The Board is empowered under the Rules of the Ornua Co-operative Limited (“The Rules”) to set up an annual bonus fund and issue bonus shares and redeemable loan stock to the members based upon purchases of dairy products during the period from members. On an annual basis, an amount is transferred from revenue reserves to the annual bonus fund in the Group’s financial statements. The amounts allocated to redeemable loan stock (via a transfer to the annual bonus fund) in 2015 is €4.0m (2014 : €4.5m) and is subject to the later approval of the Board.
Following the ratification of the amount to be transferred to the annual bonus fund and the calculation of each member’s individual share, the annual bonus fund is then applied in issuing, as fully subscribed bonus shares and convertible redeemable loan stock in the ratio of one share per each ninety nine units of convertible redeemable loan stock. These bonus shares and convertible redeemable loan stock are then issued to the holders of the A and B ordinary shares.
Members are entitled, at any time after the expiry of five years from the date of any issue of the units of convertible redeemable loan stock, to apply to the Board so as to have the loan stock redeemed. The Board has discretion as to whether, and to what extent the loan stock shall be redeemed. However, in the case of all approved redemptions they shall be paid in instalments of 50% in the first year and 10% in each of the following five years. When the redemption is ratified the value of the cash payment is reclassified as a liability.
During the period, the Board decided to redeem loan stock to the value of €5.9m (2014 : €4.5m) issued in respect of the 2010 financial period, 50% was paid in cash (the rest was included in creditors) and when combined with cash payments relating to previous years resulted in total cash payments of €6.6m in 2015 (2014 : €6.1m).
During the period, the Board also distributed redeemable loan stock and bonus shares in respect of the amount transferred to the annual bonus fund in 2014, and in 2016, intends to distribute redeemable loan stock and bonus shares in respect of the amount transferred to the annual bonus fund in 2015.
The movement in the redeemable loan stock balance during the period was as follows:
|At beginning of period||20,501||20,501|
|Transferred from annual bonus fund||4,500||4,500|
|Redemption of loan stock||(5,940)||(4,455)|
|Issue of bonus shares||(45)||(45)|
|At end of period||19,016||20,501|
|Annual cash bonus (charged to operating profit)||10,000||7,500|
|Special DPI related bonus (charged to exceptional items) (note 11)||15,000||-|
|Redeemable loan stock (transfer to annual bonus fund)||4,000||4,500|