Ginkgo Bioworks Annual Report 2015

Plain-text annual report

2 0 1 5 A N N U A L R E P O R T t r o p e r l a u n n a 5 1 0 2 d e t i m i l l a n o i t a n r e t n i o c a n o d YUNNAN GUIZHOU ARISTO INTERNATIONAL HOTEL GUANGXI VIETNAM LAOS THAILAND STAR VEGAS RESORT & CLUB annual report FULL YEAR STATUTORY ACCOUNTS – 30 JUNE 2015 contents 2 From the Chairman From the Managing Director Board of Directors Directors’ Report CAMBODIA Auditor’s Independence Declaration Statement of Profit or Loss and other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report to the Members of Donaco International Limited Shareholder Information Corporate Directory ANNUAL GENERAL MEETING The Annual General Meeting of Donaco International Limited will be held at Boardroom Pty Limited, Level 12, 225 George Street, Sydney NSW 2000 on 26 November 2015 at 2.30pm. d o n a c o i n t e r n a t i o n a l l i m i t e d 2 0 1 5 a n n u a l r e p o r t 3 5 6 10 23 26 28 29 30 32 72 73 75 77 from the chairman Following the substantial transformation of your Company, we are confident that the coming financial year will generate positive results for our shareholders. Dear Fellow Shareholder The 2015 financial year has seen a dramatic increase in the size and scale of your Company. The Board and management team focused on two key goals during the year: driving the growth of the Aristo International Hotel in Vietnam, and adding value to shareholders through corporate activity. We took a strong step towards the first goal in November 2014, when the construction of the Aristo was completed, and the property received its five star certification. After enduring some headwinds in the soft opening phase, the subsequent marketing of the property has shown promising signs of growth. We consider the Aristo to be our flagship property, and it is extremely important to us, but it is no longer our major business, as noted below. The second goal was also achieved during the year, with the signing in January 2015 of a deal to acquire the Star Vegas Resort & Club in Cambodia. The deal was successfully completed on 1 July 2015. The Star Vegas is now our largest property, and the deal has increased the pro forma revenues of your Company by a factor of more than five times. It has also provided substantial diversification benefits, with the Star Vegas serving primarily Thai customers, while the Aristo serves primarily Chinese customers. In order to complete the deal, the Company successfully raised $132 million via a pro rata rights issue. We would like to thank shareholders for their support of the Company’s strategy. As a means of clearing the decks prior to completing the Star Vegas deal, we completed the spin-off of the mobile technology business, iSentric, into a separate ASX-listed company in September 2014. This was followed by the sale of our wagering marketing business, Way2Bet, in October 2014. Accordingly the Company no longer operates its former Gaming Technology businesses. With the completion of the Star Vegas deal on 1 July 2015, the Board was expanded through the addition of Ham Techatut Sukjaroenkraisri as an Executive Director, and Paul Porntat Amatavivadhana as a Non-Executive Director. These gentlemen have substantial experience in Thai-facing businesses, and the gaming industry in particular, and have already added significant value to the Board’s deliberations. Your Board is one of the most ethnically and culturally diverse boards in the ASX300, with 57% of its members having been born, educated and now residing in Asia. This provides deep and direct experience and knowledge of the regions in which we operate. According to the 2015 Watermark Board Diversity Index, only 17% of directors on the boards of ASX100 companies have similar overseas experience and heritage. For companies in the ASX100-200, the figure is less than 10%. Further, we have two directors originally from Malaysia, and two from Thailand. These two countries are amongst Australia’s top 10 trading partners, but they have minimal representation among the ASX200 boards. Following the substantial transformation of your Company, we are confident that the coming financial year will generate positive results for our shareholders. Stuart McGregor Chairman 4 5 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportfrom the managing director Dear Fellow Shareholder In last year’s Annual Report, I stated that “we expect to transform and expand our business in the year ahead”. I am pleased to confirm that we have delivered on this promise. The successful acquisition of the Star Vegas Resort & Club has ensured that the new financial year has begun very brightly for Donaco. The Star Vegas has demonstrated the power of its diversified revenue streams, with rapid growth in turnover and revenue over the past 12 months. The Star Vegas is a large and high quality property, with 385 hotel rooms, 109 gaming tables,1500 slot machines and 57,000 square metres of usable building space. It has an enviable position in the Poipet gaming market, which is the closest legal gaming destination to the greater Bangkok area and its population of some 15 million people. Our marketing strategies for the Star Vegas property, and the ongoing improvements in the highway linking the Star Vegas to Bangkok, will drive continuing growth in this business in FY16. In addition, our recent deal with Heng Sheng Group, one of Macau’s leading junket operators, will bring substantial numbers of VIP players from outside Thailand to the Star Vegas Resort & Club. This deal is expected to generate significant additional revenues for Donaco in FY16. The fitout for the new Heng Sheng gaming room at the Star Vegas was completed very quickly and efficiently, which is a testament to the high quality and capacity of the Star Vegas property, and the professionalism of the management team. Our relationship with the Heng Sheng Group was successfully launched in September 2015, with a large number of new VIP players visiting the property for the first time and enjoying the entertainment at 30 new gaming tables. The Heng Sheng relationship will help us to capture some of the strong demand from Chinese tourists visiting Cambodia. In the first six months of calendar 2015, Chinese tourist numbers to Cambodia grew by 22%. Many of these visitors are keen to enter via the international airport at Siem Reap, which provides access to the world-famous Angkor Wat Archaeological Park. Siem Reap is also an easy two-hour drive to our Star Vegas property. The Aristo International Hotel in Vietnam is also back on track in recent months, after a difficult first year. Record levels of visitation and strong turnover figures give us confidence in the performance of this flagship business for the coming year. Further, we recently signed a ground-breaking sponsorship deal with Manchester United, which is also expected to drive further growth in the year ahead, at both the Star Vegas and the Aristo. Our appointment as the Official Casino Resort Partner of Manchester United will drive increased positive awareness of both properties in the Company’s key target markets, and is expected to generate significant value for the Company. With the expansion of our business, we have also expanded the capabilities of our senior management team. I am pleased that Mr Chong Kwong Yang has joined us in the role of Chief Financial Officer, after consulting to us for 12 months while working on the Star Vegas acquisition. Mr Richard Na remains as a key member of the management team, in his capacity as Deputy Chief Executive Officer, thus ensuring continuity and ongoing depth of management talent. Our Company now employs some 1800 people across two major leisure and entertainment properties in Asia. The capability of this diverse workforce gives us a strong base to pursue success in these businesses, and any others that meet our investment criteria. While a strong pipeline of investment opportunities continues to present itself to us, I wish to emphasise that we are highly disciplined in our approach, and will not pursue any deal unless it provides good returns to shareholders. We are confident that the Star Vegas deal will be proven to meet these criteria. Joey Lim Managing Director and Chief Executive Officer We recently signed a ground-breaking sponsorship deal with Manchester United, which is expected to drive further growth in the year ahead. OFFICIAL CASINO RESORT PARTNER 7 6 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportstuart james mcgregor B. Com, LLB, MBA joey lim keong yew B. Computer Science Non-Executive Chairman Over the past 30 years, Mr McGregor has had a wide-ranging business career with active involvement across the Australasian and Asian Region. In business, he has been Company Secretary of Carlton United Breweries, Managing Director of Cascade Brewery Company Ltd in Tasmania and 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 Executive of the Tasmanian Government’s economic development agency. Other current directorships: EBOS Group Limited (ASX: EBO) Former directorships (last three years): None Special responsibilities: Member of the Audit and Risk Management Committee and the Nominations, Remuneration and Corporate Governance Committee Interests in shares: 347,235 ordinary shares Interests in options: None Managing Director and Chief Executive Officer 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 principal of the Slingshot Group of Companies, which are investment companies based in Hong Kong. Relevant experience includes: working as an executive director to M3 Technologies (Asia) Bhd where he was responsible for strategic investments and corporate affairs; working at VXL Capital, China, a company whose business was focused on investing in and restructuring companies in Malaysia, Beijing, Shanghai and Hong Kong; and working as Project Manager for Glaxo Wellcome, London, UK. Other current directorships: None Former directorships (last three years): None Special responsibilities: None Interests in shares: 264,358,496 ordinary shares Interests in options: 913,843 unlisted employee options benedict paul reichel BA, LLB (Hons), LLM (Hons) benjamin lim keong hoe B. International Business Executive Director, Group General Counsel, Company Secretary Mr Reichel is an executive and company director in the gaming, media and technology sectors, with more than 20 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 at Publishing and Broadcasting Limited. Non-Executive Director 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. Other current directorships: None Former directorships (last three years): None Special responsibilities: Member of the Audit and Risk Management Committee and the Nominations, Remuneration and Corporate Governance Committee Interests in shares: 144,791,200 ordinary shares Other current directorships: None Interests in options: None Former directorships (last three years): None Special responsibilities: None Interests in shares: 321,150 ordinary shares Interests in options: 660,608 unlisted employee options 8 9 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportboard of directorsrobert andrew hines (appointed 1 November 2013) Non-Executive Director Mr Hines is one of Australia’s leading gaming and wagering executives. As CEO of Racing Victoria Limited from 2008 to 2012, he led and managed the Victorian racing industry through a period of substantial change. Mr Hines also held CEO roles at Jupiters Limited (2000 to 2004), which was acquired by Tabcorp; and AWA Limited (1997 to 2000), which was acquired by Jupiters. From 2005 to 2008, he was CEO UK and Europe for Vecommerce Limited, a natural language speech recognition company providing services to wagering operators. Mr Hines currently holds the positions of Non-Executive Director with Sportsbet Australia Pty Ltd; Group Chairman CEO Circle; and Non-executive Director of the Sporting Chance Cancer Foundation. Other current directorships: None Former directorships (last three years): None Special responsibilities: Chair of the Audit and Risk Management Committee and Chair of the Nominations, Remuneration and Corporate Governance Committee Interests in shares: 110,714 ordinary shares Interests in options: None ham techatut sukjaroenkraisri (appointed 1 July 2015) BSc Chemical Engineering Executive Director Mr Sukjaroenkraisri is Vice President, Casino at Star Vegas Casino & Resorts Co, Ltd. He has more than eight years’ experience in gaming and casino management. In his role at Star Vegas, one of Cambodia’s largest and most successful casino resorts, Mr Sukjaroenkraisri has been responsible for developing the model for the slot machine business. This has become one of the most successful and profitable businesses for Star Vegas, and has helped to put Star Vegas into its current leadership position in the Cambodian gaming market. Other current directorships: None Former directorships (last three years): None Special responsibilities: None Interests in shares: 73,599,764 ordinary shares Interests in options: None paul porntat amatavivadhana (appointed 1 July 2015) MSc Management Science, BA Finance and Banking Non-Executive Director Mr Amatavivadhana is a founding principal and the CEO of Infinite Capital, a successful boutique corporate advisory firm based in Bangkok. He has considerable experience in mergers and acquisitions, corporate restructuring and capital raisings. Mr Amatavivadhana is currently an independent director at Sansiri Plc, one of the largest real estate developers in Thailand, which is listed on the Stock Exchange of Thailand. His previous roles include senior positions at Ayudhya Securities Plc (Managing Director); Ploenchit Advisory Co Ltd (Assistant Managing Director); UOB KayHian Securities (Thailand) Ltd; BNP Paribas Peregrine Securities (Thailand) Ltd and Securities One Plc. Other current directorships: Sansiri Plc (SET: SIRI) Former directorships (last three years): None Special responsibilities: None. Interests in shares: None Interests in options: None ‘Other current directorships’ and ‘Former directorships (last three years)’ quoted above are directorships for listed entities only, and exclude directorships of all other types of entities, unless otherwise stated. 10 11 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportboard of directors directors’ report The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘consolidated entity’) consisting of Donaco International Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2015. directors The following persons were directors of Donaco International Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Stuart James McGregor – Chairman Joey Lim Keong Yew Benedict Paul Reichel Benjamin Lim Keong Hoe Robert Andrew Hines Ham Techatut Sukjaroenkraisri (appointed 1 July 2015) Paul Porntat Amatavivadhana (appointed 1 July 2015) principal activities During the financial year the principal continuing activities of the consolidated entity consisted of: • operation of a hotel and casino in northern Vietnam; • operation and development of gaming technology, including mobile payment gateways; and • acquisition and disposal of businesses. dividends There were no dividends to shareholders paid, recommended or declared during the current or previous financial year. A dividend was paid by the Lao Cai International Hotel Joint Venture Company to non-controlling interests (the Vietnamese Government) in the previous financial year. The consolidated entity’s dividend policy is unchanged from that set out in the prospectus dated 13 December 2012, which stated: The Company intends to pay dividends to Shareholders in the future subject to the availability of sufficient profits and franking credits and subject to the Company’s then current working capital requirements and growth plans. Shareholders should note that the payment of dividends is not guaranteed. review of operations and financial results The loss for the consolidated entity after providing for income tax and non-controlling interest amounted to $2,928,075 (30 June 2014: profit of $6,793,403). The primary focus of the Board and management team during FY15 was to complete the successful acquisition of the Star Vegas Resort & Club in Cambodia, which took place on 1 July 2015. Accordingly the FY15 statutory results include only the Aristo International Hotel, which as at the date of this report represents approximately 15% of the Company’s overall business, in terms of net (reported) revenue. Aristo International Hotel – performance summary The performance of the Aristo International Hotel was affected by a number of specific factors during the year. The property was in soft opening mode until November 2014, with not all facilities available. Further, the performance of the property in the December half was adversely affected by China’s travel warning for Vietnam, the Soccer World Cup, and an earthquake in the Aristo’s main target market of Yunnan Province. Despite these factors, the Aristo saw steady increases in casino visitation, which grew by 28% over the year, and in gaming turnover. Table game turnover grew by 17% in Australian dollar terms, while slot machine turnover grew by 294%. Normalised results show operating revenue grew by 51%, while earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 67%. Normalised results adjust the revenue received from the VIP table games business, by applying a theoretical win rate of 2.85% to VIP rolling chip turnover. This provides a more accurate guide to the underlying operating performance of the VIP table games business, which can experience significant volatility over shorter periods. The theoretical win rate for VIP baccarat in Asia is generally accepted to range between 2.7% and 3.0% of rolling chip turnover. The Company normalises its revenue from VIP table games in the middle of this range, at 2.85%, in line with other Asian casino operators. Actual results at the Aristo were affected by a below theoretical win rate of 1.93% on VIP table games. The VIP win rate at the Aristo has been closely monitored by the Board and management team. This process of scrutiny has included the engagement of external consultants, who have confirmed that while some processes could be tightened (and this has been addressed), the low win rate simply comes down to the luck factor. With the Aristo having a heavy concentration of VIP players, the business in FY15 lacked the spread of smaller players required to counter the effects of a significant win by a VIP player. Management is working to address this issue via marketing plans to attract more main hall players. Increases in operating expenses at the Aristo International Hotel primarily relate to the increased scale of operations at the new property, which opened in May 2014. The workforce was scaled up from 420 staff at the start of FY14, to 850 staff at the start of FY15. Staff numbers were scaled down to 800 during the year, but due to recent increases in business activity and visitation, have again been increased to 850. The increase in cost of sales relates to food and beverage consumables, driven by the 149% increase in food and beverage revenues during the year. Property costs (housekeeping items etc.) also increased, due to the 994% increase in accommodation revenues during the year. Other developments The Gaming Technology businesses were successfully sold during the year. The primary business was iSentric Sdn Bhd, a successful mobile commerce business based in Kuala Lumpur. The spin-off of iSentric was completed on 23 September 2014, when iSentric Limited listed on the ASX under the code ‘ICU’. The other main Gaming Technology business was Way2Bet Pty Limited, which operated the Company’s wagering marketing portal in Australia. This business was sold on 31 October 2014. As a result of these disposals, both iSentric and Way2Bet have been treated as discontinuing operations in the FY15 statutory accounts. significant changes in the state of affairs On 26 February 2014, the Company announced that it planned to spin off its mobile technology business, iSentric Sdn Bhd, into a new company separately listed on the ASX. A binding Share Sale Agreement to implement the transaction was signed with OMI Holdings Limited on 9 May 2014. The agreed value for the sale was $12,000,000 in ordinary fully paid shares in OMI, which were distributed to Donaco shareholders in specie. The transaction was completed on 23 September 2014, when OMI Holdings Limited changed its name to iSentric Limited and iSentric Limited was requoted on the ASX under the code ‘ICU’. Donaco distributed its shares in the newly listed entity to Donaco shareholders in specie on 16 September 2014. Donaco shareholders with a minimum of 19,206 shares on the record date of 12 September 2014 received approximately 0.13 iSentric shares for each Donaco share. Holders of fewer Donaco shares had their entitlements sold, and received the proceeds of sale (less costs) in cash. No impairment loss was recognised on the reclassification of iSentric to a discontinued operation. On 31 October 2014, Way2Bet Pty Ltd, a subsidiary of the Company that managed the Company’s online wagering marketing business, was sold to Punters Paradise Pty Limited. The net proceeds of sale to the Company were $450,000. There were no other significant changes in the state of affairs of the consolidated entity during the financial year. matters subsequent to the end of the financial year The ultimate parent company, Donaco International Limited (DNA), entered into a share sale agreement on 23 January 2015, supplemental share sale agreement on 22 May 2015, and amending and restating deed on 18 June 2015 (the ‘Sale and Purchase Agreements’) with independent third parties for the acquisition of the 100% equity interests in DNA Star Vegas Co., Ltd (‘DNA Star’) for a consideration of USD360 million. DNA Star is principally engaged in operation of a casino business in Cambodia. The consideration to be paid by DNA to the vendor was made by: 1. Deposit of USD5 million within 14 days of execution of the share sale agreement, which occurred in FY15. 2. USD135 million to be paid on completion date of acquisition. 3. USD120 million by issuing consideration shares in DNA on the completion date of acquisition. 4. USD100 million to be paid to an account or held in escrow in favour of the vendor. According to the nomination letter signed on 22 June 2015, DNA nominated its wholly-owned subsidiary, Donaco Hong Kong Limited (‘DHK’), to be the registered owner of DNA Star and vested unto DHK all of the rights, titles and interest in DNA Star under and/or pursuant to the Sale and Purchase Agreement. The acquisition was completed on 1 July 2015. Consequent on the completion of the acquisition, applicable legal and consultancy fees of $10,444,225 were expensed and paid in the month of July 2015. As part payment for the acquisition, a term loan of USD100 million from Mega International Commercial Bank Co, Ltd of Taiwan was drawn down on 1 July 2015, and the proceeds paid to the vendor. Pursuant to a detailed valuation report and purchase price allocation report dated 22 January 2015 prepared by Colliers International Hong Kong Limited and its related party, Colliers International Thailand, the fair value of the business acquired by DNA was USD411.2 million. Since the price paid was USD360 million, this valuation would require the acquisition to be treated as a bargain purchase, which would require the excess of USD51.2 million to be recorded as a positive income amount in the Company’s income statement. However the directors have decided to take a more conservative approach to the valuation, and will continue to evaluate the business and the assets acquired in more detail over the next 12 months, before deciding whether to treat the acquisition as a bargain purchase. As a result of the successful acquisition of the Star Vegas Resort & Club on 1 July 2015, the FY15 statutory results relate only to the Company’s pre-existing business, the Aristo International Hotel in Vietnam. Based on unaudited Star Vegas management accounts for FY15, the Aristo now represents approximately 15% of the Company’s overall business, in terms of net (reported) revenue. Unaudited management accounts for FY15 show that the Star Vegas 12 13 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportachieved actual net revenue of $92.66 million, and earnings before interest, tax, depreciation and amortisation (EBITDA) of $70.22 million, with net profit after tax (NPAT) of $65.4 million. Normalised results show revenue of $100.82 million, EBITDA of $78.39 million, and NPAT of $73.56 million. In order to provide working capital for the consolidated entity, a term loan facility in the amount of USD20 million from OL Master Limited was drawn down on 7 July 2015. No other matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may significantly affect, the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. likely developments, business strategies and prospects The Company operates leisure and entertainment businesses across the Asia Pacific region. Our largest business is the Star Vegas Resort & Club, a successful casino and hotel complex in Poipet, Cambodia, on the border with Thailand. Star Vegas was established in 1999, and is the largest and highest quality of the Poipet casino hotels. The property has more than 100 gaming tables, more than 1400 slot machines and 385 hotel rooms. Our flagship business is the Aristo International Hotel, a successful boutique casino in northern Vietnam, located on the border with Yunnan Province, China. Established in 2002, the property has recently been expanded to a brand new five star resort complex with 400 hotel rooms. Donaco is a pioneer casino operator in Vietnam and owns a 95% interest in the business, in a joint venture with the Government of Vietnam. The operation and marketing of both of these properties will underpin our growth during the next 12 months. Our strategy is to take advantage of the demand for leisure and entertainment in the Asia Pacific region, and to leverage the experience of the Board and management in the gaming sector. This will complement the growth at the expanded casinos in both Cambodia and Vietnam, and provide for diversification. Material risks to this strategy include those affecting listed entities generally, and companies operating in Thailand, Cambodia and Vietnam generally. These risks include the possibility of adverse macroeconomic developments, such as exchange rate declines; cross-border disputes; or terrorist attacks affecting the Company’s key target markets. Other material risks include the possibility of adverse regulatory change affecting casino operators, such as changes in tax rates, and the possibility of breach of licences or legislation. These risks are carefully monitored by the Board and management team. These key risks should not be taken as the only risks that may affect the Company’s operations, and many risks are outside the control of the Board and management team. Except as noted above, information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the consolidated entity. environmental regulation The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law. company secretary Benedict Paul Reichel is an Executive Director and the Company Secretary. His qualifications and experience are set out above under ‘Board of Directors’. meetings of directors The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 30 June 2015, and the number of meetings attended by each director were: Full Board Audit and Risk Management Committee Nominations, Remuneration and Corporate Governance Committee ATTENDED HELD ATTENDED HELD ATTENDED HELD Stuart James McGregor Joey Lim Keong Yew Benedict Paul Reichel Benjamin Lim Keong Hoe Robert Andrew Hines 12 12 12 9 12 12 12 12 12 12 2 – – 2 2 2 – – 2 2 2 – – 2 2 2 – – 2 2 ‘Held’: represents the number of meetings held during the time the director held office or was a member of the relevant committee. renumeration report (audited) remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: • Principles used to determine the nature and amount of remuneration • Details of remuneration • Share-based compensation • Additional information • Additional disclosures relating to key management personnel. Principles used to determine the nature and amount of remuneration The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and conforms to the market best practice for the delivery of reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good reward governance practices: • competitiveness and reasonableness • acceptability to shareholders • performance linkage/alignment of executive compensation • transparency. The performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy is to attract and retain high quality personnel, and motivate them to achieve high performance. The Board has an established Nominations, Remuneration and Corporate Governance Committee, consisting only of non-executive directors, with a majority of independent 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 Managing Director/Chief Executive Officer, and evaluating the performance of the Managing Director/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 ensuring 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. In consultation with external remuneration consultants when necessary (refer to the section ‘Use of Remuneration Consultants’ below), the Nominations, Remuneration and Corporate Governance Committee has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the consolidated entity. The remuneration framework is aligned to shareholders’ interests: • has economic profit as a core component of plan design • focuses on sustained growth in shareholder wealth, consisting of growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value • attracts and retains high calibre executives. The remuneration framework is also aligned to program participants’ interests: • rewards capability and experience • reflects competitive reward for contribution to growth in shareholder wealth • provides a clear structure for earning rewards. All remuneration paid to directors and executives is valued at cost to the Company and expensed. In accordance with best practice corporate governance, the structures of remuneration for non-executive directors and for executives are separate. 14 15 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportNon-executive directors’ remuneration Fees and payments to non- executive directors reflect the demands that are made on, and the responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed annually by the Nominations, Remuneration and Corporate Governance Committee. The Nominations, Remuneration and Corporate Governance Committee may, from time to time, receive advice from independent remuneration consultants to ensure non-executive directors’ fees and payments are appropriate and in line with the market. 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. ASX Listing Rules require that the aggregate of non-executive directors’ remuneration be determined periodically by a general meeting. The most recent determination was at the 2013 Annual General Meeting, where the shareholders approved a maximum aggregate remuneration of $750,000 per annum, including statutory superannuation contributions. Executive remuneration The consolidated entity’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. The executive remuneration and reward framework has four components: • base pay and non-monetary benefits • short-term performance incentives • long-term incentives, currently consisting of the grant of options • other remuneration such as super- annuation and long service leave. The combination of these components comprises the executive’s total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits (if any), is reviewed annually by the Nominations, Remuneration and Corporate Governance Committee, based on individual and business unit performance, the overall performance of the consolidated entity and comparable market remuneration. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive. The short-term incentive (‘STI’) program is designed to align the targets of executives with the targets of the consolidated entity. STI payments are granted to executives based on the achievement of specific annual targets and key performance indicators (‘KPIs’). During FY15, applicable KPIs related to achievement of corporate objectives, specifically the successful acquisition of the Star Vegas Resort & Club, and the successful raising of $132 million to enable the consolidated entity to achieve its objectives. The long-term incentive (‘LTI’) program currently consists of participation in the Company’s option plan. Options are awarded on an annual basis, ensuring that at any given time, the executives have at risk a number of plans, with different vesting periods and amounts. This also helps to smooth out both the risk and the cash flow for the Company and for executives. The option plan was established pursuant to shareholder approval given at the Annual General Meeting held on 21 November 2013. Consolidated entity performance and link to remuneration Remuneration for certain executives is directly linked to performance of the consolidated entity. Bonus and incentive payments are dependent on defined KPIs being met and are at the discretion of the Nominations, Remuneration and Corporate Governance Committee. The section headed ‘Additional Information’ below provides information on the improvement in revenue, earnings, share price and market capitalisation for the Consolidated Entity over the past three years. The increase of 50% in the consolidated entity’s market capitalisation is directly attributable to the successful acquisition of the Star Vegas Resort & Club on 1 July 2015. This has increased the Company’s revenues by a factor of 5.4 times, based on unaudited management accounts for the Star Vegas in FY15. This has transformed the size and scale of the consolidated entity. The Nominations, Remuneration and Corporate Governance Committee is of the opinion that the expansion of the size and scale of the consolidated entity’s business during the year can be attributed in part to the adoption of performance-based compensation, and is satisfied with the upwards trend in shareholder wealth. The Committee also considers that the remuneration framework in place will continue to increase shareholder wealth if maintained over the coming years, subject to any adjustments that are necessary or desirable to reflect the Company’s growth. Use of remuneration consultants The consolidated entity did not engage remuneration consultants during the financial year ended 30 June 2015. Recommendations received from remuneration consultants in prior years were implemented during the year. An agreed set of protocols is put in place at the time of engaging remuneration consultants, to ensure that any remuneration recommendations are free from undue influence from key management personnel. The Board is satisfied that there was no undue influence. Voting and comments made at the Company’s 2014 Annual General Meeting (‘AGM’) At the AGM held on 25 November 2014, 78.85% of the eligible votes received supported the adoption of the remuneration report for the year ended 30 June 2014. Eligible votes received represented approximately 23% of the total voting power in the Company at that time. The company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. The key management personnel of the consolidated entity consisted of the following directors of Donaco International Limited: • Stuart James McGregor – Non-Executive Director and Chairman • Joey Lim Keong Yew – Managing Director and Chief Executive Officer • Benedict Paul Reichel – Executive Director, Group General Counsel and Company Secretary • Benjamin Lim Keong Hoe – Non-Executive Director • Robert Andrew Hines (appointed 1 November 2013) – Non-Executive Director • Ham Techatut Sukjaroenkraisri (appointed 1 July 2015) – Executive Director • Paul Porntat Amatavivadhana (appointed 1 July 2015) – Non-Executive Director And the following persons: • Richard Na Chun Wee – Deputy Group CEO and Chief Financial Officer • Kenny Goh Kwey Biaw – Deputy Chief Financial Officer and CEO of Donaco Singapore 16 17 donaco international limited 2015 annual reportdonaco international limited 2015 annual report Short-term benefits Post- employment benefits Long-term benefits Share-based payments CASH SALARY AND FEES BONUS NON- MONETARY SUPER- ANNUATION LEAVE ENTITLEMENTS EQUITY- SETTLED 2015 $ Non-Executive Directors S J McGregor 155,606 Lim K H R A Hines 144,792 137,300 $ – – – Executive Directors Lim K Y B P Reichel 514,088 219,716 163,293 50,000 Other key management personnel Na C W 342,075 Goh K B 154,746 108,796 46,152 1,668,243 368,241 2014 $ Non-Executive Directors S J McGregor 139,737 Lim K H R A Hines G N Tan (resigned 6 September 2013) Mak S W (resigned 23 December 2013) 131,172 91,533 13,500 61,636 Executive Directors Lim K Y B P Reichel 432,868 190,000 Other key management personnel Na C W 288,578 Goh K B 118,055 $ – – – – – 72,145 33,334 48,096 19,676 648,931 81,931 $ – – – – – – – – $ – – – – – – – – – – $ 14,783 – 13,044 – 25,623 – – $ – – – – 7,600 – – TOTAL $ 170,389 144,792 150,344 $ – – – 160,187 112,301 837,488 415,240 327,131 224,561 778,002 425,459 53,450 7,600 824,180 2,921,714 $ 12,926 – 8,467 – – – $ – – – – – – 21,014 3,846 – – – – 42,407 3,846 $ – – – – – – – – – – $ 152,663 131,172 100,000 13,500 61,636 505,013 248,194 336,674 137,731 1,686,583 The proportion of remuneration linked to performance and the fixed proportion are as follows: NAME 2015 2014 2015 2014 2015 2014 Fixed remuneration At risk – STI At risk – LTI Non-Executive Directors S J McGregor Lim K H R A Hines G N Tan Mak S W Executive Directors Lim K Y B P Reichel 100% 100% 100% -% -% 61% 53% Other key management personnel Na C W 44% Goh K B 36% 100% 100% 100% 100% 100% 86% 87% 86% 86% -% -% -% -% -% 19% 12% 14% 11% -% -% -% -% -% 14% 13% 14% 14% -% -% -% -% -% 20% 35% 42% 53% -% -% -% -% -% -% -% -% -% The proportion of the cash bonus paid/payable or forfeited is as follows: Cash bonus paid/payable Cash bonus forfeited NAME Executive Directors Lim K Y B P Reichel Other key management personnel Na C W Goh K B 2015 100% 100% 100% 100% 2014 100% 100% 100% 100% 2015 2014 -% -% -% -% -% -% -% -% Criteria for performance-based remuneration The short-term incentive (‘STI’) program is designed to align the targets of executives with the targets of the consolidated entity. STI payments are granted to executives based on specific annual targets and key performance indicators (‘KPIs’) being achieved. The Board, advised by the Nominations, Remuneration and Corporate Governance Committee, applied these criteria in determining the award of performance-based remuneration during the year. Performance-based bonuses were paid on 1 October 2014, with the total amounts set out in the tables above. These bonuses related to performance during FY14. The relevant criteria for award of these bonuses included the fact that during FY14, the Company’s share price increased by a multiple of 2.65 times (an increase of 165%), and the Company’s market capitalisation increased by a multiple of 3.28 times (an increase of 228%), as well as the successful raising of $100 million to enable the Company to pursue its objectives. During FY15, applicable KPIs related to the achievement of corporate objectives, specifically the successful acquisition of the Star Vegas Resort & Club, and the successful raising of $132 million to enable the consolidated entity to pursue its objectives. Service agreements 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 18 19 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportduties. Otherwise, the Company may terminate the contracts by giving three months’ notice or paying three months’ salary (in the case of Mr Lim, Mr Na and Mr Goh), or six months (in the case of Mr Reichel). In the case of Mr Lim and Mr Na, termination for any reason other than just cause will result in a termination payment of 24 months’ base salary. Share-based compensation Issue of shares Details of shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2015 are set out below: Name Date Lim K Y B P Reichel Na C W Goh K B 1 October 2014 1 October 2014 1 October 2014 1 October 2014 Shares 115,116 50,556 76,744 31,395 Issue price $0.989 $0.989 $0.989 $0.989 $ 113,849 50,000 75,899 31,050 Approval for the issue of these shares was obtained pursuant to ASX Listing Rule 10.14. Options The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Grant date 1 July 2014 1 July 2014 1 July 2014 Vesting date and exercisable date 1 July 2014 1 July 2015 1 July 2016 Expiry date Exercise price Fair value per option at grant date 1 July 2016 1 July 2017 1 July 2018 $0.590 $0.590 $0.590 $0.491 $0.560 $0.616 Options granted carry no dividend or voting rights. Approval for the issue of these options was obtained pursuant to ASX Listing Rule 10.14. The number of options over ordinary shares granted to and vested by directors and other key management personnel as part of compensation during the year ended 30 June 2015 are set out below: Name Lim K Y B P Reichel Na C W Goh K B Number of options granted during the year 2015 Number of options granted during the year 2014 Number of options vested during the year 2015 Number of options vested during the year 2014 407,371 407,372 1,585,594 1,210,174 – – – – 152,466 152,468 550,766 410,258 – – – – Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part of compensation during the year ended 30 June 2015 are set out below: Name Value of options granted during the year Value of options exercised during the year Value of options lapsed during the year Lim K Y B P Reichel Na C W Goh K B $ 224,400 224,400 878,445 671,645 $ – – – – # – – – – Details of options over ordinary shares granted, vested and lapsed for directors and other key management personnel as part of compensation during the year ended 30 June 2015 are set out below: Name Grant date Vesting date Number of options granted Value of options granted Value of options vested Number of options lapsed Value of options lapsed Lim K Y 1 July 2014 1 July 2014 407,371 B P Reichel 1 July 2014 1 July 2014 407,372 Na C W Goh K B 1 July 2014 1 July 2014 1,585,594 1 July 2014 1 July 2014 1,210,174 224,400 224,400 878,445 671,645 74,800 74,801 270,206 201,273 – – – – $ $ $ – – – – Additional information The earnings of the consolidated entity for the three years to 30 June 2015 are summarised below: Revenue from continuing operations EBITDA Profit/(loss) after income tax 2015 $ 19,108,431 550,295 (2,928,075) 2014 $ 21,111,819 8,861,216 6,793,403 2013 $ 16,076,337 6,888,780 7,026,196 Information relating to previous years is not directly comparable, as the consolidated entity listed on the ASX part way through 2013. The factors that are considered to affect total shareholder return are summarised below: Share price at financial year end ($) 2015 0.75 2014 0.90 2013 0.34 Market capitalisation at year end ($) 623,042,723 414,254,367 126,372,057 Basic earnings per share (cents per share) (0.54) 2.22 2.53 The increase of 50% in the consolidated entity’s market capitalisation is directly attributable to the successful acquisition of the Star Vegas Resort & Club on 1 July 2015. This has increased the Company’s revenues by a factor of 5.4 times, based on unaudited management accounts for the Star Vegas in FY15. This has transformed the size and scale of the consolidated entity for FY16 onwards. 20 21 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportAdditional disclosures relating to key management personnel shares under option Shareholding The number of shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Balance at the start of the year Received as part of remuneration Additions Disposals/other Balance at the end of the year ORDINARY SHARES S J McGregor 235,224 Lim K Y B P Reichel Lim K H R A Hines Na C W Goh K B 207,281,355 183,306 174,291,200 75,000 5,455,000 700,000 – 115,116 50,556 – – 76,744 31,395 112,011 56,962,025 87,288 – 35,714 – – – – – 347,235 264,358,496 321,150 (29,500,000) 144,791,200 – (535,000) – 110,714 4,996,744 731,395 Unissued ordinary shares of Donaco International Limited under option at the date of this report are as follows: Grant date 1 July 2014 1 July 2014 1 July 2014 1 July 2015 1 July 2015 1 July 2015 Expiry date 1 July 2016 1 July 2017 1 July 2018 1 July 2017 1 July 2018 1 July 2019 Exercise price Number under option $0.590 $0.590 $0.590 $0.890 $0.890 $0.890 1,365,959 1,294,836 1,249,716 457,047 395,208 349,376 5,112,142 No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company or of any other body corporate. 388,221,085 273,811 57,197,038 (30,035,000) 415,656,934 shares issued on the exercise of options Option holding The number of options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Balance at the start of the year Granted Exercised Expired/forfeited /other Balance at the end of the year OPTIONS OVER ORDINARY SHARES Lim K Y B P Reichel Na C W Goh K B – – – – – 407,371 407,372 1,585,594 1,210,174 3,610,511 – – – – – – – – – – 407,371 407,372 1,585,594 1,210,174 3,610,511 This concludes the remuneration report, which has been audited. Our marketing strategies for the Star Vegas property, and the ongoing improvements in the highway linking the Star Vegas to Bangkok, will drive continuing growth in this business in FY16. The following ordinary shares of Donaco International Limited were issued during the year ended 30 June 2015 and up to the date of this report on the exercise of options granted: Date options granted Exercise price Number of shares issued 29 January 2013 17 January 2012 1 March 2012 17 May 2012 $0.280 $0.540 $0.540 $0.540 2,721,367 324,400 125,000 125,000 3,295,767 indemnity and insurance of officers indemnity and insurance of auditor The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 31 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. 22 23 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportThe directors are of the opinion that the services as disclosed in note 31 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. officers of the company who are former partners of william buck There are no officers of the Company who are former partners of William Buck. auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page. auditor William Buck continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Mr Stuart McGregor Chairman 25 September 2015 Sydney auditor’s independence declaration FOR THE YEAR ENDED 30 JUNE 2015 AUDITORʼS INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF DONACO INTERNATIONAL LIMITED I declare that, to the best of my knowledge and belief during the year ended 30 June 2015 there have been: — no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and — no contraventions of any applicable code of professional conduct in relation to the audit. William Buck Chartered Accountants ABN 16 021 300 521 M Nevill Partner Dated this 25th day of September, 2015 CHARTERED ACCOUNTANTS & ADVISORS Sydney Ofice Level 29, 66 Goulburn Street Sydney NSW 2000 Telephone: +61 2 8263 4000 Parramatta Ofice Level 7, 3 Horwood Place Parramatta NSW 2150 PO Box 19 Parramatta NSW 2124 Telephone: +61 2 8836 1500 williambuck.com 24 William Buck is an association of independent firms, each trading under the name of William Buck across Australia and New Zealand with affiliated offices worldwide. Liability limited by a scheme approved under Professional Standards Legislation other than for acts or omissions of financial services licensees. 19 d o n a c o i n t e r n a t i o n a l l i m i t e d 2 0 1 5 a n n u a l r e p o r t 25 donaco international limited 2015 annual report board of directors 2015 financials d o n a c o Statement of Profit or Loss and other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Note 1. Significant accounting policies Note 2. Critical accounting judgments, estimates and assumptions Note 3. Operating segments Note 4. Revenue Note 5. Other income Note 6. Expenses Note 7. Income tax expense/(benefits) Note 8. Discontinued operations Note 9. Current assets – cash and cash equivalents Note 10. Current assets – trade and other receivables Note 11. Current assets – inventories Note 12. Current assets – prepaid construction costs Note 13. Current assets – other Note 14. Non-current assets – 26 28 29 30 32 40 41 44 44 45 45 46 48 48 48 49 49 property, plant and equipment 49 contents Note 20. Current liabilities – income tax 54 Note 21. Current liabilities – employee benefits Note 22. Non-current liabilities – borrowings Note 23. Non-current liabilities – employee benefits Note 24. Equity – issued capital Note 25. Equity – reserves Note 26. Equity – retained profits 54 54 55 55 56 57 Note 27. Equity – non-controlling interest 57 Note 28. Equity – dividends Note 29. Financial instruments Note 30. Key management personnel disclosures Note 31. Remuneration of auditors Note 32. Commitments Note 33. Related party transactions Note 34. Parent entity information Note 35. Interests in subsidiaries 58 58 62 63 63 64 65 66 Note 36. Events after the reporting period 68 Note 37. Reconciliation of profit/(loss) after income tax to net cash from operating activities Note 39. Share-based payments Directors’ Declaration Independent Auditor’s Report to the Members of Donaco International Limited 73 Shareholder Information Corporate Directory 75 77 69 69 71 72 i n t e r n a t i o n a l l i m i t e d 2 0 1 5 a n n u a l r e p o r t 27 Note 16. Non-current assets – construction in progress Note 17. Non-current assets – other Note 18. Current liabilities – trade and other payables 52 52 53 Note 19. Current liabilities – borrowings 53 26 Note 15. Non-current assets – intangibles 50 Note 38. Earnings per share donaco international limited 2015 annual reportdonaco international limited 2015 annual report statement of profit or loss and other comprehensive income FOR THE YEAR ENDED 30 JUNE 2015 statement of profit or loss and other comprehensive income FOR THE YEAR ENDED 30 JUNE 2015 Consolidated Consolidated Earnings per share for profit/(loss) from continuing operations attributable to the owners of Donaco International Limited Basic earnings per share Diluted earnings per share Earnings per share for profit from discontinued operations attributable to the owners of Donaco International Limited Basic earnings per share Diluted earnings per share Earnings per share for profit/(loss) attributable to the owners of Donaco International Limited Basic earnings per share Diluted earnings per share Note 38 38 38 38 38 38 2015 $ CENTS (0.95) (0.91) 0.41 0.39 (0.54) (0.52) 2014 $ CENTS 1.70 1.66 0.51 0.50 2.22 2.16 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Revenue from continuing operations Other income Expenses Cost of sales Employee benefits expense Depreciation and amortisation expense Legal and compliance Marketing and promotions Professional and consulting fees Property costs Telecommunications and hosting Other expenses Finance costs Profit/(loss) before income tax (expense)/benefit from continuing operations Income tax (expense)/benefit Profit/(loss) after income tax (expense)/benefit from continuing operations Note 2015 $ 2014 $ 4 5 6 6 19,108,431 21,111,819 (427,602) 121,674 (2,208,639) (1,270,995) 9,902,974) (5,882,036) (4,857,120) (605,044) (269,058) (1,058,511) (1,202,828) (171,965) (270,153) (452,412) (510,722) (300,346) (545,837) (176,299) (1,924,054) (2,231,618) (1,683,159) (920) (5,202,523) 9,592,155 361 (2,892,203) (5,202,162) 6,699,952 Profit after income tax expense from discontinued operations 8 2,201,761 1,570,130 Profit/(loss) after income tax expense for the year (3,000,401) 8,270,082 Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the year, net of tax Total comprehensive income for the year Profit/(loss) for the year is attributable to: Non-controlling interest Owners of Donaco International Limited Total comprehensive income for the year is attributable to: Continuing operations Discontinued operations Non-controlling interest Continuing operations Discontinued operations Owners of Donaco International Limited 12,412,538 (1,316,108) 12,412,538 (1,316,108) 9,412,137 6,953,974 (72,326) 1,476,679 26 2,928,075) 6,793,403 (3,000,401) 8,270,082 (72,326) 1,603,297 – – (72,326) 1,603,297 7,203,984 3,780,547 2,280,479 1,570,130 9,484,463 5,350,677 9,412,137 6,953,974 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 28 29 donaco international limited 2015 annual reportdonaco international limited 2015 annual reportstatement of financial position FOR THE YEAR ENDED 30 JUNE 2015 statement of changes in equity FOR THE YEAR ENDED 30 JUNE 2015 Consolidated Note 2015 $ 2014 $ CONSOLIDATED Issued capital $ Reserves Retained profits Non-controlling interest Total equity $ $ $ $ Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Prepaid construction costs Other Assets of disposal groups classified as held for sale Total current assets Non-current assets Property, plant and equipment Intangibles Construction in progress Other Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Income tax Employee benefits Liabilities directly associated with assets classified as held for sale Total current liabilities Non-current liabilities Borrowings Employee benefits Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained profits Equity attributable to the owners of Donaco International Limited Non-controlling interest Total equity 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 210,175,119 2,064,923 700,866 273,207 11,883,206 225,097,321 – 225,097,321 82,017,909 2,464,577 205,737 533,765 85,221,988 98,034,937 802,301 1,405,726 18,815,625 2,207,269 121,265,858 5,706,816 126,972,674 5,894,577 9,830,615 39,151,630 18,637 54,895,459 310,319,309 181,868,133 16,016,059 2,962,712 427,505 315,879 19,722,155 – 19,722,155 13,217,093 9,011 13,226,104 12,635,132 1,446,596 4,851,700 70,490 19,003,918 2,998,897 22,002,815 10,608,370 20,485 10,628,855 32,948,259 32,631,670 277,371,050 149,236,463 246,719,609 15,757,522 13,907,457 276,384,588 986,462 129,964,909 (478,093) 18,690,859 148,177,675 1,058,788 277,371,050 149,236,463 Balance at 1 July 2013 34,692,937 964,633 12,745,584 – 6,793,403 3,599,303 1,476,679 52,002,457 8,270,082 Profit after income tax (expense)/benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year – – – Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 24) Unissued shares Share issue expense 101,073,907 (300,000) (5,501,935) Additional holding in Lao Cai JV Dividends paid to non-controlling interest – – (1,442,726) – 126,618 (1,316,108) (1,442,726) 6,793,403 1,603,297 6,953,974 – – – – – – 300,000 – – – – 101,073,907 – (5,501,935) (1,148,128) (3,322,272) (4,470,400) – (821,540) (821,540) Balance at 30 June 2014 129,964,909 (478,093) 18,690,859 1,058,788 149,236,463 CONSOLIDATED Issued capital $ Reserves Retained profits Non-controlling interest Total equity $ $ $ $ Balance at 1 July 2014 129,964,909 (478,093) 18,690,859 1,058,788 149,236,463 Loss after income tax (expense)/benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year – – – Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 24) 133,340,451 Share buy backs Share issue expense Return of capital on iSentric sale* Employee share options Transfer from retained earnings (825,113) (7,260,638) (8,500,000) – – – (2,928,075) (72,326) (3,000,401) 12,412,538 – – 12,412,538 12,412,538 (2,928,075) (72,326) 9,412,137 – – – – 1,967,750 – – – – – 1,855,327 (1,855,327) – – – – – – 133,340,451 (825,113) (7,260,638) (8,500,000) 1,967,750 – Balance at 30 June 2015 246,719,609 15,757,522 13,907,457 986,462 277,371,050 * Pursuant to the sale of iSentric Sdn Bhd to OMI Holdings Limited, which took effect on 8 September 2014, the shareholders of Donaco voted at an extraordinary general meeting on 25 August 2014 to approve an ordinary resolution under section 256C of the Corporations Act 2001, to a return of Donaco’s share capital to shareholders in the amount of $8,500,000. This equated to $0.0185 per Donaco ordinary share. The above statement of financial position should be read in conjunction with the accompanying notes. The above statement of changes in equity should be read in conjunction with the accompanying notes. 30 31 donaco international limited 2015 annual reportdonaco international limited 2015 annual report statement of cash flows FOR THE YEAR ENDED 30 JUNE 2015 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Other revenue Interest received Government levies, gaming taxes and GST Consolidated Note 2015 $ 2014 $ 26,924,930 34,465,583 (16,099,850) (16,517,800) 10,825,080 17,947,783 (358,371) 2,463,582 – 566,303 (4,427,829) (8,825,898) Net cash from operating activities 37 8,502,462 9,688,188 Cash flows from investing activities Payment for purchase of business, net of cash acquired Payments for property, plant and equipment Proceeds from disposal of business Proceeds from disposal of investments Proceeds from disposal of property, plant and equipment Other Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Net borrowings Payment of equity raising expenses Dividends paid by controlled entities to non-controlling interests Purchase of additional 20% non controlling interest in Lao Cai JV Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents (6,073,857) – (26,354,575) (41,262,043) 450,000 – – 1,003 6,720 103,865 (186,673) – (31,970,709) (41,344,851) 132,515,339 101,073,907 1,785,151 (7,260,638) – – 12,054,966 (5,501,935) (821,540) (4,470,400) 127,039,852 102,334,998 103,571,605 99,496,165 7,107,349 70,678,335 29,404,205 (586,375) Cash and cash equivalents at the end of the financial year 9 210,175,119 99,496,165 The above statement of cash flows should be read in conjunction with the accompanying notes. 32 33 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual reportnote 1. significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New, revised or amending Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities The amendments are applicable to annual reporting periods beginning on or after 1 January 2014. The amendments add application guidance to address inconsistencies in the application of the offsetting criteria in AASB 132 ‘Financial Instruments: Presentation’, by clarifying the meaning of ‘currently has a legally enforceable right of set-off’; and clarifies that some gross settlement systems may be considered to be equivalent to net settlement. The adoption of the amendments from 1 July 2014 will not have a material impact on the consolidated entity. AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets These amendments are applicable to annual reporting periods beginning on or after 1 January 2014. The disclosure requirements of AASB 136 ‘Impairment of Assets’ have been enhanced to require additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposals. Additionally, if measured using a present value technique, the discount rate is required to be disclosed. The adoption of these amendments from 1 January 2014 may increase the disclosures by the consolidated entity. Annual Improvements to IFRSs 2010-2012 Cycle These amendments are applicable to annual reporting periods beginning on or after 1 July 2014 and affects several Accounting Standards as follows: Amends the definition of ‘vesting conditions’ and ‘market condition’ and adds definitions for ‘performance condition’ and ‘service condition’ in AASB 2 ‘Share-based Payment’; Amends AASB 3 ‘Business Combinations’ to clarify that contingent consideration that is classified as an asset or liability shall be measured at fair value at each reporting date; Amends AASB 8 ‘Operating Segments’ to require entities to disclose the judgments made by management in applying the aggregation criteria; Clarifies that AASB 8 only requires a reconciliation of the total reportable segments assets to the entity’s assets, if the segment assets are reported regularly; Clarifies that the issuance of AASB 13 ‘Fair Value Measurement’ and the amending of AASB 139 ‘Financial Instruments: Recognition and Measurement’ and AASB 9 ‘Financial Instruments’ did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amount, if the effect of discounting is immaterial; Clarifies that in AASB 116 ‘Property, Plant and Equipment’ and AASB 138 ‘Intangible Assets’, when an asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount (i.e. proportional restatement of accumulated amortisation); and Amends AASB 124 ‘Related Party Disclosures’ to clarify that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a ‘related party’ of the reporting entity. The adoption of these amendments from 1 January 2015 will not have a material impact on the consolidated entity. Annual Improvements to IFRSs 2011-2013 Cycle These amendments are applicable to annual reporting periods beginning on or after 1 July 2014 and affects four Accounting Standards as follows: Clarifies the ‘meaning of effective IFRSs’ in AASB 1 ‘First-time Adoption of Australian Accounting Standards’; Clarifies that AASB 3 ‘Business Combination’ excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself; Clarifies that the scope of the portfolio exemption in AASB 13 ‘Fair Value Measurement’ includes all contracts accounted for within the scope of AASB 139 ‘Financial Instruments: Recognition and Measurement’ or AASB 9 ‘Financial Instruments’, regardless of whether they meet the definitions of financial assets or financial liabilities as defined in AASB 132 ‘Financial Instruments: Presentation’; and Clarifies that determining whether a specific transaction meets the definition of both a business combination as defined in AASB 3 ‘Business Combinations’ and investment property as defined in AASB 140 ‘Investment Property’ requires the separate application of both standards independently of each other. The adoption of these amendments from 1 January 2015 will not have a material impact on the consolidated entity. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the consolidated entity’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 34. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Donaco International Limited (‘Company’ or ‘parent entity’) as at 30 June 2015 and the results of all subsidiaries for the year then ended. Donaco International Limited and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity 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. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Foreign currency translation The financial statements are presented in Australian dollars, which is Donaco International Limited’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars 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 financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars 34 35 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual reportusing the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Revenue recognition Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. 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. Sale of goods Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods, the risks and rewards are transferred to the customer and there is a valid sales contract. Rendering of services Revenue from the provision of services is recognised in the accounting period in which the services are rendered. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income tax Current and non-current classification Inventories The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. 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 carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities that intend to settle simultaneously. Discontinued operations A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the statement of profit or loss and other comprehensive income. Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised 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. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired. 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. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Other receivables are recognised at amortised cost, less any provision for impairment. 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. Non-current assets of disposal groups classified as held for sale Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write-down of the non-current assets and assets of disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities. 36 37 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual reportProperty, plant and equipment Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Buildings and structures Machinery and equipment Motor vehicles Office equipment and other 25 years 5–10 years 3–6 years 3–10 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits. Operating lease payments, net of any incentives received from the lessor, are charged to the statement of profit or loss and other comprehensive income, on a straight-line basis over the term of the lease. Intangible assets The intangible asset includes costs incurred to acquire interests in the usage of land in the Socialist Republic of Vietnam for the original hotel, located in Lao Cai. The term of the agreement is 30 years from the initial licensing date of 19 July 2002. These land use rights are stated at cost less accumulated amortisation. Amortisation is calculated on a straight-line basis over a period of 30 years, from the licensing date. At the expiry of the land term it is expected that the relevant State body will consider an application for extension. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Prepaid construction costs Amounts recognised as prepaid construction costs relate to tranche payments made to third party developers in connection with the construction of the new Lao Cai Casino. Tranche payments are made in advance of construction work being performed in accordance with the terms of the contractor agreements, however once associated works have been completed an amount equal to the tranche payment is transferred from prepaid construction costs to construction in progress. Once recognised as part of construction in progress the amounts are then carried on the statement of financial position at cost, until such time as the asset is completed and ready for its intended use. Work in progress is not depreciated, but tested for impairment annually. Once ready for its intended use an amount equal to the cost of the completed asset will be transferred to property, plant and equipment and accounted for in accordance with the consolidated entity’s accounting policy for property, plant and equipment. Impairment of non-financial assets Goodwill and other 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 non-financial assets are reviewed 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. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the loans or borrowings are classified as non-current. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred including: – interest on short-term and long-term borrowings. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Non-accumulating sick leave is expensed to profit or loss when incurred. Other long-term employee benefits The liability for annual leave and long service leave not expected to be wholly settled within 12 months of the reporting date are recognised in non-current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date 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 reporting date on national corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new awards are treated as if they were a modification. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, 38 39 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual reportassuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Issued capital 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. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition- date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non- controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non- controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition date, but only after a reassessment of the identification and measurement of the net assets acquired, the non- controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Donaco International Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and Services Tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities that are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2015. The consolidated entity’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below. AASB 9 Financial Instruments This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2018 and completes phases I and III of the IASB’s project to replace IAS 39 (AASB 139) ‘Financial Instruments: Recognition and Measurement’. This standard introduces new classification and measurement models for financial assets, using a single approach to determine whether a financial asset is measured at amortised cost or fair value. The accounting for financial liabilities continues to be classified and measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating to the entity’s own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch. Chapter 6 ‘Hedge Accounting’ supersedes the general hedge accounting requirements in AASB 139 and provides a new simpler approach to hedge accounting that is intended to more closely align with risk management activities undertaken by entities when hedging financial and non-financial risks. The consolidated entity will adopt this standard and the amendments from 1 July 2017 but the impact of its adoption is yet to be assessed by the consolidated entity. Interpretation 21 Levies This interpretation is applicable to annual reporting periods beginning on or after 1 January 2014. The Interpretation clarifies the circumstances under which a liability to pay a levy imposed by a government should be recognised, and whether that liability should be recognised in full at a specific date or progressively over a period of time. The adoption of the interpretation from 1 January 2014 will not have a material impact on the consolidated entity. AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments makes amendments to AASB 9 to: (i) replace the general hedge accounting requirements to more closely align hedge accounting with risk management activities undertaken when hedging financial and non- financial risks; (ii) permit fair value changes due to changes in ‘own credit risk’ of financial liabilities measured at fair value to be recognised through other comprehensive income, without applying all other requirements of AASB 9 at the same time; and (iii) defer the mandatory application date of AASB 9 to annual reporting periods beginning on or after 1 January 2017. This application date is subject to review and is expected to be revised by the IASB. AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable methods of Depreciation and Amortisation. This Standard makes amendments to AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets. The main principle is to establish the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset rather than associated to revenue streams. This Standard applies to annual reporting periods beginning on or after 1 January 2016. The Company has not elected early adoption. AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2017. The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (written, verbal or implied) to be identified, together with the separate performance obligations within the contract; determination of the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity’s statement of financial position as a contract liability, a contract asset or a receivable, depending on the relationship between the entity’s performance and the customer’s payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgments made 40 41 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual reportnote 3. operating segments Identification of reportable operating segments The consolidated entity is organised into three operating segments: Casino operations, Gaming Technology operations and Corporate operations. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on at least a monthly basis. Types of products and services The principal products and services of each of these operating segments are as follows: Casino operations Comprises the Aristo International Hotel operations, including hotel accommodation, gaming and leisure facilities, operated in Vietnam. Gaming Technology Comprises the operation and operations development of gaming technology, including mobile payment gateways and interactive media and gambling applications for deployment on television, mobile and internet. Corporate operations Comprises of the development and implementation of corporate strategy, commercial negotiations, corporate finance, treasury, management accounting, corporate governance and investor relations functions. The consolidated entity is domiciled in Australia and operates predominantly in four countries: Australia, Vietnam, Singapore and Malaysia. Intersegment transactions Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation. in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will adopt this standard from 1 January 2017 but the impact of its adoption is yet to be assessed by the consolidated entity. AASB 2014-1 Amendments to Australian Accounting Standards (Parts A to C) IFRS 15 ‘Revenue from Contracts with Customers’ contains new requirements for the recognition of revenue. The standard will also include additional disclosures about revenue. Adoption of IFRS 15 is not mandatory until annual periods beginning on or after 1 January 2017 and 1 January 2018 respectively. Early adoption is permitted. The potential financial impact to the Group is not yet possible to determine. note 2. critical accounting judgments, estimates and assumptions The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgments and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgments, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgments and estimates will seldom equal the related actual results. The judgments, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black- Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share- based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Goodwill The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Income tax The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. Employee benefits provision As discussed in note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. Business combinations As discussed in note 1, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported. 42 43 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report Operating segment information for continuing and discontinuing operations CONSOLIDATED – 2015 $ $ $ Casino operations Gaming Technology operations* Corporate operations Total $ Revenue Sales revenue Interest Total revenue EBITDA Depreciation and amortisation Gain on disposal of discontinued operation Interest revenue Other income Non-recurring items Net exchange gains NCI Finance costs Tax expense disposed operations Loss before income tax benefit Income tax benefit Loss after income tax benefit Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities 17,069,618 1,296,742 1,308 18,367,668 40,310 2,529 17,109,928 1,299,271 1,997,195 1,998,503 2,040,034 20,407,702 6,382,587 (4,833,763) – 40,310 – – (86,577) (72,326) (1,683,159) – (252,928) 96,330,444 52,459,098 34,930 (2,743) – 2,529 (6,206) – – – – (30,122) (1,612) (5,867,222) 550,295 (23,357) (4,859,863) 2,203,374 1,997,195 – (715,187) (341,025) – – – 2,203,374 2,040,034 (6,206) (715,187) (427,602) (72,326) (1,683,159) (30,122) (2,746,222) (3,000,762) 361 (3,000,401) – – 213,988,865 310,319,309 310,319,309 (19,510,839) 32,948,259 32,948,259 CONSOLIDATED – 2014 $ $ Casino operations Gaming Technology operations* Revenue Sales revenue Interest Total revenue EBITDA Depreciation and amortisation Interest Other income Net exchange gains NCI Profit before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Total assets Total assets includes: 19,471,405 101,529 19,572,934 8,943,888 (270,153) 101,529 – 126,732 1,476,679 10,378,675 8,821,721 851,093 9,672,814 82,672) (21,937) 851,093 52,844 (5,059) – 794,269 84,807,927 97,060,206 Total $ 28,293,126 952,622 29,245,748 8,861,216 (292,090) 952,622 52,844 121,673 1,476,679 11,172,944 (2,902,862) 8,270,082 181,868,133 181,868,133 Acquisition of non-current assets 39,151,630 – 39,151,630 Liabilities Segment liabilities Unallocated liabilities: Provision for income tax Total liabilities 24,463,950 3,316,020 27,779,970 4,851,700 32,631,670 * The above operating segment information includes iSentric Sdn Bhd, the discontinuing operation as at 30 June 2014, which is reported under the category Gaming Technology operations. * The above operating segment information includes iSentric Sdn Bhd, Way2Bet Pty Ltd and Donaco Australia Pty Ltd, Geographical information which are discontinued operations as at 30 June 2015. Our Company now employs some 1,800 people across two major leisure and entertainment properties in Asia. Australia Vietnam Other countries (discontinuing operation) Sales to external customers Geographical non-current assets 2015 $ 1,308 17,069,618 1,296,742 2014 $ 747,050 19,471,405 8,074,671 2015 $ 3,038,226 82,183,762 – 2014 $ 9,805,003 44,863,004 227,452 18,367,668 28,293,126 85,221,988 54,895,459 The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets, post-employment benefits assets and rights under insurance contracts. 44 45 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report Revenue and other income note 6. expenses Profit/(loss) before income tax from continuing operations includes the following specific expenses: Consolidated 2015 $ 2014 $ Total reportable segment revenues Other segment revenues Discontinued operation Total revenue and other income Consolidated 2015 $ 2014 $ 17,070,926 20,165,611 1,609,903 1,299,271 1,067,882 8,133,929 19,980,100 29,367,422 The group did not engage in inter-group sales, hence there were no intersegment revenues. note 4. revenue From continuing operations Sales revenue Casino operations Corporate operations Other revenue Interest Casino operations Consolidated 2015 $ 2014 $ 17,013,088 1,308 17,014,396 2,037,505 56,530 2,094,035 19,471,405 694,206 20,165,611 946,208 – 946,208 Revenue from continuing operations 19,108,431 21,111,819 note 5. other income Revenue from continuing operations Consolidated 2015 $ 2014 $ (427,602) 121,674 Cost of sales Cost of sales Depreciation Land, buildings and structures Machinery and equipment Office equipment and other Motor vehicles Consumables Total depreciation Superannuation expense Defined contribution superannuation expense note 7. income tax expense/(benefit) Income tax expense/(benefit) Current tax Adjustment recognised for prior periods Aggregate income tax expense/(benefit) Income tax expense/(benefit) is attributable to: Profit/(loss) from continuing operations Profit from discontinued operations Aggregate income tax expense/(benefit) 2,208,639 1,270,995 1,371,729 1,459,734 202,989 101,022 1,721,646 4,857,120 58,758 108,821 45,081 57,493 – 270,153 71,310 63,296 Consolidated 2015 $ – (361) (361) (361) – (361) 2014 $ 2,883,202 19,660 2,902,862 2,892,203 10,659 2,902,862 9,592,155 1,580,789 11,172,944 3,351,883 284,972 3,636,855 19,660 (753,653) 2,902,862 Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate Profit/(loss) before income tax (expense)/benefit from continuing operations (5,202,523) Profit before income tax expense from discontinued operations Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Non-assessable or deductible items Adjustment recognised for prior period Difference in overseas tax rates Income tax expense/(benefit) 2,201,761 (3,000,762) (900,229) 472,075 (428,154) (361) 428,154 (361) 46 47 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual reportnote 8. discontinued operations Description On 26 February 2014, the Company announced that it planned to spin off its mobile technology business, iSentric Sdn Bhd, into a new company separately listed on the ASX. A binding Share Sale Agreement to implement the transaction was signed with OMI Holdings Limited on 9 May 2014. The agreed value for the sale was $12,000,000 in ordinary fully paid shares in OMI, which were distributed to Donaco shareholders in specie. The transaction was completed on 23 September 2014, when OMI Holdings Limited changed its name to iSentric Limited and iSentric Limited was requoted on the ASX under the code ‘ICU’. Donaco distributed its shares in the newly listed entity to Donaco shareholders in specie on 16 September 2014. Donaco shareholders with a minimum of 19,206 shares on the record date of 12 September 2014 received approximately 0.13 iSentric shares for each Donaco share. Holders of fewer Donaco shares had their entitlements sold, and received the proceeds of sale (less costs) in cash. No impairment loss was recognised on the reclassification of iSentric to a discontinued operation. On 31 October 2014, Way2Bet Pty Ltd, a subsidiary of the Company which managed the Company’s online wagering marketing business, was sold to Punters Paradise Pty Limited. The net proceeds of sale to the Company were $450,000. Information on the financial performance of the discontinued operation during the year ended 30 June 2015 is set out below. Financial performance information Consolidated Discontinued revenue Mobile business solution Gaming technology operations Interest Total revenue Other income Total other income Cost of sales Employee benefits expense Depreciation and amortisation expense Legal and compliance Marketing and promotions Professional and consulting fees Property costs Telecommunications and hosting Discontinued tax expense Other expenses Total expenses Profit/(loss) before income tax expense Income tax expense Profit/(loss) after income tax expense Discontinued disposal iSentric Discontinued disposal Way2Bet Income tax expense Gain on disposal after income tax expense Profit after income tax expense from discontinued operations 2015 $ 1,148,201 148,541 2,529 1,299,271 12,824 12,824 (746,309) (196,389) (2,743) (20,283) (79,452) (174,112) (6,972) (9,929) (30,123) (47,396) (1,313,708) (1,613) – (1,613) 1,753,464 449,910 – 2,203,374 2,201,761 2014 $ – 8,127,515 6,414 8,133,929 – – (4,971,121) (715,749) (21,937) (20,606) (254,304) (134,945) (34,870) (14,618) – (384,990) (6,553,140) 1,580,789 (10,659) 1,570,130 – – – – 1,570,130 Cash flow information Net cash from operating activities Net cash used in investing activities Consolidated 2015 $ 1,613,329 – Net increase in cash and cash equivalents from discontinued operations 1,613,329 Carrying amounts of assets and liabilities disposed 2014 $ 1,477,253 (209,172) 1,268,081 Cash and cash equivalents Trade and other receivables Other current assets Property, plant and equipment Other non-current assets Total assets Trade and other payables Total liabilities Net assets Details of the disposal Total sale consideration Carrying amount of net assets disposed Goodwill disposed Gain on disposal before tax income Income tax expense Gain on disposal after income tax 2015 $ 1,613,329 3,732,628 102,148 36,471 181,723 5,666,299 2,790,322 2,790,322 2,875,977 2015 $ 12,450,000 (2,875,977) (7,370,649) – 2,203,374 – 2,203,374 Consolidated 2014 $ – – – – – – – – – Consolidated 2014 $ – – – – – – – 48 49 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report note 9. current assets – cash and cash equivalents note 12. current assets – prepaid construction costs Cash on hand Cash at bank Cash on deposit Consolidated 2015 $ 8,613,555 201,561,564 – 2014 $ 5,514,580 6,160,255 86,360,102 210,175,119 98,034,937 Reconciliation to cash and cash equivalents at the end of the financial year The above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the statement of cash flows as follows: Balances as above Cash and cash equivalents – classified as held for sale 210,175,119 – 98,034,937 1,461,228 Balance as per statement of cash flows 210,175,119 99,496,165 note 10. current assets – trade and other receivables Trade receivables Receivable from related parties Interest receivable on bank deposits BAS and VAT receivable Consolidated 2015 $ 1,010,426 – 7,485 1,047,012 2,064,923 2014 $ 449,720 27,039 294,551 30,991 802,301 Prepaid construction costs Consolidated 2015 $ 2014 $ 273,207 18,815,625 Amounts recognised as prepaid construction costs relate to tranche payments made to third party developers in connection with the construction of the new Aristo Casino. Tranche payments are made in advance of construction work being performed in accordance with the terms of the contractor agreements, however once associated works have been completed an amount equal to the tranche payment is transferred from prepaid construction costs to non-current construction in progress. note 13. current assets – other Bonds and security deposits Tax receivable Prepayments Consolidated 2015 $ 8,167 546 11,874,493 11,883,206 2014 $ 8,167 1,238,204 960,898 2,207,269 In FY14, BAS and VAT receivables of $30,991 were classified as Current assets – Other. For FY15 this category has been reclassified as Current assets – Trade and other receivables. note 14. non-current assets – property, plant and equipment Consolidated In FY14, BAS and VAT receivables of $30,991 were classified as Current assets – Other. For FY15 this category has been reclassified as Current assets – Trade and other receivables. Leasehold buildings and structures – at cost Less: Accumulated depreciation Impairment of receivables The consolidated entity has recognised a loss of $0 (2014: $0) in profit or loss in respect of impairment of receivables for the year ended 30 June 2015. note 11. current assets – inventories Food and beverage – at cost Consolidated 2015 $ 2014 $ 700,866 1,405,726 Machinery and equipment – at cost Less: Accumulated depreciation Motor vehicles – at cost Less: Accumulated depreciation Office equipment and other – at cost Less: Accumulated depreciation Consumables Less: Accumulated depreciation 2015 $ 62,808,775 (2,099,485) 60,709,290 17,491,217 (3,224,294) 14,266,923 627,077 (233,519) 393,558 1,797,220 (486,099) 1,311,121 7,058,663 (1,721,646) 5,337,017 82,017,909 2014 $ 1,170,778 (488,769) 682,009 3,699,023 (1,366,871) 2,332,152 512,538 (143,948) 368,590 1,671,963 (202,541) 1,469,422 1,240,787 (198,383) 1,042,404 5,894,577 50 51 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report Reconciliations Reconciliations of the written-down values (WDVs) at the beginning and end of the current and previous financial year are set out below: Machinery and equipment Motor vehicles CONSOLIDATED Balance at 1 July 2013 Additions Disposals Exchange differences Transfers in/(out) Leasehold buildings $ 739,839 – – (996) – $ 482,984 1,766,859 (12,950) 191,130 12,950 Depreciation expense (56,834) (108,821) Balance at 30 June 2014 682,009 2,332,152 Additions Disposals Exchange differences Transfers in/(out) 61,346,689 11,576,307 (8,525) 58,742 – – 387,480 1,430,718 1,230,192 1,042,404 Office equipment and other $ 94,054 – 190,257 – (45,081) 1,469,422 1,214,941 (205) 284,954 Consumables Total $ – – – – – $ 1,500,608 4,309,575 (63,365) 374,700 41,288 (268,229) 1,042,404 5,894,577 5,775,378 79,979,508 – (8,730) 240,881 1,031,854 (1,455,002) – (24,284) $ 183,731 270,120 (50,415) (5,691) 28,338 (57,493) 368,590 66,193 – 59,797 – Reconciliations Reconciliations of the written-down values at the beginning and end of the current and previous financial year are set out below: CONSOLIDATED Balance at 1 July 2013 Exchange differences Amortisation expense Balance at 30 June 2014 Disposals Exchange differences Amortisation expense Balance at 30 June 2015 Land right $ 52,358 (16,654) (1,925) 33,779 – 6,715 (2,104) 38,390 Goodwill $ 9,796,836 – – 9,796,836 (7,370,649) – – Total $ 9,849,194 (16,654) (1,925) 9,830,615 (7,370,649) 6,715 (2,104) 2,426,187 2,464,577 Impairment testing of goodwill Goodwill is monitored by the Chief Operating Decision Makers (‘CODM’) at the cash generating unit level. CODM reviews the business performance based on geography and type of business. It has identified two reportable cash generating units. A business-level summary of the goodwill allocation is presented below: Depreciation expense (1,369,625) (1,459,734) (101,022) (202,989) (1,721,646) (4,855,016) Balance at 30 June 2015 60,709,290 14,266,923 393,558 1,311,121 5,337,017 82,017,909 In FY14, Consumables of WDV $1,042,404 were classified as Non-current assets – Other. For FY15 this category has been reclassified as Non-current assets – Property, plant and equipment. It represents low value, high turnover items that are depreciated in accordance with company policy and local legislation. In the FY14, Land right of $33,779 was classified as Non-current assets – Property, plant and equipment. For FY15 this category has been reclassified as Non-current assets – Intangibles Donaco Singapore iSentric Total goodwill Consolidated 2015 $ 2,426,187 – 2,426,187 2014 $ 2,426,187 7,370,649 9,796,836 note 15. non-current assets – intangibles Goodwill – at cost Land right – at cost Less: Accumulated amortisation Consolidated 2015 $ 2014 $ 2,426,187 9,796,836 69,474 (31,084) 38,390 56,642 (22,863) 33,779 2,464,577 9,830,615 The recoverable amount of the cash generating unit of Donaco Singapore 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. The Group determines whether goodwill is impaired at least on an annual basis. To do so, the Group employs a value- in-use calculation using cash flow projections from financial budgets approved by senior management. Management has forecast a strong growth rate in budgeted gross margin for FY16 based on the growth in revenue from Aristo’s main gaming floor, VIP gaming, and the increase in the number of slot machines. The new hotel room, entertainment, restaurant and bar revenue lines, with associated marketing programs, will increase visitation to the new hotel, which will also contribute to overall revenue growth. Gross margin projections for future years are based on past performance and management’s expectations for future performance in each segment. 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. Land right An intangible asset of $38,390 relates to a 30-year land use right in the Socialist Republic of Vietnam. Land use right is stated at cost less accumulated amortisation and any impairment losses. The amortisation period is 30 years. This intangible asset is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. In FY14, Land right of $33,779 was classified as Non-current assets – Property, plant and equipment. For FY15 this category has been reclassified as Non-current assets – Intangibles 52 53 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report note 16. non-current assets – construction in progress note 18. current liabilities – trade and other payables Consolidated 2015 $ 2014 $ Property construction works in progress (WIP) – at cost 205,737 39,151,630 Reconciliations Reconciliations of the written-down values at the beginning and end of the current and previous financial year are set out below: Trade payables Intercompany payable Deposits received Floating chips Interest payable Construction WIP Other payables and accrued expenses Consolidated 2015 $ 3,160,938 9,081 115,098 12,326,032 141,494 263,416 16,016,059 2014 $ 1,909,478 – 85,989 9,282,203 – 1,357,462 12,635,132 CONSOLIDATED Balance at 1 July 2013 Additions Exchange differences Balance at 30 June 2014 Additions Revaluation increments Transfers in/(out) Balance at 30 June 2015 $ 12,336,321 27,005,239 (189,930) 39,151,630 26,073,612 8,869,600 (73,889,105) 205,737 Construction relates to costs incurred by the new construction of the Aristo Casino. Amounts previously recognised as prepaid construction costs, are transferred to construction in progress, once associated works have been completed. Once recognised as part of construction in progress the amounts are then carried on the statement of financial position at cost, until such time as the asset is completed and ready for its intended use. Work in progress is not depreciated, but tested for impairment annually. Once ready for its intended use an amount equal to the cost of the completed asset will be transferred to property, plant and equipment or non- current prepayment and accounted for in accordance with the consolidated entity’s accounting policy for each asset class. All borrowing costs incurred in connection with the borrowing of funds that are directly attributable to the acquisition, construction or production of the qualifying asset, that necessarily take a substantial period of time to get ready for their intended use, are capitalised as part of the cost of the asset, until substantially all those activities necessary to prepare the qualifying asset for its intended use, or sale, are complete. Total capitalised as at 30 June 2015 is $31,565 (2014: $1,232,870). note 17. non-current assets – other Other debtors Consolidated 2015 $ 533,765 2014 $ 18,637 In FY14, Consumables of WDV $1,042,404 were classified as Non-current assets – Other debtors. For FY15 this category has been reclassified as Non-current assets – Property, plant and equipment. It represents low value, high turnover items that are depreciated in accordance with Company policy and local legislation. Refer to note 29 for further information on financial instruments. 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. note 19. current liabilities – borrowings Joint Stock Commercial Ocean Bank Joint Stock Commercial Bank for Foreign Trade of Vietnam Refer to note 29 for further information on financial instruments. Total secured liabilities The total secured current liabilities are as follows: Joint Stock Commercial Ocean Bank Joint Stock Commercial Bank for Foreign Trade of Vietnam Consolidated Consolidated 2015 $ 2,916,691 46,021 2,962,712 2015 $ 2,916,691 46,021 2,962,712 2014 $ 1,446,596 – 1,446,596 2014 $ 1,446,596 – 1,446,596 Assets pledged as security The bank overdraft and loans are secured by first mortgages over the consolidated entity’s land and buildings. 54 55 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit (current and non-current): Total secured liabilities The total secured liabilities (current and non-current) are as follows: Consolidated 2015 $ 2014 $ 21,808,808 17,988,139 Joint Stock Commercial Bank for Foreign Trade of Vietnam Joint Stock Commercial Ocean Bank Consolidated 2015 $ 16,041,798 138,007 2014 $ 12,054,966 – 16,179,805 12,054,966 Total facilities Bank loans Used at the reporting date Bank loans Unused at the reporting date Bank loans note 20. current liabilities – income tax Provision for income tax 16,179,805 12,054,966 5,629,003 5,933,173 Consolidated 2015 $ 2014 $ 427,505 4,851,700 Assets pledged as security The bank overdraft and loans are secured by first mortgages over the consolidated entity’s land and buildings. a lending facility for an additional VND180 billion. The term of the loan is seven years payable by 2 October 2020. On 11 July 2011, the Lao Cai International Hotel Joint Venture (the Borrower) entered into a loan agreement with Joint Stock Commercial Ocean Bank (the Lender) for a lending facility of VND180 billion Vietnamese dong, for use towards construction of the new Lao Cai International Hotel. A second agreement was signed on 25 December 2013 for On 7 April 2015 the Lao Cai International Hotel Joint Venture (the Borrower) entered into a second loan agreement with Joint Stock Commercial Bank for Foreign Trade of Vietnam for a lending facility of VND3 billion Vietnamese dong for the purchase of capital equipment. The term is three years at 10.5%pa. note 21. current liabilities – employee benefits note 23. non-current liabilities – employee benefits Consolidated Consolidated Annual leave Long service leave Other note 22. non-current liabilities – borrowings Joint Stock Commercial Ocean Bank Joint Stock Commercial Bank for Foreign Trade of Vietnam Refer to note 29 for further information on financial instruments. 2015 $ 52,240 18,986 244,653 315,879 2014 $ 32,928 – 37,562 70,490 Consolidated 2015 $ 13,125,107 91,986 2014 $ 10,608,370 – 13,217,093 10,608,370 Long service leave Employee benefits note 24. equity – issued capital 2015 $ – 9,011 9,011 2015 $ 2014 $ 20,485 – 20,485 2014 $ Consolidated 2015 SHARES 2014 SHARES Ordinary shares – fully paid 683,524,102 460,282,631 246,719,609 129,964,909 56 57 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report Movements in ordinary share capital Details Date Shares Issue price $ Balance Issued shares Issued shares Issued shares Issued shares DNAO option conversion Unissued shares 1 July 2013 371,719,896 26 November 2013 29,300,000 16 December 2013 1 April 2014 12 May 2014 multiple 31 December 2013 20,000 26,748,344 29,642,635 2,851,756 – – 460,282,631 219,621,175 898,929 2,721,367 – – $0.860 $0.860 $1.330 $1.330 $0.300 $0.000 $0.000 $0.600 $0.300 $0.280 $0.000 $0.000 34,692,937 25,198,000 17,200 35,575,297 39,424,705 858,705 (300,000) (5,501,935) 129,964,909 131,486,827 1,028,511 – (7,260,638) (8,500,000) 246,719,609 Less: transaction costs arising on share issue multiple Balance Issued shares DNAO option conversion DNAO option conversion Less: transaction costs arising on share issue Return of capital on iSentric sale 30 June 2014 multiple multiple multiple multiple Balance 30 June 2015 683,524,102 Foreign currency reserve The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to Australian dollars. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. of their remuneration, and other parties as part of their compensation for services. Revaluation surplus reserve The reserve is used to recognise increments and decrements in the fair value of net assets of disposed entities. Employee share option reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Revaluation surplus reserve* Employee share option reserve Foreign currency CONSOLIDATED Balance at 1 July 2013 Foreign currency translation Balance at 30 June 2014 Revaluation – gross Foreign currency translation Employee share option reserve Transfer to retained earnings $ – – – 2,978,285 – – (1,122,958) $ – – – – – 1,967,750 – $ Total $ 964,633 964,633 (1,442,726) (1,442,726) (478,093) – 12,412,538 – – (478,093) 2,978,285 12,412,538 1,967,750 (1,122,958) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Capital risk management The consolidated entity’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. note 25. equity – reserves In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current parent entity’s share price at the time of the investment. The consolidated entity is subject to certain financing arrangements and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 2014 Annual Report. Revaluation surplus reserve Foreign currency reserve Employee share option reserve Consolidated 2015 $ 1,855,327 11,934,445 1,967,750 15,757,522 2014 $ – (478,093) – (478,093) Balance at 30 June 2015 1,855,327 1,967,750 11,934,445 15,757,522 * The Revaluation surplus reserve is used to recognise increments and decrements in the fair value of net assets of disposed entities. note 26. equity – retained profits Retained profits at the beginning of the financial year Profit/(loss) after income tax expense for the year Transfer to revaluation surplus reserve* Transfer from options reserve Transfer from other reserves** Adjustment on the acquisition of non-controlling interest Consolidated 2015 $ 18,690,859 (2,928,075) (2,978,285) – 1,122,958 – 2014 $ 12,745,584 6,793,403 – 300,000 – (1,148,128) Retained profits at the end of the financial year 13,907,457 18,690,859 * Relates to the disposal of iSentric. ** Fair value adjustment on the acquisition of non-controlling interest from 24 July 2013. note 27. equity – non-controlling interest Retained profits Consolidated 2015 $ 2014 $ 986,462 1,058,788 58 59 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report note 28. equity – dividends There were no dividends to shareholders paid, recommended or declared during the current or previous financial year. A dividend was paid by the Lao Cai International Hotel Joint Venture Company to non- controlling interests (the Vietnamese Government) in the previous financial year. The consolidated entity’s dividend policy is unchanged from that set out in the prospectus dated 13 December 2012, which stated: The Company intends to pay dividends to Shareholders in the future subject to the availability of sufficient profits and franking credits and subject to the Company’s then current working capital requirements and growth plans. Shareholders should note that the payment of dividends is not guaranteed. note 29. financial instruments Financial risk management objectives The consolidated entity’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk. Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the consolidated entity’s operating units. Finance reports to the Board on a monthly basis. Market risk Market risk is the risk that changes in market prices, such as interest rate and foreign exchange rate, will affect the consolidated entity’s income. Foreign currency risk The consolidated entity is exposed to foreign exchange fluctuations in relation to cash generated for working capital purposes, denominated in foreign currencies and net investments in foreign operations, namely Vietnam and Malaysia. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. 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. 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. Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of The average exchange rates and reporting date exchange rates applied were as follows: Average exchange rates Reporting date exchange rates AUSTRALIAN DOLLARS USD VND CNY MYR SGD HKD 2015 1.2066 0.0001 5.1264 0.3485 0.9200 0.1556 2014 1.0931 0.0001 5.6245 0.3359 0.9070 0.1409 2015 1.3021 0.0001 4.7661 0.3443 0.9671 0.1680 2014 1.0616 0.0001 5.8466 0.3307 0.8501 0.1370 The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: CONSOLIDATED USD VND CNY MYR SGD HKD Assets Liabilities 2015 $ 178,267,338 26,998,893 8,515,466 27,636 47,643 94,811 2014 $ 8,325,884 24,407,168 5,234,206 29,269 46,987 – 2015 $ (6,013,131) (13,970,745) (12,326,033) (1,104) (11,067) – 2014 $ (2,265,498) (11,939,946) (10,076,241) (1,058) (7,644) – 213,951,787 38,043,514 (32,322,080) (24,290,387) A 5% strengthening of the AUD against the various foreign currencies at the balance date would increase/(decrease) the Company’s profit/(loss) after tax by the amounts shown below. The analysis assumes that all other variables remain constant. CONSOLIDATED – 2015 % CHANGE EFFECT ON PROFIT AFTER TAX AUD strengthened USD VND CNY MYR SGD HKD 5% 5% 5% 5% 5% 5% (8,612,710) (651,407) 190,528 (1,327) (1,829) (4,740) (9,081,485) CONSOLIDATED – 2014 % CHANGE EFFECT ON PROFIT AFTER TAX AUD strengthened USD VND CNY MYR SGD 5% 5% 5% 5% 5% (303,019) (623,361) 242,101 (1,410) (1,967) (687,656) A 5% weakening of the AUD against the various currencies would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. Interest rate risk The consolidated entity’s main interest rate risk arises from cash and cash equivalents. 60 61 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report As at the reporting date, the consolidated entity had the following cash and cash equivalents: CONSOLIDATED Bank loans Cash on hand and short-term deposits Cash at bank and long-term deposits Net exposure to cash flow interest rate risk Weighted average interest rate Weighted average interest rate Balance Balance 2015 2014 % $ % $ (11.00%) (16,179,805) (16.00%) (12,054,966) 0.19% 0.70% 210,167,449 7,669 193,995,313 -% 3.35% 17,015,447 81,019,491 85,979,972 An analysis by remaining contractual maturities is shown in ‘liquidity risk management’ below. 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. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral. Liquidity risk Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. 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. Financing arrangements Unused borrowing facilities at the reporting date: Bank loans Consolidated 2015 $ 2014 $ 5,629,003 5,933,173 Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time and have an average maturity of five years (2014: six years). Remaining contractual maturities The following tables detail the consolidated entity’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. CONSOLIDATED – 2015 Non-derivatives Non-interest bearing Trade payables Floating chips Weighted average interest rate % -% -% 1 year or less $ 3,160,938 12,326,032 Between 1 and 2 years Between 2 and 5 years Over 5 years $ – – $ – – $ – – Remaining contractual maturities $ 3,160,938 12,326,032 Interest-bearing – variable Bank loans 11.00% Total non-derivatives 2,962,712 18,449,682 2,962,712 2,962,712 8,796,034 8,796,034 1,458,345 1,458,345 16,179,803 31,666,773 CONSOLIDATED – 2014 Non-derivatives Non-interest bearing Trade payables Floating chips Weighted average interest rate % -% -% 1 year or less $ 1,909,478 9,282,203 Between 1 and 2 years Between 2 and 5 years Over 5 years $ – – $ – – $ – – Remaining contractual maturities $ 1,909,478 9,282,203 Interest-bearing – fixed rate Borrowings 12.50% Total non-derivatives 1,446,596 12,638,277 1,768,062 1,768,062 5,304,186 5,304,186 3,536,122 3,536,122 12,054,966 23,246,647 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. 62 63 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report note 30. key management personnel disclosures note 31. remuneration of auditors Directors The following persons were directors of Donaco International Limited during the financial year: Stuart James McGregor Joey Lim Keong Yew Benedict Paul Reichel Benjamin Lim Keong Hoe Robert Andrew Hines Non-Executive Director and Chairman Managing Director and Chief Executive Officer Executive Director and Company Secretary Non-Executive Director Non-Executive Director Other key management personnel The following persons also had the authority and responsibility for planning, directing and controlling the major activities of the consolidated entity, directly or indirectly, during the financial year: Richard Na Chun Wee Kenny Goh Kwey Biaw Chief Financial Officer and Deputy Group CEO Deputy Chief Financial Officer and CEO of Donaco Singapore Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments Consolidated 2015 $ 2,036,484 53,451 7,600 824,179 2,921,714 2014 $ 1,644,176 42,407 – – 1,686,583 During the financial year the following fees were paid or payable for services provided by William Buck, the auditor of the Company, and unrelated firms: Audit services – William Buck Audit or review of the financial statements Other services – William Buck Preparation of the tax return Audit services – unrelated firms Audit or review of the financial statements Other services – unrelated firms Preparation of the tax return Due diligence note 32. commitments Capital commitments Committed at the reporting date but not recognised as liabilities, payable: Property construction works Lease commitments – operating Committed at the reporting date but not recognised as liabilities, payable: Within one year One to five years Consolidated 2015 $ 2014 $ 92,391 80,000 18,000 110,391 5,000 85,000 42,764 33,564 7,850 26,571 34,421 77,185 2015 $ Consolidated 6,667 220 6,887 40,451 2014 $ 2,427,717 7,012,564 195,127 63,240 258,367 55,200 182,719 237,919 Operating lease commitments includes contracted amounts for various offices and sites within Australia and South East 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. Mortgage to Joint Stock Commercial Ocean Bank A mortgage was registered by the Ocean Bank of Vietnam over the assets of the Aristo International Hotel, on 11 July 2011. Total borrowings as per the statement of financial position as at 30 June 2015 under this arrangement were $16,041,797 (2014: $12,054,966). Mortgage to Joint Stock Commercial Bank for Foreign Trade of Vietnam In addition, a secondary mortgage was registered by Joint Stock Commercial Bank for Foreign Trade of Vietnam over assets of the Aristo International Hotel on 7 April 2015. Total borrowings as per the statement of financial position as at 30 June 2015 under this arrangement were $138,007 (2014: $0). 64 65 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report note 33. related party transactions Parent entity Donaco International Limited is the legal parent entity. Donaco International Limited is listed on the Australian Securities Exchange (ASX: DNA). Key management personnel Disclosures relating to key management personnel are set out in note 30 and the remuneration report in the directors’ report. Subsidiaries Interests in subsidiaries are set out in note 35. Transactions with related parties The following transactions occurred with related parties: note 34. parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Loss after income tax Consolidated Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Employee share option reserve Accumulated losses Total equity Other transactions: Dividends paid by controlling entities to non-controlling interest Management fee – associated entities 2015 $ – – 2014 $ (821,540) 47,394 Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Consolidated 2015 $ 2014 $ Current receivables: Amount owing to Donaco Singapore Pte Ltd by associated entity 511,356 27,039 Amounts due from associated companies and related parties are unsecured, interest free, repayable on demand and are to be settled in cash. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. Your Board is one of the most ethnically and culturally diverse boards in the ASX300, with 57% of its members having been born, educated and now residing in Asia. This provides deep and direct experience and knowledge of the regions in which we operate Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2015 and 30 June 2014. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for the following: Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2015 and 30 June 2014. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment at as 30 June 2015 and 30 June 2014. • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. • Dividends received from subsidiaries are recognised as other income by the parent entity. 2015 $ (1,554,401) (1,554,401) Parent 2014 $ (813,264) (813,264) Parent 2015 $ 2014 $ 22,306,130 81,494,286 248,179,260 130,996,072 260,981 269,992 287,577 308,065 298,057,612 1,967,750 (52,116,094) 181,302,812 – (50,614,805) 247,909,268 130,688,007 66 67 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual reportnote 35. interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1: Name Principal place of business/country of incorporation Ownership interest Donaco Australia Pty Ltd Way2Bet Pty Ltd (sold 31 October 2014) Donaco Singapore Pte Ltd Donaco Holdings Ltd* Donaco Holdings Sdn Bhd* Lao Cai International Hotel Joint Venture Company* iSentric Sdn Bhd (sold 8 September 2014) Donaco Hong Kong Limited Prime Standard Limited Donaco Holdings (Hong Kong) Pte Ltd* * Subsidiary of Donaco Singapore Pte Ltd. The principal activities of each subsidiary are: Donaco Australia Pty Ltd Australia Australia Singapore British Virgin Islands Malaysia Vietnam Malaysia Hong Kong Hong Kong Hong Kong 2015 % 100.00% -% 100.00% 100.00% 100.00% 95.00% -% 100.00% 100.00% 100.00% 2014 % 100.00% 90.00% 100.00% 100.00% 100.00% 95.00% 100.00% -% -% -% Dormant (previously operated New Zealand games service, discontinued in January 2015). Way2Bet Pty Ltd (sold 31 October 2014) Previously operated wagering marketing portal. Donaco Singapore Pte Ltd Donaco Holdings Ltd Donaco Holdings Sdn Bhd Holding company for Vietnamese casino operations. Cost centre for corporate operations. Cost centre for corporate operations. Donaco Holdings (Hong Kong) Pte Ltd Cost centre for corporate operations and marketing activities. Lao Cai International Hotel Joint Venture Company Operates Vietnamese casino operations. Donaco Hong Kong Limited Holding company for Cambodian casino operations. iSentric Sdn Bhd (sold 8 September 2014) Previously operated mobile commerce business. Prime Standard Limited Cost centre for corporate operations. Summarised financial information Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated entity are set out below: Lao Cai International Hotel Joint Venture Company Summarised statement of financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Summarised statement of profit or loss and other comprehensive income Revenue Expenses Profit/(loss) before income tax expense Income tax expense Profit/(loss) after income tax expense Other comprehensive income Total comprehensive income Statement of cash flows Net cash from/(used in) operating activities Net cash used in investing activities Net cash from financing activities 2015 $ 2014 $ 14,146,682 82,183,762 32,597,267 45,564,285 96,330,444 78,161,552 29,605,474 22,853,623 29,002,058 29,594,711 52,459,097 58,596,769 43,871,347 19,564,783 17,109,928 (18,556,453) (1,446,525) – 19,381,119 (7,311,782) 12,069,337 (2,847,373) (1,446,525) 9,221,964 – – (1,446,525) 9,221,964 (1,007,639) (8,248,552) 7,026,938 10,144,827 (40,573,413) 25,962,545 Net decrease in cash and cash equivalents (2,229,253) (4,466,041) Other financial information Profit/(loss) attributable to non-controlling interests Accumulated non-controlling interests at the end of reporting period (72,326) 986,462 1,476,679 1,058,788 68 69 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report note 36. events after the reporting period The ultimate parent company, Donaco International Limited (DNA), entered into a share sale agreement on 23 January 2015, supplemental share sale agreement on 22 May 2015, and amending and restating deed on 18 June 2015 (the ‘Sale and Purchase Agreements’) with independent third parties for the acquisition of the 100% equity interests in DNA Star Vegas Co., Ltd (‘DNA Star’) for a consideration of USD360 million. DNA Star is principally engaged in operation of a casino business in Cambodia. The consideration to be paid by DNA to the vendor was made by: 1. Deposit of USD5 million within 14 days of execution of the share sale agreement, which occurred in FY15. 2. USD135 million to be paid on completion date of acquisition. 3. USD120 million by issuing consideration shares in DNA on the completion date of acquisition. 4. USD100 million to be paid to an account or held in escrow in favour of the vendor. According to the nomination letter signed on 22 June 2015, DNA nominated its wholly-owned subsidiary, Donaco Hong Kong Limited (‘DHK’), to be the registered owner of DNA Star and vested unto DHK all of the rights, titles and interest in DNA Star under and/or pursuant to the Sale and Purchase Agreement. The acquisition was completed on 1 July 2015. Consequent on the completion of the acquisition, applicable legal and consultancy fees of $10,444,225 were expensed and paid in the month of July 2015. As part payment for the acquisition, a term loan of USD100 million from Mega International Commercial Bank Co, Ltd of Taiwan was drawn down on 1 July 2015, and the proceeds paid to the vendor. Pursuant to a detailed valuation report and purchase price allocation report dated 22 January 2015 prepared by Colliers International Hong Kong Limited and its related party, Colliers International Thailand, the fair value of the business acquired by DNA was USD411.2 million. Since the price paid was USD360 million, this valuation would require the acquisition to be treated as a bargain purchase, which would require the excess of USD51.2 million to be recorded as a positive income amount in the Company’s income statement. However the directors have decided to take a more conservative approach to the valuation, and will continue to evaluate the business and the assets acquired in more detail over the next 12 months, before deciding whether to treat the acquisition as a bargain purchase. As a result of the successful acquisition of the Star Vegas Resort & Club on 1 July 2015, the FY15 statutory results relate only to the Company’s pre-existing business, the Aristo International Hotel in Vietnam. Based on unaudited Star Vegas management accounts for FY15, the Aristo now represents approximately 15% of the Company’s overall business, in terms of net (reported) revenue. Unaudited management accounts for FY15 show that the Star Vegas achieved actual net revenue of $92.66 million, and earnings before interest, tax, depreciation and amortisation (EBITDA) of $70.22 million, with net profit after tax (NPAT) of $65.4 million. Normalised results show revenue of $100.82 million, EBITDA of $78.39 million, and NPAT of $73.56 million. In order to provide working capital for the consolidated entity, a term loan facility in the amount of USD20 million from OL Master Limited was drawn down on 7 July 2015. No other matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may significantly affect, the consolidated entity’s operations, the results of those operations or the consolidated entity’s state of affairs in future financial years. With the expansion of our business, we have also expanded the capabilities of our senior management team. note 37. reconciliation of profit/(loss) after income tax to net cash from operating activities Profit/(loss) after income tax expense for the year (3,000,401) 8,270,082 Consolidated 2015 $ 2014 $ Adjustments for: Depreciation and amortisation Net gain on disposal of non-current assets Share-based payments Foreign exchange relating to capital raising Interest on investing activities Net gain on sale of assets Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Decrease/(increase) in inventories Decrease/(increase) in other operating assets Increase in trade and other payables Decrease in provision for income tax Increase/(decrease) in employee benefits Increase/(decrease) in other provisions 4,857,120 (2,203,373) 1,967,750 381,544 – – (1,293,613) 704,860 7,897,925 3,379,938 (4,424,195) 245,389 (10,482) 292,090 – – 1,545,565 (77,117) (9,861) 2,408,358 (1,180,516) (2,092,799) 1,187,897 (319,414) (399,140) 63,043 Net cash from operating activities 8,502,462 9,688,188 note 38. earnings per share Earnings per share for profit/(loss) from continuing operations Profit/(loss) after income tax Non-controlling interest Profit/(loss) after income tax attributable to the owners of Donaco International Limited Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Options over ordinary shares Weighted average number of ordinary shares used in calculating diluted earnings per share Consolidated 2015 $ 2014 $ (5,202,162) 72,326 6,699,952 (1,476,679) (5,129,836) 5,223,273 Number Number 542,208,524 306,593,004 23,047,578 7,869,582 565,256,102 314,462,586 70 71 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report Basic earnings per share Diluted earnings per share 2015 CENTS (0.95) (0.91) 2015 $ Consolidated Consolidated 2014 CENTS 1.70 1.66 2014 $ Earnings per share for profit from discontinued operations Profit after income tax attributable to the owners of Donaco International Limited 2,201,761 1,570,130 Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Options over ordinary shares Weighted average number of ordinary shares used in calculating diluted earnings per share Basic earnings per share Diluted earnings per share Earnings per share for profit/(loss) Profit/(loss) after income tax Non-controlling interest Profit/(loss) after income tax attributable to the owners of Donaco International Limited Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Options over ordinary shares Weighted average number of ordinary shares used in calculating diluted earnings per share Basic earnings per share Diluted earnings per share 72 Number Number 542,208,524 306,593,004 23,047,578 7,869,582 565,256,102 314,462,586 Cents 0.41 0.39 2015 $ Consolidated Cents 0.51 0.50 2014 $ (3,000,401) 72,326 8,270,082 (1,476,679) (2,928,075) 6,793,403 Number Number 542,208,524 306,593,004 23,047,578 565,256,102 7,869,582 314,462,586 Cents (0.54) (0.52) Cents 2.22 2.16 note 39. share-based payments Employee Option Allocation FY14 At the Annual General Meeting on 21 November 2013, shareholders approved the establishment of a long-term incentive (LTI) plan for executives, consisting of the annual grant of units under an option share trust (OST). On 23 December 2013, the Company announced that it had issued options amounting to 1% of its then issued capital (a total of 4,010,511 options) under the LTI plan. Approval for the issue of these options under an employee incentive scheme was obtained pursuant to ASX Listing Rule 10.14. These options were not contributed to the OST until 1 July 2014. Accordingly employees were not allocated units in the OST until 1 July 2014. Employee Option Allocation FY15 Pursuant to the approval granted by shareholders at the FY13 Annual General Meeting, further options were contributed to the OST for FY15. These options were not contributed to the OST until 1 July 2015, and accordingly employees were not allocated additional units in the OST (apart from those outlined below) until 1 July 2015. Set out below are summaries of options granted during FY15 under the plan: 2015 Grant date Expiry date 01/07/2014 01/07/2016 01/07/2014 01/07/2017 01/07/2014 01/07/2018 Exercise price $0.590 $0.590 $0.590 Balance at the start of the year Granted Exercised – – – – 1,399,293 1,328,169 1,283,049 4,010,511 – – – – Expired/ forfeited/ other Balance at the end of the year (33,333) (33,333) (33,333) (99,999) 1,365,960 1,294,836 1,249,716 3,910,512 Set out below are the options exercisable at the end of the financial year: Grant date 01/07/2014 Expiry date 01/07/2016 2015 Number 1,365,960 1,365,960 2014 Number – – The weighted average share price during the financial year was $0.78 (2014: $0.56). The weighted average remaining contractual life of options outstanding at the end of the financial year was 1.97 years (2014: not applicable as no options were outstanding). For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Expiry date 01/07/2014 01/07/2016 01/07/2014 01/07/2017 01/07/2014 01/07/2018 Share price at valuation date Exercise price Expected volatility Dividend yield Risk-free interest rate Fair value at grant date $0.930 $0.930 $0.930 $0.610 $0.610 $0.610 78.74% 78.74% 78.74% -% -% -% 2.52% 2.52% 2.52% $0.490 $0.560 $0.616 73 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015donaco international limited 2015 annual reportdonaco international limited 2015 annual report t directors’ declaration 30 june 2015 r o p e r In the directors’ opinion: • the attached financial statements and notes comply with the Corporations Act 2001, the Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; • the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the financial year ended on that date; and • there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Mr Stuart McGregor Chairman 25 September 2015 Sydney l a u n n a 5 1 0 2 d e t i m i l l a n o i t a n r e t n i o c a n o d 74 independent auditor’s report to the members of donaco international limited INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DONACO INTERNATIONAL LIMTIED AND CONTROLLED ENTITIES Report on the Financial Report We have audited the accompanying financial report of Donaco International Limited (the Company) on pages 26 to 72, which comprises the statement of financial position as at 30 June 2015, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the company and the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directorsʼ Responsibility for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditorʼs Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. William Buck is an association of independent firms, each trading under the name of William Buck across Australia and New Zealand with affiliated offices worldwide. Liability limited by a scheme approved under Professional Standards Legislation other than for acts or omissions of financial services licensees. CHARTERED ACCOUNTANTS & ADVISORS Sydney Ofice Level 29, 66 Goulburn Street Sydney NSW 2000 Telephone: +61 2 8263 4000 Parramatta Ofice Level 7, 3 Horwood Place Parramatta NSW 2150 PO Box 19 Parramatta NSW 2124 Telephone: +61 2 8836 1500 williambuck.com d o n a c o i n t e r n a t i o n a l l i m i t e d 2 0 1 5 a n n u a l r e p o r t 75 t r o p e r l a u n n a 5 1 0 2 d e t i m i l l a n o i t a n r e t n i o c a n o d 76 independent auditor’s report to the members of donaco international limited shareholder information FOR THE YEAR ENDED 30 JUNE 2015 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DONACO INTERNATIONAL LIMTIED AND CONTROLLED ENTITIES (CONT) Auditorʼs Opinion In our opinion: a) the financial report of Donaco International Limited on pages 26 to 72 is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the Company and consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 13 to 20 of the directors’ report for the year ended 30 June 2015. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditorʼs Opinion In our opinion, the Remuneration Report of Donaco International Limited for the year ended 30 June 2015, complies with section 300A of the Corporations Act 2001. Matters Relating to the Electronic Presentation of the Audited Financial Report This auditor’s report relates to the financial report of Donaco International Limited for the year ended 30 June 2015 included on Donaco International Limited’s web site. The company’s directors are responsible for the integrity of the Donaco International Limited’s web site. We have not been engaged to report on the integrity of the Donaco International Limited’s web site. The auditor’s report refers only to the financial report. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of this report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report to confirm the information included in the audited financial report presented on this web site. William Buck Chartered Accountants ABN 16 021 300 521 M.A. Nevill Partner Dated this 25th day of September, 2015 The shareholder information set out below was applicable as at 31 August 2015. distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel equity security holders Number of holders of ordinary shares Number of holders of options over ordinary shares 397 703 424 963 159 2,646 240 – – – – – – – Twenty largest quoted equity security holders The names of the 20 largest security holders of quoted equity securities are listed below: Ordinary shares HSBC Custody Nominees (Australia) Limited Slim Twinkle Limited RBC Investor Services Australia Nominees Pty Limited National Nominees Limited Convent Fine Limited Total Alpha Investments Limited Citicorp Nominees Pty Limited BNP Paribas Noms Pty Ltd Mr Keong Yew Lim J P Morgan Nominees Australia Limited HSBC Custody Nominees (Australia) Limited – A/C 2 Mr Keong Yew Lim UOB Kay Hian Private Limited UBS Nominees Pty Ltd National Nominees Limited Chun Wee Na Holdex Nominees Pty Ltd No 384 A/C RBC Investor Services Australia Nominees Pty Limited Malahon Securities Limited Holdex Nominees Pty Ltd No 392 A/C Number held 130,675,427 84,437,882 80,943,594 68,032,903 60,353,318 56,962,025 52,457,127 27,983,236 25,540,155 23,074,684 9,207,480 6,000,000 4,330,201 3,626,016 3,016,000 3,000,000 2,348,338 2,302,545 2,213,000 2,000,000 % of total shares issued 15.73 10.16 9.74 8.19 7.27 6.86 6.31 3.37 3.07 2.78 1.11 0.72 0.52 0.44 0.36 0.36 0.28 0.28 0.27 0.24 648,503,931 78.06 d o n a c o i n t e r n a t i o n a l l i m i t e d 2 0 1 5 a n n u a l r e p o r t 77 notes to the consolidated financial statements FOR THE YEAR ENDED 30 JUNE 2015 shareholder information FOR THE YEAR ENDED 30 JUNE 2015 Unquoted equity securities Employee options Warrants substantial holders Substantial holders in the Company are set out below: Lim Keong Yew Lim Keong Hoe (jointly held with Lim Keong Yew) Perpetual Limited and subsidiaries Lee Bug Tong Lee Bug Huy Van Eck Associates and subsidiaries Number on issue Number of holders 5,212,142 70 6 1 Ordinary shares Number held 264,358,496 144,791,200 103,426,683 73,599,765 73,599,764 44,538,698 % of total shares issued 31.82 17.43 12.45 8.86 8.86 5.36 voting rights The voting rights attached to ordinary shares and options are set out below: Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Options There are no voting rights attached to options. Upon exercise of the option, the issued shares will confer full voting rights. Warrants There are no voting rights attached to warrants. Upon conversion of the warrant, the issued shares will confer full voting rights. There are no other classes of equity securities. securities subject to voluntary escrow Class Fully Paid Ordinary 1 Year Fully Paid Ordinary 2 Years Expiry date Number of shares 30 June 2016 48,575,845 30 June 2017 48,575,844 97,151,689 78 d o n a c o i n t e r n a t i o n a l l i m i t e d 2 0 1 5 a n n u a l r e p o r t n t e r n a t i o n a l l i m i t e d 2 0 1 5 a n n u a l r e p o r t corporate directory FOR THE YEAR ENDED 30 JUNE 2015 d o n a c o i Directors Company Secretary Registered Office Principal Place of Business Share Register Auditor Stock Exchange Listing Stuart James McGregor – Chairman Joey Lim Keong Yew – Managing Director and CEO Benedict Paul Reichel – Executive Director Benjamin Lim Keong Hoe – Non-Executive Director Robert Andrew Hines – Non-Executive Director Ham Techatut Sukjaroenkraisri – Executive Director (appointed 1 July 2015) Paul Porntat Amatavivadhana – Non-Executive Director (appointed 1 July 2015) Benedict Paul Reichel Suite 2.02, 55 Miller Street Pyrmont NSW 2009 Telephone: +61 2 9017 7000 Facsimile: +61 2 9017 7001 Suite 2.02, 55 Miller Street Pyrmont NSW 2009 Boardroom Pty Limited Level 12, 225 George Street Sydney NSW 2000 Telephone: +61 2 9290 9600 William Buck Level 29, 66 Goulburn Street Sydney NSW 2000 Donaco International Limited shares are listed on the Australian Securities Exchange (ASX code: DNA) Website www.donacointernational.com general information The financial statements cover Donaco International Limited as a consolidated entity consisting of Donaco International Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Donaco International Limited’s functional and presentation currency. Donaco International Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Suite 2.02 55 Miller Street Pyrmont NSW 2009 A description of the nature of the consolidated entity’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 25 September 2015. The directors have the power to amend and reissue the financial statements. donaco international limited 2015 annual report donaco international limited ABN: 28 007 424 777 Suite 2.02, 55 Miller Street, Pyrmont NSW 2009 Australia Phone: +61 (02) 9017 7000 Fax: +61 (02) 9017 7001 Email: enquiries@donacointernational.com www.donacointernational.com

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