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Notes to the consolidated financial statements
As of December 31, 2008, 2007 and 2006
23.Other reserves
| Legal reserve | Equity-settled transaction reserve | Equity component convertible notes |
Currency translation reserve | Revaluation reserve | Total | |
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | |
| As at January 1, 2006 | 13,577 | 4,910 | 39,109 | (76,121) | 3,308 | (15,217) |
| Fair value adjustment | – | – | – | – | (3,308) | (3,308) |
| Net shares issued via the exercise of share options |
– | (1,549) | – | – | – | (1,549) |
| Share based compensation | – | 10,487 | – | – | – | 10,487 |
| Currency translation movement |
– | – | – | 12,553 | – | 12,553 |
| As at December 31, 2006 | 13,577 | 13,848 | 39,109 | (63,568) | – | 2,966 |
| Transfer from retained profit | 1,526 | – | – | – | – | 1,526 |
| Net shares issued via the exercise of share options |
– | (3,838) | – | – | – | (3,838) |
| Share based compensation | – | 18,473 | – | – | – | 18,473 |
| Issuance of shares - 2006 LTIP | – | (4,523) | – | – | – | (4,523) |
| Conversion of part of the 4% Convertible Notes |
– | – | (196) | – | – | (196) |
| Currency translation movement |
– | – | – | 31,149 | – | 31,149 |
| As at December 31, 2007 | 15,103 | 23,960 | 38,913 | (32,419) | – | 45,557 |
| Transfer from retained profit | 262 | – | – | – | – | 262 |
| Net shares issued via the exercise of share options |
– | (937) | – | – | – | (937) |
| Share based compensation | – | 11,666 | – | – | – | 11,666 |
| Issuance of shares – 2006 LTIP |
– | (3,963) | – | – | – | (3,963) |
| Conversion of part of the 4% Convertible Notes |
– | – | (38,913) | – | – | (38,913) |
| Currency translation movement |
– | – | – | (60,846) | – | (60,846) |
| As at December 31, 2008 | 15,365 | 30,726 | – | (93,265) | – | (47,174) |
Legal reserve
On an annual basis, if the Company reports a net profit for the year on a non-consolidated basis, Luxembourg law requires appropriation of an amount equal to at least 5% of the annual net profit to a legal reserve until such reserve equals 10% of the issued share capital. This reserve is not available for dividend distribution.
At the Company's Annual General Meeting in May 2008, the shareholders voted to transfer $0.3 million from retained profits to the legal reserve.
Equity settled transaction reserve
The cost of share options is recognised as an increase in the Equity settled transaction reserve over the period in which the performance and/or service conditions are fulfilled. If the options are subsequently exercised then the cost attributed to these options is transferred from the Equity settled transaction reserve to the share premium. The reserve will be transferred to the share premium account when the shares vest.
Equity component convertible notes
The portion of the convertible bond representing the fair value of the conversion option at the time of issue is included in equity reserve.
In October 2007, $1 million of the 4% Convertible Notes were converted into 28,686 SDRs. The equity component of the 4% Convertible Notes was then reduced by $0.2 million and reclassified to share premium.
On January 22, 2008, Millicom converted a further $196 million of the outstanding bonds into 5,420,235 Ordinary Shares and 202,236 SDRs. On the same day Millicom repaid in cash the remaining $3 million of bonds that were not converted, including accrued interest. The conversion resulted in an increase of equity amounting to $175 million in January 2008. The equity component of the 4% Convertible Notes was then fully reversed and, for that part referred to the converted bonds, reclassified to share premium.
Currency translation reserve
For the purposes of consolidating joint ventures, associates and subsidiaries with functional currencies other than U.S. dollars, their balance sheets are translated to U.S. dollars using the closing exchange rate. Profit and loss accounts are translated to U.S. dollars at the average exchange rates during the year. The currency translation reserve includes foreign exchange gains and losses arising from the translation of financial statements.
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