NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period ended 28 July 2018 F. EQUITY This section provides additional information regarding lines in the financial statements that are most relevant to explaining the equity position of the Group at the end of the period, including the dividends declared and/or paid during the period. F1 CONTRIBUTED EQUITY 2018 2017 2018 2017 Number of Number of shares shares $'000 $'000 Ordinary shares - fully paid 821,278,815 821,278,815 779,963 779,963 Treasury shares Opening balance (11,228) (4,200) (40,634) (40,625) Shares acquired by Myer Equity Plans Trust on market at $1.31 - (150,000) - (196) Shares acquired by Myer Equity Plans Trust on market at $0.69 (450,000) - (309) - Shares issued under short term incentive plan - 114,617 - 150 Shares issued for performance rights granted 459,675 28,355 - 37 Closing balance of Treasury shares (1,553) (11,228) (40,943) (40,634) Closing balance 821,277,262 821,267,587 739,020 739,329 Ordinary shares The ordinary shares issued are fully paid. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands, every holder of ordinary shares present at a meeting in person, or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Treasury shares Treasury shares are shares in Myer Holdings Limited that are held by the Myer Equity Plans Trust for the purposes of issuing shares under the Equity Incentive Plans. Refer to note H4 for more information. Employee share schemes Information relating to the employee share-based payment schemes, including details of shares issued under the schemes, is set out in note H4. Capital risk management The Group’s key objective when managing capital is to minimise its weighted average cost of capital while maintaining appropriate financing facilities. This provides the opportunity to pursue growth and capital management initiatives. In managing its capital structure, the Group also seeks to safeguard its ability to continue as a going concern in order to provide appropriate returns to shareholders and benefits for other stakeholders. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of various balance sheet ratios including the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as 'equity' as shown in the balance sheet plus net debt. The gearing ratios at 28 July 2018 and 29 July 2017 were as follows: 2018 2017 $'000 $'000 Total borrowings (note D3) 149,165 143,367 Less: cash and cash equivalents (note D1) (41,793) (30,591) Net debt 107,372 112,776 Total equity 583,989 1,072,868 Total capital 691,361 1,185,644 Gearing ratio 15.5% 9.5% The increase in the gearing ratio during 2018 was primarily driven by a larger decrease in equity than net debt due to the impairment of assets recognised during the period. Accounting policy Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Where any Group company purchases the Company's equity instruments; for example, as the result of a share buy-back or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of Myer Holdings Limited as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of Myer Holdings Limited. Myer Annual Report 2018 73