For personal use only - Australian Securities Exchange · OPERATING AND FINANCIAL REVIEW (CONTINUED) VIETNAM INDUSTRIAL INVESTMENTS LIMITED Page | - 5 - PRINCIPAL ACTIVITIES The principal

VIETNAM INDUSTRIAL INVESTMENTS LIMITED ABN 64 063 656 333

ANNUAL REPORT 2016

For

per

sona

l use

onl

y

Corporate Directory

ABN 64 063 656 333

ASX Code: VII

Directors

R.S.L Kwok Independent Non-Executive Director

Chairman

V.H. Lam Managing Director

(Chief Executive Officer)

A.A. Young Non-Executive Director

A.D. Walker Independent Non-Executive Director

J.H.S Murray Independent Non-Executive Director

M.D. Mann Independent Non-Executive Director

Company Secretary

P Williams

Registered Office in Australia

Unit 5A, 1 Station Street

SUBIACO Western Australia 6008

Telephone: (618) 9388 0155

Facsimile: (618) 9218 8399

E-mail: [email protected]

Website: www.vii.net.au

Auditors

Ernst & Young

11 Mounts Bay Road

PERTH Western Australia 6000

Legal Advisors

Steinpreis Paganin

Level 4, The Read Buildings

16 Milligan Street


Bankers

Australia & New Zealand Banking Group Limited

8 St Georges Terrace


Bankwest

Bankwest Place 300 Murray Street


Share Registry

Security Transfer Registrars Pty Ltd

Suite 1/770 Canning Hwy

APPLECROSS Western Australia 6153

Home Exchange

Australian Securities Exchange Limited

Level 40 Central Park, 152-158 St Georges Terrace


Vietnam Operations

Vinausteel Limited

Km9, Vat Cach, Quan Toan

Hong Bang District

Hai Phong VIETNAM

Telephone: (84) 31 3850 145

Facsimile: (84) 31 3850 140


Website: www.vinausteel.com.vn

Austnam Joint Stock Corporation

Lane 109 Truong Chinh Street

Thanh Xuan

Hanoi VIETNAM

Telephone: (84) 4 3869 1579

Facsimile: (84) 4 3869 1632


Website: www.austnam.com.vn

SSESTEEL Ltd

Km9, Vat Cach, Quan Toan

Hong Bang District

Hai Phong VIETNAM

Telephone: (84) 31 3850 818

Facsimile: (84) 31 3850 828


Website: www.thepuc.com.vn

Total Building Systems Limited

2 Flr., SPT Building, 199 Dien Bien Phu Street

Ward 12, Binh Thanh District

Ho Chi Minh City VIETNAM

Telephone: (84) 8 3843 1917

Facsimile: (84) 8 3843 2072


Website: www.tbs.vn

VRC Weldmesh (Vietnam) Company Limited

Indochina Park Tower

4 Nguyen Dinh Chieu Street

Dakao Ward, District 1

Ho Chi Minh City VIETNAM

Telephone: (84) 8 3911 5272

Facsimile: (84) 8 3911 5254

Website: www.vrcvn.com

Contents

Summary of 2016 2

Chairman’s Report 3

Operating and Financial Review 4 - 8

Directors’ Report 9 - 16

Auditor's Independence Declaration 17

Corporate Governance Statement 18

Consolidated Statement of Financial Position 19

Consolidated Statement of Comprehensive Income 20

Consolidated Statement of Changes in Equity 21

Consolidated Statement of Cash Flows 22

Notes to the Consolidated Financial Statements 23-70

Directors' Declaration 71

Independent Audit Report 72 - 76

ASX Additional Information 77 - 78 For

per

sona

l use

onl

y

mailto:[email protected]

http://www.vii.net.au/


http://www.vinausteel.com.vn/


http://www.austnam.com.vn/


http://www.thepuc.com.vn/


http://www.tbs.vn/

http://www.vrcvn.com/

VIETNAM INDUSTRIAL INVESTMENTS LIMITED Page | - 2 -

VIETNAM INDUSTRIAL INVESTMENTS LIMITED

SUMMARY OF 2016

Corporate Sales revenue from Vietnam operations was $314.977 million (VND5.239 trillion), down 10% on 2015 of

$355.937 million (VND5.834 trillion).

Net profit after tax attributable to the owners of the parent was $8.614 million (2015: $9.868 million).

On 2 September 2016, the Board declared a dividend of 3 (three) Australian cents per ordinary share (fully unfranked)

which was paid and dispatched on 16 September 2016 (2015: Nil). The entire dividend was 100% conduit foreign

income.

Austnam Joint Stock Corporation (VII shareholding 67%) Annual sales of 643,995 m², up 20% on 2015 (536,634 m²).

Sales revenue from external parties was $5.049 million (VND83.973 billion), up 25% on 2015 sales revenue of $4.089

million from external parties (VND67.025 billion).

Net profit after tax and before non-controlling interests was $0.407 million (VND6.770 billion) (2015: $0.229 million

(VND3.750 billion)).

SSESTEEL Ltd (VII shareholding 100%) Rebar sales of 243,109 tonnes, up 27% on 2015 (191,267 tonnes).

Wire rod sales of 41,822 tonnes, down 34% on 2015 (63,494 tonnes).

Total sales revenue from external parties was $166.611 million (VND2.771 trillion), down 17% on 2015 total sales

revenue from external parties of $202.507 million (VND3.319 trillion).

Net profit after tax and before non-controlling interests was $3.481 million (VND57.290 billion) (2015: $5.142 million


Total Building Systems Limited (VII shareholding 99%)

Revenues from external parties were $2.329 million (VND38.744 billion), down 37% on 2015 total revenues from

external parties of $3.770 million (VND61.790 billion).

Net profit after tax and before non-controlling interests was $7,000 (VND109 million) (2015: $97,000


Vinausteel Limited (VII shareholding 70%)

Annual sales of 237,796 tonnes, up 5% on 2015 (226,593 tonnes).

Sales revenue from external parties was $140.793 million (VND2.342 trillion), down 2% on 2015 sales revenue from

external parties of $145.155 million (VND2.379 trillion).

Net profit after tax and before non-controlling interests was $8.910 million (VND148.012 billion) (2015:

$7.393 million (VND121.182 billion)).

For

per

sona

l use

onl

y

CHAIRMAN’S REPORT


Dear Shareholders

The Company has reported another good result from its operations in Vietnam. Although the net profit after tax attributable

to members of $8.614 million is 13% down on the previous year’s profit after tax of $9.868 million, this is a considerable

achievement having regard to the “Safeguard Tax” which was introduced in the current year. I refer to this further below.

The main contributor to our results from operations is the production of reinforcing steel from our rolling mills in Haiphong.

Overall, SSESTEEL and Vinausteel achieved a small increase in sales tonnages on 2015, however, the net profit was down

due to lower profit margins.

As I reported in the 2015 Annual Report, in 2016 a “Safeguard Tax” of 23.3% was imposed on imported billets which

increased the import tax from 10% to 33.3% making it uncompetitive to import billets. Our preference is to source billets

locally but there are times when local billet production cannot meet demand which puts our operations at a considerable

disadvantage. We, together with some other re-rolling companies, lobbied against imposition of the Safeguard Tax,

however, our efforts were unsuccessful.

Despite this setback, we have achieved a satisfactory result and we are continuing our efforts to maintain our operations.

Economic growth in Vietnam is expected to continue with GDP growth of 6.2% in 2016 and stronger economic growth

forecast for 2017, led by manufacturing. Consumption of construction steel in 2016 increased by 22% over 2015 and is

forecast to increase by 10-12% in 2017.

Management are continuing to investigate initiatives to improve our competitive position, particularly in raw material

(billet) supply, without incurring substantial capital investment. One such initiative, to provide us with lower cost billets and

finished products, is expected to be in production at the end of this year. The Company is also looking at investment

opportunities outside of our existing businesses in the capital-intensive construction steel industry so that we are not reliant

on only one source for our revenue in the future.

On behalf of the Board, I thank management and staff for their efforts and achievements in 2016. With this commitment, we

can have confidence in our operations, moving forward. Our thanks too to our suppliers and, in particular, our bankers for

their continued support.

ROGER SING-LEONG KWOK

Chairman

For

per

sona

l use

onl

y

OPERATING AND FINANCIAL REVIEW


The directors submit the Annual Report of Vietnam Industrial Investments Limited (“VII”, “Company”, “consolidated

entity” or “the Group”) for the year ended 31 December 2016.

REVIEW OF OPERATIONS

This operational and financial review reports on the period under review for the Company and its businesses in Vietnam,

Steel Making Division: Vinausteel Limited (“Vinausteel”), and SSESTEEL Ltd (“SSESTEEL”), and Steel Products

Division: Austnam Joint Stock Corporation (“Austnam”), Total Building Systems Limited (“TBS”); and VRC Weldmesh

(Vietnam) Ltd (“VRC”).

Net Profit for the year

The total comprehensive income for the year was $11.406 million (2015: $14.897 million). The total comprehensive income

for the year consisted of: 1) net profit for the year of $11.421 million (2015: $12.163 million), and 2) Foreign currency

translation loss of $0.015 million (2015: gain of $2.734 million).

For the year ended 31 December 2016, the Group net profit after tax attributable to members was $8.614 million (2015:

$9.868 million) on revenues of $318.120 million (2015: $357.497 million).

The Steel Making Division reported a net profit after tax attributable to members of $9.718 million (VND161.499 billion)

on revenues of $307.404 million (VND5.113 trillion) (2015: net profit after tax attributable to members of $10.317 million

(VND169.118 billion) on revenues of $347.662 million (VND5.699 trillion)). In 2016, SSESTEEL reported a net profit

after tax of $3.481 million (2015: $5.142 million). Whilst, the Group’s share in Vinausteel, net of non-controlling interest,

earned a net profit of $6.237 million (2015: $5.175 million).

The main contributor to the decline in net profit is the decreased average gross profit margin of the Steel Making Division.

The average gross profit margin of this division decreased from 10.4% to 9.8%. During the year, this division’s sale of

goods declined due to the drop in average selling prices due to tight competition and general decrease in the raw material

costs.

The Group’s Steel Products Division reported a net profit after tax attributable to members of $0.242 million

(2015: $0.253 million).

The net loss after tax of the parent company, Singapore entities and BVI entity was $1.346 million (2015: $0.702 million).

Foreign currency translation

For the year ended 31 December 2016, the foreign currency translation was a loss of $0.015 million (2015: a gain of $2.734

million). In 2016, the Vietnam Dong appreciated slightly against the Australian dollar. The average VND/AUD exchange

rate in 2016 was VND16,632, a 1% increase from the average VND/AUD exchange rate of VND16,391 in 2015. The

VND/AUD spot rate at 31 December 2016 was VND16,473 (31 December 2015: VND/AUD spot rate of VND16,411).

The Australian dollar depreciated against the US dollar in 2016. The Australian dollar spot rate at 31 December 2016 of

US$0.7236/A$1 was weaker than 31 December 2015 spot rate of US$0.7306/A$1.

For

per

sona

l use

onl

y

OPERATING AND FINANCIAL REVIEW (CONTINUED)


PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the year were the investments in Vietnam through its operating

subsidiaries: Austnam Joint Stock Corporation, SSESTEEL Ltd, Total Building Systems Ltd, and Vinausteel Limited.

RESULTS OF VIETNAM OPERATIONS

The results of the Vietnam operations are as follows:

Austnam Joint Stock Corporation (VII 67%)

Austnam produces metal roofing and steel frames from its factory in Hanoi which it distributes in that city and surrounding

provinces.

Sales revenue was $5.049 million (VND83.973 billion) which was an increase of 25% on 2015 sales revenue of

$4.089 million (VND67.025 billion). Sales volume for 2016 of 643,995 m² was an increase of 20% on the previous year

(536,634 m²). Austnam reported a net profit after tax of $0.407 million (VND6.770 billion) for the year ended

31 December 2016 (2015: $0.229 million (VND3.750 billion)).

SSESTEEL Ltd (VII 100%)

SSESTEEL owns and operates a fully automated rolling mill located in Hai Phong, Vietnam which produces high tensile

rebar and wire rod for the construction industry.

SSESTEEL achieved rebar sales of 243,109 tonnes (2015: 191,267 tonnes) and wire rod sales of 41,822 tonnes

(2015: 63,494 tonnes). Sales revenue was $166.611 million (VND2.771 trillion) which was lower by 17% on 2015 sales

revenue of $202.507 million (VND3.319 trillion). SSESTEEL reported a net profit after tax of $3.481 million

(VND57.890 billion) (2015: $5.142 million (VND84.290 billion)).

Total Building Systems Limited (VII 99%)

Total Building Systems (“TBS”) supplies engineering/construction services, commercial and industrial buildings, and civic

works in Vietnam. The company has been successful exporting products to Ghana and undertook one project in Myanmar.

Revenues for the year ended 31 December 2016 were $2.329 million (VND38.744 billion) (2015: $3.770 million

(VND61.790 billion)). TBS reported a net profit after tax of $7,000 (VND109 million) (2015: $97,000 (VND1.589 billion)).

Vinausteel Limited (VII 70%)

Vinausteel owns and operates a steel rolling mill in Hai Phong which produces reinforcing steel products for the

construction industry.

Sales volume for 2016 was 237,796 tonnes, an increase of 5% on the previous year of 226,593 tonnes. Sales revenue was

$140.793 million (VND2.342 trillion) which was lower by 2% on 2015 ($145.155 million (VND2.379 trillion)). Vinausteel

reported a net profit after tax of $8.910 million (VND148.012 billion) (2015: $7.393 million (VND121.182 billion)).

For

per

sona

l use

onl

y



FINANCIAL POSITION

The Group has reported good results for the year and the profit earned has strengthened the Statement of Financial Position.

The Statement of Financial Position shows an increase in net assets from $54.680 million to $59.550 million. This is mainly

attributed to:

(1) improvement in the cash position as further detailed in the cash flow section below;

(2) advances to suppliers increased by $9.561 million for deliveries in January and February 2017;

(3) finished goods increased by $5.685 million due to the build-up for January 2017 sales in addition to an increase in

the average cost price of finished goods;

(4) other current assets increased due to the inclusion of term deposits with original maturities greater than three months;

(5) recognition of deferred tax assets due to deductible timing differences.

The above is offset by the increase in trade and other payables attributed to the accrual of sales related expenses as well as

more flexible credit terms from some local suppliers. The increase in interest bearing liabilities was due to the cash

requirements for the purchase of billets, aside from some short-term loans taken out close to 31 December 2016 to take

advantage of high term deposit rates on offer.

CASH FLOWS

At 31 December 2016, cash and cash equivalents was $76.762 million (2015: $63.032 million). There was net increase in

cash and cash equivalents during the year of $13.730 million (2015: $28.372 million) mainly due to the following:

$’000

Increase in net cash flows from operating activities (a) 5,289

Decrease in net cash flows from investing activities (b) (13,434)

Increase in net cash flows from financing activities (c) 21,770

Net foreign exchange differences 105

Net Increase

13,730

Notes:

(a) Net cash inflows from operating activities were mainly due to the receipts from customers of $347.052 million and

payment to suppliers and employees of $337.737 million.

(b) Net cash outflows from investing activities were due to the funding of term deposits and the acquisition of plant,

property and equipment.

(c) Net cash inflows from financing activities were mainly due to net proceeds of bank borrowings of $28.202 million,

dividend payment to shareholders of $4.164 million and dividend payment to non-controlling interests of

$2.268 million.

BUSINESS STRATEGY AND PROSPECTS FOR FUTURE FINANCIAL YEARS

The Board and management give high priority to consideration of business strategies which will enhance and maintain the

Group’s operations in the future. The rolling mills of SSESTEEL and Vinausteel, are the Group’s largest operations and

deliver most of the Group’s revenue and profit. The Board gives priority to these businesses as they are the mainstay of the

Company but their market share is being eroded due to our limited capacity and lack of billet supply.

The Company has been able to address the capacity limitations, to some extent with modifications to the rolling mills over

the years. These have resulted in improved productivity and combined increased capacity from 430,000 tpa to 560,000 tpa.

This has been achieved with limited capital investment, however, we have probably “tweeked” performance of our mills as

far as possible. Further investment is required if we are to be competitive.

For

per

sona

l use

onl

y



The Company is reliant on purchasing billets for re-rolling and one of our initiatives to control our supply was to construct a

billet plant using EAF technology as indicated in our 2015 Annual Report. The project is on hold as it would be

uncompetitive in today’s market, however, billet supply has become more crucial due to a “Safeguard Measure” imposed by

the Government in 2016. The measure increased the tax on imported billets from 10% to 33.3% (reducing by 2% from

March of each year) and, whilst we give priority to purchasing billets locally, there are times when local billets cannot meet

demand which places our operations at a disadvantage.

With this in mind, management are finalising an initiative whereby the rolling mills will offtake product from a local

company which is constructing a steel making plant using a different scrap melting technology and continuous casting of

hot billets to a rolling mill. This is forecast to provide cost savings, secure billet supply and place us in a more competitive

position. This project will only be commissioned at the end of 2017.

Billet Plant

The study was for a 750,000 tpa billet plant using EAF (Electric arc furnace) technology to be constructed at the rear of the

SSESTEEL and Vinausteel mills in Haiphong. This was to provide total billet supply for both mills with surplus for sale or

future expansion. The plant would have given the Company control over the quality of its billet supply and grade of billet

which would enable it to move quickly to meet the market’s requirements for particular grades of rebar.

The project was put on hold as the fall in the international iron ore price has made steel production from EAF/scrap less

competitive than from the blast furnace/iron ore route. We will be assessing performance of the offtake project mentioned

above as it may lend itself to the billet plant project, at a lower capital investment.

Funding

The Company has not been able to raise capital to expand its operations and all funding, for plant modifications and other

capital expenditure, has been obtained from the Company’s own resources and from bank borrowings. This has restricted

the Company’s capability to initiate any major investment.

Prospects for future financial years

Following the setback of failure to obtain approval for the Scheme of Arrangement in 2015, the Company has sought to

utilise its resources to stay competitive and nurture existing operations.

There is still an oversupply in the construction steel market in Vietnam which will remain very competitive in the short to

medium term. Prospects for continued economic growth are good and the Group expects to remain profitable provided it

can keep its operating costs at a competitive level.

VIETNAM OPERATIONS – ADDITIONAL INFORMATION

Following is additional information on the legal structure and taxation concessions of the operating subsidiaries in Vietnam.

Austnam Joint Stock Corporation

VII acquired Austnam in 1997 when it acquired all of the issued capital of Parnham Overseas Ltd (“POL”) through a wholly

owned subsidiary, Ausviet Industrial Investments (Singapore) Pte Ltd.

Austnam was previously a joint venture enterprise established in Vietnam in accordance with the Investment Licence issued

on 27 April 1992 and amended Investment Licences. In 2005, Austnam was converted into a joint stock corporation

company incorporated under the Law on Enterprise of Vietnam pursuant to the Investment License number 358 CPH/GP

dated 15 June 2005 issued by the Ministry of Planning and Investment. VII has an effective interest of 67% in Austnam.

For

per

sona

l use

onl

y



The principal activities of Austnam are to produce metal roofing and steel frames.

Austnam has the obligation to pay enterprise income tax at the rate of 20 percent of taxable profits.

SSESTEEL Ltd

SSESTEEL is a foreign-owned company incorporated under the Law of Enterprise of Vietnam pursuant to the Investment

License No. 02/GP-HP and its amended Investment Licences. SSESTEEL received an Investment Certificate number

021043000053 on 19 October 2007 for its re-registration under the Enterprise Law and Investment Law 2005.

The principal activities of SSESTEEL are to produce and distribute reinforcing steel products in accordance with the

Investment Certificate.

SSESTEEL has the obligation to pay enterprise income tax at the rate of 20 percent of taxable profits.

Vinausteel Limited Vinausteel is a Joint Venture Company incorporated under the Law on Foreign Investment of Vietnam pursuant to the

Investment License No. 898/GP dated 28 June 1994, and various amendments issued by the Ministry of Planning and

Investment. The current investors are VII with a 70% interest and the Vietnam Steel Corporation (“VSC”) with a 30%

interest.

The principal activities of Vinausteel are to manufacture and trade various types of reinforcing steel products in accordance

with its Investment Licence.

Operational management of Vinausteel is determined by a Joint Venture Contract, a Charter and a Board of Management

which comprises of five nominees from VII and two from VSC.

Vinausteel has the obligation to pay enterprise income tax at the rate of 20 percent of taxable profits.

Total Building Systems Limited

TBS was originally established as a 100% foreign invested enterprise in Vietnam in accordance with the Investment

Certificate issued on 27 April 2004.

In 2007, TBS changed its legal form to a limited liability company with two or more members incorporated under the Law

on Enterprise of Vietnam pursuant to the Investment Certificate number 011023000084 on 27 April 2012 issued by the Ha

Noi Peoples’ Committee.

The principal activities of TBS are to provide engineering consultancy/design, implementation of construction work,

manufacture of commercial and industrial buildings and civil works.

TBS has the obligation to pay enterprise income tax at the rate of 20 percent of taxable profits.

TAX SPARING

The “tax sparing” arrangements under the Taxation Agreement between Australia and Vietnam have been formalised.

Income which is subject to tax sparing includes income from the business and trading activities established in Vietnam. VII

obtains 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.

For

per

sona

l use

onl

y

DIRECTORS’ REPORT


Your directors submit their report for the year ended 31 December 2016.

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:

Mr Roger (Sing-Leong) Kwok Chairman and Independent Non-Executive Director

Mr Roger Kwok is the Managing Director and shareholder of Arcadia Group in Perth which specialises in designing,

developing and managing retirement resorts and premium properties. For the last 22 years, Mr Kwok has managed a number

of Australian businesses in the automotive and healthcare sectors. He is a past president of The Western Australian Chinese

Chamber of Commerce and brings significant experience in business relations in international markets, particularly China.

He has not been a director of any other publicly listed company in the last three years. Mr Kwok is a member of the VII’s

Audit Committee.

Mr Lam Van Hung (Henry)

Managing Director (Chief Executive Officer)

Mr Lam, a resident of Vietnam, was born in Vietnam and came to Australia in 1977 and studied electrical engineering. He

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. In 2015, he received the

Third Class Labour award and again, in 2010 he was awarded the “Second Class Labour Medal”. He has not been a director

of any other publicly listed company in the last three years. Mr Lam is a director and shareholder of Corbyns International

Limited, the Company’s ultimate holding company.

Mr Alan Alexander Young

Non-executive Director

Mr Young held the position of Managing Director (Chief Operating Officer) until 23 March 2015 when he resigned from all

his executive positions with the Group and moved to a non-executive director capacity. He commenced his business career

in the financial industry and was engaged for several years in banking and finance. For the past 38 years, he has been

involved in the administration of public companies, previously in the resource sector. Mr Young is a Board member of all

the Group’s operating subsidiaries in Vietnam and has devoted all of his time to VII for the past 22 years. He has not been a

director of any other publicly listed company in the last three years. Mr Young is a director of Corbyns International

Limited.

Mr Andrew David Walker

Independent Non-Executive Director

Mr Walker has qualifications in Medicine and Medical Science (Hons) from Newcastle University. He also has a MBA

from The University of Melbourne. Before starting his business career, Andrew was an officer in the Australian Army in

Australia’s elite parachute battalion. Mr Walker has a wide range of Board experiences, in both public and private

companies. He was the Past-Chairman of the Melbourne Chapter of the Young Presidents Organisation. He was named

Australian Entrepreneur of the year in 2016 and in 2014 he was inducted into the Entrepreneurs Global Hall of Fame. Mr

Walker is the Founder-Chairman of Aspen Medical Pty Ltd. Mr Walker was the Chairman of VII’s Audit Committee until

24 February 2017.

Mr Jonathan Heath Stuart Murray

Independent Non-Executive Director (appointed on 19 January 2016)

Mr Murray is a partner at independent law firm Steinepreis Paganin based in Perth, Western Australia. His specialist areas

of practice include equity capital markets, mergers and acquisitions, corporate strategy and governance. He graduated from

Murdoch University in 1996 with a Bachelor of Laws and Commerce (majoring in Accounting) and has over 20 years of

legal experience. He is currently a non-executive director of ASX listed companies Peak Resources Limited and Hannans

Limited. In the last three years, Mr Murray has also been a director of Lemur Resources Limited and Nemex Resources

Limited. Mr Murray is a member of VII’s Audit Committee and was appointed as Chairman effective 25February 2017.

For

per

sona

l use

onl

y

DIRECTORS’ REPORT (CONTINUED)


Mr Michael Douglas Mann AM

Independent Non-Executive Director (appointed on 17 January 2017)

Following a cadetship at The Australian newspaper he joined what is now the Department of Foreign Affairs and Trade and

had overseas assignments to Japan, Cambodia, Italy, China, Indonesia, Thailand, France, Laos and Vietnam. He was

Ambassador in the last two countries. From 1988 to 1990 he was Assistant Secretary (Personnel) in the Department. In

1994, he was founding Chief Executive Officer of the Australia Television at the Australian Broadcasting Corporation and

from 2002 to 2008 Founding President of RMIT International University Vietnam before becoming Managing Director

(Asia-Pacific) for Laureate International Universities. Since 2012 he has been Chancellor of Torrens University Australia.

From 2013 he has been Chair of Think Education previously being a Director of that company since 2011. He is also a

Director of the Blue Mountains International Hotel Management School (since 2017) and the Australia-Vietnam Medical

Foundation at Sydney University (since 2002). He is also on University Boards in China, India and South Africa. He has not

been a director of any other publicly listed company in the last three years.

COMPANY SECRETARY

Mrs Patricia Williams (AGIA) is an associate of Governance Institute of Australia. Mrs Williams holds a Bachelor of

Accountancy degree from the Philippines. She was appointed company secretary of the Company on 3 January 2012.

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:

Note

Ordinary Shares

V. H. Lam (1) 116,308,510

A. A. Young -

R.S.L. Kwok -

A.D. Walker -

J.H.S. Murray -

M.D. Mann -

Note:

(1) Mr Lam is a director and shareholder of Corbyns International Limited which owns 116,308,510 shares in VII.

2016 2015

EARNINGS PER SHARE Cents Cents

Basic and diluted earnings per share 6.05 6.94

DIVIDENDS

On 2 September 2016, the Board declared a dividend of 3 (three) Australian cents per ordinary share (fully unfranked) which

was paid and dispatched on 16 September 2016 (2015: Nil). The entire dividend was 100% conduit foreign income.

There were no dividends declared or paid at the end of year (2015: Nil).

CORPORATE INFORMATION

Corporate Structure

VII is a company limited by shares that is incorporated and domiciled in Australia. It is the ultimate Australian 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 in Note 28.

Operating and Financial review

Operating and Financial Review of the consolidated entity for the year is set out in pages 4 to 8 in the Annual Report 2016.

For

per

sona

l use

onl

y



Employees

The consolidated entity employed 663 employees as at 31 December 2016 (2015: 667 employees).

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, other than as outlined in the Operating and Financial Review section.

SUBSEQUENT EVENTS AFTER THE BALANCE DATE

The Company announced the appointment of a new director, Mr Michael Mann, on 17 January 2017.

As disclosed in Note 13 to the financial statements, in January 2017, the assets pledged by the counterparty as security for

the other receivable of VND 180.0 billion ($10.935 million) were acquired from the original counterparty by a third party.

Under the terms of the acquisition, the third party assumed the obligation to repay the VND 180.0 billion to the Group and

provided the Group with a first charge security over the building, machinery and equipment assets acquired.

On 22 March 2017, Vinausteel Limited (VII: 70%) declared a dividend of VND120 billion. VII’s share is

VND84 billion (estimated $4.8 million) which will be paid before 30 June 2017.

There has been no other matter or circumstance that has arisen since the end of the year that has significantly affected, or

may 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.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The consolidated entity’s operations are not subject to any significant environmental regulations under either the

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.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The consolidated entity expects to continue with the commercial production of rebar and wire rod from VII’s rolling mills,

Vinausteel and SSESTEEL, roofing and wall cladding at Austnam’s factory in Hanoi, and the provision of engineering,

construction and project management services by TBS. VRC is not in operation at present.

Further information about likely developments in the operations of the Group is included in Operating and Financial Review

section.

REMUNERATION REPORT (AUDITED)

The Company’s remuneration policy is to ensure that remuneration levels are competitively set to be commensurate with

director and executive responsibilities and to attract and retain appropriately qualified and experienced directors and senior

executives.

The Remuneration Committee was terminated as the Board considered that it was not necessary for a sub-committee of the

Board to perform its task, given the small number of the Board members and senior executives. The Board now undertakes

the role of the Remuneration Committee.

The performance and remuneration of senior executives is reviewed by the Board on an annual basis. The Board may obtain

independent advice on appropriate remuneration packaging to ensure competitive structuring compared to local and

international trends. During 2016, the Company engaged Ms Alison Gaines of Gerard Daniels as its independent

remuneration consultant to review the 2016 remuneration packages of the Directors and Chief Executive Officer. The

Chairman instructed the remuneration consultant to provide remuneration recommendations for the Chief Executive Officer

and Board members (Chairman and Non-executive Directors). The remuneration consultant declared that the

recommendations were made free from undue influence by the key management personnel to whom it relates. The amount

paid to the remuneration consultant was $9,900 inclusive of GST. The remuneration recommendations were considered by

all non-executive directors at their Board meeting in July 2016 and ratified in February 2017.

For

per

sona

l use

onl

y



REMUNERATION REPORT (AUDITED) (CONTINUED)

The Board reviews and approves remuneration policies and packages applicable to the Chief Executive Officer, senior

executives and directors themselves. It is also responsible for developing bonus and incentive schemes and professional

indemnity and liability insurance.

The Company does not have any pre-determined KPI which has been linked to the remuneration policy. In the absence of a

pre-determined KPI, the bonus, if any, will be decided at the board’s discretion based on the actual result of the previous

year’s performance. During 2016, the Board decided to give Mr Lam, CEO, a discretionary bonus of $183,750 (2015: nil)

based on the 2015 profitable results. No bonuses were given to non-executive directors during the current year (2015: nil).

Details of Remuneration Post

Short-term employment

Salary &

Fees

$

Bonus

$

Non-

Monetary

Benefits

$

Super-

contributions

$

Other

Long-term

Benefits

$

Total

$

R. S. L. Kwok (i) 2016 130,000 - - 4,275 - 134,275 (Independent Non-Executive

Director/ Chairman) 2015 60,000 - - - - 60,000

A. D. Walker (ii) 2016 80,000 - - - - 80,000 (Independent Non-Executive Director)

2015 50,000 - - - - 50,000

A. A. Young (iii) 2016 174,986 - 11,428 - - 186,414 (Non-Executive Director) 2015 150,535 - 11,293 - 285,000 446,828

J.H.S. Murray (iv) 2016 75,914 - - - - 75,914 (Independent

Non-Executive Director) 2015 - - - - - -

V. H. Lam (v) 2016 568,086 183,750 56,914 - - 808,750 (Managing Director/

Chief Executive Officer) 2015 470,101 - 54,899 - - 525,000

Total 2016 1,028,986 183,750 68,342 4,275 - 1,285,353

2015 730,636 - 66,192 - 285,000 1,081,828

P Williams(vi) 2016 136,522 - - 13,300 2,334 152,156 (Company secretary) 2015 153,791 - - 13,300 2,334 169,425

D. H. Ngoc 2016 83,938 - - - - 83,938 (General Manager – TBS) 2015 83,592 - - - - 83,592

Total 2016 220,460 - - 13,300 2,334 236,094

2015 237,383 - - 13,300 2,334 253,017

(i) In 2016, Mr Kwok’s non-executive director fee is $130,000 per annum as Chairman of the Company (2015: $60,000).

However, he had foregone $15,000 of his fee which the Company donated to an organisation. Total payment made to

Mr Kwok in 2016 is $45,000 (2015: $60,000). At 31 December 2016, the balance owing to Mr Kwok is $70,000

(2015: nil).

(ii) In 2016, Mr Walker’s non-executive director fee is $80,000 per annum (2015: $50,000). Total payment made to

Mr Walker in 2016 is $50,000 (2015: $50,000). At 31 December 2016, the balance owing to Mr Walker is $30,000

(2015: nil).

(iii) In 2016, Mr Young’s base remuneration consist of non-executive director and consultancy fees and short-term non-

monetary benefits. For the period to 31 December 2016, Mr Young’s non-executive director’s remuneration was

$33,333 (2015: $37,500). Also during 2016, he was paid his consultancy services for the Group in the amount of

$153,081 including non-monetary benefits of $11,428 (2015: $124,328 including non-monetary benefits of $11,293).

His consultancy service included Group compliance with the regulations in Australia and Vietnam. At 31 December

2016, the balance owing to Mr Young of $22,526 is in relation to his consultancy fees (2015: $285,000 in relation to

his termination benefit).

For

per

sona

l use

onl

y




(iv) In 2016, Mr Murray’s non-executive director fee is $80,000 per annum (2015: nil). Total payment made to Mr Murray

in 2016 is $47,447 as he commenced his directorship on 19 January 2016 (2015: nil). At 31 December 2016, the

balance owing to Mr Murray is $28,467 (2015: nil).

(v) Under Mr Lam’s service contract, his fixed remuneration package is $525,000 per annum. On 21 July 2016, the Board

resolved to pay Mr Lam a fixed 2016 remuneration of $625,000 per annum and a discretionary bonus of $183,750

which represents 23% of Mr Lam’s total remuneration of $808,750 per Board resolution in July 2016. At 31 December

2016, the balance owing to Mr Lam is $590,417 (2015: $309,347).

(vi) Mrs Williams’ base salary is $140,000, excluding superannuation. Included in her base salary is an annual leave credit

adjustment of $3,478 (2015: $3,791 debit adjustment). No discretionary bonus paid in 2016 (2015: $10,000).

Except for Mr Lam’s discretionary bonus during the year, the directors and executives did not receive any short-term and

long-term incentives (2015: nil). Only fixed remuneration was paid to the directors and executives.

Non-monetary benefits of certain directors and senior executives pertain to benefits in relation to their employment in

Vietnam.

Other than the directors and executives stated on the above tables, there were no other executives that meet the criteria for

the key management personnel of the consolidated entity during the year.

Non-Executive Directors

During the year, the Board resolved in July 2016 and ratified in February 2017 to increase the non-executive remuneration

after considering the remuneration consultant’s recommendation. The increases are tabled in page 12.

Fees and payments made to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the

directors. Non-Executive Directors’ fees have been reviewed by the Board. Non-Executive Directors’ fees are based on

comparative roles in the external market.

The Non-Executive Directors are paid a set amount per year and, apart from reimbursement of expenses incurred on the

Company’s behalf, are not eligible for any additional payments.

The Non-Executive Directors’ fees are reviewed annually by the Board. However, the maximum aggregate remuneration

payable to Non-Executive Directors is $500,000 per year.

Share options

There were no share-based payments made to key management personnel during the year (2015: Nil).

Service Agreements

Contractual arrangements between senior executives and the company they work for are unlimited in term and provide for

termination periods of one (1) – three (3) months’ notice. On termination of employment, senior executives are entitled to

receive their entitlements to accrued annual and long service leave, together with any superannuation benefits.

For

per

sona

l use

onl

y




Shareholdings of Key Management Personnel

Shares held in Vietnam Industrial Investments Limited:

2016

Beginning

balance

1 January 2016

Granted as

remuneration

On exercise

of options

Net change

other

Ending

balance

31 December 2016

Directors

R.S.L Kwok - - - - -

V. H. Lam(i) 116,308,510 - - - 116,308,510

A. A. Young - - - - -

A.D. Walker - - - - -

J.H.S. Murray - - - - -

Executives

P. Williams - - - - -

D. H. Ngoc - - - - -

Note: (i) As at 31 December 2016, Mr Lam is a director and shareholder of Corbyns International Limited which owns

116,308,510 shares in the Company. As at 31 December 2016, the total number of VII shares on issue is 142,277,423

(2015: 142,277,423).

All equity transactions with key management personnel have been entered into under terms and conditions no more

favourable than those the Group would have adopted if dealing at arm’s length.

Option holdings of Key Management Personnel

There are no options granted as remuneration and outstanding at 31 December 2016 to key management personnel

(2015: Nil). 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.

Other transactions and balances with Key Management Personnel and their related parties

The remuneration of key management personnel are discussed in pages 12 and 13.

The Company subleases its office accommodation at Unit 5A, 1 Station Street, Subiaco, Western Australia 6008 from

Arcadia Group Pty Ltd (“Arcadia”) of which Mr Kwok is a Managing Director and a shareholder. The lease rental for the

year was $63,000 (2015: $60,000). The lease with Arcadia is made in the ordinary course of business and on normal

commercial terms and conditions. Also, the Company paid bookkeeping services to Arcadia of $24,000 during the year

(2015: $24,000).

During the year, the Company obtained case by case legal services from Mr Murray’s legal firm under commercial terms

and conditions. The legal fees paid during the year was $8,533 (2015: Nil).

Retirement Policy

Directors and employees of the parent company may be entitled to a retirement benefit. Retirement benefits are in addition

to any accrued statutory annual leave and long service leave entitlements accrued by the employee and superannuation shall

be payable on the retirement benefits. The total payment to a director or an employee on retirement or termination

(retirement benefits, plus annual and long service leave entitlements) may not exceed the Corporations Act limits. Any

determination and payment of termination benefits will be at the discretion of the Board of Directors and will be determined

on a case to case basis. As of the reporting date, there are no termination benefits accrued or payable.

For

per

sona

l use

onl

y



Performance Evaluation

There is no formal performance evaluation made for the Directors during the year. However, the Board of Directors

continuously assess the effectiveness of the Board’s performance. No formal performance evaluations were performed for

senior executives during the year.

The following table shows the earnings per share and share price of the Group for the last 5 years:

2016 2015 2014 2013 2012

Earnings per share (in cents) 6.05 6.94 (0.37) (6.44) (1.91)

Share price (in cents) – 31 December 41 9 8 11 10

End of the Remuneration Report.

DIRECTORS’ MEETINGS

For the year ended 31 December 2016, the number of meetings at which Directors were in attendance is as follows:

Directors’ Meetings Audit Committee

Meetings

No. of

meetings held

while in office

Meetings

attended

No. of

meetings held

while in office

Meetings

attended

R. S. L. Kwok 5 5 3 3

A. D. Walker 5 5 3 3

V. H. Lam 5 4 - -

A. A. Young 5 5 - -

J.H.S. Murray 5 5 1 1

There are board meetings of each of the Company’s subsidiary companies in which members of the Board participate. In

addition to the above, there were three occasions whereby the Board approved matters by circular resolution.

The Board undertakes the role of the Remuneration Committee.

SHARE OPTIONS

Unissued shares

As at the date of this report there were no unissued ordinary shares under options. Since the Company does not have any

share options, there were no shares issued as a result of the exercise of options.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

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 any 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.

INDEMNIFICATION OF AUDITORS

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its

audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment

has been made to indemnify Ernst & Young during or since the financial year.

For

per

sona

l use

onl

y



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 Corporations (Rounding in Financial/Directors’ Reports)

Instrument 2016/191. The Company is an entity to which the Instrument applies.

PROCEEDINGS ON BEHALF OF THE GROUP

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf

of the Group, or to intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on

behalf of the Group for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the

Corporations Act 2001.

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

Section 307C of the Corporations Act 2001 requires the company’s auditors, Ernst & Young, to provide the directors with a

written Independence Declaration in relation to their audit of the financial report for the year ended 31 December 2016. This

written Auditor’s Independence Declaration forms part of this Directors’ Report.

Non-Audit Services

The following non-audit services were provided by the entity’s auditor, Ernst & Young. The directors are satisfied that the

provision of non-audit services is compatible with the general standard of independence for auditors imposed by the

Corporations Act 2001. The nature and scope of each type of non-audit service provided means that the auditor

independence was not compromised.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services during the

current year:

Tax services in relation to income tax preparation $ 17,000

Other tax advice in regards to dividends and PAYG 9,500

Total $ 26,500

Signed in accordance with a resolution of the directors.

LAM VAN HUNG

Managing Director

Hai Phong, 29 March 2017

For

per

sona

l use

onl

y

A member firm of Ernst & Young Global Limited

Liability limited by a scheme approved under Professional Standards Legislation

MH:EH:VII:020

Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843

Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au

Auditor’s Independence Declaration to the Directors of Vietnam Industrial Investments Limited

As lead auditor for the audit of Vietnam Industrial Investments Limited for the year ended 31 December 2016, I declare to the best of my knowledge and belief, there have been:

a. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

b. no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Vietnam Industrial Investments Limited and the entities it controlled during the financial year.

Ernst & Young V L Hoang Partner Perth 29 March 2017

For

per

sona

l use

onl

y

CORPORATE GOVERNANCE STATEMENT


Page | - 18 -

A copy of the Company’s Corporate Governance policies and practices during the financial year ended 31 December 2016 is

available at the Company’s website at www.vii.net.au/Governance/Appendix4G.

For

per

sona

l use

onl

y

http://www.vii.net.au/

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016


Notes 2016

$’000

2015

$’000

ASSETS

Current Assets

Cash and cash equivalents 7 76,762 63,032

Trade and other receivables 8 9,399 10,797

Advances to suppliers 9 12,230 2,669

Inventories 10 46,777 42,380

Financial assets – at fair value through profit or loss 11 9 9

Other current assets 12 7,750 185

Total Current Assets 152,927 119,072

Non-current Assets

Other receivable 13 10,935 10,977

Property, plant and equipment 14 12,845 8,390

Deferred tax assets 6 (d) 1,160 27

Intangible assets and goodwill 15 83 86

Other non-current assets 16 418 464

Total Non-current Assets 25,441 19,944

TOTAL ASSETS 178,368 139,016

LIABILITIES

Current Liabilities

Trade and other payables 17 25,692 17,662

Advances from customers 2,907 4,299

Income tax payable 6 (e) 2,412 2,869

Interest-bearing loans and borrowings 18 86,868 58,614

Provisions 19 939 892

Total Current Liabilities 118,818 84,336

TOTAL LIABILITIES 118,818 84,336

NET ASSETS 59,550 54,680

EQUITY

Equity attributable to equity holders of parent

Contributed equity 20 27,819 27,819

Reserves 21 (4,909) (4,869)

Retained earnings 22 30,283 25,937

Parent interests 53,193 48,887

Non-controlling interests 23 6,357 5,793

TOTAL EQUITY 59,550 54,680

The above financial statements should be read in conjunction with the accompanying notes.

For

per

sona

l use

onl

y

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016


Notes 2016

$’000

2015

$’000

Continuing operations

Sale of goods 312,648 352,167

Contract revenue 2,329 3,770

Other revenue 5 3,143 1,560

Revenue 318,120 357,497

Cost of sales 5 (282,901) (318,229)

Gross profit 35,219 39,268

Other income 5 571 702

Selling expenses 5 (6,920) (8,921)

Administrative expenses 5 (11,854) (11,572)

Finance costs 5 (3,294) (3,468)

Profit before income tax 13,722 16,009

Income tax expense 6 (a) (2,301) (3,846)

Net profit for the year 11,421 12,163

Other comprehensive income

Items that may be reclassified subsequently to profit or loss

Foreign currency translation differences attributable to parent (40) 2,492

Items that may not be reclassified subsequently to profit or loss

Foreign currency translation attributable to non-controlling interests 25 242

Other comprehensive income for the year (15) 2,734

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

11,406

14,897

Profit attributable to:

Owners of parent 8,614 9,868

Non-controlling interests 2,807 2,295

11,421 12,163

Total comprehensive income attributable to:

Owners of parent 8,574 12,360

Non-controlling interests 2,832 2,537

11,406 14,897

Cents Cents

Earnings per share (cents per share) attributable to the ordinary

equity holders of the Company:

– Basic and diluted earnings per share 24

6.05

6.94


For

per

sona

l use

onl

y

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016


Page | - 21 -

Attributable to equity holders of the parent

Non-controlling

interests

Total equity

Contributed

equity

$’000

Foreign currency

translation

reserves

$’000

Retained

earnings

$’000

Legal

reserves

$’000

Owners of

the parent

$’000

$’000

$’000

At 1 January 2016 27,819 (5,993) 25,937 1,124 48,887 5,793 54,680

Net profit for the year - - 8,614 - 8,614 2,807 11,421

Other comprehensive loss - (40) - - (40) 25 (15)

Total comprehensive income

for the year

-

(40)

8,614

-

8,574

2,832

11,406

Dividends declared to shareholders - - (4,268) - (4,268) - (4,268)

Dividends by subsidiaries - - - - - (2,268) (2,268)

At 31 December 2016 27,819 (6,033) 30,283 1,124 53,193 6,357 59,550

At 1 January 2015 27,819 (8,485) 16,069 1,124 36,527 3,651 40,178

Net profit for the year - - 9,868 - 9,868 2,295 12,163

Other comprehensive income - 2,492 - - 2,492 242 2,734

Total comprehensive income

for the year

-

2,492

9,868

-

12,360

2,537

14,897

Dividends paid by subsidiaries - - - - - (395) (395)

At 31 December 2015 27,819 (5,993) 25,937 1,124 48,887 5,793 54,680


For

per

sona

l use

onl

y

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016


Page | - 22 -

Notes 2016

$’000

2015

$’000

Cash flows from operating activities

Receipts from customers (inclusive of VAT) 347,052 396,876

Payments to suppliers and employees (inclusive of VAT) (337,737) (362,078)

Interest income received 3,143 1,560

Interest expense paid (3,294) (3,468)

Income taxes paid (3,875) (1,783)

Net cash flows provided by operating activities 7(a) 5,289 31,107

Cash flows from investing activities

Funding of term deposits (7,291) -

Purchase of property, plant and equipment (6,280) (1,288)

Purchase of software costs - (10)

Proceeds from sale of property, plant and equipment 137 -

Net cash flows used in investing activities (13,434) (1,298)

Cash flows from financing activities

Proceeds from bank borrowings 315,666 254,198

Repayment of bank borrowings (287,464) (257,531)

Dividends paid to shareholders (4,164) -

Dividends paid to non-controlling interest (2,268) (395)

Net cash flows provided by/(used in) financing activities 21,770 (3,728)

Net increase in cash and cash equivalents 13,625 26,081

Net foreign exchange differences 105 2,291

Cash and cash equivalents at beginning of year 63,032 34,660

Cash and cash equivalents at end of year 7 76,762 63,032


For

per

sona

l use

onl

y

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016


Page | - 23 -

1. COMPANY INFORMATION

The consolidated financial statements of Vietnam Industrial Investments Limited and its subsidiaries (“the Group”) for the

year ended 31 December 2016 were authorised for issue in accordance with a resolution of the directors on 28 March 2017.

Vietnam Industrial Investments Limited is a for profit company limited by shares incorporated in Australia whose shares are

publicly traded on the Australian Securities Exchange Limited (“ASX”). The ultimate parent is Corbyns International

Limited which owns 81.75% of the ordinary shares. The nature of the operations and principal activities of the Group are

described in the Directors’ Report and Note 28.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of

the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian

Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for financial

assets at fair value through profit or loss. Cost is based on the fair values of the consideration given in exchange for assets.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($'000)

unless otherwise stated.

(a) Compliance with IFRS

The financial report also complies with the Australian Accounting Standards and International Financial Reporting

Standards (“IFRS”) as issued by the International Accounting Standards Board.

(b) Changes in accounting policy, disclosures, standards and interpretations

(i) Changes in accounting policy and disclosures

Excepted as noted below, the accounting policies adopted are consistent with the prior year. The Group has adopted all new

amended accounting standards effective from 1 January 2016, including:

Reference

Title/Summary

AASB 2015-3

Amendments to Australian Accounting Standards arising from the withdrawal of AASB 1031 Materiality

The Standard completes the AASB’s project to remove Australian guidance on materiality from Australian

Accounting Standards.

These amendments do not have an impact on the Group’s financial position and performance.

AASB 2014-4

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to AASB 116 and

AASB 138)

The IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is

not appropriate because revenue generated by an activity that includes the use of an asset generally reflects

factors other than the consumption of the economic benefits embodied in the asset.

The amendment also clarified that revenue is generally presumed to be an inappropriate basis for

measuring the consumption of the economic benefits embodied in an intangible asset. This presumption,

however, can be rebutted in certain limited circumstances.


For

per

sona

l use

onl

y

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016


Page | - 24 -

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) New accounting standards and interpretations (continued)

(i) Changes in accounting policy and disclosures (continued)

Reference Title/Summary

AASB 2015-1

Amendments to Australian Accounting Standards - Annual Improvements to Australian Accounting

Standards 2012-2014 Cycle

The subjects of the principal amendments to the Standards are set out below:

AASB 5 Non-current Assets Held for Sale and Discontinued Operations:

Changes in methods of disposal - where an entity reclassifies an asset (or disposal group)

directly from being held for distribution to being held for sale (or visa versa), an entity shall

not follow the guidance in paragraphs 27-29 to account for this change.

AASB 7 Financial Instruments: Disclosures:

Applicability of the amendments to AASB 7 to condensed Interim financial statements -

clarify that the additional disclosure required by the amendments to AASB 7 Disclosure-

Offsetting Financial Assets and Financial Liabilities is not specifically required for all interim

periods. However, the additional disclosure is required to be given in condensed interim

financial statements that are prepared in accordance with AASB 134 Interim Financial

Reporting when its inclusion would be required by the requirements of AASB 134.

AASB 119 Employee Benefits:

Discount rate: regional market issue - clarifies that the high quality corporate bonds used to

estimate the discount rate for post-employment benefit obligations should be denominated in

the same currency as the liability. Further it clarifies that the depth of the market for high

quality corporate bonds should be assessed at the currency level.

AASB 134 Interim Financial Reporting:

Disclosure of information 'elsewhere in the interim financial report' - amends AASB 134 to clarify

the meaning of disclosure of information 'elsewhere in the interim financial report' and to require

the inclusion of a cross-reference from the interim financial statements to the location of this

information.


AASB 2015-2

Amendments to Australian Accounting Standards - Disclosure initiative: Amendments to AASB

101

The Standard makes amendments to AASB 101 Presentation of Financial Statements arising from

the IASB's Disclosure Initiative project. The amendments are designed to further encourage

companies to apply professional judgment in determining what information to disclose in the

financial statements. For example, the amendments make clear that materiality apples to the whole

of financial statements and that the inclusion of immaterial information can inhibit the usefulness of

financial disclosures. The amendments also clarify that companies should use professional

judgment in determining where and in what order information is presented in the financial

disclosures.

Appropriate disclosures are made on the Group’s financial position and performance.

For

per

sona

l use

onl

y

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (CONTINUED)


Page | 25



(ii) Accounting standards and Interpretations issued but not yet effective

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Group for the annual reporting

period ending 31 December 2016 are outlined in the table below.

Reference Title Summary Application date of

standard*

Impact on Group

financial report

Application date for

Group*

AASB 9 Financial Instruments AASB9 (December 2014) is a new Standard which replaces AASB 139. This new version supersedes AASB 9 issued in December 2009 (as amended) and AASB 9 (issued in December 2010) and includes a model for classification and measurement, a single, forward-looking 'expected loss’ impairment model and a substantially-reformed approach to hedge accounting.

AASB 9 is effective for annual periods beginning on or after 1 January 2018. However, the Standard is available for early adoption. The own credit changes can be early adopted in isolation without otherwise changing the accounting for financial instruments.

Classification and measurement

AASB 9 includes requirements for a simpler approach for classification and measurement of financial assets compared with the requirements of AASB 139. There are also some changes made in relation to financial liabilities.

The main changes are described below.

Financial assets

a. Financial assets that are debt instruments will be classified based on (1) the objective of the entity's business model for managing the financial assets; (2) the characteristics of the contractual cash flows.

b. Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

1 January 2018 The entity is yet to

undertake a detailed

assessment of the

impact of AASB 9.

1 January 2018

For

per

sona

l use

onl

y



Page | 26



(ii) Accounting standards and Interpretations issued but not yet effective (continued)


standard*

Impact on Group

financial report

Application date

for Group*

AASB 9 Financial Instruments

(continued) c. Financial assets can be designated and measured at fair value

through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.

Financial liabilities

Changes introduced by AASB 9 in respect of financial liabilities are limited to the measurement of liabilities designated at fair value through profit or loss (FVPL) using the fair value option. Where the fair value option is used for financial liabilities, the change in fair value is to be accounted for as follows:

► The change attributable to changes in own credit risk are

presented in other comprehensive income (OCI)

► The remaining change is presented in profit or loss

AASB 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. This change in accounting means that gains or losses attributable to changes in the entity's own credit risk would be recognised in OCI. These amounts recognised in OCI are not recycled to profit or loss if the liability is ever repurchased at a discount.

Impairment

The final version of AASB 9 introduces a new expected-loss impairment model that will require more timely recognition of expected credit losses. Specifically, the new Standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis.

For

per

sona

l use

onl

y



Page | 27





standard*

Impact on Group

financial report

Application date

for Group*

AASB 15 Revenue from Contracts with

Customers

AASB 15 Revenue from Contracts with Customers replaces the existing revenue recognition standards AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations (Interpretation 13 Customer Loyalty Programmes, Interpretation 15 Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers, Interpretation 131 Revenue-Barter Transactions Involving Advertising Services and Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications industry). AASB 15 incorporates the requirements of IFRS 15 Revenue from Contracts with Customers issued by the International Accounting Standards Board (IASB) and developed jointly with the US Financial Accounting Standards Board (FASB).

1 January 2018 The Group is in the

process of assessing

the impact of

AASB 15.

1 January 2018

For

per

sona

l use

onl

y



Page | 28





standard*

Impact on Group

financial report

Application date

for Group*

AASB 15 Revenue from Contracts with

Customers (continued) AASB 15 specifies the accounting treatment for revenue arising from contracts with customers (except for contracts within the scope of other accounting standards such as leases or financial instruments). The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

a) Step 1: Identify the contract(s) with a customer

b) Step 2: Identify the performance obligations in the contract

c) Step 3: Determine the transaction price

d) Step 4: Allocate the transaction price to the performance

obligations in the contract

e) Step 5: Recognise revenue when (or as) the entity satisfies a

performance obligation AASB 2015-8 amended the AASB 15 effective date so it is now effective for annual reporting periods commencing on or after 1 January 2018. Early application is permitted.

AASB 2014-5 incorporates the consequential amendments to a

number Australian Accounting Standards (including Interpretations)

arising from the issuance of AASB 15.

AABS 2016-3 Amendments to Australian Accounting Standards -

Clarifications to AASB 15 amends AASB 15 to clarify the

requirements on identifying performance obligations, principal versus

agent considerations and the timing of recognising revenue from

granting a licence and provides further practical expedients on

transition to AASB 15.

For

per

sona

l use

onl

y



Page | 29





standard*

Impact on Group

financial report

Application

date for

Group*

AASB 16 Leases The key features of AASB 16 are as follows:

Lessee accounting

► Lessees are required to recognise assets and liabilities for all leases

with a term of more than 12 months, unless the underlying asset is of

low value.

► Assets and liabilities arising from a lease are initially measured on

a present value basis. The measurement includes non-cancellable

lease payments (including inflation-linked payments), and also

includes payments to be made in optional periods if the lessee is

reasonably certain to exercise an option to extend the lease, or not to

exercise an option to terminate the lease.

► AASB 16 contains disclosure requirements for lessees.

1 January 2019 The entity is yet to

undertake a detailed

assessment of the

impact of AASB 16.

1 January 2019

For

per

sona

l use

onl

y



Page | 30





standard*

Impact on Group

financial report

Application

date for

Group*

AASB 16 Leases (continued) Lessor accounting

► AASB 16 substantially carries forward the lessor accounting

requirements in AASB 117. Accordingly, a lessor continues to

classify its leases as operating leases or finance leases, and to account

for those two types of leases differently.

► AASB 16 also requires enhanced disclosures to be provided

by lessors that will improve information disclosed about a

lessor’s risk exposure, particularly to residual value risk.

AASB 16 supersedes:

a) AASB 17 Leases;

b) Interpretation 4 Determining whether an Arrangement contains

a Lease;

c) SIC-15 Operating Leases—Incentives

d) SIC-27 Evaluating the Substance of Transactions Involving the

Legal Form of a Lease.

The new standard will be effective for annual periods beginning on or

after 1 January 2019. Early application is permitted, provided the new

revenue standard, AASB 15 Revenue from Contracts with Customers,

has been applied, or is applied at the same date as AASB 16.

AASB 2016-1 Amendments to Australian

Accounting Standards -

Recognition of Deferred Tax

Assets for Unrealised Losses

[AASB 112]

This Standard amends AASB 112 Income Taxes (July 2004) and AASB 112 Income Taxes (August 2015) to clarify the requirements on recognition of deferred tax assets for unrealised losses on debt instruments measured at fair value.

1 January 2017 For the year ending

31 December 2017,

there will be no

material impact of

these amendments on

the financial

statements.

1 January 2017

For

per

sona

l use

onl

y



Page | 31





standard*

Impact on Group

financial report

Application

date for

Group*


Accounting Standards - Disclosure

Initiative: Amendments to AASB

107

This Standard amends AASB 107 Statement of Cash Flows (August

2015) to require entities preparing financial statements in accordance

with Tier 1 reporting requirements to provide disclosures that enable

users of financial statements to evaluate changes in liabilities arising

from financing activities, including both changes arising from cash

flows and non-cash changes.

1 January 2017 When these

amendments are first

adopted for the year

ending 31 December

2017, there will be

no material impact

on the financial

statements.

1 January 2017


Accounting Standards -

Classification and

Measurement of Share-based

Payment Transactions [AASB 2]

This standard amends AASB 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments provide requirements on the accounting for:

►The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments

►Share-based payment transactions with a net settlement feature for withholding tax obligations

► A modification to the terms and conditions of a share-based

payment that changes the classification of the transaction from cash-

settled to equity-settled

1 January 2018 When these

amendments are first

adopted for the year

ending 31 December

2018, there will be

no material impact

on the financial

statements.

1 January 2018

IFRIC Interpretation 22

IFRIC Interpretation 22 Foreign

Currency Transactions and

Advance Consideration

IFRIC Interpretation 22 Foreign Currency Transactions and Advance

Consideration, which addresses the exchange rate to use in

transactions that involve advance consideration paid or received in a

foreign currency, is effective l January 2018.

1 January 2018 The impact on the

financial statements

has yet to be

assessed.

1 January 2018

* Designates the beginning of the applicable annual reporting periods unless otherwise stated.

For

per

sona

l use

onl

y



Page | - 32 -


(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of Vietnam Industrial Investments Limited and its

subsidiaries ('the Group') as at 31 December 2016. Control is achieved when the Group is exposed, or has rights, to variable

returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if and only if the Group has:

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the

investee)

Exposure, or rights to variable returns from involvement with the investee, and

The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts

and circumstances in assessing whether it has power over an investee, including:

The contractual arrangement with the other vote holders of the investee

Rights arising from other contractual arrangements

The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one

or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the

subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a

subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the

Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of the other comprehensive income (OCI) are attributed to the equity holders of the

parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit

balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies

into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash

flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the

Group loses control over a subsidiary, it:

- Derecognises the assets (including goodwill) and liabilities of the subsidiary

- Derecognises the carrying amount of any non-controlling interests

- Derecognises the cumulative translation differences recorded in equity

- Recognises the fair value of the consideration received

- Recognises the fair value of any investment retained

- Recognises any surplus or deficit in profit or loss

- Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as

appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

(d) Significant accounting judgements, estimates, and assumptions

The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and

assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures,

and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that

require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, which have

the most significant effect on the amounts recognised in the consolidated financial statements:

For

per

sona

l use

onl

y



Page | - 33 -


(d) Significant accounting judgements, estimates, and assumptions (continued)

Recovery of Other Receivables – non-current assets

Management expects the outstanding balance of the other receivable disclosed in Note 13 will be received in full. In

reaching their position, management has considered:

- the quality of the second charge it had over the counterparty’s property, machinery and equipment and land use

rights at 31 December 2016;

- the subsequent conversion to a first charge over building, machinery and equipment following a debt assignment

arrangement to a new party;

- a recent independent valuation report it received on the security assets.

There is a level of estimation uncertainty inherent in the results of the independent valuation, which was considered level 3

in the fair value hierarchy. Additionally, the realisation of the security assets is dependent on other factors outside the

Group’s controls such as the overall economic conditions in Vietnam and the availability of buyers in the market.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a

significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial

year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated

financial statements were prepared. Existing circumstances and assumptions about future developments, however, may

change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the

assumptions when they occur.

Impairment of non-financial assets other than goodwill

The Group assesses impairment of all assets of the Vietnam subsidiaries at each reporting date by evaluating the conditions

specific to the Group and to the particular asset that may lead to impairment. These include market value of the assets,

technology, economic and political environments, interest rates, physical assets’ conditions and financial performance of the

subsidiaries. An impairment exists when the carrying value of an asset or cash generating unit (“CGU”) exceeds its

recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The Group used the value

in use calculation based on the discounted cash flow (“DCF”) model. The cash flows are derived from the budget for the

next five years and has been extrapolated at 0% growth rate and do not include any enhancements to the asset’s performance

for the CGU tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the

expected future cash-inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine

the recoverable amount for the CGUs, including a sensitivity analysis, are disclosed and further explained in Note 14.

Taxation

The Group's accounting policy for taxation requires management's judgement as to the types of arrangements considered to

be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether deferred tax assets and

certain deferred tax liabilities are recognised on the statement of financial position. Deferred tax assets, including those

arising from unrecouped tax losses, capital losses and temporary differences, are recognised only to the extent it is probable

that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities

arising from temporary differences in investments, caused principally by retained earnings held in foreign tax jurisdictions,

are recognised unless repatriation of retained earnings can be controlled and are not expected to occur in the foreseeable

future.

Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on management's

estimates of future cash flows. These depend on estimates of future production and sales volumes, operating costs,

restoration costs, capital expenditure, dividends and other capital management transactions. Judgements are also required

about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence

there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax

assets and deferred tax liabilities recognised on the statement of financial position and the amount of other tax losses and

temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred

tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the profit or loss.

Estimation of useful lives of plant, property and equipment

The estimation of useful lives of plant, property and equipment has been based on historical experience, assessment of the

asset’s condition yearly and consideration of the remaining useful lives of assets.

For

per

sona

l use

onl

y



Page | - 34 -


(e) Foreign currency translation

The Group’s consolidated financial statements are presented in Australian dollars ($) which is both the functional and

presentation currency of the Parent. For each entity, the Group determines the functional currency and items included in the

financial statements of each entity are measured using that functional currency. The functional currencies of the overseas

subsidiaries are Vietnamese Dong (VND) and Singapore Dollar (SGD) which are translated to the presentation currency.

(i) Transactions and balances

Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot

rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of

exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of

monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These are

recognised in other comprehensive income until the net investment is disposed of, at which time, the cumulated amount is

reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items, if any,

are also recorded in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange

rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are

translated using the exchange rates at the date when the fair value was determined. The gain or loss arising on translation of

non-monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of

the items (i.e. translation differences on items whose fair value gain or loss is recognised in other comprehensive income or

profit or loss are also recognised in other comprehensive income or profit or loss, respectively).

(ii) Group companies

On consolidation the assets and liabilities of foreign operations are translated into Australian Dollars (presentation currency)

at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates

prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised

in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating

to that particular foreign operation is recognised in the profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of

assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at

the spot rate of exchange at the reporting date.

(f) Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term

deposits with a maturity of three months or less.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term

deposits as defined above, net of outstanding bank overdrafts.

(g) Trade and other receivables

Trade receivables, which are generally on a 60 day term, are recognised initially at fair value and subsequently measured at

amortised cost using the effective interest method, less an allowance for impairment.

Collectibility of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known

to be uncollectible are written off when identified. An impairment allowance is recognised when there is objective evidence

that the Group will not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more

than 60 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable

carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest

rate.

For

per

sona

l use

onl

y



Page | - 35 -

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(h) Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

Raw materials – cost of purchase on weighted average basis.

Finished goods – cost of direct materials and labour and plus attributable overheads based on the normal levels of

activities on a weighted average basis.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and

the estimated costs necessary to make the sale.

(i) Financial instruments

Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and

receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging

instruments in an effective hedge, as appropriate.

All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through

profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or

convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to

purchase or sell the asset.

The Group’s financial assets include cash and short-term deposits, trade and other receivables, and quoted financial

instruments.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as described below:

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net

changes in fair value presented as finance costs (negative net changes in fair value) or finance income (positive net changes

in fair value) in the statement of comprehensive income.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an

active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR

method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and

fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of

comprehensive income. The losses arising from impairment are recognised in the statement of comprehensive income in

finance costs for loans and in cost of sales or other operating expenses for receivables.

For

per

sona

l use

onl

y



Page | - 36 -


(i) Financial instruments (continued)

Impairment of financial assets

The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial

assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if there is objective evidence of

impairment as a result of one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss

event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial

assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors

is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that

they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable

decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and

borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines

the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value

and, in the case of loans and borrowings, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, and loans and borrowings.

Subsequent measurement

The measurement of financial liabilities depends on their classification, described as follows:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities

designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for

trading if they are acquired for the purpose of selling in the near term. Gains or losses on liabilities held for trading are

recognised in the statement of comprehensive income.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of

recognition, and only if the criteria in AASB 139 are satisfied. The Group has not designated any financial liability as at fair

value through profit or loss.

Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR

method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR

amortisation process.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When an

existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an

existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original

liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the

statement of profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial

position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a

net basis, to realise the assets and settle the liabilities simultaneously.

j) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a

substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other

borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity

incurs in connection with the borrowing of funds.

For

per

sona

l use

onl

y



Page | - 37 -


(k) Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and/or accumulated impairment losses, if any.

Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term

construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required

to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates

them accordingly. All other repair and maintenance costs are recognised in the statement of comprehensive income as

incurred.

Buildings are measured at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Buildings and improvements – over 5-27 years

Plant and equipment – over 1-20 years

Motor Vehicles – over 3- 8 years

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or

when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the

asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the

statement of comprehensive income when the asset is derecognised.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each

financial year end and adjusted prospectively, if appropriate.

(l) Goodwill and Intangible assets

Goodwill

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount

recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration

is lower than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised in profit or

loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of

impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the

Group's cash-generating units, or groups of cash-generating units that are expected to benefit from the combination,

irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

When goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill

associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or

loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values

of the operation disposed of and the portion of the cash-generating unit retained.

Goodwill is tested for impairment annually as at 31 December and when circumstances indicate that the carrying value may

be impaired.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of an intangible asset acquired in a

business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried

at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets,

excluding capitalised development costs, are not capitalised and expenditure is charged against profits in the year in which

the expenditure is incurred.

The useful lives of intangible assets are assessed to be finite. Intangible assets with finite lives are amortised over the useful

economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The

amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at the

end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic

benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are

treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in

the statement of comprehensive income in the expense category consistent with the function of the intangible assets.

For

per

sona

l use

onl

y



Page | - 38 -


(l) Goodwill and Intangible assets

Intangible assets (continued)

A summary of the policies applied to the Group's intangible assets is as follows:

Software costs Land rights

Useful lives Finite Finite

Method used 1-5 years - Straight line 20-48 years – Straight line

Internally generated /

Acquired

Acquired

Acquired

Impairment test /

Recoverable amount

testing

Amortisation method reviewed at

each financial year-end;

Reviewed annually for

indicator of impairment

Amortisation method reviewed

at each financial year-end;

Reviewed annually for

indicator of impairment

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal

proceeds and the carrying amount of the asset and are recognised in the profit or loss when the asset is derecognised.

Non-financial assets other than goodwill are tested for impairment whenever events or changes in circumstances indicate

that the carrying amount may not be recoverable.

The Group conducts an annual internal review of asset values, which is used as a source of information to assess for any

indicators of impairment. External factors, such as changes in expected future processes, technology and economic

conditions, are also monitored to assess for indicators of impairment. If any indication of impairment exists, an estimate of

the asset’s recoverable amount is calculated.

(m) Impairment of non-financial assets

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication

exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An

asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its

value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that

are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU

exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a weight average cost of

capital that reflects current market assessments of the time value of money and the risks specific to the asset. On

determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can

be identified, an appropriate valuation model is used.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that

previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates

the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a

change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised.

The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the

carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset

in prior years. Such reversal is recognised in the statement of comprehensive income unless the asset is carried at a revalued

amount, in which case, the reversal is treated as a revaluation increase.

(n) Trade and other payables

Trade and other payables are carried at amortised cost due to their short term nature and are not discounted. They represent

liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when

the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts

are unsecured and are usually paid within 30 days of recognition.

For

per

sona

l use

onl

y



Page | - 39 -


(o) Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at fair value of the consideration received less directly attributable

transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the

effective interest method. Fees paid on the establishment of loan facilities that are yield related are included as part of the

carrying amount of the loans and borrowings.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability

for at least 12 months after the reporting date.

(p) Advances from customers

Payments received in advance from customers for products to be delivered are recorded as customer advance payments until

the delivery of goods and passing of significant risks and rewards of ownership of goods, at which time revenue is

recognised.

(q) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed,

for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the

reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive

income net of any reimbursement.

Provisions are measured at the present value of managements’ best estimate of the expenditure required to settle the present

obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of

the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of

time is recognised in finance costs.

(r) Employee provisions and other post-employment benefits

(i) Wages, salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be

settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date and

are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave

are recognised when the leave is taken and measured at the rates paid or payable.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and is measured as the present value

of expected future payments to be made in respect of services provided by employees up to the reporting date. Expected

future payments are discounted using the market yields at the reporting date on national government bonds with terms to

maturity and currencies that match as closely as possible, the estimated future cash flows.

(iii) Retirement benefit obligations

The parent company contributes to several defined contribution superannuation plans. Contributions are recognised as an

expense as they are incurred. Directors and employees of the parent company may be entitled to a retirement benefit.

Retirement benefits are in addition to any accrued statutory annual leave and long service leave entitlements accrued by

employee and superannuation shall be payable on the retirement benefits. The total payment to a director or an employee

on retirement or termination (retirement benefits, plus annual and long service leave entitlements) may not exceed the

Corporations Act limits. Any determination and payment of termination benefits will be at the discretion of the Board of

Directors and will be determined on a case to case basis.

For

per

sona

l use

onl

y



Page | - 40 -


(r) Employee provisions and other post-employment benefits (continued)

(iv) Accrual for severance allowance

The severance pay to employees is accrued at the end of each reporting year for all employees in Vietnam who have been in

service for more than 12 months up to the balance sheet date at the rate of one-half of the average monthly salary for each

year of service up to 31 December 2008 in accordance with the Vietnam Labour Code, the Law on Social Insurance and

related implementing guidance. This accrued severance pay is used to settle the termination allowance to be paid to

employees upon termination of their labour contract following Article 28 of the Vietnam Labour Code.

(s) Leases

As a lessee, operating lease payments are recognised as an operating expense in the statement of profit or loss on a straight-

line basis over the lease term.

(t) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can

be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the

consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or

duty.

The specific recognition criteria described below must also be met before revenue is recognised:

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed

to the buyer, usually on delivery of the goods.

Rendering of services other than construction contracts

Revenues are generally recognised as the services are provided to the customer.

Interest income

Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised

cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is

the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net

carrying amount of the financial asset.

Dividends

Revenue is recognised when the Group’s right to receive the payment is established.

Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenues and costs are recognised by reference to

the stage of completion of the contract activity at balance date, as measured by the proportion that contract costs incurred

for work performed to date bear the estimated total contract costs, except where this would not be representative of the stage

of completion. Variations in contract work, claims and incentive payments are included to the extent that they have been

agreed with the customer.

Where the outcome of the construction contract cannot be estimated reliably, contract revenue is recognised to the extent of

contract costs incurred that it is probable will be recoverable. Contract costs are expensed as incurred. Any expected loss is

recognised immediately as an expense.

The difference between the cumulative revenue of a construction contract recognised to date and the cumulative amount of

progress billings of that contract is presented as construction contractor receivable/payable based on the agreed progress

billings in the statement of financial position.

Rental income

Rental income from office space is accounted for on a straight-line basis over the lease term and is included in other income

in the statement of profit or loss.

For

per

sona

l use

onl

y



Page | - 41 -


(u) Income tax and other taxes

Current income tax

Current tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to

the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively

enacted, at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or

loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax

regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities

and their carrying amounts for financial reporting purposes at the reporting date.

Deferred income tax liabilities are recognised for all temporary differences except:

when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a

transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting

profit nor taxable profit or loss.

in respect of taxable temporary difference associated with investments in subsidiaries, associates or interests in

joint ventures, when the timing of the reversal of the temporary difference can be controlled and it is probable that

the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and

unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available

against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be

utilised, except:

when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an

asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects

neither the accounting profit nor taxable profit or loss.

in respect of deductible temporary difference is associated with investments in subsidiaries, associates or interests

in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary

difference will reverse in the foreseeable future and taxable profit will be available against which the temporary

difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no

longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be

utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has

become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is

realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the

reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are

recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets

against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date,

are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a

reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or in profit

or loss.

For

per

sona

l use

onl

y



Page | - 42 -


(v) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributed to the issue of new shares are shown in equity

as a deduction, net of tax, from the proceeds.

(w) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of

servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus

element.

Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:

costs of servicing equity (other than 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.

(x) Non-current assets held for sale and discontinued operations

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered

principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified

as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for held for

sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for

immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for

recognition as a completed sale within one year from the date of classification.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as

profit or loss after tax from discontinued operations in the statement of comprehensive income.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

For

per

sona

l use

onl

y



Page | - 43 -

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group's principal financial instruments comprise receivables, payables, advances, bank loans, and cash and short-term

deposits. The main purpose of these financial instruments is to finance the Group’s operations in Vietnam.

The Group has not entered into hedging transactions.

The Group has exposure to the following risks arising from the Group's financial instruments: interest rate risk, foreign

currency risk, credit risk and liquidity risk.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.

Primary responsibility for identification and control of financial risks rests with the Chief Accountants and Board of

Management of the subsidiaries under the authority of the Board. The Managing Director and the Chief Financial Officer

declare, 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 Board is responsible for developing and monitoring

risk management policies.

Risk Exposures and Responses

Interest rate risk

The Group's exposure to market interest rates relates primarily to the Group's debt obligations. The level of debt is disclosed

in Note 18.

At balance date, the Group had the following financial assets and liabilities exposed to interest rate risk:

2016

$’000

2015

$’000

Financial Assets

Cash and cash equivalents 76,762 63,032

Term deposits 7,291 -

84,053 63,032

Financial Liabilities

Interest-bearing liabilities – bank loans 86,868 58,614

86,868 58,614

Net exposure (2,815) 4,418

Cash and cash equivalents include short-term deposits that are made for varying periods between one day and three months

depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates

ranging from 1% to 5.5% (2015: 4.4% to 5.5%). Term deposits that are made for varying periods between six months and

twelve months and earn interest at the respective deposit rates ranging from 5.5% to 6.7% (2015: nil).

Vietnam subsidiaries are exposed to the interest rate risk in Vietnamese Dong and US Dollar. The Group constantly

analyses its interest rate exposure. Within this analysis, consideration is given to potential renewals of existing positions,

alternative financing, and the mix of fixed and variable interest rates.

At 31 December 2016, fixed interest rates for bank loans vary in every contract ranging from 4% to 7% for Vietnamese

Dong loans (2015: 4% - 5.2%) whilst US Dollar loans bear interest rates between 2.75% and 3.25% (2015: 2.7%). The

floating rates are based on bank bill rates.

Fixed interest rates on financial assets and liabilities vary from one month to six months.

For

per

sona

l use

onl

y



Page | - 44 -

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date:

At 31 December 2016, if interest rates on term deposits and loans denominated in Vietnamese Dong and US Dollar had

moved and had the Group’s short term borrowings been subject to renewal at the prevailing rates, as illustrated in the table

below, with all other variables held constant, post tax profit and equity would have been affected as follows:

Judgements of reasonably possible movements:

Post Tax Profit/Equity

Higher/(lower)

2016 2015

$’000 $’000

Consolidated

- rate +1% (2015: +1%) (749) (527)

- rate -1% (2015: -1%) 749 527

The movements in profit are due to higher/lower interest costs from debt balances, offset by interest on term deposits. A

sensitivity of 1% has been selected as this is considered reasonably possible given most of the interest bearing loans are

fixed varying from one month to six months and short-term in nature.

Foreign currency risk

The consolidated financial statements are presented in Australian dollars ($ or AUD) which is both the functional and

presentation currency of the parent entity. The functional currencies of the overseas subsidiaries are Vietnamese Dong

(VND) and Singapore Dollar (SGD) which are translated to the presentation currency.

The Company’s subsidiaries are mainly domiciled in Vietnam. The functional currency of the Vietnam subsidiaries is

Vietnamese Dong. The Company's operations in Vietnam face some exposure to exchange rate fluctuations as the cost of

the major raw materials are generally denominated in US dollars whereas the bulk of the their revenues is denominated in

Vietnamese Dong. The Vietnam subsidiaries have foreign currency risk exposure to loans and advances that are

denominated in US dollars. Remittance of certain funds to the Company’s Vietnam operating subsidiaries to assist with

their working capital requirements is expected to be in foreign currency, either in Australian dollars or United States dollars

and is used to purchase Vietnamese Dong by the Company's Vietnam operating subsidiaries. The movements of foreign

currency in Vietnam are subject to the restrictions and procedures imposed by the State Bank of Vietnam. The Group has

not entered into hedging transactions.

The Company’s subsidiaries which are based in Singapore are holding entities of the Vietnam subsidiaries. These Singapore

entities mainly hold cash in bank, investments in subsidiaries and intercompany balances with the parent company. Cash in

bank is held in US dollars. Investments in subsidiaries and intercompany balances are based in Australian dollars and are

eliminated on consolidation. Therefore, the Singapore entities have its main exposure in the US dollar in cash in bank which

is not significant to the consolidated entity.

Intercompany borrowings are denominated in the currency stated by the lender. Transaction recharges between companies

provides an economic hedge and the timing of payments are within the control of the Group to ensure economic viability, as

a result no derivatives are entered into.

For

per

sona

l use

onl

y



Page | - 45 -


Risk Exposures and Responses (continued)

At 31 December 2016, the Group had the following exposure to USD foreign currencies against the VND:

2016

$’000

2015

$’000

Financial Assets

Cash and cash equivalents 6 7


Interest-bearing liabilities

- US Dollar 20,526 1,484

20,526 1,484

Net exposure (20,520) (1,477)

The following exchange rates applied during the year:

Average rate Reporting date spot rate

2016 2015 2016 2015

USD/VND 22,373 21,958 22,765 22,462

AUD/USD 0.7434 0.7465 0.7236 0.7306

The following sensitivity is based on the foreign currency risk exposures in existence at the reporting date:

At 31 December 2016, had the VND moved against the USD, as illustrated in the table below, with all other variables held

constant, post tax profit and equity would have been affected as follows:

Judgements of reasonably possible movements:

Post Tax Profit/Equity

Higher/(lower)

2016 2015

$’000 $’000

Consolidated

- rate + 2% (2015: +2%) (402) (29)

- rate - 2% (2015: -2%) 419 30

The foreign currency sensitivity of 2% is considered a reasonably possible change.

At 31 December 2016, the AUD continues to fluctuate and devaluate against the USD. However the fluctuation of the AUD

would not have significant impact as the Group transactions mainly deal in VND and USD. The foreign exchange rate

exposure for VND/USD is outlined above.

For

per

sona

l use

onl

y



Page | - 46 -



Credit risk

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, and trade and other

receivables. The Group's exposure to credit risk arises from potential default of the counter party, with a maximum exposure

equal to the carrying amount of these instruments before any provision in made for impairment. Exposure at balance date is

addressed in each applicable note.

The Group's cash and cash equivalents are deposited with reputable banks. The Group manages its cash and cash

equivalents to meet its working capital and debt requirements.

The Group does not hold any credit derivatives to offset its credit exposure.

The Group trades only with recognised, creditworthy third parties, and generally, collateral is not requested nor is it the

Group's policy to securitise its trade and other receivables and advances to suppliers. Collateral is requested if the receivable

has been long outstanding.

It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures

including its capability to pay, past experience and company reputation. Risk limits are set for each individual customer in

accordance with parameters set by the board of management of each subsidiary. These risk limits are regularly monitored.

Collectibility of trade receivables is reviewed on an ongoing basis at an operating unit level. Interest is charged on overdue

debts. Individual debts that are known to be uncollectible are written off when identified. An impairment provision is

recognised when there is objective evidence that the Group will not be able to collect the receivable.

Other than a funding arrangement with a supplier of raw materials amounting to $10.935 million as disclosed in Note 13,

and an advance to an individual supplier of $10.171 million included in advances to suppliers in Note 9, there are no other

significant concentrations of credit risk within the Group.

Liquidity risk

Liquidity risk arises from financial liabilities of the Group and their subsequent ability to meet their obligations to repay

their financial liabilities as and when they fall due.

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans,

and committed available credit lines.

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, receivables and

inventories of the subsidiaries and in certain instances, by the guarantee of the parent entity. The Parent has provided

security to various banks for banking facilities provided to Vietnam subsidiaries in the form of letters of guarantee totalling

US$16.162 million ($22.336 million) (2015: US$16.294 million ($22.302 million)). At 31 December 2016 the total interest

bearing liabilities drawndown to which these corporate guarantees relate to were US$10.581 million ($14.623 million)

(2015: US$9.180 million ($12.565 million)).

The Group uses forecast cash flow budgets which assist in monitoring cash flow requirements. Typically, the Group ensure

that it has sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations.

This excludes the potential impact of extreme circumstances that cannot reasonably be predicted.

For

per

sona

l use

onl

y



Page | - 47 -



Liquidity risk (continued)

The Group’s 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 this has occurred previously. The Group obtained short-term loans

which have ongoing maturity roll over dates ranging from one month to six months to meet the Group’s working capital

requirements.

Maturity analysis based on contractual maturity

The risk implied from the values shown in the table below, based on contractual cash flows. Trade payables and other

financial liabilities mainly originate from the financing of assets used in our ongoing operations such as property, plant,

equipment and investments in working capital eg inventories and trade receivables. To monitor existing financial assets and

liabilities as well as to enable an effective controlling of future risks, the Group has established risk reporting that reflects

expectations of management of expected settlement of financial assets and liabilities.

Year ended 31 December 2016

Consolidated <=6 mths 6-12 mths 1-5 years >5 years Total

$’000 $’000 $’000 $’000 $’000


Trade and other payables 25,692 - - - 25,692

Advances from customers 2,907 - - - 2,907

Interest-bearing liabilities 87,249 - - - 87,249

115,848 - - - 115,848


Consolidated <=6 mths 6-12 mths 1-5 years >5 years Total

$’000 $’000 $’000 $’000 $’000


Trade and other payables 17,662 - - - 17,662

Advances from customers 4,299 - - - 4,299

Interest-bearing liabilities 61,662 - - - 61,662

83,623 - - - 83,623

For

per

sona

l use

onl

y




Fair Value Measurement

Fair value measurement of financial assets and financial liabilities

Fair values derived may be based on information that is estimated or subject to judgement, where changes in assumptions may

have a material impact on the amounts estimated. Areas of judgement and the assumptions have been detailed below. Where

possible, valuation information used to calculate fair value is extracted from the market, with more reliable information

available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market

bid prices.

2016

$’000

2015

$’000

Fair value

Financial assets

Listed investment – Australian (Level 1) 9 9

9 9

The carrying value of all other assets and financial liabilities approximate their fair values at the balance sheet date due to the

short-term nature of the instruments.

For determining the fair value of the listed investment, the Group uses quoted market prices for the shares (Level 1).

The three levels of a fair value hierarchy on financial assets and liabilities are defined based on the observability of significant

inputs to the measurement as follows:

Level 1: quoted prices in active markets for assets or liabilities

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or

indirectly.

Level 3: unobservable inputs for the asset or liability

4. SEGMENT INFORMATION

Identification of reportable segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of

Directors (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

The operating segments are identified by the Board based on the manner in which the product is sold and the nature of the

services provided. Discrete financial information about each of these operating businesses is reported to the Board on a regular

basis.

The Group has two main reportable segments: Steel Making and Steel Products, which are the Group’s strategic business units.

The strategic business units offer different products and services, and are managed separately because they require different

technology and marketing strategies. The following summary describes the operations in each Group reportable segment:

Steel Making: includes the manufacturing and selling of wire rod and rebar activities of Vinausteel Limited and SSESTEEL

Ltd.

Steel Products: comprise of Austnam Joint Stock Corporation, Total Building Systems Ltd, and VRC Weldmesh (Vietnam)

Limited which are primarily engaged in the manufacturing and trading of steel roofing and steel frames; engineering and project

management services; and manufacturing and trading welded wire mesh.

Unallocated: relates to corporate charges of Parent in Australia, British Virgin Islands and Singapore entities which are not

reportable segments. The unallocated assets of $0.907 million at 31 December 2016 (2015:$1.031 million) mainly relates to

cash and cash equivalents of $0.773 million (2015: $0.878 million). The unallocated liabilities of $0.942 million at 31

December 2016 (2015: $0.725 million) includes $0.720 million related parties’ payables (refer to Notes 17 and 27 (b)) (2015:

$0.594 million).

For

per

sona

l use

onl

y



4. SEGMENT INFORMATION (continued)

The Group’s two reportable segments are located in Vietnam. The Group provides the majority of its products and services to

customers based in Vietnam. During the year, three customers accounted for 12.0%, 11.8% and 10.8% of total group revenue

respectively.

The Board of directors review the results of the reportable segments during their meetings.

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision makers with respect to operating

segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial

statements of the Group.

Segment Performance

Steel Making

(Vietnam)

Steel

Products

(Vietnam)

Unallocated

Note (i)

Total Adjustments

and

eliminations

Consolidated

$’000 $’000 $’000 $’000 $’000 $’000


Revenues

External revenues 307,404 7,573 - 314,977 - 314,977

Inter-segment revenues 13 1,139 - 1,152 (1,152) -

Other revenues 3,103 40 - 3,143 - 3,143

Total segment revenues 310,520 8,752 - 319,272 (1,152) 318,120

Results

Other income 299 212 60 571 - 571

Finance costs (3,615) (22) - (3,637) 343 (3,294)

Segment results before income tax 14,563 505 (1,346) 13,722 - 13,722

Income tax expense (2,172) (129) - (2,301) - (2,301)

Net profit/(loss) after tax from

continuing operations

12,391

376

(1,346)

11,421

-

11,421


Revenues

External revenues 347,662 8,275 - 355,937 - 355,937

Inter-segment revenues 13 553 - 566 (566) -

Other revenues 1,475 85 - 1,560 - 1,560

Total segment revenues 349,150 8,913 - 358,063 (566) 357,497

Results

Other income 293 349 60 702 - 702

Finance costs (3,812) (3) - (3,815) 347 (3,468)

Segment results before income tax 16,297 414 (702) 16,009 - 16,009

Income tax expense (3,761) (85) - (3,846) - (3,846)

Net profit/(loss) after tax from

continuing operations

12,536

329

(702)

12,163

-

12,163

Note (i) – Australia, British Virgin Islands and Singapore.For

per

sona

l use

onl

y



4. SEGMENT INFORMATION (continued)

Steel

Making

(Vietnam)

Steel

Products

(Vietnam)

Unallocated

Note (i)

Total

$’000 $’000 $’000 $’000

Segment assets

At 31 December 2016

Segment operating assets 173,573 5,476 907 179,956

Inter-segment eliminations (1,588)

Total assets per statement of financial position 178,368

At 31 December 2015

Segment operating assets 132,526 6,936 1,031 140,493


Total assets per statement of financial position 139,016

Segment liabilities

At 31 December 2016

Segment operating liabilities 116,095 3,369 942 120,406


Total liabilities per statement of financial position 118,818

At 31 December 2015

Segment operating liabilities 80,066 5,020 725 85,811


Total liabilities per statement of financial position 84,336

Other segment information

At 31 December 2016

Depreciation and amortisation expense (1,532) (96) - (1,628)

Capital expenditure 5,920 360 - 6,280

At 31 December 2015

Depreciation and amortisation expense (1,525) (67) (1) (1,593)

Capital expenditure 928 360 - 1,288

Cash flow Information

At 31 December 2016

Operating activities 5,992 509 (1,212) 5,289

Investing activities (13,073) (361) - (13,434)

Financing activities 26,185 (251) (4,164) 21,770

At 31 December 2015

Operating activities 32,852 (974) (771) 31,107

Investing activities (928) (370) - (1,298)

Financing activities (4,149) 421 - (3,728)

Note (i) – Australia, British Virgin Islands and Singapore.

For

per

sona

l use

onl

y



Page | - 51 -

5. REVENUE AND EXPENSES

Revenues and expenses from continuing operations

2016 2015

$’000 $’000

(a) Other revenue

Interest income-banks 2,261 1,560

Interest income - other 882 -

3,143 1,560

(b) Other income

Rent income 100 165

Financial and executive services income 60 60

Other 411 477

571 702

(c) Cost of sales

Cost of goods sold (281,123) (315,006)

Construction costs (1,778) (3,223)

(282,901) (318,229)

(d) Finance costs

Bank loans and other borrowings (3,294) (3,468)

(e) Selling expenses

Promotional expenses (2,623) (3,907)

Salaries and wages (1,139) (1,354)

Consultancy sales expenses (86) (1,116)

Advertising expenses (899) (937)

Delivery expenses (131) (456)

Other (2,042) (1,151)

(6,920) (8,921)

(f) Administrative expenses

Salaries and employee benefits expenses (Note 5 (h)) (5,709) (5,192)

Impairment of receivables (266) (907)

Travel expense (517) (614)

Professional fees (332) (231)

Rent expense (575) (472)

Other (4,455) (4,156)

(11,854) (11,572)

(g) Depreciation and amortisation

Depreciation expense (1,625) (1,590)

Amortisation of intangible assets (3) (3)

(1,628) (1,593)

(h) Salaries and employee benefits expenses

Salaries and wages (5,710) (4,901)

Annual leave 3 (4)

Long service leave (2) (2)

Other benefits - (285)

(5,709) (5,192)

For

per

sona

l use

onl

y



6. INCOME TAX 2016 2015

$’000 $’000

(a) Income tax expense

The major components of income tax expense are:

Statement of Comprehensive Income

Current tax 3,434 3,838

Deferred tax (1,133) 8

2,301 3,846

(b) Numerical reconciliation between the aggregate tax expense recognised in the

statement of comprehensive income and tax expense calculated per the statutory

income tax rate

Profit from continuing operations before tax 13,722 16,009

At Group’s statutory income tax rate of 30% (2015: 30%)

4,117

4,803

Adjustments to tax expense:

Foreign tax rate adjustment (1,496) (1,328)

Deferred tax asset (recognition)/derecognition (1,133) 8

Non-deductible expenses 643 1,647

Non-assessable income - (65)

Utilisation of carry forward tax losses - (880)

Other 170 (339)

Aggregate tax expense 2,301 3,846

(c) Tax consolidation

All wholly-owned subsidiaries and controlled entities are domiciled in other countries. Therefore, the consolidated

entity is not a tax consolidated group under the tax consolidated regime.

(d) Temporary differences

At 31 December 2016, there are no unrecognised temporary differences associated with the Group’s investment in

subsidiaries, as the Group has no liability for additional taxation should unremitted earnings be remitted (2015: Nil).

The following are recognised deferred tax assets on timing differences:

2016 2015

$’000 $’000

Provision for doubtful debts 34 -

Provision for inventory obsolescence 164 -

Accrued expenses 869 -

Others 93 27

1,160 27

At 31 December 2016, there is no deferred income tax liability recognised (2015: Nil).

The following are unrecognised deferred tax assets on timing differences:

2016 2015

$’000 $’000

Impairment of property, plant and equipment 782 961

Provision for doubtful debts 357 49

Provision for inventory obsolescence 66 165

Accrued expenses 251 239

Others 49 145

1,505 1,559

(e) Income tax payable

At 31 December 2016, consolidated income tax payable is $2.412 million (2015: $2.869 million).

For

per

sona

l use

onl

y



6. INCOME TAX (continued)

(f) Tax losses carried forward

At 31 December 2016, the following entities have accumulated tax losses of $14.590 million

(2015: $15.525 million) available for offset against future taxable profits. Deferred tax assets of $4.050 million

(2015: $4.255 million) were not recognised in respect of the tax loss carried forward because of the uncertainty of future

profitability of these companies.

2016 2015

$’000 $’000

Revenue tax losses not recognised

SSESTEEL Ltd - 806

Total Building Systems Limited 3,271 3,215

Vietnam Industrial Investments Limited (parent company) 11,319 11,504

14,590 15,525

7. CURRENT ASSETS - CASH AND CASH EQUIVALENTS

2016 2015

$’000 $’000

Cash at bank and in hand 3,159 10,405

Short-term deposits 73,603 52,627

76,762 63,032

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The carrying amounts of cash and

cash equivalents represent fair value. Short-term deposits are made for varying periods of between one day and one month,

depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

Credit risk of cash and cash equivalents is disclosed in Note 3.

(a) Reconciliation from the net profit after tax to the net cash flows from operations:

2016 2015

$’000 $’000

Net profit after tax 11,421 12,163

Adjustment for non-cash items:

Depreciation and amortisation 1,628 1,593

Net loss on disposal of property, plant and equipment, and intangible asset 74 2

Changes in assets and liabilities

(Increase)/decrease in:

Trade, other receivables, and advances to suppliers (8,121) 14,413

Inventories (4,397) (5,764)

Other current assets (274) 70

Deferred tax assets (1,133) 8

(Decrease)/increase in:

Trade and other payables, and advances from customers 6,501 6,545

Provisions 47 (12)

Income tax payable (457) 2,089

Net cash flow provided by operating activities 5,289 31,107

(b) Disclosure of financing activities

Financing facilities are set out in Note 18.

For

per

sona

l use

onl

y



Page | - 54 -

8. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES

2016 2015

$’000 $’000

Trade receivables 8,414 8,739

Allowance for impairment loss (3,195) (2,938)

5,219 5,801

Construction contract receivables 1,104 2,548

Allowance for impairment loss (47) (47)

1,057 2,501

Other receivables 3,294 2,666

Allowance for impairment loss (171) (171)

3,123 2,495

Carrying amount of trade and other receivables 9,399 10,797

Trade receivables are non-interest bearing and are generally on terms of 60 days.

Other receivables relate to input value added tax, advances to employees and other receivables from customers.

Allowance for impairment loss

An allowance for impairment loss is recognised when there is objective evidence that an individual trade receivable is

impaired. An impairment loss of $0.266 million (2015: $0.907 million) has been recognised by the Group for the year ended

31 December 2016. These amounts have been included in the administrative expense item.

Movements in the allowance account for impairment losses were as follows:

2016 2015

$’000 $’000

At 1 January 3,156 2,105

Charge for the year 333 2,808

Unused amounts reversed (67) (1,901)

Foreign exchange translation (9) 144

At 31 December 3,413 3,156

At 31 December, the aging analyses of trade and other receivables are as follows:

2016 2015

Receivables Allowance for

Impairment


Impairment

$’000 $’000 $’000 $’000

Trade receivables

Within due date 5,125 - 7,449 (1,652)

Over 61 – 180 days 269 (252) 14 (10)

Over 181 – 360 days 6 - 43 (43)

Over 360 days 3,014 (2,943) 1,233 (1,233)

8,414 (3,195) 8,739 (2,938)

For

per

sona

l use

onl

y



8. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES (continued)

2016 2015


Impairment


Impairment

$’000 $’000 $’000 $’000

Construction contractor receivables

Within due date 1,057 - 2,501 -

Over 360 days 47 (47) 47 (47)

1,104 (47) 2,548 (47)

2016 2015


Impairment


Impairment

$’000 $’000 $’000 $’000

Other receivables

Within due date 3,123 - 2,495 -

Over 360 days 171 (171) 171 (171)

3,294 (171) 2,666 (171)

Fair value and credit risk

Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.

The maximum exposure to credit risk is the fair value of receivables before provision for impairment. Collateral is not held

as security, nor is it the Group's policy to transfer (on-sell) receivables to special purpose entities.

Foreign exchange and interest rate risk

Details regarding foreign exchange and interest rate risk of current trade receivables are disclosed in Note 3.

9. CURRENT ASSETS – ADVANCES TO SUPPLIERS

2016 2015

$’000 $’000

Other suppliers 12,230 2,669

12,230 2,669

The advances to suppliers bear interest at market rates.

10. CURRENT ASSETS – INVENTORIES

2016 2015

$’000 $’000

Raw materials – at net realisable value

25,890

26,916

Construction in progress – at cost - 262

Finished goods – at net realisable value 20,887 15,202

Total inventories at net realisable value 46,777 42,380

During the year ended 31 December 2016, the Group wrote down $0.166 million (2015: $0.417 million) of inventories.

This expense is included in the cost of goods sold in the statement of comprehensive income. For

per

sona

l use

onl

y



11. CURRENT ASSETS – FINANCIAL ASSETS – AT FAIR VALUE THROUGH PROFIT OR LOSS

2016 2015

$’000 $’000

Financial assets held for trading

– at fair value

Shares in listed companies 9 9

9 9

Financial assets – at fair value through profit or loss consist of investments in ordinary shares, and therefore have no fixed

maturity date or coupon rate. The fair value of Australian listed investments has been determined directly by reference to

published price quotations in an active market. There are no individually material investments.

12. OTHER CURRENT ASSETS

2016 2015

$’000 $’000

Term deposits 7,291 -

Prepayments 442 185

Other deposits 17 -

7,750 185

Term deposits mature in six (6) to nine (9) months from inception dates and bear interest rates ranging from 5.5% to 6.7%

(2015: Nil).

13. OTHER RECEIVABLE – NON-CURRENT

2016 2015

$’000 $’000

Other receivable 10,935 10,977

10,935 10,977

Other receivable relates to a funding arrangement with a supplier for raw material for an amount of VND 180.0 billion

($10.935 million) and was secured at 31 December 2016 by a second charge over the counterparty’s property, machinery

and equipment and land use rights. The advance is interest bearing but no interest will be accrued on the outstanding

balance until there is some certainty of repayment.

Subsequent to year end, the receivable was assigned a third party that acquired the security assets from the original

counterparty. Under the revised agreement, the Group’s receivable is secured by a first charge over the building, machinery

and equipment. Based on a recent independent valuation report of the security assets (level 3 in the fair value hierarchy),

management expects that the balance at 31 December 2016 is fully recoverable, but does not expect that the outstanding

principal will be recovered within 12 months of the balance date. The balance will be interest free until no later than January

2018, after which it will bear interest at a medium-term market rate, no less than 8%.

For

per

sona

l use

onl

y



14. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT

2016 2015

$’000 $’000

Building on leasehold land

- Gross carrying value - cost 9,363 8,423

- Accumulated depreciation (5,754) (5,918)

Net carrying amount 3,609 2,505

Plant and equipment

- Gross carrying value – cost 31,120 27,603

- Accumulated depreciation and impairment (24,453) (24,316)


Motor vehicles

- Gross carrying value - cost 3,075 2,464

- Accumulated depreciation (2,107) (1,844)

Net carrying amount 968 620

Construction in progress – Gross carrying value - cost 1,601 1,978


Reconciliation of property, plant and equipment

Building on leasehold land

Opening net carrying amount 2,505 2,906

Additions 1,540 6

Disposals/transfers 45 (36)

Depreciation expense (561) (573)

Exchange difference 80 202

Closing net carrying amount 3,609 2,505

Plant and equipment


Additions 4,471 473

Disposals/transfers (257) 34


Exchange difference (57) 232


Motor vehicles

Opening net carrying amount 620 626

Additions 635 171


Exchange difference - 43

Closing net carrying amount 968 620

Construction in progress


Additions 265 638

Transfers (635) (216)

Exchange difference (7) 100



For

per

sona

l use

onl

y



14. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT (continued)

Construction in progress mainly relates to the Australian Steel Billet Company project. SSESTEEL had been issued with an

investment certificate to form a new company, Australian Steel Billet Company Ltd, licensed to construct and own a factory

for the manufacture of steel billets. Feasibility studies, preliminary engineering design and equipment investigations have

been undertaken, however, the project has been placed on hold due to current economic conditions.

The Group’s main cash generating units are in SSESTEEL and Vinausteel.

In 2016, the recoverable amount of SSESTEEL (CGU) of $27.863 million was determined based on a value in use

calculation using cash flow projections from financial budgets approved by management covering a five year period

(2015: $25.040 million). The projected cash flows reflect the demand for steel in Vietnam. The discount rate applied is

12.5% (2015: 12.25%). Growth rate determined at nil is used to determine the terminal value in SSESTEEL (2015: nil).

At 31 December 2016, SSESTEEL (CGU) carrying value is $27.699 million (2015: $24.276 million). As a result of this

analysis, management did not identify any further impairment or reversal of previously recongised impairment for this CGU

in 2016.

The recoverable amount of Vinausteel (CGU) was determined based on a value in use calculation using cash flow

projections from financial budgets approved by management covering a five year period and have been extrapolated at 0%

growth rate to 2024, the year which Vinausteel parties may extend the term of operation in Vinausteel. The projected cash

flows reflect the demand for steel in Vietnam. The discount rate applied is 12.5% (2015: 12.25%). At 31 December 2016,

Vinausteel (CGU) carrying value is $18.843 million (2015: $17.089 million). As a result of this analysis, management did

not identify any impairment for this CGU (2015: nil).

Key assumptions used in value in use calculations

The calculations of value in use for SSESTEEL and Vinausteel CGUs are most sensitive to gross profit margins, discount

rates and growth rates. Gross profit margins are set at 7% for SSESTEEL and Vinausteel. The discount rate of 12.5% is

based on the Group’s weight average cost of capital (WACC) adjusted for risks specific to the CGU. Growth rate

determined at nil is used to determine the terminal value in SSESTEEL.

Sensitivity to changes in assumptions

The sensitivity analyses have been determined for the gross profit margin, discount rate and growth rate for the estimated

recoverable amounts of SSESTEEL and Vinausteel.

If the gross profit margin decreased by 0.5% with the discount rate and growth rate held constant, there would be an

impairment loss of $5.165 million as SSESTEEL’s estimated recoverable amount would decrease to $22.534 million.

If the discount rate increased by 1% with the gross profit margin and growth rate held constant, there would be an

impairment loss of $3.299 million as SSESTEEL’s estimated recoverable amount would decrease to $24.400 million.

If the long-term growth rate decreased by 1% in SSESTEEL with the discount rate and gross profit margin held constant,

there would be an impairment loss of $2.105 million as SSESTEEL’s estimated recoverable amount would decrease to

$25.594 million.

No impairment on the property, plant and equipment of Vinausteel (CGU) is noted if the above sensitivity analysis is

applied to this CGU.

For

per

sona

l use

onl

y



15. NON-CURRENT ASSETS – INTANGIBLE ASSETS AND GOODWILL

2016 2015

$’000 $’000

Software costs

Gross carrying value - cost 114 115

Accumulated amortisation (108) (106)

6 9

Goodwill (i)

Cost net of impairment 77 77

83 86

Reconciliation of Intangible Assets

Software costs


Additions - 11

Amortisation expense (3) (3)


Goodwill (i)


Impairment loss on goodwill - -


Net carrying amount 83 86 (i) Purchased as part of business combination in Vinausteel.

At 31 December 2016, there is no impairment loss on intangible assets (2015: nil).

16. OTHER NON-CURRENT ASSETS

2016 2015

$’000 $’000

Long-term prepayments 418 404

Long-term deposits - 60

418 464

The carrying values of other non-current assets are not expected to be materially different to their fair values.

17. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES

2016 2015

$’000 $’000

Trade payables 10,780 4,006

Payable to employees 4,134 3,971

Accrued expenses 9,152 7,982

Non-income tax obligations 117 537

Other payables 768 572

Related party payables

- key management personnel (Note 27) 741 594

25,692 17,662

Trade payables are non-interest bearing and are normally settled on 30-60 day terms.

Accrued expenses relate mainly to accrual of employee bonuses, promotional expenses, conferences, interest expenses and

professional fees.

Other payables are non-trade payables, are non-interest bearing and have varying terms of less than a year.

For

per

sona

l use

onl

y



17. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES (continued)

Related party payables

Related party payables’ terms and conditions are set out in Note 27.

Fair value

Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

Foreign exchange, interest rate and liquidity risk Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in Note 3.

18. INTEREST-BEARING LOANS AND BORROWINGS

2016 2015

$’000 $’000

Current

Bank loans – secured 86,868 58,614

86,868 58,614

Fair value

The carrying values of the Group’s interest bearing liabilities and borrowings approximate their fair value as they carry

interest at market rates.

Foreign exchange, interest rate and liquidity risk

Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in Note 3.

Terms and conditions of Interest bearing loans and borrowings

Outstanding bank loans of $86.868 million (2015: $58.614 million) relate to loans from various banks in Vietnam which are

denominated in Vietnamese Dong and US Dollar. These interest bearing liabilities of the Group’s operating subsidiaries

have various repayment terms. 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, receivables and inventories of the subsidiaries and in certain instances, by the guarantee of Vietnam Industrial

Investments Limited (“Parent”). The Parent has provided security to various banks for banking facilities provided to

Vietnam subsidiaries in the form of letters of guarantee totalling US$16.162 million ($22.336 million)

(2015: US$16.294 million ($22.302 million)). At 31 December 2016 the total interest bearing liabilities drawndown to

which these corporate guarantees relate to were US$10.581 million ($14.623 million) (2015: US$9.180 million ($12.565

million)).

Interest is recognised at an effective interest rate.

2016 2015

$’000 $’000

Financing facilities available

At reporting date, the following financing facilities had been negotiated and were

available:

Total facilities available 183,630 209,689

Facilities used at reporting date

- short-term loans 86,868 58,614

- long-term loans - -

Facilities unused at reporting date

- short-term loans 96,762 151,075

- long-term loans - -

For

per

sona

l use

onl

y



18. INTEREST-BEARING LOANS AND BORROWINGS (continued)

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 this has occurred previously. The Group obtained short-term loans which

have ongoing maturity roll over dates ranging from one month to six months to meet the Group’s working capital

requirements.

Assets pledged as security for liabilities

The banks and suppliers have the right to the security provided in the case of a default of the terms and conditions of the

finance. Carrying values of assets which are pledged as security for bank loans and supplier loans are as follows:

2016 2015

$’000 $’000

Deposits 21,065 -

Inventories 44,153 39,810

Property, plant and equipment 12,992 8,344

78,210 48,154

19. CURRENT LIABILITIES – PROVISIONS

2016 2015

$’000 $’000

Current

Employee benefits 740 804

Provision for product warranty 93 86

Dividends payable 106 2

939 892

Employee benefits relate to long service leave, annual leave and severance allowance of employees.

A provision is recognised for expected warranty claims on product sold/ completed construction projects during the last two

years, based on past experience of the level of repairs and returns. It is expected that most of these costs will be incurred in

the next financial year and all will have been incurred within two years after the reporting date. Provision for warranty

obligation of construction projects is estimated from 1% to 2% on value of projects based on the specification of each

project and actual experience.

Dividends payable relates to dividends declared from the previous years.

20. CONTRIBUTED EQUITY

2016 2015

$’000 $’000

Ordinary shares

Issued and fully paid 27,819 27,819

There was no issuance of shares for the year ended 31 December 2016 (2015: Nil).

At 31 December 2016, there are 142,277,423 fully paid ordinary shares carry one vote per share and carry the right to

dividends (2015: 142,277,423).

At reporting date, there were no options on issue (2015: Nil).

For

per

sona

l use

onl

y



20. CONTRIBUTED EQUITY (continued)

(a) Capital management

The Group’s objective when managing capital is to ensure the entity continues as a going concern as well as to maintain

optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain an optimal capital

structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets to reduce debt.

The gearing ratios at reporting date were as follows:

2016 2015

$’000 $’000

Total debt(i) 115,467 80,575

Less cash and cash equivalents (76,762) (63,032)

Net debt 38,705 17,543

Total equity 59,550 54,680

Less non-controlling interests (6,357) (5,793)

Equity 53,193 48,887

Net debt plus equity 91,898 66,430

Gearing ratio 42% 26%

(i) Consist of trade and other payables, advances from customers, and interest bearing liabilities.

21. RESERVES

2016 2015

$’000 $’000

Foreign currency translation reserve (6,033) (5,993)

Legal reserve 1,124 1,124

(4,909) (4,869)

Movement in foreign currency translation reserve

Opening balance (5,993) (8,485)

Currency translation difference arising during the year (40) 2,492

Closing balance (6,033) (5,993)

Nature and purpose of reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial

statements of foreign subsidiaries.

Legal reserve

Vinausteel maintains a legal reserve account. At the present time, there are no rules specifying the use that can be made of

the reserve.

For

per

sona

l use

onl

y



22. RETAINED EARNINGS 2016 2015

$’000 $’000

Retained earnings 30,283 25,937

Movement in retained earnings

Opening balance 25,937 16,069

Net profit for the year 8,614 9,868

Dividend to shareholders (4,268) -

Closing balance 30,283 25,937

23. NON-CONTROLLING INTERESTS

2016 2015

$’000 $’000

Non-controlling interests consist of:

Vinausteel Limited 5,653 5,162

Austnam Joint Stock Corporation 692 618

Total Building Systems Limited 12 13

6,357 5,793

Financial information of subsidiaries that have material non-controlling interests (“NCI”) are provided below:

Name Country of % Equity interests of NCI

Incorporation 2016 2015

Vinausteel Limited Vietnam 30 30

Austnam Joint Stock Corporation Vietnam 33 33

The summarised financial information of these subsidiaries are provided below. This information is based on amounts

before inter-company eliminations.

Summarised Statement of Profit or Loss Vinausteel Austnam

2016

$’000

2015

$’000 2016

$’000

2015

$’000

Sale of goods 142,071 146,787 5,108 4,117

Other revenue 1,606 1,244 33 35

Revenues 143,677 148,031 5,141 4,152

Cost of sales (127,823) (129,384) (4,012) (3,344)

Gross profit 15,854 18,647 1,129 808

Other income 244 283 133 166

Selling expenses (1,942) (2,931) (368) (288)

Administrative expenses (2,569) (4,430) (359) (372)

Finance costs (1,467) (1,232) - -

Profit before income tax 10,120 10,337 535 314

Income tax expense (1,210) (2,944) (128) (85)

Net profit for the year 8,910 7,393 407 229

Total comprehensive income 8,910 7,393 407 229

Net profit after tax attributable to non-controlling interests 2,673 2,218 134 76

Dividends paid to non-controlling interests 2,209 395 59 -

For

per

sona

l use

onl

y



23. NON-CONTROLLING INTERESTS (continued)

Summarised Statement of Financial Position Vinausteel Austnam

2016

$’000

2015

$’000 2016

$’000

2015

$’000

Current assets 59,808 47,867 2,299 2,132

Non-current assets 3,406 2,236 608 363

Current liabilities (44,371) (32,896) (811) (621)

Total equity 18,843 17,207 2,096 1,874

Total equity attributable to:

- Equity holders of the parent

13,190

12,045

1,404

1,256

- Non-controlling interests 5,653 5,162 692 618

Summarised Cash Flows Information Vinausteel Austnam

2016

$’000

2015

$’000 2016

$’000

2015

$’000

Operating 9,520 14,835 602 190

Investing (2,515) (9) (339) (355)

Financing (4,027) 459 (178) -

Net increase/(decrease) in cash and cash equivalents 2,978 15,285 85 (165)

24. EARNINGS PER SHARE

2016 2015

$’000 $’000

Net profit attributable to ordinary equity holders of the Parent for basic and

diluted earnings per share

8,614

9,868

2016

No. of Shares

2015

No. of Shares

Weighted average number of ordinary shares for basic and diluted

earnings per share

142,277,423

142,277,423

Earnings per share for profit attributable to the ordinary equity holders of

the Company: – Basic and diluted earnings per share

Cents

6.05

Cents

6.94

There have been no other transactions involving ordinary shares or potential ordinary shares that would significantly change

the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of

completion of these financial statements.

For

per

sona

l use

onl

y



25. DIVIDENDS PAID AND PROPOSED

On 2 September 2016, the Board declared a dividend of 3 (three) Australian cents per ordinary share (fully unfranked)

which was paid and dispatched on 16 September 2016 (2015: Nil). The entire dividend was 100% conduit foreign income.

There were no dividends declared at the end of the year (2015: Nil).

2016 2015

$’000 $’000

Declared and paid/payable during the year

Interim unfranked dividend for 2016: 3 cents per share (2015: NIL)

4,268

-

2016 2015

$’000 $’000

Franking credit balance

Franking credits available for the subsequent financial years based on

a tax rate of 30%

5

5

26. AUDITORS’ REMUNERATION

The auditor of Vietnam Industrial Investments Limited is Ernst & Young.

2016 2015

$ $

Amounts paid or payable to Ernst & Young (Australia) for:

- an audit or review of the financial report of the entity and any other entity in the

consolidated group

99,585

100,538

- tax services in regards to income tax preparation 17,000 18,000

- other tax advice in regards to the dividends and PAYG 9,500 -

126,085 118,538

Amounts paid or payable to related practices of Ernst & Young (Australia) for:

- an audit or review of the financial report of the subsidiary entities 83,821 85,400

83,821 85,400

Amounts paid or payable to non Ernst & Young audit firms for:

- an audit or review of the financial report of the subsidiary entities 11,175 9,262

11,175 9,262

27. KEY MANAGEMENT PERSONNEL

(a) Compensation of Key Management Personnel

2016 2015

$ $

Short-term benefits 1,501,538 1,034,211

Post employment 17,575 13,300

Other long-term benefits 2,334 287,334

1,521,447 1,334,845

For

per

sona

l use

onl

y



27. KEY MANAGEMENT PERSONNEL (continued)

(b) Other transactions and balances with Key Management Personnel and their related parties

During the year, there was an increase in directors’ 2016 remuneration after engaging Gerard Daniels, independent

remuneration consultant, to review the 2016 remuneration packages of the Directors and Chief Executive Officer.

At 31 December 2016, the Company owes $70,000 to Mr Kwok (2015: nil); $30,000 to Mr Walker (2015: nil) and $28,467

to Mr Murray (2015: nil).

On 21 July 2016, the Board resolved to pay Mr Lam a fixed 2016 remuneration of $625,000 per annum and a discretionary

bonus of $183,750. At 31 December 2016, the balance owing to Mr Lam is $590,417 (2015: $309,347).

At 31 December 2016, the balance owing to Mr Young of $22,526 is in relation to his consultancy fees (2015: $285,000 in

relation to his termination benefit).

The key management personnel payables are interest-free and payable within one year.

The Company subleases its office accommodation at Unit 5A, 1 Station Street, Subiaco, Western Australia 6008 from

Arcadia Group Pty Ltd (“Arcadia”) of which Mr Kwok is a Managing Director and a shareholder. The lease rental for the

year was $63,000 (2015: $60,000). The lease with Arcadia is made in the ordinary course of business and on normal

commercial terms and conditions. Also, the Company paid bookkeeping services to Arcadia of $24,000 during the year

(2015: $24,000).

During the year, the Company obtained case by case legal services from Mr Murray’s legal firm under commercial terms

and conditions. The legal fees paid during the year was $8,533 (2015: Nil).

28. RELATED PARTY DISCLOSURES

(a) Ultimate parent entity

Vietnam Industrial Investments Limited is the ultimate Australian parent entity and the ultimate parent of the Group is

Corbyns International Limited, which was incorporated in the British Virgin Islands and owns 81.75% of Vietnam Industrial

Investments Limited as at 31 December 2016.

(b) Investment in subsidiaries

Name Country of % Equity interest

Incorporation 2016 2015

Controlled entities

Vinausteel Limited(i) (x) Vietnam 70 70

Structure Steel Engineering Pte Ltd(iv) (xi) Singapore 100 100

SSESTEEL Ltd(iv) (viii) (x) Vietnam 100 100

Australian Steel Billet Company(viii) (x) Vietnam 100 100

Ausviet Industrial Investments Ltd(v) (xi) Singapore 100 100

Austnam Joint Stock Corporation(ii) (x) Vietnam 67 67

Parnham Overseas Ltd (ix) British Virgin

Islands

100 100

Total Building Systems Limited(vii) (x) Vietnam 99 99

Vietnam Projects (Singapore) Pte Ltd(vi) (xi) Singapore 100 100

VRC Weldmesh (Vietnam) Limited(iii) (xi) Vietnam 100 100

For

per

sona

l use

onl

y



28. RELATED PARTY DISCLOSURES (continued)

(b) Investment in subsidiaries (continued)

(i) Vinausteel Limited (“Vinausteel”) is a company established under the Laws on Enterprise of Vietnam. VII has a

70% interest in the legal capital of Vinausteel 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 Contract and Charter. The Company 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. Operational

management of Vinausteel is determined by a Joint Venture Contract and Charter. While some decisions of the

Board of Management require a unanimous decision under the Joint Venture Contract and Charter (such as

additions and amendments to the Joint Venture Enterprise and Joint Venture Charter, approval of the annual

financial statements, appointment of the General Director and Chief Accountant, approval of final statements of

capital construction and loans for investments), by virtue of the fact that the Company has power over the relevant

activities of Vinausteel, it is considered that the Company controls Vinausteel.

(ii) Austnam Joint Stock Corporation (“Austnam”) was previously a joint venture company established under the Laws

on Enterprise of Vietnam between Parnham Overseas Ltd (“POL”) and Hong Ha Building Materials Import Export

Company. The Company acquired a 73 per cent equity interest in Austnam in January 1997 through POL. In 2005,

Austnam was converted into a joint stock corporation.

(iii) VRC Weldmesh (Vietnam) Limited (“VRC”) is a wholly owned subsidiary of Vietnam Projects (Singapore) Pte

Ltd and ultimately owned by the Company. VRC holds a 100 per cent foreign owned investment licence.

(iv) Structure Steel Engineering Pte Ltd (“SSE”) is a company incorporated in Singapore for the purposes of holding

the investment in SSESTEEL Ltd. The Company 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 (“Ausviet”) is a wholly owned subsidiary of the Company, which holds the

investment in Austnam of 2 per cent, POL of 100 per cent and Total Building Systems Limited of 99%.

(vi) Vietnam Projects (Singapore) Pte Ltd is a wholly owned subsidiary of the Company which was incorporated in

Singapore to hold an investment in Vietnam. It holds 100% of VRC Weldmesh (Vietnam) Limited.

(vii) Total Building Systems Ltd (“TBS”) is a building systems provider supplying engineering services, building

systems and construction services to industrial and residential consumers.

(viii) SSESTEEL Ltd 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 and its amended investment licences

to produce steel wire rod and high tensile rebar for the construction industry. SSESTEEL Ltd is a wholly owned

subsidiary of SSE. SSESTEEL had been issued with an investment certificate to form a new company, Australian

Steel Billet Company Ltd, licensed to construct and own a factory for the manufacture of steel billets. Feasibility

studies, preliminary engineering design and equipment investigations have been undertaken, however, the project

has been placed on hold due to current economic conditions.

(ix) Parnham Overseas Ltd is a wholly owned subsidiary of Ausviet which was incorporated in the British Virgin

Islands to hold an investment in Vietnam. It holds 65 per cent of Austnam.

(x) Controlled entity audited by other member firm of Ernst & Young International.

(xi) Controlled entity audited by auditors other than Ernst & Young.

For

per

sona

l use

onl

y



28. RELATED PARTY DISCLOSURES (continued)

(c) Key management personnel

Details relating to key management personnel are set out in Note 27.

(d) Corporate structure

Vietnam Industrial Investments Limited is the ultimate Australian parent entity. The corporate structure is outlined below:

(e) Transactions with related parties

Consolidated

Sales/Purchases

There were no sales to or purchases from related parties not within the Group.

(f) Corporate guarantees

The corporate guarantees provided by the parent company have been disclosed in Note 18.

100%

100%

100%

100%

100%

2% 65%

100%

Vinausteel

Limited

SSESTEEL

Ltd

100%

100% 70%

Vietnam

Projects

(Singapore)

Pte Ltd

P

Ausviet

Industrial

Investments

Pte Ltd

VRC

Weldmesh

(Vietnam) Ltd

100%

100%

Austnam

Joint Stock

Corporation

99% 65%

Australian Steel

Billet Company Ltd

100%

Total Building

Systems Ltd

Parnham

Overseas Ltd

Structure

Steel

Engineering

Pte Ltd

P

Vietnam Industrial Investments Limited

For

per

sona

l use

onl

y



29. COMMITMENTS

(a) Operating lease commitments – (Group as lessee)

Plant and Machinery Rental

The Group has entered into commercial leases on land where it is not in the best interest of the Group to purchase these

assets. These leases have an average life of between 3 and 30 years with varying terms, clauses and renewal rights included

in the contracts. Renewals are at the discretion of the specific entity that holds the lease. There are no restrictions placed

upon the lessee by entering into these leases. The Group also leases various plant and machinery under non-cancellable

operating leases.

Future minimum rentals payable under non-cancellable operating leases as at 31 December 2016 are as follows:

2016 2015

$’000 $’000

Within one year 383 348

After one year but not more than five years 747 1,130

More than five years 431 1,094

Total minimum lease payments 1,561 2,572

(b) Capital expenditure commitments

The Group has capital commitments amounting to $0.111 million to build Austnam’s new office. This project is estimated

to be completed by November 2017.

(c) Finance lease and hire purchase commitments

There were no finance lease and hire purchase commitments as at 31 December 2016 (2015: Nil).

(d) Remuneration commitments

There were no other remuneration commitments as at 31 December 2016 (2015: Nil), except the remuneration disclosed in

Notes 17 and 27 (b).

For

per

sona

l use

onl

y



30. INFORMATION RELATING TO VIETNAM INDUSTRIAL INVESTMENTS LIMITED

(“The Parent Entity”)

2016 2015

$’000 $’000

Current Assets 1,221 1,284

Total Assets 34,486 34,549

Current liabilities 1,223 910

Total liabilities 1,223 910

Issued capital 27,819 27,819

Retained earnings 5,444 5,820

33,263 33,639

Net profit of the parent entity 3,893 8,313

Total comprehensive profit of the parent entity 3,893 8,313

Corporate guarantees

The corporate guarantees provided by the parent entity have been disclosed in Note 18.

Commitments and contingencies

The commitments have been disclosed in Note 29.

The contingencies have been disclosed in Note 31.

31. CONTINGENT LIABILITY

There were no contingent liabilities as at 31 December 2016.

32. EVENTS AFTER BALANCE SHEET DATE

The Company announced the appointment of a new director, Mr Michael Mann, on 17 January 2017.

As disclosed in Note 13 to the financial statements, in January 2017, the assets pledged by the counterparty as security for

the other receivable of VND 180.0 billion ($10.935 million) were acquired from the original counterparty by a third party.

Under the terms of the acquisition, the third party assumed the obligation to repay the VND 180.0 billion to the Group and

provided the Group with a first charge security over the building, machinery and equipment assets acquired.

On 22 March 2017, Vinausteel Limited (VII: 70%) declared a dividend of VND120 billion. VII’s share is

VND84 billion (estimated $4.8 million) which will be paid before 30 June 2017.

Other than the above, there has been no matter or circumstance that has arisen since the end of the year that has significantly

affected, or may 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.

For

per

sona

l use

onl

y

DIRECTORS’ DECLARATION


In accordance with a resolution of the directors of Vietnam Industrial Investments Limited, I state that:

1. In the opinion of the directors:

(a) The financial statements and notes of Vietnam Industrial Investments Limited for the financial year ended

31 December 2016 are in accordance with the Corporations Act 2001, including:

(i) Giving a true and fair view of its financial position as at 31 December 2016 and of its

performance for the year ended on that date; and

(ii) Complying with Accounting Standards (including the Australian Accounting Interpretations) and

the Corporations Regulations 2001.

(b) The financial statements and notes also comply with International Financial Reporting Standards as

disclosed in Note 2(a).

(c) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable.

2. This declaration has been made after receiving the declarations required to be made to the directors by the chief

executive officer and equivalent chief financial officer in accordance with Section 295A of the Corporations Act

2001 for the financial year ended 31 December 2016.

On behalf of the Board

LAM VAN HUNG

Managing Director

Hai Phong, 29 March 2017

For

per

sona

l use

onl

y



MH:VH:VII:019

Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843

Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au

Independent auditors report to the Shareholders of Vietnam Industrial Investments Limited

Report on the audit of the financial report

Opinion

We have audited the financial report of Vietnam Industrial Investments Limited (the Company), including its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2016, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the Directors’ Declaration.

In our opinion:

the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

i. giving a true and fair view of the Group’s consolidated financial position as at 31 December 2016 and of its consolidated financial performance for the year ended on that date; and

ii. complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report.

For

per

sona

l use

onl

y



MH:VH:VII:019

1. Receivable from Dinh Vu Steel Joint Stock Company (“Dinh Vu”)

Why significant How our audit addressed the key audit matter

SSE Steel Limited (subsidiary of Vietnam Industrial Investments Limited) (“SSE”) provided a commercial credit facility to Dinh Vu of VND 262 billion ($15.9 million) in May 2013. SSE holds security over Dinh Vu’s assets, comprising machinery, equipment, vehicles and billet plant (“collateral assets”). SSE held a second charge over the assets after Dinh Vu’s bankers.

The receivable balance relating to Dinh Vu was recognised as a non-current other receivable as at 31 December 2016 and amounted to VND 180.1 billion ($10.9 million) and was significant to the consolidated statement of financial position. Given the receivable was overdue, the Group performed an impairment assessment to determine if an allowance for doubtful debts was required. There was significant judgement involved in the assessment, particularly relating to the estimation of the net realisable value of the collateral assets and the timing of their realisation.

Based on the outcome of the calculation, the Group concluded that there would be sufficient surplus from the expected sale proceeds of the collateral assets to recover the outstanding receivable and therefore no allowance for doubtful debts was required. In its analysis and calculations, the Group used the expertise of an external valuer as disclosed in Note 13 to the financial statements.

We assessed the underlying assumptions supporting the Group’s analysis of the net exposure to Dinh Vu including the valuation of collateral assets and the timing of their realisation.

We engaged an independent valuation specialist to assess the valuation report provided by the Group’s external valuer including:

• The independence, objectivity and capability of the expert used by the Group.

• The methodology and valuation method adopted.

• The assumptions applied by the Group’s independent valuer providing the report.

We considered the independence, reputation and capabilities of the independent valuation specialist that we engaged to assist with the above.

We considered the impact of the subsequent event that related to the receivable balance disclosed in Notes 13 and 32 to the financial statements.

We also considered the adequacy of the Group’s disclosures with respect to the degree of estimation involved in the assessment.

2. Impairment Assessment of Production Assets

Why significant How our audit addressed the key audit matter

The Group’s steel making division operates two steel rolling mills in Vietnam. Considering the volatility of the Vietnamese steel manufacturing industry, and that the carrying amount of the Group’s net assets was higher than its market capitalisation at year-end, the Group performed an impairment assessment on its production assets, across two identified cash generating units.

Based on the outcome of this impairment assessment, the Group did not recognise any impairment charge. This matter was important to our audit due to the quantum of the carrying value of the production assets as well as the judgment involved in the assessment of their recoverable amount. This assessment requires the Group to make assumptions used in the underlying cash flow forecasts. The assumptions include expectations for production and sales volumes, gross margin and market and economic assumptions such discount rates and inflation rates which have been disclosed in Note 14 to the financial statements.

In obtaining sufficient appropriate audit evidence, we:

• Assessed the Group’s discounted cash flow (“DCF”) model which calculates the recoverable amount of the Group’s assets, in order to determine if any asset impairment or impairment reversals were required.

• Evaluated the Group’s assumptions and estimates used to determine the recoverable amount of its assets, including those relating to production, costs, discount rates and inflation rates. We involved our valuation and modelling specialists to compare these assumptions against external benchmarks (such as for the terminal value multiple and discount rates) and considered the assumptions based on our knowledge of the Group and its industry.

• Performed sensitivity analysis on individual cash generating units with a higher risk of impairment, or with the potential for a reversal of a previously recognised impairment.

• Assessed the adequacy of the Group’s disclosures in respect of asset carrying values and impairment assessment assumptions.

For

per

sona

l use

onl

y



MH:VH:VII:019

Information other than the financial statements and auditor’s report

The Directors of the Group are responsible for the other information. The other information comprises the information in the Group’s Financial Report for the year ended 31 December 2016, but does not include the financial report and the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based upon the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Directors’ responsibilities for the financial report

The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

For

per

sona

l use

onl

y



MH:VH:VII:019

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting in the preparation of the financial report. We also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events and conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in the financial report about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial report. However, future events or conditions may cause an entity to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated to the Directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on the remuneration report

Opinion on the remuneration report

We have audited the Remuneration Report included in the Directors' Report for the year ended 31 December 2016.

In our opinion, the Remuneration Report of Vietnam Industrial Investments Limited for the year ended 31 December 2016, complies with section 300A of the Corporations Act 2001.

For

per

sona

l use

onl

y



MH:VH:VII:019

Responsibilities

The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young V L Hoang Partner Perth 29 March 2017

For

per

sona

l use

onl

y

ASX ADDITIONAL INFORMATION


Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows.

The information is current as at 17 March 2017.

SUBSTANTIAL SHAREHOLDERS

Ordinary shareholder Fully Paid Number Percentage

Corbyns International Limited 116,308,510 81.75%

Land & General Berhad 13,002,000 9.14%

DISTRIBUTION OF EQUITY SECURITIES

At 17 March 2017, there were 95 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.

Category

Number of

Shareholders

Fully paid

ordinary shares 1 - 1,000 10 1,001 - 5,000 29 5,001 - 10,000 11 10,001 - 100,000 35

Over 100,000 10

95

The number of shareholders holding less than a marketable parcel is 14.

For

per

sona

l use

onl

y

ASX ADDITIONAL INFORMATION (CONTINUED)


TWENTY LARGEST SHAREHOLDERS (as at 17 March 2017)

Name

Number of Ordinary

Shares Held

Percentage of

Shares Held

Corbyns International Ltd 116,308,510 81.75%

Land & General Berhad 13,002,000 9.14%

Goh Joon Jin 3,950,000 2.78%

Hee Lee Sui 3,436,315 2.42%

Citicorp Nominees PL 2,698,000 1.90%

J P Morgan Nominees Australia Limited 589,195 0.41%

Sonya Lam 561,280 0.39%

Liem Q Phan & H T T Pham 130,000 0.09%

Seah Kee Khoo 127,500 0.09%

David and Anthony Scicluna 122,853 0.09%

Milton Yannis 110,948 0.08%

David and Colleen Dean 100,000 0.07%

National Nominees Ltd 82,053 0.06%

Basil Ladyman PL 78,241 0.05%

Susan Rose Longcake 75,900 0.05%

Melissa May Longcake 70,583 0.05%

BNP Paribas Nominees PL 51,537 0.04%

HSBC Custody Nominees Australia Ltd 49,720 0.03%

ABFAM Nominees PL 45,409 0.03%

JA, SB and DA Lowe 41,180 0.03%

141,631,224 99.55%

Restricted Securities

There are no ordinary shares on issue that have been classified by the Australian Securities Exchange (Perth) as restricted

securities.

Stock Exchange Listing

Vietnam Industrial Investments Limited shares are listed on the Australian Securities Exchange and the Frankfurt Stock

Exchange’s Unofficial Regulated Market. The home exchange is the Australian Securities Exchange (Perth).

For

per

sona

l use

onl

y

This page has been left blank intentionally.

For

per

sona

l use

onl

y

VIETNAM INDUSTRIAL INVESTMENTS LIMITED ABN 64 063 656 333

www.vii.net.au

For

per

sona

l use

onl

y

Documents

For personal use only - Australian Securities Exchange · OPERATING AND FINANCIAL REVIEW (CONTINUED) VIETNAM INDUSTRIAL INVESTMENTS LIMITED Page | - 5 - PRINCIPAL ACTIVITIES The principal