GALE Pacific
Annual Report 2008

Plain-text annual report

ANNUAL REPORT 2008 For personal use only C O N T E N T S t r o p e R l a u n n A 8 0 0 2 І d e t i 3 4 8 9 CORPORATE INFORMATION REPORT FROM THE CHAIRMAN & THE MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER BOARD OF DIRECTORS SENIOR MANAGEMENT 10 CORPORATE GOVERNANCE 14 DIRECTORS’ REPORT 24 FINANCIAL RESULTS 25 INCOME STATEMENT 26 BALANCE SHEET 27 STATEMENT OF CHANGES IN EQUITY 28 STATEMENT OF CASH FLOWS 29 NOTES TO THE FINANCIAL STATEMENT 68 ADDITIONAL SECURITIES EXCHANGE INFORMATION i m L c i f i c a P e a G l 2 For personal use only C O R P O R A T E I N F O R M A T I O N G AL E PAC IF I C L I M IT ED ABN 80 082 263 778 D i re cto r s Mr Harry Boon (Chairman) Mr Peter McDonald (Managing Director and Chief Executive Officer) Mr John Murphy (Non Executive Director) Mr George Richards (Non Executive Director) Company Secret ary Ms Sophie Karzis R eg is t e r ed O f f i ce 145 Woodlands Drive, Braeside, Victoria, 3195 T + 613 9518 3333 Solicitors Norton Gledhill Level 23, 459 Collins Street, Melbourne, Victoria, 3000 T + 613 9614 8933 Sh ar e R eg ist e r Computershare Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, 3067 Local call 1300 850 505 T + 613 9415 4000 Au dit or Pitcher Partners Level 19, 15 William Street, Melbourne, Victoria, 3000 T + 613 8610 5000 W eb s it e A d d r e s s www.galepacific.com t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 3 For personal use only R E P O R T F R O M T H E C H A I R M A N & T H E M A N A G I N G D I R E C T O R A N D C H I E F E X E C U T I V E O F F I C E R Dear Shareholders, T h e Y e a r in R e vi ew It is pleasing to report the improved results for the year ended 30 June 2008 which reflects the significant advances made over the last two years. The Gale Pacific Group underwent some substantial restructuring during 2006 and 2007. The restructuring initiatives were based around the strategy to ensure that the Group had a strengthened and stable platform for future growth. The key achievements for the year were for the Group to return to profitability and to continue to generate strong positive cash flows from operations. The net profit after tax for the year ended 30 June 2008 was $2.51 million, which was an $18.87 million improvement compared with the reported loss for the year ended 30 June 2007. Positive cash flow generated from operations for the year was $9.8 million and continues the positive trend of cash generation from the prior year of $8.5 million. Other significant improvements and strengthening of the Group’s position included; • • • • • the group with a placement Recapitalising to key shareholders, refinancing core debt and re-establishing a stable financial position; Completing the transfer and commissioning of regional manufacturing equipment to China, maximising the group leverage of the globally competitive Chinese manufacturing base; Liquidating remaining excess and obsolete inventory in Europe; Steady growth in the core Australian market and continued strong growth in the Middle East; and, Expanded retail presence in America and Europe, building the sales base in those markets for future years. The year was not without some challenges which included weakening economic conditions in some key markets, record high polymer prices and the need to take a further write down on the disposal of obsolete inventories held in Europe from previous product introductions. The inventory write down unfavourably impacted the results by $1.6 million. Synthesis Horticultural Fabrics Protective Canopy Nets Synthesis protective canopy nets help control the growing environment, protect crops and enhance yields. Premium Hortshade Synthesis Premium Hortshade helps manage and modify climate conditions, allowing controlled crop protection. Bird Netting Used as permanent canopies, drape over nets or side nets, Synthesis Bird Netting fabrics protect vineyards and orchards from bird attack. Solarweave Synthesis Solarweave is an innovative hot house fabric that allows maximum superior light transmission for optimum growing conditions. Handyscreen Installed over tunnel houses, Synthesis Handyscreen reduces stress on vegetables, plants and flowers by lowering temperatures inside and promoting even light distribution. Windbreak Fabrics Synthesis windbreaks provide instant wind protection for plants without creating turbulence. General Tree and Plant Protection Protect plants and trees from animals, frost and other environmental conditions with Synthesis Tree Tie Webbing,Treeguard and Frost Cloth. T h e f a b r i c s f o r l i f e o n e a r t h s y n t h e s i s f a b r i c s . c o m Dear Shareholders, t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 4 For personal use only R e ven ue Europe Sales revenues from continuing activities declined by 4.8% or $5.3 million to $105.1 million mainly due to foreign exchange differences year on year in the consolidation of the accounts. Op erat ion s Asia / Pacific Asia / Pacific revenue reduced marginally to $71.8 million from $72.8 million in the previous corresponding period. Sales increased in Australia. Domestic sales within New Zealand decreased and the closure and relocation of the manufacturing operations to China was completed smoothly. Operating profit after tax for the region increased to $5.0 million from a loss of $4.8 million in the previous corresponding period. Australia Sales in Australia for the full year increased by 7% compared with the previous corresponding period. Sales to the retail market were slightly lower as market conditions tightened towards the end of the financial year against a particularly strong previous corresponding period for retail product sales. This retail sales shortfall was offset by strong sales of industrial fabrics highlighted by exceptionally strong sales of our Landmark fabric for grain covers replacing competitors PVC product. Sales of coated fabrics have increased as market conditions have improved in many of our industrial market segments. New Zealand Excluding exports, sales in New Zealand decreased by 19% in local currency in a very competitive market. Some sales to New Zealand export customers were transferred to other Gale regions during the year. New Zealand manufacturing equipment was transferred to China during the year leaving no remaining production in New Zealand. China China operations continued to improve during the year, although we are still experiencing some technical processing issues. Good progress is being made and further improvements are planned during the first half of FY09. Recent restructuring of China management is designed to improve our technical capabilities and manufacturing efficiencies. A key component of this has been the recent implementation of a continuous improvement program. Polymer costs have continued to rise to record high levels. Where possible, these cost increases have been, and will continue to be passed on in our selling prices. Europe / Middle East / Africa Europe / Middle East / Africa revenue increased to $11.9 million from $10.3 million in the previous corresponding period. The operating loss after tax for this region was $3.2 million compared with a loss of $12.1 million for the previous corresponding period which included the loss on sale of the Jung business in Germany and larger inventory write downs. The result for this year includes an inventory write down of $1.6 million in Europe. Sales in Europe increased by 21% in local currency over the previous corresponding period but were from a low base. The sales increase was substantially lower than planned as the traction from increased store listings has not yet fully converted to increased sales levels, compounded by a delayed start to the selling season in Europe due to poor weather. Remaining obsolete inventory that the business has been burdened with since the 2005 and 2006 season has been liquidated. With this completed, management in Europe is focusing all of their efforts on growing both our retail and industrial business in the European market. Middle East / Africa Revenue in the Middle East increased 41% in local currency driven by the continued strong level of construction and development in this region. The Middle East business has been integrated into the Gale Europe operation improving the overall operations and focus of the Middle East business. The region benefited from improved supply of product from the China factory compared to the previous corresponding period. The Americas USA Sales in the USA declined 13% in local currency terms in a tough market and following the loss of a product listing with a retail customer. Despite this, the USA grew its retail store presence with the two major retail customers, Lowe’s and The Home Depot, and added new products with both of these accounts over the year. The sell these customers were encouraging, considering the downturn in US retail spending, particularly in the home improvement and DIY market. through rates with In Australian dollar terms, USA revenue reduced to $20.9 million from $27.8 million in the previous corresponding period. The result after tax was break even compared to a profit of $1.2 million for the previous corresponding period. While the financial results for FY08 were below expectations, we are confident of the long term growth opportunity represented by the American market. R e se a rc h and D ev e lo p m e n t ( R & D ) The R & D group under the direction of Dr Paul Cacioli has been working on a balance of shorter term product improvement and technical projects, and longer term innovation and technology step change projects. The R & D department is based in Australia and China and projects include improved fire retardant architectural fabrics and a breakthrough waterproof and breathable fabric. Important improvements to our Landmark fabric used for covering grain have assisted in winning new business for this product, replacing competitors PVC remains committed to a substantial investment in R & D as a key factor in the Group’s long term growth. fabrics. The company t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 5 For personal use only I nfo rm at ion T e chno log y D i vid en d s The group wide global information system has been implemented in Australia, New Zealand and the Middle East. The implementation to be completed in the remaining regions during 2008 / 2009 will then generate uniform processes and information. This investment in information technology will continue to provide improvements in support for decision making, ongoing working capital improvements and customer service. The Directors are pleased with the improved results, return to profitability of the business and the debt reduction which has occurred, placing the business in a much stronger financial position. Directors believe it is prudent to maintain a strong balance sheet with reduced borrowings in the current economic environment. No final dividend will be declared for the year, and Directors will review the position during the FY09 year. F in anc i a l R es u lts D i re cto r s The Group reported a profit after tax of $2.51 million for FY08 (compared with a loss after tax of $16.36 million for the previous corresponding period). This represents an increase of $18.87 million. interest, Earnings before tax, depreciation and amortisation (EBITDA) increased to $13.6 million or 13% of revenue compared with an EBITDA loss of $0.3 million from continuing business for the previous corresponding period. Revenue for the year declined 4.8% to $105.1 million from $110.4 million. Revenue increased in Australia, Europe and the Middle East. Difficult trading conditions in the USA resulted in a sales decline from the same period last year. The result includes a write down of the remaining obsolete inventory held in Europe of $1.6 million. No tax benefit has been applied to this write down and therefore the effect on the full year results of the $1.6 million cost is both before and after tax. Normalised earnings for FY08 (after removing this write down) were EBITDA of $15.2 million and a profit after tax of $4.1 million. C a sh Flow and B a lan c e Sh eet The Group significantly reduced net borrowings (borrowings less cash and cash equivalents) by $23.3 million to $20.5 million during the last twelve months through a combination of a capital raising and positive cash flow from operations. Gross cash generated from operations was $12.7 million. $2.9 million of cash payments were made relating to the one-off New Zealand plant restructuring, resulting in reported net cash generated from operations of $9.8 million. The Group has a strong balance sheet with a gearing ratio at 30th June 2008 of 26% (compared with 72% the previous corresponding period). for Capital expenditure on plant and equipment was substantially reduced to $3.4 million including freight and installation costs of equipment transferred from New Zealand to China. Inventory levels reduced by $3.4 million from June 2007. Net tangible assets per ordinary security was 49.6 cents per share as at 30 June 2008. Mr John Murphy was appointed as a Non Executive Director on 24 August 2007. There were no other changes to the composition of the Board of Directors during the year. C o rp o r at e G o v ern an c e The Group is committed to the principles of good corporate governance. A full discussion on the Group’s progress in creating strong and transparent corporate governance and in meeting all of the ‘Principles and Best Practice Recommendations’ published by the Corporate Governance Council of the Australian Securities Exchange is contained in the Directors’ Report section of this Annual Report. As part of this commentary, the Directors' Report contains the Remuneration Report. This report shows how the Group seeks to align employee remuneration with Group performance, putting a significant portion of executive remuneration at risk. It details both variable short term cash incentives and longer term performance hurdles. The Board believes such short and long term incentive programs are vital to improving organisational performance. At this year's Annual General Meeting shareholders will be asked to provide a non binding vote on the Remuneration Report. An nual General Meeting A notice of the Company’s Annual General Meeting to be held on 14 November 2008 and a proxy form for voting is enclosed with this report. Man ag em ent and St aff The senior management team has remained committed to the turnaround of the business throughout the year. On behalf of the Directors, we would like to thank the entire Gale team for their diligence and dedication to improving the business. The team should rightly be proud of the resultant return to profitability of the business. We are confident that the Gale team and Gale culture has the Group well placed to meet the challenges and capitalise on the opportunities for the business as they arise in the period ahead. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 6 For personal use only Out loo k Enormous progress has been made within the business over the last few years and we are planning for improved performance in FY09. The current unsettled economic and market environment makes it difficult to provide specific guidance on the Group’s expected financial performance for the coming year. Mr Harry Boon Chairman 30 September 2008 Mr Peter McDonald Managing Director and Chief Executive Officer 30 September 2008 Coolaroo Shade Sail The Coolaroo Shade Sail state-of-the-art material blocks up to 90% of the sun’s harmful UV rays yet remains totally unaffected by moisture and natural temperature extremes. Since Coolaroo fabric is knitted, it won’t tear or fray. All Coolaroo Shade Sails feature reinforced polyester webbing on all edges for long life performance and are warranted against UV degradation for a full 10 years. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 7 For personal use only B O A R D O F D I R E C T O R S HARRY BOON, LLB (HONS), B. Com PETER MCDONALD, Bachelor of Business (Marketing) JOHN MURPHY, CA, FCPA, B.Comm, M.Comm GEORGE RICHARDS, CPA, AAICD H a r ry Bo o n John Mu rp hy Chairman & Non Executive Director since August 2005 Non Executive Director since August 2007 Mr Boon joined the Company in August 2005 and brings to the role his experience as a senior executive in one of Australia’s leading listed companies, Ansell Limited. Mr Boon’s executive career culminated with the position of Chief Executive Officer of Ansell Limited from April 2002 to June 2004, having previously been President, Chief Executive Officer and Managing Director of Ansell Healthcare since February 1989. Mr Boon is also Chairman of Tatts Group Limited, a Non Executive Director of Hastie Group Limited, Non Executive Director of Paperlinx Limited and Non Executive Director of Toll Holdings Limited. Mr Boon has lived and worked in Australia, Europe, United States and Canada, and has broad based experience in global marketing and sales, large scale manufacturing operations, and product development. He is multi-lingual, has a strong track record of delivering business results through setting ambitious goals, building the appropriate organisation structures, and pursuing achievement. Mr Boon is Chairman of the Company’s Nomination Committee and is a member of the Audit & Risk and Remuneration Committees. Mr Murphy is the Managing Director of Investec Wentworth Private Equity Limited and in this capacity is a board member of the fund’s investments, including the following listed companies: Ariadne Australia Limited, Staging Connections Group Limited and Gale Pacific Limited. Mr Murphy is also a Non Executive Director of First Opportunity Fund Limited and Investec Bank (Australia) Limited and Specialty Fashion Group Limited. During the last 3 years, Mr Murphy was a Non Executive Director of the following listed companies: Kids Campus Limited (2004-2006), Southcorp Limited (2003-2005), Invocare Limited (2001-2005) , SMS Management and Technology Limited (2001-2004), Fone Zone Group Limited (2005 -2006) and Australian Pharmaceutical Industries Limited (2004-2007). Mr Murphy is the Chairman of the Company’s Remuneration Committee and is a member of the Audit & Risk and Nomination Committees. P e t e r M cD o n a l d G eo rge Richards Managing Director & Chief Executive Officer Non Executive Director since May 2004 Mr McDonald is the Company Managing Director and Chief Executive Officer since April 2006 and Executive Director since 1998. Mr McDonald joined Gale in 1988 and was appointed as an Executive Director of the Company in 1998. Mr McDonald has held the positions of Product Manager, National Marketing Manager, National Sales and Marketing Manager and most recently the Company’s Chief Operating Officer and Managing Director of the Company’s United States operations. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 8 Mr Richards joined the Board in 2004. Mr Richards was the Chief Executive of Mitre 10 South West Ltd from 1990 to 2000 and was previously the Managing Director of Cooper Tools, a market leader in hand tools manufacture and distribution. Mr Richards has had over 45 years experience in retail, marketing, manufacturing and distribution. He is a board member of The Alfred Foundation, a Director of Magnet Mart Pty Ltd, Bowen & Pomeroy Pty Ltd, Chairman of Carpet Court Australia Limited, Associate Member of the Australian Institute of Company Directors and Australian Society of Accountants. Mr Richards is Chairman of the Company’s Audit & Risk Committee and is a member of the Nomination and Remuneration Committees. For personal use only S E N I O R M A N A G E M E N T Jeff Cox Chief Financial Officer (“CFO”) Jeff Cox is an experienced CFO and has held senior finance positions for over 20 years. He has been the CFO of major divisions within the Pacific Dunlop Group including the Battery Group, Food Group and at Ansell. All these businesses had revenues in excess of $1 billion and significant international sales, distribution and manufacturing operations. Jeff’s experience at Ansell included residing in the USA for 5 years while playing a significant part of a successful and global company. D r Pau l C ac io li General Manager, Research & Development & Technical Services Dr Paul Cacioli joined Gale in late March 2007 and is responsible for planning and managing the Company’s research and development activities. Paul spent 19 years with Ansell, 14 of which were spent overseas in Malaysia, Sri Lanka and the USA, rising to the position of Senior Vice President of Science and Technology and Regulatory Affairs. Paul brings to Gale a broad range of technical skills and a world class knowledge of polymers and research and development processes. M a rt in D enne y Managing Director, USA Martin has strong commercial and strategic planning skills gained over 20 years across a range of industries including food and beverage, distribution, manufacturing, technology and property development. He has held senior management roles including General Manager of Socomin, a branded food import and distribution division of Pacific Dunlop Group (turnover A$40 million). Other roles include National Sales and Marketing Manager at Dennis Family Corporation (turnover A$250 million), a leading Australian property developer, and Business Development Manager at Adacel Technologies, a global simulation and systems company based in Australia. F r ank A lb e rts m ei e r Managing Director, Europe / Middle East / Africa Frank has had extensive experience in managing sales, marketing and business development in the consumer and professional goods industry in various countries in Europe. Prior to joining Gale, Frank was the Director of Sales for ICI Europe for four years, responsible for a turnover of €85 million. He played a leading role in the strategic process to develop the future direction for ICI in Europe. Frank also managed more than 100 sales and marketing people within this division while doubling the bottom line. Frank has held many sales and management positions for Black and Decker Europe through his 18 year tenure, reaching the level of Commercial Director. Emma Xu Managing Director, China Prior to joining Gale, Emma worked as an attorney in China with extensive experience in law and international business management. Emma’s responsibilities initially included government relationships, finance, internal control and communication with the Board. Emma was promoted to Managing Director of Gale Pacific Special Textiles (Ningbo) Limited (“GPST”) in September 2003 as GPST became a wholly owned overseas enterprise of Gale. Emma was responsible for managing the construction of the Gale facility in Ningbo and the relocation of the manufacturing equipment from Braeside, Australia to Ningbo, the installation of new machines purchased from Europe, the set up of aluminium extrusion and powder coating lines in-house, and selecting and leading the Chinese management team. Pa ul Du c ray Chief Manufacturing Officer Paul joined Gale in December 2004 and relocated to China in June 2006 and taking on his current position of Chief Manufacturing Officer responsible for all manufacturing and logistics functions at GPST. Paul previously worked at BTR Dunlop in South Africa. In 2001 Paul migrated to New Zealand and joined Donaghy’s NZ in the role of Manufacturing Manager. A successful turnaround of the company started with a management buyout, new management team and restructuring of the business. This led to the purchase of the Industrial Textiles division of Donaghys by Gale Pacific Limited in December 2004. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 9 For personal use only C O R P O R A T E G O V E R N A N C E the highest This statement sets out the corporate governance practices that were in operation throughout the 2007 / 2008 financial year for Gale Pacific Limited (“the Company”) and its controlled entities (“the Group”). Gale Pacific’s Directors and management the Company’s to conducting are committed business in an ethical manner and in accordance with corporate governance. The Board has continued its strategy of strengthening its corporate governance practices and the Company has adopted and complies with the ASX Corporate Governance Principles and Recommendations Second Edition August 2007. It is noted revised principles and recommendations are not required to be reported on until the Company’s 2009 annual report is published. standards of that the The ASX Corporate Governance Council has encouraged companies to make an early transition to the revised Principles and Recommendations and the Company is reporting by reference to the revised Principles and Recommendations in this 2008 Annual Report. A summary of how the Group revised ASX Corporate complies with Governance Principles and Recommendations is included below. The various charters and policies are all available on the Gale Pacific web site: www.galepacific.com. the Synthesis Architectural Fabrics Commercial 95 Synthesis Commercial 95 offers the premium combination of durability with the highest levels of UV protection available from 91% to 99% depending on colour. It’s the proven performer worldwide in an endless variety of commercial shade sails and architectural tension structures. S t y l i s h f a b r i c s t o e n h a n c e o u t d o o r d e s i g n S y n t h e s i s f a b r i c s . c o m t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 10 For personal use only Prin cip le 1: m an age men t o ve r sig ht L a y so lid fo undation f or Formalise and disclose the functions reserved to the board and those delegated to management. Complying. The Board has adopted a charter which establishes the role of the Board and its relationship with management. The primary role of the Board is the protection and enhancement of long term shareholder value. Its responsibilities include the overall strategic direction of the Group, establishing goals for management and monitoring the achievement of these goals. The functions and responsibilities of the Board and management are consistent with ASX Principle 1. A copy of the Board Charter is posted on the Group’s website. Each director is given a letter upon his or her appointment which outlines the director’s duties. The Group has in place systems designed to fairly review and actively encourage enhanced Board and management effectiveness. The Nomination Committee takes responsibility for evaluating the Board’s performance and the Group’s key executives annually. P r in c ip le 2: S t r u ct u r e t h e B o ar d t o a d d v a lu e A majority of the board members should be independent. Complying. The Board comprises four directors, three of whom are non executive and independent. The directors considered by the Board to constitute independent directors are Mr H Boon, Mr G Richards and Mr J Murphy. The test to determine independence which is used by the Company is whether a director is independent of management and any business or other relationship with the Group that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgement. The chairman should be an independent director. Complying. The Chairman, Mr H Boon has been Chairman of the Company since August 2005 and was, at the date of his appointment and continues to be, independent. The Chairman leads the Board and is responsible for the efficient organisation and conduct of the Board’s functions. The roles of the chairman and the chief executive officer should not be exercised by the same individual. Complying. The board should establish a nomination committee. Complying. The Board has a formal Nomination Committee comprising of the non executive independent directors. The Nomination Committee’s functions and powers are formalised in a Charter. Mr H Boon is Chairman of the Nomination Committee. Provide the information indicated in the Guide to reporting on Principle 2. Complying. The following information is set out in the Group’s annual report: • • • • • The skills and experience of directors. The directors considered by independent directors and thresholds. the Board to constitute the Group’s materiality A statement regarding directors’ ability to take independent professional advice at the expense of the Company. The term of office held by each director in office at the date of the report. The names of members of the Company’s committees and their attendance at committee meetings. Pr in c ip le 3: Pro mot e eth i ca l and res pon si bl e d e ci s io n m ak i n g Establish a code of conduct and disclose the code as to: • • • The practices necessary to maintain confidence in the company’s integrity. The practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders. The responsibility and accountability of individuals for reporting and reports of unethical practices. investigating Companies should establish a policy concerning trading in company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy. Companies should provide the information indicated in the Guide to reporting on Principle 3. The positions of Chairman and Chief Executive Officer are held by separate persons. Complying. The Group has formulated a Code of Conduct which can be viewed on its website. The Group has adopted a Share Trading Policy which can be viewed on its website. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 11 For personal use only Prin cip le 4: Saf egu ard integrit y in f inancial r e p o rti n g Companies should have a structure to independently verify and safeguard the integrity of their financial reporting. Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Companies should provide the information indicated in the Guide. The board should establish an audit committee. The audit committee should be structured so that it: • • • • Consists only of non executive directors. Consists of a majority of independent directors. Is chaired by an independent chair, who is not chair of the board. Has at least three members. The audit committee should have a formal charter. Complying. The Group has a documented policy which has established procedures designed to ensure compliance with Australian Securities Exchange Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance. The Managing Director and Chief Executive Officer, the Chief Financial Officer and the Company Secretary are responsible for interpreting the Group’s policy and where necessary informing the Board. The Company Secretary for all communications with the Australian Securities Exchange. The purpose of the procedures for identifying information for disclosure is to ensure timely and accurate information is provided equally to all shareholders and market participants. responsible is Companies should provide the information indicated in the Guide. A copy of the Group’s Disclosure Policy is posted on its website. Complying. The Directors are committed to the preparation of financial statements that present a balanced and clear assessment of the Group’s financial position and prospects. The Company has an Audit & Risk Committee. The Audit & Risk Committee consists of only non executive, it has an independent chairman who is not the Chairman of the Board. Mr G Richards is the Chairman of the Audit & Risk Committee. Details of the names and qualifications of the members of the Audit & Risk Committee and the number of meetings held and attended by each member are contained in the Directors’ Report of the Annual Report. independent directors and The Audit & Risk Committee has a formal charter which sets out the Audit Committee’s role and responsibilities, composition, structure and membership requirements. The Audit Committee is given the necessary power and resources to meet its charter. The primary role of the Audit & Risk Committee is to assist the Board in fulfilling its responsibilities relating to the accounting, internal control and reporting practices of the Company and its subsidiaries. The Audit & Risk Committee reviews the Group’s half yearly and annual financial statements and makes recommendations to the Board. The Board requires the Managing Director and Chief Executive Officer and the Chief Financial Officer to state in writing to the Board that the Group’s financial reports present a true and fair view, in all material respects, of the Group’s financial condition and operational results and are in accordance with relevant accounting standards. P r in c ip le 5: d i sc lo su re M a ke t i m el y a n d b al an c ed Companies should promote timely and balanced disclosure of all material matters concerning the company. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 12 P r in c ip le 6 : s h ar eho ld e rs R e spe c t t h e ri g h t s o f Companies should respect the rights of shareholders and facilitate the effective exercise of those rights. Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Companies should provide the information indicated in the Guide to reporting on Principle 6. Complying. The Board informs shareholders of all major developments affecting the Group’s state of affairs as follows: 1. 2. 3. 4. 5. 6. The annual report is distributed to all shareholders who have elected relevant receive a copy, information about the operations of the Group during the year and changes in the state of affairs. including to The half yearly report to the Australian Securities Exchange contains summarised financial information and a review of the operations of the Group during the period. All major announcements are lodged with the Australian Securities Exchange, and posted on the Group’s website. Proposed major changes in the Group which may impact on share ownership rights are submitted to a vote of shareholders. The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Group’s strategy and goals. The Company’s auditor attends Meeting. the Annual General For personal use only P r in c ip le 7: R eco g n i s e a n d m a n ag e r i s k P r in c ip le r e spo ns ib ly 8 : R em u n e ra t e f ai r l y an d Companies should establish a sound system of risk oversight and management and internal control. Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. Companies should ensure that the level and composition of remuneration its relationship to performance is clear. is sufficient and reasonable and that The board should establish a remuneration committee. The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. Companies should clearly distinguish the structure of non executive directors’ remuneration from that of executive directors and senior executives. Companies should provide the information indicated in the Guide to reporting on Principle 8. The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Companies should provide the information indicated in the Guide to reporting on Principle 7. Complying. The Board has responsibility for monitoring risk oversight and ensures that the Managing Director and Chief Executive Officer and the Chief Financial Officer report on the status of business risks through risk management programs aimed at ensuring risks are identified, assessed and appropriately managed. In addition to its financial reporting obligations, the Audit & Risk Committee is responsible for reviewing the risk management framework and policies of the Group. The structure of the Audit & Risk Committee and its responsibilities reflect the requirements of ASX Principle 7. In performing this function, the Committee receives periodic reports from the auditor, senior management and, in some instances, external consultants. The Managing Director and Chief Executive Officer and the Chief Financial Officer are required to state to the Board in writing that the integrity of the financial statements is founded on a sound system of risk management and internal compliance and control and that the Group’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects. Management has completed a review of the Group’s major business units, organisational structure and accounting controls and processes. As a result of this review a number of risk management recommendations have been made and will be implemented. A description of the Group’s risk management policy and internal compliance and control systems has been documented and is posted on the Group’s web site. Complying. The Board has in place a Remuneration Committee. The structure of this Committee and its responsibilities reflect the requirements of ASX Principle 8. All three members of the Committee are independent directors. In addition to the members, the Managing Director and Chief Executive Officer is invited to the meetings at the discretion of the Committee. This Committee is responsible for ensuring that the recruitment and remuneration policies and practices of the Group are consistent with its strategic goals and are designed to enhance corporate and individual performance as well as meet the appropriate recruitment and succession planning needs. The Chairman of the Remuneration Committee is Mr J Murphy. The Remuneration Committee is responsible for reviewing and monitoring executive performance, remuneration and incentive policies and the manner in which they should operate, the introduction and operation of share plans, executive succession planning and development programs to ensure that they are appropriate to the Group’s needs and the remuneration framework for directors (as approved by shareholders). The Committee may consult with remuneration advisors to assist in its role. Details of the directors and key senior executives remuneration are set out in the Remuneration Report of the Annual Report. The structure of non executive directors’ remuneration is distinct from that of executives and is further detailed in the Remuneration Report of the Annual Report. The charter setting out the responsibilities of the Remuneration Committee has been adopted and a copy of this charter is posted on the Group’s website. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 13 For personal use only D I R E C T O R S ’ R E P O R T (“the The Directors of Gale Pacific Limited Company”) present their annual financial report of the consolidated entity, being the Company and its subsidiaries (“the Group”) for the financial year ended 30 June 2008. Pet Beds Coolaroo Pet Beds feature unique Coolaroo knitted fabric that ‘breathes’ to keep pets cool and comfortable, promoting a healthier skin and coat condition and discouraging fleas and mites. This strong, UV-treated fabric will not be affected by moisture and temperature extremes. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 14 For personal use only The Directors in office at any time during or since the end of the year to the date of this report are: G eo rg e R i cha r d s , C PA , A AI CD Non Executive Director since May 2004 H a rry Bo on, LL B ( HON S) , B . Com Chairman and Non Executive Director since August 2005 Mr Boon joined the Company in August 2005 and brings to the role his experience as a senior executive in one of Australia’s leading listed companies, Ansell Limited. Mr Boon’s executive career culminated with the position of Chief Executive Officer of Ansell Limited from April 2002 to June 2004, having previously been President, Chief Executive Officer and Managing Director of Ansell Healthcare since February 1989. During the last three years, Mr Boon has also served as Non Executive Director of Paperlinx Limited, Tatts Group Limited, Hastie Group Limited, Toll Holdings Limited, Funtastic Limited. Mr Richards was the Chief Executive of Mitre 10 South West Ltd from 1990 to 2000 and was previously the Managing Director of Cooper Tools, a market leader in hand tools manufacture and distribution. Mr Richards has had over 45 years experience in retail, marketing, manufacturing and distribution. He is a board member of The Alfred Foundation, a Director of Magnet Mart Pty Ltd, Bowen & Pomeroy Pty Ltd, Chairman of Carpet Court Australia Limited, Associate Member of the Australian Institute of Company Directors and Australian Society of Accountants. No other directorships of listed companies were held by Mr Richards at any time during the three years prior to 30 June 2008. Mr Richards is Chairman of the Company’s Audit & Risk Committee and is a member of the Nomination and Remuneration Committees. Mr Boon is Chairman of the Company’s Nomination Committee and is a member of the Audit & Risk and Remuneration Committees. M s So p h ie K a r z i s , B JU R I S L L B P e t e r Mc D o n a ld, B ach e lo r ( Ma r ke tin g) o f B u s in es s Managing Director and Chief Executive Officer since April 2006 and Executive Director since 1998 Mr McDonald was appointed Managing Director and Chief Executive Officer of Gale in April 2006. Mr McDonald joined Gale in 1988 and was appointed as an Executive Director of the Company in 1998. Mr McDonald has held the positions of Product Manager, National Marketing Manager, National Sales and Marketing Manager and most recently the Company’s Chief Operating Officer and Managing Director of the Company’s U.S. Operations. No other directorships of listed companies were held by Mr McDonald at any time during the three years prior to 30 June 2008. John Mu rp hy, CA, FCPA, B.Comm , M.Comm Non Executive Director since August 2007 Mr Murphy is the Managing Director of Investec Wentworth Private Equity Limited and in this capacity is a board member of the fund’s investments, including listed companies Ariadne Australia Limited and Staging Connections Group Limited. Mr Murphy is also a Non Executive Director of First Opportunity Fund Limited, Investec Bank (Australia) Limited and Specialty Fashion Group Limited. During the last three years, Mr Murphy was a Non Executive Director of the following listed companies Kids Campus Limited (2004-2006), Southcorp Limited (2003-2005), Invocare Limited (2001-2005), SMS Management and Technology Limited (2001- 2004), Fone Zone Group Limited (2005-2006) and Australian Pharmaceutical Industries Limited (2004-2007). Mr Murphy is Chairman of the Company’s Remuneration Committee and is also a member of the Audit & Risk and Nomination Committees. Company Secretary Ms Karzis was appointed as Company Secretary in June 2004. Ms Karzis is a practising lawyer who holds roles at a number of public and private companies. N at u r e o f O p e rat ion s a n d Pr in c ip a l A ct iv it i es The Group’s principal activities in the course of the financial year were the marketing, sales, manufacture and distribution of advanced polymer fabrics and related products to global markets. R e vi ew a nd R e sul ts of Op e rat ion s the Group for the financial year The consolidated profit of attributable to the members of Gale Pacific Limited was $2.51 million. Refer to the Chairman and Managing Director’s & Chief Executive Officer’s Report for further details on the Group’s result. S t ate o f A f f ai r s In the opinion of the Directors there were no significant changes in the state of affairs of the Company and its controlled entities that occurred during the financial year under review not otherwise disclosed in this report or the accompanying financial report. E v ent s Sub se qu ent to Ba l an c e D at e In the interval between the end of the financial year and the date of this report, no item, transaction or event of a material and unusual nature has arisen that is likely, in the opinion of the Directors, to affect significantly, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 15 For personal use only L i ke l y D e ve lopm ent s Disclosure of information regarding likely developments in the operations of the Group in future financial years has been made in part in the Chairman and Managing Director’s and Chief Executive Officer’s Report of this Annual Report. Any further such disclosure and the expected results of those operations is likely to result in unreasonable prejudice to the Group and has accordingly not been disclosed in this report. En viron men tal Regu lation and Perfo rm an ce to any significant The Group’s operations are not subject environmental regulations under the Commonwealth or State legislation. However, the Directors believe that the Group 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 Group. D i vid en d s In respect of the financial year ended 30 June 2008, no interim dividend was paid and the Directors have determined not to pay a final dividend. Sh ar e B as ed Pa ym ent s Options The Company maintains an option scheme for certain staff and executives, including executive directors, as approved by shareholders at an Annual General Meeting. The number of unissued ordinary shares under option as at the date of this report is 750,000. The issue price of each option is zero. Each option entitles the option holder to one (1) ordinary share in Gale Pacific Limited in the event that the option is exercised. the Company’s shareholders at Of the 750,000 options on issue, 180,000 options were issued under the Company’s executive share plan to the Managing Director and Chief Executive Officer, Mr Peter McDonald on 15 December 2004 (as approved by the Company’s Annual General Meeting held on 15 November 2004). 450,000 options were issued on 16 November 2005 and 120,000 options were issued on 24 October 2006 to executives and staff of Gale. Included in these issues are options issued to senior executives; 40,000 options issued to Mr Stephen Carroll Managing Director Australia, 40,000 issued options to Mr Zafar Fakroddin Business Unit Manager Gale Europe GmbH, and 20,000 options issued to Mr Paul Ducray Chief Manufacturing Officer. The exercise price of the 180,000 issued options is $3.00, the exercise price of the 450,000 issued options and the 120,000 issued options is $1.52. The vesting of options is determined in accordance with specific share price and / or performance hurdles. In the case of the 180,000 the options achievement of certain levels of adjusted weighted average earnings per share and the vesting of the 450,000 options and 120,000 options is determined in accordance with the achievement of certain levels of adjusted weighted average earnings per share. The 180,000 options and the 450,000 options are not exercisable after 1 December 2008. The 120,000 options are not exercisable after 31 December 2008. Options carry no rights to dividends and no voting rights. During the financial year no options vested. in accordance with is determined their vesting Performance Rights On 2 February 2007, the Company issued 150,000 performance rights to the Managing Director and Chief Executive Officer, Mr Peter McDonald. Each performance right entitles the holder to one (1) ordinary share in Gale Pacific Limited when exercised and is subject to the satisfying of relevant performance hurdles based on improvements in the Company’s diluted earnings per share against the base year of the 2006 / 2007 financial year. The performance rights are not exercisable until after 30 September 2009 and expire on 2 February 2017. On 16 November 2007 the Company issued 700,000 performance rights, 100,000 each to the following senior executives: Mr Frank Albertsmeier, Managing Director Europe / Middle East / Africa; Dr Paul Cacioli, General Manager Research & Development and Technical Services; Mr Stephen Carroll, Managing Director Australia; Mr Jeff Cox, Chief Financial Officer; Mr Martin Denney, Managing Director USA; Mr Paul Ducray, Chief Manufacturing Officer; and Ms Emma Xu, Managing Director, China. Each performance right entitles the holder to one (1) ordinary share in Gale Pacific Limited when exercised and is subject to the satisfying of relevant performance hurdles based on improvements in the tax, depreciation and Company’s earnings before amortisation (“EBITDA”) over the two year period 1 July 2007 to 30 June 2009. The first tranche (25%) of these performance rights, which have as their hurdle, an EBITDA for the period 1 July 2007 to 30 June 2008 that has not been achieved, will now not vest. The remaining tranches are not exercisable until 30 June 2009 and expire on 16 November 2017. Any shares allocated upon vesting are subject to dealing restrictions for a period of twelve (12) months from the date of allocation. interest, No amount is payable on the vesting of a performance right. Performance rights carry no rights to dividends and no voting rights. As set out in the accounting standard AASB 2 and the revised ASIC guidelines, the Company has valued the issued options and performance rights. A Binomial or a Black Scholes option pricing model was used and these models take into account the following inputs: • • • • • • • Current price of the underlying shares as at the grant date. Exercise price. Expected volatility of the share price over the expected life of the option rights. First exercisable date. Expected life. Expected dividend yield. Risk free interest rate for the expected life of the option rights. Further details of the options and performance rights are disclosed in Note 16 to the Financial Statements. I nd emn ifi c ati on of Off ic er s and Aud ito r s During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary and all executive officers of the Company and of any related body corporate against a liability incurred as a Director, Secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as an officer or auditor. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 16 For personal use only Directo r s’ Sh areh old ings The following table sets out each Director’s relevant interest in shares, options and performance rights in shares of the Company as at the date of this report. Directors H Boon P McDonald J Murphy G Richards D i re cto r s ’ Me e t ing s Fully Paid Ordinary Shares 263,513 434,714 - 129,733 Options - 180,000 - - Performance Rights - 150,000 - - The following table sets out the number of Directors’ meetings (including meetings of committees of Directors) held during the financial year and the number of meetings attended by each Director while they were a Director or committee member. Directors H Boon P McDonald J Murphy G Richards Directors’ Meetings Audit & Risk Committee Meetings Remuneration Committee Meetings Nomination Committee Meetings No of meetings eligible to attend 12 12 9 12 Attended 12 12 9 12 No of meetings eligible to attend 2 0 1 2 Attended 2 0 1 2 No of meetings eligible to attend 3 0 1 3 Attended 3 0 1 3 No of meetings eligible to attend 1 0 0 1 Attended 1 0 0 1 By Board invitation, Mr Peter McDonald also attended some of the Audit & Risk, Remuneration and Nomination meetings. R emun e r at i o n R ep o rt No n Execut ive Directo r Remun e ration This report contains the remuneration arrangements in place for Directors and executives of the Group. The Remuneration Committee reviews the remuneration packages of all Directors and executive officers on an annual basis and makes recommendations to the Board. Remuneration packages are reviewed with due regard to performance and other relevant factors, and advice is sought from external advisors in relation to their structure. The Group’s remuneration policy is based on the following principles: • • • Provide competitive rewards to attract high quality executives; Provide an equity incentive for senior executives that will provide an incentive to executives to align their interests with those of the Group and its shareholders; and Ensure that rewards are referenced to relevant employment market conditions. Remuneration packages contain the following key elements: • • Primary benefits – salary / fees; and Benefits, including the provision of motor vehicles and incentive schemes, including share options and performance rights, as disclosed in Note 16 and Note 24 to the financial statements. R emun e r ati on St ruc tu re In accordance with best practice corporate governance, the structure of Non Executive Directors and senior manager remuneration is separate and distinct. Objective The Board seeks to set remuneration at a level which provides the Company with the ability to attract and retain directors of relevant experience and skill, whilst incurring costs which are acceptable to shareholders. Structure that The Company’s Constitution and the Australian Securities Exchange the aggregate remuneration of Non Listing Rules specify Executive Directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The last determination was at the Annual General Meeting held on 14 December 2000 when shareholders’ approved the Company’s constitution which provides for an aggregate remuneration of $300,000 per annum. The amount of the aggregate remuneration and the manner in which it is apportioned is reviewed periodically. The Board considers fees paid to non executive directors of comparable companies when undertaking this review process. Each Non Executive Director receives a fee for being a Director of the Company and does not participate in performance based remuneration. Non Executive Directors are encouraged to hold shares is in considered good governance for Directors to have a stake in the Company. the Company (purchased by the Director on-market). It The remuneration of Non Executive Directors for the period ended 30 June 2008 is detailed below. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 17 For personal use only S e nio r M an ag e r & E xe cut iv e D i re cto r R emun e rat ion Objective Structure The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group. The objective of the remuneration policy is: • • • Reward executives for Group and individual performance; Align the interests of the executives with those of the shareholders; and Ensure that total remuneration is competitive by market standards. In determining the level and make-up of executive remuneration, the Remuneration Committee reviews reports detailing market levels of remuneration for comparable roles. Remuneration consists of fixed and variable elements. Options and performance rights issued to executives as a form of compensation are dependant upon the performance conditions outlined in Note 16 of the financial statements. Cash bonuses granted to executives are based on the respective performance of their regional business unit. Bonuses are paid out at various times during the year and are determined at the discretion of the Remuneration Committee. The following table discloses the remuneration of the Directors of the Company: 2007 / 2008 Short term benefits Share based payments Total Performance related Post employ- ment Directors Salary & fees Bonus Non- monetary Super Options Perform- ance rights Total Options $ $ $ $ $ $ $ % % Executive Directors P McDonald Non Executive Directors H Boon G Richards (i) J Murphy (ii) Total 380,379 85,000 26,471 37,114 5,521 49,285 583,770 23.9% 9.4% 150,000 79,000 55,161 - - - - - - - - - - - - - - - 150,000 79,000 55,161 - - - - - - 664,540 85,000 26,471 37,114 5,521 49,285 867,931 2006 / 2007 Short term benefits Share based payments Total Performance related Post employ- ment Directors Salary & fees Bonus Non- monetary Super Options Perform- ance rights Total Options $ $ $ $ $ $ $ % % Executive Directors P McDonald Non Executive Directors H Boon G Richards D Reilly (iii) G Gale (iv) Total 354,215 32,000 44,609 27,929 47,138 19,930 525,821 18.8% 12.8% 150,000 71,667 31,250 - - - - - - - - - - - - - - - - - - - - - 150,000 71,667 31,250 - 607,132 32,000 44,609 27,929 47,138 19,930 778,738 - - - - - - - - - - (i) (ii) (iii) (iv) Mr Richards currently receives a fee of $75,000 per annum for his services as a Non Executive Director and Chairman of the Company’s Audit Committee. In addition, in the 2008 financial year, Mr Richards received additional fees of $4,000 per annum for additional duties undertaken at the Board’s request in relation to the Company’s China manufacturing plant. Mr Murphy was appointed as a Non Executive Director on 24 August 2007. The details of his remuneration for the reporting period are from that date. Mr Reilly retired from his role as a Non Executive Director on 21 November 2006. The details of his remuneration for the reporting period are to that date. Mr Gale retired as a Non Executive Director on 21 November 2006. Mr Gale did not receive any remuneration in his role as Non Executive Director during the reporting period. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 18 For personal use only S e nio r M an ag e r & E xe cut iv e D i re cto r Remun e rat ion (Cont inued) The following table discloses the remuneration of the key management personnel of the Group. 2007/2008 Short-term Benefits Post Employm ent Share Based Payments Termin. Benefits Total Performance Related Key management personnel Salary & fees $ Bonus $ Non- monetary $ F Albertsmeier (i) 307,357 41,091 52,420 Z Fakroddin (ii) 356,807 - Super Options J Cox P Cacioli S Carroll M Denney (iii) E Xu (iv) P Ducray (v) 252,290 40,000 246,903 25,000 261,373 - 246,336 33,051 242,284 19,397 - - - - 7,503 9,830 C McCallum (vi) 108,528 42,930 - 189,692 10,469 33,962 Perf. Rights $ 22,541 $ - $ 423,409 $ - 6,426 - 27,932 391,165 - - 6,426 - 1,832 3,213 10,050 22,541 22,541 22,541 22,541 22,541 22,541 - - - - - - 339,787 314,954 312,297 309,431 295,884 259,877 - 51,097 212,605 Total % 15.0% 1.6% 18.4% 15.1% 9.3% 18.0% 14.8% 13.9% 24.9% Options / Rights % 5.3% 1.6% 6.6% 7.2% 9.3% 7.3% 8.2% 9.9% 4.7% TOTAL 2,211,570 211,938 103,715 67,423 27,947 157,787 79,029 2,859,409 2006/2007 Short-term Benefits Post Employm ent Share Based Payments Termin. Benefits Total Performance Related Key management personnel Salary & fees $ Bonus $ Non- monetary $ Super Options F Albertsmeier (i) 320,090 77,506 Z Fakroddin (ii) 189,459 - 214,472 15,000 229,358 25,000 169,477 190,748 - - 33,479 105,064 30,873 - 28,771 - M Denney (viii) 126,964 55,017 - 179,517 12,457 4,028 S Carroll J Cox P Ducray (v) C McCallum (vi) E Xu (vii) P Cacioli (ix) TOTAL 62,713 - 1,507 5,644 1,682,798 184,980 203,722 45,429 26,523 $ - 6,408 6,408 - 3,204 8,010 2,493 - - Perf. Rights $ - - - - - - - - - - Total % Options / Rights % $ 431,075 18.0% 300,931 285,896 275,000 201,452 198,758 198,495 2.1% 7.5% 9.1% 1.6% 4.0% 7.5% 181,981 30.2% 69,864 0.0% 2,143,452 0.0% 2.1% 2.2% 0.0% 1.6% 4.0% 1.3% 0.0% 0.0% $ - - - - - - - - - - $ - - 24,956 20,510 21,957 - - - - $ - - 19,143 20,642 - - - - (i) (ii) (iii) (iv) (v) (vi) Mr Albertsmeier is based in Germany and remunerated in euro converted to Australian dollars in the table above. Mr Fakroddin is based in Europe and is remunerated in euro converted to Australian dollars in the table above. Mr Fakroddin departed his role on 30 June 2008. Mr Denney is based in the United States of America and remunerated in United States dollars converted to Australian dollars in the table above. Ms Xu is based in China and is remunerated in Chinese renminbi converted to Australian dollars in the table above. Mr Ducray is based in China and remunerated in Chinese renminbi and United States dollars converted to Australian dollars in the table above. Mr McCallum is based in New Zealand and is remunerated in New Zealand dollars converted to Australian dollars in the table above. Mr MaCallum was made redundant on 31 December 2007 following the completion of the restructuring of the New Zealand operations. His remuneration details for the reporting period are to that date. (vii) Ms Xu is based in China and is remunerated in Chinese renminbi and United States dollars converted to Australian dollars in the table above. (viii) Mr Denney was appointed Managing Director, Gale Pacific USA on 1 August 2006 and therefore the details of his remuneration for the reporting period are from that date. He is based in the United States of America and remunerated in United States dollars converted to Australian dollars in the table above. (ix) Dr Cacioli was appointed General Manager, Research and Development and Technical Services on 1 March 2007 and therefore the details of his remuneration for the reporting period are from that date. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 19 For personal use only A u d it o r Ind ep en d en ce and N o n A u d i t S e r v ic e s A copy of the auditor’s independence declaration in relation to the audit for the financial year is provided with this report. Non Audit Se rvices The following non audit services were provided by the Company’s auditor, Pitcher Partners. Non audit services have been ratified by the Audit Committee and reported to the Board. 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. The nature and scope of each non audit service provided means that auditor independence was not compromised. Amounts paid or payable to an auditor for non audit services provided during the year by the auditors to any entity that is part of the Group for: Taxation services Corporate secretarial services Systems review Capital raising related services Jung divestment Government grant review General assistance Total Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 62 21 2 - - 3 2 90 84 46 25 13 5 3 2 178 17 - - - - 3 2 22 36 - 25 13 5 3 2 84 Proceed ing s on Behalf of th e Comp an y No person has applied for leave of a Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Ro und ing Off of Amo unts The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars. Signed in accordance with a resolution of Directors made pursuant to section 298(2) of the Corporations Act 2001. On behalf of the Directors; Mr Harry Boon Chairman 30 September 2008 Mr Peter McDonald Managing Director and Chief Executive Officer 30 September 2008 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 20 For personal use only A u d it o r ’ s Ind ep en d enc e D e cl a ra t io n To the Directors of Gale Pacific Limited In relation to the independent audit for the year ended 30 June 2008, to the best of my knowledge and belief there have been: (i) No contraventions of the auditor independence requirements of the Corporations Act 2001. (ii) No contraventions of any applicable code of professional conduct. S Schonberg Partner 30 September 2008 PITCHER PARTNERS MELBOURNE t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 21 For personal use only D i re cto r s ’ De c l ar at ion The Directors of the Company declare that: The financial statements and notes, as set out on pages 24 to 67 are in accordance with the Corporations Act 2001 including: • • • Compliance with Accounting Standards in Australia and the Corporations Regulations 2001; Providing a true and fair view of the financial position as at 30 June 2008 and of the performance, as represented by the results of the operations and the cash flows, of the Company and the Group for the year ended on that date; and That the Directors have been given the declaration required under section 295A of the Corporations Act 2001. In the Directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Mr Harry Boon Chairman 30 September 2008 Mr Peter McDonald Managing Director and Chief Executive Officer 30 September 2008 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 22 For personal use only Ind ependent Aud ito r’s Repo rt To The Memb ers of G ale Pacific Lim it ed We have audited the accompanying financial report of Gale Pacific Limited and controlled entities. The financial report comprises the Balance Sheet as at 30 June 2008, and the Income Statement, Statement of Changes in Equity and Cash Flow Statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year. Directors' Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards. Auditor's Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s Opinion In our opinion, (a) the financial report of Gale Pacific Limited is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the company's and consolidated entity's financial position as at 30 June 2008 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the consolidated financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 17 to 19 of the directors' report for the year ended 30 June 2008. 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. Auditor’s Opinion In our opinion the Remuneration Report of Gale Pacific Limited and controlled entities for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001. S Schonberg Partner 30 September 2008 PITCHER PARTNERS MELBOURNE t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 23 For personal use only F I N A N C I A L R E S U L T S Synthesis Water Conservation t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 24 Water Storage Shade Covers Synthesis shade fabrics are used to cover large potable water storages to reduce evaporation, decrease algal blooms, and protect water from contamination by birds or wind-blown debris. Dam Liners Synthesis fabrics such as Canvacon and Landmark are used to line rural dams to prevent water loss through seepage. Water Containment Fabrics Synthesis fabrics are used worldwide to produce reliable water storage liners domestic water tanks to industrial-sized tank liners. Irrigation Channels Canvacon and Landmark can be used to line irrigation channels to prevent water seepage, and for tough, portable fluming. Synthesis shade fabrics can be used as channel covers to reduce evaporation and minimise aquatic plant growth. U n i qu e f a br i cs t o se c ur e our mo st p r ec i ous r e sou r c e synthesisfabrics.com For personal use only I N C O M E S T A T E M E N T F o r t h e y ea r e n d ed 3 0 Jun e 2 0 08 Consolidated Company Note 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) Revenue Expenses Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Inventory write down Impairment of goodwill and assets Restructuring and termination costs Impairment of related party receivables Operating overheads Other expenses Finance costs Profit / (loss) from continuing operations before income tax Income tax (expense) / benefit Profit / (loss) from continuing operations after income tax Loss from discontinued operations Profit / (loss) attributable to minority interests Net profit / (loss) attributable to the members of the parent entity Earnings Per Share From Continuing & Discontinued Operations Basic earnings per share (cents per share) Diluted earnings per share (cents per share) From Continuing Operations Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2 3 4 23(c) 19 18 21 21 21 21 The accompanying notes form part of these financial statements. 105,119 110,404 60,598 57,801 (597) (479) (30,012) (32,147) (3,334) (42,209) (17,799) (7,361) (1,581) - - - 5,776 (57,624) (22,623) (7,859) (4,339) (1,031) (4,672) - (7,698) (2,604) - - - - (25,202) (25,343) (10,647) (405) (3,037) 4,191 (1,686) 2,505 - - (228) (5,598) (13,137) (2,752) (15,889) (471) - (3,249) (2,252) 3,539 (1,232) 2,307 - - (8,049) (3,053) (440) (316) - (9,699) (8,080) (2,728) (4,379) (11,569) 2,884 (8,685) - - 2,505 (16,360) 2,307 (8,685) 1.92 1.90 1.92 1.90 (17.07) (17.07) (16.58) (16.58) t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 25 For personal use only B A L A N C E S H E E T A s at 30 June 2 00 8 Current Assets Cash and cash equivalents Trade and other receivables Inventories Current tax assets Other current assets Total current assets Non Current Assets Amounts receivable from controlled entities Other financial assets Property, plant and equipment Intangible assets Deferred tax assets Total non current assets Total assets Current Liabilities Trade and other payables Borrowings Other financial liabilities Current tax liabilities Provisions Total current liabilities Non Current Liabilities Borrowings Deferred tax liabilities Provisions Total non current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Parent entity interest Minority interests Total equity t r o p e R l a u n n A 8 0 0 2 І d e t i Consolidated Company Note 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 5 6 7 4 9 6 8 10 11 4 12 13 14 4 15 13 4 15 16 17 18 19 16,594 19,552 26,576 178 760 63,660 - - 55,344 10,845 175 66,364 130,024 10,649 34,140 28 6 1,778 46,601 2,978 1,587 112 4,677 51,278 78,746 100,813 (10,026) (12,030) 78,757 (11) 78,746 7,642 19,363 30,143 362 1,517 59,027 - - 60,724 11,707 270 72,701 131,728 11,104 47,073 31 658 6,182 65,048 4,348 1,133 502 5,983 71,031 60,697 81,936 (6,784) (14,444) 60,708 (11) 60,697 12,317 5,856 10,914 - 296 29,383 41,641 30,585 7,918 5,081 2,842 88,067 117,450 4,182 17,643 28 6 883 3,654 5,557 10,581 - 1,169 20,961 42,244 25,326 9,272 5,158 2,908 84,908 105,869 2,865 27,074 31 382 902 22,742 31,254 2,978 - 69 3,047 25,789 91,661 100,813 632 (9,784) 91,661 - 91,661 4,348 - 78 4,426 35,680 70,189 81,936 344 (12,091) 70,189 - 70,189 The accompanying notes form part of these financial statements. i m L c i f i c a P e a G l 26 For personal use only S T A T E M E N T O F C H A N G E S I N E Q U I T Y F o r t h e y ea r e n d ed 3 0 Jun e 2 0 08 Consolidated Company Note 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) Total Equity at the Beginning of the Period 60,697 46,933 70,189 43,896 Exchange differences on translation of foreign operations Employee share based expenditure 17(a) 17(b) (3,621) 288 (4,854) 166 Net (loss) / income recognised directly in equity (3,333) (4,688) - 288 288 - 166 166 Profit / (loss) for the period 2,505 (16,360) 2,307 (8,685) Total recognised income and expense for the period (828) (21,048) 2,595 (8,519) Transaction with Equity Holders in their Capacity as Equity Holders Contributions, net of raising costs and tax Dividends provided for or paid 16 20 18,877 34,812 18,877 34,812 - - - - 18,877 34,812 18,877 34,812 Total equity at the end of the period 78,746 60,697 91,661 70,189 Total Recognised Income and Expense for the Period is Attributable To Members of the parent Minority interest Total The accompanying notes form part of these financial statements. 2,505 - 2,505 (16,360) - (16,360) 2,307 - 2,307 (8,685) - (8,685) t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 27 For personal use only S T A T E M E N T O F C A S H F L O W S F o r t h e y ea r e n d ed 3 0 Jun e 2 0 08 Consolidated Company Note 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) Cash Flow From Operating Activities Receipts from customers 109,476 127,586 62,987 59,654 Payments to suppliers and employees (96,139) (113,027) (55,035) (55,849) Interest received Borrowing costs paid Income tax (payments) / refunds Net cash provided by operating activities 23(b) Cash Flow From Investing Activities Proceeds from sale of plant and equipment Proceeds from the disposal of business 23(c) Payment for plant and equipment Payment for intangible assets (Payments) / proceeds for / from investments Amounts advanced by related parties 876 (3,276) (1,118) 9,819 443 - (3,370) (866) - - 489 (5,740) (768) 8,540 537 15,690 (3,953) (174) - - Net cash (used) / provided by investing activities (3,793) 12,100 Cash Flow From Financing Activities Proceeds from issue of equity securities Repayment of borrowings Repayment of principal on finance leases Repayment of principal on hire purchase Net cash provided / (used) by financing activities Net increase in cash held Cash at beginning of year Effects of exchange rate changes on items denominated in foreign currencies 18,395 (5,709) (175) (2,225) 10,286 16,312 539 (1,166) Cash at the end of the year 23(a) 15,685 The accompanying notes form part of these financial statements. 19,017 (30,949) (226) (1,783) (13,941) 6,699 (6,414) 254 539 t r o p e R l a u n n A 8 0 0 2 І d e t i 2,379 (2,378) (1,060) 6,893 70 - (402) (836) (5,259) 603 (5,824) 18,395 (4,866) (175) (2,225) 11,129 12,198 (790) - 2,785 (4,379) 59 2,270 7,830 - (1,211) (174) 83 3,129 9,657 19,017 (26,489) (226) (1,783) (9,481) 2,446 (3,236) - 11,408 (790) i m L c i f i c a P e a G l 28 For personal use only N O T E S T O T H E F I N A N C I A L S T A T E M E N T S NOT E 1: BASIS OF PR EPAR AT ION (c). Net Investments in Foreign Operations This financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The financial report covers Gale Pacific Limited (“the Company”) as an individual parent entity and Gale Pacific Limited and controlled entities as a consolidated entity (“the Group”). Gale Pacific Limited is a company limited by shares, incorporated and domiciled in Australia. The following is a summary of material accounting policies adopted by the Group in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a). Basis of Preparation of the Financial Report The financial report of Gale Pacific Limited and controlled entities, and Gale Pacific Limited as an individual parent entity comply with Australian equivalents to International Financial Reporting Standards. The financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets as described in the accounting policies. Compliance with Australian equivalents of International Financial Reporting Standards ensures compliance with International Financial Reporting Standards. (b). Principals of Consolidation The consolidated financial statements are those of the consolidated entity, comprising the financial statements of the parent entity and of all entities, which Gale Pacific Limited controlled from time to time during the year and at balance date. Details of the controlled entities are contained in Note 26. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist. All related party balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Minority interests in the equity and results of the entities that are controlled are shown separately in the consolidated financial report. During the prior year, the Group reclassified a portion of the company’s related party balances as net investments in foreign operations as permitted by AASB 121 The Effects of Changes in Foreign Exchange Rates. The balances reclassified were identified as being monetary items of a non current nature as settlement of these balances is not planned and the Group’s forecasts showed that any settlement would not occur in the foreseeable future. While this situation persists, impacting the Group’s current year profits with the movement in the foreign exchange rates applying to these monetary items would not provide the best representation of a current year’s performance. As permitted by AASB 121, from the date of reclassification, all changes in the Australian dollar value of these items arising from changes in foreign exchange rates are, in the consolidated financial statements, being recognised in the foreign currency reserve. As and when settlements occur, the cumulative amount of these changes in value deferred in the foreign currency translation reserve will be recognised in that current year’s profit in the consolidated accounts. translation In the accounts of the Company, these changes in value continue to be recognised in the current year’s profit as required by AASB 121. Details of the monetary items reclassified and the total exchange difference recognised in the foreign currency translation reserve are detailed below. Note Consolidated 2007 / 2008 ($000) 2006 / 2007 ($000) 16,855 16,855 13,421 13,421 5,238 5,238 35,514 35,514 17(a) (4,374) (2,783) Monetary item identified as a net investment in a foreign operation Related party receivable to the company from Gale Europe GmbH Vertriebsgesellschaft Related party receivable to the company from Gale Pacific Special Textiles (Ningbo) Limited Related party receivable to the company from Gale Pacific (New Zealand) Limited Total Exchange movement arising on monetary item forming part of the net investment in related party, recognised in foreign currency translation reserve It is impracticable to estimate the effect of this change on future periods because movements in foreign exchange rates cannot be predicted. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 29 For personal use only NOT E 1: BASIS OF PR EPAR AT ION (CO NTINU ED) (d). Revenue Recognition Revenue from the sale of goods is recognised upon the delivery of goods to customers. Where a government grant (including Strategic Investment Plan income (SIP)) is received or receivable relating to research and development costs that have been expensed, the grant is recognised as revenue. Where a grant is received or research and development costs that have been deferred, the grant is deducted from the carrying amount of the deferred costs. receivable relating to Other revenue is recognised when the right to receive the revenue has been established. All revenue is stated net of the amount of goods and services tax (GST). (e). Cash and Cash Equivalents For the purposes of the statement of cash flows, cash includes cash on hand and at call, deposits with banks or financial in money market investments instruments maturing within less than two months and net of bank overdrafts. institutions, For the purposes of the statement of cash flows, cash includes cash on hand and at call, deposits with banks or financial in money market investments instruments maturing within less than two months and net of bank overdrafts. institutions, Cash has been offset against borrowings where; • • the Group has a legally enforceable right to set off cash and borrowings, and the Group intends to settle on a net basis or realise the asset and settle the liability simultaneously. The amount recognised as an offset against borrowings has been disclosed in Note 5 and Note 13. (f). Inventories Inventories are measured at the lower of cost and net realisable value. Net realisable value is determined on the basis of each inventory line’s normal selling pattern. Costs are assigned on a first-in first-out basis and include direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenses. (g). Plant and Equipment those assets. The recoverable amount is assessed on the basis of the expected discounted net cash flows that will be received from the asset’s employment and subsequent disposal. Refer to Note 1(j). The cost of fixed assets constructed within the Group includes the cost of materials, direct labour and an appropriate proportion of fixed and variable overheads. Depreciation The depreciable amounts of all fixed assets, including capitalised leased assets, are depreciated on a straight line basis over their estimated useful lives to the entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated improvements. Depreciation and useful for are amortisation appropriateness. When changes are made, adjustments are reflected in current and future periods only. the rates reviewed lives of annually The depreciation rates used for each class of assets are: Class of Fixed Asset Buildings Leasehold improvements Plant and equipment Leased plant and equipment Motor vehicles Depreciation Rates Depreciation Basis 2.25% Straight line Determined by lease term Straight line 6.7% - 20.0% Straight line 6.7% - 20.0% Straight line 20.0% Straight line Office equipment 14.3% - 50.0% Straight line (h). Leases Finance Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the entities within the Group are classified as finance leases. Finance leases are capitalised, recording at the inception of the lease an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are amortised on a straight line basis over their estimated useful lives where it is likely that the Group will obtain ownership of the asset or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation. Operating Leases Plant and Equipment Plant and equipment is measured on the cost basis. The carrying value of plant and equipment is reviewed annually to ensure it is not in excess of the recoverable amount from Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives received under operating leases are recognised as a liability. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 30 For personal use only NOT E 1: BASIS OF PR EPAR AT ION (CO NTINU ED) (i). Intangibles Goodwill Goodwill on consolidation represents the excess of the cost of an acquisition over the fair value of the Group’s share of net identifiable assets of the acquired entities at the date of acquisition. Goodwill is not amortised but is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is carried at cost less accumulated impairment losses. Patents and Trademarks Patents and trademarks are valued in the accounts at cost of acquisition and are amortised over the period in which the benefits are expected to be realised, but not exceeding 20 years. Application Software Application software is valued in the accounts at cost and amortised on a straight line basis over its expected useful life but not exceeding five years. Research and Development Expenditure on research is recognised as an expense when incurred. Expenditure on development activities is capitalised only when it is expected that future benefits will exceed the deferred costs. Capitalised development expenditure less accumulated amortisation. is stated at cost Amortisation is calculated using a straight line method to allocate the cost over a period (not exceeding three years), during which the related benefits are expected to be realised, once commercial production is commenced. (j). Impairment of Assets Assets with an indefinite useful life are not amortised but are tested annually for impairment in accordance with AASB 136. Assets subject to annual depreciation or amortisation are reviewed for impairment whenever events or circumstances arise that indicate that the carrying amount of the asset may be impaired. An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell and value in use. (k). Taxes Current income tax expense or revenue is the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities. A balance sheet approach is adopted under which deferred tax assets and liabilities are recognised for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred tax asset or liability is recognised in relation to temporary differences arising from the initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. tax assets are Deferred temporary differences and unused tax losses only when it is probable that future taxable amounts will be available to utilise those temporary differences and losses. recognised for Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. (l). Employee Benefits Provision is made for the Group’s liability for employee entitlements arising from services rendered by employees to balance date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries, annual leave and sick leave which will be settled after one year, have been measured at their nominal amount. Other employee entitlements payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those entitlements. Contributions are made by to employee superannuation funds and are charged as expenses when incurred. the Group Share Based Payments The Group operates share option and performance rights schemes including for certain staff and executives executive directors. The bonus element over the exercise price for these instruments is recognised as an expense in the income statement in the period(s) when the benefit is earned. The total amount to be expensed over the vesting period is determined by reference to the fair value of the share options and performance rights at grant date. The fair value of options and performance rights at grant date is determined using either the Binomial Tree or a Black Scholes option pricing model, and is recognised as an employee expense over the period during which the employees become entitled to the option or performance right. The market value of shares issued to employees for no cash consideration under an employee share scheme is recognised as an expense when the employees become entitled to the shares. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 31 For personal use only NOT E 1: BASIS OF PR EPAR AT ION (CO NTINU ED) (m). Financial Instruments Transactions and Balances The Group classifies its financial instruments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re- evaluates the designation at each reporting date. Loans and Receivables Loans and receivables are measured at fair value at inception and subsequently at amortised cost using the effective interest rate method. Financial Liabilities loans Financial liabilities include trade payables, other creditors and inter-company balances and loans from or other amounts due to director- related entities. third parties including from financial Non derivative liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Investment in Controlled Entities Investments in controlled entities are carried at cost and tested for impairment. Financial Instruments at Fair Value Through Profit and Loss Forward foreign currency contracts that do not qualify for hedge accounting are measured at their fair value with any increment or decrement in fair value recognised in profit and loss. (n). Foreign Currencies Functional and Presentation Currency Transactions in foreign currencies of entities within the Group are translated into functional currency at the rate of exchange ruling at the date of the transaction. Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the financial year. Resulting exchange differences arising on settlement or re- statement are recognised as revenues and expenses for the financial year. Group Companies The financial statements of foreign operations whose functional currency the Group’s is different presentation currency are translated as follows: from • • • Assets and liabilities are translated at year end exchange rates prevailing at that reporting date; Income and expenses are translated at average exchange rates for the period; and All resulting exchange differences are recognised as a separate component of equity. Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve as a separate component of equity in the balance sheet. (o). Rounding Amounts The Company is of a kind referred to in ASIC Class Order CO 98/0100 and in accordance with that Class Order, amounts in the financial statements have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. The financial statements of each group entity are measured using its functional currency, which is the currency of the that entity primary economic environment operates. The consolidated financial statements are presented in Australian dollars, as this is the parent entity’s functional and presentation currency. in which (p). Comparatives information has been Where necessary, comparative reclassified and repositioned for consistency with current year disclosures. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 32 For personal use only NOT E 2: R EV E NU E Operating Activities Sale of goods – other parties SIP income Interest income – other parties Other revenue Total revenue Operating Activities Sale of goods – other parties Sale of goods – related parties SIP income Interest income – other parties Interest income – related parties Other revenue Total revenue Consolidated 2007 / 2008 ($000) 2006 / 2007 ($000) Continuing Discontinuing Continuing Discontinuing 104,020 102 946 51 105,119 - - - - - 109,338 8,184 110 626 330 - - 28 110,404 8,212 Company 2007 / 2008 ($000) 2006 / 2007 ($000) Continuing Discontinuing Continuing Discontinuing 57,175 814 102 871 1,580 56 60,598 - - - - - - - 53,930 969 110 446 2,339 7 57,801 - - - - - - - t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 33 For personal use only NOT E 3: PROF IT Profit before income tax expense has been determined after charging / (crediting): Consolidated 2007 / 2008 ($000) 2006 / 2007 ($000) Continuing Discontinuing Continuing Discontinuing Cost of sales Finance Costs Other persons Depreciation of Non Current Assets Buildings Leasehold improvements Plant and equipment Motor vehicles Office equipment Amortisation of Non Current Assets Leased plant and equipment Leased motor vehicles Patents and trademarks Application software Research and Development Expenditure Capitalised and amortised Expensed as incurred Impairment Impairment of Non Current Assets Plant and equipment Inventory write down Restructuring and termination costs (Decrease) / increase in provision for obsolete inventory Bad and Doubtful Debts Bad debts written off – trade debtors Movement in provisions for doubtful debts – trade debtors Remuneration of the Auditors of the Parent Entity For Auditing the financial report Taxation services Systems review Capital raising related services Jung divestment Government grant review General assistance Total remuneration of the auditors of the parent entity Remuneration of Other Auditors of Controlled Entities For Auditing the financial report Taxation services Management services Systems review Total remuneration of other auditors Total remuneration of auditors Foreign currency translation (gains) Net (Gain) / Loss on Disposal of Non Current Assets Plant and equipment Motor vehicles Office equipment Operating lease rental expense Share based payment expense 56,577 3,037 197 76 5,375 81 476 12 96 63 167 818 670 - - 1,581 - (709) 210 103 194 17 - - - 3 2 216 136 45 21 2 204 420 (252) (5) (3) 10 1,718 288 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 74,982 4,479 5,598 195 100 5,722 121 545 46 80 55 71 924 652 317 714 4,339 4,672 1,338 107 49 316 36 25 13 5 3 2 400 142 48 46 - 236 636 (1,238) 66 42 18 3,615 166 142 - - 12 5 14 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 34 For personal use only NOT E 3: PROF IT (CONTINUED) Cost of sales Finance Costs Other persons Depreciation of Non Current Assets Leasehold improvements Plant and equipment Motor vehicles Office equipment Amortisation of Non Current Assets Leased plant and equipment Leased motor vehicles Patents and trademarks Application software Research and Development Expenditure Capitalised and amortised Expensed as incurred Impairment of Non Current Assets Plant and equipment Inventory write down Impairment of related party balances Loss on sale of investment in subsidiary (Decrease) / increase in provision for obsolete inventory Bad and Doubtful Debts Bad debts written off – trade debtors Movement in provisions for doubtful debts – trade debtors Remuneration of the Auditors of the Parent Entity For Auditing the financial report Taxation services Systems review Capital raising related services Jung divestment Government grant review General assistance Total remuneration of auditors Foreign currency translation (gains) Net (Gain) / Loss on Disposal of Non Current Assets Plant and equipment Motor vehicles Office equipment Operating lease rental expense Share based payment expense Company 2007 / 2008 ($000) 2006 / 2007 ($000) Continuing Discontinuing Continuing Discontinuing 30,428 2,252 22 1,289 30 242 12 96 (38) 133 818 713 - - - - (43) - - 194 17 - - - 3 2 216 2,202 - (5) - - 288 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 32,506 4,379 22 1,581 62 209 46 80 111 18 924 119 316 440 9,699 - 649 38 (28) 316 36 25 13 5 3 2 400 1,819 - 5 2 1,696 166 - - - - - - - - - - - - - - - 467 - - - - - - - - - - - - - - - - - t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 35 For personal use only NOT E 4: IN CO ME TA X (a). The Components of Tax Expense Current tax Deferred tax Total income tax expense / (benefit) Disclosed in the financial statements as Income tax expense / (benefit) from continuing business Income tax benefit from discontinuing business Total Consolidated Company 2007 / 2008 2006 / 2007 ($000) 638 1,048 1,686 1,686 - 1,686 ($000) 811 1,917 2,728 2,752 (24) 2,728 2007 / 2008 ($000) 684 548 1,232 1,232 - 1,232 2006 / 2007 ($000) 914 (3,798) (2,884) (2,884) - (2,884) (b). The Prima Facie Income Tax Payable on Profit is Reconciled to the Income Tax Expense as Follows Prima facie tax payable on profit before income tax at 30% Add tax effect of: Tax rate differentials in foreign countries Tax losses not recognised / derecognised Exempt income Effect of tax rate changes on deferred tax balances Interest expense non allowable Capital loss on divestment of business Other non allowable / (non assessable) items Less tax effect of: Over provision for income tax in the prior year Income tax expense / (benefit) attributed to profit from ordinary activities Less income tax benefit from discontinuing business Income tax expense / (benefit) from continuing business Consolidated Company 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) 1,257 (682) 1,269 (213) 7 - - 43 1,681 5 1,686 - 1,686 ($000) (4,089) ($000) 1,062 ($000) (3,471) 408 5,910 - - 134 79 249 2,691 37 2,728 (24) 2,752 - - - - - - 170 1,232 - 1,232 - 1,232 - - - - - 140 277 (3,054) 170 (2,884) - (2,884) (c). Income Tax Recognised Directly in Equity The following current and deferred tax amounts were credited directly to equity during the period. t r o p e R l a u n n A 8 0 0 2 І d e t i Deferred Tax Equity raising costs deductible over 5 years Total Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) (482) (482) (295) (295) (482) (482) (295) (295) i m L c i f i c a P e a G l 36 For personal use only NOT E 4: IN CO ME TA X (CONT IN U ED) (d). Current Tax Current tax asset Current tax liability Total Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 178 (6) 172 362 (658) (296) - (6) (6) - (382) (382) (e). Movement in Net Carrying Amount Movement in the current tax net carrying amount between the beginning and the end of the year. Balance at the beginning of the year Current year tax expense Income tax payments / (refunds) Disposed businesses Net foreign currency movements arising from foreign operations Carrying amount at the end of the year (f). Deferred Tax Deferred Tax (Liabilities) / Assets Arise from the Following Property, plant and equipment Foreign exchange Income not derived Finance leases Research and development Doubtful debts Other financial liabilities Provisions Employee benefits Capitalised costs Borrowing costs Equity raising costs Other Total Unused Tax Losses and Credits Tax losses Net deferred tax (liability) / asset Represented By Deferred tax asset Deferred tax liability Total Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) (296) (638) 1,118 - (12) 172 703 (811) 768 (1,051) 95 (296) (382) (684) 1,060 - - (6) 591 (914) (59) - - (382) Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) (705) (1,720) (71) 133 (203) 45 91 58 327 (190) 44 590 199 (1,402) (10) (1,412) 175 (1,587) (1,412) (1,172) (250) (153) (15) (449) 22 102 379 369 (170) 78 315 81 (863) - (863) 270 (1,133) (863) (629) (407) (71) 133 (203) - 71 2,933 265 116 44 590 - 2,842 - 2,842 2,842 - 2,842 (866) 585 (153) (15) (449) - 28 3,064 209 112 78 315 - 2,908 - 2,908 2,908 - 2,908 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 37 For personal use only NOT E 4: IN CO ME TA X (CONT IN U ED) (g). Unrecognised Deferred Tax Assets The following deferred tax assets have not been brought to account as it is not probable that these can be recovered. Tax losses – income Temporary differences not brought to account Tax losses – capital Total Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 6,205 143 1,990 8,338 4,071 1,567 1,990 7,628 - - 1,990 1,990 - - 1,990 1,990 Unrecognised deferred tax assets are calculated by applying to the pre tax value the tax rate of the jurisdiction in which the asset resides. Assets are converted to Australian dollars at the prevailing period end exchange rate. (h). Tax Losses The Group has recognised as a deferred tax asset income tax losses of $10,000 (2007: Nil) in tax jurisdictions where it is probable that future taxable income will be available to utilise these losses. NOT E 5: CASH & CA SH EQU I VAL ENT S Cash on hand Cash at bank Cash on deposit 1 Total NOT E 6: T RA DE & O T HER R EC E I VABL E S Current Trade debtors Less provision for doubtful debts Other receivables Total Non Current Amounts receivable from controlled entities Less provision for non recoverability Total t r o p e R l a u n n A 8 0 0 2 І d e t i Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 18 3,514 13,062 16,594 13 3,806 3,823 7,642 1 493 11,823 12,317 1 1,173 2,480 3,654 Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 19,117 (244) 18,873 679 19,552 - - - 18,784 (159) 18,625 738 19,363 - - - 5,526 - 5,526 330 5,856 51,340 (9,699) 41,641 5,012 - 5,012 545 5,557 51,943 (9,699) 42,244 i m L c i f i c a P e a G l 38 1 Cash on deposit is after setting off $5,827,000 (2007 : Nil) of deposit against bank loans held with the bank. For personal use only NOT E 7: IN VENTO RIES Current Raw materials at cost Work in progress at cost Finished goods at cost Less provision for obsolescence Total Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 3,659 2,383 21,146 (612) 26,576 3,892 3,369 24,406 (1,524) 30,143 1,185 - 9,734 (5) 255 1,031 9,478 (183) 10,914 10,581 NOT E 8: O TH ER F INA NCIAL A SSETS Non Current Investments in controlled entities at cost Total Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) - - - - 30,585 30,585 25,326 25,326 NOT E 9: O T H ER A S S ET S Current Prepayments Total Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 760 760 1,517 1,517 296 296 1,169 1,169 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 39 For personal use only NOT E 10: PRO PERT Y, PLA NT & EQ UI PM ENT Consolidated Company 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) 7,754 (590) 7,164 59,263 (16,741) 42,522 75 (71) 4 528 (280) 248 595 (279) 316 406 (221) 185 3,869 (2,917) 952 3,953 55,344 7,842 (415) 7,427 61,892 (13,216) 48,676 270 (254) 16 578 (264) 314 594 (271) 323 342 (125) 217 3,584 (2,616) 968 2,783 60,724 - - - 14,067 (7,257) 6,810 75 (71) 4 331 (167) 164 270 (114) 156 406 (221) 185 2,498 (1,937) 561 38 7,918 - - - 13,479 (5,968) 7,511 270 (254) 16 328 (145) 183 306 (130) 176 342 (125) 217 2,099 (1,695) 404 765 9,272 Buildings At cost Less accumulated depreciation Plant and Equipment At cost Less accumulated depreciation Plant and Equipment Under Lease At cost Less accumulated amortisation Leasehold Improvements At cost Less accumulated depreciation Motor Vehicles At cost Less accumulated depreciation Motor Vehicles Under Lease At cost Less accumulated amortisation Office Equipment At cost Less accumulated depreciation Capital Work in Progress Total property, plant and equipment t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 40 For personal use only NOT E 10: PRO PERT Y, PLA NT & EQ UI PM ENT (CONT IN U ED) Movements in Carrying Amounts Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the year. Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) Buildings Balance at the beginning of the year Additions / (transfers) Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Plant and Equipment Balance at the beginning of the year Reclassifications Additions / (transfers) Disposals Depreciation expense Impairment loss Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Plant and Equipment Under Lease Balance at the beginning of the year Reclassifications Additions / (transfers) Amortisation expense Carrying amount at the end of the year Leasehold Improvements Balance at the beginning of the year Reclassifications Additions / (transfers) Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Motor Vehicles Balance at the beginning of the year Reclassifications Additions / (transfers) Disposals Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Motor Vehicles Under Lease Balance at the beginning of the year Additions / (transfers) Disposals Amortisation expense Carrying amount at the end of the year Office Equipment Balance at the beginning of the year Reclassifications Additions / (transfers) Disposals Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year 7,427 82 (197) (148) 7,164 48,676 - 1,345 (564) (5,375) - (1,560) 42,522 16 - - (12) 4 314 - 11 (76) (1) 248 323 - 91 (12) (81) (5) 316 217 127 (63) (96) 185 968 - 500 (19) (476) (21) 952 8,357 53 (195) (788) 7,427 57,522 6 384 (623) (5,734) (714) (2,165) 48,676 715 (38) (615) (46) 16 232 46 133 (100) 3 314 836 (25) 71 (408) (126) (25) 323 197 100 - (80) 217 2,206 (80) 218 (556) (555) (265) 968 - - - - - 7,511 - 588 - (1,289) - - 6,810 16 - - (12) 4 183 - 3 (22) - 164 176 - 12 (2) (30) - 156 217 127 (63) (96) 185 404 - 399 - (242) - 561 - - - - - 17,347 (23) (7,916) - (1,581) (316) - 7,511 715 (38) (615) (46) 16 196 (1) 10 (22) - 183 364 9 - (135) (62) - 176 197 100 - (80) 217 588 (89) 132 (22) (205) - 404 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 41 For personal use only NOTE 11: INTANGIBLE ASSETS Consolidated Company Goodwill at cost Less accumulated impairment Patents, trademarks and licenses at cost Less accumulated amortisation Application software at cost Less accumulated amortisation Research and development Less accumulated amortisation Total intangible assets Movements in Carrying Amounts Movement in the carrying amounts for each class of intangible assets between the beginning and the end of the year Goodwill Balance at the beginning of the year Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Patents, Trademarks and Licences Balance at the beginning of the year Additions / (transfers) Amortisation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Application Software Balance at the beginning of the year Reclassifications Additions / (transfers) Amortisation expense Carrying amount at the end of the year Research and Development Balance at the beginning of the year Reclassifications Additions / (transfers) Amortisation expense Impairment loss Carrying amount at the end of the year 2007 / 2008 ($000) 2006 / 2007 ($000) 9,588 (929) 8,659 1,297 (617) 680 1,074 (245) 829 4,865 (4,188) 677 10,845 9,327 (668) 8,659 716 39 (63) (12) 680 169 - 827 (167) 829 1,495 - - (818) - 677 10,313 (986) 9,327 1,281 (565) 716 250 (81) 169 4,865 (3,370) 1,495 11,707 9,491 (164) 9,327 669 120 (55) (18) 716 - 250 - (81) 169 2,326 356 54 (924) (317) 1,495 2007 / 2008 ($000) 4,127 (1,054) 3,073 1,097 (497) 600 886 (155) 731 4,865 (4,188) 677 5,081 2006 / 2007 ($000) 4,127 (1,054) 3,073 1,057 (534) 523 89 (22) 67 4,865 (3,370) 1,495 5,158 3,073 - 3,073 523 39 38 - 600 67 - 797 (133) 731 1,495 - - (818) - 677 3,073 - 3,073 514 120 (111) - 523 - 89 - (22) 67 2,326 39 54 (924) - 1,495 NOT E 12: T RA DE & O T HER PA YAB L ES Current Trade payables Sundry payables and accruals Total Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 6,560 4,089 10,649 6,751 4,353 11,104 2,163 2,019 4,182 1,268 1,597 2,865 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 42 For personal use only NOT E 13: BOR ROWING S Current Secured liabilities: Bank overdrafts Bank loans 2 Other loans Finance lease liability Hire purchase liability Unsecured liabilities: Bank loans Other loans Non Current Secured liabilities: Other loans Finance lease liability Hire purchase liability Unsecured liabilities: Other loans Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 909 29,600 818 210 359 31,896 1,898 346 2,244 2,449 116 47 2,612 366 366 7,103 35,197 747 228 2,225 45,500 1,358 215 1,573 3,267 273 406 3,946 402 402 909 15,001 818 210 359 17,297 - 346 346 2,449 116 47 2,612 366 366 4,444 19,215 747 228 2,225 26,859 - 215 215 3,267 273 406 3,946 402 402 Total 37,118 51,421 20,621 31,422 Disclosed in the Financial Statements As Current borrowings Non current borrowings 34,140 2,978 47,073 4,348 17,643 2,978 27,074 4,348 The Group has a $15 million bank multi option facility in Australia and in China facilities with various banks totalling Chinese Renminbi (“RMB”) 114.5 million and a US $4.5 million facility. At 30 June 2008 the $15 million multi option facility was fully drawn down, although the Group also held cash on deposit of $11.8 million with the bank. In China the RMB facilities were drawn down to RMB 78.8 million leaving RMB 35.7 million unused and the US $ facility was drawn down to US $4.3 million leaving US $0.2 million unused. The $15 million multi option facility matures on 30 November 2008. The Chinese facilities all mature separately over the period 10 October 2008 to 13 March 2009. Security - Liabilities are secured by: • • • Registered charge over all unencumbered assets in Australia, New Zealand, United States of America and Germany. Mortgage over the buildings of Gale Pacific Special Textiles (Ningbo) Limited. Fixed and floating charges over the assets of Gale Pacific Special Textiles (Ningbo) Limited. 2 Bank loans is after set off of $5,827,000 (2007 : Nil) on deposit held with the bank as an offset. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 43 For personal use only NOT E 14: OTH E R F IN ANC IAL L IA BILI TI E S Derivatives Carried at Fair Value Current Foreign currency forward contracts Total Disclosed in the Financial Statements As Current other financial liabilities N O T E 15: PRO V I SIO N S Current Employee benefits Restructuring and termination costs Factory make good costs Non Current Employee benefits Total Disclosed in the Financial Statements As Current provisions Non current provisions (a) Aggregate employee benefits liability (b) Number of employees at year end Movements in Carrying Amounts Movement in the carrying amounts for the following classes of provision between the beginning and the end of the year Restructuring and Termination Costs 3 Balance at the beginning of the year Provisions recognised Payments made Reductions resulting from re-measurement Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Factory Make Good 4 Balance at the beginning of the year Provisions recognised Payments made Reductions resulting from re-measurement Carrying amount at the end of the year t r o p e R l a u n n A 8 0 0 2 І d e t i Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 28 28 28 31 31 31 28 28 28 31 31 31 Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 1,230 478 70 112 1,890 1,778 112 1,299 772 4,751 - (3,595) (56) (622) 478 250 - (150) (30) 70 1,181 4,751 250 502 6,684 6,182 502 1,683 815 - 4,672 - - 79 4,751 - 250 - - 250 813 - 70 69 952 883 69 882 90 - - - - - - 250 - (150) (30) 70 652 - 250 78 980 902 78 730 86 - - - - - - - 250 - - 250 3 The provision for restructuring and termination costs represents the Directors’ best estimate of the remaining costs to be incurred by the New Zealand operation for the closure of its manufacturing facility. The restructuring is expected to be completed by 28 February 2009. 4 The provision for factory make good represents the Directors’ best estimate of the remaining costs to be incurred in Australia for the make good of the site formerly occupied by the knitting plant that has been relocated to China. The make good is expected to be completed by 28 February 2009. i m L c i f i c a P e a G l 44 For personal use only NOT E 16: CONT RIBUT ED EQU IT Y Paid Up Capital 136,834,516 fully paid ordinary shares (2007: 96,834,516) Movement in Share Capital Shares issued at the beginning of the financial year 23,529,412 shares issued as part of a private placement and a Share Purchase Plan – 3 July 2006 10,941,177 shares issued in conversion of 4,270,271 convertible notes – 5 July 2006 7,294,112 shares issued in conversion of 2,594,593 convertible notes – 1 August 2006 40,000,000 shares issued as part of a private placement and a Share Purchase Plan – 30 August 2007 Costs of capital raising (net of tax) Total Company 2007 / 2008 ($000) 2006 / 2007 ($000) 100,813 81,936 - - - 20,000 (1,123) 100,813 81,936 47,124 20,000 9,000 6,500 - (688) 81,936 Convertible Notes No. No. Convertible notes issued at the beginning of the financial period 4,270,271 notes converted to 10,941,177 shares – 5 July 2006 2,594,593 notes converted to 7,294,112 shares – 1 August 2006 Convertible notes issued at the end of the financial period - - - - 6,864,864 (4,270,271) (2,594,593) - (a). Movement in Share Capital During the financial year, (30 August 2007) the Company raised $20 million through private placements of 40,000,000 shares issued at 50 cents per share. (b). Share Based Payments The Group maintains option and performance rights schemes including for certain staff and executives, executive directors, as approved by shareholders at an annual general meeting. These schemes are designed to reward key personnel when the Group meets performance hurdles relating to: • • • Improvement in net profit after tax. Improvement in return to shareholders. Improvement in share price. The number of unissued ordinary shares under option as at the date of this report is 750,000. The issue price of each option is zero. Each option entitles the holder to one (1) ordinary share in Gale Pacific Limited in the event that the option is exercised. The number of unissued ordinary shares under the performance rights scheme at the date of this report is 850,000. This includes 700,000 performance rights issued during the year to senior executives. Each performance right entitles the holder one (1) ordinary share in Gale Pacific Limited when exercised and is subject to the satisfying of relevant performance hurdles based on improvements in the Company’s diluted earnings per share. Options and performance rights issued to executives during the year were issued in accordance with the Group’s remuneration policy which: • • • Reward executives performance; for Group and individual Align the interests of the executives with those of the shareholders; and Ensure that total remuneration is competitive by market standards. The following share based payment arrangements were in existence during the current and comparative reporting periods. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 45 For personal use only NOT E 16: CONT RIBUT ED EQU IT Y (CONT IN U ED) Options Grant Date Expiry Date Exercise Price Balance at Start of the Year No. Granted During the Year No. Exercised During the Year No. Lapsed During the Year No. Balance at End of the Year No. Exercisable at End of the Year No. Consolidated and Parent Entity - 2008 15 Dec 2004 16 Nov 2005 24 Oct 2006 Total 1 Dec 2008 1 Dec 2008 31 Dec 2008 Weighted average exercise price Consolidated and Parent Entity - 2007 5 May 2004 15 Dec 2004 16 Nov 2005 24 Oct 2006 Total 1 Dec 2006 1 Dec 2008 1 Dec 2008 31 Dec 2008 Weighted average exercise price $3.00 $1.52 $1.52 $1.50 $3.00 $1.52 $1.52 180,000 450,000 120,000 750,000 $1.88 50,000 240,000 580,000 - 870,000 $1.93 - - - - - - - 370,000 370,000 $1.52 - - - - - - - - - - - - - - (50,000) (60,000) (130,000) (250,000) (490,000) $1.70 180,000 450,000 120,000 750,000 $1.88 - 180,000 450,000 120,000 750,000 $1.88 60,000 - - 60,000 $3.00 - - - - - - Grant Date 15 December 2004 Grant Date 16 November 2005 Grant Date 24 October 2006 $3.00 $3.00 35% 2.50 years 3.00 years 3.50 years 4.00 years 2.47% 4.86% 4.87% 4.91% 4.95% $1.60 $1.52 40% 2.49 years 2.99 years - - 2.96% 5.21% 5.21% - - $0.90 $1.52 45% 2.10 years - - - 1.70% 6.04% - - - Options Valuation Assumptions Option Series Grant date share price Exercise price Expected volatility Option Life Tranche 1 Tranche 2 Tranche 3 Tranche 4 Dividend yield Risk Free Interest Rate Tranche 1 Tranche 2 Tranche 3 Tranche 4 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 46 For personal use only NOT E 16: CONT RIBUT ED EQU IT Y (CONT IN U ED) Performance Rights Grant Date Expiry Date Exercise Price Consolidated and Parent Entity - 2008 Balance at Start of the Year No. Granted During the Year No. Exercised During the Year No. Lapsed During the Year No. Balance at End of the Year No. Exercisable at End of the Year No. 2 Feb 2007 16 Nov 2007 2 Feb 2017 16 Nov 2017 N/A N/A 150,000 - - 700,000 - - - - 150,000 700,000 - - Performance Rights Valuation Assumptions Grant date share price Exercise price Expected volatility Expected Life Tranche 1 Tranche 2 Dividend yield Risk free interest rate NOTE 17: RESERVES Foreign currency translation reserve Share based payment reserve Enterprise reserve fund Total (a). Foreign Currency Translation Reserve Grant Date 16 November 2007 Grant Date 2 February 2007 $0.45 N/A N/A 0.9 years 1.9 years 5.0% N/A $0.83 N/A N/A 2.4 years 1.8% N/A Consolidated Company 2007 / 2008 ($000) (11,289) 632 631 2006 / 2007 ($000) (7,668) 344 540 (10,026) (6,784) 2007 / 2008 ($000) 2006 / 2007 ($000) - 632 - 632 - 344 - 344 Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) Balance at the beginning of the year Translation of foreign subsidiaries for the year Movement arising from the reclassification of non current related party monetary items to net investments in foreign operations Gain realised on disposal of foreign subsidiary Balance at the end of the year (7,668) (2,030) (1,591) - (11,289) (2,821) (1,833) (2,783) (231) (7,668) - - - - - - - - - - Exchange differences relating to foreign currency monetary items forming part of the net investment in a foreign operation and the translation of foreign controlled entities are brought to account by entries made directly to the foreign currency translation reserve, as described in Notes 1(c) and 1(n). (b). Employee Share Based Payment Reserve Balance at the beginning of the year Share based expenditure Balance at the end of the year Consolidated Company 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) 344 288 632 178 166 344 344 288 632 178 166 344 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 47 For personal use only NOTE 17: RESERVES (CONTINUED) (c). Enterprise Reserve Fund (Gale Pacific Special Textiles (Ningbo) Limited) Balance at the beginning of the year Statutory transfers from retained earnings Balance at the end of the year Consolidated Company 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) 540 91 631 540 - 540 - - - - - - Gale Pacific Special Textiles (Ningbo) Limited (“GPST”) is required by Chinese Company Law to maintain this reserve in its accounts. This reserve is unavailable for distribution to shareholders but can be used by GPST to expand the business, make up losses or increase the registered capital. GPST is required to allocate 10% of its annual profit after tax to this reserve until it reaches 50% of GPST’s registered capital. In the Group’s 2006 / 2007 accounts this reserve was incorrectly classified as a non current provision. This has been corrected for the 2007 / 2008 reporting period and the 2006 / 2007 comparatives adjusted as follows. Enterprise reserve fund (GPST) Foreign currency translation reserve (Adjustment to bring enterprise reserve fund into equity at historical foreign currency translation rates) 2006 / 2007 Previously Stated ($000) - (7,624) 2006 / 2007 Adjustment ($000) 540 (44) 2006 / 2007 Restated ($000) 540 (7,668) Non current provisions 998 (496) 502 NOT E 18: RETA IN ED EAR NINGS Balance at the beginning of the year Net profit / (loss) attributable to members of the parent entity Transfers to reserves Balance at the end of the year NOT E 19: MINO RIT Y INTER EST S Minority interest in controlled entities comprises: Balance at the beginning of the year Net loss attributable to minority interest Balance at the end of the year Consolidated Company 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) (14,444) 2,505 (91) ($000) 1,916 (16,360) - (12,030) (14,444) ($000) (12,091) 2,307 - (9,784) ($000) (3,406) (8,685) - (12,091) Consolidated Company 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) (11) - (11) (11) - (11) - - - - - - t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 48 For personal use only NOT E 20: F RA NK ING ACCO UNT BALA NC E Adjusted franking account balance Company 2007 / 2008 ($000) 2,300 2006 / 2007 ($000) 1,213 NOT E 21: EA RN ING S PER SHA RE Basic Earnings Per Share From continuing operations From discontinued operations Total basic earnings per share Diluted Earnings Per Share From continuing operations From discontinued operations Total diluted earnings per share Earnings Per Share The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows: Net profit Earnings Used in the Calculation of Basic EPS Adjustments to exclude loss for the period from discontinued operations Earnings used in the calculation of basic and diluted EPS from continuing operations Weighted average number of ordinary shares for the purposes of basic earnings per share Weighted Average Number of Shares Deemed to be Issued For No Consideration in Respect Of: Employee options Performance rights Weighted average number of ordinary shares for the purposes of diluted earnings per share Consolidated 2007 / 2008 (Cents Per Share) 2006 / 2007 (Cents Per Share) 1.92 - 1.92 1.90 - 1.90 Consolidated 2007 / 2008 ($000) 2,505 - 2,505 Consolidated 2007 / 2008 (No. 000) 130,168 900 434 131,502 (16.58) (0.49) (17.07) (16.58) (0.49) (17.07) 2006 / 2007 ($000) (16,360) 471 (15,889) 2006 / 2007 (No. 000) 95,852 - - 95,852 For the comparative period, potential ordinary shares have not been included in the calculation of diluted EPS as losses means that they are anti- dilutive in nature. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 49 For personal use only NOT E 22: CA PITAL A ND L EA SING CO MMITMEN TS (a). Finance Leasing Commitments Payable Not longer than one year Longer than one year and not longer than five years Minimum future lease payments 5 Less future finance charges Present value of minimum lease payments Disclosed in the Financial Statements As Current borrowings Non current borrowings (b). Hire Purchase Commitments Payable Not longer than one year Longer than one year and not longer than five years Minimum future hire purchase payments 6 Less future finance charges Present value of minimum hire purchase payments Disclosed in the Financial Statements As Current borrowings Non current borrowings (c). Operating Lease Commitments Consolidated Company Note 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) 230 128 358 (32) 326 210 116 438 365 803 (302) 501 228 273 230 128 358 (32) 326 210 116 438 365 803 (302) 501 228 273 13 13 Consolidated Company Note 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) 372 50 422 (16) 406 359 47 2,376 430 2,806 (175) 2,631 2,225 406 372 50 422 (16) 406 359 47 2,376 430 2,806 (175) 2,631 2,225 406 13 13 Consolidated Company Note 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) Non cancellable operating capitalised in the accounts leases contracted for but not Payable Not longer than one year Longer than one year and not longer than five years Longer than five years Total 2,172 5,158 - 7,330 3,009 9,256 752 13,017 1,078 2,947 - 4,025 1,596 6,828 - 8,424 The Group leases property and equipment under operating leases expiring in one to six years. Leases of property generally provide the Group with a right of renewal at which time all leases are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rental increases are based on the consumer price index. 5 Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual. 6 Minimum future hire purchase payments includes the aggregate of all lease payments and any guaranteed residual. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 50 For personal use only NOT E 23: CA SH FLO W INFO RMATION (a). Reconciliation of Cash Consolidated Company 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows Cash on hand Cash at bank Cash on deposit Bank overdrafts Total 18 3,514 13,062 (909) 15,685 13 3,806 3,823 (7,103) 539 1 493 11,823 (909) 11,408 1 1,173 2,480 (4,444) (790) (b). Reconciliation of Cash Flow from Operations with Profit from Ordinary Activities Profit / (loss) after income tax Non Cash Flows in Profit Profit / (loss) on disposal of fixed assets Profit on disposal of investments Depreciation of fixed assets Impairment of fixed assets Impairment of related party balances Amortisation / impairment of intangible assets Equity settled share based payments Changes in tax balances processed directly in equity Changes in tax balances due to foreign exchange movements Changes in assets and liabilities due to the divestment of Jung Changes in Assets and Liabilities (Increase) / decrease in receivables Decrease / (increase) in inventories Decrease / (increase) in other assets (Decrease) / increase in payables, accruals and other financial liabilities Increase / (decrease) in tax balances Net cash inflow provided by operations Consolidated Company 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) 2,505 (16,360) 2,307 (8,685) 215 - 6,313 - - 1,048 288 482 4 - (189) 3,567 757 (5,252) 81 9,819 126 - 6,911 714 - 1,296 166 295 (15) (15,914) 17,339 17,456 (20) (6,185) 2,731 8,540 (5) - 1,691 - - 913 288 482 - - (299) (333) 873 1,286 (310) 6,893 7 467 2,018 316 9,699 1,035 166 295 - 76 857 676 (804) (733) (3,120) 2,270 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 51 For personal use only NOT E 23: CA SH FLO W INFO RMATION (CO NT INUED) (c). Discontinued Business On 24 August 2006 the Group announced the sale of its German garden products entity Jung Garten Freizeit Vertriebsgesellschaft mbH (“Jung”). The subsidiary was sold on 1 September 2006 and is reported in the comparatives of this financial report as a discontinued operation. This sale has no impact in the current period. Financial information relating to the discontinued operation for the period to the date of the disposal is set out below. Further information is set out in Note 27 Segment Reporting. Profit From Discontinued Operations Revenue Expenses Loss before income tax Income tax benefit Loss after income tax of discontinued operations Loss on sale of division before income tax Income tax (expense) / benefit Loss on sale of division after income tax Loss from discontinued operations Cash Flows From Discontinued Operations Net cash inflow from ordinary activities Net cash inflow from investing activities Effect of exchange rate changes on items nominated in foreign currencies Net increase in cash generated by Jung Details of Sale of Jung Consideration received Foreign currency translation reserve realised on sale Carrying amount of net assets sold Foreign currency movements on deferred consideration from date of sale written off on final settlement Loss on sale before income tax Income tax (expense) / benefit Loss on sale after income tax Reconciliation of Proceeds From Disposal of Business Repayment of related party balances by the purchaser Assumption of debt Sale consideration received from the purchaser Total proceeds from disposal of business t r o p e R l a u n n A 8 0 0 2 І d e t i Consolidated 2007 / 2008 2006 / 2007 ($000) ($000) - - - - - - - - - - - - - - - - - - - - - - - - - 8,212 (8,442) (230) 24 (206) (265) - (265) (471) 1,400 15,674 (1,111) 15,963 83 231 314 (654) 75 (265) - (265) 12,416 3,191 83 15,690 i m L c i f i c a P e a G l 52 For personal use only NOTE 24: DIRECTORS AND EXECUTIVES’ COMPEN SA TION The key management personnel of the Group who held office during the year were: Directors H Boon (Chairman, Non Executive) J Murphy (Non Executive) G Richards (Non Executive) P McDonald (Managing Director and Chief Executive Officer) Executives F Albertsmeier (Managing Director, Europe / Middle East / Africa) P Cacioli (General Manager, Research & Development and Technical Services) S Carroll (Managing Director, Australia) J Cox (Chief Financial Officer) M Denney (Managing Director, USA) P Ducray (Chief Manufacturing Officer) Z Fakroddin (Business Unit Manager, Gale Europe GmbH) C McCallum (Managing Director, New Zealand) E Xu (Managing Director, China) Key Management Personnel Compensation The Remuneration Committee reviews the remuneration packages of all directors and executive officers on an annual basis and makes recommendations to the Board. Remuneration packages are reviewed with due regard to performance and other relevant factors, and advice is sought from external advisers in relation to their structure. Remuneration packages contain the following key elements: a. b. c. Salary / fees; Benefits, including the provision of motor vehicles and superannuation; and Incentive schemes, including bonus and share options and performance rights under options and performance right schemes as disclosed in Note 16 to the Financial Statements. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 53 For personal use only NOTE 24: DIRECTORS AND EXECUTIVES’ COMPEN SA TION (CONTINUED) 2007/2008 Short-term Benefits Post Employm ent Share Based Payments Termin. Benefits Total Performance Related Key management personnel Salary & fees $ Bonus $ Non- monetary $ F Albertsmeier (i) 307,357 41,091 52,420 Z Fakroddin (ii) 356,807 - Super Options J Cox P Cacioli S Carroll M Denney (iii) E Xu (iv) P Ducray (v) 252,290 40,000 246,903 25,000 261,373 - 246,336 33,051 242,284 19,397 - - - - 7,503 9,830 C McCallum (vi) 108,528 42,930 - 189,692 10,469 33,962 Perf. Rights $ 22,541 $ - $ 423,409 $ - 6,426 - 27,932 391,165 - - 6,426 - 1,832 3,213 10,050 22,541 22,541 22,541 22,541 22,541 22,541 - - - - - - 339,787 314,954 312,297 309,431 295,884 259,877 - 51,097 212,605 Total % 15.0% 1.6% 18.4% 15.1% 9.3% 18.0% 14.8% 13.9% 24.9% Options / Rights % 5.3% 1.6% 6.6% 7.2% 9.3% 7.3% 8.2% 9.9% 4.7% TOTAL 2,211,570 211,938 103,715 67,423 27,947 157,787 79,029 2,859,409 2006/2007 Short-term Benefits Post Employm ent Share Based Payments Termin. Benefits Total Performance Related Key management personnel Salary & fees $ Bonus $ Non- monetary $ Super Options F Albertsmeier (i) 320,090 77,506 Z Fakroddin (ii) 189,459 - 214,472 15,000 229,358 25,000 169,477 190,748 - - 33,479 105,064 30,873 - 28,771 - M Denney (viii) 126,964 55,017 - 179,517 12,457 4,028 S Carroll J Cox P Ducray (v) C McCallum (vi) E Xu (vii) P Cacioli (ix) TOTAL 62,713 - 1,507 5,644 1,682,798 184,980 203,722 45,429 26,523 $ - 6,408 6,408 - 3,204 8,010 2,493 - - Perf. Rights $ - - - - - - - - - - Total % Options / Rights % $ 431,075 18.0% 300,931 285,896 275,000 201,452 198,758 198,495 2.1% 7.5% 9.1% 1.6% 4.0% 7.5% 181,981 30.2% 69,864 0.0% 2,143,452 0.0% 2.1% 2.2% 0.0% 1.6% 4.0% 1.3% 0.0% 0.0% $ - - - - - - - - - - $ - - 24,956 20,510 21,957 - - - - $ - - 19,143 20,642 - - - - (i) (ii) (iii) (iv) (v) (x) Mr Albertsmeier is based in Germany and remunerated in euro converted to Australian dollars in the table above. Mr Fakroddin is based in Europe and is remunerated in euro converted to Australian dollars in the table above. Mr Fakroddin departed his role on 30 June 2008. Mr Denney is based in the United States of America and remunerated in United States dollars converted to Australian dollars in the table above. Ms Xu is based in China and is remunerated in Chinese renminbi converted to Australian dollars in the table above. Mr Ducray is based in China and remunerated in Chinese renminbi and United States dollars converted to Australian dollars in the table above. Mr McCallum is based in New Zealand and is remunerated in New Zealand dollars converted to Australian dollars in the table above. Mr MaCallum was made redundant on 31 December 2007 following the completion of the restructuring of the New Zealand operations. His remuneration details for the reporting period are to that date. (xi) Ms Xu is based in China and is remunerated in Chinese renminbi and United States dollars converted to Australian dollars in the table above. (xii) Mr Denney was appointed Managing Director, Gale Pacific USA on 1 August 2006 and therefore the details of his remuneration for the reporting period are from that date. He is based in the United States of America and remunerated in United States dollars converted to Australian dollars in the table above. (xiii) Dr Cacioli was appointed General Manager, Research and Development and Technical Services on 1 March 2007 and therefore the details of his remuneration for the reporting period are from that date. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 54 For personal use only NOTE 24: DIRECTORS AND EXECUTIVES’ COMPEN SA TION (CONTINUED) Compensation by Category Short term employment benefits Post employment benefits Share based payments Termination benefits Total Directors’ Equity Holdings: Fully Paid Ordinary Shares Consolidated Company 2007 / 2008 ($000) 2006 / 2007 ($000) 2007 / 2008 ($000) 2006 / 2007 ($000) 3,303 104 241 79 3,727 2,755 73 94 - 2,922 1,602 104 129 - 1,835 1,263 73 73 - 1,409 2007 / 2008 Executive Directors P McDonald Non Executive Directors H Boon J Murphy G Richards Executives J Cox Total 2006 / 2007 Executive Directors P McDonald Non Executive Directors H Boon G Richards Executives J Cox Total Balance 30 June 2007 No. Received as Remuneration No. Options Exercised Net Change No. No. Balance 30 June 2008 No. 334,714 73,000 - 78,851 10,000 496,565 - - - - - - - - - - - - 100,000 434,714 190,513 - 50,882 148,923 490,318 263,513 - 129,733 158,923 986,883 Balance 30 June 2006 No. Received as Remuneration No. Options Exercised Net Change No. No. Balance 30 June 2007 No. 334,714 73,000 78,851 - 486,565 - - - - - - - - - - - - - 10,000 10,000 334,714 73,000 78,851 10,000 496,565 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 55 For personal use only NOTE 24: DIRECTORS AND EXECUTIVES’ COMPEN SA TION (CONTINUED) Directors’ and Executives’ Equity Holdings, Compensation Options and Performance Rights: Granted and Vested During the Year 2007 / 2008 Vested Number Granted Number Grant Date Terms & Conditions for Each Grant Exercise Price Expiry Date First Exercise Date Last Exercise Date Value Per Option / Right at Grant Date Executive Directors None Non Executive Directors None Executives (Performance Rights) F Albertsmeier P Cacioli S Carroll J Cox M Denney P Ducray E Xu Total - - - - - - - - - - - - - - - 25,000 16/11/2007 75,000 16/11/2007 25,000 16/11/2007 75,000 16/11/2007 25,000 16/11/2007 75,000 16/11/2007 25,000 16/11/2007 75,000 16/11/2007 25,000 16/11/2007 75,000 16/11/2007 25,000 16/11/2007 75,000 16/11/2007 25,000 16/11/2007 75,000 16/11/2007 700,000 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 2006 / 2007 Vested Number Granted Number Grant Date Executive Directors (Performance Rights) Terms & Conditions for Each Grant Exercise Price Expiry Date First Exercise Date Last Exercise Date Value Per Option / Right at Grant Date P McDonald - 150,000 02/02/2007 $0.79 Nil 02/02/2017 30/09/2009 02/02/2017 Non Executive Directors None Executives (Options) E Xu Total - - t r o p e R l a u n n A 8 0 0 2 І d e t i 80,000 24/10/2006 $0.10 $1.52 31/12/2008 29/09/2008 31/12/2008 230,000 i m L c i f i c a P e a G l 56 For personal use only NOTE 24: DIRECTORS AND EXECUTIVES’ COMPEN SA TION (CONTINUED) Directors’ and Executives’ Equity Holdings Compensation Options and Performance Rights: Movements During the Year 2007 / 2008 Balance 1 July 2007 No. Granted as Compensation No. Exercised Lapsed No. No. Net Other Change No. Balance 30 June 2008 No. Balance Held Nominally No. 150,000 180,000 Executive Directors (Options) P McDonald Executive Directors (Performance Rights) P McDonald Non Executive Directors None Executives (Options) S Carroll Z Fakroddin P Ducray C McCallum (i) E Xu Executives (Performance Rights) F Albertsmeier S Carroll P Cacioli J Cox M Denney P Ducray E Xu Total - - - - - - - 520,000 40,000 40,000 20,000 50,000 40,000 - - - - - - - 100,000 100,000 100,000 100,000 100,000 100,000 100,000 700,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 180,000 150,000 - - - (50,000) - - - - - - - - (50,000) 40,000 40,000 20,000 - 40,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 1,170,000 - - - - - - - - - - - - - - - 2006 / 2007 Balance 1 July 2006 No. Granted as Compensation No. Exercised Lapsed No. No. Net Other Change No. Balance 30 June 2008 No. Balance Held Nominally No. - 240,000 Executive Directors (Options) P McDonald Executive Directors (Performance Rights) P McDonald Non Executive Directors None Executives (Options) S Carroll P Ducray Z Fakroddin C McCallum E Xu Total 40,000 20,000 40,000 50,000 50,000 440,000 - 150,000 - - - - 80,000 230,000 - - - - - - - - (60,000) 180,000 - 150,000 - - - - (90,000) (150,000) 40,000 20,000 40,000 50,000 40,000 520,000 - - - - - - - - - - - - - - - - (i) Mr McCallum was made redundant on 31 December 2007 following the completion of the restructuring of the New Zealand operations. Remuneration Practices The Group policy for determining the nature and amount of emoluments of Board members and senior executives is as follows. The remuneration structure for executive officers, including Executive Directors, is based on a number of factors including length of service, particular experience of the individual concerned, and overall performance of the Group. The contracts of service between the Group and Executive Directors and executives are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement Executive Directors and executives are paid employee benefit entitlements accrued to date of retirement. Payment of bonuses, share options and other incentive payments are made at the discretion of the Remuneration Committee to key executives of the Group based predominantly on an objective review of the Group’s financial performance, the individuals’ achievement of stated financial and non financial targets and any other factors the Committee deems relevant. Non Executive Directors receive a fee for being Directors of the Company and do not participate in performance based remuneration. Options and performance rights issued to executives as a form of compensation are dependant upon the performance conditions outlined in Note 16(b). For the current year bonuses have been granted as at 30 June 2008. Bonuses are paid out in cash as determined at the discretion of the Remuneration Committee. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 57 For personal use only NOT E 25: RELAT ED PART Y TR AN SA CTIO N S Equity Investments in Controlled Entities Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 26 to the financial statements. Directors’ Remuneration Details of Directors’ remuneration are disclosed in Note 24. (a). Transactions within the Wholly Owned Group The wholly owned group includes: • • The ultimate parent entity in the wholly owned group; and Wholly owned controlled entities. The ultimate parent entity in the wholly owned group is Gale Pacific Limited, which is also the parent entity in the economic entity. Amounts receivable from or payable to entities in the wholly owned group are disclosed in Note 6. These amounts are unsecured and are subordinate to other liabilities. The provision for impairment, totalling $9,699,000, created as at 30 June 2007 was renewed at 30 June 2008 and considered adequate as at that date. During the financial year, the following transactions occurred between entities in the wholly owned group: • • • • • Sale and purchase of goods totalling $32,119,000 (2007: $39,624,000) Gale Pacific Limited received interest income from its subsidiaries totalling $3,044,000 (2007: $2,339,000) Gale Pacific Limited made interest payments to its subsidiaries totalling $1,558,000 (2007: $1,337,000) Plant and equipment was transferred totalling $7,335,000 (2007: $9,084,000) Reimbursement of certain operating costs totalling $1,066,000 (2007: $1,577,000) (b). Transactions with Directors and Director Related Entities The following amounts were payable to Directors and their Director related entities as at the reporting date. Consolidated Company 2007 / 2008 2006 / 2007 2007 / 2008 2006 / 2007 ($000) ($000) ($000) ($000) Current – accrued bonus and director fees 108 38 108 38 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 58 For personal use only NOT E 26: CONT ROLL ED ENT ITIES Parent Entity Gale Pacific Limited Controlled Entities Aquaspan Pty Ltd Gale Europe GmbH Vertriebsgesellschaft Gale Pacific (New Zealand) Limited Gale Pacific Employees Superannuation Fund Pty Ltd Gale Pacific FZE Gale Pacific Special Textiles (Ningbo) Limited Gale Pacific USA Inc Country of Incorporation Ownership Interest (%) 2007 / 2008 2006 / 2007 Australia Australia Germany New Zealand Australia United Arab Emirates China United States of America 50% 100% 100% 100% 100% 100% 100% 50% 100% 100% 100% 100% 100% 100% NOTE 27: SEGMENT REPORTING Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise income earning assets and revenue, interest bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. Inter-segment pricing is predominantly determined on an arm’s length basis. Geographical Segment In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. The Group comprises the following main geographical segments, based on the Group’s management reporting system. Asia / Pacific Manufacturing and distribution facilities are located in Australia, China and New Zealand which supplies products to Australia, New Zealand, Europe, USA and the Middle East. Sales offices are located in all states in Australia and in New Zealand. Americas Sales offices are located in Florida and custom blind manufacturing and distribution facilities are located in California which service the North American region. Europe / Middle East / Africa Sales offices and distribution facilities are located in the United Arab Emirates and Germany which service those regional markets. Business Segment The Group operates predominantly in one business segment, being the advanced polymer fabrics industry. The Group manufactures and markets advanced durable knitted and woven polymer fabrics and value added structures made from these fabrics. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 59 For personal use only NOT E 27: S EG ME NT R EPORT ING ( CONT IN U ED) Segment Information Primary Reporting – Geographical Segments Asia / Pacific Americas Europe / Middle East / Africa Discontinued Business Eliminations Consolidation ($’000) ($’000) ($’000) ($’000) ($’000) ($’000) 30 June 2008 Revenue outside the economic entity Inter segment revenue Total revenue Segment operating profit / (loss) Income tax (expense) / benefit Operating profit / (loss) after tax Depreciation and amortisation Individually Significant Items Reimbursement of R & D expenditure Inventory write down Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Acquisition of non current assets 30 June 2007 Revenue outside the economic entity Inter segment revenue Total revenue Segment operating profit / (loss) Income tax (expense) / benefit Operating profit / (loss) after tax 71,847 16,421 88,268 6,651 (1,683) 4,968 6,004 102 - 105,077 - 105,077 48,527 - 48,527 3,638 72,787 23,938 96,725 (4,298) (492) (4,790) 20,904 172 21,076 40 (40) - 516 - - 16,354 - 16,354 1,660 - 1,660 573 27,837 43 27,880 1,947 (737) 1,210 11,869 234 12,103 (3,222) - (3,222) 841 - (1,581) 9,331 - 9,331 1,227 - 1,227 25 10,279 222 10,501 (10,472) (1,609) (12,081) - - - - - - - - - - - - - - - - 8,212 - 8,212 (495) 24 (471) Depreciation and amortisation 6,524 564 771 31 Individually Significant Items Reimbursement of R & D expenditure Impairment of non current assets Inventory write down Restructuring and termination costs Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Acquisition of non current assets 110 (1,031) (440) (4,672) 101,856 - 101,856 65,940 - 65,940 3,570 - - - - 18,052 - 18,052 2,714 - 2,714 453 - - (3,899) - 13,280 - 13,280 2,672 - 2,672 88 - - - - - - - - - - 16 499 (16,827) (16,328) 722 37 759 - - - (842) - (842) (126) - (126) - (499) (24,203) (24,702) (314) 86 (228) - - - - - (1,564) - (1,564) (89) - (89) - 105,119 - 105,119 4,191 (1,686) 2,505 7,361 102 (1,581) 129,920 104 130,024 51,288 (10) 51,278 4,236 118,616 - 118,616 (13,632) (2,728) (16,360) 7,890 110 (1,031) (4,339) (4,672) 131,624 104 131,728 71,237 (206) 71,031 4,127 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 60 For personal use only NOT E 28: F IN ANC IAL INSTR UMENT S (a). Financial Instruments Derivative financial instruments may be used by the Group to limit exposure to exchange rate risk associated with foreign currency transactions and interest rate risk. Derivative financial instruments are recognised in the financial statements. Transactions to reduce foreign currency and interest rate exposure are undertaken without the use of collateral as the Group deals with reputable institutions with sound financial positions. (b). Net Fair Values The net fair value of assets and liabilities approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form. (c). Credit Risk Exposure to credit risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at the reporting date to recognised financial assets is the carrying amount of those assets, net of any provisions for doubtful debts of those assets. Consolidated Company Note As at 30 Jun 2008 As at 30 June 2007 As at 30 Jun 2008 As at 30 June 2007 The maximum exposure to credit risk at the reporting date was: Investments in controlled entities Amounts receivable from controlled entities Trade and other receivables Cash and cash equivalents Total 8 6 6 5 The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: Asia Pacific Americas Europe / Middle East / Africa Total The ageing of trade receivables not impaired at the reporting date was: Not outside credit terms Outside credit terms 0-30 days Outside credit terms 31-120 days Outside credit terms 121 days to one year More than one year Total The ageing of impaired receivables at the reporting date was: Outside credit terms 0-30 days Outside credit terms 31-120 days Outside credit terms 121 days to one year More than one year Total - - 19,552 16,594 36,146 7,647 6,266 4,960 18,873 13,215 3,283 1,816 411 148 - - 19,363 7,642 27,005 7,399 7,190 4,036 18,625 13,692 3,301 1,057 155 420 18,873 18,625 - 14 - 230 244 - - - - - 30,585 41,641 5,856 12,317 90,379 25,326 42,244 5,557 3,654 76,781 5,526 5,012 - - - - 5,526 5,012 2,779 1,264 1,231 252 - 5,526 - - - - - 3,564 1,189 259 - - 5,012 - - - - - t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 61 For personal use only NOT E 28: F IN ANC IAL INSTR UMENT S (CON TINU ED) (d). Liquidity Risk The following tables detail both the Group’s effective weighted average interest rates on classes of its financial liabilities at reporting date and the contractual maturity of these financial liabilities. Contractual cash flows include both interest and principal cash flows, are undiscounted and based on the earliest date on which the Group can be required to pay. Consolidated 30 June 2008 Non Derivative Financial Liabilities Bank overdrafts Bank loans Other loans Finance lease liabilities Hire purchase liabilities Derivative Financial Liabilities Note Weighted Average Effective Interest Rate Carrying Amount Contractual Cash Flows Contractual Cash Flows Maturing In: Less Than 6 Months 6 To 12 Months 1 To 2 Years 2 To 5 Years % ($000) ($000) ($000) ($000) ($000) ($000) 13 13 13 13 13 9.54% 909 946 946 - 5.07% 31,498 32,267 27,991 4,276 - - - - 8.79% 3,979 4,568 7.82% 8.84% 326 406 358 422 736 172 352 736 1,393 1,703 58 19 63 32 65 19 Foreign currency forward contracts 14 - 28 28 28 - - - Total 37,146 38,589 30,225 5,089 1,488 1,787 Company 30 June 2008 Non Derivative Financial Liabilities Bank overdrafts Bank loans Other loans Finance lease liabilities Hire purchase liabilities Derivative Financial Liabilities Note Weighted Average Effective Interest Rate Carrying Amount Contractual Cash Flows Contractual Cash Flows Maturing In: Less Than 6 Months 6 To 12 Months 1 To 2 Years 2 To 5 Years % ($000) ($000) ($000) ($000) ($000) ($000) 13 13 13 13 13 9.54% 909 946 946 3.03% 15,001 15,368 15,368 - - - - - - 8.79% 3,979 4,568 7.82% 8.84% 326 406 358 422 736 172 352 736 1,393 1,703 58 19 63 32 65 19 Foreign currency forward contracts 14 - 28 28 28 - - - Total 20,649 21,690 17,602 813 1,488 1,787 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 62 For personal use only NOT E 28: F IN ANC IAL INSTR UMENT S (CON TINU ED) Consolidated 30 June 2007 Non Derivative Financial Liabilities Bank overdrafts Bank loans Other loans Finance lease liabilities Hire purchase liabilities Derivative Financial Liabilities Note Weighted Average Effective Interest Rate Carrying Amount Contractual Cash Flows Contractual Cash Flows Maturing In: Less Than 6 Months 6 To 12 Months 1 To 2 Years 2 To 5 Years % ($000) ($000) ($000) ($000) ($000) ($000) 13 13 13 13 13 10.22% 7,103 7,105 7,105 - 5.90% 36,555 36,798 32,991 3,807 8.80% 4,631 7.04% 501 5,552 543 666 106 666 152 8.77% 2,631 2,790 1,032 1,336 - - - - 1,331 2,889 229 371 56 51 Foreign currency forward contracts 14 - 31 31 31 - - - Total 51,452 52,819 41,931 5,961 1,931 2,996 Company 30 June 2007 Non Derivative Financial Liabilities Bank overdrafts Bank loans Other loans Finance lease liabilities Hire purchase liabilities Derivative Financial Liabilities Note Weighted Average Effective Interest Rate Carrying Amount Contractual Cash Flows Contractual Cash Flows Maturing In: Less Than 6 Months 6 To 12 Months 1 To 2 Years 2 To 5 Years % ($000) ($000) ($000) ($000) ($000) ($000) 13 13 13 13 13 9.76% 4,444 4,445 4,445 5.65% 19,215 19,218 19,218 8.80% 4,631 7.04% 501 5,552 543 666 106 - - 666 152 8.77% 2,631 2,790 1,032 1,336 - - - - 1,331 2,889 229 371 56 51 Foreign currency forward contracts 14 - 31 31 31 - - - Total 31,453 32,579 25,498 2,154 1,931 2,996 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 63 For personal use only NOT E 28: F IN ANC IAL INSTR UMENT S (CON TINU ED) (e). Market Risk The Group’s activities expose it to the financial risks of changes in foreign currency exchange rates and interest rates. Foreign Exchange Risk The Group is mainly exposed to United States dollars, Euros and New Zealand dollars. The following table details the Group’s sensitivity to a 10% increase or decrease in the Australian dollar. This analysis includes only outstanding foreign currency denominated monetary items, including loans to foreign operations within the Group and details the profit effect from each of these items of a 10% strengthening in the Australian dollar on the reporting date with all other variables held constant. For a weakening in the Australian dollar there would be an equal and opposite impact on profit to the amount shown in the tables below. 30 June 2008 Financial Assets Cash and cash equivalents United States dollars Euro Trade receivables United States dollars Australian dollars Amounts receivable from controlled entities United States dollars Euro New Zealand dollars Financial Liabilities Trade payables United States dollars Euro Borrowings United States dollars Euro New Zealand dollars Foreign currency forward contracts United States dollars Euro Profit or (loss) impact Currency Asset / (Liability) Breakdown United States dollars Euro New Zealand dollars Australian dollars Profit or (loss) impact t r o p e R l a u n n A 8 0 0 2 І d e t i Consolidated Company Carrying Value ($000) Profit//(Loss) AUD +/-10% ($000) Carrying Value ($000) Profit//(Loss) AUD +/ -10% ($000) 313 167 6 1,060 - - - 783 164 13,189 7,996 150 688 591 (14,341) (8,584) (150) 1,060 313 167 6 - 23,056 24,173 4,055 783 164 13,189 7,996 150 688 591 8,715 15,589 3,905 - (31) (17) (1) 114 (1,243) (818) 46 78 16 1,319 800 15 (69) (59) 150 53 (78) 61 114 150 (31) (17) (1) - (2,306) (2,417) (406) 78 16 1,319 800 15 (69) (59) (3,078) (1,010) (1,677) (391) - (3,078) i m L c i f i c a P e a G l 64 For personal use only NOT E 28: F IN ANC IAL INSTR UMENT S (CON TINU ED) 30 June 2007 Carrying Value Profit//(Loss) Carrying Value Consolidated Company ($000) AUD +/-10% ($000) ($000) Profit//(Loss) AUD +/ -10% ($000) Financial Assets Cash and cash equivalents United States dollars Euro Trade receivables Australian dollars Amounts receivable from controlled entities United States dollars Euro New Zealand dollars Financial Liabilities Trade payables United States dollars Euro Borrowings United States dollars Euro Foreign currency forward contracts United States dollars Euro Profit or (loss) impact Currency Asset / (Liability) Breakdown United States dollars Euro New Zealand dollars Australian dollars Profit or (loss) impact 254 2 1,230 - - - 276 392 13,057 10,602 67 281 (13,146) (11,272) - 1,230 254 2 - 24,054 21,460 6,374 276 392 13,057 10,602 67 281 10,908 10,188 6,374 - (26) - 123 (1,317) (759) (117) 28 39 1,306 1,060 (7) (28) 302 (16) 312 (117) 123 302 (26) - - (2,405) (2,146) (637) 28 39 1,305 1,060 (7) (28) (2,817) (1,105) (1,075) (637) - (2,817) The following exchange rates to the Australian dollar applied during the year. United States dollars Euro New Zealand dollars As at As at Average Rate 30 Jun 2008 30 Jun 2007 2007 / 2008 2006 / 2007 0.9596 0.6065 1.2616 0.8456 0.6272 1.0954 0.8986 0.6084 1.1647 0.7743 0.5806 1.1138 t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 65 For personal use only NOT E 28: F IN ANC IAL INSTR UMENT S (CON TINU ED) Interest Rate Risk The Group is exposed to interest rate risk as entities in the Group borrow and deposit funds at both fixed and floating interest rates. Effective weighted average interest rates on classes of financial liabilities are disclosed under liquidity risk. The following table details the Group’s sensitivity to a 1% increase or decrease in interest rates at reporting date with the change taking place at the beginning of the following financial year and held constant throughout the reporting period. All other variables remain constant. Disclosed in the tables below is the profit effect of a 1% increase in interest rates. For a 1% decrease in interest rates there would be an equal and opposite impact on profit to the amount shown. Consolidated Company 30 June 2008 Carrying Value Financial Assets Cash & cash equivalents Amounts receivable from controlled entities Financial Liabilities Borrowings Profit or (loss) impact ($000) 16,576 - 21,666 Profit//(Loss) +/-1% ($000) 166 - (217) (51) Carrying Value ($000) 12,316 26,981 15,910 Consolidated Company 30 June 2007 Carrying Value Financial Assets Cash & cash equivalents Amounts receivable from controlled entities Financial Liabilities Trade payables Borrowings Profit or (loss) impact (f). Forward Exchange Contracts ($000) 6,833 - 759 31,879 Profit//(Loss) +/-1% ($000) 70 - (9) (321) (260) Carrying Value ($000) 3,651 46,684 - 23,659 Profit//(Loss) +/-1% ($000) 123 270 (159) 234 Profit//(Loss) +/-1% ($000) 37 467 - (236) 268 The Group enters into forward exchange contracts to buy and sell specified amounts of foreign currency in the future at stipulated exchange rates. The objective in entering the forward exchange contracts is to protect the Group against unfavourable exchange rate movements for both the contracted and anticipated future sales and purchases undertaken in foreign currencies. The full amount of the foreign currency the Group will be required to pay or purchase when settling the brought forward exchange contracts should the counterparty not pay the currency it is committed to deliver to the Group has been recognised in the Company’s balance sheet. At balance date the net amount payable was $28,000 (2007: $31,200). The accounting policy in regard to forward exchange contracts is detailed in Note 1(m). At balance date, the details of outstanding forward exchange contracts are: Average Exchange Rate Foreign Currency Contract Value 2008 2007 2008 (FC000) 2007 (FC000) 2008 ($000) 2007 ($000) 2008 ($000) Fair Value 2007 ($000) Buy United States Dollars / Sell Australian Dollars Less than 6 months 0.9310 0.7741 Buy European Euro / Sell Australian Dollars Less than 6 months 0.5990 0.5742 Total 660 358 57 176 709 598 73 (21) (6) 306 (7) (28) (25) (31) t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 66 For personal use only NOT E 29: SU BSEQ UENT EVEN TS There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. NOT E 30: CO MPAN Y D ETA IL S The registered office of the Company is: Gale Pacific Limited 145 Woodlands Drive Braeside, Vic, 3195 Australia t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 67 For personal use only A D D I T I O N A L S E C U R I T I E S E X C H A N G E I N F O R M A T I O N Umbrellas Coolaroo Umbrellas feature a unique knitted fabric specially designed to breathe. This simple air-flow principle keeps you cooler and more comfortable in hot weather when you’re enjoying the outdoors. Beach Umbrellas Catch the shade no matter what the sun’s position with the Coolaroo range of Beach Umbrellas. Simply tilt the head to stay cool and protected. Features long life Coolaroo fabric cover and powdercoated steel frame. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 68 For personal use only N u m b e r o f H o ld ing s o f E q u it y S e cu r it i e s a s a t 2 6 S ep t emb e r 2 00 8 Tw ent y L a rg est Ho ld ers of Q uoted Equ it y S e cu r it ie s The fully paid issued capital of the Company consisted of 136,834,516 ordinary fully paid shares held by 886 shareholders. Each share entitles the holder to one vote. Thirty nine holders hold 750,000 options and 850,000 performance rights over ordinary shares. Options and performance rights do not carry a right to vote. Dist rib ution of Ho ld ers of Equ ity Secu rities Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 Ordinary Fully Paid Shares Total Holders Units % Issued Capital 134 291 158 241 54,412 826,595 1,219,078 7,646,028 0.04 0.60 0.89 5.59 100,001 and over 62 127,088,403 92.88 Total 886 136,834,516 100.00 Dist rib ution of Ho ld ers of Equ ity Secu rities Unmarketable Parcels as at 18 September 2007 Minimum Parcel Size Holders Units Minimum $500 parcel at $0.25 per unit 2,000 204 156,919 Shareholder No. % Thorney Holdings Pty Ltd 16,567,324 12.11 Gale Australia Pty Ltd 13,927,844 10.18 INVIA Custodian Pty Limited IWPE Nominees Pty Ltd UBS Nominees Pty Ltd ANZ Nominees Limited IWPE Nominees Pty Ltd Investec Bank (Australia) Limited MGB Equity Growth Pty Limited National Nominees Limited Equity Trustees Limited Citicorp Nominees Pty Limited Ruminator Pty Ltd ANZ Nominees Limited 12,701,938 12,120,000 11,612,746 8,852,984 7,791,428 6,060,000 4,328,572 4,303,200 3,978,058 2,996,566 2,164,705 1,612,601 National Australia Trustees Limited 1,410,791 UBS Wealth Management Australia Nominees Pty Ltd Merrill Lynch (Australia) Nominees Pty Limited GFS Securities Pty Ltd Beta Gamma Pty Ltd 1,382,494 1,367,227 1,154,638 1,000,000 LIPPO Securities Nominees (BVI) Ltd 1,000,000 9.28 8.86 8.49 6.47 5.69 4.43 3.16 3.14 2.91 2.19 1.58 1.18 1.03 1.01 1.00 0.84 0.73 0.73 Sub st ant ia l Sh ar eho ld e rs a s at 2 6 Se pt emb er 2 0 0 8 Top 20 Holders of Ordinary Fully Paid Shares as at 8 September 2008 116,333,116 85.01 Shareholder No. % Investec Wentworth Private Equity Limited And Its Associated Entities 30,300,000 22.14 Thorney Holdings Pty Ltd Gale Australia Pty Ltd UBS Nominees Pty Ltd And Its Associated Entities 29,536,560 13,927,844 13,846,188 21.59 10.18 10.12 Monterrey Investment Management Limited 9,979,561 7.3 Oth e r Inf orm at ion The name of the Company Secretary is Ms Sophie Karzis. The address of the principal registered office in Australia, and the principal administrative office is 145 Woodlands Drive, Braeside, 3195, Victoria, Australia, telephone is (03) 9518 3333. The Company is listed on the Australian Securities Exchange. The home exchange is Melbourne. Registers of securities are held by Computer Investor Services Pty Ltd, Yarra Falls, 452 Johnston Street, Abbotsford, 3067, Australia, local call is 1300 850 505, international call is + 613 9415 4000. t r o p e R l a u n n A 8 0 0 2 І d e t i i m L c i f i c a P e a G l 69 For personal use only Australia PO Box 892, Braeside, Victoria 3195 Ph: +61 3 9518 3399 Toll Free: 1800 331 521 New Zealand PO Box 15 118 Aranui, Christchurch Ph: + 64 3 373 9500 Toll Free: 0800 555 171 United States PO Box 951509, Lake Mary, Florida, 32795-1509 Phone +1 407 333 1038 Middle East PO Box 17696 Jebel Ali, Dubai, U.A.E. Ph: +971 4 881 7114 Europe GmbH Am Blücherflöz 6, 66538 Neunkirchen, Germany Ph.+ 49 6821 920 640 China No.777 Hengshan West Rd, Beilun, Ningbo 315800 Ph: +86 574 5626 8888 Gale Pacific Limited ABN 80 082 263 778 For personal use only 

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