consolidated Entity during the financial year were as follows:
•
The Company entered into an agreement with Donaco Singapore Pte Ltd ("Donaco Singapore") and its two shareholders,
Convent Fine Limited ("Convent") and Slim Twinkle Limited ("Slim"), under which the Company would acquire all of the shares
of Donaco Singapore from Convert and Slim. The sale agreement was conditional upon certain things, including the
shareholders approving the corporate restructure and acquisition, and the Company receiving the ASX Chapters 1 and 2
confirmations. At the Company's Annual General Meeting held on 19 December 2012, shareholders approved the corporate
restructure and acquisition, which involved the following steps:
raising of up to $1 million by way of issuing up to 2,500,000 fully paid ordinary shares at an offer price of $0.40 per
share, with the right to accept oversubscriptions of up to $200,000;
a non-selective consolidation of the Company's issued capital, whereby all of the issued securities of the Company
were consolidated on a 20 to1 basis;
the issue of 7,131,957 bonus options to all existing shareholders of the Company on a pro-rata basis, whereby
shareholders would receive 1 option for every 2 shares (post consolidation). The bonus options were issued at nil issue
price and with an exercise price of $0.30 per option, with an expiry date of 29 January 2015; and
acquisition of 100% of the issued share capital in Donaco Singapore in consideration for 261,724,250 fully paid
ordinary shares in the Company at an issue price of $0.30 per share to Convent and Slim.
• On 29 January 2013, following the ASX restatement confirmations and as a result of the corporate restructure and
acquisition, the Company:
issued 1,859,500 fully paid ordinary shares at 40 cents each, raising a total of $743,800;
completed the purchase of the shares in Donaco Singapore and acquired 75% ownership rights in the Lao Cai
International Joint Venture Company ("Lao Cai JV") and a 75% stake in the licence under which Lao Cai JV
operates a boutique casino and hotel located in Lao Cai Province, Vietnam;
issued 261,724,250 fully paid ordinary shares at an issue price of $0.30 per share (totalling $78,517,275) to Convent
and Slim, Donaco Singapore's shareholders, in full consideration of the purchase of Donaco Singapore; and
issued 7,131,957 bonus options for nil issue price with an exercise price of $0.30 per option, with an expiry date of 29
January 2015.
15 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
• On 19 December 2012, shareholders approved the change of the Company's name from Two Way Limited to Donaco
International Limited. The ASX code was subsequently changed from TTV to DNA.
• On 8 April 2013 the Company issued 41,682,829 ordinary fully paid shares at $0.35 per share for a consideration of $14,588,990
and on 17 May 2013 the Company issued 29,745,742 fully paid ordinary shares at $0.35 per share for a consideration of
$10,411,010. The shares were issued to raise working capital to fund the expansion of the Lao Cai International Hotel and
casino in Vietnam.
• On 1 June 2013 the Company completed the acquisition of iSentric Sdh Bhd, a mobile services business in South East Asia, for
$8.5 million. To effect the completion of the acquisition, the Company issued 22,368,420 fully paid ordinary shares to the
vendors at an agreed price of $0.38 per share (totalling $8,499,999.60).
The transaction also involved the acquisition of iSentric Australia Pty Ltd (IAPL), a related business based in Australia. IAPL has
signed conditional agreements to acquire online gaming and sportsbook licences issued in the Northern Territory. This further
acquisition has not yet been completed and is subject to receipt of all regulatory approvals. The further acquisition of IAPL will
involve the issue of a further 657,894 ordinary shares at an agreed price of $0.38 per share, totalling $250,000.
• On 30 June 2013 the Consolidated Entity sold its TV wagering business, known as “TAB Active” to Tabcorp Holdings Limited for
$0.83 million. The proceeds from the sale were received on 11 July 2013.
Matters After the End of the Financial Year
On 24 July 2013, the Company announced that it had signed a non-binding memorandum of understanding with its joint venture
partner to increase its stake in the Lao Cai International Hotel joint venture by 20%, for a total cost of US$4 million. At the date of
this report, the transfer of the stake had not yet been completed.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or could
significantly affect the operations of the Consolidated entity, the results of those operations, or the state of affairs of the
consolidated entity in future financial years.
Environmental Regulation
The Consolidated Entity's operations are not subject to any particular and significant environmental regulation under the law of
the Commonwealth and States.
Meetings of Directors
During the financial year, Donaco International Limited held 13 meetings of the Board of Directors. The attendance of the
Directors at meetings of the Board and its Committees during the financial year were:
Board Meetings
Audit and Risk Management
Committee Meetings
Nominations, Remuneration and
Corporate Governance
Committee Meetings
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
13
4
13
13
4
4
13
3
13
13
4
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Name
S J McGregor
J Lim
B Reichel
G Tan
S Mak
B Lim
The Audit and Risk Management Committee and the Nominations, Remuneration & Corporate Governance Committee did not
meet during the financial year. All relevant matters were discussed as part of the regular meetings of the Board.
Annual Report 2013 | 16
DONACO INTERNATIONAL LIMITED
Directors' Interests in Securities
The relevant interest of each director in securities of the Company at the date of this report is as follows:
Name
S J McGregor
J Lim 1
B P Reichel
G N Tan 3
Mak S W
B Lim 2
Fully Paid Ordinary
Shares
DNAO
Options 4
Other
Options 5
126,816
235,266,345
122,204
648,750
-
202,826,200
63,408
-
61,102
511,875
-
-
-
-
-
812,500
-
-
Total
190,224
235,266,345
183,306
1,973,125
-
202,826,200
1
2
These shares are held directly by Mr J Lim and indirectly by Covent Fine Limited (98,713,818 shares) and Slim
Twinkle Limited (104,112,382 shares), of which Mr J Lim is a director and beneficial owner.
These shares are held indirectly by Covent Fine Limited (98,713,818 shares) and Slim Twinkle Limited (104,112,382
shares), of which Mr J Lim is a director and beneficial owner.
3 Mr Tan resigned on 6 September 2013. Certain shares held directly by Mr Tan (via a private nominee company);
other shares and all options held by Main Ace Investment Limited, a company of which Mr Tan is a director.
4 Represents listed options (DNAO) with an exercise price of $0.30 exercisable at any time up to 29 January 2015.
5 Represents options that have fully vested and unexpired as at the date of this report:
- 562,500 options with an exercise price of $0.56 exercisable any time up to 17 January 2015
- 125,000 options with an exercise price of $0.56 exercisable any time up to 1 March 2015
- 125,000 options with an exercise price of $0.56 exercisable any time up to 17 May 2015
Options Granted Over Ordinary Shares
During the year ended 30 June 2012, the Company issued a total of 16,250,000 unlisted options over shares in the Company to
Main Ace Investment Limited as part of a capital raising. The options had an exercise price of 2.8 cents, and were issued in three
tranches, on 17 January 2012 (11,250,000 options), 1 March 2012 (2,500,000 options), and 17 May 2012 (2,500,000 options). On 8
January 2013, these options were consolidated on a 20 for 1 basis to 812,500 options as part of the Company's corporate
restructure. At the date of this report, there were 812,500 unlisted options on issue over unissued ordinary shares. The options have
an exercise price of $0.56 each, and expire three years after their date of issue.
On 29 January 2013, as part of the Company's corporate restructure, the Company issued 7,131,957 bonus options over shares in
the Company for nil issue price, with an exercise price of $0.30 per option and an expiry date of 29 January 2015. As at the date
of this report, there were 7,057,082 bonus options over unissued ordinary shares on issue.
No amounts are unpaid on any of the shares. No person entitled to exercise an option had or has any right by virtue of the option
to participate in any share issue of the Company or any other body corporate.
Shares Issued on the Exercise of Options
The following ordinary shares of the Company were issued during the year ended 30 June 2013 on the exercise of the following
options:
• 2008 Series B Options granted to employees under the Company's Employee Option Plan
• Bonus Options issued to all shareholders under the company's corporate restructure and acquisition
Date Options
Granted
Issue Price of
Shares
$
Number of Shares
Issued
2008 Series B Options
1 April 2009
1 May 2009
1 June 2009
0.40
0.36
0.42
Bonus Options
29 January 2013
0.30
1,500
1,500
1,500
4,500
74,875
79,375
17 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
The Series B Options were issued in 2008 under the Company's Employee Option Plan. These options expired two years after each
vesting date, with the last remaining options expiring on 1 June 2013.
The Bonus Options are fully vested and exercisable.
No further shares have been issued since 30 June 2013 as a result of the exercise of options.
Indemnity and Insurance Premiums
Pursuant to its Constitution, the Company indemnifies every current and former officer of the Company or its subsidiaries (to the
extent permitted by law) against:
(a) liabilities incurred by that person, as an officer of the Company, to another person (other than the Company or its related
bodies corporate); and
(b) liabilities for costs and expenses incurred by that person in defending any such proceedings, or in responding to actions
taken by government agencies.
The Company has executed a Deed of Access and Indemnity in favour of each of its directors. The Deed grants an indemnity to
directors and gives the directors the right of access to Board papers.
During the financial year the Company paid premiums for Directors’ and Officers’ Liability insurance in respect of Directors and
executive officers of the Company and its subsidiaries as permitted by the Corporations Act 2001. Details of the premium paid
are confidential under the contract of insurance.
Proceedings on Behalf of Listed Entity and/or Consolidated Entity
No person has applied for leave of Court to bring proceedings on behalf of the Listed Entity and/or Consolidated Entity or
intervene in any proceedings to which the Listed Entity and/or Consolidated Entity is party for the purpose of taking responsibility
on behalf of the Listed Entity and/or Consolidated Entity for all of any part of those proceedings. The Listed Entity and/or
Consolidated Entity was not a party to any such proceedings during the year.
Non-audit Services
The Consolidated Entity may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor’s expertise and experience with the Company and/or the Consolidated Entity are important. Details of the amounts paid
or payable to the auditor for audit and non-audit services provided during the year are set out below.
The board of directors is satisfied that the provision of non-audit services during the year is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below
did not compromise the external auditor’s independence for the following reasons:
• all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not
adversely affect the integrity and objectivity of the auditor; and
• the nature of the services provided does not compromise the general principles relating to auditor independence in
accordance with APES 110: Code of Ethics for Professional Accountants as set by the Accounting Professional and Ethical
Standards Board.
For the twelve months ending 30 June 2013, the following fees were paid or payable for non-audit services provided by the
auditor of Donaco International Limited:
Taxation services
Acquisition due diligence services
William Buck
Other Firms
2013
$
18,167
18,500
58,875
2012
$
13,000
0
0
Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2013 in accordance with section 307C of the
Corporations Act has been received and can be found on page 26.
On 28 May 2013, the Board resolved to extend the lead auditor’s appointment for a further 12 months beyond the initial five
successive years, in accordance with section 324DAA of the Corporations Act 2001 (Cth). The initial five year period was due to
elapse on 30 June 2013. A copy of the resolution and the required Form 397 were lodged with ASIC on 5 June 2013.
Annual Report 2013 | 18
DONACO INTERNATIONAL LIMITED
REMUNERATION REPORT - AUDITED
This report details the Board’s policy for determining the nature and amount of remuneration of directors and executives
(including secretaries and senior managers) of the Company. The information provided in this remuneration report has been
audited as required by section 308(3C) of the Corporations Act.
Remuneration Governance
The Board has an established Nominations, Remuneration and Corporate Governance Committee, consisting of a majority of
independent non-executive directors. It is primarily responsible for setting the overall remuneration policy and guidelines for the
Company, and its functions include:
• reviewing and recommending to the Board for approval, the Company's general approach towards remuneration, and to
oversee the development and implementation of remuneration programs;
• reviewing and recommending to the Board for approval, corporate goals and objectives relevant to the remuneration of
the chief executive officer, and evaluating the performance of the chief executive officer in light of those goals and
objectives;
• reviewing and recommending to the Board for approval, remuneration programs applicable to the Company executives,
and ensure that these programs differ from the structure of remuneration for non-executive directors; and
• reviewing the remuneration of non-executive directors, and ensuring that the structure of non-executive directors'
remuneration is clearly distinguished from that of executives by ensuring that non-executive directors are remunerated by
way of fees, do not participate in schemes designed for the remuneration of executives, do not receive options or bonus
payments, and are not provided with retirement benefits other than statutory superannuation.
All remuneration paid to directors and executives is valued at cost to the Company and expensed.
The Committee seeks guidance from professional external remuneration consultants when required. Whilst the Committee did not
meet during the year, the Board of Directors has taken on this responsibility as required.
During the year, the Board received a remuneration recommendation (as defined in the Corporations Act) from Egan Associates
Pty Limited, in relation to key management personnel remuneration arrangements. The amount paid for the recommendation
was $10,000 including GST. Egan Associates also provided other services, consisting of market benchmarking, for a fee of $8,480
including GST. To ensure that there was no undue influence by the key management personnel to whom the advice related, the
advice was provided to the non-executive Directors of the Company. The remuneration consultant also stated that there was no
such undue influence, and the Board is satisfied that is the case.
Non-executive Director Remuneration Policy
The Company’s non-executive directors receive director’s fees at a market level designed to remunerate them for their time,
commitment and responsibilities, including their participation in Board Committees. The non-executive director fees in aggregate
are within the $450,000 limit for director’s fees (inclusive of superannuation) approved by the Company’s shareholders at the 2004
Annual General Meeting. There are no bonuses payable to non-executive directors, and there are no termination payments for
non-executive directors on retirement from office, other than statutory superannuation entitlements. Non-executive directors are
not granted options.
Executive Remuneration Policy and Framework
The Company’s remuneration policy is to ensure that executive remuneration packages properly reflect a person’s duties and
responsibilities, and that remuneration is competitive in attracting, retaining and motivating executives of the highest calibre. As a
result, remuneration packages for the managing director/chief executive officer and senior executives include both fixed and
performance-based remuneration. Base salary is determined by considering the scope of the executive’s responsibility,
importance to the business, competitiveness in the market, and assessed potential. The total remuneration package for
executives includes superannuation and other non-cash benefits to reflect the total employment cost to the Company, inclusive
of any fringe benefits tax.
Employees may be offered participation in Donaco International Limited's Option Plan. This plan aims to assist in retention of
employees, and to provide a direct link between the individual’s remuneration and the long term performance of the Company.
The remuneration of the managing director/chief executive officer is reviewed by the Board, acting on the advice of the
Nominations, Remuneration and Corporate Governance Committee. The remuneration of senior executives is reviewed by the
chief executive officer and by the Board.
19 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
Performance-based Remuneration
Performance-based remuneration consists of grants of options under the Company’s Option Plan, and the payment of cash
bonuses. Cash and share-based bonuses, as detailed in the tables of this report, can be payable if key performance indicators
(KPIs) are met. In relation to the MD/CEO, the relevant KPIs were based on the 41% increase in revenue and net profit (after non-
recurring items) for the financial year, compared to the previous financial year. In addition, the MD/CEO successfully completed
the listing of the Parent Entity on the ASX, and successfully attracted significant additional funding ($25 million) into the Company,
in order to complete the construction of the new Lao Cai International Hotel.
No remuneration options were issued during the year ended 30 June 2013. The values of options issued to executives during prior
financial years, and the terms and conditions applicable to them, are disclosed in the "Details of Share Based Compensation and
Bonuses" section of this report (refer page 24).
Relationship Between Remuneration Policy and Company Performance
The following table shows key performance indicators for the Consolidated Entity over the last two years. Note that FY12
comparatives are to the Parent Entity, consistent with the financial information disclosed in this report. Information relating to
previous financial years has not been included as it is not directly comparable, due to the reverse acquisition as detailed in the
financial report, and the fact that the Parent Entity changed its financial year end from 30 December to 30 June in FY13.
2013
2012
% Change
Revenue ($)
Net Profit After Tax ($)
Basic Earnings per share ($)
Dividends paid per share ($)
18,668,645
7,026,196
0.026
Nil
12,097,418
5,000,327
1,666.78
Nil
54%
41%
n/a1
Nil
1 EPS is not directly comparable due to the increase in the number of shares for the Consolidated Entity from 3,000 in FY12, to
277,827,871 (weighted average number of shares on issue) in FY13.
The following graph shows the change in the Consolidated Entity’s share price since listing on the ASX on 1 February 2013.
The general improvement in the Company’s performance since listing has been reflected in the Company’s share price. The
Board is of the opinion that these results can be attributed, in part, to the remuneration policy and framework discussed above,
and is satisfied with the upwards trend in shareholder wealth.
The Board considers that the remuneration policies adopted have been successful in attracting, retaining and motivating
talented staff who are required to manage and operate the Company as a listed public entity.
Annual Report 2013 | 20
DONACO INTERNATIONAL LIMITED
Directors and Key Management Personnel Disclosed in this Report
As required by Australian Accounting Standard AASB3: Business Combinations, Donaco International Limited (the Listed Entity) is
deemed to have been acquired by Donaco Singapore Pte Ltd (the Parent Entity) as at 1 February 2013, under the reverse
acquisition rules. The remuneration report discloses the remuneration paid by both the Parent Entity and the Listed Entity to its
directors and key executives for the periods ending on 30 June 2013 and, for historical comparative purposes, 30 June 2012.
Directors of Parent Entity (Donaco Singapore Pte Ltd):
Joey Lim Keong Yew
Ang Teck Foo
Benjamin Lim Keong Hoe
Mak Siew Wei
Goh Kwey Biaw
Ong Chong Hock
Managing Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director (appointed 25 April 2013)
Non-executive Director (resigned 25 April 2013)
From the above group, Messrs J Lim, B Lim and Mak S W were appointed as directors of the Listed Entity on 1 February 2013.
Directors of Listed Entity (Donaco International Limited):
S J McGregor
J Lim
B P Reichel
B Lim
G N Tan
Mak S W
Key Management Personnel
Non-executive Director (Chair)
Managing Director and CEO (appointed 1 February 2013)
Non-executive Director
Non-executive Director (appointed 1 February 2013)
Non-executive Director
Non-executive Director (appointed 1 February 2013)
The following Key Management Personnel of the Parent Entity continued as Key Management Personnel of the Listed Entity:
R Na
Goh K B
Chief Financial Officer (from 1 March 2013)
Deputy CFO and CEO Donaco Singapore
In addition, the following Key Management Personnel of the Listed Entity continued in office:
F R Magrini
Chief Technology Officer
Changes in Key Management Personnel since the End of the Reporting Period
Since 30 June 2013, the following changes have occurred:
Mr B P Reichel was appointed as an Executive Director on 1 July 2013.
Mr G N Tan resigned as a Director on 6 September 2013.
Details of Remuneration
The following tables show details of the remuneration received by directors and other key management personnel of the
Consolidated Entity for the current and previous financial year.
21 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
Details of Remuneration (continued)
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2
Annual Report 2013 | 22
DONACO INTERNATIONAL LIMITED
Details of Remuneration (continued)
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23 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
Details of Share Based Compensation and Bonuses
(a) Options Granted as Compensation
There were no options granted as compensation for the financial years ended 30 June 2013 and 30 June 2012.
The 2008 Series B options granted as remuneration to the key management personnel of the Consolidated Entity under the
Company's Employee Share Plan were granted progressively over the 2009 financial year, commencing from 1 July 2008. The
options vested two years after each grant date and expired progressively throughout the 2013 financial year, commencing 1 July
2012 with the last expiry date being 1 June 2013. Each option was convertible to one ordinary share of the Company. The fair
value of the options granted was calculated by valuing the options as at their grant date and allocating the value equally over
the period from the grant date to vesting date. The value per option at grant date was calculated as the volume weighted
average (VWAP) price for shares in the Company traded on the ASX in the 30 day period prior to grant date. The exercise price
was equal to the value per option at grant date.
There were no service and performance criteria to be met in determining the vesting of remuneration options, however the
options expired 12 months after termination of employment if not exercised during that period.
The table below shows the percentages of the options granted to directors and key management personnel that vested and
were forfeited during the 30 June 2013 year.
Name
B P Reichel
F Magrini
Financial
Year of
Grant
Financial
Year
Vested
Number of
Options
Granted
Percentage of
Options Vested
During the Year
Number of
Options Forfeited
During the Year
Value at
Date of
Forfeiture
%
Forfeited
2009
2009
2011
2011
-
-
-
-
-
-
-
-
-
-
(b) Shares Provided on Exercise of Remuneration Options
Details of ordinary shares in Donaco International Limited provided as a result of the exercise of remuneration options to each
director of the Company and other key management personnel of the Consolidated Entity are set out below.
Name
Directors of the Company
Date of Exercise of
Options
Number of Ordinary Shares Issued
on Exercise of Options During The
Financial Year
Value at
Exercise Date *
B P Reichel
15 January 2013
4,500
* The exercise price of options is based on the volume weighted average (VWAP) price for shares in the Company traded on the
ASX in the 30 day period prior to grant date. The value at the exercise date of options that were granted as part of remuneration
and were exercised during the year has been determined as the intrinsic value of the options at that date.
The amounts paid per ordinary share by each director and other key management personnel on the exercise of the options at
the date of exercise were as follows:
Exercise Date
Amount Paid per Share
15 January 2013
1500 shares at $0.40; 1500 shares at $0.36; 1500 shares at $0.42
No amounts are unpaid on any shares issued on the exercise of options.
Annual Report 2013 | 24
DONACO INTERNATIONAL LIMITED
(c) Bonuses
Cash bonuses were awarded as part of the employment contracts. The key management personnel noted below were deemed
to have satisfied some or all of the prerequisites, being specified KPI measures, for the receipt of their awards.
Name
Payment
Date
Joey Lim Keong Yew
30/7/2013
Richard Na
Goh Kwey Biaw
Fabian Magrini
Fabian Magrini
30/7/2013
30/7/2013
31/1/2013
30/6/2013
Bonus
Value
$
$38,944
$23,366
$13,981
$3,000
$2,640
Percentage Paid
During the
Financial Year
Percentage
Forfeited
During the
Financial Year
Percentage
Remaining as
Unvested
100%
100%
100%
100%
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Employment Contracts of Directors and Senior Executives
Remuneration and other terms of employment for the Managing Director, Chief Financial Officer and the other key management
personnel are formalised in contracts of employment. The service agreements specify the components of remuneration, benefits
and notice periods. The specified executives are employed under contracts with no fixed term. The Company may terminate
the contracts immediately if the executive is guilty of serious misconduct or wilful neglect of duties. Otherwise, the Company may
terminate the contracts by giving three months’ notice or paying three months’ salary. In the case of the MD and CFO,
termination for any reason other than just cause will result in a termination payment of 24 months’ base salary.
Share Trading Policy
The trading of shares issued to participants under any of the Company’s employee equity plans is subject to, and conditional
upon, compliance with the company’s employee share trading policy, which is available from the Company’s website.
END OF AUDITED REMUNERATION REPORT
This directors' report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors.
Mr. S. McGregor
Chairman
Sydney
27th September 2013
25 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
AUDITORS INDEPENDENCE DECLARATION
FOR THE YEAR ENDED 30 JUNE 2013
Annual Report 2013 | 26
DONACO INTERNATIONAL LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28
29
30
31
32
1
Summary of Significant Accounting Policies
18
Trade and Other Payables
2 Critical Accounting Estimates and Judgements
19 Provisions
3
Segment Information
4 Revenue
5 Other Income
6 Expenses
7 Auditor's Remuneration
8
Income Tax
9 Dividends
10 Earnings Per Share
11 Cash and Cash Equivalents
12
Trade and Other Receivables
13
Inventories
14 Other Assets
20 Other Liabilities
21 Contributed Equity
22 Reserves
23 Controlled Entities
24 Business Combination
25 Notes to Statement of Cash Flows
26 Contingent Liabilities and Contingent Assets
27 Commitments
28 Related Party Transactions
29 Key Management Personnel
30
Share Based Payments
31
Financial Risk Management
15 Property, Plant and Equipment
32 Parent Entity Financial Information
16 Construction in Progress
17
Intangible Assets
33 Events Occurring After The Reporting Period
DIRECTORS DECLARATION
INDEPENDENT AUDITORS REPORT
72
73
27 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
Revenue
Other income
Expenses
Cost of sales
Depreciation and amortisation
Employee benefits expense
Legal and compliance
Marketing & promotions
Professional and consulting fees
Property costs
Telecommunications and hosting
Other expenses from ordinary activities
Profit before tax
Income tax expense
Profit for the year
Profit for the year is attributable to:
Equity holders of Donaco International Limited
Non-controlling interests
Profit for the year
Other Comprehensive Income
Items that may be reclassified to profit and loss (net of tax)
Net movement of foreign currency translation reserve
Total Other Comprehensive Income
Total Comprehensive income for the year net of tax
Total Comprehensive Income for the year is attributable to:
Equity holders of Donaco International Limited
Non-controlling interests
Total Comprehensive income for the year net of tax
Earnings per share
Basic earnings per share (dollars per share)
Diluted earnings per share (dollars per share)
Note
2013
$
2012
$
4
5
6
6
15,671,759
11,121,439
2,996,886
975,979
(1,020,377)
(551,468)
(191,877)
(211,126)
(3,355,096)
(1,508,941)
(244,638)
(252,544)
(318,995)
(186)
(63,459)
(23,101)
(441,327)
(277,737)
(216,627)
(75,859)
(916,338)
(457,823)
11,710,826
8,927,718
8
(2,667,590)
(2,254,206)
9,043,236
6,673,508
7,026,199
5,000,327
2,017,037
1,673,181
9,043,236
6,673,508
1,241,177
(276,544)
1,241,177
(276,544)
10,284,413
6,396,964
8,267,376
4,723,783
2,017,037
1,673,181
10,284,413
6,396,964
10
10
0.026
0.025
1,667
1,667
The above consolidated statement of profit or loss and other comprehensive income, should be read in conjunction with the
accompanying notes.
Annual Report 2013 | 28
DONACO INTERNATIONAL LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total Current Assets
Non-Current Assets
Property, plant and equipment
Construction in progress
Intangible assets
Other non-current assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Current tax liabilities
Provisions
Other current liabilities
Total Current Liabilities
Non-Current Liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity attributable to equity holders of Donaco International Limited
Non-controlling Interests
Total Equity
Note
2013
$
2012
$
11
12
13
14
15
16
17
14
18
8
19
20
19
21
22
29,404,205
10,356,152
3,179,668
225,210
670,684
109,940
12,463,304
4,455,439
45,272,387
15,592,215
1,552,965
1,073,600
12,336,321
3,038,891
9,796,836
0
215,455
224,470
23,901,577
4,336,961
69,173,964
19,929,176
11,447,235
8,818,170
5,171,114
3,574,529
457,146
120,697
63,043
0
17,138,538
12,513,396
32,969
32,969
0
0
17,171,507
12,513,396
52,002,457
7,415,780
34,692,937
1,619
964,633
(276,544)
12,745,584
5,707,548
48,403,154
5,432,623
3,599,303
1,983,157
52,002,457
7,415,780
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
29 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013
Contributed
equity
Reserves
Retained
Earnings
$
$
$
Non-
Controlling
Interest
$
Total
$
2013
Opening Balance at 1 July 2012
1,619
(276,544)
5,707,548
1,983,157
7,415,780
Profit for the year
Other comprehensive income
Total comprehensive income
0
0
0
0
7,026,199
2,017,037
9,043,236
1,241,177
0
0
1,241,177
1,241,177
7,026,199
2,017,037
10,284,413
Transactions with owners recognised directly in equity
Shares issued during the year
Unissued shares
Employee share options issued
Employee share options lapsed
FX Reserve
Share issue expense
Dividends paid to NCI
36,873,208
(401,184)
22,463
(11,837)
0
(1,791,332)
0
34,691,318
0
0
0
0
0
0
0
0
0
0
0
11,837
0
0
0
0
0
0
0
36,873,208
(401,184)
22,463
0
333,597
333,597
0
(1,791,332)
(734,488)
(734,488)
11,837
(400,891)
34,302,264
Balance at 30 June 2013
34,692,937
964,633
12,745,584
3,599,303
52,002,457
2012
Opening Balance at 1 July 2011
1,619
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners recognised directly in equity
FX Reserve
Dividends paid to NCI
0
0
0
0
0
0
0
0
707,221
1,023,900
1,732,740
5,000,327
1,673,181
6,673,508
(276,544)
0
0
(276,544)
(276,544)
5,000,327
1,673,181
6,396,964
0
0
0
0
0
0
21,994
21,994
(735,918)
(735,918)
(713,924)
(713,924)
Balance at 30 June 2012
1,619
(276,544)
5,707,548
1,983,157
7,415,780
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
Annual Report 2013 | 30
DONACO INTERNATIONAL LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2013
Cash Flows From Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest and other costs of finance paid
Government levies, gaming taxes and GST
Net operating cash flows
Cash flows from investing activities
Payments for purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of investments
Note
2013
$
2012
$
28,432,419
19,139,269
(16,689,439)
(2,605,322)
56,044
0
(7,697,580)
(4,873,488)
25(a)
4,101,444
11,660,459
(9,626,742)
(7,091,309)
45,682
0
118,615
341,564
Cash and cash equivalents on acquisition of subsidiaries
24
1,188,298
0
Loans to related parties
Net investing cash flows
Cash flows from financing activities
Proceeds from issue of shares
Payment of equity raising expenses
Loans from related parties
Dividends paid by controlled entities to non-controlling interests
Other
Net financing cash flows
Net increase in cash held
Effects of exchange rate changes on balances of cash held in foreign currencies
Cash and cash equivalents at beginning of financial year
0
(1,663,497)
(8,274,147)
(8,413,242)
25,078,425
(1,865,770)
0
0
0
65,415
(1,017,586)
(713,172)
0
982
22,195,069
(646,775)
18,022,366
2,600,442
1,025,687
0
10,356,152
7,755,710
Cash and cash equivalents at end of financial year
11
29,404,205
10,356,152
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
31 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Donaco International Limited is a company incorporated and domiciled in Australia and is a listed public company whose shares
are publicly traded on the Australian Securities Exchange ("ASX"). On 19 December 2012, shareholders approved to change the
Company's name from Two Way Limited to Donaco International Limited and the ASX code was subsequently changed from TTV
to DNA.
Donaco International Limited is the legal parent of Donaco Singapore Pte Ltd. The consolidated financial statements are issued
under the name of Donaco International Limited but are deemed to be a continuation of the legal subsidiary Donaco Singapore
Pte Ltd (refer Note 1(b). The consolidated financial statements are for the Consolidated Entity consisting of Donaco International
Limited and its subsidiaries and Donaco Singapore Pte Ltd and its subsidiaries, combined, as defined on page 13.
The consolidated financial statements were authorised for issue in accordance with a resolution of the directors on 27th
September 2013.
The principal accounting policies adopted in the preparation of these consolidated financial statements is set out below. These
policies have been consistently applied to all years presented, unless otherwise stated.
(a)
Basis for Preparation
The financial statements are general purpose financial statements that have been prepared in accordance with Australian
Accounting Standards (including Australian Interpretations) issued by the Australian Accounting Standards Board and the
Corporations Act 2001. Donaco International Limited is a for-profit entity for the purpose of preparing the financial statements.
The financial statements are presented in Australian Dollars and have been prepared on an accruals basis and are based on
historical costs.
(i) Compliance with IFRS
These consolidated financial statements comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
(ii) New and Amended Standards Adopted by the Consolidated Entity
There are a number of new and amended accounting standards issued by the AASB which are applicable for reporting periods
beginning on 1 July 2012. The Consolidated Entity has adopted all the mandatory new and amended accounting standards
issued that are relevant to its operations and effective for the current reporting period. None of the new standards and
amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2012 affected any of the
amounts recognised in the current period or any prior period and is not likely to affect future periods. However, amendments
made to AASB 101: Presentation of Financial Statements effective 1 July 2012 now require the statement of comprehensive
income to show the items of comprehensive income grouped into those that are not permitted to be reclassified to profit or loss
in a future period and those that may have to be reclassified if certain conditions are met.
(iii) Critical Accounting Estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Consolidated Entity’s accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are
disclosed in Note 2.
Principles of Consolidation
(b)
On 1 February 2013 Donaco International Limited acquired all of the issued shares of Donaco Singapore Pte Ltd, resulting in
Donaco Singapore Pte Ltd becoming a wholly owned subsidiary of Donaco International Limited. The acquisition resulted in the
original shareholders of Donaco Singapore Pte Ltd holding a majority share in Donaco International Limited (formerly known as
Two Way Limited). Pursuant to Australian Accounting Standard AASB 3: Business Combinations, this transaction represents a
reverse acquisition with the result that Donaco Singapore Pte Ltd was identified as the acquirer, for accounting purposes, of
Donaco International Limited (the "acquiree" and "legal parent"). Accordingly, the consolidated financial statements reflect a
full year of Donaco Singapore Pte Ltd plus Donaco International Limited and its subsidiaries from 1 February 2013 to 30 June 2013.
The comparative information reflects Donaco Singapore Pte Ltd and its subsidiaries only.
Annual Report 2013 | 32
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Subsidiaries are all entities (including special purpose entities) over which the Consolidated Entity has the power to govern the
financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The
existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing
whether the Consolidated Entity controls another entity.
Subsidiaries are consolidated from the date on which control is transferred to the Consolidated Entity and cease to be
consolidated from the date control ceases. The acquisition method of accounting is used to account for business combinations
by the Consolidated Entity (refer to Note 1(g).
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the
Consolidated Entity.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or
loss and other comprehensive income, statement of changes in equity and statement of financial position, respectively.
A list of controlled entities is contained in Note 23.
(c)
Foreign Currency Translation
(i) Functional and Presentation Currency
Items included in the financial statements of each of the Consolidated Entity’s entities are measured using the currency of the
primary economic environment in which that entity operates ("the functional currency"). The consolidated financial statements
are presented in Australian dollars which is the Company's functional and presentation currency.
(ii) Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss,
except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are
attributable to part of the net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss and other
comprehensive income, within finance costs where relevant. All other foreign exchange gains and losses are presented in the
income statement on a net basis within other income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of
the fair value gain or loss. Exchange differences arising on the translation of non-monetary items are recognised directly in equity
to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the
statement of profit or loss and other comprehensive income.
(iii) Consolidated Entity Companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
• assets and liabilities in the statement of financial position are translated at the closing rate at the date of that balance
sheet;
•
income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at
the dates of the transactions); and
• all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings
and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income.
When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange
differences are reclassified to profit or loss, as part of the gain or loss on sale.
33 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.
(d) Revenue
Revenues are recognised at the fair value of the consideration received or receivable, net of goods and services tax,
appropriate to the country of recognition (GST, EST and VAT). Amounts disclosed as revenue are net of returns, trade allowances
and amounts collected on behalf of third parties.
The Consolidated Entity recognises revenue when the amount of revenue can be reliably measured, it is probable that future
economic benefits will flow to the entity and specific criteria have been met for each of the Consolidated Entity’s activities as
described below. The Consolidated Entity bases its estimates on historical results, taking into consideration the type of customer,
the type of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
(i) Casino Revenue
Revenue at the playing tables is recognised upon the differences between chips at the closing and chips at the opening of
each table plus chips transferred from the playing table to the cage, less chips transferred from the cage to the playing table.
Revenue from slot machines represents the amount received over the exchange counter less the amount returned to customers.
(ii) Sale of Goods
The revenue from the sale of goods is recognised when the risk and rewards of ownership of the goods is transferred to the
customer, which generally coincides with delivery and acceptance of the goods sold
(iii) Rendering of Services
Revenue from the provision of services is recognised in the accounting period in which the services are rendered.
(iv) Interest Income
Interest revenue is recognised on a proportional basis using the effective interest method.
(v) Dividend Income
Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of
pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence (refer to Note 1(h).
(e)
Income Tax
Income tax expense is comprised of current and deferred tax expense. The income tax expense or revenue for the period is the
tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by
changes to tax payable in respect of previous years and adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company’s subsidiaries operate and generate taxable income.
Deferred tax is accounted for using the liability method in respect of temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from
initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses. The amount of benefits brought to account
or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation
legislation and the anticipation that the Consolidated Entity will derive sufficient future assessable income to enable the benefit
to be realised and comply with the conditions of deductibility imposed by the law. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Annual Report 2013 | 34
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in subsidiaries where the parent entity is able to control the timing of the reversal of the temporary differences and it
is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and
when they relate to income taxes levied by the same taxation authority. Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
Donaco International Limited and its Australian subsidiaries have not formed a consolidated group for income tax purposes.
(f)
Leases
Where substantially all the risks and benefits remain with the lessor, payments made under operating leases (net of any
incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
(g) Business Combinations
For every business combination the Consolidated Entity identifies the acquirer, which is the combining entity that obtains control
of the other combining entities or businesses. Control is the power to govern the financial and operating policies of an entity so
as to obtain benefits from its activities. In assessing control the Consolidated Entity takes into consideration potential voting rights
that currently are exercisable. The acquisition date is the date on which control is transferred to the acquirer. Judgement is
applied in determining the acquisition date and determining whether control is transferred from one party to another.
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments
or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the
assets transferred, the liabilities incurred and the equity interests issued by the Consolidated Entity. The consideration transferred
also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of
any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their
fair values at the acquisition date.
Non-controlling interests
On an acquisition-by-acquisition basis, the Consolidated Entity 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 identifiable assets.
Measuring goodwill
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of
the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable
assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly
in profit or loss as a bargain purchase.
Deferred settlement
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
(h) Impairment of Assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are
tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are
35 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting
period. Impairment losses are recognised in profit or loss unless the asset has previously been revalued, in which case the
impairment is recognised as a reversal to the extent of that previous revaluation with any excess recognised in the profit or loss.
(i) Cash and Cash Equivalents
Cash on hand and in banks and short term deposits are carried at face value of the amounts deposited or drawn.
For the purpose of the statement of cash flows, cash includes cash on hand and in banks, short term deposits and money
market investments readily convertible to cash within three months and not subject to significant changes in value, net of bank
overdraft.
(j)
Trade Receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as
current assets unless collection is not expected for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by
reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there
is objective evidence that the Consolidated Entity will not be able to collect all amounts due according to the original terms of
the receivables. The amount of the impairment allowance is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the original effective interest rate. Discounting is omitted where the
effect of discounting is considered immaterial.
The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an
impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.
(k)
Inventories
Inventories include consumable stores, food and beverages and are carried at the lower of cost and net realisable value. Cost is
determined on a first-in-first-out basis and comprises all costs of purchases, conversion and other costs incurred in bringing the
inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the
related revenue is recognised. The amount of any write-down of inventories to net realizable value and all losses of inventories
are recognised as an expense in the period of the write-down or loss occurs. The amount of any reversal of any write-down of
inventories, arising from an increase in net realisable value, is recognised in the statement of profit or loss and other
comprehensive income, in the period in which the reversal occurs.
(l)
Investments and Other Financial Assets
The Consolidated Entity classifies its financial assets in the following categories:
loans and receivables;
•
• financial assets at fair value through profit or loss;
• held-to-maturity investments; and
• available-for-sale financial assets.
The classification depends on the purpose for which the investments were acquired. Management determines the classification
of its investments at initial recognition, and re-evaluates this designation at each reporting date where appropriate.
As at the end of the reporting period, the Consolidated Entity has no financial assets at fair value through profit or loss, held-to-
maturity investments or available-for-sale financial assets and has not entered into any significant derivative contracts.
An assessment of whether a financial asset or group of financial assets is impaired is made at least at the end of each reporting
period.
Annual Report 2013 | 36
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets unless they have maturities greater than 12 months after the reporting period in
which case they are classified as non-current assets. Loans and receivables are included in trade and receivables in the
statement of financial position.
(ii) Recognition and Derecognition
Regular purchases and sales of financial assets are recognised on trade-date, being the date on which the Consolidated Entity
commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial
assets have expired or have been transferred and the Consolidated Entity has transferred substantially all the risks and rewards of
ownership.
(iii) Measurement
At initial recognition the Consolidated Entity measures a financial asset at its fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. After initial
recognition financial assets are measured as follows:
• Loans and receivables
Measured at amortised cost using the effective interest method, less provision for impairment. The translation differences
related to changes in the amortised cost of loans and receivables denominated in a foreign currency are recognised in
profit or loss.
Loans and receivables are considered for impairment when they are past due or when objective evidence is received that
a specific counterparty will default. The amount of the loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the
amount of the loss is recognised in profit or loss. Impairment testing of trade receivables is described in Note 1(j).
(m)
Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation, amortisation and impairment losses and
depreciated over periods deemed appropriate to reduce carrying values to estimated residual values over their estimated
useful lives. Cost includes expenditure that is directly attributable to the acquisition of the asset and costs of bringing the asset to
working condition for its intended use and the cost of dismantling and removing items and restoring the site. The cost of fixed
assets constructed within the Consolidated Entity includes the cost of materials, direct labour, borrowing costs and an
appropriate proportion of fixed and variable overheads.
Depreciation is calculated using the straight line method commencing from the time the asset is held ready for use. Land is not
depreciated. The principal useful lives over which the assets are depreciated are as follows:
Buildings and structures
Machinery and equipment
Motor vehicles
25 years
3 to 10 years
6 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. The carrying
values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying
value may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount (Note 1(h)).
The costs of day-to-day servicing of property, plant and equipment are recognised in the statement of profit or loss and other
comprehensive income as incurred. Gains and losses on disposals are determined by comparing proceeds with carrying
amount. These are included in profit or loss.
37 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n)
Intangible Assets
(i) Goodwill
Goodwill is measured as described in Note 1(g). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill
is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it
might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to the Consolidated Entity’s cash-generating units or groups of cash-generating units that are expected to
benefit from the business combination in which goodwill arose and represents the lowest level at which goodwill is monitored
but where such level is not larger than an operating segment.
(o)
Trade Payables
These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the reporting
period which are unpaid. The amounts are unsecured and are usually paid within normal trading terms, being 30 days of
recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the
reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective
interest method.
(p) Employee Benefits
Provision is made for the Consolidated Entity's liability for employee benefits from services rendered by employees up to the end
of the reporting period. Employee benefits expected to be settled within one year have been measured at the amounts
expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have
been measured at the present value of the estimated future cash outflows to be made for those benefits.
The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding
increase in equity, over the period in which the employees become unconditionally entitled to the options. The amount
recognised is adjusted to reflect the actual number of share options that vest, except for those that fail to vest due to market
conditions not being met.
(i) Short-term Obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be
settled within 12 months after the end of the period in which the employees render the related service are recognised in respect
of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the provision for employee
benefits. All other short-term employee benefit obligations are presented as payables.
(ii) Other Long-term Obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the
period in which the employees render the related service is recognised in the provision for employee benefits and measured as
the present value of expected future payments to be made in respect of services provided by employees up to the end of the
reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at the
end of the reporting period on government bonds with terms and currencies that match, as closely as possible, the estimated
future cash outflows.
The obligations are presented as current liabilities in the statement of financial position if the entity does not have an
unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual
settlement is expected to occur.
(iii) Retirement Benefit Obligations
All employees of the Consolidated Entity can direct the Consolidated Entity to make contributions to a defined contribution plan
of their choice or the Consolidated Entity makes contributions to a defined contribution plan as required by the law of countries
where the company’s subsidiaries operate. Contributions are charged against the profit or loss in the period to which they relate.
Annual Report 2013 | 38
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(iv) Share Based Payments
Share-based compensation benefits are provided to employees via Donaco International Limited's option plan. The fair value of
options granted under Donaco International Limited's option plan is recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the
employees become unconditionally entitled to the options.
When the options are exercised, the Donaco International Limited transfers the appropriate amount of shares to the employee.
The proceeds received net of any directly attributable transaction costs are credited directly to equity.
(v) Profit Sharing and Bonus Plans
The Consolidated Entity 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 Consolidated Entity
recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(vi) Termination Benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee
accepts voluntary redundancy in exchange for these benefits. The Consolidated Entity recognises termination benefits when it is
demonstrably committed to either terminating the employment of current employees according to a detailed formal plan
without possibility of withdrawal or to providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
(q) Contributed Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
(r) Goods and Services Tax and overseas equivalent
Revenues, expenses and assets are recognised net of the amount of GST (and overseas equivalent where applicable), except
where the amount of GST incurred is not recoverable from the taxation authorities. In these circumstances the GST is recognised
as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of
financial position are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and
financing activities, which are disclosed as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
(s)
Earnings Per Share
The Consolidated Entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary
shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary
shares.
(t)
Parent Entity Information
The financial information for the parent entity, Donaco International Limited, the legal parent, as disclosed in Note 32, has been
prepared on the same basis as the consolidated financial statements, except as set out below.
(i) Investments in Subsidiaries
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Donaco
International Limited. Dividends received from associates are recognised in the parent entity’s profit or loss when its right to
receive the dividend is established.
39 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(u) Comparative Figures
Where required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for
the current financial year. Comparative figures for the 2012 financial year represent Donaco Singapore Pte Ltd, the deemed
parent. Pursuant to Australian Accounting Standard AASB 3: Business Combinations, under a reverse acquisition, Donaco
Singapore Pte Ltd was identified as the acquirer, for accounting purposes, of Donaco International Limited (the "acquiree" and
"legal parent").
(v) New Standards and Interpretations Not Yet Adopted
The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates for
future reporting periods. The following standards, amendments to standards and interpretations have been identified as those
which may impact the Consolidated Entity in the period of initial application. They are available for early adoption at 30 June
2013 but have not been applied in preparing this financial report. A discussion of the future requirements and their impact on
the Consolidated Entity are outlined below.
Title
Key Requirements
AASB 9 Financial Instruments, AASB 2009-11
Amendments to Australian Accounting
Standards arising from AASB 9,
AASB 2010-7 Amendments toAustralian
Accounting Standards arising from AASB 9
(December 2010),
AASB 2012-6 Amendments to Australian
Accounting
– Mandatory
Effective Date of AASB 9 and Transition
Disclosures.
Standards
These standards are applicable retrospectively and amend the
classification and measurement of financial assets. The changes
also incorporate the classification and measurement requirements
for financial liabilities, and the recognition and derecognition
requirements for financial instruments.
standard
This
Consolidated Entity’s financial statements.
is not expected
to
significantly
impact
the
Effective
Date *
1 January
2015
Trans-Tasman
re
2011-2
AASB 1053 Application of Tiers of Australian
Accounting Standards and AASB 2010-2
Amendments to Australian Accounting
Standards arising from Reduced Disclosure
Requirements Subsequent RDR standards
are:
AASB
Convergence Project
AASB 2011-6 Extension of
consolidation,
proportionate consolidation
AASB 2011-11 re AASB 119R
AASB 2012-1 re AASB 13
AASB 2012-7 re AASB 12 and revised AASB
7
AASB 2012-11 re extension of relief from
consolidation and equity accounting in
AASB 10 and AASB 128 and other
amendments.
relief
equity method
from
and
AASB 1053 introduces a revised two-tier differential reporting regime:
• Tier 1 are the Australian Accounting Standards as currently
applied
1 July
2013
• Tier 2 is the reduced disclosure regime which retains the
requirements of Australian
reduced disclosure
recognition and measurement
Accounting
requirements.
Standards but with
For-profit private sector entities that are publicly accountable and
all Federal, state, territory and local governments must report under
tier 1. For-profit private sector entities that are not publicly
accountable, not-for-profit entities in the private sector and public
sector entities other than those mentioned above can adopt the tier
2 requirements (unless the relevant regulator requires compliance
with tier 1).
AASB 2011-2 attempts to align Australian and New Zealand
accounting standards. The amendments have been made to the
following standards:
AASB 101 Presentation of Financial Statements; and
AASB 1054 Australian Additional Disclosures.
AASB 2011-6 and AASB 2012-11 extend the relief for intermediate
from consolidation, equity accounting and
parent entities
proportionate consolidation to parent entities that report under tier
2, where the parent higher up the group is reporting either under tier
1 or tier 2.
The reporting entity concept is not affected by these standards.
The standards focus on reduced disclosures for non-publically
accountability for-profit entities. It is expected there will be no
financial
measurement
statements when these standards are adopted.
the Consolidated Entity's
impact on
Annual Report 2013 | 40
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Title
Key Requirements
AASB 2011-4 Amendments to
Australian Accounting
Standards to Remove
Individual Key Management
Personnel Disclosure
Requirements
Financial
Consolidated
AASB
10
Statements,
AASB 11 Joint Arrangements,
AASB 12 Disclosure of Interests in Other
Entities,
Separate
revised AASB 127
Financial Statements and AASB 128
in Associates and Joint
Investments
Ventures and AASB 2011-7 Amendments to
Australian Accounting Standards arising
from
Joint
the Consolidation and
Arrangements Standards AASB 2012-10
Amendments to A Australian Accounting
Standards - Transition Guidance and Other
Amendments
Removes the individual key management personnel disclosure
requirements from AASB 124 Related Party Disclosures, to achieve
consistency with the international equivalent standard and remove
a duplication of the requirements with the Corporations Act 2001.
These amendments cannot be adopted early.
standard
This
Consolidated Entity's financial statements.
is not expected
to
significantly
impact
the
AASB 10 supersedes AASB 127 and provides a revised definition of
control. It establishes the principles for the presentation and
preparation of consolidated financial statements when an entity
controls one or more other entities.
AASB 11 replaces AASB 131: Interests in Joint Ventures (July 2004 as
amended) AASB 11 requires joint arrangements to be classified as
either “joint operations” (whereby the parties that have joint control
of the arrangement have rights to the assets and obligations for the
liabilities) or “joint venturers” (where the parties that have joint
control of the arrangement have rights to the net assets of the
arrangement). Joint ventures are required to adopt the equity
method of accounting (proportionate consolidation is no longer
allowed).
AASB 12 provides the disclosure requirements for entities that have
an interest in a subsidiary, a joint arrangement, an associate or an
unconsolidated structured entity. As such, it consolidates and
in many existing
replaces disclosure
requirements contained
Standards.
AASB 2012-10 has deferred the mandatory application date for not-
for-profit entities to 1 January 2014.
These standards are not expected to significantly impact the
Consolidated Entity’s financial statements.
Effective
Date *
1 July
2013
1 January
2013
AASB 13 Fair Value Measurement and
AASB 2011- 8 Amendments to Australian
Accounting Standards arising from AASB
13
AASB 13 defines fair value, sets out in a single standard a framework
for measuring fair value, and requires disclosures about fair value
measurements. The standard requires
inputs to all fair value
measurements to be categorised in accordance with a fair value
hierarchy and enhanced disclosures regarding all assets and
liabilities measured at fair value. This standard is not expected to
significantly impact the Consolidated Entity’s financial statements.
1 January
2013
Revised AASB 119 Employee
Benefits, AASB 2011-10
Amendments to Australian
Accounting Standards arising
from AASB 119 (September
2011)
AASB 119: Employee Benefits (September 2011) includes changes to
require only those benefits that are expected to be settled wholly
before 12 months after the end of the annual reporting period in
which the employees render the related service to be classified as
short-term employee benefits. All other employee benefits are to be
classified as other long-term employee benefits, post-employment
benefits or termination benefits as appropriate. This standard is not
expected to significantly impact the Consolidated Entity’s financial
statements.
1 January
2013
41 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Title
Key Requirements
AASB 2012-3 Offsetting Financial Assets
and Financial
Liabilities
The amendments do not change the current offsetting rules in AASB
132, but they clarify that the right of set-off must be available today
(ie not contingent on a future event) and must be legally
enforceable in the normal course of business as well as in the event
of default, insolvency or bankruptcy.
AASB 2012-2 Disclosures –
Offsetting Financial Assets and
Financial Liabilities
There are more extensive disclosures which focus on quantitative
information about recognised financial instruments that are offset in
the statement of financial position, as well as those recognised
financial instruments that are subject to master netting or similar
arrangements,
irrespective of whether they are offset. These
disclosures must also be provided in the first interim report when the
new rules first apply.
Effective
Date *
1 Jan
2014
1 Jan
2013
AASB 2012-5 Amendments to
Australian Accounting Standards arising
from Annual
Improvements 2009-2011Cycle
These changes are not expected to have a significant, if any,
financial impact.
The annual improvements project makes minor but necessary
annual amendments to Australian Accounting Standards.
1 January
2013
Amendments made in the 2009-2011 Cycle are:
• AASB 1 – clarifies that an entity may apply AASB 1 more than
once under certain circumstances and that an entity can
choose to adopt AASB 123 Borrowing Costs either from its date
of transition or from an earlier date.
• AASB 101 – clarifies the disclosure requirements for comparative
information when an entity provides a third balance either
because it has applied an accounting policy retrospectively,
restated items retrospectively or reclassified items in its financial
statements or does so voluntarily.
• AASB 116 – clarifies that spare parts and servicing equipment
are classified as property, plant and equipment rather than
inventory when they meet the definition of property, plant and
equipment
• AASB 132 – clarifies the treatment of income tax relating to
distributions and transaction costs
• AASB 134 – clarifies the disclosure requirements for segment
assets and liabilities in interim financial statements.
AASB 2012-10 Amendments to Australian
Accounting Standards - Transition
Guidance and Other Amendments
These changes are not expected to have a significant, if any,
financial impact.
The resulting standard amends 25 standards and one interpretation
and is effective in annual periods beginning on or after 1 January
2013, in line with the effective dates of AASB 10, 11 and 12. Optional
for June 2013 year ends. When implemented, these changes are not
expected to have a significant, if any, financial impact.
1 January
2013
AASB 2013-3 Amendments to AASB 136 –
Recoverable Amount Disclosures for Non-
Financial Assets
Optional for June 2013 year ends. When implemented, these
changes are not expected to have a significant, if any, financial
impact.
1 January
2014
All other new standards and interpretation do not apply to the Consolidated Entity.
*applicable to reporting periods commencing on or after the given date.
Annual Report 2013 | 42
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 2: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates and
underlying assumptions are continually evaluated and are based on historical experience and other factors considered to be
relevant. Although the estimates and judgements are believed to be reasonable under the circumstances, actual results may
differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in
any future periods affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed below.
(i) Estimated Impairment of Goodwill
The Consolidated Entity tests annually whether goodwill has suffered any impairment, in accordance with the Consolidated
Entity's accounting policy stated in Note 1(n). The recoverable amounts of cash-generating units have been determined based
on value-in-use calculations and use discounted cash flow model calculations. These calculations require the use of
assumptions. Refer to Note 17 for details of these assumptions and the potential impact of changes to the assumptions.
(ii) Determining fair values of assets acquired in respect of business combinations
In determining the fair value of assets acquired in a business combination, the Consolidated Entity has utilised valuation
specialists and internal forecast modelling. The CODM has determined that the carrying value of assets acquired are at their fair
values.
NOTE 3: SEGMENT INFORMATION
(a)
Identification of Reportable Segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the Board of Directors.
The operating segments reflect the business level at which financial information is provided to the CODM for decision making
regarding resource allocation and performance assessment. The Consolidated Entity has two reportable segments:
Casino Operations
Comprises the Lao Cai International Hotel operations, including hotel accommodation, gaming
and leisure facilities, operated in Vietnam.
Gaming Technology
Operations
Comprises the operation and development of gaming technology, including mobile payment
gateways and interactive media and gambling applications for deployment on television, mobile
and internet.
The Group is domiciled in Australia and operates predominantly in four countries: Australia, Vietnam, Singapore and Malaysia.
Accounting Policies
The accounting policies used by the consolidated entity in reporting segments internally are the same as those described in
Note 1.
43 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 3: SEGMENT INFORMATION (CONTINUED)
(b)
Reportable Segments
The segment information provided to the CODM for the reportable segments for the year ended 30 June 2013 is as follows:
30 JUNE 2013
Total Segment Revenues
Inter-segment Revenue
Revenue from External Customers
Segment Result before tax and NCI
EBITDA (i)
Depreciation & Amortisation
EBIT (ii)
Capital Expenditure (iii)
Segment Assets (iii)
Segment Liabilities (iii)
30 JUNE 2012
Total Segment Revenues
Inter-segment Revenue
Revenue from External Customers
Segment Result before tax and NCI
EBITDA (i)
Depreciation & Amortisation
EBIT (ii)
Capital Expenditure (iii)
Segment Assets (iii)
Segment Liabilities (iii)
Casino
Operations
Gaming
Technology
Operations
Total
$
$
$
16,727,703
1,940,942
18,668,645
0
0
0
16,727,703
1,940,942
18,668,645
11,311,838
398,988
11,710,826
7,740,836
(529,272)
7,211,564
186,414
5,463
191,877
7,554,422
(534,735)
7,019,687
12,336,321
0
12,336,321
52,571,603
16,602,361
69,173,964
15,500,513
1,670,994
17,171,507
Casino
Operations
Gaming
Technology
Operations
Total
$
$
$
12,097,418
0
12,097,418
8,927,718
7,104,419
211,126
6,893,293
3,038,891
19,929,176
12,513,396
0
0
0
0
0
0
0
0
0
0
12,097,418
0
12,097,418
8,927,718
7,104,419
211,126
6,893,293
3,038,891
19,929,176
12,513,396
Annual Report 2013 | 44
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 3: SEGMENT INFORMATION (CONTINUED)
(i) Segment EBITDA comprises profit before depreciation and amortisation, net finance costs, tax, net gain on sale of
investments, corporate operating costs and transaction related costs.
(ii) Segment EBIT comprises profit before net finance costs, tax, net gain on sale of investments, corporate operating costs
and transaction related costs.
(iii) The CODM does review revenues by operating segment as listed in the table below. Operating and other costs, and
assets, are not directly allocated to these and therefore the net operating results and total assets are only viewed in
aggregate.
(c)
Other Segment Information
(i) Segment Revenue
Any sales between segments are carried out at arm’s length and are eliminated on consolidation. Segment revenue reconciles
to total revenue from continuing operations as follows:
Revenue from external customers
Interest revenue
Other revenue
Total revenue
Segment revenues are allocated based on the country in which the customer is
located. The amount of its revenue from external customers is:
- in Vietnam
- in Australia
- other countries
Total Revenue
Note
2013
$
2012
$
15,671,759
11,121,439
875,114
2,121,772
361,244
614,735
4
18,668,645
12,097,418
16,727,702
12,097,418
1,471,071
469,872
0
0
18,668,645
12,097,418
45 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 3: SEGMENT INFORMATION (CONTINUED)
(c)
Other Segment Information (continued)
(ii) Segment EBITDA
This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring
costs, legal expenses and goodwill impairments when the impairment is the result of an isolated, non-recurring event.
Furthermore, the measure excludes the effects of equity-settled share-based payments and unrealised gains/(losses) on financial
instruments. Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central
treasury function, which manages the cash position of the Consolidated Entity.
A reconciliation of segment EBITDA to operating profit before income tax in the consolidated statement of profit or loss and
other comprehensive income, is provided as follows:
Segment EBITDA
Interest revenue
Exchange gains on investing activities
Depreciation
Non-controlling interest
Sale of TAB Active business
Note
2013
$
2012
$
7,211,564
7,104,419
875,104
936,034
361,244
0
(191,877)
(211,126)
2,017,037
1,673,181
862,964
0
Profit before tax per the statement of profit or loss & other comprehensive income
11,710,826
8,927,718
(iii) Segment Assets
These assets are allocated based on the operations of the segment and the physical location of the asset. Investment in shares
(classified as available-for-sale financial assets, held-to-maturity investments or financial assets at fair value through profit or loss)
held by the Consolidated Entity are not considered to be segment assets but rather managed by the treasury function.
Reportable segment assets are reconciled to total assets in the consolidated statement of financial position is provided as
follows:
Note
2013
$
2012
$
Allocated Segment Assets
Unallocated Segment Assets
Total assets per consolidated statement of financial position
Represented by:
- in Vietnam
- in Australia
- other countries
Total assets per consolidated statement of financial position
Segment assets are reported to countries based on where the assets are located.
69,173,964
19,929,176
0
0
69,173,964
19,929,176
52,571,602
19,929,176
14,121,444
2,480,917
0
0
69,173,964
19,929,176
Annual Report 2013 | 46
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 3: SEGMENT INFORMATION (CONTINUED)
(c)
Other Segment Information (continued)
The total of non-current assets other than financial instruments and deferred tax
assets located:
- in Vietnam
- in Australia
- other countries
Note
2013
$
2012
$
13,975,505
4,336,961
9,796,836
129,236
0
0
Total non-current assets per consolidated statement of financial position
23,901,577
4,336,961
(iv) Segment Liabilities
These liabilities are allocated based on the operations of the segment.
Reportable segment liabilities are reconciled to total liabilities in the consolidated statement of financial position is provided as
follows:
Note
2013
$
2012
$
Allocated Segment Liabilities
Current tax liabilities
Total liabilities per consolidated statement of financial position
Represented by:
- in Vietnam
- in Australia
- other countries
Total liabilities per consolidated statement of financial position
NOTE 4: REVENUE
Casino Operations
Gaming Technology Operations
Total Revenue
12,000,393
8,938,867
5,171,114
3,574,529
17,171,507
12,513,396
15,484,843
12,513,396
412,230
1,274,434
0
0
17,171,507
12,513,396
14,664,539
11,121,439
1,007,220
0
15,671,759
11,121,439
47 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Note
2013
$
2012
$
NOTE 5: OTHER INCOME
Foreign Exchange gains (net)
Interest
Sale of TAB Active
Total other revenue
NOTE 6: EXPENSES
Profit before income tax includes the following specific expenses;
Employee benefits expense:
- salaries, wages, bonuses and other benefits
- defined contribution superannuation expense
Total employee benefits expense
Depreciation:
- buildings and structures
- machinery and equipment
- office equipment
- motor vehicles
Total depreciation expense
NOTE 7: AUDITORS REMUNERATION
During the year the following fees were paid or payable for services provided by
the auditor of Donaco International Limited and its related practices and by non-
related audit firms:
William Buck NSW
Audit and other assurance services:
- auditing and review of financial statements
Total remuneration for audit and other assurance services
Other Audit Firms:
Audit and other assurance services:
- auditing and review of financial statements
Total remuneration for audit of other audit firms
Total auditors’ remuneration
1,258,808
875,114
862,964
614,735
361,244
0
2,996,886
975,979
3,326,606
1,508,941
28,490
0
3,355,096
1,508,941
51,733
55,669
53,606
30,869
112,212
25,752
46,744
26,418
191,877
211,126
61,539
61,539
0
0
75,292
75,292
13,847
13,847
136,831
13,847
Annual Report 2013 | 48
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 8: INCOME TAX
(a)
Income Tax Expense
Current tax
Deferred tax
Adjustments for current tax in prior periods
Total income tax expense
Note
2013
$
2012
$
8(d)
(2,667,798)
(2,252,521)
0
208
0
(1,685)
(2,667,590)
(2,254,206)
(b) Numerical Reconciliation of Income Tax Expense to Prima Facie Tax Payable
Profit before income tax expense
11,710,826
8,927,718
Tax at the Australian tax rate of 30% (2012 – 30%)
(3,513,248)
(2,678,315)
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:
Non-assessable or deductible items
Adjustments for current tax of prior periods and timing adjustments
Difference in overseas tax rates
Income tax expense
(i) R&D Tax Offset
259,909
208
585,541
(20,592)
(1,685)
446,386
(2,667,590)
(2,254,206)
The Company applied for and successfully claimed a tax offset for research and development expenditure incurred in the
2012 financial year. The tax offset is effectively a cash refund available to small companies who have incurred eligible R&D
expenditure in the previous financial year. The tax offset received in January 2013 for the 2012 financial year was $226,517
(2012: $202,016)
(c)
Tax expense (income) relating to items of other comprehensive income
No items have been identified in the current reporting periods that require tax effects to be recognised in other comprehensive
income.
(d)
Tax losses
Deferred tax assets have not been recognised in respect of any carry forward tax losses because it is not probable that future
taxable profit will be available against which the Consolidated Entity can utilise the benefits.
(e)
Australian Tax Consolidation
Donaco International Limited and its Australian subsidiaries have not formed a consolidated group for income tax purposes.
49 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 9: DIVIDENDS
No dividends were declared or paid during the year on ordinary shares
NOTE 10: EARNINGS PER SHARE
Basic earnings per share (dollars)
Diluted earnings per share (dollars)
Net profit (loss) used in the calculation of basic EPS
Net profit (loss) used in the calculation of diluted EPS
Note
2013
$
2012
$
10(a)
10(a)
10(a)
10(a)
0.026
0.025
1,667
1,667
7,026,199
5,000,327
7,026,199
5,000,327
Note
2013
Number
2012
Number
Weighted average number of ordinary shares outstanding during the year used in
calculation of basic EPS
10(b)
277,827,871
3,000
Options in Donaco International Limited
7,388,761
0
Weighted average number of ordinary shares outstanding during the year used in
calculation of diluted EPS
10(b)
285,216,632
3,000
(a) Earnings Used in Calculating Earnings Per Share
Earnings for the purpose of the calculation of basic earnings per share, and also diluted earnings per share, is net profit
attributable to the members of Donaco International Limited. The diluted EPS includes unlisted options exercisable over unlisted
shares (refer to Note 21).
(b) Classification of Securities
Under an ownership-based remuneration scheme, Donaco International Limited, had no unconverted employee share options
remaining as at 30 June 2013 (refer to Note 30).
NOTE 11: CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
Bank deposits with original maturities of less than 3 months
Note
2013
$
2012
$
9,951,954
5,702,518
12,050,857
2,846,390
7,401,394
1,807,244
29,404,205
10,356,152
The above amount reconciles to cash and cash equivalents at the end of the financial year, as shown in the statement of cash
flows.
(a) Risk Exposure
The Consolidated Entity’s exposure to interest rate risk is discussed in Note 31(a). The maximum exposure to credit risk at the end
of the reporting period is the carrying amount of cash at bank and bank deposits.
Annual Report 2013 | 50
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 12: TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Provision for impairment
Net trade receivables
Receivables from related parties
Interest receivable on bank deposits
Total trade and other receivables
Note
2013
$
2012
$
3,138,711
670,684
12(a),(b)
0
0
3,138,711
670,684
28
25,838
15,119
0
0
3,179,668
670,684
(a) Impaired Trade Receivables
An impairment loss of $nil (2012: $nil) has been recognised by the Consolidated Entity.
(b) Past due and Impaired
As at 30 June 2013 there were no trade receivables past due but not impaired (2012: nil).
The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the credit
history of these other classes, it is expected that these amounts will be received when due.
(c) Other Receivables
These amounts generally arise from transactions outside the usual operating activities of the Consolidated Entity. Interest is
normally not charged.
(d) Fair Value and Credit Risk
The carrying value of trade receivables is considered a reasonable approximation of fair value due to the short term nature of the
balances. The average credit period on provision of services is 30 days.
The maximum exposure to credit risk at the end of the reporting period is the fair value of each class of receivable in the financial
statements. The Consolidated Entity does not hold any collateral as security over any receivable balance, nor does it hold any
restrictions of title. Refer to Note 31 for more information on the risk management policy of the Consolidated Entity.
(e) Foreign Exchange and Interest Risk
Information about the Consolidated Entity’s exposure to foreign currency risk and interest rate risk in relation to trade and other
receivables is provided in Note 31.
NOTE 13: INVENTORIES
Current
Food & beverage - at cost
Note
2013
$
2012
$
225,210
225,210
109,940
109,940
51 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Note
2013
$
2012
$
NOTE 14: OTHER ASSETS
Current
Prepaid construction costs a
Bonds and security deposits
Other debtors
Tax receivable
Total current other assets
Non-Current
Other debtors
Product development
Total non-current other assets
a Refers to prepaid costs incurred in the upgrade of the Lao Cai Casino in northern Vietnam.
NOTE 15: PROPERTY, PLANT AND EQUIPMENT
Leasehold land - at cost a
Leasehold building and structures - at cost
Accumulated depreciation
Total leasehold land and buildings
Machinery and equipment - at cost
Accumulated depreciation
Total machinery and equipment
Motor vehicles - at cost
Accumulated depreciation
Total motor vehicles
Office equipment and other - at cost
Accumulated depreciation
Total motor vehicles
Total carrying amount
a Relates to a 30 year land use right in the Socialist Republic of Vietnam.
12,354,841
4,388,593
18,012
62,080
28,371
18,424
48,422
0
12,463,304
4,455,439
122,007
93,448
215,455
224,470
0
224,470
52,357
52,357
1,131,881
1,116,943
(392,042)
(402,665)
792,196
766,635
1,741,034
1,293,481
(1,258,050)
(1,202,381)
482,984
91,100
262,984
(79,253)
183,731
174,657
(55,587)
119,070
214,613
200,648
(120,559)
(103,853)
94,054
96,795
1,552,965
1,073,600
Annual Report 2013 | 52
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 15: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
(a) Movements in Carrying Amounts
Leasehold Land
Buildings and
Structures
Machinery and
Equipment
Motor Vehicles
Other
Total
Carrying amount at 1 July 2011
Additions
Disposals
Depreciation
Reclassification
$
865,516
14,856
0
(112,212)
(1,525)
$
$
$
30,321
86,531
0
50,051
95,437
0
85,990
64,350
(6,801)
(25,752)
(26,418)
(46,744)
0
0
0
$
1,031,878
261,174
(6,801)
(211,126)
(1,525)
Carrying amount at 30 June 2012
766,635
91,100
119,070
96,795
1,073,600
Additions
Disposals
Depreciation
Reclassification
Exchange differences
14,937
0
(51,733)
76,261
(13,904)
456,168
(83,525)
(55,669)
86,180
(11,270)
88,327
0
(30,869)
11,652
(4,449)
23,986
(10,021)
(53,606)
(2,130)
39,030
583,418
(93,546)
(191,877)
171,963
9,407
Carrying amount at 30 June 2013
792,196
482,984
183,731
94,054
1,552,965
Note
2013
$
2012
$
12,336,321
3,038,891
3,038,891
555,310
9,030,366
2,483,581
267,064
0
12,336,321
3,038,891
NOTE 16: CONSTRUCTION IN PROGRESS
Non-Current
Property Construction Works in Progress
(a) Movements in Carrying Amounts
Carrying amount at the beginning of the financial year
Additions
Exchange differences
Carrying amount at the end of the financial year
No borrowing costs have been incurred in respect of this project.
53 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 17: INTANGIBLE ASSETS
Non-Current
Goodwill - at cost
(a) Movements in Carrying Amounts
Carrying amount at the beginning of the financial year
Additions
Carrying amount at the end of the financial year
Note
2013
$
2012
$
9,796,836
0
9,796,836
9,796,836
0
0
0
0
(b)
Impairment Testing of Goodwill
Goodwill is monitored by CODM at the cash generating level. CODM reviews the business performance based on geography
and type of business. It has identified two reportable cash generating segments. A business-level summary of the goodwill
allocation is presented below.
2013
2012
Donaco Singapore
$
Isentric
$
Total
$
2,426,187
7,370,649
9,796,836
0
0
0
The recoverable amount of the cash generating unit has been determined based on the value in use calculation. To calculate
this, cash flow projections are based on financial budgets approved by senior management covering a five year period.
In performing the value-in-use calculations for each CGU, the Consolidated Entity has applied pre-tax discount rates to discount
the forecast future attributable pre-tax cash flows. The following describes the key assumptions on which management has
based its cash flow projections to undertake impairment testing of goodwill:
Budgeted gross margin
Growth rate
Pre-tax discount rate
2013
$
2012
$
Donaco Singapore Pte Ltd
11,311,838
Isentric Sdn Bhd
839,960
0
0
2013
$
1%
1%
2012
$
0
0
2013
$
12%
12%
2012
$
0
0
Management determined budgeted gross margin based on past performance and its expectations for the future and are
considered to be reasonably achievable. The weighted average growth rates used are consistent with forecasts included in
industry reports. The discount rates used reflect specific risks relating to the relevant segments and the countries in which they
operate.
The recoverable amount calculation for goodwill is most sensitive to changes in growth rate and EBIT margin on sales. Based on
sensitivity analysis performed, no reasonable change in these assumptions would give rise to an impairment.
Annual Report 2013 | 54
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 18: TRADE AND OTHER PAYABLES
Current
Unsecured:
Trade payables
Deposits received
Floating chips
Other payables and accrued expenses
Note
2013
$
2012
$
1,534,988
3,782,865
22,118
18,037
18(a)
9,626,898
4,975,536
263,231
41,732
11,447,235
8,818,170
All amounts are short term and the carrying values are considered to be a reasonable approximation of fair value.
(a) Floating Chips
The number of floating chips is determined as the difference between the number of chips in use and the actual chips
counted by the casino as at reporting date.
(b) Risk Exposure
Information about the Consolidated Entity’s exposure to foreign exchange risk is provided in Note 31.
Note
2013
$
2012
$
NOTE 19: PROVISIONS
Current
Employee benefits – annual leave
Employee benefits – unpaid wages
Employee benefits – other
Non-current
Employee benefits – long service leave
56,425
337,607
63,114
457,146
0
120,697
0
120,697
32,969
0
Employee benefits include provisions for annual leave and long service leave benefits applicable to jurisdictions. The current
provision for long service leave includes all unconditional entitlements where employees have completed the required period of
service and also those where employees are entitled to pro-rata payments in certain circumstances. A majority of the amount is
presented as current, since the Consolidated Entity does not have an unconditional right to defer settlement. However, based
on past experience, the Consolidated Entity does not expect all employees to take the full amount of accrued long service
leave or require payment within the next 12 months.
55 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 20: OTHER LIABILITIES
Current
Foreign government charges or levies
Other
NOTE 21: CONTRIBUTED EQUITY
(a) Share Capital
Ordinary fully paid shares
Note
2013
$
2012
$
57,401
5,642
63,043
0
0
0
34,692,937
1,619
(b) Acquisition of Donaco Singapore Pte Ltd
On 1 February 2013 Donaco International Limited acquired all of the issued shares of Donaco Singapore Pte Ltd resulting in
Donaco Singapore Pte Ltd becoming a wholly owned subsidiary of Donaco International Limited. The acquisition resulted in the
original shareholders of Donaco Singapore Pte Ltd holding a majority share in Donaco International Limited (formerly known as
Two Way Limited). Pursuant to Australian Accounting Standard AASB 3: Business Combinations, this transaction represents a
reverse acquisition with the result that Donaco Singapore Pte Ltd was identified as the acquirer, for accounting purposes, of
Donaco International Limited (the "acquiree" and "legal parent").
The consolidated financial statements and share capital represents the continuation of Donaco Singapore Pte Ltd. The number
of shares on issue reflects those of Donaco International Limited.
(c) Movement in Share Capital
Opening balance as at 1 July
Movement:
Shares transferred to Donaco International Limited on acquisition
Shares issued under Donaco Singapore Pte Ltd acquisition
Shares Issued under Isentric Sdn Bhd acquisition
Capital raising
Shares issued under options
Employee share options lapsed
Unissued shares write off b
Less: Transaction costs arising on share issue
Balance as at 30 June
Note
2013
$
2012
$
1,619
1,619
(1,619)
3,374,826
8,500,000
25,000,000
22,463
(11,837)
(401,184)
(1,791,331)
34,692,937
1,619
Annual Report 2013 | 56
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 21: CONTRIBUTED EQUITY(CONTINUED)
Opening balance as at 1 July 2012
Issued shares;
-17.09.2012
-18.09.2013
Balance at 31 January 2013
Adjustment for 20:1 consolidation
Opening balance as at 1 February 2013 post consolidation
Shares issued under Donaco Singapore Pty Ltd merger
Shares Issued under Isentric Sdn Bhd acquisition
Capital raising
Shares issued under options
Balance as at 30 June 2013
2013
2012
Note
Number
Number
268,530,760
3,000
6,666,667
10,000,000
285,197,427
(270,937,647)
14,259,780
261,724,250
22,368,420
73,292,571
74,875
371,719,896
3,000
a Post 20 for one consolidation effective 1 February 2013
b On 15th December 2011, Two Way Limited entered into a binding share subscription agreement with Priority One Network
Group Limited (“PON”). The terms of that agreement were that PON had agreed to subscribe for and Two Way had agreed to
issue a total of 35,029,614 fully paid ordinary shares (15% of Two Way’s issued capital) to PON, at an agreed price of 4 cents per
share. In return, PON was to pay to Two Way total consideration of $1,401,184, made up of $1 million in cash, and a total of
1,337,281 shares in PON ($401,184). The PON shares were valued at 30 cents per share, a price which was supported by the
independent valuation report obtained by PON, and which was the expected listing price of PON shares on the ASX.
The agreement was to be concluded by the 28th February 2012, however PON was unable to fulfil its obligations.
Consequently, Two Way issued a further announcement on 12 March 2012, advising that it had agreed new terms which
required an immediate payment by PON of $150,000 in cash, which was duly received, and the balance of $700,000 in cash on
completion of successful listing of PON.
To date Two Way has received $300,000 in cash, and has been issued with 1,337,281 PON unlisted shares, valued at $401,184
and classified as equity. No Two Way shares were issued to PON. The Statement of Changes in Equity reflects the partial share
subscription of $701,184.
Management now considers that it is unlikely that PON will complete their listing on the ASX. Accordingly, the partial share
subscription of $401,184 of unlisted shares in PON was written off to the “Statement of Changes in Equity” where it was originally
recognised in the 2012 financial year.
(d) Ordinary Shares
Ordinary shares participate in dividends and proceeds on winding up of Donaco International Limited in proportion to the
number of shares held. At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called,
otherwise each shareholder has one vote on a show of hands.
Ordinary shares have no par value and the company does not have a limited amount of authorised capital.
57 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 21: CONTRIBUTED EQUITY(CONTINUED)
(e) Options
As at reporting date the number of unlisted options exercisable over unlisted shares
were:
Bonus Options
Note
2013
Number
2012
Number
-
Unlisted 30c options expiring 29 January 2015
7,057,082
0
Main Ace Investments Limited
-
-
-
Unlisted 56c options expiring 17 January 2015
Unlisted 56c options expiring 1 March 2015
Unlisted 56c options expiring 17 May 2015
Total exercisable options
562,500
125,000
125,000
812,500
7,869,582
562,500
125,000
125,000
812,500
812,500
Information relating to Donaco International Limited's Employee Option Plan, including details of options issued, exercised and lapsed during the
financial year and options outstanding at the end of the reporting period, is set out in Note 30. The Bonus Options were issued to all shareholders
following Donaco International Limited's corporate restructure and acquisition of Donaco Singapore Pte Ltd. Refer to the Directors Report for further
information.
(f) Capital Risk Management
Management controls the capital of the Consolidated Entity in order to ensure the Consolidated Entity can fund its operations
and continue as a going concern. The Consolidated Entity’s capital includes ordinary share capital and financial liabilities,
supported by financial assets. There are no externally imposed capital requirements. There have been no changes in the strategy
adopted by management to control capital of the Consolidated Entity since the prior year.
Note
2013
$
2012
$
NOTE 22: RESERVES
Foreign Currency Translation Reserve a
964,633
(276,544)
a Foreign Currency Translation Reserve
Exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive income as
described in Note 1(c) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or
loss when the net investment is disposed of.
Annual Report 2013 | 58
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 23: CONTROLLED ENTITIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in Note 1(b). Detail of subsidiaries at the end of the reporting period are as follows:
Notes
Country of
Incorporation
2013
% owned
2012
% owned
Donaco International Limited's subsidiaries:
Donaco Australia Pty Ltd (formerly Two Way Operations Pty
Ltd)
Way2Bet Pty Ltd
Donaco Singapore Pte Ltd and its subsidiaries (refer below)
iSentric Sdn Bhd
Australia
Australia
Singapore
Malaysia
(a)
(b)
Donaco Singapore Pte Ltd's subsidiaries:
Donaco Holdings Ltd
Donaco Holdings Sdn Bhd
Lao Cai International Hotel Joint Venture Company
British Virgin Islands
Malaysia
Vietnam
100
90
100
100
100
100
75
100
90
-
-
100
100
75
(a) Acquired 1 February 2013
(b) Acquired 1 June 2013
59 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 24: BUSINESS COMBINATIONS
(a) Summary of Acquisitions
The following acquisitions occurred during the 30 June 2013 financial year. There were no acquisitions in the year ended 30 June
2012.
(i)
Donaco Singapore Pte Ltd
On 1 February 2013 the Company acquired 100% of the issued share capital of Donaco Singapore Pte Ltd, a Singapore
registered company, whose principal asset is 75% ownership of the Lao Cai International Hotel Joint Venture Company ("JV
Company"). JV Company is the entity that owns the Lao Cai International Hotel in Lao Cai, Vietnam, a 32 room hotel with a
restaurant and a fully operational casino. The other 25% of the JV Company is owned by Petro Vietnam Sapa Tourism Joint
Stock Company, an entity associated with the Government of Vietnam.
(ii)
On 1 June 2013 the Company acquired 100% of the issued share capital of Isentric Sdn Bhd, a mobile services business in South
East Asia for $8.5 million. To effect the completion of the acquisition, the Company issued 22,368,420 fully paid ordinary shares to
the vendors at an agreed price of $0.38 per share (totalling $8,500,000).
Isentric Sdn Bhd
Details of the purchase consideration, the net assets acquired and goodwill for each acquisition is as follows:
Cash paid
Value of shares issued by the Company
Purchase consideration
Donaco
Singapore
$
0
3,374,826
3,374,826
Fair Value
iSentric
$
Total
$
0
0
8,500,000
11,874,826
8,500,000
11,874,826
The assets and liabilities recognised as a result of the acquisition are as
follows;
Two Way
Limited a
$
iSentric
$
Total
$
Financial Position
Cash and cash equivalents
Trade and other receivables
Prepayments
Other current assets
Fixed assets
Other non current assets
Total Assets
Trade and other payables
Provisions
Non current Liabilities
Total Liabilities
Net identified assets acquired
Less: Non-controlling interests
Add: Goodwill
890,763
110,678
3,457
419,196
3,424
0
1,427,518
(190,058)
(241,654)
(47,167)
297,534
2,139,616
33,615
18,950
31,700
60,600
1,188,297
2,250,294
37,072
438,146
35,124
60,600
2,582,015
4,009,533
(1,190,781)
(1,380,839)
(261,883)
0
(503,537)
(47,167)
(478,879)
(1,452,664)
(1,931,543)
948,639
1,129,351
2,077,990
0
0
0
2,426,187
7,370,649
9,796,836
Net assets acquired
11,874,826
a Pursuant to Australian Accounting Standard AASB 3: Business Combinations, this merger represents a reverse acquisition with the result that Donaco Singapore Pte Ltd was
identified as the acquirer, for accounting purposes, of Donaco International Limited (the "acquiree" and "legal parent"). Therefore The Net Assets are Two Way limited,
immediately prior to the business combination.
3,374,826
8,500,000
Annual Report 2013 | 60
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 24: BUSINESS COMBINATION (CONTINUED)
Goodwill is initially measured as the excess of the purchase consideration over the fair value of the net identifiable assets and
contingent liabilities acquired, and subsequently presented as net of any impairment changes. Goodwill arose in the
acquisition because the cost of the combination included a control premium. In addition, the consideration paid for the
combination effectively included amounts in relation to the benefit from business synergies, revenue growth, future market
developments and access to capital. None of the goodwill arising on this acquisition is expected to be deductible for tax
purposes.
(b) Revenue and Profit Contributions
The year to date acquired businesses returns, contributed from their acquisition date
- revenues
- net profit before tax
Two Way
Limited a
$
iSentric
$
Total
$
1,471,071
333,792
469,871
65,195
1,940,942
398,987
Had these business combinations been effected at 1 July 2012, the revenue of the consolidated entity would have been
$26,502,746 and net profit $12,913,805.
(c) Purchase Consideration - Cash Outflow
Outflow of cash to acquire subsidiary, net of cash acquired:
Add: cash balances acquired
Inflow of cash - investing activities
NOTE 25: NOTES TO STATEMENT OF CASH FLOWS
(a)
Reconciliation Of Cash Flow From Operations With Profit From
Ordinary Activities After Income Tax
Profit from ordinary activities after income tax
Non-cash flows in profit from ordinary activities:
Depreciation & amortisation
Foreign exchange relating to capital raising
Interest on investing activities
Net loss on sale of fixed assets
Equity and Investing costs in trade creditors
Changes in assets and liabilities, net of effects from purchase of
subsidiaries :
(Increase)/decrease in receivables
(Increase)/decrease in inventories
(Increase)/decrease in other assets
Increase/(decrease) in trade payables and accruals
Increase/(decrease) in tax liabilities
Increase/(decrease) in provisions
Cash flow from Operations
61 | Annual Report 2013
890,763
890,763
297,534
297,534
1,188,297
1,188,297
Note
2013
$
2012
$
9,043,236
6,673,508
191,877
945,158
211,126
617,333
(118,614)
(341,564)
(23,670)
0
28,450
633,954
(2,508,984)
(384,241)
(115,270)
(2,927)
(7,998,850)
(34,068)
2,629,065
72,606
1,596,585
1,890,742
432,461
2,323,990
4,101,444
11,660,459
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 26: CONTINGENT LIABILITIES AND CONTINGENT ASSETS
At the end of the reporting period the directors were not aware of any contingent liabilities or contingent assets.
NOTE 27: COMMITMENTS
(a) Operating Leasing Commitments
The Consolidated Entity leases various offices and sites within Australia and SE Asia, under non-cancellable operating leases. The
leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
Payable:
Not later than 1 year
Later than 1 year but not later than 5 years
Later than five years
Note
2013
$
2012
$
153,482
96,000
0
75,168
0
0
249,482
75,168
(b) Capital Commitments
The Consolidated entity is currently undergoing significant capital works on its casino in Vietnam. These commitments are
reflected below:
Payable:
Not later than 1 year
Later than 1 year but not later than 5 years
Later than five years
Note
2013
$
2012
$
31,648,297
1,043,416
924,017
1,940,717
0
0
32,572,314
2,984,133
(c) Mortgage to Ocean Bank of Vietnam
On 11 July 2011 a mortgage was registered by the Ocean Bank of Vietnam over the assets of the Lao Cai International Hotel in
relation to a 180,000,000,000 VND loan facility. As at 30 June 2013 no amounts have been drawn on this facility.
Annual Report 2013 | 62
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 28: RELATED PARTY TRANSACTIONS
(a) Parent Entity
The ultimate legal parent entity within the Consolidated Entity is Donaco International Limited.
Donaco Singapore Pte Ltd was acquired by Donaco International Limited on 1 February 2013. As required by Australian
Accounting Standard AASB3: Business Combinations, Donaco International Limited is deemed to have been acquired by
Donaco Singapore as at 1 February 2013 under the reverse acquisition rules. Accordingly, Donaco Singapore Pte Ltd is the
Parent Entity for accounting purposes.
(b) Subsidiaries
Interests in subsidiaries are set out in Note 23.
(c) Key Management Personnel
Disclosures relating to key management personnel are set out in Note 29.
(d) Other Related Parties
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available
to other parties unless stated. The profit from operations includes the following items of expense that resulted from transactions
with key management personnel or their related parties.
Note
2013
$
2012
$
734,488
735,918
61,530
25,838
13,306
9,382
8,195
0
0
0
Dividends paid to NCI
Legal Consultancy - B.P. Reichel
Amount owing to Donaco Singapore Pte Ltd by associated entity
12
Amount owing to Isentric Sdn Bhd by associated entity
Management Fee – Donaco Singapore Pte Ltd associated entity
63 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 29: KEY MANAGEMENT PERSONNEL
Directors of Parent Entity (Donaco Singapore Pte Ltd):
Joey Lim Keong Yew
Ang Teck Foo
Benjamin Lim Keong Hoe
Mak Siew Wei
Goh Kwey Biaw
Ong Chong Hock
Managing Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director (appointed 25 April 2013)
Non-executive Director (resigned 25 April 2013)
From the above group, Messrs J Lim, B Lim and Mak S W were appointed as directors of the Listed Entity on 1 February 2013.
Directors of Listed Entity (Donaco International Limited):
S J McGregor
J Lim
B P Reichel
B Lim
G N Tan
Mak S W
Key Management Personnel
Non-executive Director (Chair)
Managing Director and CEO (appointed 1 February 2013)
Non-executive Director
Non-executive Director (appointed 1 February 2013)
Non-executive Director
Non-executive Director (appointed 1 February 2013)
The following Key Management Personnel of the Parent Entity continued as Key Management Personnel of the Listed Entity:
R Na
Goh Kwey Biaw
Chief Financial Officer (from 1 March 2013)
Deputy CFO and CEO Donaco Singapore
In addition, the following Key Management Personnel of the Listed Entity continued in office:
F R Magrini
Chief Technology Officer
Note
2013
$
2012
$
(a) Key Management Personnel Compensation
The aggregate compensation made to Directors and Other Key Management
Personnel of the Company and the Consolidated Entity is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share Based Payments
738,958
29,782
2,699
0
0
882,111
129,460
0
180,161
17,500
771,439
1,209,232
Detailed remuneration disclosures are provided in the remuneration report section of the Directors' Report.
(b) Options Over Equity Instruments Granted As Compensation
There were no options granted as compensation for the financial year ended 30 June 2013 (2012: nil).
Annual Report 2013 | 64
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 29: KEY MANAGEMENT PERSONNEL (CONTINUED)
(c) Options Over Equity Instruments Held
Movements in the holdings of options by Specified Directors and Key Management Personnel during the period held directly,
indirectly, beneficially and including their personally-related entities were as follows:
2013
Name
Specified Directors 1
S J McGregor
J Lim
B P Reichel
G N Tan 4
Mak S W
B Lim
Specified Executives
R Na
K Goh
F R Magrini
Balance
Held at 30
June 2012
Consolidation
Due to
Corporate
Restructure 2
Options
Exercised
Options
Cancelled
or Lapsed
Other
Change 3
Held at 30
June 2013
Vested and
Exercisable
-
-
360,000
16,250,000
-
-
-
-
216,000
-
-
18,000
812,500
-
-
-
-
10,800
-
-
4,500
-
-
-
-
-
-
-
-
13,500
-
-
-
-
-
10,800
63,408
-
61,102
683,750
63,408
-
61,102
1,496,250
63,408
-
61,102
1,496,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
The Non-Executive Directors, including the Chairman, did not receive or hold any options issued as remuneration during the period.
2 On 8 January 2013 a non-selective consolidation of the Company's issued capital took place, whereby all the issued securities of the Company
were consolidated on a 20 to1 basis.
3 Refers to the issue of bonus options (DNAO) to all shareholders in January 2013.
4 The majority of Mr Tan's bonus options (500,000) were issued to, and are held directly by, Main Ace Investments Limited, an entity of which Mr
Tan is a director.
2012
Name
Specified Directors 1
S J McGregor
B P Reichel
G N Tan 2
C R Grant-Foster 3
Specified Executives
R G Nugara
G J Kean
F R Magrini
Held At 30
June 2011
Granted As
Compen-
sation
Options
Exercised
Options
Cancelled
or Lapsed
Other
Change 2
Held at 30
June 2012
Vested and
Exercisable
-
360,000
-
-
165,600
259,200
216,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
360,000
-
360,000
16,250,000
16,250,000
16,250,000
-
-
-
-
-
-
165,600
259,200
216,000
165,600
259,200
216,000
1
The Non-Executive Directors, including the Chairman, did not receive or hold any remuneration options during the period.
2 Mr Tan's options were issued as part of a capital raising. The options were issued to, and are held directly by, Main Ace Investments Limited, an
entity of which Mr Tan is a director.
3 Mr Grant-Foster resigned as a director on 19 July 2012.
65 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 29: KEY MANAGEMENT PERSONNEL (CONTINUED)
(d) Shareholdings
The numbers of shares in Donaco International Limited held during the financial year by each director of Donaco International
Limited and other Key Management Personnel of the Consolidated Entity, including their personally related parties, are set out
below.
There were no shares granted during the reporting period as compensation (2012: nil).
2013
Name
Specified Directors
S J McGregor
J Lim 3
B P Reichel
G N Tan
S Mak
B Lim 3
Specified Executives
R Na
K Goh
F R Magrini
Balance Held
at 30 June
2012
Consolidation
Due to
Corporate
Restructure 1
Received
During The
Year on the
Exercise of
Options
Other Changes
During the
Year2
Balance Held
at 30 June
2013
1,536,333
-
2,354,083
26,250,000
76,816
-
117,704
1,312,500
-
-
-
-
-
-
-
-
-
-
-
-
4,500
-
-
-
-
-
-
50,000
126,816
244,366,355
244,366,355
-
122,204
55,000
1,367,500
-
-
202,826,200
202,826,200
1,600,000
1,000,000
-
1,600,000
1,000,000
-
1
2
3
On 8 January 2013 a non-selective consolidation of the Company's issued capital took place, whereby all the issued securities of the
Company were consolidated on a 20 to1 basis.
Refers to shares purchased, sold and transferred.
On 29 January 2013 the Company issued 261,724,250 fully paid ordinary shares at an issue price of $0.30 per share to the shareholders of
Donaco Singapore Pte Ltd, Convent Fine Limited ("Convent") and Slim Twinkle Limited ("Slim"), as full consideration for the acquisition of 100%
of the issued share capital in Donaco Singapore Pte Ltd. Mr J. Lim and Mr B. Lim are shareholders of Convent and Slim.
2012
Name
Specified Directors 1
S J McGregor
B P Reichel
G N Tan 3
C R Grant-Foster 4
Balance Held at 30
June 2011
Received During The
Year on the Exercise
of Options
Other Changes
During the Year 2
Balance Held at 30
June 2012
1,396,667
1,585,752
-
602,886
-
-
-
-
139,666
768,331
26,250,000
-
1,536,333
2,354,083
26,250,000
602,886
1
2
3
No KMP other than Directors held shares in the Company in the 2012 financial year.
Refers to shares purchased, sold and transferred.
The majority of Mr Tan's shares (20,000,000) were issued to Main Ace Investments Limited, an entity of which Mr Tan is a director.
4 Mr Grant-Foster resigned as a director on 19 July 2012.
Annual Report 2013 | 66
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 29: KEY MANAGEMENT PERSONNEL (CONTINUED)
(e) Other Transactions
There were no other transactions with Key Management Personnel.
(f)
Employment Contracts of Directors and Senior Executives
Remuneration and other terms of employment for the Managing Director, Chief Financial Officer and the other key management
personnel are formalised in contracts of employment. The service agreements specify the components of remuneration, benefits
and notice periods. The specified executives are employed under contracts with no fixed term. The Company may terminate the
contracts immediately if the executive is guilty of serious misconduct or wilful neglect of duties. Otherwise, the Company may
terminate the contracts by giving three months’ notice or paying three months’ salary. In the case of the MD and CFO,
termination for any reason other than just cause will result in a termination payment of 24 months’ base salary.
NOTE 30: SHARE BASED PAYMENTS
(a) Employee Remuneration Options
The 2008 Series B options granted as remuneration to the key management personnel of the Consolidated Entity under the
Company’s Employee Options Plan were granted progressively over the 2009 financial year, commencing from 1 July 2008. The
options vested two years after each grant date and expired progressively throughout the 2013 financial year, commencing 1 July
2012 with the last expiry date being 1 June 2013.
There were no service and performance criteria to be met in determining the vesting of remuneration options, however the
options expired 12 months after termination of employment if not exercised during that period.
(b) Balance Of Share Options Outstanding
The table below shows details of movements in share options and the balance outstanding at the end of the financial year.
2013
Exercise
Price
Grant Date
Expiry Date
$
Series B Options
Held at 30
June 2012
20:1
Consol *
Options
Granted
Options
Exercised
Options
Cancelled
or
Lapsed
Held
at 30
June
2013
1.07.2008
1.08.2008
1.09.2008
1.10.2008
1.11.2008
1.12.2008
1.01.2009
1.02.2009
1.03.2009
1.04.2009
1.05.2009
1.06.2009
1.07.2012
1.08.2012
1.09.2012
1.10.2012
1.11.2012
1.12.2012
1.01.2013
1.02.2013
1.03.2013
1.04.2013
1.05.2013
1.06.2013
0.072
0.066
0.060
0.033
0.038
0.037
0.034
0.029
0.025
0.020
0.018
0.021
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
5,238
5,238
5,238
5,238
5,238
5,238
5,238
5,238
5,238
5,238
5,238
5,238
1,257,120
62,856
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500
1,500
1,500
4,500
5,238
5,238
5,238
5,238
5,238
5,238
5,238
5,238
5,238
3,738
3,738
3,738
58,356
-
-
-
-
-
-
-
-
-
-
-
-
-
* On 8 January 2013 a non-selective consolidation of the Company's issued capital took place, whereby all the issued securities of
the Company were consolidated on a 20 to1 basis.
The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2013 was $0.40.
67 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 30: SHARE BASED PAYMENTS (CONTINUED)
(c) Balance Of Share Options Outstanding (continued)
2012
Exercise
Price
Grant Date
Expiry Date
$
Series B Options
1.07.2008
1.08.2008
1.09.2008
1.10.2008
1.11.2008
1.12.2008
1.01.2009
1.02.2009
1.03.2009
1.04.2009
1.05.2009
1.06.2009
1.07.2012
1.08.2012
1.09.2012
1.10.2012
1.11.2012
1.12.2012
1.01.2013
1.02.2013
1.03.2013
1.04.2013
1.05.2013
1.06.2013
0.072
0.066
0.060
0.033
0.038
0.037
0.034
0.029
0.025
0.020
0.018
0.021
Held at
30 June
2011
113,400
113,400
113,400
105,600
105,600
105,600
105,600
105,600
104,760
104,760
104,760
104,760
1,287,240
Options
Granted
Options
Exercised
Options
Cancelled
or
Lapsed
Held at
30 June
2012
Vested
and
Exercis-
able
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,640
8,640
8,640
840
840
840
840
840
-
-
-
-
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
104,760
30,120
1,257,120
1,257,120
The weighted average remaining contractual life of the options outstanding at 30 June 2012 was 0.46 years.
(d) Expenses Arising From Share Based Payment Transactions
Total expenses arising from share-based payment transactions recognised during
the period as part of employee benefit expense were as follows:
0
17,500
2013
$
2012
$
Annual Report 2013 | 68
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 31:FINANCIAL RISK MANAGEMENT
The Consolidated Entity's activities expose it to a variety of financial risks. The main risks the Consolidated Entity is exposed to
through its financial instruments are market risk (relating to interest rate risk and foreign currency risk), liquidity risk and credit risk.
Risk management is carried out by the Consolidated Entity’s finance function under policies and objectives approved by the
Board of Directors. The Chief Financial Officer has been delegated the authority for designing and implementing processes which
follow the objectives and policies. The Board receives monthly financial reports on the Consolidated Entity’s performance
including, where applicable, any issues relating to financial risk management.
Specific information regarding the mitigation of each financial risk to which the Consolidated Entity is exposed is provided below.
(a) 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.
(i)
Foreign Exchange risk
Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to
movement in foreign exchange rates of currencies in which the Consolidated Entity holds financial instruments which are other
than in the Consolidated Entity’s functional currency (Australian Dollars).
The Consolidated Entity is exposed to foreign exchange fluctuations in relation to:
• Cash generated for working capital purposes, denominated in foreign currencies
• Net investments in foreign operations, namely Vietnam and Malaysia.
Exchange rate exposures are managed within approved policy parameters and material movements are not expected. The
Consolidated Entity does not enter into any forward exchange contracts to buy or sell specified foreign currencies.
(ii)
Interest Rate Risk
Interest rate risk is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates. As at 30
June 2013, the Consolidated Entity’s exposure to interest rate risk and the effective weighted average interest rate for each class
of financial instrument is as follows:
Weighted average
effective interest rate
Floating interest rate
Non-interest bearing
Total
2013
%
2012
%
2013
$
2012
$
2013
$
2012
$
2013
$
2012
$
Financial Assets
Cash and cash
equivalents
Receivables
5.6
12.3
19,452,250
4,653,634
9,951,955
5,702,518 29,404,205 10,356,152
3,179,668
670,684
3,179,668
670,684
Total financial asset
28,265,086
9,800,222
4,318,786
1,226,614 32,583,872 11,026,836
Financial Liabilities
Trade and other
payables
Total financial
liabilities
-
-
0
0
0 11,447,235
8,818,170 11,447,235
8,818,170
0 11,447,235
8,818,170 11,447,235
8,818,170
An assessment of the sensitivity of the Consolidated Entity’s exposure to interest rate movements was performed, and was
found to be immaterial for the purposes of this disclosure.
69 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 31:FINANCIAL RISK MANAGEMENT (CONTINUED)
(b)
Liquidity Risk
Liquidity risk arises from the Consolidated Entity’s management of its working capital. It is the risk that the Consolidated Entity
will encounter difficulty in meeting its financial obligations as they fall due. The Consolidated Entity’s policy is to ensure that it
will always have sufficient cash to allow it to meet its liabilities when they become due. The Consolidated Entity maintains cash
to meet all its liquidity requirements and manages its liquidity by carefully monitoring cash outflows due in a day-to-day and
week-to-week basis. Furthermore, the Consolidated Entity’s long term liquidity needs are identified in its annual Board-
approved budget, and updated on a quarterly basis through revised forecasts. The financial liabilities are due and payable
within six months of the end of the reporting period.
(c) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the
Consolidated Entity. Credit risk arises from cash and cash equivalents, as well as credit exposure to customers, including
outstanding receivables and committed transactions. The Consolidated Entity has adopted a policy of only dealing with
creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. Ongoing credit evaluation is
performed on the financial condition of accounts receivable.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at the end of the reporting period
to recognised financial assets, is the carrying amount, net of any provisions for impairments of those assets, as disclosed in the
statement of financial position and notes to the financial statements. The Consolidated Entity does not have any material
credit risk exposure to any single debtor or group of debtors.
(e) Net Fair Values
For financial assets and liabilities the net fair value approximates their carrying value. By the date of this report, all trade
receivables and trade payables at the end of the reporting period had been settled in full.
Annual Report 2013 | 70
DONACO INTERNATIONAL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 32: PARENT ENTITY FINANCIAL INFORMATION
Donaco Singapore Pte Ltd was acquired by Donaco International Limited on 1 February 2013. As required by Australian
Accounting Standard AASB3: Business Combinations, Donaco International Limited is deemed to have been acquired by Donaco
Singapore as at 1 February 2013 under the reverse acquisition rules. Accordingly, Donaco Singapore Pte Ltd is the Parent Entity for
accounting purposes. Donaco International Limited is the legal parent.
The following information has been extracted from the books and records of the legal parent, Donaco International Limited, and
has been prepared in accordance with Australian Accounting Standards. Accordingly the information presented below does not
relate to “the Parent Entity” as defined on page 13.
Results for the parent entity:
Net profit (Loss)
Other comprehensive income
Total comprehensive loss for the year
Current Assets
Investments
Total Assets
Current Liabilities
Total Liabilities
Net Assets
Total equity of the parent entity
Contributed equity
Reserves
Retained Earnings (Losses)
Total Equity
Parent Entity Contingencies
Parent Entity
2013
$
2012
$
Note
(491,198)
(1,674,360)
0
0
(491,198)
(1,674,360)
4,369,342
995,046
32,059,157
90
36,444,258
1,000,798
560,320
712,160
400,316
656,820
35,732,098
343,978
86,030,839
50,580,653
0
47,455
(50,298,741)
(50,284,130)
35,732,098
343,978
The directors are of the opinion that no provisions are required in respect of the Company’s contingencies.
Guarantees
The Company has not entered into any guarantees, in the current or previous financial year, in relation to the debts of its
subsidiaries.
Contractual Commitments
At 30 June 2013 the Company has not entered into any contractual commitments for the acquisition of property, plant and
equipment (2012: Nil).
NOTE 33: EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 24 July 2013, the Company announced that it had signed a non-binding memorandum of understanding with its joint venture
partner to increase its stake in the Lao Cai International Hotel joint venture by 20%, for a total cost of US$4 million. At the date of
this report, the transfer of the stake had not yet been completed.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or could
significantly affect the operations of the Consolidated entity, the results of those operations, or the state of affairs of the
consolidated entity in future financial years.
71 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
DIRECTORS DECLARATION
FOR THE YEAR ENDED 30 JUNE 2013
In the opinion of the directors of Donaco International Limited (the "Company"):
1. the consolidated financial statements and notes set out on pages 27 to 76 and the Remuneration Report set out on pages
19 to 25 in the Directors' Report, are in accordance with the Corporations Act 2001, and:
(a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements, and
(b) give a true and fair view of the Consolidated Entity's financial position as at 30 June 2013 and of its performance for
the financial year ended on that date, and
2. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Mr. S. McGregor
Chairman
Sydney
27 September 2013
Annual Report 2013 | 72
DONACO INTERNATIONAL LIMITED
INDEPENDENT AUDIT REPORT TO MEMBERS
FOR THE YEAR ENDED 30 JUNE 2013
73 | Annual Report 2013
Annual Report 2013 | 74
DONACO INTERNATIONAL LIMITED
SHAREHOLDER INFORMATION
FOR THE YEAR ENDED 30 JUNE 2013
The shareholder information set out below was applicable as at 31 August 2013.
Issued Securities
Security
Quoted Securities
Ordinary Shares (DNA)
Bonus Options (DNAO)
-
These options have an exercise price of $0.30.
Unquoted Securities
Unlisted Options
Number on Issue
Number of holders
371,719,896
7,057,082
812,500
872
572
1
-
These options have an exercise price of $0.56 and are held by Main Ace Investments Limited.
Voting Rights
Ordinary Shares
The fully paid ordinary shareholders of the Company are entitled to vote at any meeting of the members of the Company, and
their voting rights are:
• On a show of hands – one vote per shareholder; and
• On a poll – one vote per fully paid ordinary share.
Options
There are no voting rights attached to options. Upon exercise of the option, the issued shares will confer full voting rights.
Distribution of Equity Securities
Holding Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total Number of Holders
Ordinary Shares
Bonus Options
235
202
70
282
83
872
290
138
39
86
19
572
Unmarketable Parcels:
Min Parcel Size
Holders
Minimum $500.00 parcel at $0.49 per unit
1,021 shares
235
Units
95,884
On Market Buy-Back
There is no current on market buy back.
75 | Annual Report 2013
DONACO INTERNATIONAL LIMITED
SHAREHOLDER INFORMATION
FOR THE YEAR ENDED 30 JUNE 2013
Substantial Holders
Ordinary Shares
Name of Substantial Holder
Lim Keong Yew
-
Relevant interests held in the following names:
Slim Twinkle Limited
Convent Fine Limited
Lim Keong Yew
Lim Keong Hoe
-
Relevant interests held in the following names:
Slim Twinkle Limited
Convent Fine Limited
Bonus Options
Nil
Twenty Largest Quoted Security Holders
Ordinary Shares
Rank
Name
Number Held
244,366,355
104,112,382
98,713,818
41,540,155
202,826,200
104,112,382
98,713,818
% of Issued
Securities
65.75
28.01
26.56
11.18
54.57
28.01
26.56
Number Held
% of Issued
Securities
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CONVENT FINE LIMITED
SLIM TWINKLE LIMITED
KEONG YEW LIM
ROYAL BANK OF CANADA SINGAPORE
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
WAVEHILL INVESTMENTS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
LEE CHIN WEE
J P MORGAN NOMINEES AUSTRALIA LIMITED
MADELENE SIANG LIN TAN
MS POH LENG SAW
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3
HOLDEX NOMINEES PTY LTD
PICTON COVE PTY LTD
DEMETA PTY LTD
CHUN WEE NA
98,713,818
62,572,227
41,540,155
41,540,155
17,193,570
14,472,912
10,917,404
10,098,755
7,904,803
7,467,105
6,583,010
3,763,771
3,000,000
2,453,814
2,400,000
2,150,830
2,005,000
1,726,000
1,713,570
1,555,000
26.556
16.833
11.175
11.175
4.625
3.893
2.937
2.717
2.127
2.009
1.771
1.013
0.807
0.660
0.646
0.579
0.539
0.464
0.461
0.418
Annual Report 2013 | 76
DONACO INTERNATIONAL LIMITED
CORPORATE DIRECTORY
FOR THE YEAR ENDED 30 JUNE 2013
ASX Code
DNA
Corporate Head Office
Suite 2.02
55 Miller Street
Pyrmont NSW 2009
Australia
Registered Office
Suite 2.02
55 Miller Street
Pyrmont NSW 2009
Australia
Company Secretary
Mr Benedict Paul Reichel
Share Registry
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Australia
Auditors
William Buck NSW
Lev el 29, 66 Goulburn Street
Sydney NSW 2000
Australia
exquisite interiors
deluxe facilities
retail luxury
poolside nightlife