Annual Report 2004 - Vietnam Industrial Investments Limited

Transcription

Vietnam Industrial
Investments Limited
A.B.N. 64 063 656 333
Annual Report 2004
CORPORATE DIRECTORY
A.B.N. 64 063 656 333
ASX CODE: VII
DIRECTORS
S. Lee, AO
Executive Chairman and
Chief Executive Officer
A.A. Young
Managing Director (Chief Operating Officer)
H.V.H. Lam
Managing Director (Vietnam Operations)
M.P. Bowen
Non-Executive Director
COMPANY SECRETARY
M.A. Clements
REGISTERED OFFICE IN AUSTRALIA
Level 5, 150 St George’s Terrace
PERTH Western Australia 6000
Telephone: (618) 9322 2911
Facsimile: (618) 9322 2699
E-mail: [email protected]
Website: www.vii.net.au
AUDITORS
Ernst & Young
11 Mounts Bay Road
LEGAL ADVISORS
Clayton Utz
Level 25, QV1 Building
250 St George’s Terrace
Deacons
Unit 303, Central Building
31 Hai Ba Trung Street
Hanoi VIETNAM
BANKERS
Australia & New Zealand Banking Group Limited
Bank of Western Australia Ltd
SHARE REGISTRY
Security Transfer Registrars Pty Ltd
Suite 1/770 Canning Hwy
APPLECROSS Western Australia 6153
HOME EXCHANGE
Australian Stock Exchange Limited
Exchange Plaza, 2 The Esplanade
VIETNAM OPERATIONS
Vinausteel Ltd
KM9, Vat Cach, Quan Toan
Hong Bang District
Haiphong
Telephone: (84) 31 850145
Facsimile: (84) 31 850 140
Website: www.vinausteel.com.vn
Vinausteel also has sales offices in Hanoi,
Ho Chi Minh City, Da Nang, Nha Trang and Vinh
SSESTEEL Ltd
KM9, Vat Cach, Quan Toan
Hong Bang District
Haiphong
Telephone: (84) 31 850818
Facsimile: (84) 31 850828
VRC Weldmesh (Vietnam) Ltd
70 Nguyen Van Luong Street
Ward 10, Go Vap District
Ho Chi Minh City
Telephone: (84) 8 8941217/894 2501
Facsimile: (84) 8 894 0964
Website: www.vrc.com.vn
Total Building Systems Ltd
112 Truong Chinh Street
Dong Da District
Hanoi
Telephone: (84) 4 868 8284
Facsimile: (84) 4 868 8283
Austnam Company Ltd
112 Truong Chinh Street
Dong Da District
Hanoi
Telephone: (84) 4 869 1579
Facsimile: (84) 4 869 1632
CONTENTS
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Review of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-5
Directors’ Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-11
Corporate Governance Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12-16
Statement of Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21-49
Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Independent Audit Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51-52
Auditor’s Independence Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ASX Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54-55
Front cover: SSESTEEL’s high yield strength Thermo Mechanical Treatment rebars.
1
VIETNAM INDUSTRIAL INVESTMENTS LIMITED
An investment holding company investing in the developing economy of Vietnam
HIGHLIGHTS OF 2004
CORPORATE
Sales Revenue from Vietnam Operations was VND 1,356 billion (A$ 117.1 million)
down 16% on 2003 of VND 1,609 billion.
Net loss after tax A$ 5.6 million (including recoverable amount write-down adjustment
of A$ 4.2 million) (2003: loss: A$ 2.7 million)
Austnam Company Limited (VII 68%)
Roofing sales were 734,720m² down 26% on 2003 (989,586m²)
Sales revenue VND 60.6 billion (A$ 5.2 million), a decrease of 18% on 2003 (VND 74.0 billion)
Net profit after tax VND 3.9 billion (A$ 0.3 million) down 44% on 2003 (VND 7.0 billion)
SSESTEEL LTD (VII 100%)
Wire rod production of 34,788 tonnes, down 53% on 2003 (73,290 tonnes)
Annual sales of 34,869 tonnes, down 59% on 2003 (84,925 tonnes)
Sales revenue VND 377.2 billion (A$ 32.6 million), down 23% on 2003 (VND 491.8 billion)
Net loss after tax of VND 51.2 billion (A$ 4.4 million) (2003: loss: VND 40.8 billion)
Vinausteel Ltd (VII 70%)
Steel bar production of 161,327 tonnes (2003: 160,757 tonnes)
Annual sales of 139,944 tonnes, down 23% on 2003 (181,300 tonnes)
Sales revenue VND 1,072 billion (A$ 93 million) up 3% on 2003 (VND 1,042 billion)
Net profit after tax VND 61.5 billion (A$ 5.3 million), up 45% on 2003 (VND 42.4 billion)
VRC Weldmesh (Vietnam) Ltd (VII 100%)
Annual sales of 6,147 tonnes, up 154% on 2003 (2,416 tonnes)
Sales revenue VND 56.7 billion (A$ 4.9 million) up 300% on 2003 (VND 14.2 billion)
Net profit after tax VND 3.1 billion (A$ 0.3 million) (2003: loss: VND 1.6 billion)
Total Building Systems Ltd (VII 100%)
Sales revenue VND 19.6 billion (A$ 1.7 million)
Net loss for the period VND 1.8 billion (A$ 0.2 million)
2
CHAIRMAN’S REPORT
On reviewing our results for 2004 I can report that it has been a challenging year. The strength of our management in Vietnam
has enabled us to endure yet another year of difficult trading conditions faced by the local steel industry.
As reported throughout the year, the rising price of steel billets, which accounts for greater than 80% of total costs, current
over capacity in the industry and continued delays in construction projects have impacted upon the Group results.
Although certain strategic processes were implemented in an effort to return the Group to profitability, we recorded an
operating loss after tax of $5.6 million. Included in this net loss is an adjustment for the write-down of non-current assets of
$4.2 million, relating to our wholly owned investment, SSESTEEL, which we believe is prudent given the historical operating
losses derived in this business unit.
The original SSESTEEL rolling mill was constructed to produce wire rod, however it was designed to allow expansion of the plant
to produce other products at a later stage. Since commencing operations in 2002, the wire rod market in Vietnam has not been
good, principally due to oversupply, resulting in fierce competition for market share and low prices. As a consequence it was
resolved to invest in a cooling bed to produce rebar in the SSESTEEL operation, a product range successfully commercialised
by our 70% owned flagship investment, Vinausteel Ltd.
The construction of the cooling bed, at a capital cost of VND58 billion (A$5 million), was completed in December 2004 and
commissioned in February 2005 with no technical problems. The historical operating performance of SSESTEEL has strained
the working capital position of that operation and the Group as a whole however we are confident that this investment will
improve the long term viability of the Company. Your Board is also considering other ways of retiring the long-term borrowings
associated with construction of the SSESTEEL plant to assist returning the Group to profitability.
I am pleased to advise that the remainder of our fully operational subsidiaries in Vietnam were profitable during the period.
Although sales volumes were lower than the prior year, Vinausteel reported a net profit of VND61.5 billion (A$5.3 million).
From these profits, the Board of Management have declared dividends of VND40 billion of which our share is VND28 billion
(A$2.4 million). Further, during the year, the Board of Management declared a special dividend from retained profits of
VND50 billion of which our share was VND35 billion (A$3.2 million).
Austnam Company Limited recorded another profitable year reporting a net profit of VND3.9 billion (A$0.3 million) and this
operation has been approved for conversion to a shareholding company under a pilot scheme to allow a limited number of
foreign investment enterprises to convert into joint stock companies. We expect the conversion to be completed in 2005.
The greatest success of the year was the turn around of our weldmesh operation, VRC Weldmesh (Vietnam) Ltd. To the
credit of our diligent management, VRC more than doubled its turnover during the year and reported a record net profit of
VND3.1 billion (A$0.3 million) following last year’s net loss of VND1.6 billion.
As part of our goal of growing and diversifying our business in Vietnam, Total Building Systems Ltd (“TBS”) was established
during the year. TBS is a full service building systems provider supplying engineering services to industrial and residential
consumers in Vietnam. Although not fully operational and recording a net loss of VND1.8 billion (A$0.2 million) for the year,
TBS won its first major contract due for completion in the first quarter of 2005.
Our prime objective for the new year will be to monitor the commercial production of rebar at the SSESTEEL facility and
maintain the momentum of our other businesses. Our focus continues to be growth of our industrial group and delivering
returns to our shareholders.
I would like to congratulate Mr Henry Lam, our Managing Director (Vietnam Operations), on receiving the prestigious ‘Third
Grade Labour Medal’ in recognition of his contribution to the economy of Vietnam and for his conduct as a good corporate
citizen. I would also like to thank my other fellow Board members who were in office during the year for their continued
support and efforts and on behalf of the Board, to thank our management and operational staff in Vietnam for their dedication
over the past year.
SIMON LEE, AO
3
REVIEW OF OPERATIONS
Vietnam Industrial Investments Limited (“VII”) is an investment holding Company, which was formed specifically to invest
in the developing economy of Vietnam. Following investment of $9.8 million in seed capital, the Company raised a further
$12.5 million by an IPO and was listed on the Australian Stock Exchange in September 1995. Since implementing its first
project, VII has acquired another two businesses and implemented a further two projects, without raising further capital. The
holding Company has no debt and all working capital requirements and project funding have been sourced by the operating
subsidiaries in Vietnam.
This review of operations reports on the period under review for the Company and its businesses in Vietnam, Austnam
Company Ltd, SSESTEEL Limited, Vinausteel Limited, VRC Weldmesh (Vietnam) Ltd and Total Building Systems Ltd.
This is followed by additional information on the legal structure and taxation concessions of the operations. Exchange rates at
31 December 2004 were US$0.7790/A$ and VND15,762/US$ (31 December 2003 : US$0.7500/A$ and VND15,662/US$).
CORPORATE
Group revenues were $121 million, slightly down in A$ terms on the previous year (2003: $160 million) and Group net loss
attributable to members was $5.6 million (2003: loss: $2.7 million).
AUSTNAM COMPANY LTD (VII 68%)
Austnam produces steel roofing, wall cladding and associated materials from its factory in Hanoi. The Company has been
in operation for 11 years and was the first to introduce these products to North Vietnam. It has maintained an excellent
reputation for supplying high quality products.
The Company reported sales of 734,720m2 in 2004, down 26% on the previous year (989,586m2). Net profit after tax was
VND 3.9 billion (A$ 0.3 million), down 44% on 2003 (VND 7.0 billion).
SSESTEEL LTD (VII 100%)
SSESTEEL owns and operates a fully automated high speed wire rod rolling mill based in Haiphong, the first company in
Vietnam to introduce this advanced technology. It produces wire rod for the construction industry.
During the later part of 2004, SSESTEEL has installed a cooling bed to produce rebar. The construction of the cooling bed was
completed in December 2004. Its commissioning will be completed by the end of February 2005 and that the cooling bed will
be fully operational in March 2005.
The Company achieved sales of 34,869 tonnes, 59% lower than 2003 (84,925 tonnes) and reported net loss of
VND 51.2 billion (A$ 4.4 million) (2003: loss: VND 40.8 billion).
VRC Weldmesh provides total reinforcing steel solutions.
4
REVIEW OF OPERATIONS
VINAUSTEEL LTD (VII 70%)
Vinausteel has been operation for 8 years and produces concrete reinforcing steel bar from
its factory in Haiphong and distributes its products throughout Vietnam.
The Company achieved sales of 139,944 tonnes, 23% lower than the previous year (181,300
tonnes) and revenues of VND 1,072 billion (A$93 million), an increase of 3% on 2003
(VND 1,042 billion). Net profit after tax was VND 61.5 billion (A$ 5.3 million) up 45% on
the previous year (2003: VND 42.4 billion). During 2004, Vinausteel declared dividends of
VND 50 billion (VII share VND 35 billion) (A$ 3.2 million).
VRC WELDMESH (VIETNAM) LTD (VII 100%)
The Weldmesh operation, located in Ho Chi Minh City, produces welded steel mesh for
concrete reinforcing and welded steel fencing.
Group companies supply steel to many high rise projects.
VRC Weldmesh achieved sales of 6,147 tonnes, an increase of 154% on 2003 (2,416 tonnes). The Company reported a net
profit after tax of VND 3.1 billion (A$ 0.3 million) (2003: loss: VND 1.6 billion).
TOTAL BUILDING SYSTEMS LTD (VII 100%)
On 27 April 2004, as part of VII’s goal of growing and diversifying its business in Vietnam, Total Building
Systems Ltd (“TBS”) was established. TBS is a full service building systems provider-supplying engineering
services, building systems and construction services to industrial and residential consumers in Vietnam.
That is, a steel building maker that offers full service from engineering through to construction, including
a wide range of building accessories and standard products. TBS won its first major contract, due for
completion in the first quarter of 2005. TBS reported a net loss of VND 1.8 billion (A$0.2 million).
Lightweight steel
factory supplied
by Total Building
Systems.
VIETNAM OPERATIONS – ADDITIONAL INFORMATION
Following is additional information on the legal structure and taxation concessions of the operating subsidiaries in Vietnam.
AUSTNAM COMPANY LTD
VII acquired the company in 1997 when it acquired all of the issued capital of Parnham Overseas Ltd (“POL”) through a wholly
owned subsidiary, Ausviet Industrial Investments (S) Pte Ltd.
Austnam Company Ltd is a joint venture company established under the Foreign Investment Laws of Vietnam between POL
and Hong Ha Building Materials Import Export Company (“Hong Ha”) (formerly Hanoi Building Materials Supply Company). The
Investment Licence was issued on 27 April 1992 for a term of 20 years.
Austnam receives concessional taxation rates of 19% on profits tax. From May 2002, VII
reduced its share of current year profits to 68 per cent. Austnam Company Ltd has been
approved for conversion to a shareholding company and Vietnam Industrial Investments
Limited will hold a 68 per cent interest.
SSESTEEL LTD
SSESTEEL is a company established under the Foreign Investment Laws of Vietnam as a
100% foreign invested enterprise which received an Investment Licence on 8 August 1997
to manufacture steel construction beams and large diameter steel pipes. The Company
obtained an amended Investment Licence on 16 November 1999 and 30 August 2000 and
10 November 2001 to enable it to produce steel wire rod for the construction industry.
SSESTEEL
- cooling bed
- furnace
- billet discharge
from furnace.
5
SSESTEEL receives concessional taxation rates from the Government of Vietnam on its profit tax as follows :
Term
Year 1
Years 2 & 3
Years 4 to 10
Years 11 onwards
Taxation Rate
Nil
10%
20%
25%
VINAUSTEEL LTD
Vinausteel is a joint venture company incorporated under the Foreign Investment Laws of Vietnam in terms of an Investment
Licence issued on 28 June 1994 and various amendments. The current joint venture partners are VII with a 70% interest and
the Vietnam Steel Corporation (“VSC”) with a 30% interest.
The term of the joint venture is 30 years and this term may be extended by mutual agreement of the parties. Operational
management of Vinausteel is determined by a Joint Venture Agreement, a Charter and board of management which comprises
of 5 nominees of VII and 2 from VSC.
The joint venture receives concessional taxation rates from the Government of Vietnam on its profits tax as follows :
Term
First two profitable years
Years 3- 6
Years 7 – 10
Years 11 onwards
Taxation Rate
Nil
7.5%
15.0%
25.0%
VRC WELDMESH (VIETNAM) LTD
The Company was established under the Foreign Investments Laws of Vietnam as a 100% foreign invested enterprise in
terms of an Investment Licence issued on 19 June 1993, for a term of 15 years.
Its profits tax rate is 23% and its dividend withholding tax rate is nil.
TOTAL BUILDING SYSTEMS LTD
The Company was established under the Foreign Investments Laws of Vietnam as a 100% foreign invested enterprise in
terms of an Investment Licence issued on 27 April 2004, for a term of 30 years.
The Company has the obligation to pay its income tax at the rate of 20 percent of taxable profits from construction consulting
activity, technology transferring activity, and technical assistance fee. The Company is entitled to an exemption from profits tax
for 2 years commencing with the first year of earning profits, and a 50% reduction for the following 3 years.
The Company has the obligation to pay its income tax at the rate of 28 percent of taxable profits from other activities. The
Company is entitled to an exemption from profits tax for 2 years commencing with the first year of earning profits, and a 50%
reduction for the following 2 years.
TAX SPARING
The “tax sparing” arrangements under the Taxation Agreement between Australia and Vietnam have been formalised and
included on the listed incentives, which are subject to tax sparing, are income from business and trading activities established
in Vietnam. VII should obtain the benefit of the tax sparing arrangement. The effect of this, is that income from operations in
Vietnam will be quarantined from Australian Income Tax and VII will not be able to deduct expenses incurred on operations in
Vietnam.
6
DIRECTORS’ REPORT
Your directors present their report for the year ended 31 December 2004.
DIRECTORS
The names, qualifications, experience and special responsibilities of the Directors of the Company in office during the financial
year and until the date of this report are:
Simon Lee, AO
Executive Chairman and Chief Executive Officer
Mr Lee has had extensive management experience with a diverse range of business enterprises in a career that has based
him in Asia, England, Canada and Australia. He is the Chairman of Equigold NL and of Medical Corporation Australasia Ltd,
and was a Director of the Bank of Western Australia Ltd, which are public companies listed on the Australian Stock Exchange
Limited. Mr Lee has held a number of honorary positions which included Board Member of the Australian Trade Commission
(AUSTRADE), Chairman of the Western Australian Museum Foundation Trust and President of the Western Australian Chinese
Chamber of Commerce Inc. In 1993 he received the Advance Australia Award for his contribution to commerce and industry
and in 1994 he was bestowed an Officer of the Order of Australia. Mr Lee assumed an executive role in the organisation
throughout the year.
Alan Alexander Young
Managing Director (Chief Operating Officer)
Mr Young commenced his business career in the financial sector and was employed for several years in banking and finance.
For the past twenty years he has gained wide experience in the administration of public companies, particularly in the resource
sector. Mr Young is a Board member of all the operating subsidiaries in Vietnam. He is a Fellow of the Institute of Corporate
Managers, Secretaries and Administrators and the immediate past President of the Western Australia-Vietnam Business
Council Inc.
Henry (Van Hung) Lam
Managing Director (Vietnam Operations)
Mr Lam, a resident of Vietnam, was born in Vietnam and came to Australia in 1977 and studied electrical engineering. He
owned and managed several businesses in the retail sector before investing in Vietnam. Mr Lam was the General Director of
Vinausteel Ltd during the year and is currently General Director of SSESTEEL. He is fluent in Vietnamese, resides in Vietnam
and is responsible for the group’s operations in Vietnam. He was awarded the “Red Star” at the end of 2000, the first
overseas Vietnamese to receive this, for his contribution to the economy of Vietnam and in 2004 he was awarded the “Third
Grade Labour Medal”.
Michael Phillip Bowen
Independent Non Executive Director (Appointed 18 October 2004)
Mr Bowen graduated from the University of Western Australia with a Bachelor of Law, Jurisprudence and Commerce. He has
been admitted as a Barrister and Solicitor to the Supreme Court of Western Australia and is a Certified Practising Accountant.
Mr Bowen is a partner of Hardy Bowen Lawyers, who specialise in corporate, commercial and securities law with an emphasis
on mergers, acquisitions, capital raising and resources. Mr Bowen is also a Director of IMF (Australia) Limited, Tennant Creek
Gold Ltd and Medical Corporation Australasia Limited which are public companies listed on the Australian Stock Exchange
Limited. He is also a member of the Audit and Remuneration Committees.
Leong Kian Ming
Mr Leong, a resident of Kuala Lumpur, Malaysia, is a Fellow of The Association of Chartered Certified Accountants (ACCA), UK
and a member of the Malaysian Institute of Accountants and acted as a non-executive Director of the Company and member
of the Audit and Remuneration Committees until his resignation on 30 April 2004.
Dimitri Bacopanos
Mr Bacopanos is a Chartered Accountant and an Associate of the Securities Institute of Australia and acted as an independent
non-executive Director of the Company and member of the Audit and Remuneration Committees until his resignation on
18 October 2004.
Directors were in office from the beginning of the financial year until the date of this report, unless otherwise stated.
7
(b) Interests in the Shares and Options of the Company and related bodies corporate
At the date of this report, there were no unissued ordinary shares under options. The interests of the directors in the shares of
the Company and related bodies corporate were:
S. Lee
A. A. Young
H. V. H. Lam
M. P. Bowen
Note
(1)
(2)
(3)
Ordinary Shares
25,938,226
2,847,000
10,701,157
-
Notes:
(1) Mr S. Lee is a Director and shareholder of Phoenix Properties International Pty Ltd as trustee for the Wellington Place
Property Trust, and a beneficiary of that trust, which trust is the holder of 12,810,000 shares in VII. Mr S. Lee is a Director
and shareholder of SHL Pty Ltd which company is the holder of 13,128,226 shares in VII.
(2) Mr A A Young is the registered holder of 700,000 shares. Mr A A Young is a Director and shareholder of Bayrunner Pty Ltd
which company is the registered holder of 2,147,000 shares in VII.
(3) Mr H.V.H. Lam is the beneficial owner of 10,701,157 shares in VII.
EARNINGS PER SHARE
Earnings Per Share
Basic earnings per share
Diluted earnings per share
Cents
(5.40)
(5.40)
CORPORATE INFORMATION
CORPORATE STRUCTURE
Vietnam Industrial Investments Limited is a company limited by shares that is incorporated and domiciled in Australia. It is the
ultimate parent entity. VII has prepared a consolidated financial report incorporating the entities that it controlled during the
financial year, which are outlined in the Group’s corporate structure at Note 24(b).
EMPLOYEES
The consolidated entity employed 719 employees as at 31 December 2004 (2003: 625 employees)
NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES
The principal activity of the consolidated entity during the course of the financial year was investment in Vietnam and the
commercial operations at its steel rolling mills in Haiphong, steel roofing factory in Hanoi, steel mesh and fencing factory in
Ho Chi Minh City and commencement of a new operation providing total building solutions. No change in the nature of those
activities has occurred during the period under review.
The consolidated entity net loss after providing for income tax and outside equity interest for the financial year ended
31 December 2004 was $5,576,898 (2003: loss $2,699,398). Included in the net loss is an adjustment for the write-down of
non-current assets of $4.2 million. While the directors are confident of the long term potential of SSESTEEL and are continuing
to invest in the plant to improve its product mix and operational performance, they are cognisant of the following;
(i) The net asset value attributable to the Company has exceeded the market capitalisation of the Company over the last
year;
(ii) Technological and operational problems with SSESTEEL have resulted in operating losses being derived in the prior two
years for this business unit.
As such, in accordance with current accounting standards, they believe it is prudent to recognise a current diminution in value
in the carrying value of non-current assets as at 31 December 2004.
8
DIRECTORS’ REPORT
REVIEW AND RESULTS OF OPERATIONS
Vinausteel Limited (70%)
The Company holds 70% equity in a steel rolling mill in Haiphong through its shareholding in Vinausteel Limited, a joint
venture company incorporated in Vietnam. Vinausteel produces concrete reinforcing steel bar. Sales for 2004 were 139,944
tonnes down 23% on the previous year (181,300 tonnes). Vinausteel reported a net profit of VND 61.5 billion (A$5.3 million)
(2003 profit: VND 42.4 billion or A$4.2 million). During the year, Vinausteel declared dividends of VND 50 billion of which VII’s
share was VND 35 billion (A$3.2 million) and VND 15 billion (A$1.37 million) to outside equity interests.
Austnam Company Ltd (68%)
The Company holds 68% of Austnam Company Ltd, a joint venture company incorporated in Vietnam which manufactures
steel roofing and wall cladding materials in Hanoi. Sales for 2004 were 734,720 m2 down 26% on the previous year
(989,586m2). Austnam reported a net profit after tax of VND 3.9 billion (A$0.3 million) which was down on the 2003 result of
VND 6.9 billion (A$0.7 million). Austnam has been approved for conversion to a shareholding company under a pilot scheme
to allow a limited number of foreign investment enterprises to convert into joint stock companies. Conversion is expected to
be completed in 2005. During the year, Austnam declared dividends of VND 3.5 billion of which VII’s share was VND 2.7 billion
(A$0.238 million) and VND 800 million (A$0.062 million) to outside equity interests.
VRC Weldmesh (Vietnam) Limited (100%)
The Company holds 100% equity in VRC Weldmesh (Vietnam) Limited, a manufacturer of steel mesh and wire products
serving the construction industry from its factory in Ho Chi Minh City. Sales for the year were 6,147 tonnes, significantly
higher than 2004 (2,416 tonnes). The Company reported a net profit of VND 3.1 billion (A$0.3 million) in 2004 (2003 loss:
VND 1.6 billion or A$0.2 million).
SSESTEEL Limited (100%)
The Company holds 100% of SSESTEEL Limited a steel rolling mill in Haiphong, which produces steel wire rod. Sales for the
year were 34,869 tonnes, down 59% on the previous year (2003: 84,925 tonnes), producing revenues of VND 377.2 billion
(A$32.6 million) (2003:VND 492 billion). SSESTEEL reported a net loss of VND 51.2 billion (A$4.4 million) (2003 loss: VND
40.8 billion or A$4.0 million). SSESTEEL has invested in a cooling bed which will enable it to produce rebar and construction
was completed in December 2004. Commissioning will be completed by the end of February 2005 and the cooling bed will
be fully operational in March 2005.
Total Building Systems Ltd (100%)
On 27 April 2004, as part of VII’s goal of growing and diversifying its business in Vietnam, Total Building Systems Ltd (“TBS”)
was established. TBS is a full service building systems provider-supplying engineering services, building systems and
construction services to industrial and residential consumers in Vietnam. That is, a steel building maker that offers full service
from engineering through to construction, including a wide range of building accessories and standard products. TBS won its
first major contract due for completion in the first quarter of 2005. TBS reported a net loss of VND 1.8 billion (A$0.2 million).
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors, there were no significant changes in the state of affairs of the consolidated entity that occurred
during the financial year under review.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
On 23 February 2005, Vinausteel Limited (VII: 70%) declared a final dividend of VND 40 billion. VII’s share is VND 28 billion
(A$2.3 million) of which VND 20 billion has been allocated to provide further working capital for SSESTEEL’s operations.
Other than the above, there has not arisen, in the interval between the end of the financial year and the date of this report, any
item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to significantly
affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity
in future financial years.
9
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The likely developments in the operations of the consolidated entity and the expected results of those operations in the
coming financial year are as follows:
(a) Continued commercial production of reinforcing steel at Vinausteel’s steel rolling mill in Haiphong, roofing and wall cladding
at Austnam’s factory in Hanoi, welded steel reinforcing and fencing at VRC’s factory in Ho Chi Minh City and building
solutions by Total Building Solutions. Commercial production of steel wire rod at SSESTEEL’s rolling mill in Haiphong will
be complemented by production of rebar following the installation and testing of a cooling bed and quenching system in
2005.
(b) Trading conditions in Vietnam cannot be estimated with any certainty, however, if the same level of economic activity
occurs as in 2004, then the Company’s businesses there should continue to trade profitably and an improvement in
SSESTEEL’s operations should result.
(c) The Directors will continue to consider opportunities for growth of the Company’s operations in Vietnam by expansion of
existing operations and by investment in new projects.
DIRECTORS’ AND EXECUTIVE OFFICERS’ EMOLUMENTS
The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies
applicable to the Managing Directors, senior executives and directors themselves. This role also includes responsibility for
share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements,
fringe benefit policies and professional indemnity and liability insurance policies.
Remuneration packages contain the following key elements:
(a) Primary benefits – salaries and fees, cash benefits (bonuses), and non-cash benefits including parking fees;
(b) Post-employment benefits – including superannuation and prescribed retirement benefits;
(c) Equity – share options under the Share Option Scheme as disclosed in Note 25 of the Financial Statements;
(d) Other benefits(i) – include other expenses incurred by Directors in relation to their employment in Vietnam.
EMOLUMENTS OF DIRECTORS OF THE COMPANY
Director
S. Lee
A. A. Young (i)
H. V. H. Lam (i)
K. M. Leong
D. Bacopanos
M. P. Bowen
(i)
Salary
& Fees
$
160,000
151,130
142,058
6,667
18,333
5,530
483,718
Primary
Post Employment
Cash Non-Cash
Super- Retirement
Benefits Benefits annuations Benefits
$
$
$
$
2,815
14,400
2,467
28,374
30,841
2,815
14,400
-
Equity
Options
Other (i)
Other
Total
$
-
$
34,709
138,397
173,106
$
177,215
188,306
308,829
6,667
18,333
5,530
704,880
The Group’s operating subsidiaries incurred other expenses of $34,709 (2003: $37,971) for Mr A.A.Young and $138,397
(2003: $121,841) for Mr H.V.H Lam in relation to their employment in Vietnam.
10
DIRECTORS’ REPORT
EMOLUMENTS OF THE FIVE MOST HIGHLY PAID EXECUTIVE OFFICERS
OF THE COMPANY AND THE CONSOLIDATED ENTITY
Executive
S. Bardoloi(ii)
P. Q. Dinh
M. A Clements
T. Huang
N. T. Tung(ii)
(ii)
Salary
& Fees
$
97,773
88,810
54,167
46,822
19,210
306,782
Primary
Post Employment
Cash Non-Cash
Super- Retirement
Benefits Benefits annuations Benefits
$
$
$
$
11,543
2,815
4,875
11,543
2,815
4,875
-
Equity
Options
Other (ii)
Other
Total
$
-
$
21,480
17,619
39,099
$
130,796
88,810
61,857
46,822
36,829
365,114
The Group’s operating subsidiaries incurred other expenses of $21,480 for Mr S. Bardoloi and $17,619 for Mr N.T.Tung
in relation to their employment in Vietnam.
DIRECTORS’ MEETINGS
During the year 3 directors’ meetings were held. The number of meetings at which Directors were in attendance is as follows:
No. of meetings held
Meetings
while in office
attended
S. Lee
3
3
A. A. Young
3
3
H. V. H. Lam
3
3
K. M. Leong
D. Bacopanos
2
2
M. P. Bowen
1
1
There are frequent Board Meetings of each of the Company’s subsidiary companies in which members of the Vietnam Industrial
Investments Limited Board participate. In addition to the above, there were 6 occasions whereby the Board approved matters
by circular resolutions. The Remuneration Committee was not required to meet during the year. The Audit Committee met
twice during the year. The first meeting was attended by Mr Lee and Mr Bacopanos and representatives from the auditors. The
second was attended by Mr Lee and representatives from the auditors.
SHARE OPTIONS - UNISSUED SHARES
As at the date of this report there were no unissued ordinary shares under options. During the period, 7,000,000 options to
take up one ordinary share at an issue price of $0.20 expired without being exercised.
ENVIRONMENTAL REGULATION
The consolidated entity’s operations are not subject to any significant environmental regulations under either Commonwealth or
State legislation. However, the Board believes that the consolidated entity has adequate systems in place for the management
of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the
consolidated entity.
LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATION ACT 2001
The lead auditor’s independence declaration is set out on page 53 and forms part of the Director’s Report for the year ended
31 December 2004.
11
INDEMNIFICATION AND INSURANCE OF DIRECTORS
The Company has not, during or since the financial year, in respect of any person who is or has been an officer of the
Company or related body corporate indemnified or made any relevant agreement for indemnifying against a liability incurred
as an officer; including costs and expenses in successfully defending legal proceedings.
During the financial year the Company has paid premiums in respect of Directors’ and Officers’ Liability and Company
Reimbursement Insurance contracts for the current directors and officers. The directors have not included details of the
nature of the liabilities covered or the amount of the premium paid in respect of this insurance, as such disclosure is prohibited
under the terms of the contract.
ROUNDING
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is
applicable) under the option available to the company under ASIC Class Order 98/0100. The Company is an entity to which
the Class Order applies.
Signed in accordance with a resolution of the directors.
ALAN A. YOUNG
Director
Perth, 31 March 2005
12
CORPORATE GOVERNANCE STATEMENT
This statement outlines the main Corporate Governance practices that were in place throughout the financial year, unless
otherwise stated. The following information about the Company’s Corporate Governance practices is set out on the Company’s
website at www.vii.net.au
BOARD OF DIRECTORS
ROLE OF THE BOARD
The Board’s primary role is the protection and enhancement of long-term shareholders value. To fulfil this role, the Board
is responsible for the overall corporate governance of the consolidated entity, including formulating its strategic direction,
approving and monitoring capital expenditure, setting remuneration, appointing, removing and creating succession policies
for directors and senior executives, establishing and monitoring the achievement of management’s goals and ensuring the
integrity of internal control and management information systems.
It is also responsible for approving and monitoring financial and other reporting. Details of the Board’s Charter is set out on the
Company’s website.
The Board has delegated responsibility for operation and administration of the Company to the Managing Directors and
executive management.
BOARD PROCESSES
To assist in the execution of its responsibilities, the Board has established a Remuneration Committee and an Audit Committee.
The committees have written mandates which are reviewed on a regular basis. The Board has also established a framework
for the management of the consolidated entity including system of internal control, a business risk management process and
the establishment of appropriate ethical standards.
INDEPENDENT PROFESSIONAL ADVICE AND ACCESS TO COMPANY INFORMATION
Each director has the right of access to all relevant Company information and to the Company’s executives and, subject to
prior consultation with the Chairperson, may seek independent professional advice from a suitably qualified adviser at the
consolidated entity’s expense. A copy of the advice received by the director must be made available to all other members of
the Board.
COMPOSITION OF THE BOARD
The names, skills, experiences, expertise and independence of the directors of the Company in office at the date of this report
are set out in the Directors’ Report.
The composition of the board is determined using the following principles:
• there shall be at least two non-executive directors;
• directors shall have a range of expertise encompassing the current and proposed activities of the Company; and
• directors are subject to re-election every three years (except for the Managing Directors).
REMUNERATION OF DIRECTORS AND EXECUTIVES
applicable to the Managing Directors, senior executives and directors themselves. This role also includes responsibility
for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination
entitlements, fringe benefit policies and professional indemnity and liability insurance policies. Members of this committee
during the financial year were non-executive director, Mr Leong and independent director, Mr Bacopanos and following his
resignation, independent director, Mr Bowen. During 2004, the Board considered adding at least one other independent
director however a suitable candidate has not yet been identified.
Remuneration policies
Remuneration levels are competitively set to attract the most qualified and experienced directors and senior executives. The
Remuneration Committee, when deemed necessary, obtains independent advice on the appropriateness of remuneration packages.
13
The Remuneration Committee meets as required. The committee was not required to meet during the year as outlined in the
Directors’ Report.
AUDIT COMMITTEE
The Audit Committee has a documented charter approved by the Board. All members of the Audit Committee must be nonexecutive directors. The committee advises on the establishment and maintenance of a framework of internal control and
appropriate ethical standards for the management of the consolidated entity. Members of this committee during the financial
year were non-executive director, Mr Leong and independent director, Mr Bacopanos and following his resignation, independent
director, Mr Bowen. During 2004, the Board considered adding at least one other independent director however a suitable
candidate has not yet been identified. The external auditors, Managing Directors and Chief Financial Officer are invited to Audit
Committee meetings at the discretion of the Committee. The Audit Committee meets as required. The Committee met on two
occasions during the year as outlined in the Directors’ Report.
The Managing Director and the Chief Financial Officer declared in writing to the Board that the Company’s financial reports for
the year ended 31 December 2004 present a true and fair view, in all material respects, of the Company’s financial condition
and operational results and are in accordance with relevant accounting standards. This statement is required annually.
The Audit Committee’s charter is available on the Company’s website.
RESPONSIBILITIES OF THE AUDIT COMMITTEE
The responsibilities of the Audit Committee include reporting to the Board on:
• reviewing the annual and half-year financial reports and other financial information distributed externally. This includes
approving new accounting policies to ensure compliance with Australian Accounting Standards and generally accepted
accounting principles, and assessing whether the financial information is adequate for shareholder needs;
• assessing corporate risk assessment processes;
• reviewing the Company’s policies and procedures for convergence with International Financial Reporting Standards for
reporting periods beginning on 1 January 2005;
• assessing whether non-audit services provided by the external auditor are consistent with maintaining the external
auditor’s independence.
• reviewing the nomination and performance of the external auditor;
• assessing the adequacy of the internal control framework and the Company’s code of conduct; and
• monitoring the procedures to ensure compliance with the Corporations Act 2001 and the ASX Listing Rules and all other
regulatory requirements.
The Audit Committee reviews the performance of the external auditors on an annual basis and normally meets with them
during the year to:
• discuss the audit plans, identifying any significant changes in structure, operations, internal controls or accounting policies
likely to impact the financial statements;
• review the half-year and preliminary final report prior to lodgement with the ASX , and any other significant adjustments
required as a result of the auditor’s findings and to recommend Board approval of these documents, prior to announcement
of results; and
• review the draft financial report and recommend Board approval of the financial report.
RISK MANAGEMENT
OVERSIGHT OF THE RISK MANAGEMENT SYSTEM
The Board oversees the establishment, implementation and annual review of the Company’s risk management system.
Management has an established approach for assessing, monitoring and managing operational, financial reporting, and
compliance risks for the consolidated entity. The Managing Director and the Chief Financial Officer have declared, in writing
to the Board, that the financial reporting risk management and associated compliance and controls have been assessed
and found to be operating efficiently and effectively. The operational and other compliance risk management have also been
assessed and found to be operating efficiently and effectively.
14
RISK PROFILE
Major risks for the consolidated entity arise from such matters as exchange rates, political and economic climate in areas of
investments, intellectual property risks, product development and commercialisation risk, technical, clinical and regulatory
risks, operational risks and financial reporting.
RISK MANAGEMENT AND COMPLIANCE AND CONTROL
The Board is responsible for the overall internal control framework, but recognises that no cost-effective internal control system
will preclude all errors and irregularities. The consolidated entity has established a system of internal controls which takes
account of key business exposures. The system is designed to provide reasonable assurance that assets are safe-guarded,
proper accounting records are maintained and financial information is reliable. The system is based upon detailed financial
and operating reporting, written procedures, policies and guidelines, organisational structures that provide an appropriate
division of responsibility and the careful selection and training of qualified personnel.
Operating practices have been established to ensure:
•
•
•
•
•
•
major capital expenditure commitments obtain prior Board approval;
financial exposures are controlled, including the use of derivatives;
business transactions are properly authorised and executed;
the quality and integrity of personnel;
financial reporting accuracy and compliance with the financial reporting regulatory framework; and
environmental regulation compliance.
FINANCIAL REPORTING
The Managing Director and the Chief Financial Officer have declared, in writing to the Board that the Company’s financial
reports are founded on a sound system of risk management and internal compliance and control which implements the
policies adopted by the Board.
Monthly actual results are reported against budgets approved by the directors and revised forecasts for the year prepared
regularly. Convergence with IFRS is a significant current financial reporting project, and the Board has delegated responsibility
for the project to the Chief Financial Officer, to ensure smooth transition to IFRS reporting, beginning with the half-year ended
30 June 2005. This project will be monitored and reviewed by the Board on a regular basis.
ETHICAL STANDARDS
All directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to
enhance the reputation and performance of the consolidated entity. Every employee has a senior executive to whom they
may refer any issues arising from their employment. The Board reviews the ethical standards related policies regularly and
processes are in place to promote and communicate these policies.
CONFLICT OF INTEREST
Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the
Company. Where the Board believes that a significant conflict exists for a director on a board matter, the director concerned
does not receive the relevant board papers and is not present at the meeting whilst the item is considered. Details of director
related entity transactions with the Company and consolidated entity are set out in Note 19 to the financial statements.
CODE OF CONDUCT
The consolidated entity has advised each director, senior executive and employee that they must comply with the Company’s
Code of Conduct. The code may be viewed at the Company’s website, and it covers the following:
•
•
•
•
the pursuit of the highest standards of ethical conduct in the interests of shareholders and other stakeholders;
usefulness of financial information by maintaining appropriate accounting policies and practices and disclosure;
employment practices such as employment opportunity, the level and structure of remuneration, and conflict resolution;
responsibilities to the community;
15
• compliance with all legislation affecting the operations and activities of the consolidated entity, both in Australia and
overseas;
• conflicts of interest;
• corporate opportunities such as preventing directors and key executives from taking advantage of property, information or
position for personal gain;
• confidentiality of corporate information;
• protection and proper use of the Company’s assets;
• compliance with laws; and
• reporting of unethical behaviour.
TRADING IN THE COMPANY’S SECURITIES BY DIRECTORS AND EMPLOYEES
All directors have an obligation to immediately advise the Company of all changes to their interests in shares, options
and debentures, if any, in the Company and its associates for reporting to the Australian Stock Exchange by the Company
Secretary.
Directors and employees may not deal in securities of the Company when in possession of any information which, if made
publicly available, could reasonably be expected to materially affect the price of the Company’s securities, whether upwards or
downwards. Legal advice will be obtained by the Company Secretary on behalf of the director and employees in circumstances
where any doubt exists.
COMMUNICATION WITH SHAREHOLDERS
The Board provides shareholders with information using a Continuous Disclosure Policy which includes identifying matters
that may have a material effect on the price of the Company’s securities, notifying them to the ASX, posting them on the
Company’s website, and issuing media releases. More details of the policy are available on the Company’s website.
In summary, the Continuous Disclosure policy operates as follows:
• the Managing Directors and the Chief Financial Officer are responsible for interpreting the Company’s policy and where
necessary informing the Board. The Company Secretary is responsible for all communications with the ASX. Such matters
are advised to the ASX on the day they are discovered and all senior executives are responsible for monitoring the Group’s
internal and external environment for information or events potentially requiring disclosure;
• the annual report is distributed to all shareholders (unless a shareholder has specifically requested not to receive the
document), including relevant information about the operations of the consolidated entity during the year, changes in the
state of affairs and details of future developments;
• the half-yearly report and preliminary final report contain summarised information and a review of the operations of
the consolidated entity during the period. The half-year reviewed financial report and full year audited financial report
are lodged with the Australian Securities and Investments Commission and the ASX, and sent to any shareholder who
requests a copy;
• proposed major changes in the consolidated entity which may impact on share ownership rights are submitted to a vote of
shareholders;
• all announcements made to the market, and related information (including information provided to analysts or the media
during briefings), are placed on the Company’s website after they are released to the ASX;
• transcripts of analyst and media presentations are placed on the Company’s website; and
• the external auditor is requested to attend the annual general meeting to answer any questions concerning the audit and
the content of the auditor’s report.
16
ASX CORPORATE GOVERNANCE COUNCIL (CGC)
During the year ended 31 December 2004 the Company followed the principles of good corporate governance as outlined by
the ASX CGC, other than the following recommendations:
CGC RECOMMENDATION 2.1 REQUIRES A MAJORITY OF THE BOARD TO BE INDEPENDENT DIRECTORS
Only one (Mr Bowen) of the four Directors is independent. Prior to Mr Bowen’s appointment, the Board included only one
independent director, Mr Bacopanos. During 2004, the Board considered adding at least one other independent director
however a suitable candidate has not yet been identified. Given the size and scope of the Company’s operations, the Board
considers that it is appropriately structured to discharge its duties in a manner that is in the best interests of the Company and
its shareholders from both a long-term strategic and day-to-day operations perspective. All board committees are comprised
only of non-executive directors and under the Company’s Directors and Executives Code of Conduct, all directors have agreed
not to participate in any decision in which they are conflicted. The Board is of the view that it has achieved an appropriate
balance between independent representation and maintaining sufficient experience for the Board to fulfil its responsibilities.
CGC RECOMMENDATIONS 2.2 AND 2.3 REQUIRES THE CHAIRPERSON TO BE AN INDEPENDENT DIRECTOR AND
THE ROLES OF THE CHAIRPERSON AND CHIEF EXECUTIVE OFFICER SHOULD NOT BE EXERCISED BY THE SAME
INDIVIDUAL
The Chairman is the Chief Executive Officer of the Company. The Board considers that the executive role carried out by the
Chairman, Mr Lee, is in the best interests of the Company. Mr Lee has been Chairman since 1995 and assumed an executive
position in the Company at the commencement of the year. Whilst the Board recognises the value of independence, it also
believes that industry experience and specific expertise to the Company’s business are vital to directors making a meaningful
contribution to the Board and its committees. Further, it should be noted that the current Chairman is the Company’s founder
and is the largest shareholder and as such, is able to clearly identify with the interests of shareholders as a whole. The Board
has established clear protocols for handling conflicts of interests and has appointed only non-executive directors to the
Remuneration and Audit Committees.
CGC RECOMMENDATION 2.4 REQUIRES THE BOARD TO ESTABLISH A NOMINATION COMMITTEE
There is no separate Nomination Committee as a sub-committee. The functions to be performed by a nomination committee
under the ASX Best Practice Recommendations are currently performed by the full Board and this is reflected in the written
policy setting out the responsibilities of the Board. Having regard to the number of members currently comprising VII’s
Board, the Board does not consider it appropriate to delegate these responsibilities to a sub-committee of the Board. These
arrangements will be reviewed periodically by the Board to ensure that they continue to be appropriate to the Company’s
circumstances.
CGC RECOMMENDATION 4.3 REQUIRES AT LEAST THREE MEMBERS OF AN AUDIT COMMITTEE
The Audit Committee currently consists of only one member. During 2004, the Board considered adding at least one other
independent director however a suitable candidate has not yet been identified. The Audit Committee was formally introduced
at the commencement of the year. Given the current composition of the Board (ie only one independent, non-executive
member), the Board deemed it was necessary that the composition of the Audit Committee be comprised of this non-executive
director (for the greater part of the year it comprised two non-executive directors, of which one was also an independent
director). The Board considers that the committee as constituted properly fulfils the objectives and responsibilities of an Audit
Committee. These arrangements will be reviewed periodically by the Board to ensure that they continue to be appropriate to
the Company’s circumstances.
17
FINANCIAL STATEMENTS 2004
18
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER 2004
Note
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
Sales revenue
2
117,079
157,756
-
-
Cost of sales
2
(103,970)
(142,623)
-
-
13,109
15,133
-
-
Gross profit
Other revenue from ordinary activities
2
4,053
2,190
6,220
2,995
Recoverable amount write-down of non-current assets
2
(4,155)
-
-
-
Net foreign exchange losses
2
(1,076)
(2,951)
(689)
(795)
Provision for diminution
2
68
(178)
(4,087)
(178)
Borrowing costs expensed
2
(2,385)
(2,839)
-
-
Other expenses from ordinary activities
2
(12,274)
(11,710)
(3,529)
(1,912)
(2,660)
(355)
(2,085)
110
(1,216)
(893)
(175)
-
(3,876)
(1,248)
(2,260)
110
Profit/(loss) from ordinary activities before income tax expense
Income tax expense attributable to ordinary activities
3
Net profit/(loss)
Net profit attributable to outside equity in interest
17
(1,701)
(1,451)
-
-
Net profit/(loss) attributable to members of
Vietnam Industrial Investments Limited
16
(5,577)
(2,699)
(2,260)
110
Net exchange difference on translation of
financial report of foreign controlled entity
16
(595)
(6,037)
-
-
(595)
(6,037)
-
-
(6,172)
(8,736)
(2,260)
110
(5.40)
(5.40)
-
(2.61)
(2.61)
0.50
Total revenues, expenses and valuation adjustments attributable
to the members of Vietnam Industrial Investments Limited
and recognised directly in equity
Total changes in equity other than those resulting from
transactions with owners as owners attributable to members
of Vietnam Industrial Investments Limited
Basic Earnings Per Share (Cents Per Share)
Diluted Earnings Per Share (Cents Per Share)
Partially Franked Dividend Per Share (Cents Per Share)
The accompanying notes form part of the financial statements.
27
27
28
19
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2004
Note
CURRENT ASSETS
Cash assets
Receivables
Inventories
Other financial assets
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Other financial assets
Property plant and equipment
Other non-current assets
Deferred tax assets
TOTAL NON-CURRENT ASSETS
4
5
6
7
8
9
10
11
3
TOTAL ASSETS
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
3,211
12,123
25,291
580
985
42,190
8,520
12,624
17,081
1,638
936
40,799
1,218
3,212
580
30
5,040
2,059
3,595
1,638
74
7,366
844
22,432
255
23,531
205
24,560
345
166
25,276
24,539
22
24,561
703
23,610
29
166
24,508
65,721
66,075
29,601
31,874
CURRENT LIABILITIES
Payables
Interest bearing liabilities
Provisions
Current tax liabilities
TOTAL CURRENT LIABILITIES
12
13
14
3
11,358
25,860
355
523
38,096
15,178
12,928
953
192
29,251
53
95
148
173
33
206
NON-CURRENT LIABILITIES
Provisions
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
13
14
3
4,932
66
4,998
7,989
21
8,010
66
66
21
21
TOTAL LIABILITIES
43,094
37,261
214
227
NET ASSETS
22,627
28,814
29,387
31,647
22,057
(8,609)
3,082
16,530
22,057
(8,014)
8,659
22,702
22,057
7,330
29,387
22,057
9,590
31,647
4,574
(2,408)
3,931
6,097
4,526
(2,070)
3,656
6,112
-
-
22,627
28,814
29,387
31,647
EQUITY
Parent Entity Interest
Contributed equity
Reserves
Retained profits
Total Parent Entity Interest in Equity
Outside Equity Interest
Contributed equity
Reserves
Retained profits
Total Outside Equity Interest in Equity
TOTAL EQUITY
15
16
16
17
20
STATEMENT OF CASH FLOWS
Note
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Borrowing costs
Dividends received
Income taxes paid
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
118,324
(125,291)
187
(2,385)
43
(803)
160,293
(131,304)
94
(2,839)
(893)
113
(1,538)
83
3,370
-
(1,842)
68
2,099
-
(9,925)
25,351
2,028
325
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for investments
Proceeds from sale of investments
Payments for property, plant & equipment
Proceeds from sale of plant & equipment
(1,965)
2,529
(5,402)
260
(1,328)
1,174
(1,341)
11
(6,414)
2,529
(11)
6
(2,542)
1,174
-
NET CASH FLOWS USED IN INVESTING ACTIVITIES
(4,578)
(1,484)
(3,890)
(1,368)
109,426
(97,956)
(2,462)
73,796
(89,702)
(1,169)
1,035
-
1,653
(517)
NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
9,008
(17,075)
1,035
1,136
NET (DECREASE)/INCREASE IN CASH HELD
Add opening cash brought forward
Add exchange rate effect on opening cash balances
(5,495)
8,520
186
6,792
4,125
(2,397)
(827)
2,059
(14)
93
2,569
(603)
3,211
8,520
1,218
2,059
NET CASH FLOWS (USED IN)/FROM OPERATING ACTIVITIES
18(a)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank borrowings
Repayment of bank borrowings
Proceeds from controlled entity
Payment of dividend
CLOSING CASH CARRIED FORWARD
18(b)
21
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Accounting
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of
the Corporations Act 2001 including applicable Accounting Standards. Other mandatory professional reporting requirements
(Urgent Issues Group Consensus Views) have also been complied with. The financial report has been prepared in accordance
with the historical cost convention.
(b) Changes in accounting policies
The accounting policies adopted are consistent with those of the previous year.
(c) Principles of consolidation
The consolidated financial statements are those of the consolidated entity, comprising Vietnam Industrial Investments Limited
(the Company) and all entities which Vietnam Industrial Investments Limited controlled from time to time during the year and at
reporting date.
Information from the financial statements of subsidiaries is included from the date the Company obtains control until such time
as control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the
part of the reporting period during which the parent company has control.
Subsidiary acquisitions are accounted for using the purchase method of accounting.
The financial statements of subsidiaries are prepared for the same reporting period as the Company, using consistent accounting
policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been
eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
(d) Recoverable amount
Non-current assets measured using the cost basis are not carried at an amount above their recoverable amount, and where a
carrying value exceeds this recoverable amount, the asset is written down. In determining the recoverable amount the expected net
cash flows have not been discounted to their present value using a market determined risk adjusted discount rate.
(e) Property, plant and equipment
Cost and valuation
All classes of property, plant and equipment are measured at cost.
Depreciation
Depreciation is provided on a straight-line basis on all property, plant and equipment.
Major depreciation periods are:
Buildings on leasehold land:
Plant and equipment:
Motor vehicles:
2004
2.5% to 5%
5% to 20%
10% to 20%
2003
2.5% to 5%
5% to 20%
10% to 20%
22
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(f) Foreign currencies
Translation of foreign currency transactions
Foreign currency transactions are converted to Australian dollars at exchange rates prevailing at the dates those transactions
occurred. Amounts payable and receivable in foreign currencies at the reporting date are converted to Australian dollars at
exchange rates prevailing on that date. Exchange differences arising from the conversion of amounts payable and receivable in
foreign currencies are recognised as revenues and expenses for the financial year.
Translation of accounts of overseas operations
The accounts of those overseas operations deemed to be self-sustaining as they are financially and operationally independent
of Vietnam Industrial Investments Limited, are translated using the current rate method whereby any exchange differences are
taken directly to the foreign currency translation reserve.
The accounts of those overseas operations deemed to be integrated operations are translated using the temporal method
whereby any exchange differences are taken to the statement of financial performance.
(g) Cash and cash equivalents
Cash on hand and in banks and short-term deposits are stated at nominal value.
For the purpose of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market investment
readily convertible to cash within two working days, net of outstanding bank overdrafts.
(h) Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate
for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as incurred.
Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as income on an
accrual basis.
(i) Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and conditions are accounted for as follows;
• Raw materials – purchase cost on a first in – first out basis or based upon a weighted average method; and
• Finished goods – cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity
(j) Interest bearing liabilities
Loans are carried at the principal amount. Interest is charged as an expense as it accrues.
(k) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date.
These benefits include wages and salaries, annual leave and long service leave.
23
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within
twelve months of the reporting date are measured at their nominal amounts, based on remuneration rates which are expected
to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated
future cash outflows to be made in respect of services provided by employees up to the reporting date. In determining the
present value of future cash outflows, the interest rates attaching to government guaranteed securities which have terms to
maturity approximating the terms of the related liability are used.
Employee benefit expenses and revenues arising in respect of the following categories:
• wages and salaries, non-monetary benefits, annual leave, long service leave and other leave benefits; and
• other types of employee benefits
are charged against profits on a net basis in their respective categories.
The value of the Share Option Plan described in Note 25 is not being charged as an employee benefits expense.
(l) Trade and other payables
Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the
future for goods and services received, whether or not billed to the consolidated entity.
Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an
expense on an accrual basis.
(m) Other non current assets
Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of
acquisition of a business or shares in a controlled entity.
Goodwill is amortised on a straight-line method over the period during which benefits are expected to be received. This is taken
as being 16 years in the case of Austnam Company Ltd and 20 years in the case of Vinausteel Limited.
Expenditure carried forward
Significant items of carry forward expenditure, such as start-up costs and project feasibility costs having benefit or relationship
to more than one period, are capitalised and are written off over the periods to which such expenditure relates.
(n) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be
reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Sale of goods
Control of the goods has passed to the buyer.
Interest
Control of a right to receive the interest payment.
Dividends
Control of the right to receive the dividend payment.
24
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(o) Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement
so as to reflect the risks and benefits incidental to ownership.
Operating leases
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits
of ownership of the leased item, are recognised as an expense on a straight-line basis.
Contingent rentals are recognised as an expense in the financial year in which they are incurred.
The lease liability in relation to the non-cancellable operating lease and land rental leases are set out in Note 19.
(p) Investments
Listed shares held for trading are carried at the lower of cost or net market value. Movements in the provision for diminution are
recognised as revenues or expenses in determining the net profit for the year.
All non-current investments are carried at the lower of cost and recoverable amount.
(q) Taxes
Income taxes
Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on
the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items
are recognised in the accounts and when items are taken into account in determining taxable income, the net related taxation
benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax.
The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the
benefit is virtually certain of being realised.
Goods and Services Tax (GST) and Value Added Tax (VAT)
Revenues, expenses and assets are recognised net of the amount of GST/VAT except:
• where the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case
the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of GST/VAT included.
The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables
in the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST/VAT component of cash flows arising from investing
and financing activities, which are recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST/VAT recoverable from, or payable to, the taxation authority.
25
(r) Earnings per share
Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity (other than dividends)
and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members, adjusted for:
• costs of servicing equity (other than dividends) and preference share dividends;
• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as
expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential
ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(s) Provisions
A provision for dividends is only recognised as a liability when dividends are declared, determined or publicly recommended on
or before the reporting date.
(t) Construction in progress
The cost of construction in progress comprises its purchase price, including import duties and non-refundable purchase taxes,
and any directly attributable costs of bringing a steel plant to working condition for its intended use. The borrowing costs that
are directly attributable to the construction of a steel plant are included in the costs of a steel plant. The amount of borrowing
costs eligible for capitalisation on a steel plant are determined as the actual borrowing costs incurred on that borrowing during
the year less any investment income on the temporary investment of those borrowings.
Administrative expenses and other general overhead costs that are directly attributed to the construction in progress are
capitalised as part of the construction in progress.
(u) Contributed equity
Issued and paid up capital is recognised at the fair value of the consideration received by the Company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share
proceeds received.
(v) Comparatives
Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year
amounts and other disclosures.
26
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
2. PROFIT/(LOSS) FROM ORDINARY ACTIVITIES
Profit/(loss) from ordinary activities before income tax is arrived
at after taking into account:
Revenues from ordinary activities
Revenues from operating activities
(a) Revenue from sale of goods
117,079
157,756
-
-
43
-
3,184
43
1,493
-
Total revenues from ordinary activities
187
2,529
5
1,289
4,053
121,132
94
1,174
11
911
2,190
159,946
83
2,529
5
376
6,220
6,220
68
1,174
260
2,995
2,995
(Expenses) and (losses)/gains
(c) Cost of sales
(103,970)
(142,623)
-
-
(79)
(997)
(1,076)
(2,245)
(706)
(2,951)
(192)
(497)
(689)
(720)
(75)
(795)
Borrowing costs
- Interest paid
(2,385)
(2,839)
-
-
(4,155)
-
-
-
68
(178)
(4,087)
(178)
(7,263)
(2,292)
(6,136)
(2,111)
(3,407)
-
(1,631)
-
(1,724)
(407)
(125)
(19)
7
(439)
(12)
(12,274)
(2,275)
(314)
(79)
(19)
(22)
(742)
(12)
(11,710)
(6)
(116)
(3,529)
(8)
(273)
(1,912)
(2,660)
(355)
(2,085)
110
Revenues from non-operating activities
(b) Other revenues from ordinary activities
- Dividend received
Related parties
(Partly-owned controlled entities)
Other corporations
- Interest received
Other corporations
- Proceeds from sale of investments
- Proceeds from sale of plant & equipment
- Other income
(d)
(e)
(f)
Foreign exchange losses
- Unrealised foreign exchange loss
- Realised foreign currency loss
(g) Provision for diminution in value of investments
(h)
Other expenses from ordinary activities
- Administration
- Selling
- Depreciation of non-current assets
Plant and equipment
Buildings
Motor vehicles
- Amortisation of goodwill
- Bad and doubtful debts – trade debtors
- Operating lease rentals
- Amortisation of preliminary feasibility expenses
Profit/(loss) from ordinary activities before income tax
27
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
2. PROFIT/(LOSS) FROM ORDINARY ACTIVITIES (CONT.)
(i)
Other gains /(losses)
- Net profit on sale of investments
- Net (loss)/gain on sale of plant & equipment
75
(6)
69
189
7
196
75
(6)
69
189
189
(798)
(106)
(626)
33
35
(6)
330
1,247
-
78
119
-
35
(1,051)
1,247
87
(448)
-
Income tax expense/(benefit) attributable to ordinary activities
808
91
(395)
(328)
Unrecorded future income tax benefit arising from tax losses and
timing differences which could be recouped
298
111
298
111
Under provision of previous year
110
691
272
217
1,216
893
175
-
523
166
21
192
-
166
21
-
3. INCOME TAX
The prima facie tax, using tax rates applicable in the country of
operation on profit/(loss) differs from the income tax provided
in the financial statements as follows:
Prima facie tax on profit/(loss) from ordinary activities at 30% (2003: 30%)
Tax effect of permanent differences
Non-deductible expenditure
Non-assessable income
Tax differences on overseas operations
Total income tax expense attributable to ordinary activities
Deferred tax assets and liabilities:
Future income tax benefit – non-current
Provision for deferred income tax – non-current
Current tax liabilities
Tax consolidation
All wholly owned subsidiaries are domiciled in other countries. Therefore Vietnam Industrial Investments Limited has not entered
into tax consolidations.
The tax losses of the Company are estimated to be $726,133 at 31 December 2004 (2003: $513,754). This amount has not been
brought into account.
The future income tax benefit will only be obtained if:
(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and
(c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
28
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
4. RECEIVABLES (CURRENT)
Trade debtors
Provision for doubtful debts
11,931
(126)
11,805
12,706
(133)
12,573
-
-
318
51
129
51
12,123
12,624
3,083
3,212
3,387
157
3,595
Movement in provision for doubtful debts
Balance at beginning of year
Doubtful debts recovered during the year
(133)
7
(155)
22
-
-
Balance at end of year
(126)
(133)
-
-
Finished goods at cost
Provision for slow moving stock
13,970
(148)
13,822
9,914
(51)
9,863
-
-
Raw materials at cost
Work in progress at cost
11,384
85
7,218
-
-
-
Total inventories at lower of cost and net realisable value
25,291
17,081
-
-
707
(127)
580
1,832
(194)
1,638
707
(127)
580
1,832
(194)
1,638
699
1,887
699
1,887
Other debtors
Amounts receivable from related parties:
Controlled entities
Dividends receivable from controlled entity
Terms and Conditions
(a) Trade debtors and other debtors are non-interest bearing and
generally on 30 day terms.
(b) Details of the terms and conditions of related party receivables
are set out in Note 24.
5. INVENTORIES
The Group’s operating subsidiaries in Vietnam have banking facilities
which facilitate the importation of raw materials and finished goods and
these facilities are secured by the finished goods and raw materials.
6. OTHER FINANCIAL ASSETS (CURRENT)
Investments at cost comprise
Shares listed on a prescribed stock exchange
Provision for diminution on listed shares
Aggregate quoted market value of shares listed
on a prescribed stock exchange
29
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
7. OTHER CURRENT ASSETS
Prepayments
Advances to staff
Other
914
71
985
719
72
145
936
30
30
20
54
74
-
-
-
703
-
-
27,850
(4,155)
23,695
23,502
23,502
844
844
205
205
844
24,539
108
23,610
8. RECEIVABLES (NON-CURRENT)
Related parties:
Loan to controlled entity
9. OTHER FINANCIAL ASSETS (NON-CURRENT)
Investments at cost comprise
Unlisted controlled entities
Other unlisted entities (i)
(i)
During the year, the Company invested VND 9.6 billion (A$843,413) in Phuong Nam Commercial Bank, a commercial bank
which operates in Vietnam. The Company holds less than 5% equity interest in Phuong Nam Commercial Bank. The carrying
amount of this investment at 31 December 2004 is $0.8 million.
Investment in controlled entities
Investment in controlled entities comprises:
Name
Country of
Incorporation
Vinausteel Limited
(i) (ix)
(ii) (ix)
Austnam Company Ltd
Parnham Overseas Ltd (ii)
VRC Weldmesh (Vietnam) Ltd (iii) (ix)
Structure Steel Engineering Pte Ltd (iv) (x)
SSESTEEL Ltd (iv) (ix)
Ausviet Industrial Investments Ltd (v) (x)
Vietnam Projects (Singapore) Pte Ltd (vi) (x)
Vietnam Property Development Pte Ltd (vii) (x)
Total Building Systems Ltd (viii) (ix)
Beneficial percentage of
ordinary shares held by
Consolidated entity
2004
2003
%
%
Amount of VII
Investment
2004
$’000
2003
$’000
Australia
-
-
-
-
Vietnam
70
70
12,554
12,554
68
100
100
100
100
100
100
100
100
68
100
100
100
100
100
100
100
-
13,427
1,131
738
27,850
9,079
1,131
738
23,502
(4,155)
23,695
23,502
Vietnam
British Virgin Islands
Vietnam
Singapore
Vietnam
Singapore
Singapore
Singapore
Vietnam
30
9. OTHER FINANCIAL ASSETS (NON-CURRENT) (CONT.)
(i)
Vinausteel Limited is a joint venture company established under the Foreign Investment Law of Vietnam. Vietnam Industrial
Investments Limited has a 70 per cent interest in the legal capital of Vinausteel Limited and its liability is limited to the amount of
legal capital contributed.
Vinausteel was created under an Investment Licence issued by the Vietnamese Government and its operations are governed by
a Joint Venture Agreement and Joint Venture Charter.
Vietnam Industrial Investments Limited has the right to appoint five of the seven directors of the Board of Management and is
entitled to 70 per cent of the after tax profit derived by Vinausteel Limited.
While some decisions of the Board of Management require a unanimous decision under the Joint Venture Agreement and Charter,
by virtue of the fact that Vietnam Industrial Investments Limited is entitled to 70 per cent of the after tax profits derived by Vinausteel
Limited, it is considered that Vietnam Industrial Investments Limited has the capacity to enjoy the majority of benefits and is exposed
to the majority of risks in respect to Vinausteel Limited and therefore Vinausteel Limited has been treated as a controlled entity for
the purpose of preparing the financial statements of the Vietnam Industrial Investments Limited entity.
(ii)
Austnam Company Ltd is a joint venture company established under the Foreign Investment Laws of Vietnam between Parnham
Overseas Ltd and Hong Ha Building Materials Import Export Company.
Vietnam Industrial Investments Limited acquired a 73 per cent equity interest in Austnam Company Ltd in January 1997. From
May 2002, VII reduced its share of current year profits to 68 per cent. Austnam Company Ltd has been approved for conversion
to a shareholding company and Vietnam Industrial Investments Limited will hold a 68 per cent interest.
It is considered that Vietnam Industrial Investments Limited has the capacity to enjoy the majority of benefits and is exposed to
the majority of risks in respect to Austnam Company Ltd and therefore Austnam Company Ltd has been treated as a controlled
entity for the purpose of preparing the financial statements of the Vietnam Industrial Investments Limited entity.
(iii)
VRC Weldmesh (Vietnam) Ltd (“VRC”) is a wholly owned subsidiary of Vietnam Projects (Singapore) Pte Ltd and ultimately owned
by Vietnam Industrial Investments Limited. VRC holds a 100 per cent foreign owned investment licence.
(iv)
Structure Steel Engineering Pte Ltd is a company incorporated in Singapore for the purposes of holding the investment in
SSESTEEL Ltd.
Vietnam Industrial Investments Limited is entitled to 100 per cent of the after tax profit derived by Structure Steel Engineering
Pte Ltd and SSESTEEL Ltd.
(v)
Ausviet Industrial Investments Pte Ltd is a wholly owned subsidiary of Vietnam Industrial Investments Limited, which holds the
investment in Austnam Company Ltd of 3 per cent.
(vi)
Vietnam Projects (Singapore) Pte Ltd is a wholly owned subsidiary of Vietnam Industrial Investments Limited which was
incorporated in Singapore to hold an investment in Vietnam. It holds 100 per cent of VRC Weldmesh (Vietnam) Ltd.
(vii)
Vietnam Property Development Pte Ltd is a wholly owned subsidiary acquired by Vietnam Industrial Investments Limited. It is
incorporated in Singapore to hold an investment in Vietnam.
(viii)
Total Building Systems Ltd is a wholly owned subsidiary of Ausviet Industrial Investments Pte Ltd which was incorporated in
Vietnam on 27 April 2004.
(ix)
Controlled entity audited by other member firm of Ernst & Young International.
(x)
Controlled entity audited by auditors other than Ernst & Young.
31
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
10. PROPERTY, PLANT AND EQUIPMENT
Buildings on leasehold land
At cost
Provision for depreciation
6,113
(1,877)
4,236
6,743
(1,736)
5,007
-
-
25,692
(8,477)
(4,155)
13,060
26,297
(7,349)
18,948
66
(44)
22
84
(55)
29
1,130
(426)
704
945
(340)
605
-
-
4,432
-
-
-
Total property, plant and equipment at cost
Recoverable amount write-down of plant & equipment
37,367
(10,780)
(4,155)
33,985
(9,425)
-
66
(44)
-
84
(55)
-
Total written-down amount
22,432
24,560
22
29
5,007
88
(293)
(407)
7,059
345
(17)
(314)
-
-
(159)
4,236
(2,066)
5,007
-
-
Plant and equipment
At cost
Recoverable amount write-down of plant & equipment
Motor vehicles
At cost
Construction in progress
At cost
(a) Reconciliations
Reconciliations of the carrying amounts of buildings on
leasehold land at the beginning and end of the current
and previous financial year.
Buildings on leasehold land
Carrying amount at beginning of year
Additions
Disposals
Depreciation expense
Net foreign currency movements arising
from self-sustaining foreign operation
Vinausteel and SSESTEEL have been granted the lease of the
land encompassing the steel mill operations for a period of
thirty years from the date of issue of the Investment Licence.
32
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
10. PROPERTY, PLANT AND EQUIPMENT (CONT.)
(a) Reconciliations (cont.)
Plant and equipment
Additions
Disposals
Transfer from construction in progress
Recoverable amount write-down of plant and equipment
Motor vehicles
Additions
Disposals
Construction in progress
Addition
Transfer to plant and equipment
18,948
832
(48)
(1,724)
27,005
727
(4)
(2,275)
29
11
(12)
(6)
37
(8)
(793)
(4,155)
13,060
(6,506)
1
18,948
22
29
605
248
(125)
547
268
(1)
(79)
-
-
(24)
704
(130)
605
-
-
4,432
4,432
1
(1)
-
-
-
Construction in progress related to civil and mechanical works, administrative expenses and borrowing costs directly related to
the construction of a cooling bed at SSESTEEL. Assets encumbered to the extent set out in Note 13.
The Group’s operating subsidiaries in Vietnam have banking facilities to facilitate acquisition of certain property, plant and
equipment. The property, plant and equipment are pledged as securities for the interest bearing liabilities in Note 13.
There are no borrowing costs capitalised as part of construction in progress at 31 December 2004.
2004
$’000
Consolidated
2003
$’000
The Company
2004
2003
$’000
$’000
11. OTHER NON-CURRENT ASSETS
Preliminary and feasibility expenses at cost
Accumulated amortisation
461
(378)
83
521
(367)
154
-
-
Goodwill
Accumulated amortisation
321
(149)
172
255
321
(130)
191
345
-
-
33
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
12. PAYABLES
Current
Trade creditors
Fees and expenses accruals
Sundry creditors
GST payable
Other payables
Amounts payable to related parties:
Controlled entities
9,658
1,048
652
11,358
13,748
1,113
316
1
15,178
53
53
106
1
107
11,358
15,178
53
66
173
22,665
3,195
25,860
10,606
2,322
12,928
-
-
974
3,958
4,932
3,345
4,644
7,989
-
-
Terms and conditions
(a) Trade and other creditors are non-interest bearing and are
normally settled within the normal commercial terms and conditions.
(b) Details of the terms and conditions of related party payables
are set out in Note 24.
13. INTEREST BEARING LIABILITIES
Current
Borrowings – bank (secured)
Borrowings – other (secured)
Non-current
Borrowings – bank (secured)
Borrowings – other (secured)
The Group’s operating subsidiaries in Vietnam have banking facilities with various banks in Vietnam for working capital and project
finance purposes. These facilities are secured by a chattel pledge over machinery, equipment and inventories of the subsidiaries and
in certain instances, by the guarantee of Vietnam Industrial Investments Ltd of US$16 million (2003: US$13 million).
The Group’s operating subsidiaries have also used supplier finance facilities amounting to Euro 4.1 million (A$7.2 million) (2003:
Euro 4.4 million), to finance the purchase of machinery and equipment. This facility is also secured by a corporate guarantee from
Vietnam Industrial Investments Limited.
Interest is recognised at an average rate of 7.97% (2003: 6.33%). The interest bearing liabilities of the Group’s operating subsidiaries
have various repayment terms. The facilities are set out in Note 18 (c).
34
Note
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
14. PROVISIONS
Current
Dividend payable
Employee benefits
25
8
347
355
661
292
953
8
87
95
8
25
33
Non-current
Employee benefits
25
66
-
66
-
22,057
22,057
22,057
22,057
15. SHARE CAPITAL
(a) Issued and paid up capital
103,320,002 fully paid ordinary shares
(2003: 103,320,002 fully paid ordinary shares)
(b) Share Options
Options over ordinary shares - Employee Share Plan
As at 31 December 2004 there are no options issued over ordinary shares (2003: 7,000,000).
(c) Terms and Conditions of Contributed Equity - Ordinary Shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares
entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Note
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
16. RESERVES AND RETAINED PROFITS
Foreign currency translation
Legal
16(a)
16(b)
(9,714)
1,105
(8,609)
(9,119)
1,105
(8,014)
-
-
Retained Profits
16(c)
3,082
8,659
7,330
9,590
(9,119)
(595)
(3,082)
(6,037)
-
-
(9,714)
(9,119)
-
-
(a) Foreign currency translation
(i) Nature and purpose of reserve
The foreign currency translation reserve is used to record
exchange differences arising from the translation of the
financial statements of self-sustaining foreign operations
(ii) Movements in reserve
• balance at beginning of year
• loss on translation of overseas controlled entities
35
Note
(b) Legal
(i) Nature and purpose of reserve
Under the Joint Venture Charter of Vinausteel Limited, 5% of
operating profit after tax and any transfers to other reserves,
is appropriated to the legal reserve up to a maximum of 10% of
invested capital of the enterprise. At the present time, there are
no rules specifying the use that can be made of the reserve.
(ii) Movements in reserve
• balance at beginning of year
• transfer from retained profits
• appropriation of profit
• appropriation of profit attributable to outside equity interest
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
1,105
-
916
43
159
(13)
-
-
1,105
1,105
-
-
Retained profits at the beginning of the financial year
Net profit/(loss) attributable to members of the Company
8,659
(5,577)
11,918
(2,699)
9,590
(2,260)
9,997
110
Total available for appropriation
3,082
9,219
7,330
10,107
Dividend provided for or paid
-
(517)
-
(517)
Aggregate of amounts transferred to reserves
-
(43)
(560)
-
(517)
3,082
8,659
7,330
9,590
Reconciliation of outside equity interest in
controlled entities :
Add share of operating profit
Less dividend
Add share of reserves of controlled entity
6,112
1,701
(1,378)
(338)
7,303
1,451
(653)
(1,989)
-
-
6,097
6,112
-
-
(c) Retained Profits
Retained profits at the end of the financial year
17. OUTSIDE EQUITY INTEREST
36
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
(3,876)
(1,248)
(2,260)
110
2,275
79
(75)
6
2,698
(397)
(189)
(7)
6
192
(75)
6
8
720
(189)
-
18. STATEMENT OF CASH FLOWS
(a) Reconciliation of the net profit/(loss) after tax to
the net cash flows from operations
Net profit/(loss) from ordinary activities after tax
Non-cash items :
Depreciation and amortisation
Unrealised foreign exchange loss
Profit on sale of investments
Loss/(gain) on sale of plant and equipment
Transfer to reserves attributable to
outside equity interest
Changes in assets and liabilities
Receivables
Inventories
Other current assets
Other non-current assets
Accounts payable
Provisions
Other current liabilities
Other non-current liabilities
4,155
(68)
(181)
-
4,087
-
(44)
(9,520)
(127)
166
(3,688)
121
692
(21)
785
27,744
815
(195)
(3,900)
324
(902)
4
(168)
21
166
(54)
128
(21)
(504)
1
31
158
-
Net cash flow (used in)/from operating activities
(9,925)
25,351
2,028
325
884
2,327
3,211
1,308
7,212
8,520
884
334
1,218
1,308
751
2,059
Total facilities available
51,331
51,282
-
-
Facilities used at reporting date
- short-term loans
- long-term loans
25,860
4,932
12,928
7,989
-
-
Facilities unused at reporting date
- short-term loans
- long-term loans
17,394
3,145
20,675
9,690
-
-
(b) Reconciliation of cash:
Cash balance comprises
- short term deposits
- cash on hand and in bank
(c) Financing facilities available
At reporting date, the following financing
facilities have been negotiated:
The facilities are repayable at the bank’s discretion and as such the Group, in the absence of alternative sources of funding, is
dependent upon the banks continuing to renew their short term facilities. The Directors are of the view that the facilities will continue
to be renewed as they fall due as has occurred previously. The Group obtained short-term loans which have ongoing maturity roll
over dates ranging from 1 month to 6 months to meet the Group’s working capital requirements. The long-term loans were to finance
the construction of the production and equipment facilities.
37
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
19. EXPENDITURE COMMITMENTS
Operating lease expenditure commitmentsOffice accommodation(i)
- not later than one year
- later than one year and not later than five years
Land rental fees – Controlled entities(ii)
- not later than one year
- later than one year and not later than five years
- later than five years
98
321
419
21
21
98
321
419
21
21
172
690
2,718
3,580
221
800
3,086
4,107
-
-
(i)
Office accommodation
- This commitment reflects the Company for entering into a non-cancellable operating lease for premises entered into
on 15 March 2004. The term of the lease is five years until 15 March 2009.
(ii)
Land rental fees – Controlled entities
- These commitments represent payments due by the Group’s operating subsidiaries in Vietnam for leasehold land
over remaining terms ranging from 4 to 25 years.
20. CONTINGENT LIABILITIES
The Company has provided security to various banks for banking facilities provided to Vinausteel Ltd and SSESTEEL Ltd in the form
of letters of guarantee totalling US$16million (2003:US$13million) and security to the supplier of machinery and equipment to
SSESTEEL Ltd in the form of a letter of guarantee totalling Euro 4.1million (A$7.2 million) (2003:Euro 4.4million).
21. SUBSEQUENT EVENTS
On 23 February 2005, Vinausteel Limited (VII:70%) declared a final dividend of VND 40 billion. VII’s share is VND 28 billion (A$2.3
million) of which VND 20 billion has been allocated to provide further working capital for SSESTEEL’s operations.
22. DIRECTORS AND EXECUTIVES DISCLOSURES
(a) Details of Specified Directors and Specified Executives
(i) Specified Directors
Mr S. Lee
Mr A. A. Young
Mr H.V.H. Lam
Mr K.M. Leong
Mr D. Bacopanos
Mr M. P. Bowen
(ii) Specified Executives
Mr S. Bardoloi
Mr P.Q. Dinh
Mr M.A. Clements
Resigned 30 April 2004
Resigned 18 October 2004
Appointed 18 October 2004
Mr T. Huang
Mr N.T. Tung
38
22. DIRECTORS AND EXECUTIVES DISCLOSURES (CONT.)
(b) Remuneration of Specified Directors and Specified Executives
(i) Remuneration Policy
applicable to the Managing Directors, senior executives and directors themselves. This role also includes responsibility
for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination
entitlements, fringe benefit policies and professional indemnity and liability insurance policies. The key performance indices
upon which the cash bonuses have been paid are determined by Vinausteel’s Board of Management. The primary key
performance index used for the cash bonuses was the achievement of financial targets. The most significant financial
targets were net profit after tax and operating cash flow.
(ii) Remuneration of Specified Directors and Specified Executives
2004
Director
S. Lee
A. A. Young (i)
H. V. H. Lam (i)
K. M. Leong
D. Bacopanos
M. P. Bowen
Primary
Salary Cash Benefits
& Fees
$
$
160,000
151,130
2,467
142,058
28,374
6,667
18,333
5,530
483,718
30,841
Post Employment
Non-Cash
Super- Retirement
Benefits annuations
$
$
$
2,815
14,400
2,815
14,400
-
Equity
Options
Benefits
$
-
Primary
& Fees
$
$
53,125
99,749
167,434
10,373
20,000
20,000
360,308
10,373
Post Employment
Super- Retirement
annuations
$
$
4,631
4,631
-
Equity
Options
Benefits
$
-
Post Employment
Non-Cash
Super- Retirement
Benefits annuations
$
$
$
2,815
4,875
2,815
4,875
-
Equity
Options
Benefits
$
-
Other
Other (i)
$
34,709
138,397
173,106
Total
$
177,215
188,306
308,829
6,667
18,333
5,530
704,880
2003
Director
S. Lee
A. A. Young (i)
H. V. H. Lam (i)
K. M. Leong
D. Bacopanos
(i)
Non-Cash
Benefits
$
2,821
2,821
Other
(i)
Total
$
37,971
121,841
159,812
$
60,577
137,720
299,648
20,000
20,000
537,945
Other
Refer Note 22(d).
2004
Primary
& Fees
$
$
S. Bardoloi (ii)
97,773
11,543
P. Q. Dinh
88,810
M. A. Clements 54,167
T. Huang
46,822
19,210
N.T. Tung (ii)
306,782
11,543
Executives
(ii)
Refer Note 22(d).
Other
Other (ii)
$
21,480
17,619
39,099
Total
$
130,796
88,810
61,857
46,822
36,829
365,114
39
2003
Primary
& Fees
$
$
(ii)
S. Bardoloi
94,068
20,000
P. Q. Dinh
56,952
T. Huang
27,351
228,044
20,000
Executives
Post Employment
Non-Cash
Super- Retirement
Benefits annuations
$
$
$
2,821
4,500
2,821
4,500
-
Equity
Options
Benefits
$
-
Other
Other
$
24,061
10,952
35,013
Total
$
118,129
76,994
67,904
27,351
290,378
(c) Directors’ and Executives’ Holdings of Shares and Share Options
Interest in the equity investments of entities in the consolidated entity held by directors of the reporting entity and their directorrelated entities as at 31 December 2004, being the number of instruments held;
Option holdings of Specified Directors and Specified Executives
Specified Directors
Director
Beginning
Granted as Options
Other net
balance remuneration exercised
changes
1 Jan 2004
S. Lee
A. A. Young
1,200,000
- (1,200,000)
H. V. H. Lam
2,800,000
- (2,800,000)
K. M. Leong
150,000
(150,000)
D. Bacopanos
120,000
(120,000)
M. P. Bowen
-
Ending
balance
31 Dec 2004
-
Total
Ending
balance
31 Dec 2004
-
Total
Vested at 31Dec 2004
Not Exercisable
exercisable
-
-
-
Specified Executives
Executives
Beginning
Granted as Options
Other net
balance remuneration exercised
changes
1 Jan 2004
T. Huang
2,000,000
- (2,000,000)
(200,000)
P.Q. Dinh
150,000
(150,000)
S. Bardoloi
N.T. Tung
-
Vested at 31Dec 2004
Not Exercisable
exercisable
-
-
-
Shareholdings of Specified Directors and Specified Executives
Director
S. Lee
A. A. Young
H. V. H. Lam
M. P. Bowen
Beginning
balance
1 Jan 2004
25,938,226
2,158,000
10,396,000
-
Granted as
remuneration
On exercise
of options
Net change
other
-
-
689,000
-
Ending
balance
31 Dec 2004
25,938,226
2,847,000
10,396,000
-
40
22. DIRECTORS AND EXECUTIVES DISCLOSURES (CONT.)
Executives
T. Huang
M. A. Clements
P.Q. Dinh
S. Bardoloi
N.T. Tung
Beginning
balance
1 Jan 2004
2,950
45,000
-
Granted as
remuneration
On exercise
of options
Net change
other
-
-
45,000
-
Ending
balance
31 Dec 2004
2,950
90,000
-
All equity transactions with specified directors and specified executives have been entered into under terms and conditions no
more favourable than those the entity would have adopted if dealing at arm’s length.
Mr H.V.H. Lam is the beneficial owner of 10,396,000 shares.
Mr S. Lee is a director and shareholder of Phoenix Properties International Pty Ltd as trustee for the Wellington Place Property
Trust, and a beneficiary of that trust, which trust is the holder of 12,810,000 shares in VII. Mr S. Lee is a director and shareholder
of SHL Pty Ltd which company is the holder of 13,128,226 shares in VII.
Mr A. A. Young is the registered holder of 700,000 shares. Mr A.A. Young is a director and shareholder of Bayrunner Pty Ltd
which company is the registered holder of 2,147,000 shares in VII.
There have been no other transactions concerning shares or share options between entities in the reporting entity and directors
of the reporting entity or their director-related entities. Refer Note 25 for details regarding the Company’s Share Option Plan.
(d) Other transaction and balances with specified directors and specified executives
The Company incurred other expenses of $34,709 (2003: $37,971) for Mr A.A.Young and $138,397 (2003: $121,841) for
Mr H.V.H Lam, $21,480 (2003: $24,061) for Mr S Bardoloi and $17,619 for Mr N.T. Tung in relation to their employment in Vietnam.
During the year, the Company commenced leasing its office accommodation from Phoenix Properties International Pty Ltd, a
company associated with Mr Simon Lee, a director of the Company. The lease was made in the ordinary course of business and
is on normal terms and conditions. During the year, rental of $86,132 was paid (2003: Nil). The term of the lease is five years
until 15 March 2009. The office lease commitment is set out in Note 19 (i).
41
Consolidated
2004
2003
$’000
$’000
The Company
2004
2003
$’000
$’000
23. AUDITOR’S REMUNERATION
Amounts received or due and receivable by the auditors,
of Vietnam Industrial Investments Limited for:
• an audit or review of the financial report of the entity and
any other entity in the consolidated entity
• other services in relation to the entity and any other entity in
the consolidated entity
- tax compliance
65,000
44,600
65,000
44,600
16,720
81,720
11,930
56,530
16,720
81,720
11,930
56,530
2004
$’000
Consolidated
2003
$’000
39,677
48,080
-
-
39,677
48,080
-
-
1,883
3,406
-
-
The Company
2004
2003
$’000
$’000
Amounts received or due and receivable by other member firms
of Ernst & Young International:
• an audit or review of the financial report of the entity and any
other entity in the consolidated entity
• other services in relation to the entity and any other entity in
the consolidated entity
Amounts received or due and receivable by auditors other than the
auditor of Vietnam Industrial Investments Limited for:
• an audit or review of the financial report of subsidiary entities
24. RELATED PARTY DISCLOSURES
(a) The following related party transactions occurred during the financial year:
Transactions with related parties in wholly owned group.
1. The Company has provided an unsecured loan of $636,598 (2003: $106,322) via its wholly owned subsidiary, Vietnam
Projects (Singapore) Pte Ltd, to VRC Weldmesh (Vietnam) Ltd for working capital requirements. The loan bears an interest
rate of 6%. This loan includes accrued interest of $58,935 as at 31 December 2004.
2. The Company increased its investment in SSESTEEL by $4,348,228. Of which $2,920,305 was through conversion of an
intercompany loan to equity. The Company has provided a working capital loan facility of US$1.25million (A$1.60 million) of
which US$0.12million (A$0.15 million) was drawndown as at 31 December 2004.
3. The Company has paid for corporate expenses totalling $90,131 (2003: $59,299) on behalf of its controlled entities.
4. During the year the Company established Total Building Systems Ltd, via its wholly owned subsidiary, Ausviet Industrial
Investments (S) Pte Ltd and provided an equity contribution of US$0.2 million (A$0.28 million) and a loan facility of
US$0.26million (A$0.33 million) of which US$0.13million (A$0.17 million) was drawndown and subsequently converted into
equity as at 31 December 2004.
42
24. RELATED PARTY DISCLOSURES (CONT.)
(b) Vietnam Industrial Investments Limited is the ultimate parent entity. The corporate structure is outlined below;
VIETNAM INDUSTRIAL INVESTMENTS LIMITED
70%
100%
100%
100%
AUSVIET INDUSTRIAL VIETNAM PROJECTS
INVESTMENTS
(SINGAPORE)
(S) PTE LTD
PTE LTD
PARNHAM
OVERSEAS LTD
65%
VINAUSTEEL LTD
100%
3%
AUSTNAM
COMPANY LTD
100%
STRUCTURE STEEL
ENGINEERING
PTE LTD
100%
TOTAL BUILDING
SYSTEMS LTD
Note
100%
VIETNAM PROPERTY
DEVELOPMENT
PTE LTD
100%
VRC WELDMESH
(VIETNAM) LTD
SSESTEEL LTD
2004
$’000
Consolidated
2003
$’000
347
66
413
292
292
The Company
2004
2003
$’000
$’000
25. EMPLOYEE BENEFITS
Aggregate employee entitlement liability is comprised of :
Provisions
- Current
- Non-current
14
14
87
66
153
25
25
Share Option Plan
The Company had a Share Option Plan for directors, executives and employees of the Company and related bodies corporate.
The plan was designed as part of remuneration planning for directors and executives and as an incentive to motivate officers of the
Company and to generate loyalty from senior employees. All current directors, executives and employees of the Company and its
related corporations were selected by the Board to participate in the plan.
All of the seven million options that may be granted under the plan had been issued to participants. None of these options were
exercised on or before 31 December 2004 at an exercise price of twenty cents and therefore these options have lapsed.
The market value of VII shares closed at $0.11 on 31 December 2004 (2003: $0.185).
No other equities in any of the entities within the consolidated entity were acquired by or issued to employees during the year in
relation to any other ownership based remuneration plan.
43
Information with respect to the number of options granted under the Share Option Plan are as follows:
Granted
Forfeited
Exercised
Exercisable at end of year
Number of
options
7,000,000
(7,000,000)
-
2004
Weighted average
exercise price
0.20
0.20
-
Number of
options
6,620,000
380,000
7,000,000
7,000,000
2003
Weighted average
exercise price
0.20
0.20
0.20
0.20
(a) Options held at the beginning of the reporting period:
The following table summarises information about options held by employees as at 1 January 2004:
Number of Options
6,620,000
380,000
Grant date
Vesting date
Expiry date
21 February 2000
29 May 2003
21 February 2000
29 May 2003
31 December 2004
31 December 2004
Weighted Average
exercise price
0.20
0.20
(b) Options granted during the reporting period:
The following table summarises information about options granted by Vietnam Industrial Investments Limited to employees
during the year:
2004
2003
Number of Options granted
380,000
Grant date
29 May 2003
Vesting date
29 May 2003
Expiry date
31 December 2004
Weighted average exercise price
$0.20
(c) Options exercised
No options were exercised in the year ended 31 December 2004 or in the previous corresponding year ended 31 December
2003. The 7,000,000 options lapsed on 31 December 2004.
(d) Options held at the end of the reporting period:
There are no options held by employees as at 31 December 2004.
44
26. SEGMENT INFORMATION
Primary Reporting – Geographical segment
The consolidated entity operated predominantly in two geographical areas – Australia and Vietnam. The manufacturing operations
comprise the production and sale of concrete reinforcement steel bar, steel mesh and wire rod, cold rolled steel roofing, wall
cladding materials and steel fencing and an operation providing total building solutions for the construction industry. There were no
intersegment sales.
Australia
2004
2003
$’000
$’000
Revenue
Sales revenue
2004
$’000
Vietnam
2003
$’000
Eliminations
2004
2003
$’000
$’000
Consolidated
2004
2003
$’000
$’000
-
-
117,079
157,756
-
-
117,079
157,756
Interest revenue
Dividend revenue
Other income
83
3,227
2,910
68
1,493
1,434
104
237
1,171
26
1,165
662
(3,421)
(258)
(2,658)
-
187
43
3,823
94
2,096
Total segment revenue
6,220
2,995
118,591
159,609
(3,679)
(2,658)
121,132
159,946
(2,085)
110
2,542
2,646
(3,117)
(3,111)
(2,660)
(355)
(2,660)
(335)
Results
Segment result
Consolidated operating
loss before tax
Assets
Segment Assets
29,601
31,844
92,268
118,366
(56,148)
(84,135)
65,721
66,075
214
196
53,067
58,951
(10,187)
(21,886)
43,094
37,261
Other Segment Information
Acquisition of property, plant and
equipment, Intangible assets and
other non current assets
855
-
5,600
1,339
-
-
6,455
1,339
Depreciation
6
8
2,250
2,731
-
(71)
2,256
2,668
Amortisation
-
-
12
12
19
19
31
31
4,155
-
-
-
(4,155)
-
-
-
-
-
4,155
-
-
-
4,155
-
Liabilities
Segment Liabilities
Recoverable amount write-down
of plant & equipment
45
Segment accounting policies
The Group generally accounts for intersegment sales and transfers as if sales or transfers were to third parties at current market
prices. Revenues are attributed to geographic areas based on the location of the assets producing the revenues.
Segment accounting policies are the same as the consolidated entity’s policies described in Note 1. During the financial year, there
were no changes in segment accounting policies that had a material effect on the segment information.
Secondary Reporting – Business segment
The Group predominantly operated in one business segment being production and sale of concrete reinforcement steel bar, steel mesh
and wire rod, cold rolled steel roofing, wall cladding materials, steel fencing and total building solutions for the construction industry.
27. EARNINGS PER SHARE
2004
(5.40)
(5.40)
(a) Basic earnings per share (cents per share)
(b Diluted earnings per share (cents per share)
2003
(2.61)
(2.61)
Consolidated
2004
$’000
2003
$’000
(3,876)
(1,701)
(5,577)
(1,248)
(1,451)
(2,699)
Number of Shares
Number of Shares
103,320,002
103,320,002
2004
$’000
Consolidated
2003
$’000
The Company
2004
2003
$’000
$’000
-
517
(c) The following reflects the income and share data used
in the calculations of basic and diluted earnings per share
Net loss
Net profit attributable to outside equity interest
Earnings used in calculating basic and diluted earnings per share
(d) Weighted average number of ordinary shares used
in the calculation of basic and diluted earnings per share
28. DIVIDENDS PAID OR PROVIDED FOR
ON ORDINARY SHARES
(a) Dividends paid during the year
Partially franked dividends
(b) Franking Credit Balance
The amount of franking credits available for the
subsequent financial year are:
- franking account balance as at the end of the financial year (at 30%)
- franking account credits that will arise from the payment of income
tax payable as at the end of the financial year
- franking account credits that will arise from the receipt of fully franked
dividends as at the end of the financial year
- franking debits that will arise from the payment of dividends as at
the end of the financial year
- franking debits that will arise from the refund of income tax paid as
at the end of the financial year
The tax rate at which paid dividends have been franked is 30% (2003: 30%).
-
517
-
39
-
-
-
-
-
(39)
-
-
46
29. FINANCIAL INSTRUMENTS
(a) Interest rate risk
The consolidated entity’s exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities,
both recognised and unrecognised at the balance date as follows:
2004
Financial Instruments
Floating
Interest Rate
(i) Financial assets
Cash
Receivables
Listed shares
Unlisted shares
Total financial assets
(ii) Financial liabilities
Accounts payable
Total financial liabilities
Fixed interest rate maturing in:
1 year or
Over 1 to
More than
less
5 years
5 years
Non-interest Total carrying
bearing amount as per
the statement
of financial
position
$
Weighted
average
effective
interest rate
$
$
$
$
%
884
884
-
-
-
2,327
12,123
580
844
15,874
3,211
12,123
580
844
16,758
2.30
N/A
N/A
N/A
-
25,860
25,860
4,932
4,932
-
11,358
11,358
11,358
30,792
42,150
N/A
7.97
Non-interest Total carrying
bearing amount as per
the statement
of financial
position
$
Weighted
average
effective
interest rate
2003
Financial Instruments
Floating
Interest Rate
(i) Financial assets
Cash
Receivables
Listed shares
Unlisted shares
(ii) Financial liabilities
Accounts payable
Fixed interest rate maturing in:
1 year or
Over 1 to
More than
less
5 years
5 years
$
$
$
$
%
8,517
8,517
-
-
-
3
12,624
1,638
205
14,470
8,520
12,624
1,638
205
22,987
1.7
N/A
N/A
N/A
-
12,928
12,928
7,989
7,989
-
15,178
15,178
15,178
20,917
36,095
N/A
6.33
47
(b) Net fair values
The aggregate net fair values of financial assets and financial liabilities, both recognised and unrecognised, at the balance date, are
as follows:
Total carrying amount
Aggregate net Total carrying amount
Aggregate net
as per the statement
fair value (i) as per the statement
fair value (i)
of financial position
of financial position
2004
2004
2003
2003
$’000
$’000
$’000
$’000
Financial assets
Cash
3,211
3,211
8,520
8,520
Trade receivables
12,123
12,123
12,624
12,624
Listed shares
580
699
1,638
1,887
Unlisted shares
844
844
205
205
16,758
16,877
22,987
23,236
Financial liabilities
Accounts payable
Interest-bearing liabilities
11,358
30,792
42,150
11,358
30,792
42,150
15,178
20,917
36,095
15,178
20,917
36,095
(i) The following methods and assumptions are used to determine the net fair values of financial assets and liabilities
Recognised financial instruments
Cash, cash equivalents and short-term investments: The carrying amount approximates fair value because of their short-term to maturity.
For financial instruments traded in organised financial markets, fair value is the current quoted market bid price for an asset or offer
price for liability, adjusted for transaction costs necessary to realise the asset or settle the liability.
Trade receivables and payables: The carrying amount approximates fair value.
Dividends payable: The carrying amount approximates fair value.
Short-term borrowings: The carrying amount approximates fair value because of their short-term to maturity. These are working
capital facilities for subsidiaries operating in Vietnam which have recently been renewed subject to annual review.
Long-term loans receivable: The carrying amount approximates fair value.
Long-term borrowings: The fair values of long-term borrowings are estimated using discounted cash flows analysis, based on
current incremental borrowing rates for similar types of borrowing arrangements.
(c) Credit risk exposures
The consolidated entity’s maximum exposures to credit risk at balance date in relation to each class of recognised financial asset is
the carrying amount of those assets as indicated in the statement of financial position.
Concentrations of credit risk
The Company minimises concentrations of credit risk in relation to trade accounts receivable by undertaking transactions with a
large number of customers. Refer also to Note 26- Segment information.
Credit risk in trade receivables is managed by limiting payment terms to 30 days and undertaking a risk assessment process for
customers.
(d) Hedging instruments
(i) Hedges of specific commitments
The Company had not entered into foreign exchange contracts as at 31 December 2004.
48
30. IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS
Vietnam Industrial Investments Limited has commenced transitioning its accounting policies and financial reporting from
current Australian Standards to Australian equivalents of International Financial Reporting Standards (IFRS). The Company has
allocated internal resources to review the impact of the transition to IFRS. As the Company has a 31 December year-end, priority
has been given to considering the preparation of an opening balance sheet in accordance with AASB equivalents to IFRS as at
1 January 2004. This will form the basis of accounting for Australian equivalents of IFRS in the future, and is required when the
first fully IFRS compliant annual financial report for the year ended 31 December 2005 and half-year report for the period ended
30 June 2005 is prepared. Set out below are the key areas where accounting policies will change and may have an impact on the
financial report of the Company.
Goodwill
Under AASB 3 Business Combinations, goodwill will no longer be able to be amortised but instead will be subject to annual
impairment testing. This will result in a change in the group’s current accounting policy which amortises goodwill over its useful life
but not exceeding 20 years. Under the new policy, amortisation will no longer be charged, but goodwill will be written down to the
extent it is impaired. Reliable estimation of the future financial effects of this change in accounting policy is impracticable because
the conditions under which impairment will be assessed are not yet known.
Impairment of Assets
Under AASB 136 Impairment of Assets, the recoverable amount of an asset is determined as the higher of net selling price and value
in use. This will result in a change in the group’s current accounting policy which determines the recoverable amount of an asset on
the basis of expected undiscounted cash flows. Under the new policy it is likely that impairment of assets will be recognised sooner
and that the amount of write-downs will be greater. Reliable estimation of the future financial effects of this change in accounting
policy is impracticable because the conditions under which impairment will be assessed are not yet known.
Intangible Assets
Under AASB 138 Intangible Assets, costs associated with starting up an operation must be expensed. This will result in a change in
the group’s current accounting policy which allows for the capitalisation of such costs where future benefits are expected beyond
reasonable doubt. On transition these start up costs will be required to be adjusted against opening retained earnings, as they will
not meet the recognition requirements under IFRS.
Share Based Payments
Under AASB 2 Share Based Payments, the Company will be required to determine the fair value of options issued to employees as
remuneration and recognise an expense in the profit and loss. This standard is not limited to options and also extends to other forms
of equity-based remuneration. It applies to all share-based payments issued after 7 November 2002 which have not vested as at 1
January 2005. The financial effects of adopting this standard have not yet been quantified at 31 December 2004.
Income Taxes
Under AASB 112 Income Taxes, the Company will be required to use a balance sheet liability method which focuses on the tax
effects of transactions and other events that affect amounts recognised in either the accounting balance sheet or a tax-based
balance sheet. The effect of adopting this standard has not yet been quantified at 31 December 2004.
Effects of Changes in Foreign Exchange Rates
Under AASB 121 Effects of Changes in Foreign Exchange Rates, the Company will be required to translate its financial report to the
functional currency or presentation currency. The group’s functional currency could potentially be determined as the Vietnamese
Dong as the Group primarily generates cash and revenues in this currency. However, at the date of this report the determination of
the Group’s functional currency has not been made.
49
AASB121 requires an entity to classify some translation differences as a separate component of equity and on disposal of a foreign
operation to transfer the cumulative translation difference for that foreign operation to the income statement as part of the gain or
loss on disposal. Under IFRS 1, first time adopters of IFRS are provided with an exemption relating to the balance of the foreign
currency reserve at the date of transition to IFRS. If the Company utilises this exemption, the following will occur:
(i) the cumulative translation difference for the foreign subsidiaries will be deemed to be zero at the date of transition.
(ii) the gain or loss on a subsequent disposal of these subsidiaries shall exclude translation differences that arose before the date
of transition and shall include translation differences arising after the transition and shall include translation differences arising
after the transition to IFRS.
The Company has not determined whether the exemption will be applied on transition.
Classification of Financial Instruments
Under AASB 139 Financial Instruments: Recognition and Measurement, financial instruments will be required to be classified into one
of five categories which will, in turn, determine the accounting treatment of the item. The classifications are loans and receivablesmeasured at amortised cost, held to maturity – measured at amortised cost, held for trading – measured at fair value with fair value
changes charged to net profit or loss, available for sale – measured at fair value with fair value changes taken to equity and nontrading liabilities – measured at amortised cost. This will result in a change in the current accounting policy that does not classify
financial instruments. Current measurement is at amortised cost, with certain derivative financial instruments not recognised on
balance sheet. The future financial effect of this change in accounting policy is not yet known as the classification and measurement
process has not yet been fully completed.
50
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Vietnam Industrial Investments Ltd, I state that :
1. In the opinion of the directors:
(a) the financial statements and notes, of the Company and of the consolidated entity are in accordance with the Corporations Act
2001, including :
i. giving a true and fair view of the financial position of the Company and consolidated entity as at 31 December 2004 and of
their performance, for the year ended on that date; and
ii. complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
On behalf of the Board
ALAN A. YOUNG
Director
Perth, 31 March 2005
51
INDEPENDENT AUDIT REPORT
TO MEMBERS OF VIETNAM INDUSTRIAL INVESTMENTS LIMITED
SCOPE
The financial report and directors’ responsibility
The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows,
accompanying notes to the financial statements, and the directors’ declaration for Vietnam Industrial Investments Limited and the
consolidated entity, for the year ended 31 December 2004. The consolidated entity comprises both the company and the entities it
controlled during that year.
The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position and
performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with
the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are
designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.
Audit approach
We conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. Our audit
was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial
report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement,
selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore,
an audit cannot guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations
Act 2001, including compliance with Accounting Standards in Australia, and other mandatory financial reporting requirements in Australia, a
view which is consistent with our understanding of the company’s and the consolidated entity’s financial position, and of their performance
as represented by the results of their operations and cash flows.
We formed our audit opinion on the basis of these procedures, which included:
• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting
estimates made by the directors.
While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent
of our procedures, our audit was not designed to provide assurance on internal controls.
We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report.
These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business
plans or strategies adopted by the directors and management of the company.
INDEPENDENCE
We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements
and the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of
which is included in the Directors’ Report. In addition to our audit of the financial report, we were engaged to undertake the services
disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.
52
INDEPENDENT AUDIT REPORT
TO MEMBERS OF VIETNAM INDUSTRIAL INVESTMENTS LIMITED
AUDIT OPINION
In our opinion, the financial report of Vietnam Industrial Investments Limited is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of Vietnam Industrial Investments Limited and the consolidated entity at 31
December 2004 and of their performance for the year ended on that date; and
(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b) other mandatory financial reporting requirements in Australia.
Ernst & Young
J P Dowling
Partner
Perth
Date: 31 March 2005
Liability limited by the Accountants Scheme, approved under the Professional Standards Act 1994 (NSW).
53
AUDITOR’S INDEPENDENT DECLARATION
TO THE DIRECTORS OF VIETNAM INDUSTRIAL INVESTMENTS LIMITED
In relation to our audit of the financial report of Vietnam Industrial Investments Limited for the financial year ended 31 December 2004, to
the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act
2001 or any applicable code of professional conduct.
Ernst & Young
J P Dowling
Partner
Perth
Date: 31 March 2005
Liability limited by the Accountants Scheme, approved under the Professional Standards Act 1994 (NSW).
54
ASX ADDITIONAL INFORMATION
SUBSTANTIAL SHAREHOLDERS
The number of shares held by the substantial shareholders as disclosed by notices received by the Company under Part 6C.1 of the
Corporations Act 2001 are as follows:
Shareholder
Simon Lee
Land & General Berhad
Henry Lam
Vietnam Enterprise Investments Ltd
Note
(1)
(2)
Ordinary shares
25,938,226
13,002,000
10,701,157
9,340,600
Notes:
(1) Mr Simon Lee is :
• a director and shareholder of Phoenix Properties International Pty Ltd as trustee for the Wellington Place Property Trust, and a
beneficiary of that trust, which trust is the holder of 12,810,000 shares in VII; and
• a director and shareholder of SHL Pty Ltd which company is the holder of 13,128,226 shares in VII.
(2) Mr Henry Lam is the beneficial owner of 10,701,157 shares in VII.
CLASS OF SHARES AND VOTING RIGHTS
At 11 March 2005 there were 242 holders of the ordinary shares of the Company.
Ordinary shares
In accordance with the Company’s constitution, on a show of hands, every member present in person or by proxy or attorney or duly
authorised representative has one vote. In a poll, every member present in person or by proxy or attorney or duly authorised representative
has one vote for every fully paid ordinary share.
DISTRIBUTION OF SHAREHOLDERS (AS AT 11 MARCH 2005)
Category
1
1,001
5,001
10,001
100,001
-
1,000
5,000
10,000
100,000
and over
Number of Shareholders
Ordinary shares
8
57
48
96
33
242
The number of shareholders holding less than a marketable parcel at 11 March 2005 was 35.
55
TWENTY LARGEST SHAREHOLDERS (AS AT 11 MARCH 2005)
Name
Nefco Nominees Pty Ltd
Citicorp Nominees Pty Ltd
SHL Pty Ltd
Land & General Berhad
Phoenix Properties International Pty Ltd
Lee Swee Khoon
Khoo Seah Kee
Goh Joon Jin
Westpac Custodian Nominee
ANZ Nominees Limited
Bayrunner Pty Ltd
Wang Khee Pong
Chung Hsing Phil
Yang Yi Chung
National Nominees Limited
Colbern Fiduciary Nominee
Young Alan Alexander
Provest Pty Ltd
Tulloch Nigel Selby & Bonney Sau Ying
Reghenzani Claude Augustus
Number of Ordinary Shares Held
15,690,941
13,208,795
13,128,226
13,002,000
12,810,000
5,050,000
4,000,000
3,950,000
3,156,135
2,722,100
2,147,000
1,600,000
1,554,200
1,546,000
1,380,730
618,700
600,000
450,000
402,481
400,000
97,417,308
Percentage of Shares Held
15.19%
12.78%
12.71%
12.58%
12.40%
4.89%
3.87%
3.82%
3.05%
2.63%
2.08%
1.55%
1.50%
1.50%
1.34%
0.60%
0.58%
0.44%
0.39%
0.39%
94.29%
RESTRICTED SECURITIES
There are no ordinary shares on issue that have been classified by the Australian Stock Exchange (Perth) Limited as restricted securities.
STOCK EXCHANGE LISTING
Vietnam Industrial Investments Limited shares are listed on the Australian Stock Exchange Limited and the Frankfurt Stock Exchange’s
Unofficial Regulated Market. The home exchange is the Australian Stock Exchange (Perth) Limited.
56
A.B.N. 64 063 656 333
www.vii.net.au

Annual Report 2004 - Vietnam Industrial Investments Limited

Transcription

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