Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 FOSHAN HUAXIN PACKAGING CO., LTD. ANNUAL REPORT 2018 March 2019 1 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of Foshan Huaxin Packaging Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements or material omissions therein. Ren Xiaoping, the Company’s legal representative, Ding Guoqiang, the Company’s Chief Financial Officer, and Luo Jing, the Company’s Financial Manager hereby guarantee that the financial statements carried in this Report are factual, accurate and complete. Except for the following directors, all the other directors attended in person the Board meeting for the review of this Report and its summary. Reason for not attending the Proxy entrusted to attend the Name Office title meeting in person meeting Zhang Wenjing Independent Director For the reason of work Li Jun Any outlook for the Company’s development in 2019 or other forward-looking statements mentioned in this Report and its summary shall NOT be considered as promises to investors. Therefore, investors are reminded to exercise caution when making investment decisions. Risks facing the Company have been explained in detail in “Part IV Operating Performance Discussion and Analysis” herein. The Company has no final dividend plan, either in the form of cash or stock, for the Reporting Period. This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. 2 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Table of Contents Part I Important Notes, Table of Contents and Definitions ........................................................... 2 Part II Corporate Information and Key Financial Information ................................................... 5 Part III Business Summary ............................................................................................................. 10 Part IV Operating Performance Discussion and Analysis ........................................................... 14 Part V Significant Events ................................................................................................................ 29 Part VI Share Changes and Shareholder Information ................................................................. 61 Part VII Preferred Shares ............................................................................................................... 68 Part VIII Directors, Supervisors, Senior Management and Staff ............................................... 69 Part IX Corporate Governance ...................................................................................................... 79 Part X Corporate Bonds .................................................................................................................. 87 Part XI Financial Statements .......................................................................................................... 88 Part XII Documents Available for Reference .............................................................................. 221 3 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Definitions Term Definition Foshan Huaxin Packaging Co., Ltd. and its consolidated subsidiaries, except The “Company”, “FSHXP” or “we” where the context otherwise requires China Paper China Paper Corporation (the actual controller of the Company) China Chengtong China Chengtong Holdings Group Ltd. (the ultimate controller of the Company) Huaxin Development Foshan Huaxin Development Co., Ltd. Hongta Renheng Zhuhai Hongta Renheng Packaging Co., Ltd. Zhuhai Huafeng Zhuhai Huafeng Paper Co., Ltd. Golden Pheasant Chemical Zhuhai Golden Pheasant Chemical Co., Ltd. Huaxin Color Printing Huaxin (Foshan) Color Printing Co., Ltd. Kunshan Focai Kunshan Focai Packaging & Printing Co., Ltd. Zhejiang Hongta Zhejiang Hongta Renheng Packaging Technology Co., Ltd. Chengtong Finance China Chengtong Finance Corporation Ltd. The “Reporting Period” or “Current Period” The period from 1 January 2018 to 31 December 2018 Expressed in the Chinese currency of Renminbi, expressed in tens of thousands RMB, RMB’0,000 of Renminbi 4 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part II Corporate Information and Key Financial Information I Corporate Information Stock name Huaxin Packaging-B Stock code 200986 Stock exchange for stock Shenzhen Stock Exchange listing Company name in Chinese 佛山华新包装股份有限公司 Abbr. 华新包装 Company name in English (if Foshan Huaxin Packaging Co.,Ltd any) Abbr. (if any) FSHXP Legal representative Ren Xiaoping 2/F, Block 7, 3 Keyang Road, Luoge Park, Chancheng Economic Development Zone, Nanzhuang Registered address Town, Chancheng District, Foshan, Guangdong Province, P.R.China Zip code 528000 2/F, Block 7, 3 Keyang Road, Luoge Park, Chancheng Economic Development Zone, Nanzhuang Office address Town, Chancheng District, Foshan, Guangdong Province, P.R.China Zip code 528000 Company website http://www.fshxp.com Email address hxbz@chinapaper.com.cn II Contact Information Board Secretary Securities Representative Name Ding Guoqiang Shi Hui 2/F, Block 7, 3 Keyang Road, Luoge Park, 2/F, Block 7, 3 Keyang Road, Luoge Park, Chancheng Economic Development Zone, Chancheng Economic Development Zone, Address Nanzhuang Town, Chancheng District, Nanzhuang Town, Chancheng District, Foshan, Guangdong Province, P.R.China Foshan, Guangdong Province, P.R.China Tel. 0756-8666975 0756-8666978 Fax 0756-8666922 0756-8666922 Email address dinggq@htrh-paper.com shih@htrh-paper.com 5 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 III Media for Information Disclosure and Place where this Report Is Lodged Newspapers designated by the Company for Securities Times, Ta Kung Pao information disclosure Website designated by CSRC for publication of this http://www.cninfo.com.cn Report 2/F, Block 7, 3 Keyang Road, Luoge Park, Chancheng Economic Place where this Report is lodged Development Zone, Nanzhuang Town, Chancheng District, Foshan, Guangdong Province, P.R.China IV Changes to Company Registered Information Unified social credit code No change Change to principal activity of the No change Company since going public (if any) Every change of controlling shareholder No change since incorporation (if any) V Other Information The independent audit firm hired by the Company: Name Pan-China Certified Public Accountants LLP Office address 6/F, 128 Xixi Road, Xihu District, Hangzhou City, Zhejiang Province, China Accountants writing signatures Li Qinglong and Liu Jingya The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period: □ Applicable √ Not applicable The independent financial advisor hired by the Company to exercise constant supervision over the Company in the Reporting Period: □ Applicable √ Not applicable VI Key Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No 2018-over-2017 2018 2017 2016 change (%) Operating revenue (RMB) 3,683,004,543.50 3,583,157,646.37 2.79% 3,607,758,904.01 Net profit attributable to the listed -2,814,965.92 18,637,865.97 -115.10% 61,324,088.11 company’s shareholders (RMB) 6 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Net profit attributable to the listed company’s shareholders before -36,089,244.17 12,337,519.04 -392.52% 27,820,866.82 exceptional items (RMB) Net cash generated from/used in 393,465,394.72 -21,910,921.08 1,895.75% 409,111,111.08 operating activities (RMB) Basic earnings per share -0.01 0.04 -125.00% 0.12 (RMB/share) Diluted earnings per share -0.01 0.04 -125.00% 0.12 (RMB/share) Weighted average return on equity Down by 1.08 perce -0.14% 0.94% 3.13% (%) ntage points Change of 31 December 2018 over 31 December 2018 31 December 2017 31 December 2016 31 December 2017 (%) Total assets (RMB) 5,794,694,744.15 5,426,368,352.69 6.79% 6,182,737,808.93 Equity attributable to the listed 1,970,946,820.29 1,982,859,436.21 -0.60% 1,980,395,170.24 company’s shareholders (RMB) VII Accounting Data Differences under China’s Accounting Standards for Business Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards 1. Net Profit and Equity under CAS and IFRS □ Applicable √ Not applicable No difference for the Reporting Period. 2. Net Profit and Equity under CAS and Foreign Accounting Standards □ Applicable √ Not applicable No difference for the Reporting Period. VIII Key Financial Information by Quarter Unit: RMB Q1 Q2 Q3 Q4 Operating revenue 791,489,361.74 955,666,979.18 966,386,108.12 969,462,094.46 Net profit attributable to the listed -10,204,661.39 -5,095,101.40 5,007,777.78 7,477,019.09 company’s shareholders 7 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Net profit attributable to the listed company’s shareholders before -11,700,027.27 -7,503,716.60 4,637,788.37 -21,523,288.67 exceptional items Net cash generated from/used in 25,982,578.72 42,810,407.39 316,624,480.08 8,047,928.53 operating activities Indicate by tick mark whether any of the quarterly financial data in the table above or their summations differs materially from what have been disclosed in the Company’s quarterly or interim reports. □ Yes √ No IX Exceptional Gains and Losses √ Applicable □ Not applicable Unit: RMB Item 2018 2017 2016 Note Gain or loss on disposal of non-current assets (inclusive of impairment allowance 42,435.21 275,303.86 -690,044.71 write-offs) Government subsidies charged to current profit or loss (exclusive of government subsidies given in the Company’s ordinary 17,519,293.30 13,791,511.79 26,022,524.47 course of business at fixed quotas or amounts as per the government’s uniform standards) Capital occupation charges on non-financial enterprises that are charged to current profit 14,745,309.37 22,334,467.56 or loss Gain equal to the amount by which investment costs for the Company to obtain subsidiaries, associates and joint ventures 21,561,238.54 are lower than the Company’s enjoyable fair value of identifiable net assets of investees when making investments Gain or loss on fair-value changes in trading financial assets and liabilities & investment income from disposal of trading financial assets and liabilities and available-for-sale 12,578,644.03 1,326,459.63 5,536,398.42 financial assets (exclusive of effective portion of hedges that arise in the Company’s ordinary course of business) Non-operating income and expense other -2,043,196.49 -24,429,364.21 -263,588.90 than the above 8 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Other gains and losses that meet the definition of exceptional gain/loss Less: Income tax effects 761,426.39 -661,998.98 2,645,887.81 Non-controlling interests effects (net 15,622,709.95 70,872.49 16,790,647.74 of tax) Total 33,274,278.25 6,300,346.93 33,503,221.29 -- Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss Items: √ Applicable □ Not applicable Item Amount involved (RMB) Reason Other gains and losses that meet the definition of 7,800,232.76 Interest income from structured deposits exceptional gain/loss 9 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part III Business Summary I Principal Activity of the Company in the Reporting Period Is the Company subject to any disclosure requirements for special industries? No. The Company specializes in the R&D, production and sales of high-end coated ivory board, chemicals for paper making and color printing products. The businesses are described as follows: (I) High-end coated ivory board The ivory board is a product of the Company’s main business, as a category of ivory board, is widely applied in various fields such as cigarette packaging, food packaging, medicine packaging, cosmetic packaging and living supplies packaging, which is an important source of the Company's major business income. The R&D, production and sales of the ivory board is mainly undertaken by Zhuhai HongtaRenheng Packaging Co., Ltd. and Zhuhai Huafeng Paper Co., Ltd. HongtaRenheng is the core high-end packaging board platform under Huaxin Packaging which is based in domestic and overseas high-end packaging markets of cigarette and food and provides "personalized" products and services for customers with "differentiation" business strategy. The Company now has three coated ivory board production lines, and the annual production capacity around 600,000 tons. The Company's products can be divided into the following categories: 1. Coated ivory board for cigarette packaging of company’s dominant product, is widely used in the high-end cigarette packaging market. The coated ivory board for cigarette packaging produced by HongtaRenheng takes up a dominant position in the domestic cigarette packaging field. It represents the highest level of coated ivory board quality in China. It has won a Golden Award at China’s International Paper & Paper Product Brands Exhibition, and the top award of the Chinese science and technology community—the first-class State Science and Technology Advancement Award. The anti-counterfeit coated ivory board with color fiber and true-color fiber etc.—a technology that is independently developed by the Company and has been granted the national invention patent of China—has been successfully applied in the packaging of a series of cigarettes in the “Hongta Group” and “HongyunHonghe Group" brands to combat counterfeiting from the packaging materials, reaching the significant anti-counterfeit results of “easily identifiable but difficult to copy”. Currently, a new type of ivory board for cigarette packaging is at the stage of trial production. 2. The ivory boards for liquid food packaging is an important development direction of the Company. HongtaRenheng is the first to break the foreign technological monopoly, by independently developing the sterile paper for packaging of liquid milk, fruit juice, herbal tea and other drinks, effectively substituting imported products. The series of food packaging products such as anti-oil food grade coated board and high-end paper cup have been recognized by well-known catering groups such as McDonald’s after they are put into the market. 3. The high-end commercial ivory board papers aim to meet the personalized demands of customers. They are widely applied in the segmented packaging market fields like the high-end medicine, cosmetics, and daily necessities. The anti-counterfeit coated ivory paper with personalized identification code independently developed by the Company and for which it has been granted the invention 10 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 patent has been successfully applied in the anti-counterfeit packaging of the high-end products like high-end medicine and cosmetics, which does not only solve the difficulties posed by impact from counterfeit and shoddy products for customers at the source, but also effectively reduces the customer’s anti-counterfeit costs and fake product crackdown expanses and win high trust from the market. (II) Paper making business Chemicals for paper making is business to extend the paper-making industry chain by the Company, the R&D, production and sales of which are mainly undertaken by Zhuhai Jinji Chemical Co., Ltd., a subsidiary of the Company, which mainly supplies the carboxylic butadiene-styrene latex, styrene-acrylic latex and calcium carbonate of domestically first-class quality. (III) Color printing business Color printing business is an important industrial linkage supporting business of the Company, which covers designing and manufacturing packaging materials and providing packaging solutions for customers. This business is mainly undertaken by Huaxin (Foshan) Color Printing Co., Ltd.. The Company now owns the offset, flexo and intaglio printing workshop. Main products include color boxes, various labels (paper label, in-mold label and sticker), barcode printing, brochure, books and periodicals involved in wide terminal consumption industry. II Significant Changes in Major Assets 1. Significant Changes in Major Assets Major assets Main reason for significant changes Up 7888%. The Company appointed a director to investee Chengtong Finance during the Reporting Period, thus having significant influence in the joint venture’s substantial Equity assets decision-making. Therefore, the accounting of the Company’s investment in Chengtong Finance changed from an available-for-sale financial asset to a long-term equity investment measured at the equity method. 2. Major Assets Overseas □ Applicable √ Not applicable III Core Competitiveness Analysis Is the Company subject to any disclosure requirements for special industries? No. (I) Backed by a central government-owned enterprise The ultimate controller of the Company, China Chengtong Holdings Group Ltd. (China Chengtong), authorized by the State-owned Assets Supervision and Administration Commission of the State Council to perform relevant duties of the investor on behalf of the State Council, is listed among the first batch of pilot enterprises by the State-owned Assets Supervision and Administration Commission to construct the standard board of directors and the first pilot state-owned asset management Company. In 2016, China 11 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Chengtong was approved to be the pilot state-owned capital operation Company, and its main business includes equity operation, financial services, asset management, integrated logistics services, production materials trading, forestry-pulp paper production development and utilization etc.. It is also the only large-scale central enterprise approved by the State-owned Assets Supervision and Administration Commission of the State Council to focus on production, development and utilization of forestry, wood pulp and paper. As a pilot enterprise of the state-owned asset management companies, China Chengtong has built a platform for the state-owned assets restructuring and capital operation in accordance with prevailing market principles, explored the central enterprise’s non-main business and a special path for the NPA’s market-oriented specialized operations and disposal, and reorganized and integrated a number of subsidiaries subordinated to central enterprises by means of trusteeship and the transfer of state-owned property rights. In 2016, China Chengtong was entrusted by the State-owned Assets Supervision and Administration Commission of the State Council to participate in the diversification reform of Sinopec International Petroleum Exploration and Production Corporation, managed China Railway Materials Co., Ltd. in the form of trusteeship, and invested Guoyuan Coal Asset Management Co., Ltd.. As approved by the State Council and entrusted by the State-owned Assets Supervision and Administration Commission, China Chengtong, as the main sponsor, cooperated with nine central enterprises, local state-owned enterprises and financial institutions to jointly set up the largest domestic private equity investment fund with a total investment of RMB 350 billion Yuan -- The China State-Owned Enterprise Restructuring Fund. Meanwhile, Chengtong Fund Management Co., Ltd. was also established to take responsibility for the implementation of relevant fund management affairs. China Chengtong is aiming at improving the state-owned capital’s operation efficiency, serving the national strategy, abiding by the law of the market, and building a state-owned capital operation platform featuring the market-oriented operation and professional management. In addition, it will promote the rational flow and optimized of the state-owned capital and optimizing the configuration through equity operation, value management, and flexible transfer etc.. so as to form an institutional mechanism and operational model that meet various functional requirements for corresponding state-owned capital operation. (II) Technological innovation advantage The Company persists in taking "scientific and technological innovation" as the core power that drives enterprise development. The Company has over 20 years of technical experience in the production of high-end coated ivory board. Over the years, the Company has developed anti-counterfeit products such as the coated ivory board with color fiber and true-color fiber and formed strong anti-counterfeit product innovation capability. Meanwhile, the Company has personalized product technique innovation capability and has developed the "anti-counterfeit coated ivory paper with personalized identification code" which can attain anti-counterfeiting according to the customer's personalized demand and solve the difficulties posed by impact from counterfeit and shoddy products for customers at the source. Currently, the Company is developing quite a few individualized products featuring new technologies. In addition, to ensure safe, green and clean products, the Company has managed to effectively control toxic and harmful substances such as VOCS in its products through continuous commitment of R&D resources and tests. By means of continuous research and development, the Company has obtained various patents, providing the most important technical support and guarantee for the advancement of product competitiveness. As of the end of the Reporting Period, the Company had been granted 50 duly authorized patents, including 24 invention patents and 26 utility models. There are 18 pending patents, including 12 invention patents and 6 utility models. 12 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 In recent years, the Company has made unremitting effort to promote its subsidiaries’ R&D system improvement: 1. HongtaRenheng was re-recognized as a "National High-tech Enterprise" in 2018. It has established a technology R&D center equipped with completed devices, and been recognized by the Municipal and Provincial Technology Centers, Engineering R&D Center and Guangdong Provincial Innovation Pilot Enterprise; in 2016, the "Nature Color Packaging Paper Project" of HongtaRenheng won second-class Science and Technology Advancement Award issued by China National Light Industry Council. Meanwhile, the company also participated in formulating corresponding national and industrial standards including Coated Paper and Board-Coated Ivory Board and Quality Requirements and Test Methods for Intaglio Printed Matter. In 2018, HongtaRenheng set up the New Materials Research Institute by integrating R&D resources and committing more such resources in a bid to remaining technologically advanced in the area of new materials. 2. In 2016, the subsidiary Zhuhai Huafeng Paper Co., Ltd. was recognized as a "National High-tech Enterprise", as well as by the Municipal and Provincial Technology Centers and Engineering R&D Centers. 3. The subsidiary Zhuhai Golden Pheasant Chemical Co., Ltd. was re-recognized as a "National High-tech Enterprise" in 2016, as well as by the Municipal and Provincial Engineering Centers. 4. The subsidiary Huaxin Color Printing was re-recognized as a "National High-tech Enterprise" in 2018, as well as by the Foshan Enterprise Technology Center. All the Company’s main subsidiaries have been recognized as "National High-tech Enterprise" and were granted the 10% relief from income tax in three successive years. (III) Quality and brand advantage HongtaRenheng has the top award of the Chinese science and technology community—the first-class State Science and Technology Advancement Award. The high-end coated ivory board produced by HongtaRenheng has excellent printing performance. Dominant product—coated ivory board for tobacco packaging, is widely used in the high-end tobacco packaging market, takes up a dominant position in high-end tobacco packaging field. "Hongta" coated ivory board takes up a leading position in domestic and overseas ivory board industry and leads the development of production and technology of domestic middle and top grade coated ivory board. "Hongta" coated ivory board represents the highest level of production, technology and product of coated ivory board in China. (IV) Management advantage “The fittest survives. That’s why we must be open-minded and innovative for survival and development.” is the Company’s management philosophy. Upon more than two decades of accumulation, the Company has possessed a large pool of high-quality talent in technological innovation and management, as well as formulated a corporate culture that is well accepted by its key personnel. In 2018, reforms were implemented in terms of supply chain management, human resources and so on, which have produced positive results. (V) Superiority in environment protection Hongta Renheng’s boilers are using biomass molding fuel (BMF). Its emission reduction through BMF program is China’s biggest biomass boiler program. BMF, a clean energy which releases zero harmful emissions to the environment, is used for 70% of Hongta Renheng’s energy consumption, which can help bring a nearly 70% reduction in carbon emission during the papermaking process, as well as a reduction of 60,000~100,000 tons of carbon dioxide emission every year. BMF has helped create remarkable superiority in emission reduction and environment protection. 13 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part IV Operating Performance Discussion and Analysis I Overview (I) Market Environment In 2018, affected by China-US trade conflicts and exchange rate fluctuations, macroeconomic index fell and the packaging and paper-making industries that are highly associated with macro economy were impacted at different degrees. The market end demands showed great decrease and the supply side continued the trend of 2017 with new increases instead of any decrease in 2018. The capacity that could be placed in market increased, while the whole industry witnessed oversupply. As a result, the paper-making industry took on an overall trend of narrowed profit margins. (II) Company Performance during the Reporting Period In 2018, based on the core concepts of “four news” and “strictness, practicality, transparency and rapidness”, the Company stuck to three “consistencies”, aimed at “five new forces”, sought “four breakthroughs” and centered around “three decreases, one increase and one control” to keep strengthening party building, strive to explore strategic reforms, proactively expand external markets, fully enhance the internal management level, continue to refine the institutional reform, increase R&D investment and seek the increase of operating profits. The competition was fierce with unbalanced supply and demand development in the ivory board industry in which the Company is engaged and related industries. The production and operation of the ivory board segment were basically stable. In the whole year, the production reached 513,000 tons, which was an increase of 15% from the previous year; the sales volume reached 483,000 tons, an increase of 2.2% from the previous year; and the price rose by 6.63% from the previous year, which was an increase against the trend. In respect of the cost end, affected by the persistently high price of raw wood pulp, production costs increased substantially, resulting in big YOY decrease in the profits of the paper segment and causing losses. In terms of the printing segment, the total operating revenue and profits increased by 15% and 561% respectively from the previous year as a result of proactive attraction to external quality resources and diversification of the industrial chain. In the chemical industry, latex sales volume increased by 3% from the previous year and revenue rose by 2% from the previous year due to persistent optimization of production techniques, and the operating budget goal established at the beginning of the year was achieved. Despite the good performance of the printing and chemical segments, the whole-year budget goal was not achieved by the Company as a whole due to the losses in the paper segment. For 2018, the Company recorded operating revenue of RMB3,683 million, a net profit attributable to the listed company’s shareholders of RMB-2.81 million, and net cash generated from operating activities of RMB393.47 million. As at 31 December 2018, total assets stood at RMB5,794.69 million and equity attributable to the listed company’s shareholders of RMB1,970.95 million. (III) Management Measures Taken within the Reporting Period 1. Reform the organization structure and optimize remuneration distribution and talent promotion mechanism Aimed at “reducing hierarchies, grouping functions and flattening management”, the Company adjusted its internal organization structure to serve the purpose of matching staff abilities with position requirements and established a performance-based position performance and remuneration system. The reform on the Company’s existing remuneration system was carried out in accordance with the motivating distribution principle of “focusing on performance, awarding diligence and punishing laziness; encouraging creation and increasing profits”. The career promotion channel was established and a comprehensive review on the technical, skilled and management professionals at each hierarchy would be conducted in proportion annually to guide staff to be concerned with the improvement in their skills and abilities, effectively motivate and stabilize the staff team and serve the future strategic development of the Company. 2. Reform the marketing system and inspire the sales potential 14 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 In accordance with the thinking of “new era and new marketing”, the Company carried out an all-round reform on its marketing system to highlight the core function of marketing. A brand new performance appraisal system was implemented to inspire staff to develop new orders; a new mechanism of bottom out, awarding diligence and punishing laziness was established to keep improving corporate competitiveness. 3. Practice the concept of “four newness” and strictly control period costs Centering around the concept of “four newness” of “new measures for reforms, new methods for management, new thinking for operations and new mechanisms for activation”, the Company implemented the outsourcing of warehousing and logistics in its factory area to save and reduce logistics costs through a professional warehousing and logistics outsourcing service mode. The Company expanded financing channels and financing modes to increase the fund utilization efficiency and control the risk of exchange rate fluctuations, resulting in an obvious YOY decrease in financial costs. 4. Persist in technology-orientation and intensify the creation of profits through R&D The Company adjusted the organization of the Technical R&D Department to make the function of new product development and the function of routine process maintenance run independently. It persisted in the goal of technology-orientation, intensified the core function of technical R&D and motivated the vitality of innovation and profits creation. So far there have been more than ten types of new product projects being developed, with breakthroughs made in some products. II Core Business Analysis 1. Overview See “I Overview” above. 2. Revenue and Cost Analysis (1) Breakdown of Operating Revenue Unit: RMB 2018 2017 As % of total As % of total Change (%) Operating revenue operating revenue Operating revenue operating revenue (%) (%) Total 3,683,004,543.50 100% 3,583,157,646.37 100% 2.79% By operating division Manufacturing 3,588,986,332.24 97.45% 3,387,712,195.06 84.92% 5.94% Other 94,018,211.26 2.55% 195,445,451.31 15.08% -51.90% By product category Ivory board 2,948,225,373.27 80.05% 2,788,623,257.46 72.68% 5.72% Presswork 300,249,287.80 8.15% 255,573,322.07 7.28% 17.48% Latex 340,511,671.17 9.25% 343,515,615.53 4.96% -0.87% Other 94,018,211.26 2.55% 195,445,451.31 15.08% -51.90% 15 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 By operating segment Domestic 3,130,591,132.61 85.00% 3,105,722,094.04 84.17% 0.80% Overseas 552,413,410.89 15.00% 477,435,552.33 15.83% 15.70% (2) Operating Division, Product Category or Operating Segment Contributing over 10% of Operating Revenue or Operating Profit √ Applicable □ Not applicable Is the Company subject to any disclosure requirements for special industries? No. Unit: RMB YoY change in YoY change in Operating Gross profit YoY change in Cost of sales operating revenue gross profit revenue margin cost of sales (%) (%) margin (%) By operating division Manufacturing 3,588,986,332.24 3,290,603,851.05 8.31% 5.94% 11.60% -4.65% By product category Ivory board 2,948,225,373.27 2,798,619,637.59 5.07% 5.72% 14.70% -7.43% Presswork 300,249,287.80 233,559,654.68 22.21% 17.48% 6.84% 7.75% Latex 340,511,671.17 258,424,558.78 24.11% -0.87% -10.84% 8.48% By operating segment Domestic 3,036,572,921.35 2,742,909,279.61 9.67% 4.34% 9.81% -4.50% Overseas 552,413,410.89 547,694,571.44 0.85% 15.70% 21.54% -4.76% Core business data of the prior year restated according to the changed statistical caliber for the Reporting Period: □ Applicable √ Not applicable (3) Whether Revenue from Physical Sales Is Higher than Service Revenue √ Yes □ No Operating division Item Unit 2018 2017 Change (%) Unit sales 0,000 tons 48.31 47.31 2.11% Paper-making Output 0,000 tons 51.3 44.61 15.00% Inventory 0,000 tons 4.82 3.77 27.85% Any over 30% YoY movements in the data above and why: □ Applicable √ Not applicable 16 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (4) Execution Progress of Major Signed Sales Contracts in the Reporting Period □ Applicable √ Not applicable (5) Breakdown of Cost of Sales By operating division and product category Unit: RMB 2018 2017 Operating Item As % of total cost As % of total cost Change (%) division Cost of sales Cost of sales of sales (%) of sales (%) Manufacturing 3,290,603,851.05 98.04% 2,948,469,093.13 94.86% 11.60% Other 65,742,861.68 1.96% 159,896,380.04 5.14% -58.88% Unit: RMB 2018 2017 Product category Item As % of total cost As % of total cost Change (%) Cost of sales Cost of sales of sales (%) of sales (%) White cardboard 2,798,619,637.59 83.38% 2,440,020,977.87 78.50% 14.70% Presswork 233,559,654.68 6.96% 218,608,477.34 7.03% 6.84% Latex 258,424,558.78 7.70% 289,839,637.92 9.32% -10.84% Other 65,742,861.68 1.96% 159,896,380.04 5.14% -58.88% Note: (6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period √ Yes □ No Kunshan Focai Packaging & Printing Co., Ltd., the subsidiary of the Company, was cancelled in the Reporting Period, no more included into the scope of the consolidated financial statements. (7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period □ Applicable √ Not applicable (8) Major Customers and Suppliers Major customers: Total sales to top five customers (RMB) 619,276,954.35 Total sales to top five customers as % of total sales of the 16.81% Reporting Period (%) 17 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Total sales to related parties among top five customers 0.00% as % of total sales of the Reporting Period (%) Information about top five customers: Sales revenue contributed for No. Customer As % of total sales revenue (%) the Reporting Period (RMB) 1 Customer A 256,868,748.22 6.97% 2 Customer B 95,460,896.85 2.59% 3 Customer C 91,168,325.20 2.48% 4 Customer D 88,525,346.53 2.40% 5 Customer E 87,253,637.55 2.37% Total -- 619,276,954.35 16.81% Other information about major customers: □ Applicable √ Not applicable Major suppliers: Total purchases from top five suppliers (RMB) 1,705,167,566.62 Total purchases from top five suppliers as % of total 50.28% purchases of the Reporting Period (%) Total purchases from related parties among top five suppliers as % of total purchases of the Reporting Period 19.61% (%) Information about top five suppliers: Purchase in the Reporting No. Supplier As % of total purchases (%) Period (RMB) 1 China Paper Corporation 665,169,020.33 19.61% 2 Supplier B 345,571,770.48 10.19% 3 Supplier C 275,747,857.34 8.13% 4 Supplier D 230,376,071.10 6.79% 5 Supplier E 188,302,847.37 5.55% Total -- 1,705,167,566.62 50.28% Other information about major suppliers: □ Applicable √ Not applicable 3. Expense Unit: RMB 18 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 2018 2017 Change (%) Reason for any significant change Selling expense 169,422,183.20 182,923,723.55 -7.38% Administrative expense 113,073,452.18 120,342,343.74 -6.04% Finance costs 89,130,763.80 121,627,924.65 -26.72% R&D expense 32,784,184.94 5,134,464.54 538.51% 4. R&D Expense √ Applicable □ Not applicable In 2018, the Company continued to intensify product structure adjustment, strengthen technological innovation, and develop new products to transform into new generation according to the situation of domestic economy and industrial development, based on market needs, with the purpose of improving the added value of products. The product structure of the Company was further upgraded towards high-end and high added value products to enhance the market competitiveness of the products and facilitate the significant improvement of economic benefit. The Company continued to lead the development of ivory board industry with product quality and technological innovation. To proactively respond to the general trend of restricting plastic packages around the world, the Company has input lots of labor and resources to develop plastic substitute products. Among those products, the “film-free eco paper cup card” has passed the appraisal for scientific achievements. The project has taken the lead in the production of film-free eco paper cup cards with inner-coating in the ivory board machine and the technology is in the “domestic leading position”. At the same time, the Company continued to improve product quality and reduce costs through research and development of new raw and auxiliary materials instead and innovation of process and technology. As a result, the production and manufacturing cost was controlled effectively and significant economic benefits were achieved. By the end of the Reporting Period, the Company has obtained 50 valid authorized patents, 24 of which were patents for invention, and the rest 26 were utility model; 18 patents in the process of application, where there were 12 patents for invention in the process of application and 6 utility model in the process of application, improved products’ comprehensive competitiveness of the Company. Details about R&D expense: 2018 2017 Change (%) Number of R&D personnel 126 143 -11.89% R&D personnel as % of total 7.50% 7.34% 0.16% employees R&D expense (RMB) 120,065,948.12 113,827,129.75 5.48% R&D expense as % of operating 3.26% 3.18% 0.08% revenue Capitalized R&D expense 9,053,412.40 19,038,707.23 -52.45% (RMB) Capitalized R&D expense as % 7.54% 16.73% -9.19% of total R&D expense Reasons for any significant YoY change in the percentage of R&D expense in operating revenue: □ Applicable √ Not applicable Reason for any sharp variation in the percentage of capitalized R&D expense and rationale: □ Applicable √ Not applicable 19 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 5. Cash Flows Unit: RMB Item 2018 2017 Change (%) Subtotal of cash generated from 4,002,240,424.49 3,582,514,948.89 11.72% operating activities Subtotal of cash used in 3,608,775,029.77 3,604,425,869.97 0.12% operating activities Net cash generated from/used in 393,465,394.72 -21,910,921.08 1,895.75% operating activities Subtotal of cash generated from 258,543,412.90 769,936,987.88 -66.42% investing activities Subtotal of cash used in 572,551,931.82 431,123,041.42 32.80% investing activities Net cash generated from/used in -314,008,518.92 338,813,946.46 -192.68% investing activities Subtotal of cash generated from 2,053,749,572.93 1,817,952,730.48 12.97% financing activities Subtotal of cash used in 2,263,808,296.08 2,227,191,111.64 1.64% financing activities Net cash generated from/used in -210,058,723.15 -409,238,381.16 48.67% financing activities Net increase in cash and cash -126,239,226.52 -102,851,789.07 -22.74% equivalents Explanation of why any of the data above varies significantly: √ Applicable □ Not applicable (1) Net cash flows from operating activities was RMB393.47 million in 2018, which increased RMB415.38 million from last year mainly due to the increase of the sales of the Company in the Reporting period with the increase of cash of RMB341.69 million from last year from selling products and providing labor services but the decrease of various taxes of RMB60.64 million from last year(mainly the decrease of VAT) (2) Net cash flows from investing activities was RMB-314.01 million in 2018, which decreased RMB652.82 million from last year mainly due to the recovering of principal and interests of borrowing of related parities of RMB0.516 billion in the last Reporting Period. (3) Net cash flows from financing activities was RMB-210.06 million in 2018, which increased RMB199.18 million from last year mainly because eth Company cashed the due medium term note of RMB200 million in the Reporting Period. Reason for any big difference between the net operating cash flow and the net profit for this Reporting Period √ Applicable □ Not applicable During the Reporting Period, the production and sales volume of the Company increased, and the increase of the operating revenue resulted in the increase of the net cash flows from operating activities from last year. But due to the largely increase of the costs, the operating profits decreased from the year earlier. 20 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 III Analysis of Non-Core Businesses √ Applicable □ Not applicable Unit: RMB Amount As % of total profit Source/Reason Exceptional or recurrent Long-term equity investment income calculated by equity Investment income 18,008,673.27 -32.26% method (joint venture) and Recurrent income from financial assets available for sale Gain/loss on Financial liabilities at fair changes in fair 2,394,879.25 -4.29% Exceptional value through profit or loss value Bad debt and inventory Asset impairments 18,009,523.05 -32.27% Exceptional falling price provisions Balance between carrying Non-operating value and net assets when 32,719,902.12 -58.62% Exceptional income converting the equity method Abnormal factory shutdown Non-operating 8,259,701.51 -14.80% losses and abandonment Exceptional expense losses Asset disposal Gains/losses of fixed assets 1,390,311.65 -2.49% Exceptional income disposal Other income 11,229,258.30 -20.12% Governmental subsidy Exceptional IV Analysis of Assets and Liabilities 1. Significant Changes in Asset Composition Unit: RMB 31 December 2018 31 December 2017 Change in Reason for any significant As % of total As % of total Amount Amount percentage (%) change assets assets 133,983,939.7 Decreased by Monetary capital 2.31% 287,652,868.65 5.30% 3 2.99% Accounts 781,215,643.8 Increased by 13.48% 730,130,223.06 13.46% receivable 9 0.02% 1,022,167,373. Increased by Inventories 17.64% 586,179,348.11 10.80% 51 6.84% 21 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Investment Decreased by 30,763,683.73 0.53% 32,092,356.29 0.59% property 0.06% Long-term equity 662,590,158.0 Increased by 11.43% 8,294,365.17 0.15% investments 0 11.28% 2,178,817,683. 2,302,301,389. Decreased by Fixed assets 37.60% 42.43% 33 40 4.83% Construction in Decreased by 38,735,958.38 0.67% 39,315,774.19 0.72% progress 0.05% Short-term 862,776,823.8 Decreased by 14.89% 897,426,244.52 16.54% borrowings 6 1.65% Long-term 100,000,000.0 Decreased by 1.73% 200,000,000.00 3.69% borrowings 0 1.96% 2. Assets and Liabilities at Fair Value √ Applicable □ Not applicable Unit: RMB Gain/loss on Cumulative Impairment fair-value fair-value Purchased in Sold in the Beginning allowance for Ending Item changes in the changes the Reporting Reporting amount the Reporting amount Reporting charged to Period Period Period Period equity Financial assets 3. Available-for-sa -627,355,141.0 627,643,841.04 288,700.00 le financial 4 assets Subtotal of -627,355,141.0 627,643,841.04 288,700.00 financial assets 4 Total of the -627,355,141.0 627,643,841.04 288,700.00 above 4 Financial 2,394,879.25 -2,394,879.25 0.00 liabilities Significant changes to the measurement attributes of the major assets in the Reporting Period: □ Yes √ No Reason for significant changes to the measurement attributes of the major assets and influences on its business performance and financial conditions in the Reporting Period In the Reporting Period, according to the Proposal of Electing Ding Guoqiang as the Company’s Director reviewed and approved by The 1st Extraordinary General Meeting of 2018 of China Chengtong Finance Corporation Ltd in 2018, the CFO of the Company Ding 22 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Guoqiang was qualified for the Director of China Chengtong Finance Corporation Ltd, and will take office from the approval date of qualification for directors of Beijing Banking Bureau. In accordance with the Approval Beijing Banking Bureau about Examination of Ding Guoqiang’s Qualification for the Director of China Chengtong Finance Corporation Ltd (JYJX[2018] No. 531) by Beijing Supervision Bureau of China Banking Regulatory Commission, Ding Guoqiang was qualified for the Director of China Chengtong Finance Corporation Ltd on 24 October 2018. The Company designated a director in China Chengtong Finance Corporation Ltd, and had the right to participate in decision-making of the Finance and operating policies of China Chengtong Finance Corporation Ltd. The Company had a significant influence on China Chengtong Finance Corporation Ltd, so with regard to the investment in China Chengtong Finance Corporation Ltd, it can convert the financial assets available for sale to long-term equity investment calculated by equity method. 3. Restricted Asset Rights as at the Period-End RMB305.9713 million of total assets of the Company was restricted, of which other current assets was RMB300.00 million (fixed deposits for pledge guarantee); monetary assets was RMB5,971,300 (L/G cash deposits). V Investments Made 1. Total Investment Amount □ Applicable √ Not applicable 2. Major Equity Investments Made in the Reporting Period □ Applicable √ Not applicable 3. Major Non-Equity Investments Ongoing in the Reporting Period □ Applicable √ Not applicable 4. Financial Investments (1) Securities Investments □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Investments in Derivative Financial Instruments □ Applicable √ Not applicable No such cases in the Reporting Period. 5. Use of Funds Raised □ Applicable √ Not applicable No such cases in the Reporting Period 23 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 VI Sale of Major Assets and Equity Interests 1. Sale of Major Assets □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Sale of Major Equity Interests □ Applicable √ Not applicable VII Major Subsidiaries √ Applicable □ Not applicable Major fully/majority-owned subsidiaries and those minority-owned subsidiaries with an over 10% effect on the Company’s net profit: Unit: RMB Relationship Principal Registered Operating Operating Name with the activity Total assets Net assets Net profit capital revenue profit Company Zhuhai High-grade Hongta coated white Renheng cardboard, 600,000,000. 4,833,610,77 2,669,129,82 3,391,466,29 -108,418,625 -104,530,265 Packaging Subsidiary latex and 00 9.51 6.01 1.03 .93 .78 Co., Ltd. calcium (consolidated carbonate ) Zhuhai Hongta High-grade Renheng 600,000,000. 4,073,699,93 2,620,254,15 2,332,201,21 -67,139,270. -64,719,737. Subsidiary coated white Packaging 00 3.83 7.24 8.45 76 36 cardboard Co., Ltd. (alone) Zhuhai High-grade Huafeng 984,559,331. 2,656,411,97 1,000,375,46 2,132,710,19 -53,784,966. -49,534,013. Subsidiary coated white Paper Co., 06 1.36 8.32 9.75 12 34 cardboard Ltd. Zhuhai Golden Latex and 69,271,940.0 278,529,227. 180,025,780. 463,326,859. 36,858,123.7 32,445,872.2 Pheasant Subsidiary calcium 0 13 51 91 8 4 Chemical carbonate Co., Ltd. Huaxin Subsidiary Color 96,895,605.1 407,437,871. 228,320,219. 310,467,280. 15,743,178.4 13,690,939.8 24 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Foshan) packaging 4 53 16 14 2 8 Color printing Printing Co., Ltd. Subsidiaries obtained or disposed in the Reporting Period: √ Applicable □ Not applicable How subsidiary was obtained or disposed Effects on overall operations and operating Subsidiary in the Reporting Period performance Kunshan Focai Packaging & Printing Co., Liquidation No Ltd. Information about major majority- and minority-owned subsidiaries: During the reporting period, affected by the continuously increasing price of raw materials of wood pulp, and the fluctuation of US dollar currency rate, the production costs of ivory board produced and sold by subsidiaries Hongta Renheng and Zhuhai Huafeng increased dramatically, causing a large decline in the profit of paper section from last year. VIII Structured Bodies Controlled by the Company □ Applicable √ Not applicable IX Prospects (I) Industrial Competition Framework and Development Trend Affected by China-US trade conflicts and exchange rate fluctuations, macroeconomic index fell and the packaging and paper industries that are highly associated with macro economy were impacted at different degrees. The market end demands showed great decrease and the supply side continued the trend of 2017 with new increases instead of any decrease in 2018. The capacity that could be placed in market increased, while the whole industry presented a status of supply exceeding demand. As a result, the paper industry took on an overall trend of narrowed profit margins. The investigation report shows that, compound annual growth rate of domestic ivory board industry will reach about 5.5% in next few years, but the growth trend of subdivided paper grades is expected to present differentiation. The annual average growth rate of food packaging board is about 7%; the annual average growth rate of liquid packaging board is about 5%; the annual average growth rate of social ivory board in cosmetics and personal care field is about 9%; the annual average growth rate of social ivory board in medicines and health products field is about 6%; by contrast, with the tobacco industry's entering the downlink stage of its development cycle, it is expected that the annual growth rate of cigarette box board packaging market will drop at an average annual rate of 2% by 2030. (II) Development Strategy The Company will grasp the development opportunity in the new era, make full use of its advantages, develop towards the depth of the industrial chain and relevant fields through specialized and market-oriented acquisition and reorganization, improve its capacity for design, R&D, manufacturing and whole service of high-end paper packaging materials, eventually achieve its transformation and upgrading from traditional paper making industry to "packaging material field",make the packaging material industry better, stronger and bigger, and become a first-class provider of green and environmental protection packaging materials and packaging solutions which integrates design, manufacturing and service. (III) Management Solution for 2019 2019 marks the 70th anniversary of the founding of the People’s Republic of China and is a crucial year upon the release of the 25 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Guangdong-Hong Kong-Macao Greater Bay Area Planning. The Company will stick to the guidance of Xi Jinping’s thought on socialism with Chinese characteristics for a new era, deeply implement the spirit of the 19 th National Congress of the Communist Party of China and the Central Economic Working Conference, give full play the leading role of party building and ensure the integration of party building and the Company’s operation in cohesion for joint development. The Company will keep an eye on domestic and foreign policies, understand and follow the economic trend and continue to explore share transfer to provide a capital platform guarantee for its sustainable development. It will persist in the concept of green development, opening up and innovation, and oriented by market with focus on customers, center around its development strategy to carry out work and proactively promote key projects. It will keep driving corporate in-depth reforms, optimizing the existing mechanism and refine the echelon talent team, build a “fighter-oriented” talent development system, focus resources towards fighters and incline the incentive mechanism towards fighters. It will keep enhancing its standardized operation and governance level and effectively prevent operation risks. It will reinforce the strength of new product development and marketing, return to the development route led by technology and fully increase the corporate competitiveness. (IV) Possible Risks 1. Market risk High-end coated ivory board is the dominant product of the Company. However, affected by the concentrated release of the new production capacity for various ivory boards in China in the past two years, the domestic demands didn’t increase greatly. The more fierce market competition of the ivory boards in China has brought a great impact on the market of the Company’s products. Countermeasure: intensify product structure adjustment, and strengthen the efforts in developing new products and expanding new market. 2. Raw material price and exchange rate fluctuation risk The raw material used by the Company’s main products is imported paper pulp. Due to the continuously increased price of international paper pulp during the Reporting Period, and the fluctuation of US dollar currency rate, the Company is under great pressure to the costs control. Countermeasure: keep a close watch on the paper pulp price change trend and US dollar exchange rate tendency, gradually purchase more paper pulp at home, and meanwhile, strategically purchase paper pulp as reserves when necessary, in order to effectively control the cost. 3. Safety and Environmental Protection Risk The company is specialized in manufacturing with large mechanical equipment. Due to complicated production and manufacturing environment, safety production and environmental requirements become much more stringent. Countermeasures: strengthen the recognition and management of safety and environmental protection hazards; improve the management of production & manufacturing machines and pollution discharge equipment/facilities; clearly define personnel responsibilities of front-line production workers; enhance the supervision and inspection of safety operation on the production site; reinforce corresponding publicity and education and create possible safety production atmosphere; consolidate job responsibilities for staffs in environmental protection department; strictly implement environmental protection and emission standards; eliminate possible risks of safety and environmental protection accidents. X Communications with the Investment Community such as Researches, Inquiries and Interviews 1. During the Reporting Period √ Applicable □ Not applicable Date Way of communication Type of communication Index to main information 26 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 party communicated Inquired whether the Company would conduct share reform recently, and whether there was specific scheme and 9 February 2018 By phone Individual idea. The Company replied according to the disclosed information with no materials offered. Inquired the production operation of the company, and whether the performance in the first quarter improved; inquired the significant event plan after the share 21 March 2018 By phone Individual trading suspension of the Company and the plan for share reform after the share trading resumption. The Company replied according to the disclosed information with no materials offered. Inquired the procedure of transferring 29 March 2018 By phone Individual non-tradable share. The Company had replied with no materials offered. Inquired the production operation of the company, and the reason and countermeasures of the declining 20 April 2018 By phone Individual performance. The Company replied according to the disclosed information with no materials offered. Inquired the production operation and the thought of the future share reform of 28 May 2018 By phone Individual the company. The Company replied according to the disclosed information with no materials offered. Inquired the production operation and whether there was a plan for share 26 June 2018 By visit Individual reform recently. The Company had replied with no materials offered. Inquired whether there was a plan for share reform recently. The Company 29 August 2018 By phone Individual replied according to the disclosed information with no materials offered. The share price of the Company continuously decreasing, so whether the 3 September 2018 By phone Individual performance in the second half year could improved, and whether there was a 27 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 plan for assets restructuring. The Company replied according to the disclosed information with no materials offered. Inquired the main reasons of the declining performance of the Company, and whether there was a good news. The 10 September 2018 By phone Individual Company replied according to the disclosed information with no materials offered. Inquired the reason for changing the accounting firm. The Company replied 17 October 2018 By phone Individual according to the disclosed information with no materials offered. Inquired the event of attending the Extraordinary General Meeting of the 29 October 2018 By phone Individual Company. The Company replied according to the disclosed information with no materials offered. Inquired whether the Company could make a profit at the end of the year. The 13 November 2018 By phone Individual Company replied according to the disclosed information with no materials offered. Inquired the production operation and development direction. The Company 17 December 2018 By phone Individual replied according to the disclosed information with no materials offered. Times of communications 13 Number of institutions communicated with 1 Number of individuals communicated with 12 Number of other communication parties 0 Tip-offs or leakages of substantial supposedly-confidential information during None communications 28 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part V Significant Events I Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock) How the profit distribution policy, especially the cash dividend policy, for ordinary shareholders was formulated, executed or revised in the Reporting Period: √ Applicable □ Not applicable During the Reporting Period, the Company didn’t carry out the annual profit distribution plan temporarily due to the operating losses. Special statement about the cash dividend policy In compliance with the Company’s Articles of Association and Yes resolution of general meeting Specific and clear dividend standard and ratio Yes Complete decision-making procedure and mechanism Yes Independent directors faithfully performed their duties and Yes played their due role Non-controlling interests are able to fully express their opinion Yes and desire and their legal rights and interests are fully protected In case of adjusting or changing the cash dividend policy, the conditions and procedures involved are in compliance with No adjustments or changes applicable regulations and transparent The profit distributions to ordinary shareholders, either in the form of cash or stock, in the past three years (including the Reporting Period) are summarized as follows: 2018 profit distribution plan: the Company didn’t carry out the 2018 profit distribution plan temporarily due to the operating losses during the Reporting Period.. 2017 profit distribution plan: Based on the total shares of the Company as of 31 December 2017, a dividend of RMB0.18 (tax inclusive) per 10 shares would be distributed to all shareholders of the Company. 2016 profit distribution plan: Based on the total shares of the Company as of 31 December 2016, a dividend of RMB0.32 (tax inclusive) per 10 shares would be distributed to all shareholders of the Company. Cash dividend for ordinary shareholders in the past three years (including the Reporting Period): Unit: RMB Net profit attributable to Total cash Cash ordinary Cash dividends dividends A as % of B in other forms C as % of B D as % of B Year dividends (tax shareholders (including (%) (such as share (%) (%) inclusive) (A) of the listed repurchase) (C) those in other company in forms) (D) consolidated 29 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 statements for the year (B) 2018 0.00 -2,814,965.92 0.00% 0.00 0.00% 0.00 0.00% 2017 9,097,650.00 18,637,865.97 48.81% 0.00 0.00% 0.00 48.81% 2016 16,173,600.00 61,324,088.11 26.37% 0.00 0.00% 0.00 26.37% Indicate by tick mark whether the Company fails to put forward a cash dividend proposal for the ordinary shareholders despite the facts that the Company has made profits in the Reporting Period and the profits of the Company as the parent distributable to the ordinary shareholders are positive. □ Applicable √ Not applicable II Final Dividend Plan for the Reporting Period □ Applicable √ Not applicable The Company has no final dividend plan, either in the form of cash or stock. III Fulfillment of Commitments 1. Commitments of the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and other Entities Fulfilled in the Reporting Period or Ongoing at the Period-end √Applicable □ Not applicable Date of Type of Details of Term of Commitment Promisor commitment Fulfillment commitment commitment commitment making Commitments made in share reform In order to avoid potential horizontal competition, China Commitments made in acquisition China Paper Supplies 28 June 2005 Normal documents or shareholding alteration Long-term Corporation Development performance documents Investment Corporation (which has changed its name to “China Paper 30 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Corporation”) makes the following commitment: 1. The Company and the Company’s wholly owned and controlling companies ensure that there is no same or similar business with Foshan Huaxin Packaging Co., Ltd. 2. The Company and the Company’s wholly owned and controlling companies ensure that there is no same or similar business with Foshan Huaxin Packaging Co., Ltd.; The Company and the Company’s wholly owned and controlling companies 31 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 will not self-run no same or similar business with Foshan Huaxin Packaging Co., Ltd.; not self- run any similar projects constitute a direct competition with Foshan Huaxin Packaging Co., Ltd.; nor any method of investment business constituted or may constituted competition with Foshan Huaxin Packaging Co., Ltd. thus ensure to avoid any direct or indirect business competition to the production and operation of Foshan Huaxin Packaging Co., Ltd.. Commitments made in time of asset Singapore For defective 29 October Long-term Long-term restructuring Renheng real estate 2012 commitment 32 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Industry Co., failing to belonging to Ltd.; Yunnan obtain the need trigger Hongta Group drawbacks of conditions Co., Ltd.,(both the ownership are not the certificate, shareholders Hongta Group of the Co., Ltd. and Company) Yanlord Industries Pte. Ltd. undertake that if a third party claims right or property demolition, which results in the inability of Hongta Renheng to normally possess, utilize, profit from and dispose of defective (real estate), Hongta Group Co., Ltd and Yanlord Industries Pte. Ltd agree to pay the compensation for the losses of Foshan Huaxin Packaging Co., Ltd. and Long Bon International Co., Ltd. within 30 days from receiving the notice of 33 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Foshan Huaxin Packaging Co., Ltd. and Long Bon International Co., Ltd. The value of defective real estate will be comprehensiv ely determined according to the Rights and Interests of All Shareholders Value Assets Evaluation Report of Zhuhai Special Economic Zone Hongta Renheng Paper Co., Ltd. issued by Zhongshang Assets Appraisal Co., Ltd. on 7 November 2008 as well as used years and depreciation of real estate. The compensation shall not exceed the total assessed net value of the defective 34 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 real estate of RMB10,746,2 98.00. Foshan Huaxin Development Co., Ltd. as the controlling shareholder of Foshan Huaxin Packaging Co., Ltd. (here in after referred to as "YHB")undert akes that it will not in any place within or outside of Guangdong province in Foshan any way Commitments made in time of IPO or Huaxin Normal (including, but 23 June 1999 Long-term refinancing Development performance not limited to, Co., Ltd. with individual proprietorship, joint venture or through another company hold the share or own equities) participate in similar business activities that may directly form competition with YHB at that time, but with the 35 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 exception that Foshan Huaxin Development Co., Ltd. no longer actually controls YHB in the case of any subsequent restructuring, transfer, new issuance, etc., Equity incentive commitments The Company’s specific planning for returns to its shareholders for the next three years (2018-2020): 1. The Company can use cash, shares or cash Foshan and shares Other commitments made to minority Huaxin Normal combined to 15 April 2018 14 April 2021 shareholders Packaging performance allocate Co., Ltd. dividends and allocate interim cash dividends.2. Within the next three years, the Company will proactively distribute profits in cash. In accordance with relevant 36 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 laws, regulations and the related provisions and terms of the Company’s Articles of Incorporation and policies, if the Company makes profits and meets the capital demand of normal production and business operation with sufficient reserved legal accumulation fund and surplus accumulation and if there is no major investment plan or major cash payments, etc., the cumulative profits in cash to be distributed in the next three years will be no less than thirty percent of the average annual attributable profits realized in 37 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 recent three years. 3. Depending on the actual situation of the Company’s long-term and sustainable development, when the Board of Directors deems that the profit allocation in share dividends meets the overall interests of all shareholders, the Company can use share dividends to distribute profits. The Company’s specific planning for returns to its shareholders for the next Foshan three years Had Huaxin 31 August (2015-2017): 29 June 2015 completed the Packaging 2018 1. The performance Co., Ltd. Company can use cash, shares or cash and shares combined to allocate dividends and 38 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 allocate interim cash dividends.2. Within the next three years, the Company will proactively distribute profits in cash. In accordance with relevant laws, regulations and the related provisions and terms of the Company’s Articles of Incorporation and policies, if the Company makes profits and meets the capital demand of normal production and business operation with sufficient reserved legal accumulation fund and surplus accumulation and if there is no major investment plan or major cash payments, etc., the cumulative 39 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 profits in cash to be distributed in the next three years will be no less than thirty percent of the average annual attributable profits realized in recent three years. 3. Depending on the actual situation of the Company’s long-term and sustainable development, when the Board of Directors deems that the profit allocation in share dividends meets the overall interests of all shareholders, the Company can use share dividends to distribute profits. Fulfilled on time Yes Specific reasons for failing to fulfill commitments on time and plans for N/A next step (if any) 40 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 2. Where there had been an earnings forecast for an asset or project and the Reporting Period was still within the forecast period, explain why the forecast has been reached for the Reporting Period. □Applicable √ Not applicable IV Occupation of the Company’s Capital by the Controlling Shareholder or Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. V Explanations Given by the Board of Directors, the Supervisory Board and the Independent Directors (if any) Regarding the Independent Auditor's “Modified Opinion” on the Financial Statements of the Reporting Period □ Applicable √ Not applicable VI YoY Changes to Accounting Policies, Estimates and Methods √Applicable □ Not applicable 1) The Company prepared 2018 Financial Statements in accordance with the Notes of the Ministry of Finance on Revising and Printing the Format of 2018 General Enterprises Financial Statement (CK [2018] No. 15) and the interpretation of it and the requirements of the Accounting Standards for Enterprises. Retroactive adjustment was adopted for the changes in the accounting policy. The significantly affected items and amounts in 2017 Financial Statements are as follows: Item and amount in original financial statement Item and amount in new financial statement Notes receivable 430,699,664.45 1,160,829,887.51 Notes and accounts Accounts receivable 730,130,223.06 receivable Interest receivable 141,388.09 Other receivables 20,249,531.23 Other receivables 20,108,143.14 Notes payable 8,530,196.41 Notes and accounts 349,777,358.80 Accounts payable 341,247,162.39 payable Interest payable 7,865,380.83 Other payables 50,811,351.70 Dividends payable 12,116,789.76 Other payables 30,829,181.11 Administrative expense 125,476,808.28 120,342,343.74 Administrative expense 5,134,464.54 R&D expense Cash generated from other 66,763,328.29 Cash generated from 81,627,128.29 operating activities[Note] other operating activities 41 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Cash generated from other 735,773,715.83 Cash generated from 720,909,915.83 investing activities [Note] other investing activities [Note]: the presentation of actually received Government subsidy of RMB14,863,800.00 related to assets in cash flow statement shall be adjusted from “cash generated from other investing activities” to “cash generated from other operating activities”. 2) The Ministry of Finance in 2017 announced the Interpretation to the Accounting Standards for Enterprises No. 9 - Regarding the Accounting Treatment of Net Investment Losses under the Equity Method, Interpretation to the Accounting Standards for Enterprises No. 10 - Regarding the Depreciation Method Based on the Use of Incomes Generated from Fixed Assets, Interpretation to the Accounting Standards for Enterprises No. 11 - Regarding the Amortization Method Based on the Use of Incomes Generated from Intangible Assets and Interpretation to the Accounting Standards for Enterprises No. 12 - Regarding Whether the Provider and the Receiver of Key Management Personnel Service Are Related Parties. The Company has implemented the aforementioned interpretations to the accounting standards for enterprises since 1 January 2018 and the implementation does not have any effect on the opening financial data of the Company. VII Retrospective Restatements due to Correction of Material Accounting Errors in the Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. VIII YoY Changes to the Scope of the Consolidated Financial Statements √Applicable □ Not applicable Kunshan Focai Packaging & Printing Co., Ltd. has been liquidated and de-registered during the Reporting Period, and has thus no longer been included in the consolidated financial statements. IX Engagement and Disengagement of Independent Auditor Current independent auditor: Name of the domestic independent auditor Pan-China Certified Public Accountants (LLP) The Company’s payment to the domestic independent auditor 95 (RMB’0,000) How many consecutive years the domestic independent auditor 1 has provided audit service for the Company Names of the certified public accountants from the domestic Li Qinglong, Liu Jingya independent auditor writing signatures on the auditor’s report How many consecutive years the certified public accountants 1 have provided audit service for the Company Indicate by tick mark whether the independent auditor was changed for the Reporting Period. 42 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 √ Yes □ No Indicate by tick mark whether the independent auditor was changed during the audit period. √ Yes □ No Indicate by tick mark whether an approval procedure was implemented for the change of independent auditor. √ Yes □ No Further details about the change of independent auditor: The former CPAs has consecutively served for three years. According to the actual operation and development, the Company engaged Pan-China Certified Public Accountants (LLP) as the 2018 Finance audit institution. Independent auditor, financial advisor or sponsor engaged for the audit of internal controls: √ Applicable □ Not applicable The Company engaged Pan-China Certified Public Accountants (Special General Partnership) as the internal control auditor for the Current Year and paid RMB0.3 million additionally for that. X Possibility of Listing Suspension or Termination after Disclosure of this Report □ Applicable √ Not applicable XI Insolvency and Reorganization □ Applicable √ Not applicable No such cases in the Reporting Period. XII Major Legal Matters √Applicable □ Not applicable Involved Index to Decisions and Execution of Disclosure General information amount Provision Progress disclosed effects decisions date (RMB’0,000) information A major production As of the safety accident was end of the http://www.c caused by a flash Reporting ninfo.com.cn/ burn when Jiangsu Period, cninfo-new/d Tianxing Zhuhai isclosure/szse High-Altitude Huafeng 6 March _main/bulleti 1,116 None Pending Pending Anti-Corrosion received 2017 n_detail/true/ Engineering Co., compensati 1203132688? Ltd. (hereinafter on of announceTim referred to as RMB1.1.4 e=2017-03-0 "Jiangsu Tianxing") million 6 and Wuhan Kedio from 43 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Electric Power defendants, Technology Co., and there Ltd. (hereinafter still are referred to as RMB9.76 "Wuhan Kedio") million to carried out the be claimed maintenance of from them. 120m chimney This civil anti-corrosion compensati project for Zhuhai on case has Huafeng, the not yet been holding subsidiary closed. of the company, on 4 March 2017. Six construction workers of the construction company died in the accident. Zhuhai Huafeng paid a total compensation of RMB 11.16 million to relatives of the victims on 7 March 2017 for Jiangsu Tianxing and Wuhan Kedio in accordance with the requirements and under the supervision of the government. Zhuhai Huafeng applied to Zhuhai Jinwan District People's Court for property preservation before litigation on 14 March 2017. Zhuhai Huafeng applied to Zhuhai Jinwan District People's Court for recovery action in which 44 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Jiangsu Tianxing and Wuhan Kedio were taken as joint defendants on 16 March 2017. Then Wuhan Kedio applied to add Yancheng Xinda High-Altitude Anti-Corrosion Co., Ltd. (hereinafter referred to as YanchengXinda) as a defendant and YanchengXinda applied to add Liu Jiechun as a defendant. XIII Punishments and Rectifications □ Applicable √ Not applicable No such cases in the Reporting Period. XIV Credit Quality of the Company as well as Its Controlling Shareholder and Actual Controller □ Applicable √ Not applicable XV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees □ Applicable √ Not applicable No such cases in the Reporting Period. XVI Major Related-Party Transactions 1. Continuing Related-Party Transactions √Applicable □ Not applicable Relation Type of Specific Pricing Transact Total As % of Approv Over Method Obtaina Index Related Disclos ship transacti transacti principl ion value total ed the of ble to party ure date with the on on e price (RMB’0 value of transacti approve settleme market disclose 45 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Compan ,000) all on line d line or nt price for d y same-ty (RMB’0 not same-ty informa pe ,000) pe tion transacti transacti ons ons Being decided through China http://w Actual Purchasi negotiat 17 Paper Continu Market 66,516. 114,236 Remitta ww.cni controll ng ion 19.61% Not -- March Corporati ing price 9 .03 nce nfo.co er products based 2018 on m.cn on the market value A compan Being y decided Guangzho controll through http://w u ed by negotiat 17 Continu Selling Market Remitta ww.cni Chenhui actual ion 6,660.4 1.81% 20,000 Not -- March ing products price nce nfo.co Paper controll based 2018 m.cn Co., Ltd er on the indepen market dent value director 73,177. 134,236 Total -- -- -- -- -- -- -- -- 3 .03 Large-amount sales return in detail N/A Give the actual situation in the Reporting Period (if any) where an estimate had been made for the total N/A value of continuing related-party transactions by type to occur in the Reporting Period Reason for any significant difference between the transaction price and the N/A market reference price (if applicable) 2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Interests □ Applicable √ Not applicable No such cases in the Reporting Period. 46 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 3. Related Transactions Regarding Joint Investments in Third Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Credits and Liabilities with Related Parties √Applicable □ Not applicable Indicate by tick mark whether there were any credits and liabilities with related parties for non-operating purposes. □ Yes √ No No such cases in the Reporting Period. 5. Other Major Related-Party Transactions □ Applicable √ Not applicable No such cases in the Reporting Period. XVII Major Contracts and Execution thereof 1. Entrustment, Contracting and Leases (1) Entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Contracting □ Applicable √ Not applicable No such cases in the Reporting Period. (3) Leases □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Major guarantees √ Applicable □ Not applicable 47 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (1) Guarantees Unit: RMB'0,000 Guarantees provided by the Company as the parent and its subsidiaries for external parties (exclusive of those for subsidiaries) Disclosure Guarante date of the Actual Having e for a guarantee Line of Actual Type of Term of Obligor guarantee expired related line guarantee occurrence date guarantee guarantee amount or not party or announcem not ent Guarantees provided by the Company as the parent for its subsidiaries Disclosure Guarante date of the Actual Having e for a guarantee Line of Actual Type of Term of Obligor guarantee expired or related line guarantee occurrence date guarantee guarantee amount not party or announcem not ent 27 Zhuhai Hongta 12 27 September September Renheng Packaging February 3,880 3,880 Joint-liability Nott Yes 2017 2017 to 13 Co., Ltd. 2015 March 2020 28 February Zhuhai Hongta 24 January 28 February 2017 to 28 Renheng Packaging 20,000 20,000 Joint-liability Not Yes 2017 2017 February Co., Ltd. 2019 Zhuhai Hongta 23 May 2017 24 May Renheng Packaging 33,000 23 May 2017 27,800 Joint-liability to 22 May Not Yes 2017 Co., Ltd. 2020 1 March Zhuhai Hongta 2016 to 31 29 April Renheng Packaging 20,000 1 March 2016 2,800 Joint-liability December Not Yes 2016 Co., Ltd. 2019 Zhuhai Hongta 15 July 2017 Renheng Packaging 5 July 2017 20,000 15 July 2017 0 Joint-liability to 15 July Not Yes Co., Ltd. 2019 24 February Zhuhai Hongta 24 January 24 February 2017 to 24 Renheng Packaging 10,000 0 Joint-liability Yes Yes 2017 2017 February Co., Ltd. 2018 Zhuhai Hongta 23 June 10,000 28 July 2017 10,000 Joint-liability 28 July 2017 Not Yes 48 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Renheng Packaging 2017 to 14 May Co., Ltd. 2018 12 Zhuhai Hongta 23 June 12 September Joint-liability September Renheng Packaging 10,000 4,602 Not Yes 2017 2017 2017 to 31 Co., Ltd. March 2019 10 November Zhuhai Hongta 24 May 10 November 2017 to 9 Renheng Packaging 10,000 9,999 Joint-liability Not Yes 2017 2017 November Co., Ltd. 2019 13 November Zhuhai Hongta 24 May 13 November 2017 to 3 Renheng Packaging 10,000 0 Joint-liability Yes Yes 2017 2017 September Co., Ltd. 2018 Zhuhai Hongta 30 1 January Joint-liability Renheng Packaging December 3,120 1 January 2018 1,120 2018 to 13 Not Yes Co., Ltd. 2017 March 2020 Zhuhai Hongta 8 June 2018 18 July Renheng Packaging 5,000 8 June 2018 5,000 Joint-liability to 7 June Not Yes 2018 Co., Ltd. 2019 26 October Zhuhai Hongta 23 August 2018 to 31 Renheng Packaging 10,000 26 October 2018 10,000 Joint-liability Not Yes 2018 December Co., Ltd. 2019 29 October Zhuhai Huafeng Paper 25 October Joint-liability 35,000 29 October 2016 16,602 2016 to 28 Not Yes Co., Ltd. 2016 October 2019 10 October Zhuhai Huafeng Paper 23 August 8,000 10 October 2018 6,198 Joint-liability 2018 to 31 Not Yes Co., Ltd. 2018 July 2020 1 January Huaxin (Foshan) 5 August 2016 to 31 Color Printing Co., 6,000 1 January 2016 3,000 Joint-liability Not Yes 2016 December Ltd. 2020 Huaxin (Foshan) 10 October 30 October Color Printing Co., 2,000 10 October 2018 1,000 Joint-liability 2018 to 10 Not Yes 2018 Ltd. October 2019 Total approved line for such Total actual amount of such guarantees in the Reporting Period 300,000 guarantees in the Reporting 216,000 (B1) Period (B2) Total approved line for such 300,000 Total actual balance of such 122,001 49 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 guarantees at the end of the guarantees at the end of the Reporting Period (B3) Reporting Period (B4) Guarantees provided between subsidiaries Disclosure Guarante date of the Actual Having e for a guarantee Line of Actual Type of Term of Obligor guarantee expired related line guarantee occurrence date guarantee guarantee amount or not party or announcem not ent 31 December Zhuhai Huafeng Paper 31 December 5 July 2017 15,000 0 Joint-liability 2017 to 13 Yes Yes Co., Ltd. 2017 July 2018 Zhuhai Golden 21 31 August Pheasant Chemical November 10,000 31 August 2015 0 Joint-liability 2015 to 30 Yes Yes Co., Ltd. 2015 August 2018 Total approved line for such Total actual amount of such guarantees in the Reporting Period 40,000 guarantees in the Reporting 25,000 (C1) Period (C2) Total approved line for such Total actual balance of such guarantees at the end of the 40,000 guarantees at the end of the 0 Reporting Period (C3) Reporting Period (C4) Total guarantee amount (total of the three kinds of guarantees above) Total actual guarantee Total guarantee line approved in 340,000 amount in the Reporting 241,000 the Reporting Period (A1+B1+C1) Period (A2+B2+C2) Total actual guarantee Total approved guarantee line at balance at the end of the the end of the Reporting Period 340,000 122,001 Reporting Period (A3+B3+C3) (A4+B4+C4) Total actual guarantee amount (A4+B4+C4) as % of the 61.9% Company’s net assets Of which: Balance of guarantees provided for shareholders, actual controller 0 and their related parties (D) Balance of debt guarantees provided directly or indirectly for 0 obligors with an over 70% debt/asset ratio (E) Amount by which the total guarantee amount exceeds 50% of the 23,453.66 Company’s net assets (F) Total of the three amounts above (D+E+F) 23,453.66 Compound guarantees: 50 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 None. (2) Irregularities in Provision of Guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Cash Entrusted to Other Entities for Management (1) Cash Entrusted for Wealth Management □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Entrusted Loans □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Other Major Contracts □ Applicable √ Not applicable No such cases in the Reporting Period. XVIII Corporate Social Responsibility (CSR) 1. Measures Taken to Fulfill CSR Commitment The Company paid attention on the execution of the social responsibilities, so in the process of the production, operating and the business development, when creating the value for the shareholders, it took great efforts to achieve the mutual coordination between the economic efficiency, the social efficiency and the ecological efficiency, the short-term profits and the long-term profits, the self development and the society development by complying with the other appeal of the nation and devoting itself to the promotion of the comprehensive development of the society that to realize the healthy and harmonious development of between the Company and the employees, the Company and the society, the Company and the environment. The Company took the provider of the green environmental protection packaging materials and the packaging solving proposals as it s mission, regarded the construction of the international first-class enterprise as the target, unshakably walked on the scientific innovation development path, constantly innovate the enterprise management, enhanced the products quality, enlarged the R&D strength of the new products, produced the packaging materials products with high quality and high-tech content that met with the production social demand, made great efforts to forge the excellent project of the national packaging materials brand and create the environmental protecting as well as high quality social wealth. When the Company was realizing the profits, should insist to share the development results with the society, try its best to pursuit the harmonious and unity with the social development, constantly promotes the development and progress of the society and the economy, so that to pay for and contribute to the society with green 51 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 ecological development. The Company devoted itself to the construction of the international first-class packaging materials enterprise possessed of green ecology and constantly development and as one of the major enterprises among the domestic papermaking, during the years’ development, the Company always regard green ecology as the goal of survival and development and positively introduced and upgraded the high-efficient, energy-saving and environmental protection international high-end production equipment system for promoting the transformation and upgrade of the enterprise. Since its foundation, the company has always paid attention to environmental protection and insisted on the path of sustainable development and has always been committed to controlling pollution, continuously improving environmental behavior and conscientiously fulfilling social responsibility. Subsidiaries Hongta Renheng and Zhuhai Huafeng have passed the quality, environment, occupational health and safety and food safety management certification and FSC/COC management system certification and gotten the certificates. Moreover, the products of subsidiaries Hongta Renheng and Zhuhai Huafeng have passed QS certification to ensure that products which conform to food safety requirements continuously and stably are supplied to consumers. Meanwhile, Hongta Renheng and Zhuhai Huafeng has won the title of "Environmental Protection and Integrity Enterprise" for successive years and has been awarded the green card "Five-Star Environmental Protection and Integrity Enterprise". The Company has been fulfilling its social responsibility and insisting on building it into a green and environmental enterprise. Main energy saving and emission reduction and technical transformation projects completed in recent years include: (1) The subsidiary Hongta Renheng initially introduced the largest biomass solid moulding fuel energy saving and emission reduction project which fulfills the large scale transition of energy structure to clean energy and achieves "eco zero emission" and "low-carbon papermaking; (2) The subsidiaries Hongta Renheng and Zhuhai Huafeng set up the energy management center, passed the energy management system (GB/T23331-2009) certification, provided digital supporting platform tool for the company to achieve management energy saving; (3)Hongta Renheng completed the renovation of BM2 air compressor energy saving project via energy management contracting; (4) Zhuhai Huafeng completed the construction of reclaimed water reuse project, strengthened the reuse of recycled water, reduced water consumption, realized the energy saving and emission reduction project; (5)Zhuhai Huafeng completed boiler desulfurization and denitrification transformation to further reduce sulfur dioxide emission; (6) Zhuhai Huafeng invested in the turbine fan project to dramatically reduce paper machine dewatering energy consumption. 2. Measures Taken for Targeted Poverty Alleviation (1) Plans The Company will carry out the targeted poverty alleviation according to the poverty alleviation plan of the leading group of the actual controller China paper Corporation. (2) Summary of the Related Work Done in the Reporting Period The Company didn’t carry out any related work during the Reporting Period. (3) Results Indicator Measurement unit Quantity/Progress 1. General results —— —— 52 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 2. Itemized results —— —— 2.1 Out of poverty by industrial development —— —— 2.2 Out of poverty by transferring —— —— employment 2.3 Out of poverty by relocation —— —— 2.4 Out of poverty by education —— —— 2.5 Out of poverty by improving health —— —— 2.6 Out of poverty by protecting ecological —— —— environment 2.7 Subsidy for the poorest —— —— 2.8 Social poverty alleviation —— —— 2.9 Other items —— —— 3. Accolades received (for what and at what —— —— level) (4) Subsequent Plans The Company will seriously carry out the targeted poverty-relief work with China Paper Corporation according to the implementation plan of poverty alleviation project of the actual controller China Paper Corporation, and continuously carry out the subsequent targeted poverty alleviation plan. 3. Issues Related to Environmental Protection Indicate by tick mark whether the Company or any of its subsidiaries is identified as a major polluter by the environmental protection authorities. Yes Discharge Name of Number of Distribution Discharge Approved Name of Way of standards Total Excessive major discharge of discharge concentratio total polluter discharge implemente discharge discharge pollutants outlets outlets n discharge d Chemical Chemical Chemical oxygen Discharged Chemical oxygen oxygen demand, Chemical into water oxygen demand, demand, and oxygen quality Sewage demand≤80 and and Hongta ammonia demand, purificatio 1 disposal mg/l and ammonia ammonia Naught Renheng nitrogen are ammonia n plant center ammonia nitrogen are nitrogen are 37.85mg/l nitrogen after being nitrogen≤8 122.16t and 294.4t and and disposed mg/l 1.42t 29.44t 0.46mg/l respectively respectively respectively 53 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Sulfur dioxide, Sulfur Sulfur Sulfur nitrogen dioxide, dioxide, dioxide≤50 Sulfur oxide, nitrogen nitrogen mg/m3, dioxide, smoke are oxide, oxide, Hongta Organized Power nitrogen nitrogen 1 0.79mg/m3, smoke are smoke are Naught Renheng discharge boiler oxide≤200 oxide, 59.76mg/m 0.60t, 34.04t, mg/m3, and smoke 3, and 44.73t, and 136.15t, and smoke 17.26mg/m 12.83t 20.42t ≤30mg/m3 3 respectively respectively respectively Chemical Chemical Chemical oxygen Discharged Chemical oxygen oxygen demand, Chemical into water oxygen demand, demand, and oxygen quality Sewage demand≤80 and and Zhuhai ammonia demand, purificatio 1 disposal mg/l and ammonia ammonia Naught Huafeng nitrogen are ammonia n plant center ammonia nitrogen are nitrogen are 34.04mg/l nitrogen after being nitrogen≤8 73.46t and 180t and and disposed mg/l 1.36t 22.5t 0.53mg/l respectively respectively respectively Sulfur Sulfur Sulfur dioxide, dioxide, Sulfur dioxide, nitrogen nitrogen dioxide, Sulfur nitrogen oxide, oxide, nitrogen dioxide, oxide, Zhuhai Organized Power smoke are smoke are oxide, nitrogen 1 smoke are Naught Huafeng discharge boiler 28.5mg/m3, 50mg/m3, smoke are oxide, 55.82t, 64.75mg/m 100mg/m3, 68t, 142t, smoke 129.76t, and 3, and and and 26t 23.9t 12.13mg/m 20mg/m3 respectively respectively 3 respectively Secondary standard of Phase II of Emission 20m Non-methan Upper-air Limit for Golden discharge e emissions Air Pheasant 2 outlet after 16mg/m? 1.123t 2.246t Naught hydrocarbo after being Pollution Chemical the disposal n disposed (DB44/27- of RCO 2001) and Emission Limit for Odor 54 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Pollutants (GB14554 -1993) Chemical Chemical Chemical oxygen Chemical oxygen oxygen Chemical demand, oxygen demand, demand, Discharged Golden oxygen Sewage and demand≤35 and and to sewage Pheasant demand, 1 disposal ammonia 0mg/l and ammonia ammonia Naught discharge Chemical ammonia center nitrogen are ammonia nitrogen are nitrogen are outlet nitrogen 68mg/l and nitrogen≤25 3.125t and 3.528t and 7.6mg/l mg/l 0.201t 0.252t respectively respectively respectively Chemical Chemical Chemical oxygen Chemical oxygen oxygen demand, oxygen demand, demand, Nanzhuang and Huaxin Chemical Discharged demand≤11 and and Jili ammonia Color oxygen after being 1 0mg/l and ammonia ammonia Naught Sewage nitrogen are Printing demand disposed ammonia nitrogen are nitrogen are Surge 8.294mg/l nitrogen≤15 0.156t and 0.178t and and mg/l 0.021t 0.026t 0.0984mg/l respectively respectively respectively Construction and operation of facilities for preventing pollution: (I) Hongta Renheng The Sewage Station and Boiler were all built and operated by the third party. As for sewage, Hongta Renheng belongs to State key monitoring enterprise; as for smoke, Hongta Renheng belongs to Zhuhai key monitoring enterprise. 1. The company established a Sewage Station whose maximum processing capacity was 12000m3/d, and it was put into service on 1 April 2013 with the investment of RMB14 million through applying A/O technology. The quality of water after such processing could meet relevant national discharge standards stated in Discharge Standard of Water Pollutants for Pulp & Paper Industry (GB3544-2008), and waste water (after processing) reaching corresponding standards would be discharged into Qianshan Water Quality Purification Plant via the municipal sewage pipeline network of Xiangzhou District. Meanwhile, corresponding COD, ammonia nitrogen, total phosphorus, and total nitrogen, and PH values auto monitoring system would be installed at the discharge outlet, and the qualified unit, Zhuhai Fixed Star EP Technology Co., Ltd, would be in charge of its operation management and 24-hour auto online detection and monitoring of COD, ammonia nitrogen, total phosphorus, and total nitrogen, and PH values. 2. The company established 2 biomass briquette boilers with the operating capacity of 40 tons per hour were installed in association with relevant dust removal measures. As ceramic multi-tube cyclone dust collector and bag-type dust removal technology were applied to dispose flue gas, all discharged smoke pollutants, SO2 and nitric oxides via the 25m chimney would meet corresponding discharge limit standard stated in Emission Standard of Air Pollutants for Boilers (DB44/765-2010). Moreover, corresponding flue gas auto monitoring system would be installed at the discharge outlet, and the qualified unit would be in charge of its operation management and 24-hour auto online detection and monitoring of discharged SO2, nitric oxides and smoke dust. (II) Zhuhai Huafeng The company began to overhaul in downtime on 15 May in the first half year of 2018, and began to manufacturing on 7 June, which 55 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 were 22 days for overhaul. 1. The company established a Sewage Station whose maximum processing capacity was 22000m3/d, and it was put into service on 28 September 2006 with the floor space 21,358m2 and the investment of RMB38 million through applying flocculation precipitation + SBR technology. In addition, SBR biochemical system applied Canada ADI company’ s SBR technology, and key devices were all introduced from foreign countries. The quality of water after such processing could meet relevant national discharge standards stated in Discharge Standard of Water Pollutants for Pulp & Paper Industry (GB3544-2008), and waste water (after processing) reaching corresponding standards would be discharged into Nanshui Water Quality Purification Plant via the municipal sewage pipeline network of Gaolan Port District. Meanwhile, corresponding COD, ammonia nitrogen, total phosphorus, and total nitrogen, and PH values auto monitoring system would be installed at the discharge outlet, and the qualified unit, Zhuhai Fixed Star EP Technology Co., Ltd, would be in charge of its operation management and 24-hour auto online detection and monitoring of COD, ammonia nitrogen, total phosphorus, and total nitrogen, and PH values. 2. The company established two self-supplied fire coal CFBs were installed with the operating capacity of 75t per hour in association with relevant sulphur and dust removal measures. As out-of-furnace alkaline-mode wet desulphurization technology, bag-type dust remover, low-temperature and low-nitrogen combustion technology + SNCR were applied to dispose flue gas, the desulfurization rate is over 90%, the dust removal efficiency would exceed 99.6% and the denitration efficiency over 85%. All discharged smoke pollutants, SO2 and nitric oxides via the 120m chimney (discharged in temporary chimney in the first half year of 2018) would meet special discharge limit standard stated in Emission Standard of Air Pollutants for Thermal Power Plants (GB13223-2011). Moreover, corresponding flue gas auto monitoring system would be installed at the discharge outlet, and the qualified unit would be in charge of its operation management and 24-hour auto online detection and monitoring of discharged SO2, nitric oxides and smoke dust (the online monitoring system was not in operation due to the use of temporary chimney). (III) Golden Pheasant Chemical Exhaust processing system and sewage station are in normal operation. (1) Establishing a Sewage Station whose maximum processing capacity was 70m3/d, and the actual processing capacity was about 20m3 per day through applying biosorption technology. Sewage disposal equipment is running normally, and waste water (after processing) reaching corresponding standards would be discharged into Nanshui Sewage Disposal Plant in Zhuhai City via the municipal sewage pipeline network of Gaolan Port District, Zhuhai City. When all industrial waste water after disposal in sewage station can reach Class 1 Standard during the second period stated in Discharge Limits of Water Pollutants (DB44/26-2001), it will be disposed after being discharged into Nanshui Sewage Disposal Plant in Zhuhai City via the municipal sewage pipeline network of Gaolan Port District, Zhuhai City. (2) Establishing a exhaust processing system respectively in phase I with 1000m3 per hour processing capacity and phase II with 2000m3 per hour processing capacity. It adopted the equipment of bio-trickling, activated carbon adsorption, and photo-catalytic oxidation to discharge orderly after processing and reaching corresponding standards. Secondary standard of Phase II of Emission Limit for Air Pollution (DB44/27-2001) and Emission Limit for Odor Pollutants (GB14554-1993) were reached. Two exhaust gas devices and a waste water device are in normal operation. (IV) Huaxin Color Printing The Sewage Station is in normal operation. The company established its own Sewage Station whose maximum processing capacity can reach 20m3/d, and the qualified environmental protection company has always been involved in disposing waste water. All industrial waste water after disposal and reaching Class 1 Standard during the second period stated in Discharge Limits of Water Pollutants (DB44/26-2001) will be discharged into Nanzhuang Sewage Surge. Appraisal of environment influences for construction project and other administrative licensing of environment protection (I) Hongta Renheng 56 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 1. In September 1998, passed the environmental impact assessment for the 150,000-ton high-grade packaging cardboard project by the State Environmental Protection Administration and Guangdong Province Environmental Protection Bureau respectively (HF [1998] No. 321 and YHH [1998] No. 208); 2. In 2010, passed the environmental impact assessment for the MBF technical renovation project (ZHJ [2010] No. 5) and the test run of the renovation project (ZHS [2010] No. 6) by the Environmental Protection Bureau of Zhuhai Municipality; 3. In 2012, obtained the approval for the environmental impact report on the clean production of paper machines and the comprehensive waste water treatment technology renovation project (ZXHJB [2012] No. 155) by the Environmental Protection Bureau of Xiangzhou District; 4. In December 2003, passed the environmental acceptance for the completion of the 150,000-ton high-grade packaging cardboard project (YHH [2003] No. 969); 5. In 2013, completed the acceptance of the MBF technical renovation project (ZHY [2013] No. 5); 6. In 2014, completed the acceptance of the biochemical treatment of waste water project (ZXHY [2014] No. 10) 7. In 2017, obtained the approval for the environmental impact report on the sludge resource utilization technical project (ZXHJB [2017] No. 63) Pollutant discharge permit, No. 91440400617502107U001P; validity period: from 7 June 2017 to 6 June 2020; issued by: Environmental Protection Bureau of Xiangzhou District of Zhuhai City. (II) Zhuhai Huafeng 1. The reply letter of review opinions of the State Environmental Protection Administration on the environmental impact report for the capital increase of Foshan Huafeng Paper Co., Ltd. for building a new project with the annual capacity of 300,000-ton high-grade coating ivory board (HS [2005] No. 156) 2. The reply letter of opinions on the environmental protection acceptance for the completion of the autonomous MBF environmental upgrading and technical renovation project of Zhuhai Huafeng Paper Co., Ltd. (ZHY [2015] No. 3) 3. The reply on the environmental assessment for the new annual 60,000-ton ivory board film processing construction project of Zhuhai Huafeng Paper Co., Ltd. (ZGHJ [2012] No. 115) 4. The review opinions on the environmental impact report for the reuse of reclaimed water project of Zhuhai Huafeng Paper Co., Ltd. (ZGHJ [2013] No. 54) 5. The reply on the environmental assessment for the sludge burning project of Zhuhai Huafeng Paper (ZGHJ [2008] No. 69) 6. The review opinions of the Environmental Protection Bureau of Gaolangang District of Zhuhai Municipality on the environmental assessment report for the expansion of the annual 180,000-ton ivory board production line project of Zhuhai Huafeng Paper Co., Ltd. (ZGHJ [2014] No. 67) 7. The review opinions on the environmental impact registration for the garbage concentration center of Zhuhai Huafeng Paper Co., Ltd. (ZGHJ [2016] No. 58) 8. The approval on the environmental assessment for the waste water treatment renovation project of Zhuhai Huafeng Paper Co., Ltd. (ZGHJ [2016] No. 106) Pollution discharge permit, No. 914404006176214217001P; validity period: from 7 June 2017 to 6 June 2020; issued by: Environmental Protection Bureau of ZHUHAI GAOLAN PORT ECONOMIC ZONE MANAGEMENT COMMITTEE. (III) Golden Pheasant Chemical Acceptance inspection of Phase I environmental assessment: ZGHJY[2017] –No.007 Acceptance inspection of Phase II environmental assessment: ZGHJY[2016] –No.20 Pollution discharge permit, No. 4404062010000030 renewed on 28 December 2018, and it is valid until 31 July 2021; issued by: Planning and Construction Environmental Protection Bureau of ZHUHAI GAOLAN PORT ECONOMIC ZONE. (IV) Huaxin Color Printing 57 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Pollution discharge permit, No. 4406042010231001; validity period: from 17 October 2018 to 16 October 2021; issued by: Environmental Protection Bureau of Chancheng District of Foshan City. Emergency plan for abrupt environment affairs (I) Hongta Renheng Hongta Renheng prepared the Emergency Plan for Environmental Pollution and filed it with Zhuhai Environmental Protection Bureau Environment Monitoring Branch on 17 December 2015; Filing No.: 44040120150P-L Emergency Plan for Abrupt Environment Affairs of Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd. and the Risk Assessment Report for Abrupt Environment Affairs of Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd. A new round of compiling work of emergency plan for abrupt environment affairs and risk assessment report for abrupt environment affairs is underway. (II) Zhuhai Huafeng Zhuhai Huafeng prepared the Emergency Plan for Environmental Pollution and filed it with Environmental Protection Bureau of ZHUHAI GAOLAN PORT ECONOMIC ZONE on 24 October 2013; and filed the Emergency Plan for Abrupt Environment Affairs of Zhuhai Huafeng Paper Co., Ltd. (“Zhuhai Huafeng”) and the Risk Assessment Report for Abrupt Environment Affairs of Zhuhai Huafeng Paper Co., Ltd. (“Zhuhai Huafeng”) with Environmental Emergency Management Office of Department of Environmental Protection of Guangdong Province on 23 January 23 2015. Reassessment of emergency plan was completed on December 2018, and it was filed on Environmental Protection Bureau of ZHUHAI GAOLAN PORT. (III) Golden Pheasant Chemical Golden Pheasant Chemical prepared the Investigation Report for Environmental Emergency Resources, Time Risk Assessment Report for Abrupt Environment, and Comprehensive Emergency Plan for Abrupt Environment Affairs and filed them with Environmental Protection Bureau of ZHUHAI GAOLAN PORT ECONOMIC ZONE on October 2018. (IV) Huaxin Color Printing Huaxin Color Printing prepared the Emergency Plan for Abrupt Environment Affairs and the Risk Assessment Report for Abrupt Environment Affairs. Filing No.: 440604-2017-034-L. Environment self-monitoring scheme (I) Hongta Renheng Hongta Renheng prepared self-monitoring scheme, annual self-monitoring report and self-monitoring result information and disclosed the same on the Platform for Disclosure of Self-Monitoring Information of State-Controlled Enterprises at the Provincial Level in Guangdong and the National Pollutant Sources Monitoring Data Management System Platform according to the requirements of the Measures for the Self-Monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State (for Trial Implementation) (HF[2013] No. 81) and the Work Scheme for the Self-Monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State. The enterprise self-monitoring content includes: air pollutant emission monitoring at main exhaust emission outlets, water pollutant emission monitoring at main wastewater discharge outlets, and factory boundary noise monitoring, as follows: (1) Chemical oxygen demand and ammonia nitrogen shall be monitored every two hours every day and the values monitored shall be disclosed; biochemical oxygen demand, total phosphorus and total nitrogen shall be monitored once a week and the values monitored shall be disclosed; other pollutants in the wastewater shall be monitored once a month at least; (2) Sulfur dioxide, nitrogen oxides and particles shall be monitored every hour every day and the values monitored shall be disclosed; other pollutants in the exhaust shall be monitored once a season at least; (3) Factory boundary noise shall be monitored once a season at least; (4) Factory boundary odor concentration shall be monitored once a season. If the self-monitoring shall be carried out by an entrusted institution, a social testing institution that is certified by the competent department of environmental protection at the provincial level or an environment monitoring institution to which the competent 58 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 department of environmental protection belongs shall be entrusted to carry out the monitoring task. The environment monitoring institution to which the competent department of environmental protection belongs that has undertaken a supervisory monitoring task shall not undertake the self-monitoring entrustment business of the enterprise monitored. The enterprise has an online monitoring system of chemical oxygen demand, an online monitoring system of ammonia-nitrogen containing wastewater and an online monitoring system of flue gas. The data of online monitoring systems of chemical oxygen demand, ammonia-nitrogen, sulfur dioxide, nitrogen oxides and particles shall be disclosed on the Integrated Management Platform of Key Pollution Sources in Guangdong Province every day; other pollutants shall be monitored by a qualified third party testing institution that is entrusted according to relevant requirements and then monitoring data shall be disclosed on the Integrated Management Platform of Key Pollution Sources in Guangdong Province and the Management System Platform of National Pollutant Sources Monitoring Data. (II) Zhuhai Huafeng Zhuhai Huafeng prepared self-monitoring scheme, annual self-monitoring report and self-monitoring result information and disclosed the same on the Platform for Disclosure of Self-Monitoring Information of State-Controlled Enterprises at the Provincial Level in Guangdong and the National Pollutant Sources Monitoring Data Management System Platform according to the requirements of the Measures for the Self-Monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State (for Trial Implementation) (HF[2013] No. 81) and the Work Scheme for the Self-Monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State. The enterprise self-monitoring content includes: air pollutant emission monitoring at main exhaust emission outlets, water pollutant emission monitoring at main wastewater discharge outlets, and factory boundary noise monitoring, as follows: (1) Chemical oxygen demand and ammonia nitrogen shall be monitored every hour every day and the average values shall be disclosed; other pollutants in the wastewater shall be monitored once a month at least; (2) Sulfur dioxide, nitrogen oxides and particles shall be monitored every hour every day and the average values shall be disclosed; other pollutants in the exhaust shall be monitored once a season at least; (3) Factory boundary noise shall be monitored once a season at least; (4) Factory boundary odor concentration shall be monitored once a season. (5) The daily monitoring data of PH value, chroma and suspended solids in the wastewater and the weekly monitoring data of total phosphorus and total nitrogen shall be disclosed on the Management System Platform of National Pollutant Sources Monitoring Data. If the self-monitoring shall be carried out by an entrusted institution, a social testing institution that is certified by the competent department of environmental protection at the provincial level or an environment monitoring institution to which the competent department of environmental protection belongs shall be entrusted to carry out the monitoring task. The environment monitoring institution to which the competent department of environmental protection belongs that has undertaken a supervisory monitoring task shall not undertake the self-monitoring entrustment business of the enterprise monitored. The enterprise has an online monitoring system of chemical oxygen demand, an online monitoring system of ammonia-nitrogen containing wastewater and an online monitoring system of flue gas. The data of online monitoring systems of chemical oxygen demand, ammonia-nitrogen, sulfur dioxide, nitrogen oxides and particles shall be disclosed on the Integrated Management Platform of Key Pollution Sources in Guangdong Province every day; other pollutants shall be monitored by a qualified third party institution that is entrusted according to relevant requirements and then monitoring data shall be disclosed on the Integrated Management Platform of Key Pollution Sources in Guangdong Province and the Management System Platform of National Pollutant Sources Monitoring Data. (III) Golden Pheasant Chemical In accordance with the requirements of the Work Scheme for the Self-Monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State, Golden Pheasant Chemical entrusts a qualified third party testing institution 59 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 to conduct wastewater and factory boundary noise test every year, as follows: (1) Biochemical oxygen demand, ammonia nitrogen, suspended solids and chemical oxygen demand test shall be conducted four times a year at least; (2) Factory boundary noise test shall be conducted once a year at least. (IV) Huaxin Color Printing In accordance with the requirements of the Work Scheme for the Self-Monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State, Huaxin Color Printing entrusts a qualified third party testing institution to conduct wastewater, exhaust and factory boundary noise test every year, as follows: (1) PH value, ammonia nitrogen, suspended solids, chemical oxygen demand, biochemical oxygen demand, chroma, sulfides test shall be conducted twice a year at least; (2) Benzene, toluene and xylene test shall be conducted once a year at least; (3) Factory boundary noise test shall be conducted once a year at least. Other environment-related information that should be disclosed: None. Other relevant information: None. XIX Other Significant Events □ Applicable √ Not applicable No such cases in the Reporting Period. XX Significant Events of Subsidiaries □ Applicable √ Not applicable 60 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part VI Share Changes and Shareholder Information I. Share Changes 1. Share Changes Unit: share Before Increase/decrease in the Reporting Period (+/-) After Shares as Shares as dividend dividend Percentag New converted Percentag Shares converted Other Subtotal Shares e (%) issues from e (%) from capital profit reserves 333,500,0 333,500,0 1. Private shares 65.98% 65.98% 00 00 333,500,0 333,500,0 1.1 Promoter’s shares 65.98% 65.98% 00 00 Such shares held by 332,930,2 332,930,2 65.87% 65.87% domestic legal persons 90 90 Other 5,697,101 0.11% 5,697,101 0.11% 171,925,0 171,925,0 2. Public shares 34.02% 34.02% 00 00 2.2 Domestically listed 171,925,0 171,925,0 34.02% 34.02% foreign shares 00 00 505,425,0 505,425,0 3. Total shares 100.00% 100.00% 00 00 Reasons for share changes: □ Applicable √ Not applicable Approval of share changes: □ Applicable √ Not applicable Transfer of share ownership: □ Applicable √ Not applicable Progress on any share repurchase: □ Applicable √ Not applicable Progress on reducing the repurchased shares by means of centralized bidding: 61 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 □ Applicable √ Not applicable Effects of share changes on the basic and diluted earnings per share, equity per share attributable to the Company’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period, respectively: □ Applicable √ Not applicable Other information that the Company considers necessary or is required by the securities regulator to be disclosed: □ Applicable √ Not applicable 2. Changes in Restricted Shares □ Applicable √ Not applicable II. Issuance and Listing of Securities 1. Securities (Exclusive of Preferred Shares) Issued in the Reporting Period □ Applicable √ Not applicable 2. Changes to Total Shares, Shareholder Structure and Asset and Liability Structures □ Applicable √ Not applicable 3. Existing Staff-Held Shares □ Applicable √ Not applicable III Shareholders and Actual Controller 1. Shareholders and Their Shareholdings at the Period-End Unit: share Number of Number of Number of preferred ordinary preferred shareholders shareholders Number of shareholders with resumed at the ordinary 13,422 13,367 with resumed 0 voting rights at 0 month-end shareholders voting rights the month-end prior to the (if any) (see prior to the disclosure of note 8) disclosure of this Report this Report (if 62 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 any) (see note 8) 5% or greater shareholders or top 10 shareholders Total Shares in pledge or frozen Increase/ Sharehol shares decrease Private Public Name of Nature of ding held at in the shares shares shareholder shareholder percenta the Status Shares Reportin held held ge period-en g Period d FOSHAN HUAXIN State-owned 329,512, 329,512, 65.20% 0 0 DEVELOPMENT legal person 030 030 CO., LTD. GUOTAI JUNAN SECURITIES(H Foreign legal 3,192,45 0.63% -94600 0 3,192,453 ONGKONG) person 3 LIMITED Foreign natural 2,561,99 WU HAOYUAN 0.51% 0 0 2,561,991 person 1 Domestic natural 1,570,00 CAI YUJIU 0.31% 376348 0 1,570,000 person 0 Domestic natural 1,522,80 MIU JUN 0.30% 286500 0 1,522,800 person 0 Foreign legal 1,352,72 NORGES BANK 0.27% 0 0 1,352,720 person 0 ESSENCE INTERNATIONA Foreign legal 1,205,25 L SECURITIES 0.24% 0 0 1,205,252 person 2 (HONG KONG) CO., LTD. FOSHAN CHAN BEN DE ASSET State-owned 1,139,42 0.23% 0 0 1,139,420 MANAGEMENT legal person 0 CO., LTD KGI ASIA Foreign legal 1,111,95 0.22% -50000 0 1,111,959 LIMITED person 9 Domestic natural 1,053,23 PENG RUIHUA 0.21% 0 1,053,239 person 9 Strategic investor or general legal None 63 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 person becoming a top-10 ordinary shareholder due to rights issue (if any) (see note 3) Related or acting-in-concert parties It is unknown whether there is among the above shareholders any related or acting-in-concert among the shareholders above party as defined in the Administrative Measures for the Acquisition of Listed Companies. Top 10 public shareholders Shares by type Name of shareholder Public shares held at the period-end Type Shares GUOTAI JUNAN Domestically SECURITIES(HONGKONG) 3,192,453 listed foreign 3,192,453 LIMITED stock Domestically WU HAOYUAN 2,561,991 listed foreign 2,561,991 stock Domestically CAI YUJIU 1,570,000 listed foreign 1,570,000 stock Domestically MIU JUN 1,522,800 listed foreign 1,522,800 stock Domestically NORGES BANK 1,352,720 listed foreign 1,352,720 stock ESSENCE INTERNATIONAL Domestically SECURITIES (HONG KONG) CO., 1,205,252 listed foreign 1,205,252 LTD. stock Domestically KGI ASIA LIMITED 1,111,959 listed foreign 1,111,959 stock Domestically PENG RUIHUA 1,053,239 listed foreign 1,053,239 stock Domestically ZHANG LI 1,011,300 listed foreign 1,011,300 stock Domestically MA ZEQI 959,762 listed foreign 959,762 stock Related or acting-in-concert parties It is unknown whether there is among the above shareholders any related or acting-in-concert among top 10 unrestricted public party as defined in the Administrative Measures for the Acquisition of Listed Companies. 64 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 shareholders, as well as between top 10 unrestricted public shareholders and top 10 shareholders Top 10 ordinary shareholders involved in securities margin trading None (if any) (see note 4) Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yea √ No No such cases in the Reporting Period. 2. Controlling Shareholder Nature of the controlling shareholder: Controlled by a central state-owned legal person Type of the controlling shareholder: legal person Legal Name of controlling Unified social credit representative/person Date of establishment Principal activity shareholder code in charge Production, manufacture and distribution of packing materials, papermaking, cable, wire, new materials; FOSHAN HUAXIN distribution of packing Yan Su 5 January 1993 914406001935399258 DEVELOPMENT CO., LTD. machinery and repairing services, amplifiers and fittings, decoration materials, and drinks; information consulting Controlling shareholder’s holdings in other listed None companies at home or abroad in the Reporting Period Change of the controlling shareholder in the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Actual Controller and Its Acting-in-Concert Parties Nature of the actual controller: Central institution for state-owned assets management 65 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Type of the actual controller: legal person Legal Date of Unified social credit Name of actual controller representative/per Principal activity establishment code son in charge Production, exploitation, and utilization of wood-pulp-paper; investment and development of important industrial products’ means of production; sales of metallic materials, building materials, wood, cement, chemical light raw materials (excluding dangerous China Paper Corporation Huang Xin 16 September 1988 91110000100008907C chemicals ) and its products, clothes, paper, rubber, tire, mechanical and electrical products, wire, cable, and automobile; import and export trade; technology consulting and service related to material development; wholesale and retail of coal and coke, sales of food. Other listed companies at home or abroad controlled by the Guangdong Guanhao High-tech Co., Ltd. (600433.SH), Yueyang Forest & Paper Co., Ltd. actual controller in the (600963.SH). Reporting Period Change of the actual controller during the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. Ownership and control relations between the actual controller and the Company: 66 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 SASAC of the State Council 100% China Chengtong Holdings Group Ltd 100% China Paper Corporation Foshan Chan Ben De Asset Management Co., Ltd 78.87% 21.13% Foshan Huaxin Development Co., Ltd 34.69% 0.11% 65.2% Foshan Huaxin Packaging Co., Ltd Other promoter shareholders & B-shareholders Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset management. □ Applicable √ Not applicable 4. Other 10% or Greater Corporate Shareholders □ Applicable √ Not applicable 5. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller, Reorganizer and Other Commitment Makers □ Applicable √ Not applicable 67 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part VII Preferred Shares □ Applicable √ Not applicable No preferred shares in the Reporting Period. 68 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part VIII Directors, Supervisors, Senior Management and Staff I Change in Shareholdings of Directors, Supervisors and Senior Management Beginnin Increase Decrease Other Ending g in the in the Office Incumben Start of End of increase/d sharehold Name Gender Age sharehold Reporting Reporting title t/Former tenure tenure ecrease ing ing Period Period (share) (share) (share) (share) (share) Huang Incumben 6 June 16 April Chairman Male 56 0 0 0 0 0 Xin t 2014 2020 Ren Vice Incumben 15 March 16 April Male 46 0 0 0 0 0 Xiaoping president t 2018 2020 15 Ren Incumben 16 April GM Male 46 January 0 0 0 0 0 Xiaoping t 2020 2018 Incumben 17 April 16 April Hong Jun Director Male 59 0 0 0 0 0 t 2017 2020 Zhang Incumben 17 April 16 April Director Male 44 0 0 0 0 0 Qiang t 2017 2020 Incumben 17 April 16 April Ye Meng Director Male 50 0 0 0 0 0 t 2017 2020 30 Yang 17 April Director Former Male 48 January 0 0 0 0 0 Weixing 2017 2019 Xu Independ Incumben 17 April 16 April Changlon ent Male 56 0 0 0 0 0 t 2017 2020 g Director Independ Zhang Incumben 6 June 16 April ent Male 51 0 0 0 0 0 Wenjing t 2014 2020 Director Independ Incumben 17 April 16 April Li Jun ent Male 46 0 0 0 0 0 t 2017 2020 Director Superviso Ren Incumben 17 April 16 April ry Board Male 56 0 0 0 0 0 Xiaoming t 2017 2020 Chairman Zhang Superviso Incumben Female 48 17 April 16 April 14,600 0 0 0 14,600 69 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Hong r t 2017 2020 Employee 21 Zhao Incumben 16 April superviso Male 25 Septembe 0 0 0 0 0 Yaxing t 2020 r r 2018 Employee Chen Incumben 17 April 30 August superviso Male 39 0 0 0 0 0 Long t 2017 2018 r Vice GM, Ding CFO, and Incumben 17 July 16 April Male 34 0 0 0 0 0 Guoqiang Board t 2018 2020 Secretary Yang Incumben 17 April 16 April Vice GM Male 45 0 0 0 0 0 Chenglin t 2017 2020 Wu Incumben 17 April 16 April Vice GM Male 56 0 0 0 0 0 Yirong t 2017 2020 Vice GM, 1 August 26 March Liu Yan Board Former Female 38 0 0 0 0 0 2017 2018 Secretary Yang 17 April 13 July CFO Former Male 45 0 0 0 0 0 Chenglin 2017 2018 30 Zhang Incumben 16 April Vice GM Male 46 January 0 0 0 0 0 Chunhua t 2020 2019 Total -- -- -- -- -- -- 14,600 0 0 0 14,600 II Change of Directors, Supervisors and Senior Management √Applicable □ Not applicable Name Office title Type of change Date of change Reason for change Vice GM, Board Liu Yan Dismissed 26 March 2018 Job change Secretary Yang Chenglin CFO Dismissed 13 July 2018 Job change Vice GM, CFO, Appointed and Ding Guoqiang and Board 17 July 2018 Appointed by Board of Directors dismissed Secretary Employee Chen Long Left 30 August 2018 Resignation supervisor Employee Appointed and 7 September Zhao Yaxing The workers’ congress election supervisor dismissed 2018 70 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Appointed and Zhang Chunhua Vice GM 31 January 2019 Appointed by Board of Directors dismissed Yang Weixing Director Left 30 January 2019 Resignation III Biographical Information Professional backgrounds, major work experience and current duties in the Company of the incumbent directors, supervisors and senior management: Board Chairman Huang Xin, male, born in 1962, Bachelor’s degree holder and Engineer. He successively served as Deputy Manager of Development Operation Dept.Ⅱ, Manager of Industrial Investment Dept., Manager of Stratagem Investment Dept. and Manager of Asset Management Dept. Deputy GM, and Party Committee in China Material Development Investment Corporation (renaming to China National Paper-Industry Investment Corp. and China Paper Corporation successively); the Executive GM and GM and Deputy Party Secretary of China National Paper-Industry Investment Corp (renaming to China Paper Corporation later); Deputy GM of Foshan Huaxin Development Co., Ltd and Foshan Huaxin Packaging Co., Ltd; GM of Zhuhai Hongta Renheng Paper Co., Ltd. Now he is the Chairman and Party Secretary of China Paper Corporation; the Chairman of Tiger Forest &Paper Group Co., Ltd and Yueyang Forest & Paper Co., Ltd, the Chairman of Longbang Investment and Development Co., Ltd; Director of Foshan Huaxin Development Co., Ltd; the Chairman of Foshan Huaxin Packaging Co., Ltd; and the Chairman of Zhuhai Hongta Renheng Packaging Co., Ltd. Vice President and GM Ren Xiaoping, male, born in 1972, is a Master’s degree holder, professor and CPA. He successively worked as Director of the Teaching and Research Section of Financial Management and Deputy Dean of Management Department in China University of Labor Relations; GM of Management Center, Stratagem Development Dept. in China Paper Corporation; Supervisor of Mcc Meili Cloud Computing Industry Investment Co., Ltd. He now acts as Supervisor of Tiger Forest Paper Group Co., Ltd; Director of Guangdong Guanhao High-tech Co., Ltd; Director of Mcc Meili Cloud Computing Industry Investment Co., Ltd; Party Secretary, Vice President, and GM of Foshan Huaxin Packaging Co., Ltd; Party Secretary, Vice President, and GM of Zhuhai Hongta Renheng Packaging Co., Ltd. Director Hong Jun, male, born in 1959, is a Bachelor’s degree holder and senior economist. He successively took posts as General Manager of Human Resource Department in China Chengtong Holding Group Co., Ltd; Party Secretary, and Deputy GM of China Material Development Investment Corporation (renaming to China National Paper-Industry Investment Corp. and China Paper Corporation successively), the Party Secretary, Director, and Deputy GM of China Paper Corporation; Party Secretary of Guangdong Guanhao High-tech Co., Ltd; Director of Yueyang Forest & Paper Co., Ltd; and now he is the Party Secretary and Deputy GM of Chengtong Real Estate Investment Co., Ltd; Director of Tiger Forest Paper Group Co., Ltd and Director of Foshan Huaxin Packaging Co., Ltd and Zhuhai Hongta Renheng Packaging Co., Ltd., and Director of Guangdong Guanhao High-tech Co., Ltd. Director Zhang Qiang, male, born in 1974, is a CPA with master’s degree. He used to act as the Deputy Manager of the Operating Management Department, the Deputy Manager of Strategic Development Department in China Material Development Investment Corporation (renaming to China National Paper-Industry Investment Corp. and China Paper Corporation successively); Management Representative of Zhanjiang Guanlong Paper Industrial Co., Ltd.; Assistant of GM in Guangdong Guanhao High-tech Co., Ltd; Manager of Strategic Development Department of China National Paper-Industry Investment Corp (renaming to China Paper Corporation later); Vice President, GM, and President of MCC Meili Paper Industry Co., Ltd; and Deputy GM of China Paper Corporation. Now he is a Director and GM of China Paper Corporation; the Chairman of Guangdong Guanhao High-tech Co., Ltd; Director of MCC Meili Paper Group Co., Ltd; Executive Director of Beijing Xingchengwang Industry Co., ltd; and Director of Foshan Huaxin Packaging Co., Ltd Director Ye Meng, male, born in 1968, is a Senior Economist with master’s degree. He used to be the HR Minister, Deputy GM, and Party Secretary of Yueyang Paper Co., Ltd.; Chief Economist and Chief Legal Officer, Secretary of the Board, Deputy GM, Deputy Party Secretary, and Secretary of Commission in Tiger Forest & Paper Group Co., Ltd.; Deputy Party Secretary of Yueyang Forest & Paper Co., Ltd, General Manager Assistant in China Paper Corporation. He now is Party Secretary, Director, and GM of Tiger Forest 71 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 & Paper Group Co., Ltd; Party Secretary of Yueyang Forest & Paper Co., Ltd; and Director of Foshan Huaxin Development Co., Ltd and Foshan Huaxin Packaging Co., Ltd. Independent Director Xu Changlong, male, born in 1962, is a certified public accountant, certified cost engineer and member of Revolutionary Committee of the Chinese Kuomintang with master’s degree. Xu Changlong once served as the auditor of Hunan Provincial Audit Office and the Changsha Resident Office, National Audit Office of the People's Republic of China and has successively held the posts of the head of Hunan Zhongshan Auditing Firm, the Chairman and Senior Accountant of Hunan Yongxin Limited Liability Accounting Firm, the General Manager of Hunan Yongxin Assets Appraisal Co., Ltd., the Head of Hunan Yongxin Judicial Expertise Institute, the Chairman of Hunan Yongxin Engineering Project Management Co., Ltd., and the Equity Partner of Shinewing Certified Public Accountants Limited. At present, he holds the posts of the Chairman of the Council of Hunan Zheng Dongguo Education Foundation, the General Manager of Reanda Certified Public Accountants Hunan Branch, and the Vice President of ZBX Construction Cost Consulting (Beijing) Co., Ltd; Independent Director of Foshan Huaxin Packaging Co., Ltd, Huatian Hotel Group Co., Ltd, Talkweb Information System Inc., and Zhanijajie Tourism Group Co., Ltd, and China Tungsten and Hightech Materials Co., Ltd. Independent Director Zhang Wenjing, male, born in 1967, is a lawyer with master’s degree. He acted as a lawyer of Guangdong Chenguang Law Offices (renamed as De Heng (Zhuhai) Law Offices later); Independent Director of Huajin Capital Co., Ltd. He now is a Lawyer and Director of De Heng (Zhuhai) Law Offices; legal adviser of the Standing Committee of the National People' s Congress of Zhuhai City, People’s Government of Zhuhai, Discipline Inspection Committee of Zhuhai, High-tech Zone Management Committee of Zhuhai, State-owned Assets Supervision and Administration Commission of People’s Government of Zhuhai, Zhuhai Municipal Housing and Urban and Rural Planning Construction Bureau, Finance Bureau in Hnegqin New District, Development Revolution and Finance Bureau in Gaolangang Economical Area; Independent Director in Foshan Huaxin Packaging Co., Ltd. and Zhuhai Port Co., Ltd. Independent Director Li Jun, Male, born in 1972, is a professor and doctoral supervisor with doctoral degree. He worked as teacher, lecture, associate professor, and professor in South China University of Technology. Now he is a Vice President of School of Light Industry Science and Engineering in South China University of Technology; the team head of Processing Technology and Equipment; Deputy Director of State Key laboratories in Pulp and Paper Engineering of South China University of Technology; Independent Director of Foshan Huaxin Packaging Co., Ltd. Chairman of the Supervisory Committee Ren Xiaoming, male, born in 1962, is a lecturer with bachelor’s degree. He once was a teacher in Beijing Materials University; Deputy Director of Information Teaching and Research Office of Computing Center in Beijing Materials University; the staff, Manager of Operation Dept. I, and Manager of Future Goods Dept. in Beijing Company of China’s Defense Military Supplies; Deputy Manager, Deputy Director of Administration (Party Committee) Office, Deputy Manager of HR & Admin Dept., and Deputy Director of Part Committee Office, Deputy Manager and member of CCDI in Party-mass work Dept and General management Dept in China Material Development Investment Corporation (renaming to China National Paper-Industry Investment Corp. and China Paper Corporation successively); Party Committee Member, Secretary of Commission, chairman of the labor union, and Chairman of Supervisory board in Foshan Huaxin Packaging Co., Ltd; Deputy Party Secretary, Secretary of Commission, and Chairman of Supervisory board in Zhuhai Hongta Renheng Packaging Co., Ltd.; Chairman of Supervisory board in Huaxin (Foshan) Color Printing Co., Ltd. He now is the GM of Foshan Huaxin Import & Export Co., Ltd; Chairman of Supervisory board in Foshan Huaxin Development Co., Ltd; Chairman of Supervisory board in Huaxin (Foshan) Color Printing Co., Ltd; Deputy Party Secretary, Secretary of Commission, and supervisor in Zhuhai Hongta Renheng Packaging Co., Ltd.; and chairman of the labor union, and Chairman of Supervisory board in Foshan Huaxin Packaging Co., Ltd. Supervisor: Zhang Hong, female, born in 1970, bachelor degree, Human Resources Management Division, Level 1. Zhang Hong once held the posts of the Teacher, the Secretary for the Office of the Party Committee, and the Deputy Business Director of Labor Output Training Division in Jiangxi Yichun Technician School; the Office Executive Secretary, Deputy Director and Director and the Human Resources Manager in Zhuhai Hongta Renheng Packaging Co., Ltd; Human Resources Manager in Foshan Huaxin Packaging Co., Ltd; Now, she is the GM Assistant, Director of Human Resources Administration Center in Zhuhai Hongta Renheng 72 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Packaging Co., Ltd, and Deputy Party Secretary, Secretary of Commission, and supervisor in Foshan Huaxin Packaging Co., Ltd. Employee supervisor Zhao Yaxing, male, was born in 1993, bachelor degree. He once worked in the Logistics Department, Security Investment Department, and Ministry of Law of Zhuhai Hongta Renheng Packaging Co., Ltd; now he is the employee supervisor in Foshan Huaxin Packaging Co., Ltd and Deputy Director of Zhuhai Hongta Renheng Packaging Co., Ltd. Vice GM, Board Secretary, and CFO Ding Guoqiang, male, born in 1984, is a certified public accountant with bachelor degree. He once acted as the Director of Finance Management Department and deputy manager in China Paper Corporation; Vice GM, Chief Accountant, and Secretary of the Board in Mcc Meili Cloud Computing Industry Investment Co., Ltd; Supervisor of Ningxia Meili Paper Group Environmental Protection and Energy Saving Co., Ltd; GM of Strategic Development Department of Ningxia Yu; Supervisor of Guangdong Guanhao High-tech Co., Ltd; and Director of Mcc Meili Cloud Computing Industry Investment Co., Ltd. Now he is the Vice GM, Board Secretary, and CFO in Foshan Huaxin Packaging Co., Ltd, and Vice GM, CFO, and Board Secretary in Zhuhai Hongta Renheng Packaging Co., Ltd. Deputy GM Yang Chenglin, male, born in 1973, with a master degree and is a CPA. He acted as CFO in Zhuhai Huihai Development Co., Ltd.; Financial Manager in Zhuhai MABOX Furniture Co., Ltd; Deputy Financial Manager, Financial Manager, and Assistant of General Manager in Zhuhai Hongta Renheng Packaging Co., Ltd; Deputy GM and CFO in Foshan Huaxin Packaging Co., Ltd and Zhuhai Hongta Renheng Packaging Co., Ltd. Now he is the Deputy GM of Foshan Huaxin Packaging Co., Ltd and Zhuhai Hongta Renheng Packaging Co., Ltd. Deputy General Manager Wu Yirong, male, born in 1962, is a Senior Engineer with bachelor’s degree. He acted as Technology Deputy Managers, Sales Deputy Managers, Deputy Chief Engineer, Deputy General Manager in Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. He has been acting as Deputy General Manager in Zhuhai Hongta Renheng Packaging Co., Ltd. He has been acting as Deputy General Manager in Foshan Huaxin Packaging Co., Ltd. and Zhuhai Hongta Renheng Packaging Co., Ltd. Deputy General Manager Zhang Chunhua, male, born in 1972, is a senior engineer with master degree. He once held the posts of Deputy Manager, Manager, and General Manager Assistant of Equipment Management Department in Zhuhai Hongta Renheng Packaging Co., Ltd, and Deputy GM of Foshan Huaxin Packaging Co., Ltd. Offices held concurrently in shareholding entities: √Applicable □Not applicable Office held in Remuneration or the Name Shareholding entity Start of tenure End of tenure allowance from the shareholding shareholding entity entity Chairman and Huang Xin China Paper Corporation Deputy Party 23 August 2016 Yes Secretary 6 November Zhang Qiang China Paper Corporation Director, GM Yes 2016 Ye Meng Foshan Huaxin Development Co., Ltd Director, 23 March 2015 No Notes N/A Offices held concurrently in other entities: √Applicable □Not applicable Remuneration or Office held in Name Other entity Start of tenure End of tenure allowance from the entity the entity Zhuhai Hongta Renheng Packaging Co., 5 December Huang Xin Chairman No Ltd. 2015 73 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Huang Xin Tiger Forest &Paper Group Co., Ltd Chairman 7 June 2016 No Huang Xin Yueyang Forest & Paper Co., Ltd Chairman 19 March 2015 No Longbang Investment and Development Huang Xin Chairman 1 January 2016 No Co., Ltd Zhuhai Hongta Renheng Packaging Co., 30 January Hong Jun Director No Ltd. 2017 Party 23 October Hong Jun Chengtong Real Estate Investment Co., Ltd Secretary and No 2018 Deputy GM 22 January Hong Jun Guangdong Guanhao High-tech Co., Ltd Director No 2010 1 February Zhang Qiang Guangdong Guanhao High-tech Co., Ltd Chairman No 2016 Zhang Qiang MCC Meili Paper Industry Co., Ltd Director 1 March 2013 No Executive Zhang Qiang Beijing Xingchengwang Industry Co., ltd 6 April 2016 No Director Ren Xiaoping Tiger Forest &Paper Group Co., Ltd Supervisor 25 August 2016 No Zhuhai Hongta Renheng Packaging Co., 15 January Ren Xiaoping Director, GM Yes Ltd. 2018 23 September Ren Xiaoping Guangdong Guanhao High-tech Co., Ltd Director No 2017 Mcc Meili Cloud Computing Industry 6 February Ren Xiaoping Director No Investment Co., Ltd 2018 Party Ye Meng Tiger Forest &Paper Group Co., Ltd Committee 7 June 2017 No Member, GM Deputy Party Ye Meng Yueyang Forest & Paper Co., Ltd 29 March 2015 No Secretary Reanda Certified Public Accountants Hunan Executive 1 February Xu Changlong c Branch Head 2011 1 November Xu Changlong Hunan Reanda Judicial Expertise Institute Head Yes 2011 Vice ZBX Construction Cost Consulting Chairman and 28 November Xu Changlong Yes (Beijing) Co., Ltd GM of Hunan 2014 Branch Independent Xu Changlong Talkweb Information System Inc 27 June 2016 Yes Director 74 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Independent Xu Changlong Zhanijajie Tourism Group Co., Ltd 12 July 2018 Yes Director President and Hunan Zheng Dongguo Education Legal 1 November Xu Changlong No Foundation (charity fund) Representativ 2015 e Independent 19 September Xu Changlong Huatian Hotel Group Co., Ltd Yes Director 2017 China Tungsten and Hightech Materials Independent Xu Changlong 16 June 2017 Yes Co., Ltd. Director 1 December Zhang Wenjing De Heng (Zhuhai) Law Offices Director Yes 1997 Independent Zhang Wenjing Zhuhai Port Co., Ltd. 27 July 2015 Yes Director Professor and Li Jun South China University of Technology 28 August 2017 Yes Director Zhuhai Hongta Renheng Packaging Co., 30 January Ren Xiaoming Supervisor yes Ltd. 2016 Chairman of Ren Xiaoming Huaxin (Foshan) Color Printing Co., Ltd Supervisory 6 July 2017 No board Ren Xiaoming Foshan Huaxin Import & Export Co., Ltd GM 28 April 2016 No Assistant of GM and Director of Zhuhai Hongta Renheng Packaging Co., Zhang Hong Human 7 March 2018 Yes Ltd. Resources Administratio n Center Zhuhai Hongta Renheng Packaging Co., Deputy 12 September Zhao Yaxing Yes Ltd. Director 2018 Vice GM, Ding Zhuhai Hongta Renheng Packaging Co., Board 7 August 2018 Yes Gguoqiang Ltd. Secretary, and CFO Zhuhai Hongta Renheng Packaging Co., 30 January Yang Chenglin Deputy GM Yes Ltd. 2016 25 October Yang Chenglin Huaxin (Foshan) Color Printing Co., Ltd Director Yes 2017 Wu Yirong Zhuhai Hongta Renheng Packaging Co., Deputy GM 30 January Yes 75 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Ltd. 2016 Director and 25 October Zhang Chunhua Huaxin (Foshan) Color Printing Co., Ltd Yes GM 2017 Notes N/A Punishments imposed in the recent three years by the securities regulator on the incumbent directors, supervisors and senior management as well as those who left in the Reporting Period: □ Applicable √ Not applicable IV Remuneration of Directors, Supervisors and Senior Management Decision-making procedure, determination basis and actual payments of remuneration for directors, supervisors and senior management: 1. Decision-making procedure of remuneration of directors, supervisors and senior executives: remuneration of directors and supervisors was deliberated and approved by shareholders’ general meeting; the standards of remuneration of senior executives were decided by the remuneration and appraisal commission according to management regulations of remuneration and business performance, and then were submitted to the board of directors for approval. 2. Determination basis of remuneration of directors, supervisors and senior executives: the Company, according to the income level of industry and region and considering business performance of the Company and contribution to the Company, decided the scope of annual remuneration of directors, supervisors and senior executives. On the basis of appraisal results, annual remuneration was determined. Moreover, according to the growth of annual business performance and accomplishment of major projects, the extra rewards would be granted after the authorization of the board of directors and verification of Chairman of the board of directors. Remuneration of directors, supervisors and senior management for the Reporting Period Unit: RMB'0,000 Total before-tax Any Incumbent/Forme remuneration Name Office title Gender Age remuneration r from the from related party Company Huang Xin Chairman Male 56 Incumbent Yes Vice Chairman, Ren Xiaoping Male 46 Incumbent 36.55 No GM Hong Jun Director Male 59 Incumbent Yes Zhang Qiang Director Male 44 Incumbent Yes Ye Meng Director Male 50 Incumbent Yes Yang Weixing Director Male 48 Incumbent No Independent Zhang Wenjing Male 51 Incumbent 8 No Director Independent Xu Changlong Male 56 Incumbent 8 No Director Li Jun Independent Male 46 Incumbent 8 No 76 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Director Chairman of Ren Xiaoming Supervisory Male 56 Incumbent 42.92 No Board Zhang Hong Supervisor Female 48 Incumbent 43.56 No Employee Zhao Yaxing Male 25 Incumbent 10.06 No Supervisor Employee Chen Long Male 39 Former 14.95 No Supervisor Wu Yirong Deputy GM Male 56 Incumbent 47.42 No Zhang Chunhua Deputy GM Male 46 Incumbent 32.47 No Yang Chenglin CFO Male 45 Former 49.9 No Ding Gguoqiang CFO Male 35 Incumbent 10.49 Yes Total -- -- -- -- 312.32 -- Equity incentives for directors, supervisors and senior management in the Reporting Period: □ Applicable √ Not applicable V Employees 1. Number, Functions and Educational Backgrounds of Employees Number of in-service employees of the Company as the parent 17 Number of in-service employees of major subsidiaries 1,671 Total number of in-service employees 1,688 Total number of paid employees in the Reporting Period 1,688 Number of retirees to whom the Company as the parent or its 0 major subsidiaries need to pay retirement pensions Functions Function Employees Production 1,248 Sales 69 Technical 126 Financial 46 Administrative 199 Total 1,688 Educational backgrounds Educational background Employees 77 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Master’s degree and above 13 Bachelor’s degree 215 Junior college 291 Technical secondary school 246 High school 923 Total 1,688 2. Employee Remuneration Policy Combined with industry situations of the market, development strategy of the Company, and operation performance, the employee remuneration policy of the Company provides employees with competitive salary level in industries and regions. Meanwhile, the Company set up a normalized, standardized, and systematic salary management system according to national laws and regulations and the actual conditions of the Company. Salary distribution is inclined to strategic talents, production backbones, and technical personnel to ensure the market competitiveness of core talents’ income level. The employee remuneration policy incentivizes the performance and reflects the market with clear guidance and difference. Among the compensation package of the Company’s employees, the salary is decided by position value in line with the market, and the bonus is decided by their performance to stand out their contributions. Moderate adjustments and collections are done to the remuneration policy of the Company according to the development strategy and managerial demands of production operation every year. Sharing innovative achievements with staffs, the Company provides employees with legal labor remuneration as their due to improve employees’ happiness. The Company is pushing forward the establishment of engagement system of professional technical and skilled talents’ grade evaluation, with recognition to employees’ professional abilities, providing competent skilled and technical talents with performance with multi career development channel other than management position to comprehensively build the employment mechanism of attracting talents, incentivizing talents, and retaining talents as well. 3. Employee Training Plans Guided by strategic objectives of organization and development requirements of HR, the Company provides employees with targeted and systematic trainings, including various respects, such as, post knowledge, job qualification, safety education, system standards, and administrative regulations, etc. The Company carried out the training in the whole company for 6 times with the participation of 6000 people in 2018, which includes the training of promotion for writing ability, training of internal auditor, training of crane license, Youth Talent Cultivation of China Paper Corporation, training of internal trainer, training of senior executives of Lingyun Commercial college in China Paper Corporation, and Skills Training for Post Operation to improve knowledge and skills, comprehensive quality, to build an excellent staff team and strengthen the competitiveness ability of core talents of the Company, and to achieve the objective of mutual development between the Company and employees. 4. Labor Outsourcing □ Applicable √ Not applicable 78 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part IX Corporate Governance I General Information of Corporate Bonds During the Reporting Period, the Company continuously improved corporate governance structure, and established modern enterprises system to standardize the Company’s operation in strict accordance with the related laws and regulations of Corporation Law, Securities Law, Governance Regulations of listing Companies and related rules of Shenzhen Stock Exchange. On the basis of the related regulations of Corporation Law, Stock Listing Rules, Rules of Procedure of General Meeting of Shareholders, Board of Directors, and Supervisory Board, the Company convened General Meeting of Shareholders, Board of Directors, and Supervisory Board in time within the involved terms of reference of decision-making events, fully implementing the decided events; the responsibility of General Meeting of Shareholders, Board of Directors, Supervisory Board, and Business Management is clear with effectively operated balance mechanism, and the decision-making and rules of procedure are democratic and transparent. The actual conditions of the Company’s governance are in line with the related regulations of CSRC. Indicate by tick market whether there is any material incompliance with the regulatory documents issued by the CSRC governing the governance of listed companies. □ Yes √ No No such cases in the Reporting Period. II The Company’s Independence from Its Controlling Shareholder in Business, Personnel, Asset, Organization and Financial Affairs The Company, the controlling shareholders and the actual controllers of the Company realized the independent execution in business, personnel, assets, finance and institution with independent calculation and respectively burden the responsibilities and risks. The Company possesses independent and entire business and self operating ability. 1. As for the business: the Company possessed the independent and complete business and decision-making system as well as the independent operating ability that entirely independent of the controlling shareholders and the actual controllers. 2. As for the personnel: the Company possessed independent labor, HR and salary management system and the Senior Executives such as the GM, the managers, the Financial Administrator and the Board Secretary were all paid by the Company and unable to take charge in the controlling shareholders’ units of the Company. 3. As for the assets: the Company possessed the independent production and operating system as well as the supporting facilities, and the assets the controlling shareholders invested in the Company were independent as well as complete with clear ownership. 4. As for the institutions: the Company set up the organizations and intuitions independent of the controlling shareholders for independently handling the official business and the execution of the functions. 5. As for the finance: the Company set up the independent finance management department and built up the independent accounting calculation mechanism and financial management system; the Company opened the independent account and paid for the taxes according to laws. III Horizontal Competition □ Applicable √ Not applicable 79 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 IV Annual and Special General Meetings Convened during the Reporting Period 1. General Meeting Convened during the Reporting Period Investor Index to disclosed Meeting Type Date of the meeting Disclosure date participation ratio information Name of announcement: Announcement on Resolution of The 1st Extraordinary General Meeting of 2018 of Foshan Huaxin Packaging The 1st Extraordinary Co., Ltd. ; Number Extraordinary General Meeting of 66.05% 31 January 2018 1 February 2018 of announcement: General Meeting 2018 2018-082 ; Newspaper and website on which the announcement was disclosed: Securities Times, HK Ta Kung Pao, Cninfo (http:/www.cninfo.co m.cn) Name of announcement: Announcement on Resolution of The 2017 Annual General Meeting of Foshan Huaxin Packaging Co., Ltd. ; The 2017 Annual Annual General Number of 66.09% 17 April 2018 18 April 2018 General Meeting Meeting announcement: 2018-044 ; Newspaper and website on which the announcement was disclosed: Securities Times, HK Ta Kung Pao, Cninfo (http:/www.cninfo.co 80 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 m.cn) Name of announcement: Announcement on Resolution of The 2nd Extraordinary General Meeting of 2018 of Foshan Huaxin Packaging The 2nd Co., Ltd. ; Number Extraordinary Extraordinary 65.80% 11 May 2018 12 May 2018 of announcement: General Meeting of General Meeting 2018-082 ; 2018 Newspaper and website on which the announcement was disclosed: Securities Times, HK Ta Kung Pao, Cninfo (http:/www.cninfo.co m.cn) Name of announcement: Announcement on Resolution of The 3rd Extraordinary General Meeting of 2018 of Foshan Huaxin Packaging The 3rd Co., Ltd. ; Number Extraordinary Extraordinary 65.55% 31 October 2018 1 November 2018 of announcement: General Meeting of General Meeting 2018-082 ; 2018 Newspaper and website on which the announcement was disclosed: Securities Times, HK Ta Kung Pao, Cninfo (http:/www.cninfo.co m.cn) 2. Special General Meetings Convened at the Request of Preferred Shareholders with Resumed Voting Rights □ Applicable √ Not applicable 81 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 V Performance of Duty by Independent Directors in the Reporting Period 1. Attendance of Independent Directors at Board Meetings and General Meetings Attendance of independent directors at board meetings and general meetings Total number The Board of board Board Board independent Board meetings meetings the meetings meetings the director failed General Independent meetings attended by independent attended independent to attend two meetings director attended on way of director was through a director failed consecutive attended site telecommunica eligible to proxy to attend board meetings tion attend (yes/no) Xu Changlong 9 1 8 0 0 No 1 Zhang Wenjing 9 1 8 0 0 No 1 Li Jun 9 0 8 1 0 No 4 Why any independent director failed to attend two consecutive board meetings: Not applicable. 2. Objections Raised by Independent Directors on Matters of the Company Indicate by tick mark whether any independent directors raised any objections on any matter of the Company. □ Yes √ No No such cases in the Reporting Period. 3. Other Information about the Performance of Duty by Independent Directors Indicate by tick mark whether any suggestions from independent directors were adopted by the Company. √ Yes □ No Suggestions from independent directors adopted or not adopted by the Company: In accordance with the related requirements of Institutional guidance of Independent Directors of Listing Companies, Articles of Association, and Rules of Procedure of Board of Directors, the independent Directors of the Company performed the duties, and earnestly reviewed various proposals of Board of Directors, fully expressed their opinions about the significant events of the Company, and also expressed related opinions about the events in need of approval opinions of independent Directors or independent opinions in advance, giving a full play to the functions of independent directors, and providing effective guarantee to the scientific decision-making of Board of Directors. VI Performance of Duty by Specialized Committees under the Board in the Reporting Period (I) Performance of the Audit Committee of the Board of Directors The Audit Committee of the Board of Directors held one meeting. In accordance with the responsibilities of the Audit Committee of the Board of Directors of the company, the Audit Committee mainly coordinates, supervises and checks the internal and external 82 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 audit: 1. The audit committee fully communicated with the accounting firm responsible for annual audit of the company with respect to the audit plan, engagement letter, risk and control etc. 2. Before the certified public accountant responsible for annual audit of the company entered the site, the audit committee reviewed the financial statements prepared preliminarily by the company and believed that the statements reflect the current financial state of the company in all material respects. 3. After the certified public accountant responsible for annual audit of the company provided his preliminary opinion, the audit committee reviewed the financial statements of the company and communicated with the accounting firm concerning important issues and main accounting estimation issues, audit adjustment issues and important accounting policies that may have an potential impact on the financial statements, believed that the financial and accounting statements of the company reflected the overall situation of the company truly, accurately and completely and agreed to prepare the annual report of FY 2018 based on these statements. 4. The audit committee reviewed the financial statements of FY 2018 which has been audited by the auditor, believed that these statements reflected the financial state, operating results and cash flow of the company in FY 2018 fairly in all materials respects, and agreed to submit these statements to the Board of Directors for deliberation. (II) Performance of the Remuneration and Appraisal Committee of the Board of Directors The Remuneration and Appraisal Committee of the Board of Directors held just one meeting in total. In accordance with own responsibilities, the Remuneration and Appraisal Committee of the Board of Directors reviewed the annual pay declared by directors, supervisors and senior executives of the company and believed that the annual pay declared by directors, supervisors and senior executives of the company is consistent with that they actually collect from the company. The remuneration of directors, supervisors and senior executives of the company is paid according to the salary management regulations of the company. Meanwhile, annual salary allocation proposal for management staff of the company was deliberated, passed and submitted to the Board of Directors. (III) Nomination Committee of the Board of Directors The Nomination Committee of the Board of Directors held two meetings in total. In accordance with own responsibilities, the Nomination Committee of the Board of Directors reviewed the qualifications of personnel involved in the Proposal of Employment of General Manager, and the Proposal of Employment of Deputy General Manager, Secretary of the Board, and CFO. VII Performance of Duty by the Supervisory Committee Indicate by tick mark whether the Supervisory Committee found any risk to the Company during its supervision in the Reporting Period. □ Yes √ No The Supervisory Committee raised no objections in the Reporting Period. VIII Appraisal of and Incentive for Senior Management In the principle of reasonableness, fairness, and justice, the Company thinks highly of the combination of material incentives with spirit incentives, and the combination of operation target of the Company with dedication spirit, social responsibility, and career achievement of the senior executive at the same time. During the Reporting Period, the Company established the appraisal system based on system of objective responsibility in accordance with Methods of Compensation Management and Enforcement Regulations of Compensation Incentives reviewed and approved by board of Directors and Compensation and Appraisal Committee. The Company and executive officers signed the Liability Statement of the Company’s Annual Operation to confirm the compensation incentives scheme of executive officers. The Board of Directors evaluates the performance of executive officers to confirm the compensation according to the indicators of 83 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Liability Statement of the Annual Operation, including multidimensional indicators, like various annual financial indicators, internal operation management indicators, and special indicators of main work, and etc. IX Internal Control 1. Material Internal Control Weaknesses Identified for the Reporting Period □ Yes √ No 2. Internal Control Self-Evaluation Report Disclosure date of the internal control 18 March 2019 self-evaluation report Index to the disclosed internal control http://www.cninfo.com.cn self-evaluation report Evaluated entities’ combined assets as % of 100.00% consolidated total assets Evaluated entities’ combined operating revenue as % of consolidated operating 100.00% revenue Identification standards for internal control weaknesses Weaknesses in internal control over financial Weaknesses in internal control not Type reporting related to financial reporting (1) Indications of the great defect of the (1) If there were unambiguous evidence financial report including: ① malpractices indicated the Company possessed one of of the Directors, Supervisors and the Senior the following conditions among the Executives of the Company; ② published evaluation at the period-end, should be financial report with significant recognized as the great defect of the misstatement which influenced its internal control: ① the significant authenticity, integrity and fairness that the events lacked of the legal Company would make certain verification; decision-making process; ② lacked of ③ CPA discovered the significant the decision-making process or the Nature standard misstatement of the current financial report process was not normative that caused while the internal control failed to find out significant mistakes; ③ violated the during the operating;④ the supervision on national laws, regulations, rules or the internal control by the Audit Committee normative documents that received the and the internal audit institution of the administrative punishment such as the Company was invalid. (2) The indications of criminal penalties or be ordered for the significant defect of the financial report suspension of production or business, be including: ① the environmental control withheld or revoked the permits or was invalid; ② the accounting polices license; ④ the great defect of the formulated by the Company violated the internal control had not been verified; ⑤ 84 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 ASBE; ③ the applied accounting polices the significant business lacked of the not met with the accounting system of the systematic control or which was invalid. Company; ④ had not built up the fraud (2) There was unambiguous evidence program and control measurements; ⑤ the indicated the Company possessed one of financial treatment with unconventional or the following conditions among the special transactions did not build up evaluation at the period-end, should be corresponding control system or failed to recognized as the significant defect of execute; ⑥ there was one or multiple the internal control: ① there was defects during the control of financial report decision-making process but not at the period-end and could not reasonably complete enough; ② the ensure the statement of the compile of the decision-making process was irregular financial report was real and complete. (3) that caused rather big mistake; ③ General defect refers to the other control violated the national laws, regulations, defect except for the above great defect and rules and the normative documents that significant defect. received the administrative punishment except the criminal penalties or the order of the suspension of production or business or be withheld or revoked the permits or license; ④ significant business mechanism or system existed significant defect; ⑤ the significant defect of the internal control had not been verified. (3) The general defect refers to the other control defect except for the above great defect and significant defect The quantitative criteria regarded the total The quantitative criteria regarded the assets amount of the consolidated financial directly financial losses amount as the report as the measurement index. If the measurement index. If the defect alone or defect alone or accompanied with other accompanied with other defects which defects which may cause the amount of the may cause the amount of the directly misstatement of the financial report lower financial losses lower than 0.5% of the than 0.5% of the total assets amount of the total assets amount of the consolidated consolidated statements, should be statements, should be recognized as the Quantitative standard recognized as the general defect; if exceeded general defect; if exceeded 0.5% of the 0.5% of the total assets amount of the total assets amount of the consolidated consolidated statement but still lower than statement but still lower than 1% of 1% of which, should be recognized as the which, should be recognized as the significant defect; if exceeded 1% of the significant defect; if exceeded 1% of the total assets amount of the consolidated total assets amount of the consolidated statement, should be recognized as the great statement, should be recognized as the defect. great defect. Number of material weaknesses in internal 0 control over financial reporting 85 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Number of material weaknesses in internal 0 control not related to financial reporting Number of serious weaknesses in internal 0 control over financial reporting Number of serious weaknesses in internal 0 control not related to financial reporting X Independent Auditor’s Report on Internal Control √ Applicable □ Not applicable Opinion paragraph in the independent auditor’s report on internal control Huaxin Packaging maintained valid internal control of the financial report in the significant aspects according to the C-SOX and the relevant regulations on 31 December 2018. Independent auditor’s report on Disclosed internal control disclosed or not Disclosure date 18 March 2019 Index to such report disclosed www.cninfo.com.cn Type of the auditor’s opinion Unmodified unqualified opinion Material weaknesses in internal control not related to financial None reporting Indicate by tick mark whether any modified opinion is expressed in the independent auditor’s report on the Company’s internal control. □ Yes √ No Indicate by tick mark whether the independent auditor’s report on the Company’s internal control is consistent with the internal control self-evaluation report issued by the Company’s Board. √ Yes □ No 86 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part X Corporate Bonds Does the Company have any corporate bonds publicly offered on the stock exchange, which were outstanding before the date of this Report’s approval or were due but could not be redeemed in full? No. 87 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part XI Financial Statements I Independent Auditor’s Report Type of the independent auditor’s opinion Unmodified unqualified opinion Date of signing this report 15 March 2019 Name of the independent auditor Pan-China Certified Public Accountants(LLP) Name of the certified public accountants Li Qinglong, Liu Jingya Text of the Independent Auditor’s Report Independent Auditor’s Report Pan-China Audit Report [2019] No. 8-14 To the Shareholders of Foshan Huaxin Packaging Co., Ltd. I. Opinion We have audited the accompanying financial statements of Foshan Huaxin Packaging Co., Ltd. (together with its consolidated subsidiaries included in the consolidated financial statements, the “Company”), which comprise the parent’s and consolidated balance sheets as at 31 December 2018, the parent’s and consolidated income statements, the parent’s and consolidated cash flow statements, the parent’s and consolidated statements of changes in owners’ equity for the year then ended, as well as the notes to the financial statements. In our opinion, the financial statements attached were prepared in line with the regulations of Accounting Standards for Business Enterprises in all significant aspects which gave a true and fair view of the consolidated and parent financial position of Foshan Huaxin Packing Co., Ltd. as at 31 December 2018 and the consolidated and parent business performance and cash flow for 2018. II. Basis for Opinion We conducted our audit in accordance with Standards on Auditing for Certified Public Accountants. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. In accordance with professional ethics for certified public accountants, we are independent with Foshan Huaxin Packing Co., Ltd. and we have fulfilled our other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. III. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the Current Period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. (II) Accounted by Equity Method on the Investment of Associated Companies 1. Event description Refer to Note V. (I) 8, Note V. (II) 12 and Note VII. (III) 1 to the financial statements for the details of the relevant information disclosure; 88 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 During the Reporting Period, the management of Huaxin Packaging (hereinafter referred to as “the management”) made the following significant judgments: Although Huaxin Packaging holds less than 20% of the equity of Chengtong Finance Corporation Ltd. (hereinafter referred to as Chengtong Finance), it has the rights to delegate directors to Chengtong Finance, participate in the operation and financial decision-making of Chengtong Finance and independently declare opinions during the operation and financial decision-making process, and it has actually delegated directors to Chengtong Finance. Therefore, it has significant effects on Chengtong Finance. Huaxin Packaging converted its investment on Chengtong Finance from available-for-sale financial assets into long-term equity investment accounted by equity method, and recognized into non-operating revenue the difference amount of RMB21,561,200 between the initial investment cost and the fair value of the identifiable net assets of the investee on the conversion date that it should be entitled to. This event has significant effects on the consolidated financial statements of Huaxin Packaging. 2. Audit response Audit procedures we implemented against the changes in the accounting method for associated companies include: (1) Obtain the documents on the Articles of Incorporation, and organization structure of Chengtong Finance to understand the investment purposes. (2) By checking relevant document records, including the explanation on the delegation of directors by Huaxin Packaging, understand the significant effects of Huaxin Packaging on Chengtong Finance, including the delegation of representatives in the board of directors of Chengtong Finance, participation in the formulation of financial and operation policies and connected transactions. Determine whether the conversion from cost method to equity method and the confirmation of the conversion date on Chengtong Finance during the Reporting Period was reasonable. (3) Obtain the financial statements of Chengtong Finance, determine the fair value of the identifiable net assets of Chengtong Finance, and execute the audit procedures including recalculation to check the accuracy of the amount of non-operating income and the appropriateness of relevant accounting treatment by the management. (4) Check the presentation and disclosure of the event. (II) Revenue Recognition 1. Event description Refer to Note III. (XXIV) and Note V. (II) 1 to the financial statements for the details of the relevant information disclosure; Huaxin Packaging is mainly engaged in the production and sale of ivory board, latex and printing products. In 2018, the operating revenue of Huaxin Packaging was RMB 3,683,004,500, which was mainly from domestic sale. According to the sale terms, the revenue from domestic sale shall be recognized when products have been delivered to the place requested by the customer with the acknowledgment on the receipt while the revenue from overseas sale shall be recognized when products have been cleared by the customs with the declaration for export obtained. As operating revenue is one of the key performance indicators of Huaxin Packaging, there might be the inherent risk of the management intending to achieve certain goals or expectations through improper revenue recognition. Therefore, we identify revenue recognition as a key audit event. 2. Audit response Audit procedures we implemented against revenue recognition mainly include: (1) Understand key internal control related to revenue recognition, evaluate its design and execution 89 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 and test the operation effectiveness of relevant internal control; (2) Check key sale contracts, identify the terms related to the major risks and remuneration shift of commodity ownership, evaluate whether the revenue recognition policy complies with the regulation of the accounting standards for enterprises; (3) Implement the analysis procedures on operating revenue and gross profit margin by product and customer, identify whether there are any significant or unusual fluctuations and find out the reasons; (4) In terms of domestic sale, check the supporting documents related to revenue recognition using the sampling method, including sale contracts, sale invoices and customers’ acknowledgment receipts; for overseas sale, check the supporting documents using the sampling method, including sale contracts, declarations for export and sale invoices; (5) Based on the letters of confirmation on accounts receivable, confirm with key customers on the sales for the Reporting Period; (6) Use the sampling method to check the revenue recognized around the balance sheet date against the supporting documents such as customers’ acknowledgment receipts and declarations for export and evaluate whether the revenue has been recognized in an appropriate period; (7) Check whether the information related to operating revenue has been properly presented and disclosed in the financial statements. IV. Other Information The management is responsible for the other information. The other information comprises all of the information included in the annual report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. V. Responsibility of Management and Those Charged with Governance for the Financial Statements The management is responsible for the preparation and fair presentation of these financial statements in accordance with Accounting Standards for Business Enterprises to make them a fair presentation and designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidate or to cease operations, or has no realistic alternative but to do so. Government of Foshan Huaxin Packing Co., Ltd (hereinafter refer to as “Government”) are responsible for overseeing the Company’s financial reporting process. VI. CPA’s Responsibility for the Audit of the Financial Statements 90 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: (I) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (II) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. (III) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. (IV) Conclude on the appropriateness of the management’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, and if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. (V) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (VI) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an audit opinion on the financial statements. We are responsible for the direction, supervision and performance of the Company’s audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards (if applicable). From the matters communicated with those charged with governance, we determine those matters 91 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 that were of most significance in the audit of the financial statements of the Current Period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. II Financial Statements Currency unit for the financial statements and the notes thereto: RMB 1. Consolidated Balance Sheet Prepared by Foshan Huaxin Packaging Co., Ltd. 15 March 2019 Unit: RMB Item 31 December 2018 31 December 2017 Current assets: Monetary capital 133,983,939.73 287,652,868.65 Settlement reserve Interbank loans granted Financial assets at fair value through profit or loss Derivative financial assets Notes and accounts receivable 1,058,839,572.02 1,160,829,887.51 Including: Notes receivable 277,623,928.13 430,699,664.45 Accounts receivable 781,215,643.89 730,130,223.06 Prepayments 114,855,049.09 130,297,310.05 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other receivables 26,332,955.74 20,249,531.23 Including: Interest receivable 7,800,232.76 141,388.09 Dividends receivable Financial assets purchased under resale agreements Inventories 1,029,236,159.71 586,179,348.11 Assets classified as held for sale 92 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Current portion of non-current assets Other current assets 338,311,849.45 44,160,627.03 Total current assets 2,701,559,525.74 2,229,369,572.58 Non-current assets: Loans and advances to customers Available-for-sale financial assets 288,700.00 627,643,841.04 Held-to-maturity investments Long-term receivables Long-term equity investments 662,590,158.00 8,294,365.17 Investment property 30,763,683.73 32,092,356.29 Fixed assets 2,178,817,683.33 2,302,301,389.40 Construction in progress 38,735,958.38 39,315,774.19 Productive living assets Oil and gas assets Intangible assets 131,907,260.76 139,717,215.22 R&D expense 7,752,439.97 Goodwill 11,547,305.29 11,547,305.29 Long-term prepaid expense 4,755,506.18 3,256,890.17 Deferred income tax assets 31,549,345.48 27,594,599.01 Other non-current assets 1,495,963.49 5,235,044.33 Total non-current assets 3,100,204,004.61 3,196,998,780.11 Total assets 5,801,763,530.35 5,426,368,352.69 Current liabilities: Short-term borrowings 862,776,823.86 897,426,244.52 Borrowings from central bank Customer deposits and interbank deposits Interbank loans obtained Financial liabilities at fair value through 2,394,879.25 profit or loss Derivative financial liabilities Notes and accounts payable 782,312,573.76 349,777,358.80 Advances from customers 33,431,588.79 21,769,745.08 Financial assets sold under repurchase agreements 93 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Handling charges and commissions payable Payroll payable 44,817,842.45 29,262,158.33 Taxes payable 41,288,520.29 21,397,103.10 Other payables 179,737,877.39 50,811,351.70 Including: Interest payable 6,315,962.71 7,865,380.83 Dividends payable 25,083,228.68 12,116,789.76 Reinsurance payables Insurance contract reserve Payables for acting trading of securities Payables for underwriting of securities Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities 200,000,000.00 199,834,258.85 Other current liabilities Total current liabilities 2,144,365,226.54 1,572,673,099.63 Non-current liabilities: Long-term borrowings 100,000,000.00 200,000,000.00 Bonds payable Including: Preferred shares Perpetual bonds Long-term payables 16,825,912.17 Long-term payroll payable Provisions 1,508,735.64 1,366,445.61 Deferred income 30,305,313.30 30,773,540.27 Deferred income tax liabilities 2,131,935.03 2,238,594.61 Other non-current liabilities Total non-current liabilities 133,945,983.97 251,204,492.66 Total liabilities 2,278,311,210.51 1,823,877,592.29 Owners’ equity: Share capital 505,425,000.00 505,425,000.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 256,822,373.42 256,822,373.42 94 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Less: Treasury stock Other comprehensive income 169,714.39 169,714.39 Specific reserve Surplus reserves 196,399,250.80 192,647,450.61 General reserve Retained earnings 1,012,130,481.68 1,027,794,897.79 Total equity attributable to owners of the 1,970,946,820.29 1,982,859,436.21 Company as the parent Non-controlling interests 1,552,505,499.55 1,619,631,324.19 Total owners’ equity 3,523,452,319.84 3,602,490,760.40 Total liabilities and owners’ equity 5,801,763,530.35 5,426,368,352.69 Legal representative: Ren Xiaoping Chief Financial Officer: Ding Guoqiang Financial Manager: Luo Jing 2. Balance Sheet of the Company as the Parent Unit: RMB Item 31 December 2018 31 December 2017 Current assets: Monetary capital 357,681.85 27,448,820.30 Financial assets at fair value through profit or loss Derivative financial assets Notes and accounts receivable Including: Notes receivable Accounts receivable Prepayments Other receivables 61,127,498.79 187,029,661.31 Including: Interest receivable 4,481,906.67 Dividends receivable Inventories Assets classified as held for sale Current portion of non-current assets Other current assets 45,344.03 18,255.56 Total current assets 61,530,524.67 214,496,737.17 Non-current assets: Available-for-sale financial assets 288,700.00 627,643,841.04 95 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Held-to-maturity investments Long-term receivables Long-term equity investments 1,719,127,360.28 1,070,107,442.14 Investment property Fixed assets 89,328.44 121,857.50 Construction in progress Productive living assets Oil and gas assets Intangible assets 95,808.24 118,626.24 R&D expense Goodwill Long-term prepaid expense 168,411.39 213,321.10 Deferred income tax assets Other non-current assets Total non-current assets 1,719,769,608.35 1,698,205,088.02 Total assets 1,781,300,133.02 1,912,701,825.19 Current liabilities: Short-term borrowings Financial liabilities at fair value through profit or loss Derivative financial liabilities Notes and accounts payable Advances from customers Payroll payable 10,500.40 5,701.66 Taxes payable 1,214.50 1,698.89 Other payables 51,738,991.68 11,731,091.24 Including: Interest payable 2,536,586.20 4,511,037.89 Dividends payable 229,593.13 219,338.35 Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities 199,834,258.85 Other current liabilities Total current liabilities 51,750,706.58 211,572,750.64 Non-current liabilities: Long-term borrowings 96 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Bonds payable Including: Preferred shares Perpetual bonds Long-term payables Long-term payroll payable Provisions Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities 51,750,706.58 211,572,750.64 Owners’ equity: Share capital 505,425,000.00 505,425,000.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 250,531,482.00 250,531,482.00 Less: Treasury stock Other comprehensive income Specific reserve Surplus reserves 196,399,250.80 192,647,450.61 Retained earnings 777,193,693.64 752,525,141.94 Total owners’ equity 1,729,549,426.44 1,701,129,074.55 Total liabilities and owners’ equity 1,781,300,133.02 1,912,701,825.19 3. Consolidated Income Statement Unit: RMB Item 2018 2017 1. Revenue 3,683,004,543.50 3,583,157,646.37 Including: Operating revenue 3,683,004,543.50 3,583,157,646.37 Interest income Premium income Handling charge and commission income 2. Costs and expenses 3,796,303,733.02 3,566,071,163.08 97 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Including: Cost of sales 3,356,346,712.73 3,108,365,473.17 Interest expense Handling charge and commission expense Surrenders Net claims paid Net amount provided as insurance contract reserve Expenditure on policy dividends Reinsurance premium expense Taxes and surcharges 17,536,913.12 22,967,010.28 Selling expense 169,422,183.20 182,923,723.55 Administrative expense 113,073,452.18 120,342,343.74 R&D expense 32,784,184.94 5,134,464.54 Finance costs 89,130,763.80 121,627,924.65 Including: Interest 97,699,988.40 122,634,675.32 expense Interest 11,188,199.94 20,462,322.12 income Asset impairment loss 18,009,523.05 4,710,223.15 Add: Other income 11,229,258.30 13,791,511.79 Investment income (“-” for loss) 18,008,673.27 34,641,907.00 Including: Share of profit or 5,625,141.25 22,353,488.34 loss of joint ventures and associates Gain on changes in fair value (“-” 2,394,879.25 -3,966,220.91 for loss) Foreign exchange gain (“-” for loss) Asset disposal income (“-” for 1,390,311.65 689,820.93 loss) 3. Operating profit (“-” for loss) -80,276,067.05 62,243,502.10 Add: Non-operating income 32,719,902.12 4,412,955.57 Less: Non-operating expense 8,259,701.51 29,256,836.85 4. Profit before tax (“-” for loss) -55,815,866.44 37,399,620.82 Less: Income tax expense 1,168,739.98 2,171,808.47 5. Net profit (“-” for net loss) -56,984,606.42 35,227,812.35 98 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 5.1 Net profit from continuing -56,866,173.83 37,706,435.17 operations (“-” for net loss) 5.2 Net profit from discontinued -118,432.59 -2,478,622.82 operations (“-” for net loss) Net profit attributable to owners of -2,814,965.92 18,637,865.97 the Company as the parent Net profit attributable to -54,169,640.50 16,589,946.38 non-controlling interests 6. Other comprehensive income, net of tax Attributable to owners of the Company as the parent 6.1 Items that will not be reclassified to profit or loss 6.1.1 Changes caused by remeasurements on defined benefit pension schemes 6.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 6.2 Items that may subsequently be reclassified to profit or loss 6.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 6.2.2 Gain/Loss on changes in fair value of available-for-sale financial assets 6.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets 6.2.4 Effective gain/loss on cash flow hedges 6.2.5 Differences arising from translation of foreign currency-denominated financial statements 6.2.6 Other Attributable to non-controlling interests 99 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 7. Total comprehensive income -56,984,606.42 35,227,812.35 Attributable to owners of the -2,814,965.92 18,637,865.97 Company as the parent Attributable to non-controlling -54,169,640.50 16,589,946.38 interests 8. Earnings per share 8.1 Basic earnings per share -0.01 0.04 8.2 Diluted earnings per share -0.01 0.04 Where business combinations under common control occurred in the current period, the net profit achieved by the acquirees before the combinations was RMB0.00, with the amount for last year being RMB0.00. Legal representative: Ren Xiaoping Chief Financial Officer: Ding Guoqiang Financial Manager: Luo Jing 4. Income Statement of the Company as the Parent Unit: RMB Item 2018 2017 1. Operating revenue 0.00 0.00 Less: Cost of sales 0.00 0.00 Taxes and surcharges 1,320.00 28,682.69 Selling expense Administrative expense 2,283,741.47 5,978,826.57 R&D expense Finance costs 68,524.98 4,020,985.86 Including: Interest expense 8,806,,875.29 55,902,473.17 Interest income 8,822,547.45 51,954,404.84 Asset impairment loss 7,369.57 Add: Other income Investment income (“-” for loss) 18,317,719.37 33,862,273.89 Including: Share of profit or 5,103,538.56 22,059,145.80 loss of joint ventures and associates Gain on changes in fair value (“-” for loss) Asset disposal income (“-” for loss) 2. Operating profit (“-” for loss) 15,956,763.35 23,833,778.77 Add: Non-operating income 21,561,238.54 2,449.44 100 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Less: Non-operating expense 108,053.64 3. Profit before tax (“-” for loss) 37,518,001.89 23,728,174.57 Less: Income tax expense 4,386.83 4. Net profit (“-” for net loss) 37,518,001.89 23,723,787.74 4.1 Net profit from continuing 37,518,001.89 23,723,787.74 operations (“-” for net loss) 4.2 Net profit from discontinued operations (“-” for net loss) 5. Other comprehensive income, net of tax 5.1 Items that will not be reclassified to profit or loss 5.1.1 Changes in caused by remeasurements on defined benefit pension schemes 5.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 5.2 Items that may subsequently be reclassified to profit or loss 5.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 5.2.2 Gain/Loss on changes in fair value of available-for-sale financial assets 5.2.3 Gain/Loss arising from reclassification of held-to-maturity investments to available-for-sale financial assets 5.2.4 Effective gain/loss on cash flow hedges 5.2.5 Differences arising from translation of foreign currency-denominated financial statements 5.2.6 Other 6. Total comprehensive income 37,518,001.89 23,723,787.74 7. Earnings per share 101 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 7.1 Basic earnings per share 7.2 Diluted earnings per share 5. Consolidated Cash Flow Statement Unit: RMB Item 2018 2017 1. Cash flows from operating activities: Proceeds from sale of commodities 3,842,502,603.81 3,500,810,257.77 and rendering of services Net increase in customer deposits and interbank deposits Net increase in borrowings from central bank Net increase in loans from other financial institutions Premiums received on original insurance contracts Net proceeds from reinsurance Net increase in deposits and investments of policy holders Net increase in proceeds from disposal of financial assets at fair value through profit or loss Interest, handling charges and commissions received Net increase in interbank loans obtained Net increase in proceeds from repurchase transactions Tax rebates 77,562.83 Cash generated from other operating 159,737,820.68 81,627,128.29 activities Subtotal of cash generated from 4,002,240,424.49 3,582,514,948.89 operating activities Payments for commodities and 3,126,706,099.95 3,151,914,393.79 services Net increase in loans and advances to customers Net increase in deposits in central bank and in interbank loans granted Payments for claims on original insurance contracts 102 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Interest, handling charges and commissions paid Policy dividends paid Cash paid to and for employees 202,823,160.04 198,978,451.99 Taxes paid 82,766,773.12 143,402,317.73 Cash used in other operating 196,478,996.66 110,130,706.46 activities Subtotal of cash used in operating 3,608,775,029.77 3,604,425,869.97 activities Net cash generated from/used in 393,465,394.72 -21,910,921.08 operating activities 2. Cash flows from investing activities: Proceeds from disinvestment Investment income 10,245,728.00 47,768,096.34 Net proceeds from disposal of fixed assets, intangible assets and other 16,914,152.88 1,258,975.71 long-lived assets Net proceeds from disposal of subsidiaries or other business units Cash generated from other investing 231,383,532.02 720,909,915.83 activities Subtotal of cash generated from 258,543,412.90 769,936,987.88 investing activities Payments for acquisition of fixed assets, intangible assets and other 27,351,931.82 34,123,041.42 long-lived assets Payments for investments 396,000,000.00 Net increase in pledged loans granted Net payments for acquisition of subsidiaries and other business units Cash used in other investing 545,200,000.00 1,000,000.00 activities Subtotal of cash used in investing 572,551,931.82 431,123,041.42 activities Net cash generated from/used in -314,008,518.92 338,813,946.46 investing activities 3. Cash flows from financing activities: Capital contributions received Including: Capital contributions by non-controlling interests to subsidiaries Increase in borrowings obtained 1,964,748,616.03 1,625,060,964.89 103 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Net proceeds from issuance of bonds Cash generated from other financing 89,000,956.90 192,891,765.59 activities Subtotal of cash generated from 2,053,749,572.93 1,817,952,730.48 financing activities Repayment of borrowings 2,109,665,980.99 2,061,300,029.05 Payments for interest and dividends 108,171,060.59 132,490,125.69 Including: Dividends paid by 6,648,241.15 subsidiaries to non-controlling interests Cash used in other financing 45,971,254.50 33,400,956.90 activities Subtotal of cash used in financing 2,263,808,296.08 2,227,191,111.64 activities Net cash generated from/used in -210,058,723.15 -409,238,381.16 financing activities 4. Effect of foreign exchange rate 4,362,620.83 -10,516,433.29 changes on cash and cash equivalents 5. Net increase in cash and cash -126,239,226.52 -102,851,789.07 equivalents Add: Cash and cash equivalents, 254,251,911.75 357,103,700.82 beginning of the period 6. Cash and cash equivalents, end of the 128,012,685.23 254,251,911.75 period 6. Cash Flow Statement of the Company as the Parent Unit: RMB Item 2018 2017 1. Cash flows from operating activities: Proceeds from sale of commodities and rendering of services Tax rebates Cash generated from other operating 13,374,787.33 1,277,482,830.05 activities Subtotal of cash generated from 13,374,787.33 1,277,482,830.05 operating activities Payments for commodities and services Cash paid to and for employees 1,321,951.81 3,744,473.34 Taxes paid 1,020.00 222,684.00 Cash used in other operating 1,173,471.23 442,612,705.55 activities 104 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Subtotal of cash used in operating 2,496,443.04 446,579,862.89 activities Net cash generated from/used in 10,878,344.29 830,902,967.16 operating activities 2. Cash flows from investing activities: Proceeds from disinvestment Investment income 10,000,000.00 46,915,384.12 Net proceeds from disposal of fixed assets, intangible assets and other 25,320.71 long-lived assets Net proceeds from disposal of 8,214,180.81 subsidiaries or other business units Cash generated from other investing 304,272,441.64 511,909,915.83 activities Subtotal of cash generated from 322,486,622.45 558,850,620.66 investing activities Payments for acquisition of fixed assets, intangible assets and other 249,580.00 long-lived assets Payments for investments 396,000,000.00 Net payments for acquisition of subsidiaries and other business units Cash used in other investing 156,310,000.00 activities Subtotal of cash used in investing 156,310,000.00 396,249,580.00 activities Net cash generated from/used in 166,176,622.45 162,601,040.66 investing activities 3. Cash flows from financing activities: Capital contributions received Increase in borrowings obtained Net proceeds from issuance of bonds Cash generated from other financing 55,600,000.00 activities Subtotal of cash generated from 55,600,000.00 financing activities Repayment of borrowings 200,000,000.00 899,980,000.00 Payments for interest and dividends 19,702,981.05 74,484,459.27 Cash used in other financing 40,000,000.00 activities Sub-total of cash used in financing 259,702,981.05 974,464,459.27 105 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 activities Net cash generated from/used in -204,102,981.05 -974,464,459.27 financing activities 4. Effect of foreign exchange rate -43,124.14 changes on cash and cash equivalents 5. Net increase in cash and cash -27,091,138.45 19,039,548.55 equivalents Add: Cash and cash equivalents, 27,448,820.30 8,409,271.75 beginning of the period 6. Cash and cash equivalents, end of the 357,681.85 27,448,820.30 period 7. Consolidated Statements of Changes in Owners’ Equity 2018 Unit: RMB 2018 Equity attributable to owners of the Company as the parent Other equity Non-co Other Retaine Total Item instruments Less: ntrollin Share Capital compre Specific Surplus General d owners’ Treasur g Prefer Perpet equity capital reserves hensive reserve reserves reserve earning y stock interests red ual Other income s shares bonds 1. Balances as at 505,42 1,027,7 1,619,6 3,602,4 256,822 169,714 192,647 the end of the prior 5,000. 94,897. 31,324. 90,760. ,373.42 .39 ,450.61 year 00 79 19 40 Add: Adjustments for changed accounting policies Adjustments for corrections of previous errors Adjustments for business combinations under common control Other adjustments 2. Balances as at 505,42 1,027,7 1,619,6 3,602,4 256,822 169,714 192,647 the beginning of 5,000. 94,897. 31,324. 90,760. ,373.42 .39 ,450.61 the year 00 79 19 40 106 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 3. Increase/ decrease in the 3,751,8 -15,664, -67,125, -79,038, period (“-” for 00.19 416.11 824.64 440.56 decrease) 3.1 Total -2,814,9 -54,169, -56,984, comprehensive 65.92 640.50 606.42 income 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 3.3 Profit 3,751,8 -12,849, -12,956, -22,053, distribution 00.19 450.19 184.14 834.14 3.3.1 3,751,8 -3,751,8 Appropriation to 00.19 00.19 surplus reserves 3.3.2 Appropriation to general reserve 3.3.3 Appropriation to -9,097,6 -12,956, -22,053, owners (or 50.00 184.14 834.14 shareholders) 3.3.4 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 107 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.5 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as at 505,42 1,012,1 1,552,5 3,523,4 256,822 169,714 196,399 the end of the 5,000. 30,481. 05,499. 52,319. ,373.42 .39 ,250.80 period 00 68 55 84 2017 Unit: RMB 2017 Equity attributable to owners of the Company as the parent Non-co Other equity Other ntrollin Total Item instruments Less: Retaine Share Capital compre Specific Surplus General g owners’ Prefer Perpet Treasur d capital reserves hensive reserve reserves reserve interest equity red ual Other y stock earnings income s shares bonds 1. Balances as at 505,42 1,027,7 1,618,3 3,598,7 256,822 169,714 190,275 the end of the prior 5,000. 03,010. 19,827. 14,997. ,373.42 .39 ,071.84 year 00 59 16 40 Add: Adjustments for changed accounting policies Adjustments for 108 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 corrections of previous errors Adjustments for business combinations under common control Other adjustments 2. Balances as at 505,42 1,027,7 1,618,3 3,598,7 256,822 169,714 190,275 the beginning of 5,000. 03,010. 19,827. 14,997. ,373.42 .39 ,071.84 the year 00 59 16 40 3. Increase/ decrease in the 2,372,3 91,887. 1,311,4 3,775,7 period (“-” for 78.77 20 97.03 63.00 decrease) 3.1 Total 18,637, 16,589, 35,227, comprehensive 865.97 946.38 812.35 income 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 3.3 Profit 2,372,3 -18,545, -15,278 -31,452, distribution 78.77 978.77 ,449.35 049.35 3.3.1 2,372,3 -2,372,3 Appropriation to 78.77 78.77 surplus reserves 3.3.2 Appropriation to general reserve 109 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 3.3.3 Appropriation to -16,173, -15,278 -31,452, owners (or 600.00 ,449.35 049.35 shareholders) 3.3.4 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.5 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as at 505,42 1,027,7 1,619,6 3,602,4 256,822 169,714 192,647 the end of the 5,000. 94,897. 31,324. 90,760. ,373.42 .39 ,450.61 period 00 79 19 40 8. Statements of Changes in Owners’ Equity of the Company as the Parent 2018 Unit: RMB 2018 Item Share Other equity instruments Capital Less: Other Specific Surplus Retaine Total 110 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 capital reserves Treasury comprehe reserve reserves d owners’ Preferre Perpetu Other stock nsive earnings equity d shares al bonds income 1. Balances as at 505,425, 250,531,4 192,647,4 752,525 1,701,129 the end of the prior 000.00 82.00 50.61 ,141.94 ,074.55 year Add: Adjustments for changed accounting policies Adjustments for corrections of previous errors Other adjustments 2. Balances as at 505,425, 250,531,4 192,647,4 752,525 1,701,129 the beginning of 000.00 82.00 50.61 ,141.94 ,074.55 the year 3. Increase/ decrease in the 3,751,800 24,668, 28,420,35 period (“-” for .19 551.70 1.89 decrease) 3.1 Total 37,518, 37,518,00 comprehensive 001.89 1.89 income 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 3.3 Profit 3,751,800 -12,849, -9,097,65 distribution .19 450.19 0.00 111 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 3.3.1 3,751,800 -3,751,8 Appropriation to .19 00.19 surplus reserves 3.3.2 Appropriation to -9,097,6 -9,097,65 owners (or 50.00 0.00 shareholders) 3.3.3 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.4 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as at 505,425, 250,531,4 196,399,2 777,193 1,729,549 the end of the 000.00 82.00 50.80 ,693.64 ,426.44 period 2017 Unit: RMB 2017 Item Share Other equity instruments Capital Less: Other Specific Surplus Retaine Total 112 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 capital reserves Treasury comprehe reserve reserves d owners’ Preferre Perpetu Other stock nsive earnings equity d shares al bonds income 1. Balances as at 505,425, 250,531,4 190,275,0 747,347 1,693,578 the end of the prior 000.00 82.00 71.84 ,332.97 ,886.81 year Add: Adjustments for changed accounting policies Adjustments for corrections of previous errors Other adjustments 2. Balances as at 505,425, 250,531,4 190,275,0 747,347 1,693,578 the beginning of 000.00 82.00 71.84 ,332.97 ,886.81 the year 3. Increase/ decrease in the 2,372,378 5,177,8 7,550,187 period (“-” for .77 08.97 .74 decrease) 3.1 Total 23,723, 23,723,78 comprehensive 787.74 7.74 income 3.2 Capital increased and reduced by owners 3.2.1 Ordinary shares increased by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 3.3 Profit 2,372,378 -18,545, -16,173,6 distribution .77 978.77 00.00 113 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 3.3.1 2,372,378 -2,372,3 Appropriation to .77 78.77 surplus reserves 3.3.2 Appropriation to -16,173, -16,173,6 owners (or 600.00 00.00 shareholders) 3.3.3 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.4 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as at 505,425, 250,531,4 192,647,4 752,525 1,701,129 the end of the 000.00 82.00 50.61 ,141.94 ,074.55 period III Company Profile Foshan Huaxin Packaging Co., Ltd. (hereinafter referred to as the Company) was sponsored and set by Foshan Huaxin Development Co., Ltd., Foshan Municipal Investment General Corporation, Foshan Xinhui Industrial Development Co., Ltd., China Packaging General Corporation, China Material Development & Investment General Corporation, Guangdong Technical Reforming & Investment Co., Ltd., China Chemistry & Light 114 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Industry General Corporation, and Foshan Light Industry Company under approval of People’s Government of Guangdong Province with YBH (1999) No. 297 document and Economic System Reform Committee of Guangdong Province with YTG (1999) No. 032 document, and was registered in Administration Bureau for Commerce & Industry of Guangdong Province on 21 June 1999. The Company holds the business license with the unified social credit code of 914406007076822793. And its registered capital is RMB505,425,000.00 with total 505,425,000.00 shares (RMB1 per share), among which, there are unrestricted public 171,925,000.00 B shares and unrestricted private 333,500,000.00 B shares. The Company’s stocks were listed in Shenzhen Stock Exchange for trade in 2000. The Company is in the industry of papermaking, paper packaging and printing. Main business scope: mainly manufactures (operated by subsidiary companies under the Company) and sells packaging materials, and packaging products, materials for decoration and aluminum and plastic compound materials; sells and maintains package machinery; invests in industry in terms of package and printing. Main products or services include high-grade coated white cardboard and color packages printing products, and etc. The financial statement is reported after the approval of the 2nd Meeting of the 7th Board of Directors in 2019 of the Company. The Company included five subsidiaries, Zhuhai Hongta Renheng Packaging Co., Ltd (hereinafter referred to as Hongta Renheng), Zhuhai Huafeng Paper Co., Ltd (hereinafter referred to as Huafeng Paper), Zhuhai Golden Pheasant Chemical Co., Ltd (hereinafter referred to as Golden Pheasant Chemical), Huaxin (Foshan) Color Printing Co., Ltd. (hereinafter referred to as Foshan Color Printing), and Zhejiang Hongta Renheng Packaging Technology Co., Ltd, into the scope of consolidated financial statement in the Reporting Period. For details, see changes in consolidation scope of the notes to financial statement and the explanation for equities in other entities. IV. Basis for the Preparation of Financial Statements 1. Preparation Basis The financial statement of the Company was prepared on the base of the assumption of continuation. 2. Continuation There was no such case where the sustainable operation ability within 12 months since the end of the Reporting Period was highly doubted. V. Important Accounting Policies and Estimations Is the Company subject to any disclosure requirements for special industries? No. Indication of specific accounting policies and estimations: Naught 1. Statement for Complying with the Accounting Standard for Business Enterprise The financial statements for the Reporting Period prepared by the Company are in compliance with the requirements of the accounting standard for business enterprise, and have reflected the Company’s financial status, 115 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 operating results and cash flows in an accurate and complete way. 2. Fiscal Period The fiscal year of the Company is a solar calendar year, which is from 1 January to 31 December. 3. Operating Cycle The operating cycle of the Company’s business is comparatively short with 12 months as the classification standard for the mobility of assets and liabilities. 4. Standard Currency of Accounts The Company adopts Renminbi as a standard currency of accounts. 5. Accounting Process of Business Combinations under the Same Control and not under the Same Control 1. Accounting Process of Business Combinations under the Same Control The assets and liabilities that the Company obtains in a business combination shall be measured on the basis of their carrying amount combined party in the consolidated financial statements of the final controller on the combining date. As for the balance between the carrying amount of combined party’s owners equities in the consolidated financial statements of the final controller and the carrying amount of the consideration paid by it or the total par value of the shares issued), the additional paid-in capital shall be adjusted. If the additional paid-in capital is not sufficient to be offset, the retained earnings shall be adjusted. 2. Accounting Process of Business Combinations not under the Same Control The Company shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets obtained from the acquiree on purchase date as goodwill. If the combination costs are less than the fair value of the identifiable net assets obtained from the acquire, the Company shall recheck the various identifiable assets and liabilities obtained from the acquire, fair value with liabilities, and measurement of combination costs. If the combination costs are less than the fair value of the identifiable net assets obtained from the acquire after recheck, the Company shall the record the balance into the profit and loss of the current period. 6. Methods for Preparing Consolidated Financial Statements The Company as the parent included its all subsidiaries into the consolidation scope of consolidated financial statements. Based on the financial statements of the Company as the parent and its subsidiaries and other related materials, the consolidated financial statements were prepared by the Company as the parent according to Accounting Standards for Enterprises No. 33 –Consolidated Financial Statements. 7. Classification of Joint arrangements and Accounting Treatment of Joint Operations 1. Joint arrangement is classified into joint operation and joint ventures. 2. When the Company is a party of a joint operation, recognize the following items related to the profits in the joint operation: (1) Recognize the assets held independently, and recognize the assets held jointly in the holding portion; 116 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (2) Recognize the liabilities borne independently, and recognize the liabilities held jointly in the holding portion; (3) Recognize the revenue generated from the output portion of joint operation shared for selling the Company; (4) Recognize the revenue generated from the sale of assets in joint operation in the holding portion of the Company; (5) Recognize the expenses incurred independently, and recognize the expenses incurred in joint operation in the holding portion of the Company. 8. Recognition Standard for Cash and Cash Equivalents The term “cash” listed and presented in the cash flow statement refers to cash on hand and deposits that are available for payment at any time. The term “cash equivalents” refers to short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. 9. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements 1. Translation of Foreign Currency Business As for a foreign currency transaction in its initial recognition, the amount in the foreign currency shall be translated into the amount in the Renminbi at the spot exchange rate of the transaction date. On balance sheet date, the foreign currency monetary items shall be translated as the spot exchange rate on the balance sheet date, the balance occurred thereof shall be recorded into the profits and losses at the current period except that the balance of exchange arising from the principal and interests of foreign currency borrowings for the purchase and construction or production of assets eligible for capitalization. The foreign currency non-monetary items measured at the historical cost shall still be translated at the spot exchange rate on the transaction date, of which the amount of functional currency shall not be changed. The foreign currency non-monetary items measured at the fair value shall be translated at the spot exchange rate on the confirming date of fair value, of which the balance of exchange shall be included into the profit and loss of the current period or other comprehensive income. 2. Translation of Foreign Currency Financial Statements The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among the owner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date. The differences arising from the translation of foreign currency financial statements in compliance with the aforesaid Items shall be recorded into other comprehensive incomes. 10. Financial Instruments 1. Classification of Financial Assets and Financial Liabilities Financial assets shall be classified into the following four categories when they are initially recognized: the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period (including transactional financial assets and the financial assets which are measured at their fair values and of which the variation is included in the current profits and losses); the investments which will be held to their maturity; loans and the account receivables; and financial assets available for sale. Financial liabilities shall be classified into the following two categories when they are initially recognized: the 117 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses (including transactional financial liabilities and the designated financial liabilities n its initial recognition which are measured at their fair values and of which the variation is included in the current profits and losses) and other financial liabilities. 2. Recognition Basis, Calculation Method, and Termination of Recognition of Financial Assets and Liabilities When the Company becomes a party to a financial instrument, it shall recognize a financial asset or financial liability. The financial assets and financial liabilities initially recognized shall be measured at their fair values. For the financial assets and liabilities measured at their fair values and of which the variation is recorded into the profits and losses of the current period, the transaction expenses thereof shall be directly recorded into the profits and losses of the current period; for other categories of financial assets and financial liabilities, the transaction expenses thereof shall be included into the initially recognized amount. The Company shall make subsequent measurement on its financial assets according to their fair values, and may not deduct the transaction expenses that may occur when it disposes of the said financial asset in the future. However, those under the following circumstances shall be excluded: (1)The investments held until their maturity, loans and accounts receivable shall be measured on the basis of the post-amortization costs by adopting the actual interest rate method; (2) The equity instrument investments for which there is no quotation in the active market and whose fair value cannot be measured reliably, and the derivative financial assets which are connected with the said equity instrument and must be settled by delivering the said equity instrument shall be measured on the basis of their costs. The Company shall make subsequent measurement on its financial liabilities on the basis of the post-amortization costs by adopting the actual interest rate method, with the exception of those under the following circumstances: (1) For the financial liabilities measured at their fair values and of which the variation is recorded into the profits and losses of the current period, they shall be measured at their fair values, and none of the transaction expenses may be deducted, which may occur when the financial liabilities are settled in the future; (2) For the derivative financial liabilities, which are connected to the equity instrument for which there is no quotation in the active market and whose fair value cannot be reliably measured, and which must be settled by delivering the equity instrument, they shall be measured on the basis of their costs; (3)For the financial guarantee contracts which are not designated as a financial liability measured at its fair value and the variation thereof is recorded into the profits and losses of the current period, and for the commitments to grant loans which are not designated to be measured at the fair value and of which the variation is recorded into the profits and losses of the current period and which will enjoy an interest rate lower than that of the market, a subsequent measurement shall be made after they are initially recognized according to the higher one of the following: 1) the amount as determined according to the Accounting Standards for Enterprises No. 13 - Contingencies; 2) the surplus after accumulative amortization as determined according to the principles of the Accounting Standards for Enterprises No. 14 - Revenues is subtracted from the initially recognized amount. Profits or losses from the change in fair value of financial assets or financial liabilities, unless related to hedging, shall be treated in the following methods: (1) Profits or losses from the change in fair value of financial assets measured by fair value and the changes included in the current gains and losses shall be included in gains from the change in fair value; interests or cash dividends gained during asset holding shall be recognized as investment income; at disposal, the difference between the amount actually received and the initially recognized amount shall be recognized as investment income, and at the same time, income from the change in fair value shall be adjusted. (2) The change in fair value of available-for-sale financial assets shall be included into other comprehensive income; interests calculated in the actual interest rate method during the holding shall be included into investment income; cash dividends from the investment of available-for-sale equity instruments shall be included into 118 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 investment income when the investee announces the issue of dividends; at disposal, the difference between the amount actually received and the book value after deducting the cumulative amount of the change in fair value originally included into other comprehensive income shall be recognized as investment income. When the contractual right to receive the cash flow from a financial asset has been terminated or almost all the risks and remunerations in respect of the ownership of the financial asset have been shifted, the financial asset shall be derecognized; when the current obligations of a financial liability are fully or partially terminated, the financial liability or a part of it shall be derecognized accordingly. 3. Recognition Basis and Measurement of Transfer of Financial Assets Where the Company has transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall stop recognizing the financial asset. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall continue to recognize the transferred financial asset, and recognize the received consideration as a financial liability. Where the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of a financial asset, it shall deal with it according to the circumstances as follows, respectively: (1) If it gives up its control over the financial asset, it shall stop recognizing the financial asset; (2) If it does not give up its control over the financial asset, it shall, according to the extent of its continuous involvement in the transferred financial asset, recognize the related financial asset and recognize the relevant liability accordingly. If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the difference between the amounts of the following 2 items shall be recorded in the profits and losses of the current period: (1) The book value of the transferred financial asset; (2) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owner's equities. If the transfer of partial financial asset satisfies the conditions to stop the recognition, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped, be apportioned according to their respective relative fair value, and the difference between the amounts of the following two items shall be included into the profits and losses of the current period: (1)The book value of the portion whose recognition has been stopped; (2)The sum of consideration of the portion whose recognition has been stopped, and the portion of the accumulative amount of the changes in the fair value originally recorded in the owner's equities which is corresponding to the portion whose recognition has been stopped. 4. Recognition Method of Financial Assets and Financial Liabilities’ Fair Value The Company adopts the valuation technique with sufficient useful data and supported by other information which is suitable for the current situation to recognize the fair value of related financial assets and liabilities. The Company classifies the input value used in the valuation technique into the following levels and uses them in sequence: (1) The first level of input value is the non-adjustable offer of the same assets or liabilities in the active market on the calculation date; (2) The second level of input value is the directly or indirectly observable input value of related assets or liabilities except the input value on the first level, including: offer of similar assets or liabilities in the active market; offer of identical or similar assets or liabilities in the non-active market; other observable input value except offer, including the observable interest rate during the interval period of common offer, profit rate curve, etc.; the input value for market verification etc.. (3) The third level of input value is the non-observable input value of related assets or liabilities, including interest rates that cannot be observed directly or verified by the data of observable market, stock fluctuation rate, future cash flow of the disposal obligation borne in corporate mergers, financial forecast based on self-data, etc.. 119 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 5. Impairment Test and Withdrawal Method of Provision for the Impairment of Financial Assets (1) Except for financial assets which are measured at their fair values and of which the variation is included in the current profits and losses, the Company checks the book values of all other financial assets on the balance sheet date. If there is objective evidence proving that a financial asset is impaired, an impairment provision is made. (2) For held-to-maturity investments, loans and accounts receivable, financial assets with significant ingle amounts shall be separated first, and carry out an impairment test independently. With regard to the financial assets with insignificant single amounts, an independent impairment test may be carried out, or they may be included in a combination of financial assets with similar credit risk features so as to carry out an impairment-related test. Where, upon independent test, the financial asset (including those financial assets with significant single amounts and those with insignificant amounts) has not been impaired, it shall be included in a combination of financial assets with similar risk features so as to conduct another impairment test. If the test results show that it has been impaired, the impairment losses shall be recognized according to the positive balance between its carrying value and the estimated present value of future cash flow. (3) Financial Assets Available for sale 1) The objective evidences that can prove the impairment of debt instrument available for sale in investment shall include: A serious financial difficulty occurs to the debtor; The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal, etc.; The Company makes concession to the debtor which is in financial difficulties due to economic or legal factors, etc.; The debtor will probably become bankrupt or carry out other financial reorganizations; )The debt instrument can no longer continue to be traded in the active market due to serious financial difficulties of the debtor; ⑥Other objective evidences showing the impairment of the debt instrument available for sale 2) Objective evidences showing the impairment of equity instrument include: the fair value of the equity instrument investment drops significantly or not temporarily; Any seriously disadvantageous change has occurred to technical, market, economic or legal environment, etc. wherein the invested companies’ business, which makes the Company unable to take back its cost of investment. On balance sheet date, the Company separately examines each available-for-sale equity instrument investment. If the fair value of the equity instruments which invests on the balance sheet date is lower than its initial investment cost for more than 50% (including 50%) or lower than its initial investment cost for the duration time for more than 12 months (including 12 months), which indicates that it had occurred impairment; if the fair value of the equity instruments which invests on the balance sheet date is lower than its initial investment cost for more than 20% (including 20%) but not reach at 50%, or lower than its initial investment cost for the duration time for more than 6 months (including 6 months) but not exceed 12 months, the Company will comprehensively considerate the other relevant factors such as the price volatility etc. and will judge the equity investment whether had occurred impairment. In respect of the equity instrument investment measured at cost, the Company determines whether there is any impairment to the equity instrument by comprehensively considering whether there are any unfavorable changes to the technical, market, economic or legal environment operated by the investee. When there is any impairment to the available-for-sale financial assets measured at fair value, the accumulative losses from decrease in fair value originally and directly recorded into other comprehensive income shall be rolled out and included into impairment losses. As for the investment of available-for-sale debt instruments whose 120 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 impairment-related losses have been recognized, if, after the accounting period, the fair value has risen and is objectively related to the subsequent events that occur after the originally impairment-related losses were recognized, the originally recognized impairment-related losses shall be reversed and be recorded into the profits and losses of the current period. As for the investment of available-for-sale equity instruments whose impairment-related losses have been recognized, the increased fair value after the accounting period shall be recorded into other comprehensive income. When there is any impairment to the available-for-sale equity instruments measured at cost, the difference between the book value of the equity instrument investment and the present value obtained from the discount of future cash flow with the present market return of similar financial assets shall be recognized as impairment losses and recorded into current profits or losses. Once recognized, the impairment losses shall not be reversed. 11. Notes and Accounts Receivable (1) Bad Debt Provision for Individually Significant Accounts Receivable Judgment basis or monetary standards of provision for bad debts An account receivable exceeds RMB10 million (inclusive), or of the individually significant accounts receivable another account receivable exceeds RMB5 million (inclusive). An impairment test shall be conducted separately on the account Accounts receivable with significant single amount for which receivable and the difference of the present value of expected bad debt provision separately accrued at the period-end future cash flow less than its book value shall be withdrawn as the bad debt provision. (2) Accounts Receivable which the Bad Debt Provision is Withdrawn by Credit Risk Characteristics Name of the group Bad debt provision method Aging Aging analysis method Amounts of connected-parties within the scope of consolidation In the groups, adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Withdrawal proportion for accounts Withdrawal proportion for other accounts Aging receivable receivable 1-3 months 0.00% 0.00% 4-12 months 5.00% 5.00% 1-2 years 10.00% 10.00% 2-3 years 20.00% 20.00% Over 3 years 50.00% 50.00% 3-4 years 50.00% 50.00% 4-5 years 50.00% 50.00% Over 5 years 50.00% 50.00% In the groups, adopting balance percentage method to withdraw bad debt provision: 121 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 □ Applicable √ Not applicable In the groups, adopting other methods to withdraw bad debt provision: □ Applicable √ Not applicable (3) Accounts Receivable with an Insignificant Single Amount but for which the Bad Debt Provision is Made Individually There exists evidence that the Company unable to recover the Reason of individually withdrawing bad debt provision: account receivable in line with the original items. An impairment test shall be conducted separately on the account receivable and the difference of the present value of expected Withdrawing bad debt provision method future cash flow less than its book value shall be withdrawn as the bad debt provision. 12. Inventory Is the Company subject to any disclosure requirements for special industries? No. 1. Category Inventory was referred to the finished goods or commodities for sale, products in the process, materials in production or providing services in daily activities, etc. 2. Pricing Method for Outgoing Inventories Adopting the weighted average method for pricing at the end of the month at a time 3. Recognition basis of Net Realizable Value of Inventory On the balance sheet date, inventory shall be measured at the lower of cost or net realizable value, and provision shall be made for falling price of inventories on the ground of the difference between the cost of each item of inventories and the net realizable value. Inventories directly for sale, under normal producing process, to the amount after deducting the estimated sale expense and relevant taxes from the estimated sell price of the inventory, the net realizable value has been recognized; inventories which need to be processed, under normal producing process, to the amount after deducting the estimated cost of completion, estimated sale expense and relevant taxes from the estimated sale price of produced finished goods, the net realizable value has been recognized; on the balance sheet date, in the same item of inventories, if some have contractual price agreement while others do not, the net realizable value shall be recognized respectively and compared with their cost, and the amount of provision withdrawal or reversal for falling price of inventories shall be recognized respectively. 4. Inventory System for Inventories: Inventory system: Perpetual inventory system 5. Amortization Method of the Low-value Consumption Goods and Packing Articles (1) Low-value Consumption Goods One-off amortization method (2) Packing Articles One-off amortization method 122 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 13. Divided as Assets Held for Sale 1. Classification of Non-current assets or disposal group Held for Sale Non-current assets or disposal group are confirmed to be the components held for sale when the following conditions are simultaneously satisfied: (1) According to the convention of similar transactions selling this kind of assets or disposal group, they can be sold instantly in such conditions. (2) Sale is extremely likely to happen, that is, the Company has made the decision of a sale plan, and got the confirmed purchase commitment. It is estimated that the sale will be finished within 1 year. Non-current assets or disposal groups specifically obtained by the Company for resale will be classified as held-for-sale on the acquisition date when they meet the stipulated conditions of “expected to be sold within one year” on the acquisition date, and may well satisfy the category of held-for-sale within a short time (which is usually 3 months). If any transaction between non-related parties fails to complete within one year due to one of the following reasons outside the Company’s control, and the Company still commits to sell non-current assets or disposal groups, the non-current assets or disposal groups shall be still classified as the held-for-sale category: (1) For conditions of sale delay resulting from the accidental setting by the buyer or another party, the Company has duly taken actions against those conditions and it is expected that the delay factors can be smoothly solved within one year since the conditions of sale delay resulting from the setting; (2) Non-current assets or disposal groups held for sale fail to be sold within one year due to rare circumstances, and the Company has taken necessary measures against those new situations within the first year and re-satisfied the conditions for classifying them into the held-for-sale category. 2. Measurement of held-for-sale non-current assets or disposal groups (1) Initial measurement and subsequent measurement For the initial measurement and the re-measurement of held-for-sale non-current assets or disposal groups on the balance sheet date, if the book value is higher than the net amount of the fair value deducting the selling expenses, the book value shall be written down to the net amount of the fair value deducting the selling expenses. The written down amount shall be recognized as asset impairment losses and recorded into current profits or losses, and at the same time, the held-for-sale asset impairment provision shall be withdrawn. In respect of non-current assets or disposal groups classified into the held-for-sale category on the date of obtainment, when initially measuring them, compare the initially measured amount supposing that they are not classified into the held-for-sale category and the amount of the fair value deducting the selling expenses, and measure them at the lower amount. Other than the non-current assets or disposal groups obtained in corporate mergers, the difference generated from the net amount of the fair value of non-current assets or disposal groups deducting the selling expenses as the initially measured amount shall be recorded into current profits or losses. For the amount of asset impairment losses recognized in respect of held-for-sale disposal groups, first write off the book value of goodwill in the disposal groups, and then write off their book value in proportion according to the percentage of the book value of each non-current asset in the disposal groups. Depreciation or amortization shall not be withdrawn for held-for-sale non-current assets or the non-current assets in disposal groups, while the interests of liabilities and other expenses in held-for-sale disposal groups shall still be recognized. (2) Accounting Methods for the Recovery of Assets Impairment Losses If the net amount that the fair value of the non-current assets held for sale on the follow-up balance sheet date minus the sale costs increases, the previous written-down amount will be restored, and reversed to the asset impairment loss confirmed after the assets being classified as held-for-sale. The reversed amount will be included 123 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 in the current profit or loss. Impairment losses on assets recognized prior to classification as held for sale are not reversed. If the net amount that the fair value of the disposal groups held for sale on the follow-up balance sheet date minus the sale costs increases, the previous written-down amount will be restored, and reversed to the asset impairment loss confirmed after the assets being classified as held-for-sale. The reversed amount will be included in the current profit or loss. The book value of deducted goodwill and the non-current assets applicable to the measurement of held-for-sale categories will not be reversed if the asset impairment loss is recognized before it is classified as held for sale. For the subsequent reversal amount of the asset impairment loss recognized by the disposal group held for sale, its book value shall be increased proportionately to the proportion of the book value of various non-current assets measured by the disposal group in addition to goodwill. (3) Accounting Methods for Ceasing to be classified as held-for-sale and Termination of Recognition When a non-current asset or disposal group ceases to be classified as held-for-sale or a non-current asset is removed out from the held-for-sale disposal group due to failure in meeting the classification conditions for the category of held-for-sale, it will be measured by one of the followings whichever is lower: ① The book value before being classified as held for sale will be adjusted according to the depreciation, amortization or impairment that would have been recognized under the assumption that it was not classified as held for sale; ② The recoverable amount. When terminating the recognition of non-current assets or disposal group held for sale, the unconfirmed gains or losses shall be recorded into the current profits and losses. 14. Long-term Equity Investment 1. Judgment of Joint Control and Significant Influences The term "joint control" refers to the joint control over an arrangement in accordance with the related agreements, which does not exist unless the participants sharing the control power agree with each other about the related arranged activity. The term "significant influences" refers to the power to participate in making decisions on the financial and operating policies of an enterprise, but not to control or do joint control together with other parties over the formulation of these policies. 2. Recognition of Investment Cost (1) If the business combination is under the common control and the acquirer obtains long-term equity investment in the consideration of cash, non-monetary asset exchange, bearing acquiree’s liabilities, or the issuance of equity securities, the initial cost is the carrying amount of the proportion of the acquiree’s owner’s equity at the acquisition date. The difference between the initial cost of the long-term equity investment and the carrying amount of the paid combination or the total amount of the issued shares should be adjusted to capital surplus. If the capital surplus is not sufficient for adjustment, retained earnings are adjusted respectively. When a long-term equity investment is formed from the business combination under common control through the Company’s multiple transactions step by step, the treatment shall be carried out based on whether the transactions constitute the “package deal”. If they do, the accounting treatment shall be carried out on the basis of assuming all transactions as one transaction with the acquisition of control. If they do not, the initial investment cost shall be the portion of the carrying value of acquiree’s net assets entitled in the consolidated financial statements of the final controller after the consolidation. The difference between the initial investment cost of the long-term equity investment on the combination date and the carrying value of the investment before the combination plus the 124 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 carrying value of the newly-paid consideration for the acquisition of the shares on the consolidation date shall be adjusted to capital reserve; if the capital reserve is insufficient for the adjustment, retained earnings should be adjusted accordingly. (2) For those formed from the business combination under different control, the initial investment cost is the fair value of the combination consideration paid on the acquisition date. When a long-term equity investment is formed from the business combination under different control through the Company’s multiple transactions step by step, the accounting treatment shall be carried out based on whether the financial statements are individual or consolidated: 1) In individual financial statements, the initial investment cost accounted in cost method is the sum of the book value of the equity investment originally held and the cost of new investment. 2) In consolidate financial statements, judge whether the transactions constitute the “package deal”. If they do, the accounting treatment shall be carried out on the basis of assuming all transactions as one transaction with the acquisition of control. If they do not, for the acquiree’s equity held before the acquisition date, re-measurement shall be carried out according to the fair value of the equity on the acquisition date and the difference between the fair value and the book value shall be recorded into current investment income; if the acquiree’s equity held before the acquisition date involves other comprehensive income accounted in equity method, other comprehensive income related to it shall be transferred into the income for the period in which the acquisition date falls, with the exception of the other comprehensive incomes occurred because of the changes of net liabilities or net assets of the defined benefit pension plans be re-measured for setting by the investees. 3) For those formed other than from business combination: If they are acquired in cash payment, the initial investment cost is the purchase price actually paid; if they are acquired in the issue of equity securities, the initial investment cost is the fair value of the issued equity securities; if they are acquired in debt restructuring, the initial investment cost shall be recognized according to the Accounting Standards for Enterprises No. 12 - Debt Restructuring; if they are acquired in the exchange of non-monetary assets, the initial investment shall be recognized according to the Accounting Standards for Enterprises No. 7 - Exchange of Non-Monetary Assets. 3. Method of subsequent measurement and recognition of profits and losses Long-term equity investment with control over investees shall be accounted in cost method; long-term equity investment on associated enterprises and joint ventures shall be accounted in equity method. 4. Method of treating the disposal of the investment in a subsidiary stem by step through multiple transactions until the loss of the controlling right (1) Individual financial statements For the disposed equity, the difference between its fair value and the actually obtained price shall be recorded into current profits or losses. For the residual equity, the part that still has significant effects on investees or with common control jointly with other parties shall be accounted in equity method; the part that has no more control, common control or significant effects on investees shall be recognized as financial assets and accounted in accordance with the relevant regulation of the Accounting Standards for Enterprises No. 22 - Recognition and Measurement of Financial Instruments. (2) Consolidated financial statements 125 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 1) For the disposal of the investment in subsidiaries step by step until the loss of the controlling right through multiple transactions, which do not constitute the “package deal” Before the loss of the controlling right, for the balance between the disposal remuneration and the shares of net assets in the subsidiaries that have been calculated since the acquisition date or combination date corresponding to the disposal of long-term equity investment, capital reserve (capital premium) shall be adjusted, and if the capital premium is not sufficient for the write-down, the retained earnings shall be written down. At the loss of the controlling right over the original subsidiaries, the residual equity shall be re-measured at its fair value on the date of losing the controlling right. The difference between the consideration obtained in the equity disposal, plus the fair value of the remaining equities, less the Company’s share of net assets enjoyed of the former subsidiary that has been calculated since the acquisition date or combination date according to the former shareholding ratio, shall be recorded into the investment gains for the period when the control ceases; meanwhile, goodwill shall be written down. Other comprehensive income related to former subsidiary's equity investment shall be transferred into current investment income when the control ceases. 2) For the disposal of the investment in subsidiaries step by step until the loss of the controlling right through multiple transactions, which constitute the “package deal” The accounting treatment shall be carried out on the basis of considering each transaction as a transaction of disposing the subsidiary and losing control. However, before losing control, the difference between each disposal price before losing the control, and the corresponding net assets share enjoyed of subsidiary when disposing long-term equity investment, shall be recognized as other comprehensive income in the consolidated financial statements and when the control ceases, transferred into current profits or losses of the period of losing control. 15. Investment Property Measurement mode of investment real estates Measurement of cost method Depreciation or amortization method 1. The term "investment real estate" includes the right to use any land which has already been rented, the right to use any land which is held and prepared for transfer after appreciation, and the right to use any building which has already been rented. 2. The Company initially measures the investment property according to the costs, and adopts the cost method in the subsequent measurement of investment property, and adopts the same methods with fixed assets and intangible assets to withdraw depreciation or amortization. 16. Fixed Assets (1) Recognized Standard of Fixed Assets The term "fixed assets" refers to the tangible assets that simultaneously possess the features as follows: they are held for the sake of producing commodities, rendering labor service, renting or business management; and their useful life is in excess of one fiscal year. No fixed asset may be recognized unless it simultaneously meets the conditions as follows: (1) The economic benefits are likely to flow into the enterprise; (2) The cost of the fixed 126 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 asset can be measured reliably. (2) Depreciation Method Expected net salvage Category Depreciation method Useful life Annual deprecation value Houses and buildings Straight-line depreciation 30-40 5% 2.375%-3.17% Machinery equipment Straight-line depreciation 10-25 5% 3.8%-9.5% Transportation Straight-line depreciation 5 5% 19% Electronic equipment and Straight-line depreciation 5-10 5% 9.5%-19% other (3) Recognition Basis and Pricing Method of Fixed Assets by Finance Lease Where one of the following provisions is regulated in the rental agreement, it shall be recognized as an asset acquired under finance leases: (1) the ownership of the leased asset is transferred to the lessee after the term of lease expires; (2) the lessee has the option to buy the asset at a price which is far lower than the fair value of the asset at the date when the option becomes exercisable; (3) the lease term covers the major part of the use life of the leased asset [usually accounting for 75%(75% inclusive) of the use life of the leased asset]; (4) in the case of the lessee, the present value of the minimum lease payments on the lease beginning date amounts to substantially all of the fair value of the leased asset [above 90% (90% inclusive)]; in the case of the lessor, the present value of the minimum lease payments on the lease beginning date amounts to substantially all of the fair value of the leased asset [above 90% (90% inclusive)] (5) When nature of the leased asset is special, if there is no great transform, only the Company can use it, As for the fixed assets by finance lease, the Company shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments as the entering value in an account, and make provision for depreciation according to the depreciation policy of self-owned fixed assets. 17. Construction in Progress Is the Company subject to any disclosure requirements for special industries? No. 1. No construction in progress may be recognized unless it simultaneously meets the conditions as follows: (1) The economic benefits are likely to flow into the enterprise; (2) The cost of the fixed asset can be measured reliably. Construction in progress shall be measured according to the occurred actual costs before the assets available for the intended use. 2. When the construction in progress is available for the intended use, it shall be transferred to fixed assets according to the actual cost of the project. For construction in progress available for the intended use but not dealing with final accounts of completed project, it shall be transferred to fixed assets according to the estimated value first, and then adjust original temporarily estimated value based on the actual costs after the final accounts of completed project, but not adjust the depreciation that was already calculated. 127 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 18. Borrowing Costs 1. Recognition Principle of Capitalization of Borrowing Costs Where the borrowing costs incurred to the Company can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses when it occurred, and shall be recorded into the current profits and losses. 2. Capitalization Period of Borrowings Costs (1) The borrowing costs shall not be capitalized unless they simultaneously meet the following requirements: 1) The asset disbursements have already incurred; 2) The borrowing costs have already incurred; 3) The acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started. (2) Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. The borrowing costs incurred during such period shall be recognized as expenses, and shall be recorded into the profits and losses of the current period, till the acquisition and construction or production of the asset restarts. (3) When the acquisition and construction or production of a qualified asset eligible for capitalization are available for its intended use or sale, the capitalization of borrowing costs shall be stopped. 3. Capitalized rate and amount of borrowing costs To the extent that funds are borrowed specifically for the purpose of acquiring or constructing a qualifying asset, the amount of borrowing costs eligible for capitalization on that asset is determined as the actual interest costs (including amortization of discount and premium confirmed according to effective interest method) incurred on that borrowing during the period less any investment income on the temporary investment of the borrowing. To the extent that funds are borrowed generally and used for the purpose of acquiring or constructing a qualifying asset, the amount of borrowing costs eligible for capitalization shall be determined by applying a capitalization rate to the weighted average of excess of accumulated expenditures on qualifying asset over that on specific purpose borrowing. 19. Biological Assets 20. Oil and Gas Assets 21. Intangible Assets (1) Pricing Method, Useful Life and Impairment Test 1. Intangible assets include right to use land sites, patent right and non-patented technology, and conduct the initial measurement according to the costs. 2. With regard to intangible assets with limited service life, it shall be amortized systematically and reasonably within their service life according to the expected implementation of economic interests related to the intangible assets. If it can’t recognize the expected implementation reliably, it shall be amortized by straight-line method. The specific useful lives are as follows: Items Useful life for amortization (years) Right to use land sites 50 128 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Non-patented technology 10 Software and others 2-10 The intangible assets with uncertain service life shall not be amortized, and the Company rechecks the service life of the intangible assets in every accounting period. (2) Accounting Policies of Internal R&D Expenses The expenses in research stage for its internal research and development projects shall be recorded into the current profits and losses when it occurred. The expenses in development stage for its internal research and development projects of the Company may be capitalized when they satisfy the following conditions simultaneously: (1) It is feasible technically to finish intangible assets for use or sale; (2) It is intended to finish and use or sell the intangible assets; (3) The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally; (4) It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources; and (5) The development expenditures of the intangible assets can be reliably measured. Standard for Classifying the Expenses of Research Phase and Development Phase of the Company’s R&D Projects The term “research” refers to the creative and planned investigation to acquire and understand new scientific or technological knowledge. The term "development" refers to the application of research achievements and other knowledge to a certain plan or design, prior to the commercial production or use, so as to produce any new material, device or product, or substantially improved material, device and product. The expenditures of R&D stage in internal R&D project, was recorded into current profits or losses. 22. Impairment of Long-term Assets For long-term assets, such as long-term equity investment, investment property measured by cost model, fixed assets, construction in progress, and intangible assets with limited service life, the Company shall estimate the recoverable amount if there are signs of impairment on balance sheet date. For intangible assets with uncertain goodwill or service life formed by enterprise combination, whether or not there is sign of impairment, impairment test shall be conducted every year. Goodwill combination and its related assets group or combination of assets group shall be conducted the impairment test. If the recoverable amount of the above-mentioned long-term assets is lower than its carrying value, it shall make the preparation for assets impairment based on its balance and be recorded into current profits and losses. 23. Long-term Unamortized Expenses Long-term deferred expenses refer to general expenses with the amortized period over one year (one year excluded) that have occurred. Long-term deferred expense shall be recorded into the account according to the actual accrual. Long-term deferred expense shall be amortized averagely within benefit period or specified period. In case of no benefit in the future accounting period, the amortized value of such project that fails to be amortized shall be transferred into the profits and losses of the current period. 129 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 24. Payroll (1) Accounting Treatment of Short-term Compensation During the accounting period when the employees providing the service for the Company, the actual short-term compensation shall be recognized as liabilities, and be recorded into the current profits and losses or related assets costs. (2) Accounting Treatment of the Welfare after Demission The Company's welfare after demission plans is divided into defined contribution plans and defined benefit plans (1) During the accounting period when the employee providing service for the Company, the amount paid in line with the setting drawing plan will be recognized as liabilities and recorded into current profits or losses or cost of relevant assets. (2) The accounting treatment of defined benefit plans usually consists of the following steps: 1) According to the expected cumulative welfare unit method, adopt unbiased and mutually consistent actuarial assumptions to evaluate related demographic variables and financial variables, measure the obligations generated from defined benefit plans and recognize the period in respect of related obligations. Meanwhile, discount the obligations generated from defined benefit plans to recognize their present value and the current service costs; 2) If there are any assets in a defined benefit plan, the deficit or surplus formed from the present value of the defined benefit plan obligations less the fair value of the defined benefit plan assets shall be recognized as net liabilities or net assets of a defined benefit plan. If there is any surplus in a defined benefit plan, the net assets of the plan shall be measured at the lower of the surplus or the upper asset limit; 3) At the end of the period, the staff remuneration costs generated from a defined benefit plan shall be recognized as services costs, net interests of the net liabilities or net assets of the plan and changes from the re-measurement of the net liabilities or net assets of the plan. Service costs and net interests of the net liabilities or net assets of the plan shall be recorded into the current profits or losses or related asset costs, while changes from the re-measurement of the net liabilities or net assets of the plan shall be recorded into other comprehensive income and shall not be transferred back to profits or losses in subsequent accounting periods. But the amounts recognized in other comprehensive income may be transferred within the equity scope. (3) Accounting Treatment of Demission Welfare When the Company is unable to unilaterally withdraw the plan on the cancellation of labor relationship or the layoff proposal, or when recognizing the costs or expenses (the earlier one between the two) related to the reorganization of paying the demission welfare, should recognize the payroll liabilities from the demission welfare and include in the current gains and losses. (4) Accounting Treatment of other Welfare of the Long-term Employees The Company provides the other long-term employee benefits for the employees, and for those met with the defined contribution plans, accounting treatment should be conducted according to the related regulations of the defined contribution plans; the for the others long-term employee benefits except for the former, accounting treatment should be conducted according to the related regulations of the defined benefit plans. In order to simplify the related accounting treatment, the payrolls shall be recognized as service costs, the net amount of interest of net 130 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 liabilities and net assets of other welfare of the long-term employees. The total net amounts made up from the changes of measuring the net liabilities and net assets of other welfare of the long-term employees again shall be recorded into the current profits and losses or related assets costs. 25. Accrued Liabilities 1. The obligation such as external guaranty, litigation or arbitration, product quality assurance, loss contract, pertinent to a contingencies shall be recognized as an estimated debts when the following conditions are satisfied simultaneously: ① That obligation is a current obligation of the enterprise; ② It is likely to cause any economic benefit to flow out of the enterprise as a result of performance of the obligation; and ③ The amount of the obligation can be measured in a reliable way. 2. The Company shall conduct the initial measurement to accrued liabilities according to the best estimate number needed for performing the related current obligation and recheck the carrying value of accrued liabilities on balance sheet date. 26. Share-based Payment 27. Other Financial Instruments such as Preferred Shares and Perpetual Capital Securities 28. Revenue Is the Company subject to any disclosure requirements for special industries? No. 1. Revenue Recognition Principle (1) Sale of goods No revenue from selling goods may be recognized unless the following conditions are met simultaneously: 1) The significant risks and rewards of ownership of the goods have been transferred to the buyer by the Company; 2)The Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; 3) The revenue amount could be reliably measured; 4) The relevant economic benefits may flow into the Company; and 5) the relevant cost which had occurred or will occur could be reliably measured. (2) Providing labor services If the provision of labor services can be reliably estimated (all the following conditions are met: ① The amount of income can be measured reliably; ②The relevant economic benefits are likely to inflow to the Company; ③ The progress of the transaction can be reliably determined; ④ The cost incurred and to be incurred in the transaction can be measured reliably), it shall recognize the revenue from providing services employing the percentage-of-completion method, and confirm the completion of labor service according to the costs incurred as a percentage of the total estimated costs. If the Company can’t, on the date of the balance sheet, reliably estimate the outcome of a transaction concerning the labor services it provides, it shall be handled under the following conditions: If the cost of labor services incurred is expected to be compensated, the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred, and the cost of labor services shall be carried forward at the same amount; If the cost of labor services incurred is not expected to compensate, the cost incurred should be included in the current profits and losses, and no revenue from the providing of labor services may be recognized. (3) Transferring the Right to Use Assets 131 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 The revenue of transferring the right to use assets may not be recognized unless the following conditions are both met: the relevant economic benefits are likely to inflow to the Company; and the revenue can be reliably measured. The interest income shall be recognized according to the time and actual interest rate in which other people use the Company’s monetary funds. Royalty revenue shall be recognized according to the chargeable time and method stipulated in related contracts and agreements. 2. Confirmation methods of sales revenues (1) Confirmation methods of domestic sales revenue Shall satisfy following conditions: products should be delivered according to customer’s requirements and signed by customers; amount of sales revenues is determined, received or respected to receive; sales slip should be invoiced; costs of sold products should be calculated; (2) Confirmation methods of export sales revenue Shall satisfy following conditions: products should be produced according to export sales agreement signed with customers, received export declaration and obtained bill of lading (waybill); amount of sales revenues is determined, received or respected to receive; sales slip should be invoiced; costs of sold products should be calculated. If the collection of the price as stipulated in the contract or agreement is delayed and if it has the financing nature, the revenue incurred by selling goods shall be ascertained in accordance with the fair value of the receivable price as stipulated in the contract or agreement. 29. Government Subsidies 1. If the government subsidies meet with the following conditions at the same, it should be recognized: (1) The entity will comply with the condition attaching to them; (2) The grants will be received from government. If a government subsidy is a monetary asset, it shall be measured according to the amount received or receivable. If a government subsidy is a non-monetary asset, it shall be measured at its fair value, and shall be measured at a nominal amount when the fair value cannot be obtained reliably. 2. Judgment basis and accounting methods of government subsidies related to assets The government subsidies that are acquired for construction or form long-term assets in other ways according to government documents shall be defined as asset-related government subsidies. For those not specified in government documents, the judgment shall be made based on the compulsory fundamental conditions for acquiring the subsidies. If the subsidies are acquired with construction or the formation of long-term assets in other ways as fundamental conditions, they shall be recognized as asset-related government subsidies. For asset-related government subsidies, the book value of related assets shall be written down or recognized as deferred income. If asset-related government subsidies are recognized as deferred income, it shall be recorded into profits or losses by period in a reasonable and systemic manner within the life of related assets. Government subsidies measured at the nominal amount shall be directly recorded into current profits or losses. If related assets are sold, transferred, disposed of or destroyed before the end of their life, the undistributed balance of related deferred income shall be transferred into the profits or losses for the period of the asset disposal. 3. Judgment basis and accounting treatment of profits-related government subsidies Government subsidies other than asset-related government subsidies shall be defined as profits-related government subsidies. For government subsidies consisting of both asset-related parts and profits-related parts, which is difficult to judge whether they are related to assets or profits, the entirety shall be classified as profits-related government subsidies. Profits-related government subsidies that are used to compensate the related future expenses or losses shall be recognized as deferred income and shall be included into the current 132 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 profit/losses or write down related costs during the period when the relevant expenses or losses are recognized; those subsidies used to compensate the related expenses or losses incurred shall be directly included into the current profits/losses or write down related costs. 4. Government subsidies related to the Company’s routine operating activities shall be included into other income or write down related costs according to the economic business nature. Government subsidies not related to the Company’s routine activities shall be included into non-operating income and expenditure. 30. Deferred Income Tax Assets/Deferred Income Tax Liabilities 1. In accordance with the balance (the item not recognized as assets and liabilities can confirm their tax bases according to the tax law, the balance between the tax bases and its carrying amount) between the carrying amount of assets or liabilities and their tax bases, deferred tax assets and deferred tax liabilities should be recognized at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. 2. A deferred tax asset shall be recognized within the limit of taxable income that is likely to be obtained to offset the deductible temporary differences. At the balance sheet date, where there is strong evidence showing that sufficient taxable profit will be available against which the deductible temporary difference can be utilized, the deferred tax asset unrecognized in prior period shall be recognized. 3. The Company assesses the carrying amount of deferred tax asset at the balance sheet date. If it’s probable that sufficient taxable profit will not be available against which the deductible temporary difference can be utilized, the Company shall write down the carrying amount of deferred tax asset, or reverse the amount written down later when it’s probable that sufficient taxable profit will be available. 4. The current income tax and deferred income tax of the Company are recorded into the current gains and losses as income tax expenses or revenue, except in the following circumstances: (1) Business combination (2) The transaction or event directly included in owner’ equity 31. Lease (1) Accounting Treatment of Operating Lease As a Lessee, the Company shall record the rent into relevant assets cost or recognize it as the current profit or loss on a straight-line basis over the lease term. The initial direct costs incurred shall be recognized as the current profit or loss; Contingent rents shall be charged into the current profit or loss when they are incurred. As a lessor, the Company shall recognize the rent as the current profit or loss on a straight-line basis over the lease term. Initial direct costs incurred by the lessor shall be directly recognized as the current profit or loss except that costs with larger amounts shall be capitalized and recorded into the current profit and loss by stages; Contingent rents shall be charged into the current profit or loss when they are incurred. (2) Accounting Treatments of Financial Lease For the lessee, a fixed asset acquired under finance lease shall be valued at the lower of the fair value of the leased asset and the present value of the minimum lease payments at the inception of lease. The minimum lease payments as the entering value in long-term account payable, the difference as unrecognized financing charges; the initial direct costs shall be directly recorded into leasing asset value. At each period during the lease term, the effective interest rate method shall be adopted to calculate and confirm the current financing charge. 133 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 On the initial date of financial lease, lessee of the financial lease shall record the sum of the minimum lease payments and initial direct costs as the financing lease accounts receivable, and also record the non-guaranteed residual value; recognize the difference between the total minimum lease payments, initial direct costs, non-guaranteed residual value and sum of the present value as the unrealized financing income; At each period during the lease term, the effective interest rate method shall be adopted to calculate and confirm the current financing income. 32. Other Significant Accounting Policies and Estimates 33. Changes in Main Accounting Policies and Estimates (1) Change of Accounting Policies √Applicable □ Not applicable Contents and reasons Procedures Remarks According to the adjust from the relevant requirements of Article 15 of CK[2018], Adjusting the format of financial statement the format of the financial statement was according to the relevant requirements of reviewed by the 2th Meeting of the 7th Article 15 of CK[2018] Board of Directors of 2019, with no need to be reviewed by General Meeting of Shareholders. Revising the relevant accounting criteria according to the relevant regulations of financial instruments newly issued by Revising the relevant accounting criteria Ministry of Finance, this revision was according to the regulations of new already reviewed by the 2th Meeting of the financial instrument 7th Board of Directors of 2019, with no need to be reviewed by General Meeting of Shareholders. 1) The Company prepared 2018 Financial Statements in accordance with the Notes of the Ministry of Finance on Revising and Printing the Format of 2018 General Enterprises Financial Statement (CK [2018] No. 15) and the interpretation of it and the requirements of the Accounting Standards for Enterprises. Retroactive adjustment was adopted for the changes in the accounting policy. The significantly affected items and amounts in 2017 Financial Statements are as follows: Item and amount in original financial statement Item and amount in new financial statement Notes receivable 430,699,664.45 1,160,829,887.51 Notes and accounts Accounts receivable 730,130,223.06 receivable Interest receivable 141,388.09 Other receivables 20,249,531.23 Other receivables 20,108,143.14 Notes payable 8,530,196.41 Notes and accounts 349,777,358.80 Accounts payable 341,247,162.39 payable 134 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Interest payable 7,865,380.83 Other payables 50,811,351.70 Dividends payable 12,116,789.76 Other payables 30,829,181.11 Administrative expense 125,476,808.28 120,342,343.74 Administrative expense 5,134,464.54 R&D expense Cash generated from other 66,763,328.29 Cash generated from 81,627,128.29 operating activities[Note] other operating activities Cash generated from other 735,773,715.83 Cash generated from 720,909,915.83 investing activities [Note] other investing activities [Note]: the presentation of actually received Government subsidy of RMB14,863,800.00 related to assets in cash flow statement shall be adjusted from “cash generated from other investing activities” to “cash generated from other operating activities”. 2) The Ministry of Finance in 2017 announced the Interpretation to the Accounting Standards for Enterprises No. 9 - Regarding the Accounting Treatment of Net Investment Losses under the Equity Method, Interpretation to the Accounting Standards for Enterprises No. 10 - Regarding the Depreciation Method Based on the Use of Incomes Generated from Fixed Assets, Interpretation to the Accounting Standards for Enterprises No. 11 - Regarding the Amortization Method Based on the Use of Incomes Generated from Intangible Assets and Interpretation to the Accounting Standards for Enterprises No. 12 - Regarding Whether the Provider and the Receiver of Key Management Personnel Service Are Related Parties. The Company has implemented the aforementioned interpretations to the accounting standards for enterprises since 1 January 2018 and the implementation does not have any effect on the opening financial data of the Company. (2) Changes in Accounting Estimates □ Applicable √ Not applicable 34. Other VI. Taxation 1. Main Taxes and Tax Rate Category of taxes Tax basis Tax rate VAT Sale of goods or rendering taxable services 5%, 6%, 10%, and 16% Urban maintenance and construction tax Turnover tax actually paid 7% and 5% Enterprise income tax Taxable income 25% and 15% For taxation according to price, it shall pay Property tax 1.2% and 12% 1.2% of the residual value of original 135 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 property value subtracting 30%; for taxation according to rent, it shall pay 12% of rental income Education surcharge Turnover tax actually paid 3% Local education surcharge Turnover tax actually paid 2% Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate Name Income tax rate The Company 25% Hongta Renheng 15% Zhuhai Huafeng 15% Golden Pheasant Chemical 15% Huaxin Color Printing 15% Zhejiang Hongta 25% 2. Tax Preference 1. According to the Notice on Issuing the First Name List of Proposed Hi-tech Enterprise in Guangdong Province for Y2018 published issued by Science & Technology Department of Guangdong Province, Hongta Renheng, the Company’s subsidiary, passed the reaffirmation of First Batch of Hi-tech Enterprise in Guangdong Province for Y2018, and gained Certificate for Hi-tech Enterprise. Hongta Renheng shall pay the corporate income tax according to the corporate income tax rate of 15%in 2018. 2. According to the First Name List of Proposed Hi-tech Enterprise in Guangdong Province for Y2016 published by the National Leading Group Office for the Management of High-tech Enterprises Recognition, Zhuhai Huafeng Paper, the Company’s subsidiary, passed the affirmation of First Batch of Proposed Hi-tech Enterprise in Guangdong Province for Y2016, and gained Certificate for Hi-tech Enterprise (Certificate No.: GR201644001293, with three years of validity). Thus Zhuhai Huafeng Paper shall pay the corporate income tax according to the corporate income tax rate of 15% in 2018. 3. According to the Notice on Issuing the Second Name List of Proposed Hi-tech Enterprise in Guangdong Province for Y2016 published by the National Leading Group Office for the Management of High-tech Enterprises Recognition, Golden Pheasant Chemical, the Company’s subsidiary, passed the reaffirmation of Hi-tech Enterprise, and gained Certificate for Hi-tech Enterprise (Certificate No.: GR201644004219, with three years of validity). Thus Golden Pheasant Chemical shall pay the corporate income tax according to the corporate income tax rate of 15% in 2018. 4. According to the Notice on Issuing the Second Name List of Proposed Hi-tech Enterprise in Guangdong Province for Y2018 jointly issued by Science & Technology Department of Guangdong Province, Department of Finance of Guangdong Province, Guangdong Provincial Office, SAT, Guangdong Local Taxation Bureau, the subsidiary of the Company Huaxin (Foshan) Color Printing, passed the reaffirmation of high-tech enterprise of 2018 and the gained the Certification of Hi-tech Enterprise. Thus Huaxin (Foshan) Color Printing shall pay the corporate income tax according to the corporate income tax rate of 15% in 2018. 136 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 3. Other VII. Notes to Major Items in the Consolidated Financial Statements of the Company 1. Monetary Funds Unit: RMB Item Ending balance Beginning balance Cash on hand 131,195.64 173,601.37 Bank deposits 127,881,489.59 254,078,310.38 Other monetary funds 5,971,254.50 33,400,956.90 Total 133,983,939.73 287,652,868.65 Other notes: The letter of guarantee of other monetary funds was RMB5,971,254.50 at the period-end. For those money whose usage was limited, the Company had already got rid of it from the balance of cash and of cash equivalents at the period-end when it prepared the cash flow statement. 2. Financial Assets at Fair Value through Profit or Loss Unit: RMB Item Ending balance Beginning balance Other notes: 3. Derivative Financial Assets □ Applicable √ Not applicable 4. Notes Receivable and Accounts Receivable Unit: RMB Item Ending balance Beginning balance Notes receivable 277,623,928.13 430,699,664.45 Accounts receivable 781,215,643.89 730,130,223.06 Total 1,058,839,572.02 1,160,829,887.51 (1)Notes Receivable 1) Notes Receivable Listed by Category Unit: RMB 137 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Item Ending balance Beginning balance Bank acceptance bill 271,186,964.94 428,945,798.73 Commercial acceptance bill 6,436,963.19 1,753,865.72 Total 277,623,928.13 430,699,664.45 2) Notes Receivable Pledged by the Company at the Period-end Unit: RMB Item Amount 3) Notes Receivable which Had Endorsed by the Company or had Discounted and had not Due on the Balance Sheet Date at the Period-end Unit: RMB Amount of recognition termination at the Amount of not terminated recognition at Item period-end the period-end Bank acceptance bill 1,415,305,636.24 Total 1,415,305,636.24 4) Notes Transferred to Accounts Receivable because Drawer of the Notes Failed to Execute the Contract or Agreement Unit: RMB Amount of the notes transferred to accounts receivable at the Item period-end Other notes The acceptors of bank acceptance bills are commercial banks. Since commercial banks have relatively high credit and bank acceptance bills are less likely to not be paid at maturity, the Company has confirmed the termination of bank acceptance bills which had endorsed or discounted. But the Company will still undertake joint liability for bearers pursuant to Law on Negotiable Instruments if those notes are not paid at maturity. (2)Accounts Receivable 1) Accounts Receivable Classified by Category Unit: RMB Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Category Withdra Carrying Carrying Proportio wal Proportio Withdrawal Amount Amount value Amount Amount value n proportio n proportion n Accounts receivable withdrawal of bad 785,225, 4,009,93 781,215,6 733,348 3,218,491 730,130,22 debt provision by 94.83% 0.51% 94.67% 0.44% 577.36 3.47 43.89 ,714.44 .38 3.06 credit risks characteristics 138 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Accounts receivable with insignificant single amount for 42,815,1 42,815,1 41,284, 41,284,52 5.17% 100.00% 5.33% 100.00% which bad debt 89.86 89.86 524.04 4.04 provision separately accrued 828,040, 46,825,1 781,215,6 774,633 44,503,01 730,130,22 Total 100.00% 5.65% 100.00% 5.75% 767.22 23.33 43.89 ,238.48 5.42 3.06 Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end: □ Applicable √ Not applicable Among these groups, accounts receivable adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Unit: RMB Ending balance Aging Accounts receivable Bad debt provision Withdrawal proportion Subentry within 1 year 1-3 months 714,159,083.62 4-12 months 65,543,693.32 3,277,184.67 5.00% Subtotal of within 1 year 779,702,776.94 3,277,184.67 0.42% 1 to 2 years 5,049,001.48 504,900.15 10.00% 2 to 3 years 30,169.41 6,033.88 20.00% Over 3 years 443,629.53 221,814.77 50.00% Total 785,225,577.36 4,009,933.47 0.51% Notes of the basis of recognizing the group: Among these groups, accounts receivable adopting balance percentage method to withdraw bad debt provision: □ Applicable √ Not applicable Among these groups, accounts receivable adopting other methods to withdraw bad debt provision: 2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB2,325,487.14; the amount of the reversed or collected part during the Reporting Period was of RMB0.00. Significant amount of reversed or recovered bad debt provision: Unit: RMB Name of the entity Amount Method 3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount Balance payment unrecoverable 3,379.23 Of which: significant actual verification of accounts receivable 139 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Unit: RMB Whether occurred because of Name of the entity Nature Amount Reason Procedure related-party transactions Notes of the verification of accounts receivable: The accounts receivable actually verified during the Reporting Period is RMB3379.23. (4) Top 5 of the Ending Balance of the Accounts Receivable Collected according to the Arrears Party Name of the entity Carrying amount Proportion to Bad debt provision balance of accounts receivable (%) No.1 35,888,170.76 4.33 613,705.20 No.2 32,448,953.80 3.92 No.3 27,367,696.63 3.31 No.4 25,304,474.36 3.06 No.5 24,583,778.51 2.97 697,859.26 Total 145,593,074.06 17.59 1,311,564.46 5) Derecogniziton of Accounts Receivable due to the Transfer of Financial Assets 6) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Accounts Receivable Other notes: 5. Prepayments (1) List by Aging Analysis Unit: RMB Ending balance Beginning balance Aging Amount Proportion Amount Proportion Within 1 year 94,869,167.00 82.61% 106,169,940.89 81.48% 1 to 2 years 532,773.51 0.46% 23,790,082.66 18.26% 2 to 3 years 19,115,822.08 16.64% Over 3 years 337,286.50 0.29% 337,286.50 0.26% Total 114,855,049.09 -- 130,297,310.05 -- Notes of the reasons of the prepayment ages over 1 year with significant amount but failed settled in time: (2) Top 5 of the Ending Balance of the Prepayments Collected according to the Prepayment Target Name of the entity Carrying amount Proportion to the balance of prepayments (%) 140 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 No.1 19,305,029.21 16.81 No.2 19,072,741.17 16.61 No.3 15,116,875.61 13.16 No.4 8,123,672.49 7.07 No.5 6,450,924.49 5.62 Total 68,069,242.97 59.27 Other notes: 6. Other Receivables Unit: RMB Item Ending balance Beginning balance Interest receivable 7,800,232.76 141,388.09 Other receivables 18,532,722.98 20,108,143.14 Total 26,332,955.74 20,249,531.23 (1) Interest Receivable 1) Category of Interest Receivable Unit: RMB Item Ending balance Beginning balance Fixed time deposits 7,800,232.76 141,388.09 Total 7,800,232.76 141,388.09 2) Significant Overdue Interest Unit: RMB Whether occurred Entity Ending balance Overdue time Overdue reason impairment and the judgment basis Other notes: (2) Dividends Receivable 1) Dividends Receivable Unit: RMB Item (or investees) Ending balance Beginning balance 2) Significant Dividends Receivable Aged over 1 Year Unit: RMB Whether occurred Item (or investees) Ending balance Aging Reason impairment and the 141 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 judgment basis Other notes: (3) Other Receivables 1) Other Receivables Classified by Category Unit: RMB Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Category Withdra Carrying Carrying Proportio wal Proportio Withdrawal Amount Amount value Amount Amount value n proportio n proportion n Other receivables with significant single amount for 19,188,9 19,188,9 18,582, 18,582,48 42.27% 100.00% 40.04% 100.00% which bad debt 43.82 43.82 481.20 1.20 provision separately accrued Other receivables withdrawn bad debt 20,020,8 1,488,16 18,532,72 21,621, 1,513,213 20,108,143. provision according 44.11% 7.43% 46.60% 7.00% 89.73 6.75 2.98 356.32 .18 14 to credit risks characteristics Other receivables with insignificant single amount for 6,180,87 6,180,87 6,198,5 6,198,529 13.62% 100.00% 13.36% 100.00% which bad debt 8.67 8.67 29.18 .18 provision separately accrued 45,390,7 26,857,9 18,532,72 46,402, 26,294,22 20,108,143. Total 100.00% 59.17% 100.00% 56.67% 12.22 89.24 2.98 366.70 3.56 14 Other receivables with significant single amount for which bad debt provision separately accrued at the period-end √ Applicable □ Not applicable Unit: RMB Other receivables (by Ending balance unit) Other receivables Bad debt provision Withdrawal proportion Withdrawal reason Hong Kong Hang Fung Holdings Limited Co., 13,188,943.82 13,188,943.82 100.00% Irrecoverable expected Ltd. 142 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Zhuhai Yidesheng 6,000,000.00 6,000,000.00 100.00% Irrecoverable expected Industrial Co., Ltd. Total 19,188,943.82 19,188,943.82 -- -- Among these groups, other receivables adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Unit: RMB Ending balance Aging Other receivables Bad debt provision Withdrawal proportion Subentry within 1 year 1-3 months 5,805,855.78 4-12 months 2,232,010.13 111,600.51 5.00% Subtotal of within 1 year 8,037,865.91 111,600.51 1.39% 1 to 2 years 11,132,387.07 1,113,238.70 10.00% 2 to 3 years 539,969.43 107,993.89 20.00% Over 3 years 310,667.32 155,333.65 50.00% Total 20,020,889.73 1,488,166.75 7.43% Notes: Among these groups, other receivables adopting balance percentage method to withdraw bad debt provision: □ Applicable √ Not applicable Among these groups, other receivables adopting other methods to withdraw bad debt provision: □ Applicable √ Not applicable 2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB563,765.68; the amount of the reversed or collected part during the Reporting Period was of RMB0.00. Significant amount of reversed or recovered bad debt provision during the Reporting Period: Unit: RMB Name of the entity Reversed or collected amount Method 3) Particulars of the Actual Verification of Other Receivables during the Reporting Period Unit: RMB Item Amount Of which: significant actual verification of other receivables: Unit: RMB Whether occurred because of Name of the entity Nature Amount Reason Procedure related-party transactions Notes of verification of other receivables: 143 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 4) Other Receivables Classified by Account Nature Unit: RMB Nature Ending carrying amount Beginning carrying amount Margin 4,769,090.02 5,129,666.50 Pretty cash 393,469.10 1,563,520.43 Freight and miscellaneous charges on 384,229.74 3,088,597.59 behalf Compensation for victim’s families on 9,760,000.00 9,760,000.00 behalf Other intercourse funds 30,083,923.36 26,860,582.18 Total 45,390,712.22 46,402,366.70 (5) Top 5 of the Ending Balance of the Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to ending Ending balance of Name of the entity Nature Ending balance Aging balance of other bad debt provision receivables% No.1 Other intercourse 13,188,943.82 Over 3 years 29.06% 13,188,943.82 funds No.2 Payment of compensation on 9,760,000.00 1 to 2 years 21.50% 976,000.00 behalf No.3 Borrowings 6,000,000.00 Over 3 years 13.22% 6,000,000.00 No.4 Margin and cash 2,131,423.52 1 to 3 months 4.70% pledge No.5 Borrowings 2,000,000.00 Over 3 years 4.41% 2,000,000.00 Total -- 33,080,367.34 -- 72.89% 22,164,943.82 6) Accounts Receivable Involving Government Subsidies Unit: RMB Project of government Estimated recovering Name of the entity Ending balance Aging at period-end subsidies time, amount and basis 7) Derecogniziton of Other Receivables due to the Transfer of Financial Assets 8) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Other Receivables Other notes: 7. Inventories Whether the Company need satisfy relevant disclosure requirements governing the real estate industry No 144 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (1) Category of Inventories Unit: RMB Ending balance Beginning balance Item Falling price Falling price Carrying amount Carrying value Carrying amount Carrying value reserves reserves Raw materials 467,532,479.83 4,480,886.67 463,051,593.16 307,249,280.55 4,405,881.46 302,843,399.09 Goods in process 44,261,927.39 44,261,927.39 37,051,626.77 37,051,626.77 Inventory goods 425,642,397.59 17,513,957.49 408,128,440.10 226,189,790.49 6,490,549.35 219,699,241.14 Merchandise 110,747,269.74 4,021,856.88 106,725,412.86 26,585,081.11 26,585,081.11 shipped Total 1,048,184,074.55 26,016,701.04 1,022,167,373.51 597,075,778.92 10,896,430.81 586,179,348.11 Whether the Company need satisfy relevant disclosure requirements stated in SZSE Industrial Information Disclosure Guidance No.4---Listed Company Specialized in Seed Industry and Planting Businesses or not? No Whether the Company need satisfy relevant disclosure requirements stated in SZSE Industrial Information Disclosure Guidance No.11-Listed Company Specialized in Jewelry-related Business or not? No (2) Falling Price Reserves of Inventories Unit: RMB Increase Decrease Beginning Item Reverse or Ending balance balance Withdrawal Other Other write-off Raw materials 4,405,881.46 123,116.16 48,110.95 4,480,886.67 Inventory goods 6,490,549.35 11,720,215.62 696,807.48 17,513,957.49 Merchandise 4,021,856.88 4,021,856.88 shipped Total 10,896,430.81 15,865,188.66 744,918.43 26,016,701.04 (3) Notes to the Ending Balance of Inventories Including Capitalized Borrowing Expense (4) Completed but Unsettled Assets Generated from Construction Contacts at the Period-end Unit: RMB Item Amount Other notes: 145 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 8. Held-for-sale Assets Unit: RMB Estimated disposal Item Ending carrying value Fair value Estimated disposal time expense Other notes: 9. Current Portion of Non-current Assets Unit: RMB Item Ending balance Beginning balance Other notes: 10. Other Current Assets Unit: RMB Item Ending balance Beginning balance The VAT deduction 19,509,101.68 22,185,700.04 Structured Deposits 317,200,000.00 1,000,000.00 Prepaid expense 1,598,646.30 Advance Payment of corporate income tax 4,101.47 13,826.63 Damaged property to be disposed for 20,961,100.36 typhoon Total 338,311,849.45 44,160,627.03 Other notes: 11. Available-for-sale Financial Assets (1) List of Available-for-sale Financial Assets Unit: RMB Ending balance Beginning balance Item Carrying Depreciation Carrying Depreciation Carrying value Carrying value amount reserves amount reserves Available-for-sale equity 288,700.00 288,700.00 627,643,841.04 627,643,841.04 instruments: Measured at cost 288,700.00 288,700.00 627,643,841.04 627,643,841.04 Total 288,700.00 288,700.00 627,643,841.04 627,643,841.04 146 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (2) Available-for-sale Financial Assets Measured by Fair Value at the Period-end Unit: RMB Available-for-sale equity Available-for-sale debt Category Total instruments instruments (3) Available-for-sale Financial Assets Measured by Cost at the Period-end Unit: RMB Carrying amount Depreciation reserves Shareholdi Cash ng bonus of Investee Period-beg Period-beg proportion the Increase Decrease Period-end Increase Decrease Period-end inning inning among the Reporting investees Period China Guangfa 288,700.00 288,700.00 0.00% Bank Co., Ltd. China Chengtong 627,355,14 627,355,14 10,000,000 Finance 1.04 1.04 .00 Corporatio n Ltd. 627,643,84 627,355,14 10,000,000 Total 288,700.00 -- 1.04 1.04 .00 (4) Changes in Depreciation of Available-for-sale Financial Assets during the Reporting Period Unit: RMB Available-for-sale equity Available-for-sale debt Category Total instruments instruments (5) Notes to the Available-for-sale Equity Instrument with Serious Fall or Non-transient Fall in Ending Fair Value but without Provisions for Impairment Unit: RMB Item of Falling scope of Withdrawn Reason for not available-for-sale Duration of Investment cost Ending fair value fair value against impairment withdrawing the equity falling (month) the cost amount impairment instruments Other notes 147 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 12. Held-to-maturity Investments (1) List of Held-to-maturity Investments Unit: RMB Ending balance Beginning balance Item Depreciation Depreciation Carrying amount Carrying value Carrying amount Carrying value reserves reserves (2) Significant Held-to-maturity Investments at the Period-end Unit: RMB Item Par value Coupon rate Actual interest rate Due date (3) Re-classified Held-to-maturity Investments during the Reporting Period Other notes 13. Long-term Receivables (1) List of Long-term Receivables Unit: RMB Ending balance Beginning balance Interval of Item Carrying Bad debt Carrying Bad debt Carrying value Carrying value discount rate amount provision amount provision (2) Derecogniziton of Long-term Receivables due to the Transfer of Financial Assets (3) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Long-term Receivables Other notes 14. Long-term Equity Investments Unit: RMB Increase/decrease Ending Additiona Gains and Adjustme Cash Withdraw balance Beginnin Reduced Changes Ending Investees l losses nt of bonus or al of of g balance investmen of other Other balance investmen recognize other profits depreciati depreciati t equity t d under comprehe announce on on 148 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 the equity nsive d to issue reserves reserves method income I. Joint ventures II. Associated enterprises Guangdo ng Chengton 8,294,365 521,602.6 245,728.0 8,570,239 g .17 9 0 .86 Logistics Co., Ltd. China Chengton 5,103,538 648,916,3 654,019,9 g Finance .56 79.58 18.14 Corporati on Ltd. 8,294,365 5,625,141 245,728.0 648,916,3 662,590,1 Subtotal .17 .25 0 79.58 58.00 8,294,365 5,625,141 245,728.0 648,916,3 662,590,1 Total .17 .25 0 79.58 58.00 Other notes In accordance with the Proposal on Electing Ding Guoqiang as the Director of China Chengtong Finance Corporation Ltd. approved on the 1st Extraordinary General Meeting of 2018 held by China Chengtong Finance Corporation Ltd. in 2018, Mr. Ding Guoqiang, the CFO of the Company, acquired the qualification for directors in China Chengtong Finance Corporation Ltd. and will take office from the date of approval of qualification for directors by Beijing China Banking Regulatory Commission. In line with the Reply on the Approval of Ding Guoqiang’s Qualification for Directors in China Chengtong Finance Corporation Ltd. by Beijing China Banking Regulatory Commission (JYJF[2018]No.531) issued by Beijing office of China Banking Regulatory Commission, Mr. Ding Guoqiang acquired the qualification for directors in China Chengtong Finance Corporation Ltd. on 24 October 2018. The Company delegates one director to go to China Chengtong Finance Corporation Ltd. who has the right to participate in the decision-making for the Finance and operation policies of China Chengtong Finance Corporation Ltd. The Company has significant influence on the latter. Thus, the investment to the latter by the Company was transferred to long-term equity investment calculated by equity method from available-for-sale financial assets. 15. Investment Property (1) Investment Property Adopting the Cost Measurement Mode √ Applicable □ Not applicable Unit: RMB Item Houses and buildings Land use right Construction in progress Total 149 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 I. Original carrying value 1. Beginning balance 46,506,036.02 46,506,036.02 2. Increased amount of 35,171.57 35,171.57 the period (1) Outsourcing (2) Transfer from inventories\fixed 35,171.57 35,171.57 assets\construction in progress (3) Enterprise combination increase 3. Decreased amount of the period (1) Disposal (2) Other transfer 4. Ending balance 46,541,207.59 46,541,207.59 II. Accumulative depreciation and accumulative amortization 1. Beginning balance 14,413,679.73 14,413,679.73 2. Increased amount of 1,363,844.13 1,363,844.13 the period (1) Withdrawal or 1,363,844.13 1,363,844.13 amortization 3. Decreased amount of the period (1) Disposal (2) Other transfer 4. Ending balance 15,777,523.86 15,777,523.86 III. Depreciation reserves 1. Beginning balance 2. Increased amount of 150 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal (2) Other transfer 4. Ending balance IV. Carrying value 1. Ending carrying 30,763,683.73 30,763,683.73 value 2. Beginning carrying 32,092,356.29 32,092,356.29 value (2) Investment Property Adopting the Fair Value Measurement Mode □ Applicable √ Not applicable (3) Investment Property Failed to Accomplish Certification of Property Unit: RMB Item Carrying value Reason Other notes 16. Fixed Assets Unit: RMB Item Ending balance Beginning balance Fixed assets 2,178,817,683.33 2,302,301,389.40 Total 2,178,817,683.33 2,302,301,389.40 (1) List of Fixed Assets Unit: RMB Machinery Transportation Electronic Houses and Item equipment equipment and Total buildings others I. Original carrying 151 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 value 1. Beginning 1,158,249,569.78 2,825,912,365.48 44,645,338.25 134,213,664.23 4,163,020,937.74 balance 2. Increased 2,228,359.83 21,231,929.66 2,414,272.98 8,467,200.95 34,341,763.42 amount of the period (1) Purchase 2,228,359.83 10,858,214.92 2,128,461.02 4,191,205.14 19,406,240.91 (2) Transfer from construction in 10,373,714.74 285,811.96 4,275,995.81 14,935,522.51 progress (3) Enterprise combination increase 3. Decreased 1,234,794.05 2,693,142.02 2,840,997.28 2,152,683.84 8,921,617.19 amount of the period (1) Disposal or 1,199,622.48 2,693,142.02 2,840,997.28 2,152,683.84 8,886,445.62 Scrap (2) Other 35,171.57 35,171.57 decrease 4. Ending balance 1,159,243,135.56 2,844,451,153.12 44,218,613.95 140,528,181.34 4,188,441,083.97 II. Accumulative depreciation 1. Beginning 400,525,039.42 1,247,659,071.06 38,150,002.83 97,705,678.03 1,784,039,791.34 balance 2. Increased 33,820,250.86 111,086,567.27 2,026,086.82 8,956,184.21 155,889,089.16 amount of the period (1) Withdrawal 33,820,250.86 111,086,567.27 2,026,086.82 8,956,184.21 155,889,089.16 3. Decreased 1,053,727.14 1,754,849.20 2,115,636.89 2,061,023.63 6,985,236.86 amount of the period (1) Disposal or 1,053,727.14 1,754,849.20 2,115,636.89 2,061,023.63 6,985,236.86 Scrap (2) Other decrease 4. Ending balance 433,291,563.14 1,356,990,789.13 38,060,452.76 104,600,838.61 1,932,943,643.64 III. Depreciation reserves 1. Beginning 76,679,757.00 76,679,757.00 balance 152 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal or Scrap 4. Ending balance 76,679,757.00 76,679,757.00 IV. Carrying value 1. Ending carrying 725,951,572.42 1,410,780,606.99 6,158,161.19 35,927,342.73 2,178,817,683.33 value 2. Beginning 757,724,530.36 1,501,573,537.42 6,495,335.42 36,507,986.20 2,302,301,389.40 carrying value (2) List of Temporarily Idle Fixed Assets Unit: RMB Original carrying Accumulative Depreciation Item Carrying value Note value depreciation reserves (3) Fixed Assets Leased in by Financing Lease Unit: RMB Accumulative Item Original carrying value Depreciation reserves Carrying value depreciation Houses and buildings 12,212,610.00 11,601,979.50 610,630.50 Machinery equipment 3,160,000.00 3,002,000.00 158,000.00 Total 15,372,610.00 14,603,979.50 768,630.50 (4) Fixed Assets Leased out by Operation Lease Unit: RMB Item Ending carrying value (5) Fixed Assets Failed to Accomplish Certification of Property Unit: RMB 153 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Item Carrying value Reason Property right certificate was under Houses and buildings 99,135,653.46 process Total 99,135,653.46 Other notes (6) Proceeds from Disposal of Fixed Assets Unit: RMB Item Ending balance Beginning balance Other notes 17. Construction in Progress Unit: RMB Item Ending balance Beginning balance Construction in progress 38,735,958.38 39,315,774.19 Total 38,735,958.38 39,315,774.19 (1) List of Construction in Progress Unit: RMB Ending balance Beginning balance Item Depreciation Depreciation Carrying amount Carrying value Carrying amount Carrying value reserves reserves Latex phase II matching raw 17,151,537.73 17,151,537.73 15,918,047.55 15,918,047.55 material tank farm project Treatment system for industrial 1,556,896.56 1,556,896.56 waste gas Internal and external antiseptic 1,943,205.00 1,943,205.00 treatment for the 120-meter chimney BM3 Tetra 6,338,209.24 6,338,209.24 5,168,440.11 5,168,440.11 project 154 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Renovation project on the control system of 1,444,396.61 1,444,396.61 BM3 paper machines Advanced waste-water treatment and 2,477,929.63 2,477,929.63 2,431,959.91 2,431,959.91 water reuse project BM2 Self-made Sizing Starch 1,978,479.72 1,978,479.72 74,308.06 74,308.06 System Renovation project on BM3 56,813.64 56,813.64 1,302,234.23 1,302,234.23 Broke Pulper BM3 Reel alternation of hydro-acupunctur 1,967,411.17 1,967,411.17 e renovation project BM3 coating draught fan energy saving 1,070,085.47 1,070,085.47 renovation project Equipment in 5,047,332.75 5,047,332.75 process Other 5,788,490.25 5,788,490.25 6,335,954.94 6,335,954.94 Total 38,735,958.38 38,735,958.38 39,315,774.19 39,315,774.19 (2) Changes in Significant Construction in Progress during the Reporting Period Unit: RMB Proporti Accumul Of Capitaliz on of ated which: ation rate Transferr Beginnin Other accumul amount amount of Increase ed in Ending Job Capital Item Budget g decrease ated of of interests d amount fixed balance schedule resources balance d amount investme interest capitaliz for the assets nt in capitaliz ed Reportin construct ation interests g Period 155 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 ions to for the budget Reportin g Period BM3 18,730,0 5,168,44 1,169,76 6,338,20 Tetra 33.84% 33 Other 00.00 0.11 9.13 9.24 project Latex phase II matching raw 20,000,0 15,918,0 1,233,49 17,151,5 85.76% 85 Other material 00.00 47.55 0.18 37.73 tank farm project Treatme nt system for industria l waste gas of Guangzh ou 6,020,00 1,556,89 1,556,89 25.86% 25 Other Tongshe 0.00 6.56 6.56 ng Environ mental Protectio n Technolo gy Co., Ltd. Internal and external antisepti c 3,500,00 1,943,20 1,943,20 55.52% 55 Other treatmen 0.00 5.00 5.00 t for the 120-met er chimney Advance 18,000,0 2,431,95 45,969.7 2,477,92 13.77% 13 Other 156 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 d 00.00 9.91 2 9.63 waste-w ater treatmen t and water reuse project BM3 Reel alternati on of hydro-ac 2,000,00 1,967,41 16,808.2 1,984,21 99.21% 100 Other upunctur 0.00 1.17 4 9.41 e renovati on project Renovati on project on the control 2,000,00 1,444,39 1,444,39 72.22% 70 Other system 0.00 6.61 6.61 of BM3 paper machine s BM3 coating draught fan 1,300,00 1,070,08 1,070,08 energy 82.31% 100 Other 0.00 5.47 5.47 saving renovati on project Renovati on 1,370,00 1,138,43 1,138,43 project 100.00% 100 Other 0.00 8.44 8.44 of BM1 QCS BM2 2,900,00 74,308.0 1,904,17 1,978,47 68.22% 68 Other 157 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Self-mad 0.00 6 1.66 9.72 e Sizing Starch System Renovati on project 3,500,00 1,302,23 71,570.0 1,316,99 56,813.6 100.00% 100 Other on BM3 0.00 4.23 0 0.59 4 Broke Pulper Equipme 5,047,33 2,009,76 7,057,10 nt in Other 2.75 9.04 1.79 process 6,335,95 1,821,22 2,368,68 5,788,49 Other Other 4.94 2.12 6.81 0.25 79,320,0 39,315,7 14,355,7 14,935,5 38,735,9 Total -- -- -- 00.00 74.19 06.70 22.51 58.38 (3) List of the Withdrawal of the Depreciation Reserves for Construction in Progress Unit: RMB Item Amount withdrawn Reason for withdrawal Other notes (4) Engineering Materials Unit: RMB Ending balance Beginning balance Item Depreciation Carrying Depreciation Carrying amount Carrying value Carrying value reserves amount reserves Other notes: 18. Productive Living Assets (1) Productive Living Assets Adopting Cost Measurement Mode □ Applicable √ Not applicable (2) Productive Living Assets Adopting Fair Value Measurement Mode □ Applicable √ Not applicable 158 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 19. Oil and Gas Assets □ Applicable √ Not applicable 20. Intangible Assets (1) List of Intangible Assets Unit: RMB Item Land use right Patent right Non-patent right Software and other Total I. Original carrying value 1. Beginning 146,970,093.89 56,822,865.97 8,653,219.40 212,446,179.26 balance 2. Increased 9,053,412.40 6,053,220.75 15,106,633.15 amount of the period (1) Purchase 2,679,066.14 2,679,066.14 (2) Internal 9,053,412.40 9,053,412.40 R&D (3) Business combination increase (4) Transfer from construction in 3,374,154.61 3,374,154.61 progress 3. Decreased 14,532,760.00 14,532,760.00 amount of the period (1) Disposal 14,532,760.00 14,532,760.00 4. Ending balance 132,437,333.89 65,876,278.37 14,706,440.15 213,020,052.41 II. Accumulated amortization 1. Beginning 49,595,308.00 19,221,477.69 3,912,178.35 72,728,964.04 balance 2. Increased 2,798,699.44 5,176,198.90 1,109,388.10 9,084,286.44 amount of the period (1) Withdrawal 2,798,699.44 5,176,198.90 1,109,388.10 9,084,286.44 3. Decreased 700,458.83 700,458.83 amount of the period 159 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (1) Disposal 700,458.83 700,458.83 4. Ending balance 51,693,548.61 24,397,676.59 5,021,566.45 81,112,791.65 III. Depreciation reserves 1. Beginning balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal 4. Ending balance IV. Carrying value 1. Ending carrying 80,743,785.28 41,478,601.78 9,684,873.70 131,907,260.76 value 2. Beginning 97,374,785.89 37,601,388.28 4,741,041.05 139,717,215.22 carrying value The proportion of intangible assets formed from the internal R&D of the Company at the Period-end to the ending balance of intangible assets was 30.92%. (2) Land Use Right with Certificate of Title Uncompleted Unit: RMB Item Carrying value Reason Other notes: 21. R&D Expense Unit: RMB Beginning Ending Item Increase Decrease balance balance SBS coated (combined) 1,809,893.80 1,809,893.80 ivory board (coated with 160 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 copper) Craft board 2,733,903.09 2,733,903.09 High barrier 3,020,246.66 3,020,246.66 board R&D of tobacco stem 2,799,715.49 2,799,715.49 board R&D of environmenta l protection 1,489,368.85 1,489,368.85 food packaging board R&D of special 546,784.41 546,784.41 testing carton base paper Special food packaging 4,405,940.07 4,405,940.07 board with natural color 16,805,852.3 Total 9,053,412.40 7,752,439.97 7 Other notes 22. Goodwill (1) Original Carrying Value of Goodwill Unit: RMB Name of the invested units or Beginning Increase Decrease Ending balance events generating balance goodwill Zhuhai S.E.Z. Hongta Renheng 9,129,025.01 9,129,025.01 Paper Co., Ltd. Zhuhai Golden Pheasant 2,418,280.28 2,418,280.28 Chemicals Co., Ltd. 161 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Total 11,547,305.29 11,547,305.29 (2) Depreciation Reserves of Goodwill Unit: RMB Name of the invested units or Beginning Increase Decrease Ending balance events generating balance goodwill Zhuhai S.E.Z. Hongta Renheng 0.00 0.00 Paper Co., Ltd. Zhuhai Golden Pheasant 0.00 0.00 Chemicals Co., Ltd. Total 0.00 0.00 Information on the assets group or combination of assets groups which goodwill belongs to Notes of the testing process of goodwill impairment, parameters (such as growth rate of the forecast period, growth rate of stable period, rate of profit, discount rate, forecast period and so on for prediction of future present value of cash flows) and the recognition method of goodwill impairment losses: The testing process, method and conclusion of goodwill impairment The recoverable amount of goodwill is calculated based on the present value of the estimated future cash flow. The cash flow is estimated based on the 5-year cash flow forecast approved by the Company. The discount rate used for cash flow forecast is 4.75%. The cash flow after the forecast period was speculated based on the growth rate of 5% which is comparable to the overall long-term average growth rate of the paper industry. Other key data in the impairment test include: predicted selling price of products, sales volume, production cost and other related expenses. The Company confirmed the above-mentioned key data against its historical experience and the forecast of market development. The discount rate adopted by the Company is the pre-tax rate that reflects the current market currency time value and the specific risks of the relevant asset group. The above estimation of the recoverable amount indicates that there is no impairment loss on goodwill. Influence of goodwill impairment testing Other notes 23. Long-term Prepaid Expense Unit: RMB Amortization Other decreased Item Beginning balance Increased amount Ending balance amount of the period amount 162 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Decoration expense 213,321.10 44,909.71 168,411.39 for rent-in plant Fee for technical 232,806.84 87,302.64 145,504.20 service Maintaining renovation of 2,810,762.23 2,834,671.33 1,203,842.97 4,441,590.59 construction project Total 3,256,890.17 2,834,671.33 1,336,055.32 4,755,506.18 Other notes 24. Deferred Income Tax Assets/Deferred Income Tax Liabilities (1) Deferred Income Tax Assets that Had not Been Set-off Unit: RMB Ending balance Beginning balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference assets difference assets Provision for impairment 176,170,867.67 26,425,630.18 144,093,941.83 21,629,140.63 of assets Unrealized profit of 9,851,070.07 1,477,660.51 internal transactions Accrued expenses 24,307,031.93 3,646,054.79 37,374,843.28 5,606,226.49 Net amount of change in fair value of trading 2,394,879.25 359,231.89 financial liabilities Total 210,328,969.67 31,549,345.48 183,863,664.36 27,594,599.01 (2) Deferred Income Tax Liabilities Had Not Been Off-set Unit: RMB Ending balance Beginning balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference liabilities difference liabilities Assets evaluation appreciation in the 14,212,900.20 2,131,935.03 14,923,964.07 2,238,594.61 business combination not under the same control Total 14,212,900.20 2,131,935.03 14,923,964.07 2,238,594.61 163 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (3) Deferred Income Tax Assets or Liabilities Listed by Net Amount after Off-set Unit: RMB Mutual set-off amount of Ending balance of Mutual set-off amount of Beginning balance of deferred income tax deferred income tax deferred income tax deferred income tax Item assets and liabilities at assets or liabilities after assets and liabilities at assets or liabilities after the period-end off-set the period-begin off-set Deferred income tax 31,549,345.48 27,594,599.01 assets Deferred income tax 2,131,935.03 2,238,594.61 liabilities (4) List of Unrecognized Deferred Income Tax Assets Unit: RMB Item Ending balance Beginning balance Deductible losses 199,990,599.74 67,269,298.96 Provision for impairment of assets 208,702.94 201,333.37 Total 200,199,302.68 67,470,632.33 (5) Deductible Losses of Unrecognized Deferred Income Tax Assets will Due in the Following Years Unit: RMB Years Ending amount Beginning amount Notes Y2019 Y2020 72,934,938.44 49,162,723.17 Y2021 1,734,170.90 1,734,170.90 Y2022 9,996,774.57 3,166,186.95 Y2023 115,324,715.83 Total 199,990,599.74 54,063,081.02 -- Other notes: 25. Other Non-current Assets Unit: RMB Item Ending balance Beginning balance Prepayment of equipment 1,495,963.49 5,235,044.33 Total 1,495,963.49 5,235,044.33 Other notes: 164 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 26. Short-term Borrowings (1) Category of Short-term Borrowings Unit: RMB Item Ending balance Beginning balance Pledge borrowings 199,095,460.59 Guaranteed borrowings 662,776,823.86 698,330,783.93 Credit borrowings 200,000,000.00 Total 862,776,823.86 897,426,244.52 Notes of short-term borrowings category: (2) List of the Short-term Borrowings Overdue but Not Returned The amount of the overdue unpaid short-term borrowings at the period-end was of RMB0.00, of which the significant overdue unpaid short-term borrowings are as follows: Unit: RMB Borrower Ending balance Interest rate Overdue time Overdue charge rate Other notes: 27. Financial Liabilities at Fair Value through Profit or Loss Unit: RMB Item Ending balance Beginning balance Specified as financial liabilities at fair 2,394,879.25 value through profit or loss Total 2,394,879.25 Other notes: 28. Derivative Financial Liabilities □ Applicable √ Not applicable 29. Notes Payable and Accounts Payable Unit: RMB Item Ending balance Beginning balance Notes payable 310,600,000.00 8,530,196.41 Accounts payable 464,643,787.56 341,247,162.39 Total 775,243,787.56 349,777,358.80 165 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (1) Notes Payable Listed by Category Unit: RMB Category Ending balance Beginning balance Bank’s acceptance bill 310,600,000.00 8,530,196.41 Total 310,600,000.00 8,530,196.41 The total amount of the due but not paid notes payable at the end of the period was of RMB0.00. (2) List of Accounts Payable Unit: RMB Item Ending balance Beginning balance Payment of materials 375,399,151.20 257,450,045.60 Payment of equipment 6,104,986.59 9,163,006.20 Payment of freight 42,626,350.09 53,544,546.45 Other 40,513,299.68 21,089,564.14 Total 464,643,787.56 341,247,162.39 (3) Significant Accounts Payable Aging over One Year Unit: RMB Item Ending balance Unpaid/ Un-carry-over reason Other notes: 30. Advances from Customers (1) List of Advances from Customers Unit: RMB Item Ending balance Beginning balance Within 1 year 32,561,871.59 21,099,280.81 1-2 years 236,602.58 185,873.32 2-3 years 103,015.37 239,511.43 Over 3 years 530,099.25 245,079.52 Total 33,431,588.79 21,769,745.08 (2) Significant Advances from Customers Aging over One Year Unit: RMB 166 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Item Ending balance Unpaid/ Un-carry-over reason (3) Settled but Uncompleted Projects Formed by Construction Contracts at the Period-end Unit: RMB Item Amount Other notes: 31. Payroll Payable (1) List of Payroll Payable Unit: RMB Item Beginning balance Increase Decrease Ending balance I. Short-term salary 29,068,767.86 190,941,490.14 178,932,415.55 41,077,842.45 II. Post-employment benefit-defined 193,390.47 21,089,267.03 17,542,657.50 3,740,000.00 contribution plans III. Termination benefits 6,546,612.00 6,546,612.00 Total 29,262,158.33 218,577,369.17 203,021,685.05 44,817,842.45 (2) List of Short-term Salary Unit: RMB Item Beginning balance Increase Decrease Ending balance 1. Salary, bonus, 19,456,610.16 166,935,427.76 156,018,011.07 30,374,026.85 allowance, subsidy 2. Employee welfare 8,501,127.96 8,501,127.96 3. Social insurance 6,425,059.22 6,425,059.22 Of which: Medical 5,468,476.86 5,468,476.86 insurance premiums Work-re 449,701.28 449,701.28 lated injury insurance Materni 506,881.08 506,881.08 ty insurance 4. Housing fund 4,705,409.16 4,671,499.80 33,909.36 5. Labor union budget and employee education 9,612,157.70 4,374,466.04 3,316,717.50 10,669,906.24 budget 167 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Total 29,068,767.86 190,941,490.14 178,932,415.55 41,077,842.45 (3) List of Defined Contribution Plans Unit: RMB Item Beginning balance Increase Decrease Ending balance 1. Basic pension benefits 11,610,669.71 11,610,669.71 2. Unemployment 531,263.71 531,263.71 insurance 3. Annuity 193,390.47 8,947,333.61 5,400,724.08 3,740,000.00 Total 193,390.47 21,089,267.03 17,542,657.50 3,740,000.00 Other notes: 32. Taxes Payable Unit: RMB Item Ending balance Beginning balance VAT 30,384,238.41 9,173,589.49 Corporate income tax 3,347,494.70 4,829,691.00 Personal income tax 155,162.18 220,969.58 Urban maintenance and construction tax 78,011.80 443,966.24 Education Surcharge 55,722.70 317,118.82 Stamp tax 376,052.60 149,295.59 Property tax 5,085,707.04 3,997,526.54 Land use tax 1,694,485.83 2,264,945.84 Other 111,645.03 Total 41,288,520.29 21,397,103.10 Other notes: 33. Other Payables Unit: RMB Item Ending balance Beginning balance Interest payable 6,315,962.71 7,865,380.83 Dividends payable 25,083,228.68 12,116,789.76 Other payables 148,338,686.00 30,829,181.11 Total 179,737,877.39 50,811,351.70 168 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (1) Interest Payable Unit: RMB Item Ending balance Beginning balance Interest of long-term borrowings with installment payments of interest and 454,930.56 887,413.70 payment of principal at maturity Enterprise bond interest 4,455,452.06 Interest payable of short-term borrowings 1,841,377.53 2,466,929.24 Interest payable of borrowings provided by 4,019,654.62 55,585.83 units Total 6,315,962.71 7,865,380.83 List of the significant overdue unpaid interest: Unit: RMB Borrower Overdue amount Overdue reasons Other notes: (2) Dividends Payable Unit: RMB Item Ending balance Beginning balance Ordinary share dividends 25,083,228.68 12,116,789.76 Total 25,083,228.68 12,116,789.76 Other notes, including significant dividends payable unpaid for over one year, the unpaid reason shall be disclosed: (3) Other Payables 1) Other Payables Listed by Nature Unit: RMB Item Ending balance Beginning balance Margin and cash pledge 40,981,285.95 13,124,079.64 Prepayment 8,523,323.85 6,232,605.94 Intercourse funds among units 92,200,000.00 8,110,384.98 balance payment of engineering 733,688.95 1,158,579.69 Other 5,900,387.25 2,203,530.86 Total 148,338,686.00 30,829,181.11 (2) Significant Other Payables Aging over One Year Unit: RMB 169 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Item Ending balance Unpaid/Un-carry-over reason Other notes 34. Held-for-sale Liabilities Unit: RMB Item Ending balance Beginning balance Other notes: 35. Current Portion of Non-current Liabilities Unit: RMB Item Ending balance Beginning balance Current portion of long-term borrowings 200,000,000.00 Current portion of bonds payable 199,834,258.85 Total 200,000,000.00 199,834,258.85 Other notes: 36. Other Current Liabilities Unit: RMB Item Ending balance Beginning balance Increase/decrease of the short-term bonds payable: Unit: RMB Amortizat Withdraw ion of Repayme The al of Bonds Issuing Issuing Beginnin premium nt in the Ending Par value Duration current interest name date amount g balance and Reporting balance issue by par depreciati Period value on Other notes: 37. Long-term Borrowings (1) Category of Long-term Borrowings Unit: RMB Item Ending balance Beginning balance Guaranteed borrowings 100,000,000.00 200,000,000.00 Total 100,000,000.00 200,000,000.00 170 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Notes to the category of long-term borrowings: Other notes, including the interval of interest rate: 38. Bonds Payable (1) List of Bonds Payable Unit: RMB Item Ending balance Beginning balance (2) Increase/Decrease of Bonds Payable (Excluding Other Financial Instrument Classified as Financial Liabilities such as Preferred Shares and Perpetual Bonds) Unit: RMB (3) Notes to the Conditions and Time of the Shares Transfer of the Convertible Corporate Bonds (4) Notes to Other Financial Instruments Classified as Financial Liabilities Basic situation of other financial instruments such as preferred shares and perpetual bonds outstanding at the period-end Changes in financial instruments such as preferred shares and perpetual bonds outstanding at the period-end Unit: RMB Outstanding Period-beginning Increase Decrease Period-end financial Carrying Carrying Carrying Carrying Amount Amount Amount Amount instrument value value value value Notes to basis for the classification of other financial instruments as financial liabilities Other notes 39. Long-term Payables Unit: RMB Item Ending balance Beginning balance Long-term payables 16,825,912.17 Total 16,825,912.17 (1) Long-term Payables Listed by Nature Unit: RMB Item Ending balance Beginning balance Financial leasing 825,912.17 Borrowings from non-financial institution 16,000,000.00 171 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Total 16,825,912.17 Other notes: (2) Specific Payables Unit: RMB Reason for Item Beginning balance Increase Decrease Ending balance formation Other notes: 40. Long-term Payroll Payable (1) List of Long-term Payroll Payable Unit: RMB Item Ending balance Beginning balance (2) Changes in Defined Benefit Plans Obligation present value of defined benefit plans: Unit: RMB Item Reporting period Same period of last year Plan assets: Unit: RMB Item Reporting period Same period of last year Net liabilities (net assets) of defined benefit plans: Unit: RMB Item Reporting period Same period of last year Notes of influence of content of defined benefit plans and its relevant risks to the future cash flow, time and uncertainty of the Company: Notes to the results of significant actuarial assumptions and sensitivity analysis of defined benefit plans: Other notes: 41. Provisions Unit: RMB Item Ending balance Beginning balance Reason for formation Predicted losses resulting from Product quality guarantee 1,508,735.64 1,366,445.61 any product quality problem Total 1,508,735.64 1,366,445.61 -- 172 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Other notes, including notes to related significant assumptions and evaluation of significant provisions: 42. Deferred Income Unit: RMB Reason for Item Beginning balance Increase Decrease Ending balance formation Capital Government compensating related 30,773,540.27 3,613,697.19 4,081,924.16 30,305,313.30 subsidies funds for construction Total 30,773,540.27 3,613,697.19 4,081,924.16 30,305,313.30 -- Item involving government subsidies: Unit: RMB Amount Amount recorded into recorded into Amount Amount of Related to Beginning non-operatin other income offset cost in Other Ending Item newly assets/related balance g income in in the the Reporting changes balance subsidy income the Reporting Reporting Period Period Period Renovation project of the information system of Related to paper-making 720,000.00 32,000.00 688,000.00 assets enterprise energy management center No. 1 paper machine Related to update & 224,000.00 9,600.00 214,400.00 assets renovation project Liquid paper Related to renovation 233,333.20 35,000.04 198,333.16 assets project Renovation project of the Related to information 1,096,666.71 279,999.96 816,666.75 assets system of energy 173 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 management center Steam condensation water Related to 1,536,000.00 384,000.00 1,152,000.00 recycling and assets energy saving projects Subsidy of improvement Related to of Zhuhai 1,398,794.33 699,397.24 699,397.09 assets motor efficiency Subsidy of latex phase II production Related to line 228,000.00 114,000.00 114,000.00 assets technological transformatio n BM1 ink-jet printer system and drive system 10,031,627.7 Related to upgrade 447,507.56 9,584,120.15 1 assets synthesis technique transformatio n project Zhuhai Gaolan Port national treasury equipment Related to 960,266.59 41,600.04 918,666.55 renewal assets (Robot Application) special fund subsidies Energy Related to management 891,746.71 227,679.96 664,066.75 assets center 174 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 energy-savin g technological innovation support fund Post-awarded subsidies of Automatic Related to 4,268,161.40 179,005.68 4,089,155.72 packaging assets line technical innovation Post-awarded subsidies of HCB-Turn Nozzle Related to optimization 1,754,105.57 72,834.84 1,681,270.73 assets and technological transformatio n project Post-awarded subsidies of TP liquid food packing Related to board 4,937,748.66 4,937,748.66 assets synthesis technique transformatio n project Post-awarded subsidies of MES technical renovation Related to 1,893,089.39 649,059.24 1,244,030.15 project of assets Zhuhai Huafeng Paper Co., Ltd. Support funds for Related to 600,000.00 600,000.00 0.00 restoring assets production 175 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 after typhoon Subsidy for migration of Related to 2,358,270.19 39,339.60 2,318,930.59 high voltage assets cable Specific project subsidy for a new round of technical Related to 442,727.00 442,727.00 renovation in assets Finance Bureau of Chancheng District 2017 provincial industrial and information specific funds Related to 812,700.00 270,900.00 541,800.00 of Foshan assets Finance Bureau (technical renovation) 30,773,540.2 30,305,313.3 Total 3,613,697.19 600,000.00 3,481,924.16 7 0 Other notes: 43. Other Non-current Liabilities Unit: RMB Item Ending balance Beginning balance Other notes: 44. Share Capital Unit: RMB Increase/decrease (+/-) Beginning New shares Bonus issue Ending balance balance Bonus shares Other Subtotal issued from profit 176 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 The sum of 505,425,000.00 505,425,000.00 shares Other notes: 45. Other Equity Instruments (1) The Basic Information of Other Financial Instruments such as Preferred Stock and Perpetual Bond Outstanding at the End of the Period (2) Changes in Financial Instruments such as Preferred Stock and Perpetual Bond Outstanding at the End of the Period Unit: RMB Outstanding Period-beginning Increase Decrease Period-end financial Carrying Carrying Carrying Carrying Amount Amount Amount Amount instruments value value value value The current changes in other equity instruments and the corresponding reasons and the basis of the relevant accounting treatment Other notes: 46. Capital Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Capital premium 256,362,525.38 256,362,525.38 (premium on stock) Other capital reserves 459,848.04 459,848.04 Total 256,822,373.42 256,822,373.42 Other notes, including changes and reason of change: 47. Treasury Shares Unit: RMB Item Beginning balance Increase Decrease Ending balance Other notes, including changes and reason of change: 48. Other Comprehensive Income Unit: RMB Reporting Period Beginning Ending Item Income Less: recorded Less: Attributable Attributable balance balance before in other Income tax to owners to 177 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 taxation in comprehensive expense of the non-control the Current income in Company ling Period prior period as the interests and transferred parent after after tax in profit or tax loss in the Current Period II. Other comprehensive income that 169,714.3 may subsequently be reclassified to 169,714.39 9 profit or loss Of which: Share of other comprehensive income of investees 169,714.3 169,714.39 that will be reclassified to profit or 9 loss under equity method 169,714.3 Total of other comprehensive income 169,714.39 9 Other notes, including the adjustment of the effective gain/loss on cash flow hedges to the initial recognized amount: 49. Specific Reserve Unit: RMB Item Beginning balance Increase Decrease Ending balance Other notes, including changes and reason of change: 50. Surplus Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Statutory surplus 192,647,450.61 3,751,800.19 196,399,250.80 reserves Total 192,647,450.61 3,751,800.19 196,399,250.80 Notes, including changes and reason of change: 51. Retained Earnings Unit: RMB Item Reporting Period Same period of last year Beginning balance of retained earnings before 1,027,794,897.79 1,027,703,010.59 adjustments Beginning balance of retained earnings after 1,027,794,897.79 1,027,703,010.59 178 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 adjustments Add: Net profit attributable to owners of the -2,814,965.92 18,637,865.97 Company as the parent Less: withdrawal of statutory surplus reserves 3,751,800.19 2,372,378.77 Dividend of ordinary shares payable 9,097,650.00 16,173,600.00 Ending retained earnings 1,012,130,481.68 1,027,794,897.79 List of adjustment of beginning retained earnings: (1) RMB0.00 beginning retained earnings was affected by retrospective adjustment conducted according to the Accounting Standards for Business Enterprises and relevant new regulations. (2) RMB0.00 beginning retained earnings was affected by changes in accounting policies. (3) RMB0.00 beginning retained earnings was affected by correction of significant accounting errors. (4) RMB0.00 beginning retained earnings was affected by changes in combination scope arising from same control. (5) RMB0.00 beginning retained earnings was affected totally by other adjustments. 52. Operating Revenue and Cost of Sales Unit: RMB Reporting Period Same Period of last year Item Operating revenue Cost of sales Operating revenue Cost of sales Main operations 3,588,986,332.24 3,290,603,851.05 3,387,712,195.06 2,948,469,093.13 Other operations 94,018,211.26 65,742,861.68 195,445,451.31 159,896,380.04 Total 3,683,004,543.50 3,356,346,712.73 3,583,157,646.37 3,108,365,473.17 53. Taxes and Surtaxes Unit: RMB Item Reporting Period Same Period of last year Urban maintenance and construction tax 3,608,728.97 6,902,983.13 Education Surcharge 2,588,747.22 4,933,650.70 Property tax 6,522,892.91 6,460,903.34 Land use tax 2,038,050.46 2,412,212.48 Vehicle and vessel use tax 21,277.57 43,663.68 Stamp Duty 2,453,442.87 2,213,596.95 Other 303,773.12 Total 17,536,913.12 22,967,010.28 Other notes: 179 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 54. Selling Expense Unit: RMB Item Reporting Period Same Period of last year Salary and benefits 16,869,968.19 13,510,588.27 Business entertainment fees 5,124,436.79 6,092,497.55 Packing charges 10,274,001.73 10,055,322.24 Warehousing fees 9,048,439.87 4,020,228.11 Transport charge 119,273,809.00 141,141,510.57 Office expenses 504,015.59 726,361.44 Other 8,327,512.03 7,377,215.37 Total 169,422,183.20 182,923,723.55 Other notes: 55. Administrative Expense Unit: RMB Item Reporting Period Same Period of last year Salary and benefits 47,688,944.73 43,313,668.97 Social insurance 8,615,815.27 20,611,798.52 Housing fund 1,324,367.76 4,287,169.43 Depreciation and amortization 18,816,835.86 19,587,722.05 Office expenses 3,441,391.70 3,422,223.93 Fees for agencies 6,427,166.04 7,384,158.05 Utilities 3,663,342.86 4,858,252.20 Rental fees 5,213,126.28 1,209,743.51 Business travel fees 2,104,812.31 2,726,094.32 Business entertainment fees 2,260,907.57 1,982,313.19 Material consumption 3,193,820.09 3,156,395.79 Other 10,322,921.71 7,802,803.78 Total 113,073,452.18 120,342,343.74 Other notes: 56. R&D Expense Unit: RMB Item Reporting Period Same Period of last year 180 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Salary 8,401,940.35 3,141,582.90 Material drawing out 19,702,922.55 365,879.52 Experiment and inspection fees 1,830,531.43 334,994.82 Depreciation and amortization 1,788,418.60 233,600.59 Fees for technical service 104,015.01 Entertainment fees 174,240.80 122,275.39 Business travel fees 260,409.89 203,870.77 Office expenses 161,192.50 209,495.04 Other 464,528.82 418,750.50 Total 32,784,184.94 5,134,464.54 Other notes: 57. Finance Costs Unit: RMB Item Reporting Period Same Period of last year Interest expense 97,699,988.40 122,634,675.32 Less: Interest income 11,188,199.94 20,462,322.12 Foreign exchange gains or losses -1,796,490.75 15,787,286.73 Other 4,415,466.09 3,668,284.72 Total 89,130,763.80 121,627,924.65 Other notes: 58. Asset Impairment Loss Unit: RMB Item Reporting Period Same Period of last year I. Bad debt loss 2,889,252.82 2,314,605.74 II. Loss on inventory valuation 15,120,270.23 2,395,617.41 Total 18,009,523.05 4,710,223.15 Other notes: 59. Other Income Unit: RMB Sources Reporting Period Same period of last year Government subsidy related to assets 3,481,924.16 2,915,637.18 181 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Government subsidy related to income 7,747,334.14 10,875,874.61 Total 11,229,258.30 13,791,511.79 60. Investment Income Unit: RMB Item Reporting Period Same Period of last year Long-term equity investment income 5,625,141.25 22,353,488.34 accounted by equity method Investment income from disposal of financial 5,292,680.54 assets at fair value through profit or loss Investment income from holding of available 10,000,000.00 6,995,738.12 for sale financial assets Investment income from disposal of financial 2,383,532.02 liabilities at fair value through profit or loss Total 18,008,673.27 34,641,907.00 Other notes: 61. Gain on Changes in Fair Value Unit: RMB Sources Reporting Period Same period of last year Financial assets at fair value through profit -1,571,341.66 or loss Financial liabilities at fair value through 2,394,879.25 -2,394,879.25 profit or loss Total 2,394,879.25 -3,966,220.91 Other notes: 62. Asset Disposal Income Unit: RMB Sources Reporting Period Same period of last year Fixed asset disposal income 1,390,311.65 689,820.93 Total 1,390,311.65 689,820.93 63. Non-operating Income Unit: RMB 182 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Amount recorded in the current Item Reporting Period Same Period of last year non-recurring profit or loss Government subsidy 6,290,035.00 6,290,035.00 Compensation income 1,504,158.25 Difference between the carrying value and net assets enjoyed 21,561,238.54 21,561,238.54 when transferred by equity method Other 4,868,628.58 2,908,797.32 4,868,628.58 Total 32,719,902.12 4,412,955.57 32,719,902.12 Government subsidies recorded into current profit or loss Unit: RMB Whether influence the Special Related to Distribution Distribution Reporting Same period Item Nature profits or subsidy or assets/related entity reason Period of last year losses of the not income year or not Support funds for Related to restoring Subsidy Yes No 600,000.00 income production after typhoon Subsidy for losses on suspension of Related to Subsidy Yes No 5,690,035.00 production income due to power failure Total 6,290,035.00 Other notes: 64. Non-operating Expense Unit: RMB Amount recorded in the current Item Reporting Period Same Period of last year non-recurring profit or loss Donation 3,000.00 29,750.00 3,000.00 Loss on damage and scrap of 1,347,876.44 414,517.07 1,347,876.44 non-current assets Penalty, reparations and fine for 815,704.33 183 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 delaying payment Loss on scrap of raw materials 132,982.11 Loss on abnormal suspension of 6,875,690.07 27,797,264.89 6,875,690.07 production Other 33,135.00 66,618.45 33,135.00 Total 8,259,701.51 29,256,836.85 8,259,701.51 Other notes: 65. Income Tax Expense (1) List of Income Tax Expense Unit: RMB Item Reporting Period Same Period of last year Current income tax expense 5,230,146.03 5,922,905.23 Deferred income tax expense -4,061,406.05 -3,751,096.76 Total 1,168,739.98 2,171,808.47 (2) Adjustment Process of Accounting Profit and Income Tax Expense Unit: RMB Item Reporting Period Profit before taxation -55,815,866.44 Current income tax expense accounted at statutory/applicable tax -13,953,966.61 rate Influence of applying different tax rates by subsidiaries 9,242,820.07 Influence of income tax before adjustment -3,147,582.74 Influence of non-taxable income -9,244,434.68 Influence of non-deductable costs, expenses and losses 973,805.90 Influence of deductable temporary difference or deductable losses of unrecognized deferred income tax at the beginning of -230,133.58 the Reporting Period Influence of deductable temporary difference or deductable losses of unrecognized deferred income tax in the Reporting 17,878,979.61 Period Influence of R&D expense deduction -350,748.02 Income tax expense 1,168,739.98 Other notes 184 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 66. Other Comprehensive Income Refer to Note 48 for details. 67. Cash Flow Statement (1) Cash Generated from Other Operating Activities Unit: RMB Item Reporting Period Same Period of last year Intercourse funds 101,993,952.31 20,712,965.39 Government subsidies 17,051,066.33 26,339,674.61 Cash deposit received 12,875,827.91 Interest income 3,529,355.27 26,629,976.60 Other 24,287,618.86 7,944,511.69 Total 159,737,820.68 81,627,128.29 Notes: (2) Cash Used in Other Operating Activities Unit: RMB Item Reporting Period Same Period of last year Intercourse funds 30,000,000.00 55,652,086.82 Fees 162,012,997.06 51,716,874.45 Petty cash for employees 1,773,035.43 2,761,745.19 Cash deposit paid 2,627,073.52 Other 65,890.65 Total 196,478,996.66 110,130,706.46 Notes: (3) Cash Generated from Other Investing Activities Unit: RMB Item Reporting Period Same Period of last year Principal of structural deposits 229,000,000.00 209,000,000.00 Principal and interest of borrowings 511,909,915.83 Disposal of trading financial liabilities 2,383,532.02 Total 231,383,532.02 720,909,915.83 185 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Notes: (4) Cash Used in Other Investing Activities Unit: RMB Item Reporting Period Same Period of last year Principal of structural deposits 545,200,000.00 1,000,000.00 Total 545,200,000.00 1,000,000.00 Notes: (5) Cash Generated from Other Financing Activities Unit: RMB Item Reporting Period Same Period of last year Restricted monetary capital recovered as 33,400,956.90 176,891,765.59 margin or pledge Borrowings from non-financial institutions 55,600,000.00 16,000,000.00 Total 89,000,956.90 192,891,765.59 Notes: (6) Cash Used in Other Financing Activities Unit: RMB Item Reporting Period Same Period of last year Restricted monetary capital as margin or 5,971,254.50 33,400,956.90 pledge Repayment for borrowings from external 40,000,000.00 parties Total 45,971,254.50 33,400,956.90 Notes: 68. Supplemental Information for Cash Flow Statement (1) Supplemental Information for Cash Flow Statement Unit: RMB Supplemental information Reporting Period Same period of last year 1. Reconciliation of net profit to net cash -- -- flows generated from operating activities 186 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Net profit -56,984,606.42 35,227,812.35 Add: Provision for impairment of assets 18,009,523.05 4,710,223.15 Depreciation of fixed assets, oil-gas assets, 157,252,933.29 159,400,760.10 and productive living assets Amortization of intangible assets 9,084,286.44 7,993,240.03 Amortization of long-term prepaid expenses 1,336,055.32 1,267,488.68 Losses from disposal of fixed assets, intangible assets and other long-lived assets -1,390,311.65 -689,820.93 (gains: negative) Losses from scrap of fixed assets (gains: 1,347,876.44 414,517.07 negative) Losses from changes in fair value (gains: -2,394,879.25 3,966,220.91 negative) Finance costs (gains: negative) 93,337,367.57 108,435,156.14 Investment loss (gains: negative) -18,008,673.27 -34,641,907.00 Decrease in deferred income tax assets -3,954,746.47 -3,260,644.87 (increase: negative) Increase in deferred income tax liabilities -106,659.58 -490,451.89 (decrease: negative) Decrease in inventory (gains: negative) -451,108,295.63 26,685,441.54 Decrease in accounts receivable generated 116,122,123.02 11,803,322.52 from operating activities (gains: negative) Increase in accounts payable used in 530,923,401.86 -342,732,278.88 operating activities (decrease: negative) Net cash generated from/used in operating 393,465,394.72 -21,910,921.08 activities 2. Significant investing and financing activities without involvement of cash -- -- receipts and payments 3. Net increase/decrease of cash and cash -- -- equivalent: Ending balance of cash 128,012,685.23 254,251,911.75 Less: beginning balance of cash 254,251,911.75 357,103,700.82 Net increase in cash and cash equivalents -126,239,226.52 -102,851,789.07 (2) Net Cash Paid For Acquisition of Subsidiaries Unit: RMB 187 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Amount Of which: -- Of which: -- Of which: -- Other notes: (3) Net Cash Receive from Disposal of the Subsidiaries Unit: RMB Amount Cash or cash equivalents received in the Reporting Period from 8,214,180.81 disposal of subsidiaries in the Current Period Of which: -- Kunshan Focai Packaging & Printing Co., Ltd. 8,214,180.81 Less: cash and cash equivalents held by subsidiaries on the date of 8,214,180.81 losing control power Of which: -- Kunshan Focai Packaging & Printing Co., Ltd. 8,214,180.81 Of which: -- Other notes: (4) Cash and Cash Equivalents Unit: RMB Item Ending balance Beginning balance I. Cash 128,012,685.23 254,251,911.75 Including: Cash on hand 131,195.64 173,601.37 Bank deposit on demand 127,881,489.59 254,078,310.38 III. Ending balance of cash and cash 128,012,685.23 254,251,911.75 equivalents Other notes: 69. Notes to Items of the Statements of Changes in Owners’ Equity Notes to the name of “Other” of ending balance of the same period of last year adjusted and the amount adjusted: 70. Assets with Restricted Ownership or Right to Use Unit: RMB 188 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Item Ending carrying value Reason for restriction Monetary capital 5,971,254.50 Cash deposit for letter of guarantee Other current assets 300,000,000.00 Pledge guarantee Total 305,971,254.50 -- Other notes: 71. Foreign Currency Monetary Items (1) Foreign Currency Monetary Items Unit: RMB Ending foreign currency Ending balance converted to Item Exchange rate balance RMB Monetary capital -- -- Of which: USD 5,386,930.36 6.8632 36,971,580.45 EUR HKD 93,216.36 0.8762 81,676.17 GBP 248,100.07 8.6762 2,152,565.83 Accounts receivable -- -- Of which: USD 6,482,218.67 6.8632 44,488,763.18 EUR HKD 2,982,178.46 0.8762 2,612,984.77 Long-term borrowings -- -- Of which: USD EUR HKD Other receivables Of which: HKD 15,052,435.31 0.8762 13,188,943.82 Short-term borrowings Of which: USD 15,266,468.12 6.8632 104,776,824.00 Accounts payable Of which: USD 16,147,177.64 6.8632 110,821,309.58 EUR 225,967.00 7.8473 1,773,230.84 Other notes: 189 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (2) Notes to Overseas Entities Including: for Significant Oversea Entities, Main Operating Place, Recording Currency and Selection Basis Shall Be Disclosed; if there Are Changes in Recording Currency, Relevant Reasons Shall Be Disclosed. □ Applicable √ Not applicable 72. Arbitrage Qualitative and quantitative information of relevant arbitrage instruments, hedged risk in line with the type of arbitrage to disclose: 73. Government Subsidy (1) Basic Information on Government Subsidy Unit: RMB Amount recorded in the current Category Amount Listed items profit or loss Government subsidy related to 3,481,924.16 Other income 3,481,924.16 assets Government subsidy related to 600,000.00 Non-operating income 600,000.00 assets Government subsidy, related to income, and used to compensate 5,690,035.00 Non-operating income 5,690,035.00 accrual cost expense or losses of the Company Government subsidy, related to income, and used to compensate 7,747,334.14 Other income 7,747,334.14 accrual cost expense or losses of the Company Total 17,519,293.30 17,519,293.30 (2) Return of Government Subsidy □ Applicable √ Not applicable Other notes: 190 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 74. Other VIII. Changes of Consolidation Scope 1. Business Combination Not under the Same Control (1) Business Combination Not under the Same Control during the Reporting Period Unit: RMB Income of Net profits of Time and Cost of Recognition acquiree from acquiree from Name of place of Proportion of Way to gain gaining the Purchase date basis of the purchase the purchase acquiree gaining the equity the equity equity purchase date date to date to equity period-end period-end Other notes: (2) Combination Cost and Goodwill Unit: RMB Combination cost Note to determination method of the fair value of the combination cost, consideration and changes: The main formation reason for the large goodwill: Other notes: (3) The Identifiable Assets and Liabilities of Acquiree on Purchase Date Unit: RMB Fair value on purchase date Carrying value on purchase date The determination method of the fair value of identifiable assets and liabilities Contingent liability of acquiree undertaken in the business combination Other notes: (4) Gains or losses from Re-measurement of Equity Held before the Purchase Date at Fair Value Whether there is a transaction that through multiple transaction step by step to realize business combination and gaining the control during the Reporting Period □ Yes √ No 191 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (5) Notes to Reasonable Consideration or Fair Value of Identifiable Assets and Liabilities of the Acquiree that Cannot Be Determined on the Acquisition Date or during the Period-end of the Merger (6) Other Notes 2. Business Combination under the Same Control (1) Business Combination under the Same Control during the Reporting Period Unit: RMB Income from Net profits the from the Income of the Net profits of Recognition period-begin period-begin acquiree the acquiree Combined Proportion of Combination basis of Basis ning to the ning to the during the during the party the equity date combination combination combination period of period of date date of the date of the comparison comparison acquiree acquiree Other notes: (2) Combination Cost Unit: RMB Combination cost Note to contingent consideration and the changes: Other notes: (3) The Carrying Value of Assets and Liabilities of the Combined Party on the Combination Date Unit: RMB Combination date Period-end of the last period Contingent liabilities of the combined party undertaken in the business combination Other notes: 3. Counter Purchase Basic information of trading, the basis of transactions constitute counter purchase, the retain assets , liabilities of the listed companies whether constituted a business and its basis, the determination of the combination costs, the amount and calculation of adjusted rights and interests in accordance with the equity transaction process: 4. Disposal of Subsidiary Whether there is a single disposal of the investment to the subsidiary and lost control? 192 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 □ Yes √ No Whether there are several disposals of the investment to the subsidiary and lost controls? □ Yes √ No 5. Changes in Combination Scope for Other Reasons Note to changes in combination scope for other reasons (such as newly establishment or liquidation of subsidiaries, etc.) and relevant information: Kunshan Focai Packaging & Printing Co., Ltd. has been liquidated and de-registered during the Reporting Period and has thus no longer been included in the consolidated financial statements. 6. Other IX. Equity in Other Entities 1. Equity in Subsidiary (1) Subsidiaries Main operating Nature of Holding percentage (%) Name Registration place Way of gaining place business Directly Indirectly Business Zhuhai S.E.Z. Manufacturing combination not Hongta Renheng Zhuhai Zhuhai 41.9653% industry under the same Paper Co., Ltd. control Business Zhuhai Huafeng Manufacturing combination Zhuhai Zhuhai 100.00% Paper Co., Ltd. industry under the same control Zhuhai Golden Business Pheasant Manufacturing combination not Zhuhai Zhuhai 51.00% Chemical Co., industry under the same Ltd. control Huaxin (Foshan) Manufacturing Color Printing Foshan Foshan 100.00% Establishment industry Co., Ltd. Zhejiang Hongta Renheng Manufacturing Packaging Pinghu Pinghu 100.00% Establishment industry Technology Co., Ltd. Notes: holding proportion in subsidiary different from voting proportion: 193 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Basis of holding half or less voting rights but still controlling the investee and holding more than half of the voting rights but not controlling the investee: The Company holds 41.9653% shares of Hongta Renheng, and in accordance with the contract and articles, there is seven directors in Hongta Renheng, of which four directors are sent by the Company, two sent by Yunnan Hongta Group Co., Ltd.(now renamed to Yunnan Hehe (Group) Co., Ltd.) and one sent by Renheng Industrial Co., Ltd.. Dragon State International Limited didn’t send any director. The Company still control Hongta Renheng, and will continue to include it into the consolidated financial statements of the Company in this year. Significant structural entities and controlling basis in the scope of combination: Basis of determining whether the Company is the agent or the principal: Other Notes: (2) Significant Non-wholly-owned Subsidiary Unit: RMB Shareholding proportion The profit or loss Declaring dividends Balance of Name of non-controlling attributable to the distributed to non-controlling interests interests non-controlling interests non-controlling interests at the period-end Zhuhai Hongta Renheng 58.0347% -69,644,772.71 1,503,534,129.76 Packaging Co., Ltd. Holding proportion of non-controlling interests in subsidiary different from voting proportion: Other notes: (3) The Main Financial Information of Significant Not Wholly-owned Subsidiary Unit: RMB Ending balance Beginning balance Non-curr Non-curr Non-curr Non-curr Name Current Total Current Total Current Total Current Total ent ent ent ent assets assets liabilities liabilities assets assets liabilities liabilities assets liability assets liability Zhuhai Hongta Renheng 2,583,10 2,250,50 4,833,61 2,010,15 154,329, 2,164,48 2,066,88 2,341,31 4,408,19 1,247,24 374,334, 1,621,58 Packagin 4,910.22 5,869.29 0,779.51 1,157.60 795.90 0,953.50 7,651.66 1,528.10 9,179.76 8,199.38 704.45 2,903.83 g Co., Ltd. Unit: RMB Reporting Period Same period of last year Total Cash flows Total Cash flows Name Operating Operating Net profit comprehensi from Net profit comprehensi from revenue revenue ve income operating ve income operating 194 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 activities activities Zhuhai Hongta 3,391,466,29 -104,532,316. -104,532,316. 353,344,964. 3,320,528,76 17,181,492.2 17,181,492.2 -63,846,227.2 Renheng 1.03 66 66 20 0.26 4 4 2 Packaging Co., Ltd. Other notes: (4) Significant Restrictions on Using the Assets and Liquidating the Liabilities of the Company (5) Financial Support or Other Supports Provided to Structural Entities Incorporated into the Scope of Consolidated Financial Statements Other notes: 2. The Transaction of the Company with Its Owner’s Equity Share Changed but Still Controlling the Subsidiary (1) Note to the Owner’s Equity Share Changed in Subsidiary (2) The Transaction’s Influence on the Equity of Non-controlling Interests and the Owner's Equity Attributable to the Company as the Parent Unit: RMB Other notes 3. Equity in Joint Ventures or Associated Enterprises (1) Significant Joint Ventures or Associated Enterprises Holding percentage (%) Accounting treatment of the Main operating Nature of investment to Name Registration place place business Directly Indirectly joint venture or associated enterprise China Chengtong Accounted by Finance Beijing Beijing Financial industry 10.00% equity method Corporation Ltd. Notes to holding proportion of joint venture or associated enterprise different from voting proportion: Basis of holding less than 20% of the voting rights but has a significant impact or holding 20% or more voting rights but does not have a significant impact: 195 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 During the Reporting Period, the voting proportion in China Chengtong Finance Corporation Ltd. enjoyed by the Company is less than 20%. Since the Company has sent directors to participate in its operation and decision-making, the Company still has significant influence on it. (2) Main Financial Information of Significant Joint Ventures Unit: RMB Beginning balance/The same period of last Ending balance/Reporting Period year Other notes (3) Main Financial Information of Significant Associated Enterprise Unit: RMB Beginning balance/The same period of last Ending balance/Reporting Period year China Chengtong Finance Corporation Ltd. Current assets 25,573,917,580.26 Non-current assets 9,674,484,033.81 Total assets 35,248,401,614.07 Current liabilities 28,708,202,432.69 Total liabilities 28,708,202,432.69 Equity attributable to shareholders of the 6,540,199,181.38 Company as the parent Shares of net assets calculated by 654,019,918.14 shareholding ratio Carrying value of equity investment in 654,019,918.14 associated enterprises Operating revenue 499,562,019.89 Net profit 270,315,188.67 Total comprehensive income 270,315,188.67 Other notes (4) Summary Financial Information of Insignificant Joint Ventures or Associated Enterprises Unit: RMB Ending balance/Reporting Period Beginning balance/The same period of last 196 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 year Joint venture: -- -- The total of following items according to the -- -- shareholding proportions Associated enterprise: -- -- Total carrying value of investment 8,570,239.86 8,294,365.17 The total of following items according to the -- -- shareholding proportions --Net profit 541,784.24 328,338.89 --Total comprehensive income 541,784.24 328,338.89 Other notes (5) Note to the Significant Restrictions on the Ability of Joint Ventures or Associated Enterprises to Transfer Funds to the Company (6) The Excess Loss of Joint Ventures or Associated Enterprises Unit: RMB The cumulative recognized The derecognized losses (or the The accumulative unrecognized Name losses in previous share of net profit) in Reporting losses in Reporting Period accumulatively derecognized Period Other notes (7) The Unrecognized Commitment Related to Investment to Joint Ventures (8) Contingent Liabilities Related to Investment to Joint Ventures or Associated Enterprises 4. Significant Common Operation Proportion /share portion Name Main operating place Registration place Nature of business Directly Indirectly Notes to holding proportion or share portion in common operation different from voting proportion: For common operation as a single entity, basis of classifying as common operation Other notes 5. Equity in the Structured Entity Excluded in the Scope of Consolidated Financial Statements Notes to the structured entity excluded in the scope of consolidated financial statements: 197 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 6. Other X. The Risk Related to Financial Instruments The Company is engaged in risk management to achieve balance between risks and returns, minimizing the negative effects of risks on its operation performance and maximizing the interests of its shareholders and other equity investors. Based on that risk management goal, the fundamental strategy of its risk management is to identify and analyze various risks facing the Company, establish an appropriate risk bottom line, carry out risk management and monitor various risks in a timely and reliable manner to control them within a restricted scope. The Company faces various risks related to financial instruments in its routine activities, mainly including credit risk, liquidity risk market risk. The management has reviewed and approved the policies of managing those risks, which are summarized as follows. (I) Credit Risk Credit risk means the risk of financial losses incurred to the other party when one party of a financial instrument is unable to fulfill its obligations. The Company’s credit risk mainly comes from bank deposits and accounts receivable. To control the aforementioned relevant risks, the Company has adopted the following measures. 1. Bank deposits The Company places its bank deposits with financial institutions of high credit ratings. Thus, its credit risk is low. 2. Accounts receivable The Company conducts credit assessment on the customers trading in the mode of credit on a regular basis. Based on the credit assessment result, the Company chooses to trade with recognized customers with good credit and monitor the balance of the accounts receivable from them to ensure that the Company will not face any significant bad debt risk. As the Company’s risk points of accounts receivable are distributed among a number of cooperation parties and customers, as at 31 December 2018, 17.59% (31 December 2017: 18.04%) of its accounts receivable came from the top five customers of balance and the Company did not have any significant credit concentration risk. (1) The analysis on the amount not overdue and without impairment and the amount overdue but without impairment of the Company’s accounts receivable and the overdue aging is as follows: Item Period-end Not overdue and Overdue but not devalued Total devalued Within 1 1 to 2 Over 2 year years years Notes receivable and 717,524,096.14 717,524,096.14 accounts receivable Other receivables 5,805,855.78 5,805,855.78 Subtotal 723,329,951.92 723,329,951.92 (Continued) Item Period-beginning Not overdue and Overdue but not devalued Total devalued Within 1 1 to 2 Over 2 year years years Notes receivable and 680,265,898.71 680,265,898.71 198 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 accounts receivable Other receivables 3,608,477.00 3,608,477.00 Subtotal 683,874,375.71 683,874,375.71 (2) The information on the accounts receivable of individual withdrawn impairment is shown in the notes on accounts receivable for consolidated financial statements in the notes to the financial statements. (II) Liquidity Risk Liquidity risk refers to the risk of fund shortage occurring when the Company fulfills the settlement obligation in the mode of cash delivery or other financial assets. Liquidity risk may originate from the failure to sell financial assets at fair value as soon as possible; or from the other party’s failure to pay off its contractual debts; or from the earlier maturity of debts; or from the failure to generate the expected cash flow. To control the risk, the Company comprehensively adopts multiple financing approaches including notes clearing and bank loans, appropriately combine long-term and short-term financing modes and optimize the financing structure to maintain the balance between financing sustainability and flexibility. The Company has obtained the line of credit from a number of commercial banks to satisfy its operation fund needs and capital expenditure. Classification of financial liabilities by remaining maturity days Item Period-end Carrying value Contract amount not Within 1 year 1 to 3 years Over 3 discounted years Bank’s 1,162,776,823.86 1,192,606,559.00 1,091,188,156.22 101,418,402.78 borrowings Current portion of notes payable Notes payable 775,243,787.56 775,243,787.56 775,243,787.56 and accounts payable Other payables 154,654,648.71 154,654,648.71 154,654,648.71 Subtotal 2,092,675,260.13 2,122,504,995.27 2,021,086,592.49 101,418,402.78 - (Continued) Item Period-beginning Carrying value Contract amount not Within 1 year 1 to 3 years Over 3 discounted years Bank’s 1,097,426,244.52 1,150,897,387.67 949,418,290.45 201,479,097.22 borrowings Current portion 199,834,258.85 201,313,356.07 201,313,356.07 of notes payable Notes payable 349,777,358.80 349,777,358.80 349,777,358.80 and accounts payable Other payables 38,694,561.94 38,694,561.94 38,694,561.94 Long-term 16,825,912.17 16,825,912.17 16,825,912.17 199 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 payables Subtotal 1,702,558,336.28 1,757,508,576.65 1,556,029,479.43 201,479,097.22 (III) Market Risk Market risk means the fluctuation risk of the fair value of financial instruments or the future cash flow due to market price changes. 1. Interest rate risk Interest rate risk means the fluctuation risk of the fair value of financial instruments or the future cash flow due to changes of market interest rate. The risk of changes of market interest rate facing the Company is mainly related to its borrowings with interests calculated in floating interest rates. As at 31 December 2018, the amount of the Company’s bank borrowings with interests calculated in floating interest rates was RMB240,000,000.00 (31 December 2017: RMB593,000,000.00). Under the hypothesis of other variables remaining unchanged, suppose that the interest rates changed by 50 reference points, then there would be no significant effects on the Company’s total profits and shareholders’ equity. 2. Foreign exchange risk Foreign exchange risk means the fluctuation risk of the fair value of financial instruments or the future cash flow due to changes of foreign exchange rate. The risk of changes of foreign exchange facing the Company is mainly related to the Company’s foreign-currency monetary assets and liabilities. As for foreign currency assets and liabilities, when short-tem imbalances occur, the Company will trade foreign currencies at market rate as necessary, so as to limit the net risk exposure to an acceptable level. The information on the Company’s foreign currency monetary assets and liabilities at the period-end is shown in the notes on foreign currency monetary items of other for consolidated financial statements in the notes to the financial statements. XI. The Disclosure of Fair Value 1. Ending Fair Value of Assets and Liabilities at Fair Value Unit: RMB Ending fair value Item Fair value measurement Fair value measurement Fair value measurement Total items at level 1 items at level 2 items at level 3 I. Consistent fair value -- -- -- -- measurement II. Inconsistent fair value -- -- -- -- measurement 200 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value Measurement Items at Level 1 3. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for Consistent and Inconsistent Fair Value Measurement Items at Level 2 4. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for Consistent and Inconsistent Fair Value Measurement Items at Level 3 5. Sensitiveness Analysis on Unobservable Parameters and Adjustment Information between Beginning and Ending Carrying Value of Consistent Fair Value Measurement Items at Level 3 6. Explain the Reason for Conversion and the Governing Policy when the Conversion Happens if Conversion Happens among Consistent Fair Value Measurement Items at Different Levels 7. Changes in the Valuation Technique in the Current Period and the Reason for Such Changes 8. Fair Value of Financial Assets and Liabilities Not Measured at Fair Value 9. Other XII. Related Party and Related-party Transactions 1. Information Related to the Company as the Parent of the Company Proportion of share Proportion of voting held by the rights owned by the Name Registration place Nature of business Registered capital Company as the Company as the parent against the parent against the Company (%) Company (%) Foshan Huaxin Manufacturing Development Co., Foshan RMB457,930,000 65.20% 65.20% industry Ltd. Notes: information on the Company as the parent China National Paper-industry Investment Corporation, the actual controller of the Company, directly holds 0.11% shares of the Company. The total shares of the Company directly held by China National Paper-industry Investment Corporation and indirectly held through Foshan Huaxin Development Co., Ltd. are 65.31%. China Chengtong Holdings Group Co., Ltd., the ultimate controller of the Company, enjoys all shares of China National Paper-industry Investment Corporation. The ultimate controller of the Company is China Chengtong Holdings Group Co., Ltd. Other notes: 201 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 2. Subsidiaries of the Company Refer to Note IX Equity in Other Entities for details. 3. Information on the Joint Ventures and Associated Enterprises of the Company Refer to Note IX Equity in Other Entities for details of significant joint ventures or associated enterprises of the Company. Information on other joint venture or associated enterprise of occurring related-party transactions with the Company in Reporting Period, or forming balance due to related-party transactions made in previous period: Name Relationship with the Company Guangdong Chengtong Logistics Co., Ltd. Associated enterprise Other notes 4. Information on Other Related Parties Name Relationship with the Company Foshan Huaxin Import & Export Co., Ltd. Under the control of the same actual controller Guangdong Guanhao High-tech Co., Ltd. Under the control of the same actual controller Dragon State International Limited Under the control of the same ultimate controller Tianjin Port Free Trade Zone Zhongwu Investment Development Under the control of the same actual controller Co., Ltd. Yueyang Forest & Paper Co., Ltd. Under the control of the same actual controller Yueyang Antai industrial Co., Ltd Under the control of the same actual controller Yuanjiang Paper Co., Ltd. Under the control of the same actual controller Hunan Juntai Pulp Paper Co., Ltd. Under the control of the same actual controller Zhejiang Guanhao Advanced Materials Co., Ltd. Under the control of the same actual controller Guangdong Guanhao High-tech Industrial Co., Ltd. Under the control of the same ultimate controller Dragon State Investment Development Co., Ltd. Under the control of the same ultimate controller China Chengtong International Co., Ltd. Under the control of the same ultimate controller HONG KONG DRAGON STATE YAN WING Under the control of the same ultimate controller INTERNATIONAL COMPANY Zhanjiang Guanhao Paper Co., Ltd. Under the control of the same ultimate controller Under the control of the independent director of the actual Guangzhou Chenhui Pulp & Paper Trading Co., Ltd. controller Chengtong Energy (Guangdong) Co., Ltd. Under the control of the same ultimate controller Chengtong Real Estate Investment Co., Ltd. Under the control of the same ultimate controller Tianjin CMST Chuangshi Logistics Co., Ltd. Under the control of the same ultimate controller Other notes 202 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 5. List of Related-party Transactions (1) Information on Acquisition of Goods and Reception of Labor Service Information on acquisition of goods and reception of labor service Unit: RMB The approval trade Whether exceed trade Same period of last Related party Content Reporting Period credit credit or not year Guangdong Reception of labor Chengtong 840,416.67 6,450,000.00 Not 17,407,421.76 service Logistics Co., Ltd. Guangdong Guanhao High-tech Purchase of goods 140,188.96 3,230,000.00 Not 369,490.76 Industrial Co., Ltd. Guangzhou Chenhui Pulp & Purchase of goods 10,640,606.77 45,000,000.00 Not 6,453,777.61 Paper Trading Co., Ltd. Yueyang Antai Purchase of goods 890,156.90 5,500,000.00 Not 663,229.06 Industrial Co., Ltd. Zhejiang Guanhao Advanced Materials Purchase of goods 307,537.99 Not Co., Ltd. China National Paper Industry Purchase of goods 665,169,020.33 1,142,360,300.00 Not 192,949,030.08 Investment Corp. Tianjin Port Free Trade Zone Zhongwu Purchase of goods 3,913,511.43 Investment Development Co., Ltd. Tianjin CMST Reception of labor Chuangshi Logistics 56,477,625.12 110,000,000.00 Not service Co., Ltd. Total 734,465,552.74 1,312,540,300.00 221,756,460.70 Information of sales of goods and provision of labor service Unit: RMB Related party Content Reporting Period Same period of last year Guangdong Guanhao High-tech Sales of goods 10,934,163.52 12,646,501.73 203 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Co., Ltd. Guangzhou Chenhui Pulp & Sales of goods 66,604,008.15 107,144,946.76 Paper Trading Co., Ltd. Yueyang Forest & Paper Co., Sales of goods 15,681,631.95 25,872,112.25 Ltd. Zhanjiang Guanhao Paper Co., Sales of goods 174,670.48 65,290.60 Ltd. Zhejiang Guanhao Advanced Sales of goods 325,948.27 Materials Co., Ltd. China National Paper Industry Sales of goods 2,377,452.61 34,121,462.56 Investment Corp. Guangdong Chengtong Other 63,600.00 Logistics Co., Ltd. Total 96,097,874.98 179,913,913.90 Information of sales/purchase of goods and provision/reception of labor service (2) Information on Related-party Trusteeship/Contract Lists of trusteeship/contract: Unit: RMB Name of the Name of the Income entruster/contract entrustee/ Type Start date Due date Pricing basis recognized in this ee contractor Reporting Period Notes: Lists of entrust/contractee Unit: RMB Name of the Name of the Charge entruster/contract entrustee/ Type Start date Due date Pricing basis recognized in this ee contractor Reporting Period Notes: (3) Information on Related-party Lease The Company was lessor: Unit: RMB The lease income confirmed in The lease income confirmed in Name of lessee Category of leased assets the Reporting Period the same period of last year Guangdong Chengtong Houses and buildings 409,600.00 737,413.33 Logistics Co., Ltd. 204 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Chengtong Energy Houses and buildings 5,714.29 (Guangdong) Co., Ltd. The Company was lessee: Unit: RMB The lease fee confirmed in the The lease fee confirmed in the Name of lessor Category of leased assets Reporting Period same period of last year Notes: (4) Information on Related-party Guarantee The Company was guarantor: Unit: RMB Execution accomplished Secured party Guarantee amount Start date End date or not The Company was secured party Unit: RMB Execution accomplished Guarantor: Guarantee amount Start date End date or not Notes: (5) Information on Inter-bank Lending of Capital of Related Parties Unit: RMB Related party Amount Start date End date Note Borrowing China Paper Corporation 20,000,000.00 4 April 2018 3 August 2018 China Paper Corporation 5,000,000.00 4 April 2018 6 August 2018 China Paper Corporation 15,000,000.00 4 April 2018 28 December 2018 China Paper Corporation 10,000,000.00 4 April 2018 28 December 2018 Foshan Huaxin 5,600,000.00 9 August 2018 31 December 2018 Development Co., Ltd. Foshan Huaxin 12,600,000.00 1 September 2018 31 December 2018 Development Co., Ltd. Lending (6) Information on Assets Transfer and Debt Restructuring by Related Party Unit: RMB Related party Content Reporting period Same period of last year 205 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (7) Information on Remuneration for Key Management Personnel Unit: RMB Item Reporting period Same period of last year Remuneration for key management 3,123,231.54 3,845,000.00 personnel (8) Other Related-party Transactions The Company deposited the monetary capital in China Chengtong Finance Corporation Ltd. The relevant interest received in the Reporting Period is RMB324,764.07. The notes receivable of the Company were discounted in China Chengtong Finance Corporation Ltd. for which RMB2,224,702.02 of handling charge was paid in the Reporting Period. 6. Accounts Receivable and Payable of Related Party (1) Accounts Receivable Unit: RMB Ending balance Beginning balance Item Related party Carrying amount Bad debt provision Carrying amount Bad debt provision Foshan Huaxin Notes receivable and Import & Export 549,882.60 330,982.23 549,882.60 201,380.64 accounts receivable Co., Ltd. Notes receivable and Guangdong Guanhao 3,344,313.88 4,380,668.14 accounts receivable High-tech Co., Ltd. Guangzhou Chenhui Notes receivable and Pulp & Paper 2,606,562.50 2,018,375.33 accounts receivable Trading Co., Ltd. Notes receivable and Yueyang Forest & 3,906,883.44 7,043,454.67 accounts receivable Paper Co., Ltd. Notes receivable and Yueyang Antai 5,302.10 5,302.10 5,302.10 5,302.10 accounts receivable Industrial Co., Ltd Notes receivable and Zhanjiang Guanhao 2,617.76 130.89 accounts receivable Paper Co., Ltd. Long Bond Notes receivable and Investment 175.15 175.15 176.14 88.07 accounts receivable Development Co., Ltd. Subtotal 10,415,737.43 336,590.37 13,997,858.98 206,770.81 Prepayments China Paper 1,939,495.40 206 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Corporation Guangzhou Chenhui Prepayments Pulp & Paper 3,259,470.15 Trading Co., Ltd. Guangdong Prepayments Chengtong Logistics 558,233.03 Co., Ltd. Subtotal 558,233.03 5,198,965.55 Guangdong Other receivables Chengtong Logistics 899,858.00 50,250.77 1,019,540.63 62,254.41 Co., Ltd. Subtotal 899,858.00 50,250.77 1,019,540.63 62,254.41 (2) Accounts Payable Unit: RMB Item Related party Ending carrying amount Beginning carrying amount Notes payable and accounts Guangdong Chengtong 510,997.88 4,413,891.39 payable Logistics Co., Ltd. Notes payable and accounts Guangzhou Chenhui Pulp & 1,726,693.70 1,726,693.70 payable Paper Trading Co., Ltd. Notes payable and accounts China Paper Corporation 112,621,632.26 19,794,676.49 payable Notes payable and accounts Yueyang Antai Industrial Co., 229,398.00 298,400.00 payable Ltd Notes payable and accounts Zhejiang Guanhao Advanced 118,390.00 payable Materials Co., Ltd. Notes payable and accounts Tianjin CMST Chuangshi 33,071,832.47 payable Logistics Co., Ltd. Notes payable and accounts Guangdong Guanhao High-tech 135,922.28 payable Industrial Co., Ltd. Tianjin Port Free Trade Zone Notes payable and accounts Zhongwu Investment 2,052,704.73 payable Development Co., Ltd. Subtotal 148,278,944.31 28,422,288.59 Advances from customers China Paper Corporation 1,147,031.58 573,515.79 Guangzhou Chenhui Pulp & Advances from customers 94,989.97 1,992,812.03 Paper Trading Co., Ltd. Subtotal 1,242,021.55 2,566,327.82 207 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Foshan Huaxin Development Other payables 13,007,084.99 7,055,585.83 Co., Ltd. Guangdong Chengtong Other payables 1,110,384.98 1,110,384.98 Logistics Co., Ltd. Tianjin CMST Chuangshi Other payables 16,400,000.00 Logistics Co., Ltd. Other payables China Paper Corporation 81,634,166.67 Subtotal 112,151,636.64 8,165,970.81 7. Commitments of Related Party 8. Other XIII. Stock Payment 1. The Overall Situation of Stock Payment □ Applicable □ Not applicable 2. The Stock Payment Settled in Equity □ Applicable □ Not applicable 3. The Stock Payment Settled in Cash □ Applicable □ Not applicable 4. Modification and Termination of the Stock Payment Naught 5. Other XIV. Commitments and Contingency 1. Significant Commitments Significant Contingency on Balance Sheet Date As of 30 December 2018, there was no significant commitment for the Company to disclose. 208 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 2. Contingency (1) Significant Contingency on Balance Sheet Date Contingency generated from pending action or arbitration and the corresponding financial influence “3.4” high altitude falling production safety accident caused by a flash burn (hereinafter referred to as the“3.4 Safety Accident”) At around 9:15am on 4 March 2017, a major production safety accident occurred in the factory area of Huafeng Paper Co., Ltd., a subsidiary of the Company. It was mainly because that Wuhan Kedio Electric Power Technology Co., Ltd. (hereinafter referred to as “Wuhan Kedio”) undertook the 120m reinforced concrete chimney anti-corrosion project in the name of Jiangsu Tianxing High-Altitude Anti-Corrosion Engineering Co., Ltd. (hereinafter referred to as “Jiangsu Tianxing”); Wuhan Kedio subcontracted the project to Liu Jiechun in the form of labor and material subcontracting and Liu Jiechun undertook the project in the name of Yancheng Xinda High-Altitude Anti-Corrosion Co., Ltd. (hereinafter referred to as Yancheng Xinda). On 4 March 2017, Liu Jiechun took nine workers (including the six victims who had died in the accident) to carry out the 120m reinforced concrete chimney anti-corrosion project in the factory area of Huafeng Paper and during the construction, flash burn caused high altitude falling and resulted in the death of six workers. After the accident, as the owner, Huafeng Paper immediately launched the emergency plan for safety accident. The emergency group comprising principal leaders of Huafeng Paper rushed to the scene to handle the accident at the first time and transferred RMB11.16 million to the regulatory bank account of Zhuhai Gaolan Port Economic Zone in accordance with the requirements of the government of Zhuhai Gaolan Port Economic Zone to compensate the relatives of the victims. Then Jiangsu Tianxing also transferred RMB1.4 million to the regulatory bank account. After handling the accident, the government of Zhuhai Gaolan Port Economic Zone returned the remaining RMB1.4 million in the regulatory bank account to Huafeng Paper, so Huafeng Paper actually paid RMB9.76 million to the relatives of victims. Zhuhai Huafeng brought a lawsuit of recourse against Jiangsu Tianxing High-Altitude Anti-Corrosion Engineering Co., Ltd. and Wuhan Kedio Electric Power Technology Co., Ltd. on 16 Mar. 2017. Then, Wuhan Kedio Electric Power Technology Co., Ltd. applied to add Yancheng Xinda High-Altitude Anti-Corrosion Co., Ltd. as a defendant and Yancheng Xinda High-Altitude Anti-Corrosion Co., Ltd. applied to add Liu Jiechun, the actual constructor, as a defendant. The criminal case shall be tried before civil compensation case. In June 2018, the criminal case was closed; as at 31 December 2018, the civil compensation case was not closed yet. (2) In Despite of no Significant Contingency to Disclose, the Company Shall Also Make Relevant Statements There was no significant contingency in the Company. 3. Other XV. Events after Balance Sheet Date 1. Significant Non-adjusted Events Unit: RMB 209 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Influence number to the Reason of inability to estimate Item Content financial position and operating influence number results 2. Profit Distribution Unit: RMB Profits or dividends to be distributed 0.00 Profits or dividends announced to be distributed after the approval 0.00 3. Sales Return 4. Notes to Other Events after Balance Sheet Date XVI. Other Significant Events 1. The Accounting Errors Correction in Previous Period (1) Retrospective Restatement Unit: RMB Name of the influenced report Content Processing program accumulative impact items during comparison period (2) Prospective Application Reason for adopting prospective Content Processing program application 2. Debt Restructuring 3. Assets Replacement (1) Non-monetary Assets Exchange (2) Other Assets Replacement 4. Pension Plan Approved in the 9th meeting of the 6th of Board of Directors in 2016, the Company could participate in the corporate pension plan of China Chengtong Holdings Co., Ltd., and formulate its own pension plan implementation rules under the framework of China Chengtong Holdings Co., Ltd. in line with China National Paper Industry Investment Corp. Pension Plan Implementation Rules and the actual situation. Annuity payment is 210 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 divided into enterprise contribution and individual contribution. The total annual contribution of the enterprise is 5% of the total salary of the previous year, the individual contribution of the employee is 25% of the contribution of the enterprise, and the employee who is in service before 1 Jan. 2017 of the Company can volunteer to participation in the annuity plan. 5. Discontinued Operations Unit: RMB Profit from discontinued operations Income tax Item Income Expense Total profit Net profit attributable to expense owners of the Company as the parent Kunshan Focai Packaging & 56,860.50 -118,432.59 -118,432.59 -118,432.59 Printing Co., Ltd. Other notes 6. Segment Information (1) Determination Basis and Accounting Policies of Reportable Segment In accordance with the internal organization structure, management requirements and internal report system, the Company identified the reportable segments based on the product segment and assessed the operational performance of ivory business, printing business and latex business. The assets and liabilities sharing with other segments shall be proportionally distributed among segments by scales. (2) The Financial Information of Reportable Segment Unit: RMB Offset among Item Ivory board Printed matter Latex Other Total segment Main business 2,967,099,980.90 300,303,707.84 340,511,671.17 -18,929,027.67 3,588,986,332.24 revenue Main business 2,815,978,176.83 233,505,234.64 258,424,558.78 -17,304,119.20 3,290,603,851.05 cost -3,415,587,102.0 Total assets 6,730,111,905.19 407,437,871.53 278,529,227.13 1,794,202,842.37 5,794,694,744.15 7 -1,167,771,660.8 Total liabilities 3,109,482,279.63 179,117,652.37 98,503,446.62 51,910,706.58 2,271,242,424.31 9 211 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (3) If there Was no Reportable Segment, or the Total Amount of Assets and Liabilities of Each Reportable Segment Could not Be Reported, Relevant Reasons Shall Be Clearly Stated (4) Other Notes 7. Other Significant Transactions and Events with Influence on Investors’ Decision-making 8. Other XVII. Notes of Main Items in the Financial Statements of the Company as the Parent 1. Notes Receivable and Accounts Receivable Unit: RMB Item Ending balance Beginning balance (1) Notes Receivable 1) Notes Receivable Listed by Category Unit: RMB Item Ending balance Beginning balance 2) Notes Receivable Pledged by the Company at the Period-end Unit: RMB Item Amount 3) Notes Receivable Endorsed by the Company or Discounted and not due on the Balance Sheet Date at the Period-end Unit: RMB Non-derecognized amount at the Item Derecognized Amount at the period-end period-end 4) Notes Transferred to Accounts Receivable because Drawer of the Notes Failed to Execute the Contract or Agreement Unit: RMB Amount of the notes transferred to accounts receivable at the Item period-end Other notes (2) Accounts Receivable 1) Accounts Receivable Classified by Category Unit: RMB Category Ending balance Beginning balance 212 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Bad debt Bad debt provision Carrying value Carrying value provision Withdra Carrying Bad debt Proportio wal amount Proportio Withdrawal provision Amount Amount Amount Amount n proportio n proportion n Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end □ Applicable √ Not applicable Among these groups, accounts receivable adopting aging analysis method to withdraw bad debt provision: □ Applicable √ Not applicable Among these groups, accounts receivable adopting balance percentage method to withdraw bad debt provision: □ Applicable √ Not applicable Among these groups, accounts receivable adopting other methods to withdraw bad debt provision: 2) Bad Debt Provision Withdrawal, Reversed or Recovered in the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB0.00; the amount of the reversed or collected part during the Reporting Period was of RMB0.00. Significant amount of reversed or recovered bad debt provision: Unit: RMB Name of the entity Amount Method 3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount Of which: significant actual verification of accounts receivable Unit: RMB Whether occurred because of Name of the entity Nature Amount Reason Procedure related-party transactions Notes to verification of accounts receivable: 4) Top5 of the Ending Balance of the Accounts Receivable Collected according to Arrears Party 5) Derecogniziton of Accounts Receivable due to the Transfer of Financial Assets 6) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Accounts Receivable Other notes: 2. Other Receivables Unit: RMB Item Ending balance Beginning balance Interest receivable 4,481,906.67 213 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Other receivables 56,645,592.12 187,029,661.31 Total 61,127,498.79 187,029,661.31 (1) Interest Receivable 1) Category of Interest Receivable Unit: RMB Item Ending balance Beginning balance Interest of borrowings among units 4,481,906.67 Total 4,481,906.67 2) Significant Overdue Interest Unit: RMB Whether occurred Entity Ending balance Overdue time Overdue reason impairment and its judgment basis Other notes: (2) Dividends Receivable 1) Dividends Receivable Unit: RMB Item (or investees) Ending balance Beginning balance 2) Significant Dividends Receivable Aged over 1 Year Unit: RMB Whether occurred Item (or investees) Ending balance Aging Reason impairment and its judgment basis Other notes: (3) Other Receivables 1) Other Receivables Disclosed by Category Unit: RMB Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Category Withdra Carrying Carrying Proportio wal Proportio Withdrawal Amount Amount value Amount Amount value n proportio n proportion n 214 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Other receivables withdrawn bad debt 56,652,9 56,645,59 187,029 187,029,66 provision according 100.00% 7,369.57 0.01% 100.00% 61.69 2.12 ,661.31 1.31 to credit risks characteristics 56,652,9 56,645,59 187,029 187,029,66 Total 100.00% 7,369.57 0.01% 100.00% 61.69 2.12 ,661.31 1.31 Other receivables with significant single amount for which bad debt provision separately accrued at the end of the period □ Applicable √ Not applicable Among these groups, other receivables adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Unit: RMB Ending balance Aging Other receivables Bad debt provision Withdrawal proportion Subentry within 1 year 1-3 months 40,955.85 4-12 months 147,391.46 7,369.57 5.00% Total 188,347.31 7,369.57 3.91% Notes: Among these groups, other receivables adopting balance percentage method to withdraw bad debt provision □ Applicable √ Not applicable Among these groups, other receivables adopting other methods to withdraw bad debt provision: □ Applicable √ Not applicable 2) Bad Debt Provision Withdrawal, Reversed or Recovered in the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB7,369.57; the amount of the reversed or collected part during the Reporting Period was of RMB0.00. Significant amount of reversed or recovered bad debt provision: Unit: RMB Name of the entity Reversed or collected amount Method 3) Particulars of the Actual Verification of Other Receivables during the Reporting Period Unit: RMB Item Amount Of which, the verification of significant other receivables: Unit: RMB Whether occurred because of Name of the entity Nature Amount Reason Procedure related-party transactions 215 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Notes to the verification of other receivables: 4) Other Receivables Classified by Nature Unit: RMB Nature Ending carrying amount Beginning carrying amount Accounts of related party within the scope of 56,464,614.38 186,766,283.28 combination Petty cash 188,347.31 263,378.03 Total 56,652,961.69 187,029,661.31 5) Top 5 of the Ending Balance of Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to ending Ending balance of Name of the entity Nature Ending balance Aging balance of total other bad debt provision receivables% Huaxin (Foshan) Within 1 year, 1 to 2 Color Printing Co., Intercourse funds 56,464,614.38 99.67% years Ltd. Zhang Jiangyong Petty cash 101,994.66 Within 1 year 0.18% 3,839.84 Huang Guoguang Petty cash 45,432.10 Within 1 year 0.08% 1,483.70 Liu Yulu Petty cash 40,920.55 Within 1 year 0.07% 2,046.03 Total -- 56,652,961.69 -- 100.00% 7,369.57 6) Accounts Receivable Involving Government Subsidies Unit: RMB Project of government Estimated recovering Name of the entity Ending balance Ending aging subsidies time, amount and basis 7) Derecogniziton of Other Receivables due to the Transfer of Financial Assets 8) The Amount of the Assets and Liabilities Formed due to the Transfer and the Continued Involvement of Other Receivables Other notes: 3. Long-term Equity Investment Unit: RMB Ending balance Beginning balance Item Depreciation Depreciation Carrying amount Carrying value Carrying amount Carrying value reserve reserve Investment to 1,065,107,442.14 1,065,107,442.14 1,070,107,442.14 1,070,107,442.14 subsidiaries Investment to 654,019,918.14 654,019,918.14 joint ventures and 216 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 associated enterprises Total 1,719,127,360.28 1,719,127,360.28 1,070,107,442.14 1,070,107,442.14 (1) Investment to Subsidiaries Unit: RMB Depreciation Ending balance of Beginning Investee Increase Decrease Ending balance reserve depreciation balance withdrawn reserve Zhuhai Hongta Renheng 927,570,697.11 927,570,697.11 Packaging Co., Ltd. Huaxin (Foshan) Color Printing Co., 122,536,745.03 122,536,745.03 Ltd. Kunshan Focai Packaging & 5,000,000.00 5,000,000.00 Printing Co., Ltd. Zhejiang Hongta Renheng Packaging 15,000,000.00 15,000,000.00 Technology Co., Ltd. Total 1,070,107,442.14 5,000,000.00 1,065,107,442.14 (2) Investment to Joint Ventures and Associated Enterprises Unit: RMB Increase/decrease Ending Gains and Adjustme Cash Withdraw balance Additiona losses nt of Beginnin Reduced Changes bonus or al of Ending of Investee l recognize other g balance investmen of other profits impairme Other balance depreciati investmen d under comprehe t equity announce nt on t the equity nsive d to issue provision reserve method income I. Joint ventures II. Associated enterprises China 5,103,538 648,916,3 654,019,9 Chengton 217 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 g Finance .56 79.58 18.14 Corporati on Ltd. 5,103,538 648,916,3 654,019,9 Subtotal .56 79.58 18.14 5,103,538 648,916,3 654,019,9 Total .56 79.58 18.14 (3)Other Notes 4. Operating Revenue and Cost of Sales Unit: RMB Reporting Period Same period of last year Item Operating revenue Cost of sales Operating revenue Cost of sales Other notes: 5. Investment Income Unit: RMB Item Reporting Period Same period of last year Long-term equity investment income 11,803,128.09 accounted by cost method Long-term equity investment income 5,103,538.56 22,059,145.80 accounted by equity method Investment income from disposal of 3,214,180.81 long-term equity investment Investment income from holding of 10,000,000.00 available-for-sale financial assets Total 18,317,719.37 33,862,273.89 6. Other XVIII. Supplementary Materials 1. Items and Amounts of Non-recurring Profit or Loss √ Applicable □ Not applicable Unit: RMB Item Amount Note 218 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Gains/losses on the disposal of non-current 1,390,311.65 assets Government grants recognized in the current period, except for those acquired in the ordinary course of business or granted at 17,519,293.30 certain quotas or amounts according to the government’s unified standards Gains due to that the investment costs for the Company to obtain subsidiaries, associates and joint ventures are lower than the 21,561,238.54 enjoyable fair value of the identifiable net assets of the investees when making the investments Gain/loss from change of fair value of trading assets and liabilities, and investment gains from disposal of trading financial assets and liabilities and available-for-sale 12,578,644.03 financial assets, other than valid hedging related to the Company’s common businesses Other non-operating income and expense -2,043,196.49 other than the above Other items conformed with the definition of non-recurring profit or loss Less: Income tax effects 761,426.39 Non-controlling interests effects 15,622,709.95 Total 33,274,278.25 -- Explain the reasons if the Company classifies an item as an non-recurring gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item □ Applicable √Not applicable Item Amount (RMB) Reason 2. Return on Equity and Earnings Per Share EPS (Yuan/share) Profit as of Reporting Period Weighted average ROE (%) EPS-basic EPS-diluted Net profit attributable to ordinary -0.14% -0.01 -0.01 shareholders of the Company Net profit attributable to ordinary -1.83% -0.07 -0.07 219 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 shareholders of the Company after deduction of non-recurring profit or loss 3. Differences between Accounting Data under Domestic and Overseas Accounting Standards (1) Differences of Net Profit and Net Assets Disclosed in Financial Reports Prepared under International and Chinese Accounting Standards □ Applicable √ Not applicable (2) Differences of Net profit and Net assets Disclosed in Financial Reports Prepared under Overseas and Chinese Accounting Standards □ Applicable √ Not applicable (3) Explain Reasons for the Differences between Accounting Data under Domestic and Overseas Accounting Standards; for any Adjustment Made to the Difference Existing in the Data Audited by the Foreign Auditing Agent, Such Foreign Auditing Agent’s Name Shall Be Clearly Stated 4. Other 220 Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 Part XII Documents Available for Reference 221