Foshan Huaxin Packaging Co., Ltd.
Semi-Annual Report 2009
Stock ID: Yuehuabao B Stock Listed in: Shenzhen Stock Exchange
Stock Code: 200986 First Listed: 6 July, 2000
Total Capital Share: 505.425 million shares Amount of negotiable B shares: 171.925 million shares2
Contents
I. Important Statement…………………………………………………………………3
II. Company Profile……………………………………………………………………3
III. Change of Share Capital and Shares Held by Principal Shareholders………….…5
IV. Particulars about the Directors, Supervisors and Senior Managements………...…6
V. Report of the Board of Directors…………………………………………….……6
VI. Significant Events……………………………………………………………..…13
VII. Financial Report…………………………………………………………………21
VIII. Documents Available for Reference……………………………………………923
Foshan Huaxin Packaging Co., Ltd.
Semi-Annual Report 2009
I. Important Statement
I. The Board of Directors, the Supervisory Committee as well as directors, supervisors
and senior managements of the Company guarantee that there are no any omissions,
fictitious or serious misleading statements carried in the report and will take all
responsibilities, individual and/or joint for the authenticity, accuracy and integrality of the
whole contents. The report is prepared both in Chinese and English. Should there be any
diversity in interpretation, the Chinese version shall prevail.
II. Mr. Tong Laiming, Chairman of the Board, Mr. Wang Qi, the General Manager and Mr.
Liu Yulu, Manager of the Accountant Department hereby declares that the financial report
enclosed in this Semi-Annual Report is authentic and integrated.
III. Mr. Zhu Zhengfu, independent director of the Company didn’t attend the meeting due
to business and authorized Ms. Ge Yun who was independent director of the Company in
written to vote on his behalf.
IV. The Semi-Annual Financial Report 2009 has not been audited.
II. Company Profile
I. Company Profile
1. Legal name of the Company in Chinese: 佛山华新包装股份有限公司
Legal name in English: Foshan Huaxin Packaging Co., Ltd.
2. Stock Listed in: Shenzhen Stock Exchange
Stock ID: Yuehuabao B
Stock Code: 200986
3. Registered address: No. 18, Jihua Road 5th, Foshan City, Guangdong Province
Office Address: 18/F, Jinghua Bldg., No. 18, Jihua Road 5th, Foshan City, Guangdong
Post Code: 528000
Email: hejf@fshxp.com
4. Legal Representative: Tong Laiming
5. Secretary of the Board: Zhou Qihong
Address: 18/F, Jinghua Bldg, No. 18 Jihua Road 5th, Foshan City
Tel: 0757-83981729
Fax: 0757-83992026
Email: hf_zhouqh@fshxp.com
6. Securities Affairs Representative: Zhou Qihong
Address: 18/F, Jinghua Bldg., No. 18 Jihua Road 5th, Foshan City
Tel: 0757-83992076
Fax: 0757-83992026
Email: hejf@fshxp.com4
7. Newspapers Designated for Information Disclosing: Securities Times, Ta Kung Pao
Website Designated by China Securities Regulatory Commission:
http://www.cninfo.com.cn
The Place Where the Interim Report is Prepared and Placed: Office of the Board of the
Company
8. Other relevant Information of the Company:
Initial business registration was on: 21 Jun. 1999
Registered place: Guangdong Provincial Industrial and Commercial Administrative
Bureau
Business license number: 4400001008467
Tax registration number: Guo-shui-zi No. 440601707682279
(II) Main financial data and indices
Unit: RMB Yuan
At the end of the
report period
At the period-end
of last year
Increase/decrease compared with
the period-end of last year (％)
Total assets 6,245,026,603.46 3,425,460,446.52 82.31%
Owners’ equity (or shareholders’ equity) 1,277,143,124.17 1,269,218,639.42 0.62%
Net assets per share 2.53 2.51 0.80%
In the report period
(from Jan. to Jun.)
The same period of
last year
Increase/decrease year-on-year
(％)
Operating profit 3,820,523.69 54,077,229.48 -92.94%
Total profit 4,404,741.29 54,364,240.18 -91.90%
Net profit 11,156,984.75 47,765,810.68 -76.64%
Net profit deducted non-recurring gain/loss -37,277,286.40 44,583,387.86 -183.61%
Basic earnings per share 0.022 0.095 -76.72%
Diluted earnings per share 0.022 0.095 -76.72%
Net return on equity 0.87% 3.73% -2.86%
Net cash flow from operating activities 48,667,492.35 149,219,401.29 -67.39%
Net cash flow from operating activities per share 0.096 0.295 -67.46%
(III) Non-recurring gains and losses
In “Net profit deducted non-recurring gains and losses” at the first half year of 2009,
the deducted items and relevant amounts were as follows:
Unit: RMB Yuan
Non-recurring gains and losses Amount
Gain/loss from non-current assets disposal 456,632.60
Other net non-operating income/expenses 130,585.00
Other items of non-recurring gains and losses 234,801.56
Incoming from disposal of equity 47,891,412.67
Expenditure of donation -3,000.00
Subtotal 48,710,431.83
Less: Impact on enterprise income tax of non-recurring gains and losses 130,106.285
Impact on minority interest income of non-recurring gains and losses 146,054.40
Total 48,434,271.15
(IV) Supplement of profit statement
According to requirements of Rule No. 9 on Information Disclosure and Financial
Records of Companies Publicly Issuing Securities issued by CSRC, the net assets
earning ratio and earnings per share were as follows:
Net assets earning ratio Earnings per share
From Jan. to Jun. 2009
Fully diluted Weighted average Basic earnings per share Diluted earnings per share
Net profit attributable to ordinary shareholders
of the Company
0.87% 0.88% 0.022 0.022
Net profit attributable to ordinary shareholders
of the Company after deducting non-recurring
profit and loss
-2.92% -2.92% -0.074 -0.074
III. Change of Share Capital and Shares Held by Principal Shareholders
(I) Change of Capital Share
There was no change in share capital of the Company in the report period
(II) The shareholders of the Company totaled to 18537 as of the end of report period.
(III) Shareholder holding over 5% (including 5%) shares of the Company was Foshan
Huaxin Development Co., Ltd.
(IV) Particulars about the top ten shareholders
Particulars about the top ten shareholders who registered before 30 Jun. 2009:
Shares held by the top ten shareholders
Name of shareholders Nature of shareholder
Proportion of
shares held
Total shares
held
Non-tradable
shares held
Shares pledged
or frozen
Foshan Huaxin Development Co., Ltd State-owned corporation 65.20% 329,512,030 329,512,030 0
Wu Haoyuan Overseas natural person 0.32% 1,602,541
Liu Tingyu Domestic natural person 0.31% 1,562,472
Ma Zeqi Domestic natural person 0.13% 670,000
PANG KWOK SHI Overseas natural person 0.13% 644,805
Lin Qingle Overseas natural person 0.13% 635,800
Lin Chubin Domestic natural person 0.12% 613,134
Lin Qiongzhi Domestic natural person 0.12% 585,580
China Material Development and
Investment General Corporation
State-owned corporation 0.11% 569,710 569,710 0
Foshan Assets Management Centre State-owned corporation 0.11% 569,710 569,710 0
Explanation on associated relationship
among the aforesaid shareholders or
acting-in-concert
China Material Development and Investment General Corporation ① is the controlling
shareholder of the principal shareholder of the Company, Foshan Huaxin Development Co.,
Ltd., therefore China Material Development and Investment General Corporation exists related
relationships with the Company and the controlling shareholders of the Company.
② The Company is unknown whether other shareholders exists related relationship or whether
it belongs to action-in-concert regulated in Measures for the Administration of Disclosure of6
Shareholder Equity Changes of Listed Companies.
In the report period, the shares held by shareholders of the Company ③ holding over 5%
(including 5%) were not pledged or frozen.
(V) Brief introduction of the top ten shareholders of tradable share
Name of shareholders Tradable shares held Variety of shares
Wu Haoyuan 1,602,541 Domestically listed foreign shares
Liu Tingyu 1,562,472 Domestically listed foreign shares
Ma Zeqi 670,000 Domestically listed foreign shares
PANG KWOK SHI 644,805 Domestically listed foreign shares
Lin Qingle 635,800 Domestically listed foreign shares
Lin Chubin 613,134 Domestically listed foreign shares
Lin Qiongzhi 585,580 Domestically listed foreign shares
Zhan Changcheng 568,295 Domestically listed foreign shares
Chen Pinghua 531,000 Domestically listed foreign shares
PIAO JOY GUANGSHI 500,104 Domestically listed foreign shares
Explanation on associated relationship among
the aforesaid shareholders or acting-in-concert
The Company is unknown whether other shareholders exists related
relationship or whether it belongs to action-in-concert regulated in
Measures for the Administration of Disclosure of Shareholder Equity
Changes of Listed Companies.
(VI) Controlling shareholder and the actual controller of the Company
The controlling shareholder or actual controlling holder of the Company remained
unchanged.
IV. Particulars about the Directors, Supervisors and Senior Managements
(I) In the report period, none of the directors, supervisors and senior managements is
holding the stocks of the Company.
(II) Particulars about changes of directors, supervisors and senior managements in the
report period:
The Company received resignation from Mr. Ji Xiangdong, Chief Financial Officer of
the Company. Mr. Ji Xiangdong resigned from post of CFO due to work, and his
resignation came into effect since it submitted to the Board of Directors.
V. Report of the Board of Directors
(I) Discussion and Analysis of overall operation
Since 2009, influenced by global financial crisis and the state policy to stimulate
macro-economic, market of paper-making and color-printed business of the Company
undergone bottom and rebound process.
Influenced by global financial crisis, demand of paper-making industry in domestic
and overseas market kept recession in this year. All paper-making enterprise anxious
to deal with inventories, which caused dropping of price of paper and decreased7
profitability of main business of the Company. In aspect of color printing, repaid
growth of export brought improvement of capacity in recent years. However,
recession of real economy due to financial crisis directly caused overplus of capacity
and shrink of market demand, which caused decline of price of printed matter. On the
other hand, macro policy to stimulate economy implemented by the country was
effective, and influence on demand of domestic market reduced gradually, which
supported revival of domestic paper-making and printing industries.
Under the severe market environment, subsidiaries of the Company developed new
varieties with low cost and price to suit for demand of low cost by clients, adjusted
market structure and made effort to exploit domestic market. However, these
measures never offset influence of recession, and operation achievement of the first
half year slipped down by a large margin year-on-year.
During the reporting period, the Company achieved an operation revenue of RMB
574,193,400, down by 30.90% year-on-year; an operating profit amounting to RMB
3,820,500, down by 92.94% year-on-year; a net profit attributable to the shareholders
of the parent company reaching RMB 11,157,000, down by 76.64% year-on-year.
1. Explanation on significant changes in assets structure in the report period compared
with the same period of last year
Unit: RMB Yuan
30 Jun. 2009 31 Dec. 2008
Items
Amount
Proportion in
total assets
Amount
Proportion in
total assets
Increase/decreas
e year-on-year
(%)
Total assets 6,245,026,603.46 100% 3,425,460,446.52 100% 82.31
Monetary capital 737,865,971.01 11.81% 208,091,895.59 6.07% 254.59
Notes receivable 203,315,987.45 3.26% 47,440,393.16 1.38% 328.57
Accounts receivable 716,032,618.61 11.46% 238,416,506.08 6.96% 200.33
Other receivables 53,059,288.98 0.85% 36,934,269.64 1.08% 43.66
Inventories 672,562,181.46 10.77% 335,648,893.09 9.80% 100.38
Fixed assets 3,023,650,888.28 48.41% 2,195,528,165.59 64.09% 37.72
Construction in progress 13,490,075.11 0.22% 1,176,195.54 0.03% 1,046.92
Intangible assets 485,864,215.96 7.78% 62,775,368.64 1.83% 673.97
Good will 18,067,648.56 0.30% -- -- --
Long-term deferred expenses 10,937,082.64 0.18% 6,895,053.00 0.20% 58.62
Short-term borrowings 1,613,673,449.96 25.84% 617,488,134.71 18.03% 161.33
Notes payable 350,754,816.78 5.62% 54,510,322.25 1.59% 543.46
Accounts payable 402,080,822.25 6.44% 264,477,215.08 7.72% 52.03
Accounts received in advance 123,460,514.38 1.98% 13,728,197.76 0.40% 799.32
Interests payable 29,180,122.64 0.47% 11,681,609.01 0.34% 149.80
Other accounts payable 96,761,413.74 1.55% 22,664,445.76 0.66% 326.93
Long-term payables 83,482,757.86 1.34% -- -- --
Accrued liabilities 14,090,000.00 0.23% -- -- --
Deferred income tax liabilities 18,937,523.29 0.30% -- -- --
Explanation on changes:8
1. Total assets at the period-end increased 82.31% compared with the period-begin,
mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd
absorbed into consolidated scope of the Company at the period-end, and consolidated
scope of the period-begin enlarged than the period-end;
2. Monetary capital at the period-end increased 254.59% than the period-begin,
mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd
absorbed into consolidated scope of the Company at the period-end, and consolidated
scope of the period-begin enlarged than the period-end;
3. Notes receivable at the period-end increased 325.57% than the period-begin,
mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd
absorbed into consolidated scope of the Company at the period-end, and consolidated
scope of the period-begin enlarged than the period-end;
4. Accounts receivable at the period-end increased 200.33% than the period-begin,
mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd
absorbed into consolidated scope of the Company at the period-end, and consolidated
scope of the period-begin enlarged than the period-end;
5. Other receivables at the period-end increased 43.66% than the period-begin, mainly
because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd absorbed into
consolidated scope of the Company at the period-end, and consolidated scope of the
period-begin enlarged than the period-end;
6. Inventories at the period-end increased 100.38% than the period-begin, mainly
because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd absorbed into
consolidated scope of the Company at the period-end, and consolidated scope of the
period-begin enlarged than the period-end;
7. Fixed assets at the period-end increased 37.72% than the period-begin, mainly
because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd absorbed into
consolidated scope of the Company at the period-end, and consolidated scope of the
period-begin enlarged than the period-end;
8. Construction in progress at the period-end increased 1,046.92% than the
period-begin, mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper
Co., Ltd absorbed into consolidated scope of the Company at the period-end, and
consolidated scope of the period-begin enlarged than the period-end;
9. Intangible assets increased 673.97% than the period-begin, mainly because balance
sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd absorbed into consolidated
scope of the Company at the period-end, and evaluation on land use right of Zhuhai
S.E.Z Hongta Renheng Paper Co., Ltd and Foshan Huafeng Paper Co., Ltd
appreciated;
10. Good will at the period-end increased RMB 18,067,648.56 than the period-begin,
mainly because the Company increased capital in Zhuhai S.E.Z Hongta Renheng
Paper Co., Ltd at the consideration of 75% equity of Foshan Huafeng Paper Co., Ltd,
then the Company has 40.176% equity of Zhuhai S.E.Z Hongta Renheng Paper Co.,
Ltd;
11. Long-term deferred expenses at the period-end increased 58.62% than the
period-begin, mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper9
Co., Ltd absorbed into consolidated scope of the Company at the period-end, and
consolidated scope of the period-begin enlarged than the period-end;
12. Short-term borrowings at the period-end increased 161.33% than the period-begin,
mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd
absorbed into consolidated scope of the Company at the period-end, and consolidated
scope of the period-begin enlarged than the period-end;
13. Notes payable at the period-end increased 543.46% than the period-begin, mainly
because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd absorbed into
consolidated scope of the Company at the period-end, and consolidated scope of the
period-begin enlarged than the period-end;
14. Accounts payable at the period-end increased 52.03% than the period-begin,
mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd
absorbed into consolidated scope of the Company at the period-end, and consolidated
scope of the period-begin enlarged than the period-end;
15. Accounts received in advance at the period-end increased 799.32% than the
period-begin, mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper
Co., Ltd absorbed into consolidated scope of the Company at the period-end, and
consolidated scope of the period-begin enlarged than the period-end;
16. Interests payable at the period-end increased 149.80% than the period-begin,
mainly because the Company issued short-term financing bonds amounting to RMB
500 million, and withdrawal of interest increased month by month.
17. Other payables at the period-end increased 326.93% than the period-begin, mainly
because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd absorbed into
consolidated scope of the Company at the period-end, and consolidated scope of the
period-begin enlarged than the period-end;
18. Long-term payables at the period-end increased RMB 18,937,523.29 than the
period-begin, mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper
Co., Ltd absorbed into consolidated scope of the Company at the period-end, and
consolidated scope of the period-begin enlarged than the period-end;
19. Accrued liabilities at the period-end increased RMB 14,090,000.00 than the
period-begin, mainly because balance sheet of Zhuhai S.E.Z Hongta Renheng Paper
Co., Ltd absorbed into consolidated scope of the Company at the period-end, and
consolidated scope of the period-begin enlarged than the period-end;
20. Deferred income tax liabilities increased RMB 18,937,523.29 than the
period-begin, mainly because the Company evaluated identifiable net assets of Foshan
Huafeng Paper Co., Ltd and Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd as of 30
Jun. 2008, and calculated deferred income tax liabilities with appreciation.
2. Explanation on significant changes in operating income and expense items during
the report period year-on-year
Unit: RMB Yuan
Items The first half year of 2009 The first half year of 2008
Increase/decrease
year-on-year (%)
Operating income 574,193,444.90 831,019,173.62 -30.9010
Operating cost 562,186,817.24 706,657,762.00 -20.44
Income from investment 78,431,052.19 32,985,717.68 137.77
Assets impairment loss -10,300,000.00 -- --
Operating profit 3,820,523.69 54,077,229.48 -92.94
Total profit 4,404,741.29 54,364,240.18 -91.90
Explanation on changes:
ⅰ. Operating income and operating cost in the report period decreased respectively
by 30.90% and 20.44% over the same period of last year, which was mainly due to the
impact of the financial crisis on Foshan Huafeng Paper Co., Ltd.. Affected by the
financial crisis, the market demand and selling prices of the said company’s
product—high-class coated white paper—experienced a considerable drop compared
with the same period of last year. Meanwhile, the gross profit rate also decreased
significantly due to the reduced production and the increased fixed cost per unit;
ⅱ. Investment gains in the report period increased by 137.77% over the same period
of last year, which was mainly due to the evaluated disposal gains of RMB
47,891,412.67 (the difference between the fair value of the 75% shares of Foshan
Huafeng Paper Co., Ltd. and the Company’s cost of investment into Foshan Huafeng
Paper Co., Ltd.) of the 75% shares of Foshan Huafeng Paper Co., Ltd., which were
used as the consideration for the shares of Zhuhai S.E.Z Hongta Renheng Paper Co.,
Ltd.;
ⅲ. Asset impairment loss in the report period registered a decrease of RMB
10,300,000.00 compared with the same period of last year, mainly because the market
price of coated white paper produced by Foshan Huafeng Paper Co., Ltd. showed an
increase on 30 Jun. 2009 compared with that on 31 Dec. 2008. The net realizable
value started to rise and the inventory falling price reserves of RMB 10,300,000.00
withdrawn on 31 Dec. 2008 was thus offset.
ⅳ. Operating profit and total profit in the report period was reduced respectively by
92.94% and 91.90% over the same period of last year, which was mainly due to the
impact of the financial crisis on Foshan Huafeng Paper Co., Ltd.. Affected by the
financial crisis, the market demand and selling prices of the said company’s
product—high-class coated white paper—experienced a considerable drop compared
with the same period of last year. Meanwhile, the gross profit rate also decreased
significantly due to the reduced production and the increased fixed cost per unit.
3. Analysis and explanation on cash flows in the report period
Unit: (RMB) Yuan
Items
The first half of
2009
The first half of
2008
Year-on-year increase/
decrease (%)
Net cash flows from operating
activities
48,667,492.35 149,219,401.29 -67.3911
Net cash flows from investment
activities
434,457,512.22 34,048,714.70 1,175.99
Net cash flows from financing
activities
46,649,070.85 -170,943,178.97 127.29
Explanation on changes:
ⅰ. Net cash flows from operating activities in the report period decreased by 67.39%
over the same period of last year, which was mainly due to the impact of the financial
crisis on Foshan Huafeng Paper Co., Ltd.. Affected by the financial crisis, the market
demand and selling prices of the said company’s product—high-class coated white
paper—experienced a considerable drop compared with the same period of last year.
Consequently, the cash received from selling products decreased compared with the
same period of last year;
443,362,104.65 from
ⅱ. Net cash flows from investment activities in the report period registered an
increase of 1,175.99% over the same period of last year. This was mainly because the
Company obtained net cash flow in amount of RMB 443,362,104.65 from Zhuhai S.E.Z
Hongta Renheng Paper Co., Ltd..
ⅲ. Net cash flows from financing activities in the report period increased by 127.29%
over the same period of last year, which was mainly because in the previous period,
the Company paid the short-term financing bill of RMB 420 million issued in 2007.
(Ⅱ) Main operation in the report period
1. Scope of main businesses
In the report period, the major products of the Company were high-class coated white
paper board and color-printing packaging paper.
2. Operation of main businesses
(1) Main businesses regarding industries and products
Unit: RMB’0000
Industries or
products
Operating
income
Operating cost
Gross profit
ratio (%)
Year-on-year
increase/
decrease of
operating
income (%)
Year-on-year
increase/
decrease of
operating cost
(%)
Year-on-year
increase/
decrease of
operating cost
(%)
Main businesses regarding industries
Paper-making
industries
50,727.93 50,973.35 -0.48% -32.98% -21.60% -14.59%
Color-package
printing industry
6,497.32 5,170.48 20.42% 3.60% 2.93% 0.51%
Main businesses regarding products12
High-class coated
white paper board
50,727.93 50,973.35 -0.48% -32.98% -21.60% -14.59%
Printing products 6,497.32 5,170.48 20.42% 3.60% 2.93% 0.51%
(2) Main business income regarding regions
Regions Main business income (Unit: RMB’0000) Year-on-year increase/ decrease (%)
Domestic 53,948.36 -18.98
Foreign 3,276.89 -79.54
(3) Explanation on the considerable change of the Company’s profit composition,
main businesses and their structure from those in the previous report period
Due to the impact of the global financial crisis in the report period, the profitability of
the Company’s paper-making business—one of the Company’s main
businesses—experienced a significant drop; Meanwhile, the investment gains in the
report period increased because of the evaluated disposal gains of RMB
47,891,412.67 of the 75% shares of Foshan Huafeng Paper Co., Ltd., which were used
as the consideration for the shares of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd.,
which led to a greater contribution by the investment gains to the Company’s profit in
the report period;
(4) Explanation on the change of the profitability (gross profit ratio) of the Company’s
main businesses
Due to the sluggish demand in the report period caused by the global financial crisis,
the sales and price of high-class coated white paper board—one of the Company’s
main products—showed a considerable decrease compared with the same period of
last year. Meanwhile, the fixed cost per unit was on the rise due to the falling
production. Consequently, the gross profit ratio dropped from 14.11% in the same
period of last year to -0.48%, with a year-on-year decrease of 14.59%.
3. Other businesses which had significant influence on net profit in the report period
In the report period, Tetra Pak Huaxin (Foshan) Packaging Co., Ltd.—the Company’s
affiliated company—achieved a net profit of RMB 12,215.86, which made a great
contribution to the total profit of the Company. With the Company holding 25% of its
shares, Tetra Pak Huaxin (Foshan) Packaging Co., Ltd. specialized in manufacturing
tetra packaging materials.
4. Difficulties and problems in operation
In the report period, the Company encountered the following difficulties in operation:
(1) Due to the influence of the international financial crisis, the demand in the
paper-making and printing market remained low, with shrinking export, fierce
competition in the domestic market and falling market prices of the relevant products.13
(2) The prices of the main raw materials showed a rebound, with the price of the
energy on the rise, which brought certain pressure on the production and operation of
the Company.
(Ⅲ) Investment in the report period
1. Use of raised funds
No funds were raised in the report period.
2. Significant investment projects of non-raised funds
There were no significant investment projects of non-raised funds in the report period.
Ⅵ. Significant Events
(Ⅰ) Corporate governance
In accordance with the Company Law, the Securities Law and other laws and
regulations issued by CSRC and Shenzhen Stock Exchange, the Company had, ever
since its being listed, continuously perfected its corporate governance structure,
regulated the operation and formulated a series of governance rules. The actual
corporate governance of the Company was basically in compliance with the
requirements of relevant regulatory documents issued by CSRC and Shenzhen Stock
Exchange. In the future, the Company would continue to improve its internal
management system, better the supervisory mechanism and strengthen the execution,
so as to ensure that every links of the Company’s operation would work well, and that
the Company’s business would grow steadily.
(Ⅱ) Profit distribution plan of the Company
The Company did not conduct profit distribution or capitalization of public reserves
for the first half of 2009.
(Ⅲ) As of the end of the report period, the equity of other listed companies, the equity
of financial enterprises (commercial banks, securities companies, insurance
companies, trust companies, futures companies, etc.) and the equity of would-be listed
companies held by the Company
Unit: (RMB) Yuan
Name of the held
object
Initial investment
amount
Amount of
shares held
Proportion in
the total
shares of the
held object
Carrying value
at period-end
Gains and
losses in
report
period
Change of
owners’ equity
in report
period
Accounting
subject
Source of
shares
Foshan Urban 3,100,000.00 0 2.583% 0 0.00 0.00 Long-term By14
Cooperation Bank
Co., Ltd.
equity
investment
investment in
the
establishment
of the held
object
Guangdong
Development Bank
113,558.00 0 0.0004% 113,558.00 0.00 0.00
Long-term
equity
investment
By
investment in
the
establishment
of the held
object
Fuhua Group Co.,
Ltd., Zhuhai S.E.Z
1,854,600.00
385,537.00
shares
0.11% 2,987,911.75 -- 906,649.40
Available-f
or-sale
financial
assets
By purchase
Total 5,068,158.00
385,537.00
shares
3,101,469.75 906,649.40
Notes: The relevant impairment loss had been withdrawn concerning the carrying
value at period-end of the investment amount of Foshan Urban Cooperation Bank Co.,
Ltd.
(Ⅳ) Significant lawsuits and arbitrations
Concerning the lawsuit filed by Foshan Huafeng Paper Co., Ltd. (hereinafter referred
to as “Huafeng Paper”)—the holding subsidiary of the Company—against Stora Enso
Packing Boards Asia Oy (hereinafter referred to as “Stora Enso”) over a disputed
transfer agreement, the basic details of the case had been disclosed in the previous
periodic reports. And the latest progress of the case by the end of the report period
was as follows:
In Apr. 2009, the Company received the Civil Ruling Paper (2009) (MS Zi No.285)
issued by the Supreme People’s Court of PRC. According to the Civil Ruling Paper,
the Supreme People’s Court, after deliberation of the collegiate bench, decided to
reject the retrial appeal filed by Stora Enso concerning the asset transfer agreement
dispute with Huafeng Paper.
At present, the said case is still in progress. And it is quite uncertain to tell whether15
the Company can get its claimed compensation through the judgment, execution and
other relevant judicial procedures concerning the case. Any new progress of the case
will be disclosed in time. And the Company is now in normal production and
operation.
(Ⅴ) Significant asset reorganization in the report period
In order to expand the Company’s production scale, and focus on developing the
high-class liquid food packaging paper with high technology and high added value to
change the single product structure, the Company planned to increase its investment
in Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. (hereinafter referred to as “Hongta
Renheng”). The project was considered a significant asset reorganization event of
listed company, which was briefed as follows:
Paying by the stock rights of Foshan Huafeng Paper Co., Ltd. (hereinafter referred to
as “Huafeng Paper”) respectively held by them, the Company and its related party
Dragon State International Limited (hereinafter referred to as “Dragon State
International”) subscribed for the increased capital of Hongta Renheng and became its
new shareholders. The original shareholders of Hongta Renheng had renounced the
pre-emptive right to buy the increased capital. After the subscription for the increased
capital, the Company and Dragon State International were to hold respectively
40.18% and 13.39% shares of Hongta Renheng. And the Company would be the
biggest shareholder of Hongta Renheng, with control over it. According to the
calculation standard of Article 12 of Administrative Rules for the Material Asset
Reorganizations of Listed Companies (hereinafter referred to as “Rules for
Reorganizations”), the total assets involved in this transaction valued RMB
2,774,390,100, with the operating income standing at RMB 1,659,508,300 and the net
asset value at RMB 1,036,173,000. All these indexes were in line with the standards
for material asset reorganization of Article 11 of the Rules for Reorganizations.
This transaction of the Company was considered a move of reorganization for
expansion, which was in line with the Company’s strategic planning and shareholders’
interests. The move to control Hongta Renheng could help improve the Company’s
production capacity and potential for long-term development, which conformed to the
country’s industrial policy and the development trend in the trade. Therefore, this
transaction was believed to be helpful for the Company in optimizing the resource
allocation, realizing the economies of scale, strengthen its market position and
promote its rapid development. The consistency of the Company’s operation and the
stability of its management would not be affected by the transaction and the minority
interests would also be fully safeguarded in this transaction.
In the report period, the asset reorganization project achieved progress as follows:
On 27 May 2009, the Reply Concerning Approving the Material Asset Reorganization
Plan of Foshan Huaxin Packaging Co., Ltd. (ZJXK 【2009】No.426) was issued by
CSRC.16
On 5 Jun. 2009, Huafeng Paper received the Notice of Approving the Change of
Registration (FHBTN Zi 【2009】No.0900366038) issued by Foshan Administrative
Bureau for Industry and Commerce, and became a subsidiary wholly-owned by
Hongta Renheng.
On 29 Jun. 2009, Hongta Renheng received the Notice of Approving the Change of
Registration (ZHBTW Zi 【2009】No.0900125957) issued by Zhuhai Administrative
Bureau for Industry and Commerce, as well as the Business License for Enterprise as
a Legal Person with the registration number as 440400400028253. According to the
Notice of Approving the Change of Registration, after the change, the registered
capital of Hongta Renheng would be increased to USD 211,061,305 and its business
scope would be changed to include the production and sale of self-made high-class
packaging paper boards. And the equity structure of Hongta Renheng after alteration
was as follows: Dragon State International Limited contributed USD 28,265,326,
holding 13.39% shares; Foshan Huaxin Packaging Co., Ltd. contributed USD
84,795,979, holding 40.18% shares; Yunnan Hongta (Group) Co., Ltd. contributed
USD 68,600,000, holding 32.5% shares; Yanlord Industries Pte. Ltd. contributed USD
29,400,000, holding 13.93% shares. So far, the equity change of Hongta Renheng was
completed, which marked the substantive completion of this material asset
reorganization.
Considering the substantive completion of the material asset reorganization project on
30 Jun. 2009, the balance sheet of Hongta Renheng was included into the Company’s
consolidated statements at the end of the report period. As a result, the scope of the
Company’s consolidated balance sheet was expanded at the end of the report period
compared to the period-begin, and the value of the Company’s total assets rose to
RMB 6,245,026,603.46, with a considerable increase of 82.31% over the period-begin.
Meanwhile, other items in the consolidated balance sheet also showed some increase
accordingly. According to the Agreement of Capital Increase and Share Expansion
signed by the parties involved in the reorganization, the gains and losses during the
transitional period of the reorganization process would be shared and shouldered by
the original shareholders of relevant parties in accordance with their original
shareholding ratios. And the operation gains and losses of Hongta Renheng were not
included in the Company’s consolidated statements before 1 Jul. 2009.
(Ⅵ) Significant related transactions
Related transactions arising from daily operation
In the report period, there existed routine related transactions between the Company’s
holding subsidiaries Foshan Huafeng Paper Co., Ltd. and Huaxin (Foshan) Color
Printing Co., Ltd. and the Company’s related parties Foshan Huaxin Import & Export
Co., Ltd. (hereinafter referred to as “Huaxin Import & Export”) and Qingdao
Chengtong Fuel Co., Ltd. (hereinafter referred to as “Chengtong Fuel”), of which the
details were specified in the Notes to the Financial Statements.17
Type of related
transaction
Related party Transaction
amount
(RMB’0000)
Proportion in the
total transaction
amount of the
same kind of
transactions
Pricing
principle
Settlement method
Purchasing coal Chengtong Fuel 1,270.11 19.76% Market price
Bank bills and telegraphic
transfer
Purchasing raw
materials
Huaxin Import
& Export
203.60 3.20% Market price
Bank bills and bank
transfer
Selling products
Huaxin Import
& Export
5970.68 10.43% Market price
Bank bills and bank
transfer
(Ⅶ) Non-operational current of creditor’s rights and debts
According to the Loan Contract signed by the Company and its parent company
Foshan Huaxin Development Co., Ltd., as of 30 Jun. 2009, the loan balance of the
Company to Foshan Huaxin Development Co., Ltd. stood at RMB 2,705,000.
(Ⅷ) Significant contracts and their implementation in the report period
1. The Company did not conduct significant transactions involving holding in trust,
contracting or leasing other companies’ assets, nor vice versa in the report period, and
there existed no such transactions carried down from the previous periods.
2. The Company did not entrust others to manage its cash asset in the report period
and there existed no such transactions carried down from the previous periods.
3. Significant guarantees provided by the Company in the report period
As of 30 Jun. 2009, the balance of the external guarantees concerning which the
Company had not been released from the guarantee responsibility stood at RMB 452
million. To be specific, the balance of the guarantee provided for Foshan Huafeng
Paper Co., Ltd. stood at RMB 417 million, while that for Huaxin (Foshan) Color
Printing Co., Ltd. stood at RMB 35 million. The guarantees in question were all joint
liability guarantees provided for the Company’s holding subsidiaries. And the
Company did not have overdue external guarantees.
Unit: RMB’0000
External guarantees provided by the Company (excluding guarantees for subsidiaries)
Guaranteed party
Date of occurrence (date
of signing relevant
Amount of
guarantee
Type of
guarantee
Term of
guarantee
Executed or
not
Guarantee for related
party or not18
agreement)
Total guarantee amount in report period 0.00
Total guarantee balance at period-end (A) 0.00
Guarantees provided for subsidiaries
Total guarantee amount for subsidiaries in
report period
1000
Total guarantee balance for subsidiaries at
period-end (B)
45200
Total guarantee amount provided by the Company (including those for subsidiaries)
Total guarantee amount (A+B) 45200
Proportion of total guarantee amount in net
asset of the Company
35.39%
Including:
Guarantee amount offered to shareholders,
actual controller and related parties (C)
0.00
Guarantee amount directly or indirectly
offered to those parties with their
asset-liability ratio over 70% (D)
0.00
Amount of the total guarantee amount
exceeding 50% of net assets (E)
0.00
Total of the above three types of guarantees*
（C+D+E）
0.00
(Ⅸ) Particular explanation and independent opinion from independent directors on
capital occupation by related parties and the Company’s external guarantees
According to the Circular on Relevant Issues Concerning Regulating Capital Flow
between Listed Companies and Related Parties and Provision of External Guaranty
By Listed Companies (ZJF【2003】No.56) issued by CSRC, as the independent
directors of Foshan Huaxin Packaging Co., Ltd., we conscientiously and carefully
examined the relevant materials provided by the Company’s Board of Directors, and
conducted investigations and checks on the Company’s relevant personnel concerning
the capital occupation by the controlling shareholder and other related parties, as well
as the external guarantees provided by the Company. And we hereby issue the
relevant explanation and our independent opinion as follows:
1. The Company adopted a prudent attitude towards and strictly controlled the
possible debt risks arising from the guarantees provided for external parties,
established a strict system for its provision of external guarantees and kept revising
and perfecting the system in time according to the Rules for Listing Shares in
Shenzhen Stock Exchange;19
2. After our careful examinations and checks according to relevant regulations, it was
found that: in the report period, there existed no occupation of the Company’s capital
by the controlling shareholder or other related parties; all the external guarantees of
the Company were provided for its holding subsidiaries, and the Company strictly
went through the relevant approval and authorization procedures; and the Company
had provided no guarantees for its controlling shareholder or other related parties, as
well as any non-corporate unit or individual.
(Ⅹ) Interviews and visits received in the report period
Reception time Reception place Way of reception Visitor Main discussion and materials provided
20 May 2009 The Company Field study
Zhang Yuanhang from
Shanghai Securities
Particulars about the Company’s main
business and operation
(Ⅺ) In the report period, the Company or the shareholders holding over 5%
(including 5%) shares of the Company made no commitment that would significantly
affect the Company’s operating results and financial status. And there was no such
commitments carried down from the previous periods, either.
(Ⅻ) In the report period, the Company, its directors, supervisors, senior management
personnel, shareholders, actual controller and purchaser received no investigations
from relevant authorities, no enforcement measures from judicial and discipline
inspection organs, no transfer to judicial organs, no prosecution for criminal liability,
no investigation from CSRC, no administrative punishment from CSRC, no ban from
securities market, no circulars of criticism, no being recognized as improper persons,
no punishment from other administrations and no public criticism from any stock
exchange.
(ⅩⅢ) Engagement of CPA firm
On 20 May 2009, the Company convened the 2008 Shareholders’ General Meeting, at
which the proposal on engaging a CPA firm for the year 2009 was examined and
approved. And the Company decided to engage Guangdong Dahua Delu Certified
Public Accountants as the Company’s auditing agency for its 2009 financial report.
(ⅩⅣ) Index for disclosed information
No. of public notice Date of disclosure Public notice
2009-001 21 Jan. 2009
Public Notice on Earnings Estimate
2009-002 11 Feb. 2009
Public Notice on Resolutions Made at the 1st Meeting of the 4th Board of Directors 2009
2009-003 11 Feb. 2009
Public Notice on Convening the 1st Provisional Shareholders’ General Meeting in 2009
2009-004 13 Feb. 2009
Public Notice on Progress of Increasing Investment in Zhuhai S.E.Z Hongta Renheng Paper Co.,
Ltd.20
2009-005 21 Feb. 2009
Suggestive Public Notice on External Investment by the Company’s Actual Controller China
Materials Investment Corp.
2009-006 27 Feb. 2009
Public Notice on Resolutions Made at the 1st Provisional Shareholders’ General Meeting in 2009
2009-007 27 Mar. 2009
Public Notice on Resolutions Made at the 2nd Meeting in 2009 of the 4th Board of Directors
2009-008 27 Mar. 2009
Public Notice on Resolutions Made at the 1st Meeting in 2009 of the 4th Board of Supervisors
2009-009 27 Mar. 2009
Summary of 2008 Annual Report
2009-010 27 Mar. 2009
Public Notice on Correcting Major Accounting Mistakes
2009-011 27 Mar. 2009
Public Notice on Provision of External Guarantee
2009-012 24 Apr. 2009
Public Notice on Resolutions Made at the 3rd Meeting in 2009 of the 4th Board of Directors
2009-013 24 Apr. 2009
Summary of the 1st Quarterly Report in 2009
2009-014 24 Apr. 2009
Public Notice on Routine Related Transaction
2009-015 29 Apr. 2009
Public Notice on Resolutions Made at the 4th Meeting in 2009 of the 4th Board of Directors
2009-016 29 Apr. 2009
Public Notice on Convening 2008 Annual Shareholders’ General Meeting
2009-017 8 May 2009
Public Notice on Resignation of the Company’s CFO
2009-018 21 May 2009
Public Notice on Resolutions Made at the 5th Meeting in 2009 of the 4th Board of Directors
2009-019 21 May 2009
Public Notice on Resolutions Made at 2008 Annual Shareholders’ General Meeting
2009-020 1 Jun. 2009
Public Notice on CSRC’s Approving the Company’s Plan of Material Asset Reorganization
2009-021 1 Jun. 2009
Explanation on Amendment to the Report of Increasing Investment in Zhuhai S.E.Z Hongta
Renheng Paper Co., Ltd. & Material Asset Reorganization (Related Transaction)
2009-022 1 Jun. 2009
Public Notice on Resolutions Made at the 6th Meeting in 2009 of the 4th Board of Directors
2009-023 1 Jun. 2009
Public Notice on Routine Related Transaction
2009-024 1 Jun. 2009
Public Notice on Convening the 2nd Provisional Shareholders’ General Meeting in 2009
2009-025 17 Jun. 2009
Public Notice on Resolutions Made at the 2nd Provisional Shareholders’ General Meeting in 2009
The above-mentioned provisional public notices and periodic reports in the report
period were all disclosed on Securities Times, Ta Kung Pao and www.cninfo.com.cn.21
Ⅶ. Financial Report (Un-audited)
Balance Sheet (Ⅰ)
Prepared by: Foshan Huaxin Packaging Co., Ltd. 30 Jun. 2009 Unit: (RMB) Yuan
Notes Amount at period-end Amount at period-begin
Items Consolidation Parent
company
Consolidation Parent company Consolidation Parent company
Current assets:
Monetary funds Ⅷ.(Ⅰ) 737,865,971.01 134,729,253.29 208,091,895.59 30,851,611.31
Transactional financial
assets
- - -
Notes receivable Ⅷ.(Ⅱ) 203,315,987.45 - 47,440,393.16 -
Accounts receivable Ⅷ.(Ⅲ) 716,032,618.61 - 238,416,506.08 -
Accounts paid in advance Ⅷ.(Ⅳ) 47,671,440.89 657,314.00 70,122,453.30 6,149,168.11
Interest receivable - - -
Dividend receivable - - -
Other accounts receivable Ⅷ.(Ⅴ) Ⅸ.(Ⅰ) 53,059,288.98 1,356,016,688.47 36,934,269.64 1,417,257,518.46
Inventories Ⅷ.(Ⅵ) 672,562,181.46 - 335,648,893.09 -
Non-current assets due
within 1 year
- - -
Other current assets Ⅷ.(Ⅶ) 3,318,046.51 - - -
Total current assets 2,433,825,534.91 1,491,403,255.76 936,654,410.86 1,454,258,297.88
Non-current assets:
Available-for-sale financial
assets
Ⅷ.(Ⅷ) 2,987,911.75 - - -
Held-to-maturity
investment
- - - -
Long-term accounts
receivable
- - - -
Long-term equity
investment
Ⅷ.(Ⅸ) Ⅸ.(Ⅱ) 228,610,174.01 1,127,799,679.01 198,070,534.49 988,083,927.13
Investment real estate Ⅷ.(Ⅹ) 10,798,859.06 - 11,025,316.46 -
Fixed assets Ⅷ.(Ⅺ) 3,023,650,888.28 1,497,550.06 2,195,528,165.59 1,610,873.38
Construction in progress Ⅷ.(Ⅻ) 13,490,075.11 - 1,176,195.54 -
Engineering material - - - -
Disposal of fixed assets - - - -
Productive biological assets - - - -
Oil and gas assets - - - -
Intangible assets Ⅷ.(ⅩⅢ) 485,864,215.96 - 62,775,368.64 -
Development expense Ⅷ.(ⅩⅣ) 12,456,903.51 - 7,748,092.27 -
Goodwill Ⅷ.(ⅩⅤ) 18,067,648.56 - - -
Long-term deferred
expenses
Ⅷ.(ⅩⅥ)
10,937,082.64 - 6,895,053.00 -22
Deferred tax assets Ⅷ.(ⅩⅦ) 4,337,309.67 - 5,587,309.67 -
Other non-current assets - - - -
Total non-current assets 3,811,201,068.55 1,129,297,229.07 2,488,806,035.66 989,694,800.51
Total assets 6,245,026,603.46 2,620,700,484.83 3,425,460,446.52 2,443,953,098.39
Balance Sheet (Ⅱ)
Prepared by: Foshan Huaxin Packaging Co., Ltd. 30 Jun. 2009 Unit: (RMB) Yuan
Notes Amount at period-end Amount at period-begin
Items Consolidation Parent
company
Consolidation Parent company Consolidation Parent company
Current liabilities:
Short-term borrowings Ⅷ.(ⅩⅣ) 1,613,673,449.96 368,000,000.00 617,488,134.71 280,000,000.00
Transactional financial liabilities - - - -
Notes payable Ⅷ.(ⅩⅩ) 350,754,816.78 - 54,510,322.25 -
Accounts payable Ⅷ.(ⅩⅩⅠ) 402,080,822.25 - 264,477,215.08 -
Accounts received in advance Ⅷ.(ⅩⅩⅡ) 123,460,514.38 - 13,728,197.76 -
Payroll payable Ⅷ.(ⅩⅩⅢ) 9,419,581.76 73,998.27 11,105,149.39 479,364.75
Tax payable Ⅷ.(ⅩⅩⅣ) -4,615,792.03 65,398.98 -32,142,429.38 169,547.79
Interest payable Ⅷ.(ⅩⅩⅤ) 29,180,122.64 24,671,500.00 11,681,609.01 10,546,500.00
Dividend payable Ⅷ.(ⅩⅩⅥ) 133,758.00 133,758.00 133,758.00 133,758.00
Other accounts payable Ⅷ.(ⅩⅩⅦ) 96,761,413.74 79,243,194.47 22,664,445.76 6,516,424.39
Non-current liabilities due within
1 year
- - - -
Other current liabilities Ⅷ.(ⅩⅩⅧ) 560,438,129.17 499,666,666.70 498,666,666.68 498,666,666.68
Total current liabilities 3,181,286,816.65 971,854,516.42 1,462,313,069.26 796,512,261.61
Non-current liabilities
Long-term borrowings Ⅷ.(ⅩⅩⅨ) 440,000,000.00 380,000,000.00 440,000,000.00 380,000,000.00
Bonds payable - - - -
Long-term payables Ⅷ.(ⅩⅩⅩ) 83,482,757.86 - - -
Special payables - - - -
Estimated liabilities Ⅷ.(ⅩⅩⅩⅠ) 14,090,000.00 - - -
Deferred tax liabilities Ⅷ.(ⅩⅩⅩⅡ) 18,937,523.29 - - -
Other non-current liabilities Ⅷ.(ⅧⅧⅧⅧ) 1,320,000.00 - 1,320,000.00 -
Total non-current liabilities 557,830,281.15 380,000,000.00 441,320,000.00 380,000,000.00
Total liabilities 3,739,117,097.80 1,351,854,516.42 1,903,633,069.26 1,176,512,261.61
Owners’ equity (or shareholders’
equity)
Paid-up capital (or share capital) Ⅷ.(ⅧⅧⅧⅧ) 505,425,000.00 505,425,000.00 505,425,000.00
505,425,000.00
Capital reserves Ⅷ.(ⅧⅧⅧⅧ) 250,531,482.00 250,531,482.00 253,763,982.00 250,531,482.00
Less: Treasury Stock - - - -
Surplus reserves Ⅷ.(ⅧⅧⅧⅧ) 125,274,475.42 125,274,475.42 125,274,475.42 125,274,475.42
Retained profits Ⅷ.(ⅧⅧⅧⅧ) 395,912,166.75 387,615,010.99 384,755,182.00 386,209,879.36
Foreign exchange difference -23
Total owners’ equity attributable to
parent company
1,277,143,124.17 1,269,218,639.42
Minority interests 1,228,766,381.49 252,608,737.84
Total owners’ equity 2,505,909,505.66 1,268,845,968.41 1,521,827,377.26 1,267,440,836.78
Total liabilities and owners’ equity 6,245,026,603.46 2,620,700,484.83 3,425,460,446.52 2,443,953,098.39
Profit Statement
Prepared by: Foshan Huaxin Packaging Co., Ltd. From Jan. 2009—Jun. 2009 Unit: (RMB) Yuan
Notes This period Same period of last year
Items Consolidation Parent
company
Consolidation Parent company Consolidation Parent company
. Total Ⅰ operating income 574,193,444.90 831,019,173.62
Including: operating income Ⅷ.(ⅩⅩⅩⅧ) 574,193,444.90 831,019,173.62
Ⅱ. Total operating cost 648,803,973.40 39,009,395.82 809,927,661.82 391,536.64
Including: operating cost Ⅷ.(ⅩⅩⅩⅧ) 562,186,817.24 706,657,762.00
Business taxes and
surcharges
Ⅷ.(ⅩⅩⅩⅨ)
359,108.28 360,733.54
Selling expenses Ⅷ.(XL) 20,071,354.31 27,136,153.79
Administrative
expenses
Ⅷ.(ⅩLⅠ)
36,520,388.07 7,100,048.64 36,607,305.81 5,847,490.90
Financial expenses Ⅷ.(ⅩLⅡ) 39,966,305.50 31,909,347.18 39,165,706.68 -5,455,954.26
Asset impairment loss Ⅷ.(ⅩLⅢ) -10,300,000.00
Add: gains/ losses from
change in fair value (“-” for
losses)
Gains/ losses from
investment (“-” for losses)
Ⅷ.(ⅩLⅣ) Ⅸ.(Ⅲ)
78,431,052.19 40,414,527.45 32,985,717.68 52,407,329.99
Including: gains from
investment in joint ownership
enterprises and joint ventures
30,539,639.52 30,539,639.52 32,985,717.68 32,985,717.68
Foreign exchange
difference (“-” for losses)
Ⅲ. Operating profit (“-” for
losses)
3,820,523.69 1,405,131.63 54,077,229.48 52,015,793.35
Add: non-operating income Ⅷ.(ⅩLⅤ) 587,217.60 319,943.85
Less: non-operating expense Ⅷ.(ⅧLⅧ) 3,000.00 32,933.15
Including: loss from
disposal of non-current assets
Ⅷ.Total profit (“-” for losses) 4,404,741.29 1,405,131.63 54,364,240.18 52,015,793.35
Less: income tax expense Ⅷ.(ⅧLⅧ) 2,252,647.07 - 1,339,259.30
Ⅷ. Net profit (“-” for losses) 2,152,094.22 1,405,131.63 53,024,980.88 52,015,793.35
Attributable to owners of
parent company
11,156,984.75 1,405,131.63 47,765,810.68 52,015,793.3524
Minority interests -9,004,890.53 5,259,170.20
Ⅷ. Earnings per share
(Ⅰ) Basic earnings per
share
0.022 0.0945
(Ⅱ) Diluted earnings per
share
0.022 0.0945
Cash Flow Statement
Prepared by: Foshan Huaxin Packaging Co., Ltd. From Jan. 2009—Jun. 2009 Unit: (RMB) Yuan
This period Same period of last year
Items
Consolidation Parent company Consolidation Parent company
Ⅰ. Cash flows from operating activities:
Cash received from sale of commodities and provision
of labor service
462,242,026.13 - 810,246,689.71 -
Refund of taxes and fares received - - - -
Other cash received relating to operating activities 36,131,040.88 161,133,894.00 31,427,790.93
628,162,929.40
Sub-total of cash inflows from operating activities 498,373,067.01 161,133,894.00 841,674,480.64
628,162,929.40
Cash paid for goods and services 371,426,185.90 - 563,036,462.41 -
Cash paid to and on behalf of employees 43,744,791.88 3,945,061.84 42,527,143.43 3,214,413.93
Taxes and fares paid 11,720,686.07 802,914.45 17,257,716.82 830,730.53
Other cash paid relating to operating activities 22,813,910.81 83,516,813.73 69,633,756.69 752,392,351.12
Sub-total of cash outflows from operating activities 449,705,574.66 88,264,790.02 692,455,079.35
756,437,495.58
Net cash flows from operating activities 48,667,492.35 72,869,103.98 149,219,401.29 -128,274,566.18
Ⅱ. Cash flows from investment activities:
Cash received from investment income 54,049,903.16 164,263,044.57
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets
449,466.45 51,516.64
Other cash received relating to investment activities 443,362,104.65
Sub-total of cash inflows from investment activities 443,811,571.10 54,101,419.80 164,263,044.57
Cash paid for acquiring fixed assets, intangible assets
and other long-term assets
7,850,018.88 20,052,705.10 720,860.00
Cash paid for investments 36,237,645.00
Other cash paid relating to investment activities 1,504,040.00 1,504,040.00
Sub-total of cash outflows from investment activities 9,354,058.88 37,741,685.00 20,052,705.10 720,860.00
Net cash flows from investment activities 434,457,512.22 -37,741,685.00 34,048,714.70 163,542,184.57
Ⅷ. Cash flows from financing activities
Cash received from absorbing investment 12,075,960.09 -
Including: Cash received from minority investment in
subsidiaries
12,075,960.09 -
Cash received from borrowings 573,967,770.99 336,000,000.00 893,137,122.54 577,800,000.00
Other cash received relating to financing activities - -
Sub-total of cash inflows from financing activities 586,043,731.08 336,000,000.00 893,137,122.54
577,800,000.00
Cash paid for settling debts 508,285,447.87 248,000,000.00 1,029,428,206.50 620,230,000.0025
Cash paid for interest expense and distribution of
dividends or profit
31,109,212.36 19,249,777.00 34,652,095.01 16,961,139.74
Including: Dividends and earnings paid to minority
shareholders by subsidiaries
- -
Other cash paid relating to financing activities - -
Sub-total of cash outflows from financing activities 539,394,660.23 267,249,777.00 1,064,080,301.51
637,191,139.74
Net cash flows from financing activities 46,649,070.85 68,750,223.00 -170,943,178.97 -59,391,139.74
. Effect of foreign exchange rate changes Ⅷ on cash and cash
equivalents
- -
Ⅷ. Net increase in cash and cash equivalents 529,774,075.42 103,877,641.98 12,324,937.02 -24,123,521.35
Add: Balance of cash and cash equivalents at
period-begin
208,091,895.59 30,851,611.31 63,767,336.50 24,921,687.13
Ⅷ. Balance of cash and cash equivalents at period-end 737,865,971.01 134,729,253.29 76,092,273.52
798,165.78
Consolidated Statement of Changes in Owners’ Equity (Ⅰ)
Prepared by: Foshan Huaxin Packaging Co., Ltd. From Jan. 2009—Jun. 2009 Unit: (RMB) Yuan
Amount in this period
Owners’ equity attributable to parent company
Items Paid-up capital
(or share
capital)
Capital reserve
Less:
treasury
stock
Surplus public
reserve
General
risk
reserve
Retained profit Others
Minority
interests
Total owners’ equity
I. balance at the end of last
year
505,425,000.00253,763,982.00 -125,274,475.42 384,755,182.00 - 252,608,737.84 1,521,827,377.26
Add: change of
accounting policy
- - - - - - - -
Correction of errors in
previous period
- - - - - - - -
II. Balance at the beginning
of this year
505,425,000.00253,763,982.00 -125,274,475.42 384,755,182.00 - 252,608,737.84 1,521,827,377.26
III. Increase/ decrease of
amount in this year (“-”
for decrease)
- -3,232,500.00 - - 11,156,984.75 - 976,157,643.65 984,082,128.40
(I) Net profit - - - - 11,156,984.75 - -9,004,890.53 2,152,094.22
(II)Gain/loss directly
included in owners’ equity
- -3,232,500.00 - - - - - -3,232,500.00
1. Net amount of
changes in book value of
financial assets available for
sale
- - - - - - - -26
2. Effect of changes in
other owners’ equity of
invested units under equity
method
- - - - - - - -
3. Effect of income tax
relating to items recorded in
owners’ equity
- - - - - - - -
4. Others - -3,232,500.00 - - - - - -3,232,500.00-
Subtotal of (I)and (II) - -3,232,500.00 - - 11,156,984.75 - -9,004,890.53 -1,080,405.78
(III) Investment by
owners and capital
reduction
- - - - - - 985,162,534.18 985,162,534.18
1. Capital investment
by owners
- - - - - - 13,075,960.09 13,075,960.09
2. Amount of
share-based payment
recorded in owners’ equity
- - - - - - - -
3. others - - - - - - 972,086,574.09 972,086,574.09
(IV) Profit distribution - - - - - - - -
1. Surplus public
reserve withdrawn
- - - - - - -
2. General risk reserve
withdrawn
- - - - - - -
3. Distribution to
owners (or shareholders)
- - - - - - - -
4. Others
(V)Internal carrying
forward of owners’ equity
- - - - - - - -
1. New increase of
capital (or share capital)
from capital reserves
- - - - - - - -
2. Converting surplus
reserves to capital (or share
capital)
- - - - - - - -27
3. Surplus reserves
used for making up losses
- - - - - - - -
4. Others - - - - - - - -
IV. Balance at the end of
this period
505,425,000.00250,531,482.00 -125,274,475.42 395,912,166.75 -1,228,766,381.49 2,505,909,505.66
Consolidated Statement of Changes in Owners’ Equity (Ⅱ)
Prepared by: Foshan Huaxin Packaging Co., Ltd. From Jan. 2009—Jun. 2009 Unit: (RMB) Yuan
Amount in last period
Owners’ equity attributable to parent company
Items Paid-up capital
(or share
capital)
Capital reserve
Less:
treasury
stock
Surplus public
reserve
General
risk
reserve
Retained profit Others
Minority
interests
Total owners’ equity
I. balance at the end of last
year
505,425,000.00253,763,982.00 -118,570,535.83 348,870,277.23 - 190,224,007.16 1,416,853,802.22
Add: change of
accounting policy
- - - - - - - -
Correction of errors in
previous period
- - - - - - - -
II. Balance at the beginning
of this year
505,425,000.00253,763,982.00 -118,570,535.83 348,870,277.23 - 190,224,007.16 1,416,853,802.22
III. Increase/ decrease of
amount in this year (“-” for
decrease)
- - - 6,703,939.59 35,884,904.77 - 62,384,730.68 104,973,575.04
(I) Net profit - - - 42,588,844.36 - -1,686,722.41 40,902,121.95
(II)Gain/loss directly
included in owners’ equity
- - - - - - - -
1. Net amount of
changes in book value of
financial assets available for
sale
- - - - - - - -
2. Effect of changes in
other owners’ equity of
invested units under equity
method
- - - - - - - -
3. Effect of income tax
relating to items recorded in
owners’ equity
- - - - - - - -28
4. Others - - - - - -
Subtotal of (I)and (II) - - - - 42,588,844.36 - -1,686,722.41 40,902,121.95
(III) Investment by owners
and capital reduction
- - - - - - 70,580,696.21 70,580,696.21
1. Capital investment by
owners
- - - - - - 70,580,696.21 70,580,696.21
2. Amount of
share-based payment
recorded in owners’ equity
- - - - - - - -
3. others - - - - - - -
(IV) Profit distribution - - - 6,703,939.59 -6,703,939.59 - -6,509,243.12 -6,509,243.12
1. Surplus public
reserve withdrawn
- - - 6,703,939.59 -6,703,939.59 - -
2. General risk reserve
withdrawn
- - - - - -
3. Distribution to
owners (or shareholders)
- - - - - - -6,509,243.12 -6,509,243.12
4. Others - - - - - - - -
(V)Internal carrying
forward of owners’ equity
- - - - - - - -
1. New increase of
capital (or share capital)
from capital reserves
- - - - - - - -
2. Converting surplus
reserves to capital (or share
capital)
- - - - - - - -
3. Surplus reserves used
for making up losses
- - - - - - -
4. Others
IV. Balance at the end of this
period
505,425,000.00253,763,982.00 -125,274,475.42 384,755,182.00 - 252,608,737.84 1,521,827,377.2629
FOSHAN HUAXIN PACKAGING CO., LTD.
NOTE TO FINANCIAL STATEMENT
For the six months ended 30 June 2009
（All amounts in RMB Yuan unless otherwise stated）
[English version for reference only]
I. Company profiles
Foshan Huaxin Packing Co., Ltd. (hereinafter referred to as the Company)
was promoted by Foshan Huaxin Development Co., Ltd., as a main sponsor,
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 jointly
invested by seven shareholders such as 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 Industry General
Corporation, and Foshan Light Industry Company by promotion with total
share capital of RMB 290,000,000 at par value of RMB 1 per share. The
Company is joint-stock company who was registered in Administration
Bureau for Commerce & Industry of Guangdong Province on June 21, 1999.
(Business License No. 40000000005147). In the year of 2000, the Company
successfully placed domestically listed foreign shares (B shares) amounting
to 149,500,000 by mean of private placing, which was listed in Shenzhen
Stock Exchange for trade. After offering, the Company’s total share capital
was increased to RMB 439,500,000.00. In June 2007, the Company
distributed dividends of 65,925,000 shares; therefore, the total share capital
was changed into RMB 505,425,000.00.
The Company is engaged in paper making, paper package and printing and 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. The
Company is located in No. 18, Jihua 5th Road, Foshan, Guangdong. Zhuhai S.E.Z Hongta
Renheng Paper Co., Ltd., Foshan Huafeng Paper Co., Ltd and Huaxin (Foshan) Color Printing Co.,
Ltd. are three shareholding subsidiaries of the Company, of which main products include
high-class coated white board, ivory board and color printed packaging products.
II. Basis for preparation30
The Company and its subsidiaries maintain their accounting record and prepare their statutory
financial statement base on the assumption of going concern, in accordance with transaction and
item’s substance and economic reality, and according to the New Accounting Standard for
Business Enterprise and relevant supplemental provisions issued by the Ministry of Finance on 15
February 2006, and also in the light of those Accounting policy and Accounting estimate that
described in part four of this FS notes.
III. Declaration of Compliance with the Enterprise Accounting Standards
The Company ensured that its financial statements prepared follow the requirements of the
Accounting Standards for Business Enterprise promulgated by the Ministry of Finance; fairly and
completely present the financial position, operation result and cash flows, and other relevant
information of the Company.
IV. Main accounting policies and accounting estimates adopted by the Company
(1) Accounting system
The Company performed the Accounting Standard for Business Enterprise (2006) and relevant
supplemental provisions.
(2) Fiscal year
The fiscal year of the Company is the solar calendar year, which is from January 1 to December
31.
(3) Standard currency of accounts
The Company adopts Renminbi as a standard currency of accounts.
(4) Accounting measurement attribute
The Company is to use accrual basis as record-keeping basis. The financial statement items shall
be accorded based on historical cost. Financial assets and financial liabilities which are measured
at their fair values, of which the variation is recorded into the profits and losses of the current
period, financial assets available for sale, derivative financial instruments shall be measured in the
light of fair value; inventories which are delayed in payment over the normal credit condition
when purchased and fixed assets shall be accorded with present value of purchase price;
inventories which impairment loss occurred shall be measured by net realizable value; other assets
depreciation shall be measured by recoverable amount (which higher between fair value and
present value); inventory surplus assets shall be measured by replacement cost.
(5) Recognition standard for cash equivalents
Cash equivalents of the Company refer to short-term (usually due within 3 months since the day of
purchase) and high circulating investments, which are easily convertible into known amount of
cash and whose risks in change of value are minimal.
(6) Foreign currency
For a foreign currency occurred, the amount in the foreign currency shall be translated into the
amount in the functional currency at an approximate exchange rate with the spot exchange rate of
the transaction date. For the balance of foreign currency at the period-end in various foreign
currency accounts, the foreign currency monetary items shall be translated at the spot exchange
rate on the balance sheet date, the balance of exchange shall be recorded into the profits and losses
at the current period; except that the balance of exchange arising from foreign currency31
borrowings for the purchase and construction or production of assets eligible for capitalization
shall be measured in the light of capitalization principle. The foreign currency non-monetary items
measured at the historical cost shall still be translated at the spot exchange rate on the transaction
date; the foreign currency non-monetary items measured at the fair value shall be translated at the
spot exchange rate on the fair value confirming date, the difference is taken as the changes in the
profit and loss of fair value.
(7) Recognition and measurement of financial instruments
A. Classification of financial assets and financial liabilities
Financial assets shall be classified into the following four categories when they are initially
recognized: (a) 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; (b) the investments which will be held to their maturity;
(c) loans and the account receivables; and (d) financial assets available for sale.
Financial liabilities shall be classified into the following two categories when they are initially
recognized: (a) the 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 which are measured at their fair values and of which the
variation is included in the current profits and losses; and (b) other financial liabilities.
B. Recognition basis and measurement method
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 by the
Company 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
value; 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: (a) 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;
(b) 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: (a) 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; (b For the derivative financial
liabilities, which are connected to the equity instrument for which there is no quotation in the32
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. (c) 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: i. the best estimated
amount as outgone due to performing the relevant current obligation; or ii. the surplus after
accumulative amortization as determined according to the effective interest method is subtracted
from the initially recognized amount.
C. Recognition 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 entire financial asset to be transferred and shall recognize the consideration it
receives 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: (a) If it gives up its control over the financial asset, it shall
stop recognizing the financial asset; (b) 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: (a) The book value of the transferred financial asset; (b) 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 2 items shall be included into the profits and
losses of the current period: (a) The book value of the portion whose recognition has been stopped;
(b) 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.
D. Determination of the fair value of financial assets and financial liabilities
As for the financial assets or financial liabilities for which there is an active market, the quoted
prices in the active market shall be used to determine the fair values thereof. Where there is no
active market for a financial instrument, the enterprise concerned shall adopt value appraisal
techniques (the value appraisal techniques mainly include the prices adopted by the parties, who
are familiar with the condition, in the latest market transaction upon their own free will, the
current fair value obtained by referring to other financial instruments of the same essential nature,
the cash flow capitalization method and the option pricing model, etc.) to determine its fair value.
As for the financial assets initially obtained or produced at source and the financial liabilities33
assumed, the fair value thereof shall be determined on the basis of the transaction price of the
market.
E. Impairment inspection and withdrawal method of impairment provision for financial assets and
financial liabilities
The Company shall carry out an inspection, on the balance sheet day, on the carrying amount of
the financial assets other than those measured at their fair values and of which the variation is
recorded into the profits and losses of the current period. An impairment test shall be made on the
financial assets with significant single amounts. With regard to the financial assets with
insignificant single amounts, it shall be included in a combination of financial assets with similar
risk features so as to conduct another impairment 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.
Where a financial asset which is measured on the basis of post-amortization costs and for which
there is any objective evidence proving that the impairment occurred, the impairment losses shall
be recognized in accordance with the balance between book value and the current value of the
predicted future cash flow. Where there is a very small gap between the predicted future cash flow
of a short-term account receivable item and the current value thereof, the predicted future cash
flow is not required to be capitalized when determining the relevant impairment-related losses.
Where an equity instrument investment for which there is no quoted price in the active market and
whose fair value cannot be reliably measured, or a derivative financial asset which is connected
with the equity instrument and which must be settled by delivering the equity instrument, suffers
from any impairment, the gap between the carrying amount of the equity instrument investment or
the derivative financial asset and the current value of the future cash flow of similar financial
assets capitalized according to the returns ratio of the market at the same time shall be recognized
as impairment-related losses. Where a fair value of financial assets available for sale drops by a
big margin or not contemporarily in anticipation, its impairment losses shall be recognized, the
accumulative losses arising from the decrease of the fair value of the owner’s equity which was
directly included shall be transferred out and recorded into impairment losses.
(8) Withdrawal method for reserve for bad debts of accounts receivable
A reserve for bad debts shall, in accordance with the balance of its current value of future cash
flow’s lowering than its book value, be withdrawn on accounts receivable (including accounts
receivable and other receivables) with significant single amounts and that there is any objective
evidence shows that it has been impaired and ones with insignificant single amounts but with the
greater risk after combination based on credit risk features; A withdrawal proportion for bad debts
reserve shall, based on the actual loss rate of accounts receivable combination with same aging
and combining the present situation, be confirmed on accounts receivable (including accounts
receivable and other receivables) with insignificant single amounts and those with significant
single amounts and there has not been impaired after independent test, Withdrawal proportions of
bad debts reserve are as follows:
Aging Withdrawal proportion
==================== =================
1-3 months -
4-12 months 5%34
1-2 years 10%
2-3 years 20%
Over 3 years 50%
==================== =================
(9) Recognition and measurement of inventories
A. The term "inventories" refers to finished products or merchandise possessed by an enterprise
for sale in the daily of business, or work in progress in the process of production, or materials and
supplies to be consumed in the process of production or offering labor service.
B. The sending out inventories shall be measured by planned cost.
C. On the date of balance sheet, the inventories shall be measured whichever is lower in
accordance with the cost and the net realizable value. The Company shall make provision for loss
on decline in value of inventories on the ground of the balance of the cost of inventories is higher
than the net realized value. Such merchandise inventory for sale directly as finished goods
inventories, merchandise and materials for sale, their net realizable value shall be the amount after
deducting estimated sale expense and relevant taxes from the estimated sale price of the
inventories in course of normal production and operation; the net realizable value of materials
inventories for processing shall be the amount after deducting the estimated cost of completion,
estimated sale expense and the relevant taxes from the estimated sale price of finished products in
course of normal production and operation; on the balance sheet date, for inventories with the
contract price and inventories without the contract price in the same inventories, their net
realizable value shall be measured separately, and comparing with their corresponding costs, their
amounts of provision for loss on decline in value of inventories withdrawn or carried forward shall
be confirmed respectively.
D. Inventory system for inventories: Perpetual inventory system shall be adopted.
E. The Company shall amortize the easily consumed products of low value and packing articles
and supplies by employing the one-off write-off method.
(10) Recognition and measurement of long-term equity investment
A. Recognition of initial investment cost of long-term equity investment
(a) For the merger of enterprises under the same control, if the consideration of the merging
enterprise is that it makes payment in cash, transfers non-cash assets or bear its debts or issue
equity securities, it shall, on the date of merger, regard the share of the book value of the owner's
equity of the merged enterprise as the initial cost of the long-term equity investment. The
difference between the initial cost of the long-term equity investment and the book value of
merger consideration paid or the total amount of the par value of share issued shall offset against
the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be
adjusted.
(b) For the merger under different control, the Company, on the date of merger, regards the fair
value of the merger consideration paid and various direct costs as the initial cost of the long-term
equity investment.
(c) Besides the long-term equity investments formed by the merger of enterprises, the initial cost
of a long-term equity investment obtained by making payment in cash shall be the purchase cost
which is actually paid; the initial cost of a long-term equity investment obtained on the basis of
issuing equity securities shall be the fair value of the equity securities issued; the initial cost of a35
long-term equity investment of an investor shall be the value stipulated in the investment contract
or agreement except the unfair value stipulated in the contract or agreement.
B. A long-term equity investment that is controlled by the Company shall be accounted by
employing the cost method, and shall be made an adjustment by employing the equity method
when it works out consolidated financial statements. A long-term equity investment that does not
do joint control or does not have significant influence on the Company, and entity, and has no
offer in the active market and its fair value cannot be reliably measured, shall be measured by
employing the cost method. A long-term equity investment that does joint control or significant
influences over the Company shall be accounted by employing the equity method.
C. Recognition measurement for income from long-term equity investment
The price of a long-term equity investment measured by employing the cost method shall be
included at its initial investment cost. If there are additional investments or disinvestments, the
cost of the long-term equity investment shall be adjusted. The dividends or profits declared to
distribute by the invested entity shall be recognized as the current investment income. The
investment income recognized by the investing enterprise shall be limited to the amount received
from the accumulative net profits that arise after the invested entity has accepted the investment.
Where the amount of profits or cash dividends obtained by the investing entity exceeds the
aforesaid amount, it shall be regarded as recovery of initial investment cost. The price of a
long-term equity investment measured by employing the equity method shall, in accordance with
the attributable share of the net profits or losses of the invested entity, recognize the investment
profits or losses and adjust the book value of the long-term equity investment. The investing
enterprise shall, in the light of the profits or cash dividends declared to distribute by the invested
entity, calculate the proportion it shall obtain, and shall reduce the book value of the long-term
equity investment correspondingly. Where any change is made to the owner's equity other than the
net profits and losses of the invested entity, the book value of the long-term equity investment
shall be adjusted and be included in the owner's equity. When disposing of a long-term equity
investment, the difference between its book value and the actual purchase price shall be included
in the current profits and losses. If any change other than the net profits and losses of the invested
entity occurs and is included in the owner's equity, the portion previously included in the owner's
equity shall, when disposing of a long-term equity investment measured by employing the equity
method, be transferred to the current profits and losses according to a certain proportion.
D. On the balance sheet date, where an long-term equity investment for which it is measured by
employing the cost method, there is no quoted price in the active market and whose fair value
cannot be reliably measured, there is any objective evidence proving that such long-term equity
investment has been impaired, shall be withdrawn provision for impairment of long-term equity
investment in the light of the gap between the book value of long-term equity investment and
current value of the future cash flow of similar investment according to the return ratio of the
market at the same time,. Where other investment for which there exist impairment signs, shall be
withdrawn provision for impairment of long-term equity investment in the light of the method
mentioned in IV (16) in the Notes to the Financial Statement.
E. Recognition basis of joint control and significant influences over the investing enterprises: the
joint control shall be recognized in the light of the control over an economic activity in accordance
with the contracts and agreements, which does not exist unless the investing parties of the
economic activity with one an assent on sharing the control power over the relevant important36
financial and operating decisions. Significant influences shall be recognized in the light of 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. Where an investing enterprise is able to have significant influences on an invested entity,
the invested entity shall be its associated entity.
(11) Recognition and measurement of investment real estates
A. Investment real estates include: 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.
B. The initial measurement of the investment real estate shall be made at its cost. The Company
shall make a subsequent measurement to the investment real estate through the cost pattern
C. An investment real estates measured through the cost pattern shall be withdrawn a depreciation
and made an amortization by employing the same method with fixed assets and intangible assets.
D. Where an investment real estates measured through the cost pattern for which there exist
impairment signs on the balance sheet, shall be withdrawn provision for impairment of investment
real estates in the light of the method mentioned in IV (16) in the Notes to the Financial Statement.
(12) Recognition and measurement of fixed assets
A. Fixed assets refers to the tangible assets that simultaneously possess the features as follows: (a)
they are held for the sake of producing commodities, rendering labor service, renting or business
management; and (b) their useful life is in excess of one fiscal year.
B. No fixed assets may be recognized unless it simultaneously meets the conditions as follows: (a)
the economic benefits pertinent to the fixed assets are likely to flow into the enterprise; and (b) the
cost of the fixed assets can be measured reliably. Where the subsequent expenditure related with
fixed assets, meeting the aforesaid recognition condition, shall be measured into the cost of the
fixed assets, while not meeting the aforesaid recognition condition, it shall be measured into the
profits and losses of the current period.
C. The initial measurement of fixed assets shall be made at its cost.
D. The Company shall account the depreciation of the fixed assets by employing the straight-line
method.
Category of fixed asset Useful life
Expected net
salvage value
Annual depreciation
rate (%)
================== =============== =========== ===============
House and building 40 years 10% 2.25%
Machinery equipment 20-30 years 10% 3-4.50%
Transport equipment 8 years 10% 11.25%
Other 5 -10 years 10% 9-18%
================== ============== =========== ===============
E. A fixed assets, for which it is stopped to use for six months in succession due to running under
its production capacity or natural disasters, shall be recognized idle fixed assets. The Company
shall withdraw depreciation of idle fixed assets by employing the method with other fixed assets.
F. On the balance sheet date, where a fixed assets for which there exist impairment signs, shall be
withdrawn provision for impairment of fixed assets in the light of the method mentioned in IV (16)
in the Notes to the Financial Statement.37
(13) Recognition and measurement of construction in progress
A. No construction in progress may be recognized unless it simultaneously meets the conditions as
follows: a. the economic benefits are likely to flow into the Company, and b. the cost of the
construction in progress can be measured reliably. The construction in progress shall be measured
in the light of the actual cost when the assets complete and achieve estimated usable status.
B. Constructions in progress are carried down to fixed assets according to their actual costs when
completing and achieving estimated usable status. The fixed assets that have been completed and
reached estimated usable status but have not yet been through completion and settlement
procedures are charged to an account according to their estimate values; adjustment will be
conducted upon confirmation of their actual values.
C. On the balance sheet date, where a construction in progress for which there exist impairment
signs, shall be withdrawn provision for impairment of the construction in progress in the light of
the method mentioned in IV (16) in the Notes to the Financial Statement.
(14) Recognition and measurement of intangible assets
A. The intangible assets shall be initially measured according to its cost.
B. In accordance with such integrative factors as intangible asset’s contractual right or other
statutory rights, same industry situation, historical experience as well as expert discussion, if it is
able to forecast the period when the intangible assets can bring economic benefit to the Company,
it shall be regarded as an intangible asset with certain service life; if it is unable to forecast the
period when the intangible assets can bring economic benefit to the Company, it shall be regarded
as an intangible asset with uncertain service life.
C. With regard to intangible assets with limited useful life, the following factors shall be
considered when the useful life is estimated: (aa) general life cycle of products manufactured with
the said assets, information of useful life of similar assets obtained; (b) estimation over the present
phase and future development tendency in the respect of technology and technics; (c) market
demand of products manufactured with the said assets and of labor service provided by the said
assets; (d) action taken by present or potential competitor; (e) expected maintain expenditure for
which it keeps economic benefit capacity brought by the said assets, and expenditure capacity paid
in advance by the Company; (f) such laws, regulations or the similar restriction related with
control period of the said assets, i.e. concession period and tenancy duration; and (g) relevance of
useful life of other assets held by the Company.
D. With regard to intangible assets with limited service life shall be amortized reasonably in
accordance with the expected realization pattern of the economic benefits which relevant to the
intangible assets within the service life, if it is unable to determine the expected realization pattern
reliably, intangible assets shall be amortized by the straight-line method. Intangible assets with
uncertain service life may not be amortized, but the Company shall check the service life of the
said intangible assets for every year, and make impairment testing.
E. On the balance sheet date, the Company shall check future economic benefit capacity is
expected to be brought by the intangible asset to it. And the said intangible assets shall be
withdrawn provision for impairment in the light of the method mentioned in IV (16) in the Notes
to the Financial Statement.
F. The research expenditures for its internal research and development projects of the Company
shall be recorded into the profit or loss for the current period. The development expenditures for
its internal research and development projects of the Company may be confirmed as intangible38
assets when they satisfy the following conditions simultaneously:(a)It is feasible technically to
finish intangible assets for use or sale;(b)It is intended to finish and use or sell the intangible
assets;(c)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;(d)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 (e)The development expenditures of the
intangible assets can be reliably measured.
(15) Recognition and measurement of goodwill
The goodwill shall be recognized on the light of the positive balance between the business
combination costs not under the same control and the fair value of the identifiable net assets it
obtains from the investee or acquiree on the day of acquisition or purchase.
The goodwill related to the subsidiaries shall be shown separately in the consolidated financial
statement, while the goodwill related to the affiliated enterprises and associated enterprises shall
be included into the carrying value of long-term equity investment.
The goodwill shown separately in the financial statement shall be subject to an impairment test at
least at the end of each year. When the Company makes an impairment test of assets, the carrying
value of the goodwill shall be apportioned to the beneficial asset groups or combinations of asset
groups in the light of synergistic effect of business combination.
(16) Impairment of assets
A. The Company shall, on the balance sheet date, make a judgment of assets (excluding
inventories, equity instrument investment without quoted price in the active market and whose fair
value cannot be reliably measured, investment real estates measured by fair value pattern,
consumptive biological assets, assets formed by construction contracts, deferred income tax assets,
unsecured residual value of the lessor in a financial leasing and assets out of financial assets) on
whether there is any sign of possible assets impairment. With there is any evidence indicating a
possible impairment of assets, the Company shall, on the basis of single item assets, estimate the
recoverable amount. Where it is difficult to do so, it shall determine the recoverable amount of the
group assets on the basis of the asset group to which the asset belongs.
B. The recoverable amount shall be determined in light of the higher one of the net amount of the
fair value of the single item assets, assets group, or combination of group assets minus the disposal
expenses and the current value of the expected future cash flow of the single item assets, assets
group, or combination of group assets.
C. Where the recoverable amount of the single assets is lower than its book value, its
corresponding provision for impairment of assets shall be recognized shall be withdrawn in
according to the balance of the book value of the single assets and the recoverable amount. Where
the recoverable amount of an asset group or a combination of asset groups is lower than its book
value, it shall be recognized as the corresponding impairment loss. The amount of the impairment
loss shall first charge against the book value of the headquarter' assets and goodwill which are
apportioned to the asset group or combination of asset groups, then charge it against the book
value of other assets in proportion to the weight of other assets in the asset group or combination
of asset groups with the goodwill excluded. The charges against the book value of the assets above
shall be treated as the impairment loss of the assets (including the goodwill) and shall be39
withdrawn the provision for impairment of single assets.
D. Once any loss of asset impairment is recognized, it shall not be switched back in the future
accounting period.
(17) Recognition and measurement of borrowing costs
A. Recognition principle for 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
on the basis of the actual amount incurred, and shall be recorded into the current profits and losses.
The term "assets eligible for capitalization" shall refer to the fixed assets, investment real estate,
inventories and other assets, of which the acquisition and construction or production may take
quite a long time to get ready for its intended use or for sale.
B. Period of capitalization of borrowing costs
(a) The borrowing costs shall not be capitalized unless they simultaneously meet the following
requirements:(i)The asset disbursements have already incurred; (ii) The borrowing costs has
already incurred; and (iii)The acquisition and construction or production activities which are
necessary to prepare the asset for its intended use or sale have already started.
(b) Suspension of capitalization: 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, till the acquisition and construction or production of
the asset restarts.
(c) Ceaseing of capitalization: When the qualified asset under acquisition and construction or
production is ready for the intended use or sale, the capitalization of the borrowing costs shall be
ceased.
C. Capitalized amount of borrowing costs
As for specifically borrowed loans for the acquisition and construction or production of assets
eligible for capitalization, the to-be-capitalized amount of interests shall be determined in light of
the actual cost (including amortization of depreciation or premium recognized by the actual rate
method) incurred of the specially borrowed loan at the present period minus the income of
interests earned on the unused borrowing loans as a deposit in the bank or as a temporary
investment; Where a general borrowing is used for the acquisition and construction or production
of assets eligible for capitalization, the Company shall calculate and determine the
to-be-capitalized amount of interests on the general borrowing by multiplying the weighted
average asset disbursement of the part of the accumulative asset disbursements minus the general
borrowing by the capitalization rate (weighted average rate) of the general borrowing used. During
the period of capitalization, the amount of interest capitalized during each accounting period shall
not exceed the amount of interest actually incurred to the relevant borrowings in the current period.
During the period of capitalization, the exchange balance on foreign currency borrowings shall be
capitalized, and shall be recorded into the cost of assets eligible for capitalization. For the
ancillary expense incurred to a specifically borrowed loan, those incurred before a qualified asset
under acquisition, construction or production is ready for the intended use or sale shall be
capitalized at the incurred amount when they are incurred; those incurred after a qualified asset
under acquisition and construction or production is ready for the intended use or sale shall be40
recorded into the profits and losses of the current period. The ancillary expenses arising from a
general borrowing shall be recognized as expenses at their incurred amount when they are
incurred, and shall be recorded into the profits and losses of the current period.
(18) Recognition principle of revenue
A. Selling goods
No revenue from selling goods may be recognized unless the following conditions are met
simultaneously: a. The significant risks and rewards of ownership of the goods have been
transferred to the buyer by the enterprise; b. The enterprise retains neither continuous management
right that usually keeps relation with the ownership nor effective control over the sold goods; c.
The relevant amount of revenue can be measured in a reliable way; d. The relevant economic
benefits may flow into the enterprise; and e. The relevant costs incurred or to be incurred can be
measured in a reliable way.
B. Providing labor services
If the Company can, on the date of the balance sheet, reliably estimate the outcome of a
transaction concerning the labor services it provides (The outcome of a transaction concerning the
providing of labor services can be measured in a reliable way, means that the following conditions
shall be met simultaneously: a. The amount of revenue can be measured in a reliable way; b. The
relevant economic benefits are likely to flow into the enterprise; c. The schedule of completion
under the transaction can be confirmed in a reliable way; and d. The costs incurred or to be
incurred in the transaction can be measured in a reliable way), it shall recognize the revenue from
providing services employing the percentage-of-completion method. And the Company shall
ascertain the schedule of completion under the transaction concerning the providing of labor
services in accordance with the measurement of the work completed. If an enterprise can not, on
the date of the balance sheet, measure the result of a transaction concerning the providing of labor
services in a reliable way, it shall be conducted in accordance with the following circumstances,
respectively: a. 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; or b. 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.
C. Abalienating the right to use assets
No revenue from abalienating of right to use assets may be recognized unless the following
conditions are met simultaneously: a. the relevant economic benefits are likely to flow into the
enterprise; and b. the amount of revenues can be measured in a reliable way. The amount of
interest revenue should be measured and confirmed in accordance with the length of time for
which the enterprise's cash is used by others and the actual interest rate; or the amount of royalty
revenue should be measured and confirmed in accordance with the period and method of charging
as stipulated in the relevant contract or agreement.
(19) Recognition and measurement of income taxes
A. Where there is difference between the book value of the assets or liabilities and its tax base (As
for an item that has not been recognized as an asset or liability, if its tax base can be determined in
light of the tax law, the difference between the tax base and its book value), the deferred income
tax assets or the deferred income tax liabilities shall be determined according to the applicable tax41
rate in the course of prospective recovering assets or discharging liabilities.
B. The Company shall recognize the deferred income tax assets in accordance with the extent of
the amount of the taxable income which it is most likely to obtain and which can be deducted from
the deductible temporary difference. On the balance sheet date, where there is any exact evidence
showing that it is likely to acquire sufficient amount of taxable income tax in a future period to
offset against the deductible temporary difference, the deferred income tax assets unrecognized in
prior periods shall be recognized.
C. The carrying amount of deferred income tax assets shall be reexamined on balance sheet day. If
it is unlikely to obtain sufficient taxable income taxes to offset the benefit of the deferred income
tax assets, the carrying amount of the deferred income tax assets shall be written down. When it is
probable to obtain sufficient taxable income taxes, such write-down amount shall be subsequently
reversed.
D. On the basis of measuring and recognizing income taxes of the current period (income taxes
payable of the current period) and deferred income tax (or income), the summation of both the
income taxes of the current period and deferred income tax of an enterprise shall be recognized as
income tax expenses or incomes in the income statement, but excluding influence on income tax
due to the transactions or events directly recognized as the owner's rights and interests.
(20) Preparation method of the consolidated financial statement
Parent company shall bring all subsidiaries under its control into the consolidation scope of
consolidated financial statement. In line with the Accounting Standard for Business Enterprise No.
33 – Consolidated Financial Statement, the consolidated financial statement shall be prepared by
parent company on the basis of the both financial statement of parent company and its subsidiaries
after adjusting long-term equity investment over its subsidiaries based on equity method in
accordance with other relevant information.
V. Change in accounting policies and accounting estimates and correction of accounting errors:
During the reporting period, there are no changes in accounting policies, accounting estimates and
correction of accounting errors.
VI. Taxation
Main taxes types and tax rate are applicable to the Company as follows:
1. Value-added tax (VAT)
VAT was paid based on tax rate of 17%.
2. Business tax
Business tax was paid based on tax rate of 5% of taxable income payable.
3. City maintenance and construction tax
City maintenance and construction tax was based on tax rate of 7% of turnover tax payable.
4. Educational surtax
Education surtax was based on tax rate of 3% of turnover tax payable.
5. Embankment protection cost
Embankment protection cost was based on tax rate of 3% of turnover tax payable.
6. Income tax
Income tax was paid based on 25% of taxable income.
The corporate income tax of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd., the subsidiary
company controlled by the Company, in accordance with the Circular on the Implementation of42
Transitional Preferential Enterprise Income Tax Policies (Guo-Fa [2007] No. 39 document)
issued by the State Council, shall be gone over into the statutory tax step by step within five years
since 2008. Of which, the income tax rate for this company in 2008 is 18%, and 20% in 2009,
22% in 2010, 24% in 2011, and 25% in 2012.
On 29 July 2003, as approved by Department of Foreign Trade and Economic Cooperation of
Guangdong Province with the Reply on Supplementary Contract and Supplementary Articles of
Association of Foshan Huafeng Paper Co., Ltd. by the Joint Venture (YWJMZ Zi[2003]No. 432
document), the total investment in Foshan Huafeng Paper Co., Ltd., the shareholding subsidiary of
the Company, has increased to USD 239.57 million from USD 95 million, with a registered capital
increasing to USD 121.39 million from USD 73.2 million. Such increased investment was used
for establishing a subbranch in Zhuhai. On 13 May 2008, receiving the Reply on Foshan Huafeng
Paper Co., Ltd. Enjoying Preferential CIT Policies on Additional Investment (YGSH [2008]
No.236 document) from the State Tax Bureau of Guangdong Province, in accordance with
provision stated in Supplementary Circular of the Ministry of Finance, the State Administration of
Taxation of the People's Republic of China, on Issues Relevant to Enjoyment by Foreign-invested
Enterprises of Preferential CIT Policies on Additional Investments (GSH [2003] No. 368
document) and Notice of the State Administration of Taxation on Issues concerning the Time Limits
for Handling the Examination and Approval Matters as Set out in the Income Tax Law of the
People’s Republic of China for Foreign-Invested Enterprises and Foreign Enterprises (GSH
[2008] No. 213 document) , the additional investment in Foshan Huaxin Paper Co., Ltd. shall be
calculated separately and enjoy the regular exemption from or reduction of income tax stipulated
in the Clause 1 of the Article 8 of Income Tax Law of The People's Republic of China for
Foreign-Invested Enterprises with and Foreign Enterprise. Year 2007 was the first profit-making
year for the subsidiary, therefore, the CIP was exempted between 2007 and 2008, and CIT should
be half reducted from 2009 to 2011. After assets reorganization between the Company and Zhuhai
S.E.Z Hongta Renheng Paper Co., Ltd., Foshan Huafeng Paper Co., Ltd. had become a
domestically-funded enterprise from the foreign-invested enterprise. Therefore, Foshan Huafeng
Paper Co., Ltd. no longer enjoyed the aforesaid income tax preference of reduction or remission
since 1 Jul. 2009.
As approved by the State Tax Bureau of Foshan Chancheng District, Huaxin (Foshan) Color
Printing Co., Ltd., a shareholding subsidiary of the Company, enjoyed preferential taxation
policies of “two-year CIT exemption and three-year 50% CIT reduction” since year 2006, that is
to say, the CIP was exempted between 2006 and 2007, and CIT should be half reduced from 2008
to 2010.
VII. Enterprise combination and consolidated financial statement
(I) Subsidiary company
1. Subsidiaries obtained through enterprise combinations under the same control
Proportion of
shares held by the
Company
-------------------
Full name of
subsidiaries
Registration
place
Organization
code
Registered
capital
Natural of
business and
business scope
Actual
investment
amount up to
the
period-end
Net investment
balance over
subsidiaries in
fact
directly indirectly43
================= ======== ========== ========== =============== ========== ========= ===== ======
Foshan Huafeng Paper
Co., Ltd.
Foshan 61762142-1 USD
121390000
Manufacturing and
selling of high-class
paper and paper
board
CNY
1064928400
--- --- 100%
Huaxin (Foshan) Color
Printing Co., Ltd.
Foshan 72111733-X USD
12800000
Process and printing
of packaging or
decorating printing
products, domestic
and export sales of
products
CNY
72674100
--- 75% ---
================= ======== ========== ========= ============== ========= ========== ===== ======
2. Subsidiaries obtained through enterprise combinations not under the same control
Proportion of
shares held by the
Company
--------------------
Full name of investees
Registration
place
Organization
code
Registered
capital
Natural of business
and business scope
Actual
investment
amount up to
the
period-end
Net investment
balance over
subsidiaries in
fact
directly indirectly
================== ======== ========== ========== ============== ========== =========== ===== ======
Zhuhai S.E.Z Hongta
Renheng Paper Co., Ltd.
Zhuhai 61750210-7 USD
211060000
manufacturing and
selling self-produced
high-grade
packaging
paperboard
USD
84796000
--- 40.176
%
---
Zhuhai Hengshun Supply
Chain Logistical Service
Co., Ltd.
Zhuhai 78485447-6 CNY
30000000
International Cargo
Transportation agent
CNY
22500000
--- --- 75%
=================== ======== ========== ========== =============== ========== =========== ===== ======
3. Subsidiaries obtained not through enterprise combinations
Proportion of
shares held by the
Company
---------
Full name of
investees
Registrat
ion place
Organization
code
Registered
capital
Natural of business
and business scope
Actual
investment
amount up to
the period-end
Net investment
balance over
subsidiaries in
fact
directly indirectly
===========
=
=====
=
========= =========
=
============
==
========= ========== ==== ====
Foshan Huazhi
Waste Paper
Recycling Co.,
Ltd.
Foshan 77620148-3 CNY
5000000
Purchase and
sale of waste
paper and
waste
newspaper
CNY
5000000
--- --- 100%
Pearl River Color
Printing Co., Ltd.
of Chancheng
Foshan 70817367-9 CNY
1500000
Printing other
printed matter,
design & production
CNY
1500000
--- --- 100%44
District, Foshan and release of
advertising
Foshan Huaxin
Jinfeng Industrial
Co., Ltd.
Foshan 67889495-X CNY
3000000
Investing and
industrial
CNY
3000000
--- 100% ---
Foshan Chengtong
Paper Co., Ltd
Foshan 68641217-2 CNY
6000000
manufacturing and
selling high-grade
paper and paper
board
CNY
4500000
--- 75% ---
===========
=
=====
=
========= =========
=
============
==
========= ========== ==== ====
(II) Change in consolidation scope in the reporting period
On 29 Jun. 2009, Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. (hereinafter referred
to as “Hongta Renheng”) received the Notice of Approving the Change of
Registration (ZHBTW Zi 【2009】No. 0900125957) issued by Zhuhai Administrative
Bureau for Industry and Commerce, as well as the Business License for Enterprise as
a Legal Person with the registration number as 440400400028253. After
accomplishing the equity change of Hongta Renheng, Foshan Huaxin Packaging Co.,
Ltd. shall acquire 40.176% equity of Hongta Renheng with 75% of net assets of
Foshan Huafeng Paper Co., Ltd. as the consideration. Hereto, Hongta Renheng had
become a subsidiary company under controlled by Foshan Huaxin Packaging Co.,
Ltd.. In accordance with the Agreement of Capital Increase and Share Expansion, the
purchasing date is 30 Jun. 2009, thus the balance sheet of Hongta Renheng was
included into the Company’s consolidated statements as at the end of the reporting
period. Moreover, the balance sheet of Zhuhai Hengshun Supply Chain Logistical
Service Co., Ltd., a shareholding subsidiary of Hongta Renheng, was also included
into the consolidated scope of the Company in the reporting period.
Foshan Chengtong Paper Co., Ltd. was incorporated by the Company together with
Jiacheng Enterprise Development Co., Ltd. on 13 Apr. 2009. Hereto, Foshan
Chengtong Paper Co., Ltd. was also included into the consolidated scope of the
Company in the reporting period.
(III) Newly increased subsidiaries obtained through enterprise combinations not under
the same control
1. Basic information
As approved by the Office of Introduction of Foreign Capital of Zhuhai Special
Economic Zone with ZTYWZ Zi [1991] No. 036 document, Zhuhai S.E.Z Hongta
Renheng Paper Co., Ltd. (hereinafter referred to as “Hongta Renheng”) was
incorporated in Zhuhai on 23 Jan. 1991 as Chinese-foreign joint venture, which was
originally named Zhuhai S.E.Z Hongta Renheng Paper Products Co., Ltd.. And the
said company got the Business License for Enterprise as a Legal Person with the
registration number as QHYZZZ No. 000938 from Zhuhai Administrative Bureau for
Industry and Commerce, Guangdong. This company is engaged in production and
sales of self-produced high-grade packaging paper board with 30-year operating
period. The 40% of products are exported.45
In accordance with the resolutions of the temporary Board meeting of Foshan Huafeng Paper Co.,
Ltd., the subsidiary of the Company, on 6 Oct. 2008, it agreed to sell its assets and liabilities
related with the businesses located in Foshan. Subsequent to finishing assets sale, Foshan Huafeng
Paper Co., Ltd. also gave consent to increase capital in Zhuhai S.E.Z. Hongta Renheng Paper Co.,
Ltd. by its original shareholders, the Company and Dragon State International Limited, at the
evaluation of 75% equity and 25% equity held respectively by the said two shareholders. After
capital increased, Foshan Huafeng Paper Co., Ltd. would become into a wholly-owned subsidiary
of Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd..
At the 6th meeting of the 4th Board of Directors for the year 2008 held on 8 Oct. 2008, Foshan
Huaxin Packaging Co., Ltd. increasing capital in Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd.
and the material assets reorganization preplan was approved. On the same day, both the Company
and Dragon State International Limited signed the Framework Agreement on Capital Increase with
all three companies, Yunan Hongta Group Co., Ltd., Yanlord Industries Pte. Ltd. and Zhuhai S.E.Z.
Hongta Renheng Paper Co., Ltd.. According to this agreement, both the Company and Dragon
State International Limited carried out additional investment in Zhuhai S.E.Z. Hongta Renheng
Paper Co., Ltd. at the appraisal value (base date of assets appraisal 30 June 2008) of 75% equity
and 25% equity of Zhuhai Huafeng (a enterprise after Foshan Huafeng Paper Co., Ltd. sold its
assets and liabilities related with the businesses located in Foshan) held respectively by the
Company and Dragon State International Limited. On the base of such appraisal value, Zhuhai
Huafeng has calculated additional investment in Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd. in
the light of the paid-up amount invested by Dragon State International Limited although USD
10,233,793.55 is still not paid in full by Dragon State International Limited. After finishing the
transaction, the Company and Dragon State International Limited respectively holds 40.1760%
equity and 13.3920% equity of Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd., and Yunan Hongta
Group Co., Ltd. and Yanlord Industries Pte. Ltd. respectively holds 32.5024% equity and
13.9296% equity of Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd..
Dragon State International Limited has paid investment in full in Foshan Huafeng Paper Co., Ltd.
on 7 Nov. 2008.
As approved by the Ministry of Commerce of the People’s Republic of China with (approval
document) SZP [2009] No, 23 document “Apply of MOFCOM on Giving Consent to Increase
Capital in Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd.” on 12 Mar. 2009, the MOFCOM was
in agreement with the capital increase in Zhuhai Special Economic Zone Hongta Yanlord Paper
Co., Ltd. with the total investment amount reaching to USD 310.74 million from USD 197.67
million, as well as registered capital of USD 211,061,305 from USD 98,000,000. The Newly
increased registered capital is paid by the Company and Dragon State International Limited at the
evaluation of 75% equity and 25% equity of Foshan Huafeng Paper Co., Ltd. held respectively by
the said shareholders. Foshan Huafeng Paper Co., Ltd. had become a domestically-funded
enterprise from the foreign-invested enterprise.
On 24 Mar. 2009, the Reply Concerning Equity Transfer of Foshan Huafeng Paper Co., Ltd.
(YWJMZZ [2009] No. 263) was issued by Guangdong Foreign Trade Economic Cooperation
Department.
On 27 May 2009, the Reply Concerning Approving the Material Asset Reorganization Plan of
Foshan Huaxin Packaging Co., Ltd. (ZJXK [2009] No.426) was issued by CSRC.
On 5 Jun. 2009, Huafeng Paper received the Notice of Approving the Change of Registration46
(FHBTN Zi [2009] No.0900366038) issued by Foshan Administrative Bureau for Industry and
Commerce, and became a subsidiary wholly-owned by Hongta Renheng.
On 29 Jun. 2009, Hongta Renheng received the Notice of Approving the Change of
Registration (ZHBTW Zi [2009] No.0900125957) issued by Zhuhai Administrative
Bureau for Industry and Commerce, as well as the Business License for Enterprise as
a Legal Person with the registration number as 440400400028253. According to the
Notice of Approving the Change of Registration, after the change, the registered
capital of Hongta Renheng would be increased to USD 211,061,305 and its business
scope would be changed to include the production and sale of self-made high-class
packaging paper boards. And the equity structure of Hongta Renheng after alteration
was as follows: Dragon State International Limited contributed USD 28,265,326,
holding 13.3920% shares; Foshan Huaxin Packaging Co., Ltd. contributed USD
84,795,979, holding 40.1760% shares; Yunnan Hongta (Group) Co., Ltd. contributed
USD 68,600,000, holding 32.5024% shares; Yanlord Industries Pte. Ltd. contributed
USD 29,400,000, holding 13.9296% shares. So far, the equity change of Hongta
Renheng was completed, which marked the substantive completion of this material
asset reorganization.
2. Recognition of consolidation scope
Subsequent to accomplishing assets restructuring, the Company had become the first
principal shareholder of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. (hereinafter
referred to as “Hongta Renheng Paper”), accounting for 40.1760% equity. Therefore,
the Company has the voting right no more than half in Hongta Renheng.
In accordance with the Agreement of Capital Increase and Share Expansion, the BOD
of Hongta Renheng Paper is made up of 5 directors, including 3 directors from the
Company, 1 director from Yunnan Hongta Group Co., Ltd., as well as 1 director from
Yanlord Industries Pte. Ltd.. The Company possesses multiple-voting right in the
BOD of Hongta Renheng Paper. In accordance with the aforesaid of Agreement of
Capital Increase and Share Expansion, General Manager and Chief Financial Officer
of Hongta Renheng Paper shall be nominated by the Company, while they shall be
appointed and dismissed by the BOD of Hongta Renheng Paper. In a word, the
Company can control Hongta Renheng Paper in respect of financing and operations
policy through the multiple-voting right in the BOD and recommending key senior
management, therefore, Hongta Renheng Paper shall be included in the consolidation
scope of the Company.
3. Recognition basis of purchasing date
In accordance with the Agreement of Capital Increase and Share Expansion, the
transition period refers to a period from the base day to the last day of that month, in
which the capital increase was implemented (the registration day that the Business
License was changed). On 29 Jun. 2009, Hongta Renheng Paper got the Notice of
Approving the Change of Registration (ZHBTW Zi [2009] No.0900125957) issued by
Zhuhai Administrative Bureau for Industry and Commerce, as well as the Business
License for Enterprise as a Legal Person with the registration number as47
440400400028253.
As at 30 Jun. 2009, the Company (the acquirer) had obtained actually the control on
Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. (the acquiree), which met for the
relevant terms for determining the purchasing date.
Therefore, purchasing date of the equity transaction shall be 30 Jun. 2009.
4. Combination cost
Combination costs include the fair values, on the purchasing date, of the cash or
noncash assets paid and the liabilities incurred or assumed to the Company for the
business combination and the summation of all relevant direct costs incurred to the
Company for the business combination. The cost of the equity transaction is RMB
819,128,917.97.
(IV) Minority interests
Full name of subsidiaries Minority interests
Amount of
minority
shareholder’s
gains and
losses offset
from minority
shareholders’
equity
Balance of losses as of
this period borne by
minority shareholder of
subsidiaries exceeding
share enjoyed by minority
shareholders in owner’s
equity at the period-begin
offset from owner’s
equity of parent company
============================
===
============== ======== ===============
==
Zhuhai S.E.Z Hongta Renheng Paper Co.,
Ltd.
1,199,695,838.45 --- ---
Huaxin (Foshan) Color Printing Co., Ltd. 26,997,819.17
Foshan Chengtong Paper Co., Ltd. 2,072,723.87 --- ---
Total 1,228,766,381.49 --- ---
============================ ============== ======== ===============48
VIII. Notes to the consolidated financial statement
Unless otherwise stated in the following items, amount at the closing balance refers to
data as at 30 June 2009, opening balance refers to data as at 1 January 2009, amount
of the current period refers to data from 1 January 2009 to 30 June 2009, the amount
of last period refers to data from 1 January 2008 to 30 June 2008.
(I) Monetary fund
Closing balance Opening balance
Items ------------------------------- ---------------------------------
Original
currency
Rate of
exchange
Amount
converted into
RMB
Original
currency
Rate of
exchange
Amount
converted into
RMB
================== ========== ====== ========== ========== ======= ===========
Cash — CNY --- --- 238,300.74 --- --- 172,923.47
Cash —HKD 75,795.79 0.88158 66,820.49 --- --- ---
Cash —USD 6,740.70 6.8319 46,051.79 --- --- ---
Bank deposit—HKD 2,679,312.68 0.88158 2,362,028.47 1,676,974.72 0.8819 1,478,923.46
Bank deposit—USD 10,488,007.73 6.8319 71,653,020.01 1,733,606.72 6.8346 11,848,508.49
Bank deposit—EUR 43,645.59 9.6408 420,778.40 --- --- ---
Bank deposit—CNY --- --- 575,799,153.16 --- --- 178,636,818.67
Other monetary fund
—CNY
--- --- 87,277,726.23 --- --- 15,954,721.50
Other monetary fund
—USD
306.17 6.8319 2,091.72 --- ---
---
------------ ------------
Total 737,865,971,.01 208,091,895.59
=========== ===========
1. Closing amount of monetary fund has increased by RMB 529,774,075.42 than the
opening amount, an increase of 254.59%, which was mainly because balance sheet of
Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd is included into the consolidated scope
of the Company in the reporting period.
2. Closing amount of other monetary fund is RMB 87,279,817.95, of which, RMB
87,128,409.72 is margin paid into the bank for bank acceptance bill and letter of
credit, and others is credit card deposit.
3. Except for statement mentioned in above “2”, there was no payment with restricted
realization due to mortgage or freezing or deposited in overseas as well as with
potential risk.
(II) Notes receivable
Type Closing balance Opening balance
================================ ============= =============
Bank Acceptance Bill 203,315,987.45 47,440,393.16
------------- -------------
Total 203,315,987.45 47,440,393.16
============= =============49
1. There is no pledged note receivable at the end of reporting period.
2. By the end of reporting period, there are notes of RMB 251,183,902.51 that the
endorsement has been made but not yet due. Maturity date related to such notes would
be 1 Jul. 2009 to 19 Dec. 2009.
(III) Accounts receivable
1. Composing of accounts receivable
Closing balance Opening balance
---------------------------------- ----------------------------------
Items
Book balance
Proport
ion
Reserve for bad
debts
Book balance
Proport
ion
Reserve for bad
debts
================ =========== ===== ========== ============ ===== ===========
Accounts receivable
with significant single
amounts
271,122,005.69 35.62% 10,464,828.71 66,675,677.28 26.19% ---
Accounts receivable
with insignificant
single amounts but
with significant credit
risk
43,881,634.16 5.77% 27,911,256.69 17,141,297.26 6.73% 14,343,445.33
Other insignificant 446,111,119.96 58.61% 6,706,055.80 170,808,858.34 67.08% 1,865,881.47
-------------- ------ -------------
Total 761,114,759.81 100% 45,082,141.20 254,625,832.88 100% 16,209,326.80
============== ====== ============= ============== ===== =============
2. Aging analysis
Closing balance Opening balance
Aging ---------------------------------- ----------------------------------
Book balance
Proporti
on
Reserve for bad
debts
Book balance
Proporti
on
Reserve for bad
debts
============ ============== ====== ============= ============== ===== =============
1-3 months 472,334,082.99 62.06% 211,371,115.90 83.01% ---
4-12 months 201,333,578.28 26.45% 7,882,938.54 20,841,635.30 8.19% 1,042,081.76
1-2 years 34,596,291.96 4.55% 1,862,737.55 2,305,571.68 0.91% 230,557.17
2-3 years 8,749,356.17 1.15% 2,921,243.89 2,966,212.74 1.16% 593,242.54
Over 3 years 44,101,450.41 5.79% 32,415,221.22 17,141,297.26 6.73% 14,343,445.33
-------------- ------ -------------
Total 761,114,759.81 100% 45,082,141.20 254,625,832.88 100% 16,209,326.80
============== ====== ============= ============== ====== =============
3. Accounts receivable with significant single amounts
Name of debtor Amount Proportion of
provision
withdrawn
Reason
================================ ============== ============= ===============50
Foshan Huaxin Import & Export Co., Ltd.
57,367,222.74
---
Within 3 months
Shenzhen Kainuo Import & Export Trading
Co., Ltd
37,777,540.00 --- Within 1 year
Ningbo Zhuoli Import and Export Co., Ltd.
26,676,073.74
---
Within 1 year
Honghe Xiongfeng Printing Co., Ltd. 23,021,296.69 ---
Within 1 year
================================ ============== ============= ===============
4. In closing accounts receivable, no arrearage due to shareholders which holding over
5% (including 5%) of shares with voting right.
5. The top 5 arrearage in accounts receivable at the year-end
Name of debtor Arrearage
Term limit of
arrearage
Proportion in
total accounts
receivable
================================ ============== ========= ==========
Foshan Huaxin Import & Export Co., Ltd. 57,367,222.74 Within 3 months 7.54%
Shenzhen Kainuo Import & Export Trading
Co., Ltd
37,777,540.00
Within 1 year
4.96%
Ningbo Zhuoli Import and Export Co., Ltd. 26,676,073.74 Within 1 year 3.50%
Honghe Xiongfeng Printing Co., Ltd. 23,021,296.69 Within 1 year 3.02%
Guangxi Zhenlong Color Printing Packaging
Co., Ltd.
16,583,972.15
Within 1 year
2.18%
================================ ============== ========= ==========
6. Accounts receivable – foreign currency balance
Closing balance Opening balance
---------------------------------- -----------------------------------
Currency
Original currency
Rate of
exchange
Converted into
RMB
Original currency
Rate of
exchange
Converted into
RMB
====== ============= ======= ============= ============= ======= =============
USD 5,031,747.52 6.8319 34,376,395.88 3,181,558.12 6.8346 21,744,677.11
HKD 25,812,432.34 0.88158 22,755,724.10 61,309,109.52 0.8819 54,067,890.59
-------------
Total 57,132,119.98 75,812,567.70
============= =============
(IV) Prepayments
1. Aging analysis
Closing balance Opening balance
------------------------- ------------------------Aging -
Book balance Proportion Book balance Proportion
================= ================ ======= ================ =======
Within 1 year 42,997,139.19 90.19% 68,510,649.26 97.70%
1-2 years 4,674,301.70 9.81% 1,433,783.39 2.04%
2-3 years 178,020.65 0.26%51
---------------- -------
Total 47,671,440.89 100% 70,122,453.30 100%
================ ======= ================ =======
2. Prepayments that are material in amount
Name of debtor Amount Nature or Contents
============================================= ============== ===========
Foshan Huaxin Import & Export Co., Ltd. 33,908,371.20 Payment for goods
Shenzhen Huayu Trade Development Co., Ltd. 1,673,429.88 Payment for goods
Foshan ANDRITZ Technology Co., Ltd. 1,400,000.00 Payment for goods
Shandong Asia Pacific Symb Pulp and Paper Co., Ltd. 1,169,406.69 Payment for goods
Heidelberger Printing Equipment (Shenzhen) Co., Ltd.
775,742.85 Payment for
equipment
============================================= ============== ===========
3. Among closing balance, no arrearage due to shareholders which holding over 5%
(including 5%) of shares with voting right.
4. Prepayment – foreign currency balance
(V) Other receivables
1. Composing of other receivables
Closing balance Opening balance
--------------------------------- ----------------------------------
Items
Book balance
Proport
ion
Reserve for
bad debts
Book balance
Proport
ion
Reserve for bad
debts
================== ============= ====== ============ ============= ====== =============
Accounts receivable
with significant single
amounts
21,760,963.26 34.13% 6,089,242.72 21,461,155.04 56.72% ---
Accounts receivable
with insignificant
single amounts but
with significant credit
risk
4,581,601.44 7.19% 4,126,685.20 655,113.80 1.73% 376,124.39
Other insignificant 37,417,472.99 58.68% 484,820.79 15,719,495.56 41.55% 525,370.37
------------- ------ ------------
Total 63,760,037.69 100% 10,700,748.71 37,835,764.40 100% 901,494.76
============= ====== ============ ============= ====== =============
2. Aging analysis
Closing balance Opening balance
Items -------------------------------- --------------------------------
Book balance
Proporti
on
Reserve for bad
debts
Book balance
Proporti
on
Reserve for bad
debts
============= ============= ====== ============ ============= ===== ============
1-3 months 17,342,730.25 27.20% --- 18,279,147.31 48.31% ---52
4-12 months 19,198,147.35 30.11% 174,023.03 9,179,665.11 24.26% 38,128.70
1-2 years 8,996,541.32 14.11% 429,518.54 8,694,565.36 22.98% 281,786.91
2-3 years 3,085,985.82 4.84% 120,398.69 1,042,273.82 2.75% 205,454.76
Over 3 years 15,136,632.95 23.74% 9,976,808.45 640,112.80 1.70% 376,124.39
------------- ------ ------------ ------------- ------ ------------
Total 63,760,037.69 10,700,748.71 37,835,764.40 100% 901,494.76
============= ====== ============ ============= ===== ============
3. In closing balance, no arrearage due to shareholders which holding over 5%
(including 5%) of shares with voting right.
4. The top 5 arrearage in other receivables at the year-end
Name of debtor Arrearage Kind or contents
Term limit of
arrearage
Proportion in
total other
receivables
========================= ============= ============== ========= ===========
Hong Kong Hangfung Ltd.
10,524,018.48
Payment for goods Within 3
months
16.51%
Zhuhai Yidecheng Industrial Co.,
Ltd.
6,000,000.00 Borrow money Over 3 years 9.41%
Compensation for the loss from
typhoon “Hagupit”
3,980,039.23
Insurance indemnity 1-2 year
6.24%
Nianyi Company 2,379,823.79 Commission 1-2 year 3.73%
Zhuhai Construction Bureau 2,000,000.00 Borrow money Over 3 years 3.14%
========================= ============= ============== ========= ===========
(VI) Inventory
1. Composing of inventory
Closing balance Opening balance
--------------------------- ---------------------------
Items
Book balance
Reserve for falling
price
Book balance
Reserve for falling
price
=================== ============== ============= ============== =============
Raw materials 327,455,531.51 30,029.46 152,661,518.86 30,029.46
Goods in production 10,400,620.16 --- 3,840,896.77 ---
Finished products 301,510,993.29 17,276,354.66 190,468,328.20 11,750,282.15
Packing and low-value
consumption goods
40,359,356.89 --- 458,460.87 ---
Self-made semi-finished
products
10,142,063.73 --- --- ---
Total 689,868,565.58 17,306,384.12 347,429,204.70 11,780,311.61
============== ============ ============== ============
2. Reserve for falling price of inventory53
Decrease for the current period
----------------------Items -
Opening
carrying balance
Withdrawal for
the current period
Switching back Writing off
Closing carrying
balance
======== =========== ============ =========== ======== =============
Raw
materials
30,029.46 --- --- --- 30,029.46
Goods in
production
--- --- --- --- ---
Finished
products
11,750,282.15 15,826,072.51 10,300,000.00 --- 17,276,354.66
------------- ------------- ----------- ----------- ----------
Total 11,780,311.61 15,826,072.51 10,300,000.00 --- 17,306,384.12
=========== ============ =========== ======== =============
Note: (1) As at the period-end, if the cost of inventories is higher than the net
realizable value, the reserve for falling price of inventories shall be made. The net
realizable value is recognized that in the daily business activity the amount after
deducting the estimated cost of completion, estimated sale expense and relevant taxes
from the estimated sale price of inventories.
(2) Item “Withdrawal for the current period” of finished products is an amount of
Zhuhai S.E.Z Hongta Renheng Paper included into the consolidated statement of the
Company.
(3) Closing amount of inventory has increased by RMB 336,913,288.37 than the
opening amount, an increase of 100.38%, which was mainly because the balance
sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd is included into the
consolidated scope of the Company in the reporting period.
(VII) Other current assets
Items
Character or
content
Closing balance Opening balance
Insurance premium
Expenses to be
apportioned
2,653,700.85
---
Fees for national conference
on placing orders for products
Expenses to be
apportioned
591,929.66
---
Other
Expenses to be
apportioned
72,416.00 ---
Total 3,318,046.51 ---
=========== ============
(VIII) Sales of available-for-sale financial assets
Items Closing fair value Opening fair value
Available-for-sale equity instrument 2,987,911.75 --- --
Total 2,987,911.75 --- --
Note: Equity instrument available for sale is 385,537 shares subject to trading moratorium of
Zhuhai S.E.Z Fuhua Group Co., Ltd. after completing SMR, which are held by Zhuhai S.E.Z54
Hongta Renheng Paper Co., Ltd. (a subsidiary of the Company), while such shares had been
transferred into circulating shares since the end of 2007.
(IX) Long-term equity investment
Closing balance Opening balance
-------------------------- --------------------------
Items
Book balance
Reserve for
impairment
Book balance
Reserve for
impairment
=================== ============== =========== ============ ============
Investment in affiliated
enterprises
228,496,616.01 --- 197,956,976.49 ---
Other equity investment 3,213,558.00 3,100,000.00 3,213,558.00 3,100,000.00
-------------- ------------ -------------- ------------
Total 231,710,174.01 3,100,000.00 201,170,534.49 3,100,000.00
============= ============ ============= ============
1. Long-term equity investment measured at cost method
Name of investing
enterprise
Proportion
of shares
held
Initial investment
amount
Opening balance
Increase
for the
current
period
Decrease
for the
current
period
Closing balance
================= ====== ============ ============ ===== ===== ============
Foshan Urban
Cooperative Bank Co.,
Ltd.
2.583% 3,100,000.00 3,100,000.00 --- --- 3,100,000.00
Guangdong
Development Bank
0.0004% 113,558.00 113,558.00 --- --- 113,558.00
------------ ------------ ----- ----- ------------
Total 3,213,558.00 3,213,558.00 --- --- 3,213,558.00
============ ============ ===== ===== ============
2. Long-term equity investment measured at equity method
Increase/decrease for the current
period
-----------------------------
Name of investing
enterprise
Initial
investment
amount
Addit
ional
inves
tment
Opening
balance
Net gains and
losses
adjusted
based on
equity
method
Cash
dividends
distributed
Change
in other
equity
Closing
balance
=============== =========== ==== =========== =========== =========== ====== ===========
Affiliated
enterprise:
Tetra Huaxin 145,945,947.55 --- 197,956,976.49 30,539,639.52 --- --- 228,496,616.0155
(Foshan) Packing
Co., Ltd.
----------- ---- ----------- ----------- ----------- ------ -----------
Total 145,945,947.55 --- 197,956,976.49 30,539,639.52 --- --- 228,496,616.01
=========== ==== =========== =========== =========== ====== ===========
Name of investing
enterprise
Registr
ation
place
Business
nature
Proportion
of shares
held by
the
Company
Voting
right
proportions
in
investing
enterprise
Total net assets
at the period-end
Total operating
income for the
current period
Net profit for the
current period
=============== ====== ======== ====== ======== ============== ================ ==============
Affiliated
enterprise:
Tetra Huaxin
(Foshan) Packing
Co., Ltd.
Foshan Sino-fore
ign joint
venture
enterprise
25% 25% 707,630,569.95 523,286,778.64 122,158,558.08
=============== ====== ======== ====== ======== ============== ================ ==============
3. Reserve for impairment of long-term equity investment
Name of investing
enterprise
Opening balance
Increase for the
current period
Decrease for
the current
period
Closing balance
Reason for
withdrawal
=============== ============ ========== ========== ============ ==========
Foshan Urban
Cooperative Bank Co.,
Ltd.
3,100,000.00 --- --- 3,100,000.00 Insolvency
------------ ---------- ---------- ------------
Total 3,100,000.00 --- --- 3,100,000.00
============ ========== ========== ===========
(X) Investment real estate
Items Opening balance
Increase for the
current period
Decrease for the
current period
Closing balance
=================== ============= ============ ============ =============
Original price
House and building 18,670,864.52 --- --- 18,670,864.52
------------- ------------ ------------ ------------
Total 18,670,864.52 --- --- 18,670,864.52
------------- ------------ ------------ ------------
Accumulative depreciation
House and building 7,645,548.06 226,457.40 --- 7,872,005.4656
------------- ------------ ------------
Total 7,645,548.06 226,457.40 --- 7,872,005.46
------------- ------------ ------------
Accumulative amount of
reserve for impairment
House and building --- --- --- ---
------------- ------------ ------------ ------------
Total --- --- --- ---
------------- ------------ ------------ ------------
Book value
House and building 11,025,316.46 --- --- 10,798,859.06
------------- ------------ ------------ ------------
Total 11,025,316.46 --- --- 10,798,859.06
============= ============ ============ =============
(XI) Fixed assets
1. Original price of fixed assets
Type Opening balance
Increase for the current
period
Decrease for the
current period
Closing balance
============ ================ ================ ============= ================
House and
building 739,150,382.10 480,727,639.05 40,983,300.00 1,178,894,721.15
Machinery
equipment 1,900,390,129.13 1,297,761,589.38 74,593,915.58 3,123,557,802.93
Transportation
equipment 23,299,137.29 26,147,206.19
---
49,446,343.48
Other 51,611,685.10 57,806,514.85 --- 109,418,199.95
---------------- ---------------- ------------- ----------------
Total 2,714,451,333.62 1,862,442,949.47 115,577,215.58 4,461,317,067.51
================ ================ ============= ================
Of which, original price of project in construction transferred into fixed assets was
RMB 10,523,845.37 for the current period.
2. Accumulative depreciation
Type Opening balance
Increase for the
current period
Decrease for the
current period
Closing balance
============ ================ ============== ============== ===============
House and
building
65,379,235.11 140,908,982.29 --- 206,288,217.40
Machinery
equipment
424,833,658.58 724,895,261.52 42,850.52 1,149,686,069.58
Transportation
equipment
14,504,835.24 22,504,934.63 --- 37,009,769.87
Other 14,004,105.73 30,476,683.28 --- 44,480,789.0157
--------------- -------------- -------------- ---------------
Total 518,721,834.66 918,785,861.72 42,850.52 1,437,464,845.86
================ ============== ============== ===============
3. Impairment of assets
Type Opening balance
Increase for the
current period
Decrease for the
current period
Closing balance
============ ================ ============== ============== ==============
Machinery
equipment
201,333.37 --- --- 201,333.37
---------------- -------------- -------------- --------------
Total 201,333.37 --- --- 201,333.37
================ ============== ============== ==============
Note: Reserve for impairment of fixed assets was withdrawn by Huaxin (Foshan) Color Printing
Co., Ltd. in accordance with expected recoverable amount of single fixed assets as at the end of
2005 lower than its book value.
4. Carrying value of fixed assets
Type Closing balance Opening balance
=================================== =============== ================
House and building 972,606,503.75 673,771,146.99
Machinery equipment 1,973,670,399.98 1,475,355,137.18
Transportation equipment 12,436,573.61 8,794,302.05
Other 64,937,410.94 37,607,579.37
----------------
Total 3,023,650,888.28 2,195,528,165.59
=============== ================
4. The workshop of Foshan Huafeng Paper Co., Ltd. totaling to 38,124.91 sq.m.
(original value: RMB 146,759,239.84; net value as at 30 Jun. 2009: RMB
107,104,979.43) , which was located in No. 17, Hebin Road, Foshan, and the land use
right of such plot, have been used as a mortgage for loan, and relevant certificate of
the other rights of land has been handled. The righter is China Construction Bank
Corporation Foshan Branch. The debt maturity is to be Dec. 31, 2009.
5. By the end of the reporting period, the property right certificate for workshop
(original value: RMB 508,968,794.94) of Foshan Huafeng Paper Co., Ltd. Zhuhai
Branch Company is under handle.
6. Foshan Huafeng Paper Co., Ltd. Zhuhai Branch Company’s production line on
annual output of 300,000-ton high-class coated white board paper and relevant
infrastructure projects have not yet been handled final account. The expenditure
involved in the construction is expected in accordance with budgetary estimate and
actual situation incurred, while the final engineering cost will be adjusted based on the
settlement.
7. The house and building of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. (original
value: RMB 519,553,654.85; net value as at 30 Jun. 2009: RMB376,971,766.87),
which was located in No. 508, Jinji Road, Qianshan, Zhuhai, the equipment such as58
production line in the second-stage (original value: RMB 907，070，689.91; net value
as at 30 Jun. 2009: RMB 828,610,213.76) and the land use right of such plot, have
been used as a mortgage for loan, and relevant certificate of the other rights of land
has been handled. The righter is Bank of Communications Zhuhai Branch. The debt
maturity is to be 30 Sep. 2009.
(XII) Construction in progress
1. Category of construction
Decrease for the current
period
---------------------
Name of projects
Opening
balance
Increase for
the current
period
Transferring
into fixed
assets
Other
decrease
Closing
balance
Resource of
funds
================ ========== =========== =========== ========= ========= =========
Huafeng-300000-ton
expansion production
project for
--- 4,737,817.36 --- --- 4,737,817.36 Borrowing from
financial
institution and
self-financing
Huafeng-Local
reformation project for
production line
405,159.93 17,549,078.51 10,163,845.37 --- 7,790,393.07 Self-financing
Other 771,035.61 550,829.07 360,000.00 --- 961,864.68 Self-financing
---------- ----------- ----------- --------- ---------
Total 1,176,195.54 22,837,724.94 10,523,845.37 -- 13,490,075.11
========== =========== =========== ========= =========
2. Construction in progress refers to an unfinished project under construction. As reviewed to the
actual construction of each project, there is no situation on reserve for impairment.
(XIII) Intangible assets
1. Original value of intangible assets
Items
Opening original
value
Increase for the
current period
Decrease for the
current period
Closing original
value
=============== ============= ============= ============= =============
Land use right of
Huafeng Co.
42,392,255.88 184,684,027.83 32,978,923.04 194,097,360.67
Land use right of
Huaxin Color Printing
29,367,297.44 --- --- 29,367,297.44
Land use right of
Chengtong Paper
--- 32,978,923.04 ---- 32,978,923.04
Land use right of
Hongta Renheng
--- 253,439,441.53 --- 253,439,441.53
Other 562,650.10 505,216.00 --- 1,067,866.1059
------------- ------------- ------------- -------------
Total 72,322,203.42 471,607,608.40 32,978,923.04 510,950,888.78
============= ============= ============= =============
2. Accumulative amortization
Items Opening balance
Amortization for
the current period
Decrease for the
current period
Closing balance
=============== ============= ============= ============= =============
Land use right of
Huafeng Co.
6,732,488.20 423,922.56 6,779,877.41 376,533.35
Land use right of
Huaxin Color Printing
2,667,574.00 293,673.00 --- 2,961,247.00
Land use right of
Chengtong Paper
--- 6,779,877..41 --- 6,779,877.41
Land use right of
Hongta Renheng
--- 14,766,263.52 --- 14,766,263.52
Other 146,772.58 55,978.96 --- 202,751.54
------------- ------------- ------------- -------------
Total 9,546,834.78 22,319,715.45 6,779,877.41 25,086,672.82
============= ============= ============= =============
3. Carrying value of intangible assets
Items Opening balance
Increase for the
current period
Decrease for the
current period
Closing balance
=============== ============= ============= ============= =============
Land use right of
Huafeng Co.
35,659,767.68 184,260,105.27 26,199,045.63 193,720,827.32
Land use right of
Huaxin Color Printing
26,699,723.44 --- 293,673.00 26,406,050.44
Land use right of
Chengtong Paper
--- 32,978,923.04 6,779,877.41 26,199,045.63
Land use right of
Hongta Renheng
--- 253,439,441.53 14,766,263.52 238,673,178.01
Other 415,877.52 505,216.00 55,978.96 865,114.56
------------- ------------- ------------- -------------
Total 62,775,368.64 471,183,685.84 48,094,838.52 485,864,215.96
============= ============= ============= =============
Note: (1) The use right of Foshan ChengTong Paper Co., Ltd.’s land located in No. 17,
Hebin Road, Foshan, was taken as mortgage for loan. For details, please refer to Note
VI (X). Up to the year-end, the original value was RMB 32,978,923.04, as well as net
value of RMB 26,199,045.63.
(2) At the end of reporting period, all the land use right of Hongta Renheng has been
pledged, of which the certificate No. for the land use right with area of 206,984.38
sq.m. is YFDZ Zi No. C5617915, and other land with area of 71,094.48 sq.m. has
been included in the above-ground building when handling property right certificate.60
(XIV) Development Expenses
Items
Opening
balance
Increase for the
current period
Amortization for the
current period
Closing balance
============= =========== ============= ================= =============
Development
expense for coated
Kraft liner
7,748,092.27 4,708,811.24 --- 12,456,903.51
--------- ------------- --------- -------------
Total 7,748,092.27 4,708,811.24 --- 12,456,903.51
========= ============= ========= =============
(XV) Goodwill
Items Opening balance Increase for the
current period
Decrease for the
current period
Closing balance
Purchasing equity
of Zhuhai S.E.Z
Hongta Renheng
Paper Co., Ltd.
--- 18,067,648.56 --- 18,067,648.56
Total --- 18,067,648.56 --- 18,067,648.56
Both the Company and Dragon State International Limited signed the Agreement on Capital
Increase and Share Expansion with Yunnan Hongta Group Co., Ltd., YANLORD INDUSTRIES
PTE. LTD. and Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. (hereinafter referred to as “Hongta
Renheng”) on 20 Nov. 2008. The Company increased capital in Hongta Renheng at the
consideration of 75% equity of Foshan Huafeng Paper Co., Ltd, then the Company has 40.176%
equity of Hongta Renheng. The costs invested by the Company in Hongta Renheng is RMB
819,128,917.97, while fair value of net identifiable assets of Hongta Renheng held by the
Company at 40.176% is RMB 801,061,269.41, from which the difference of RMB 18,067,648.56
is recognized as goodwill the Company invests in Hongta Renheng.
(XVI) Long-term deferred expense
Items Opening balance
Increase for the
current period
Amortization for
the current period
Closing balance
=============== ============= ============= ============= =============
Repair and
improvement of the
rented fixed assets
6,895,053.00 1,985,896.08 1,044,556.52 7,836,392.56
Charges for disposing
pollutants
--- 4,665,062.29 1,812,238.98 2,852,823.31
Expenditure on road
repairs
--- 214,666.75 36,799.98 177,866.77
Expense of room
charge
--- 130,000.00 60,000.00 70,000.0061
Total 6,895,053.00 6,995,625.12 2,953,595.48 10,937,082.64
============= ============= ============= =============
(XVII) Deferred income tax assets
Closing balance Opening balance
------------------------- --------------------------
Items
Deferred income
tax assets
Deductible
temporary
difference
Deferred income
tax assets
Deductible
temporary
difference
================== ============ ============ =========== ============
Reserve for impairment of
assets
4,337,309.67 20,685,665.72 5,587,309.67 25,685,665.72
------------ ------------ ----------- ------------
Total 4,337,309.67 .20,685,665.72 5,587,309.67 25,685,665.72
============ ============ =========== ============
(XVIII) Reserve for impairment of assets
Decrease for the current
period
----------------
Closing carrying
balance
Items
Opening carrying
balance
Withdrawal for the
current period
Switching back
Writing
off
==================== ============= ============ ========== === ===========
Reserve for bad debt 17,110,821.56 38,672,068.35 --- --- 55,782,889.91
Reserve for falling price of
inventory
11,780,311.61 15,826,072.51 10,300,000.00 --- 17,306,384.12
Reserve for impairment of
long-term equity investment
3,100,000.00 --- --- --- 3,100,000.00
Reserve for impairment of
fixed assets
201,333.37 --- --- --- 201,333.37
------------- ------------ --------- ----- ---------
Total 32,192,466.54 54,498,140.86 10,300,000.00 --- 76,390,607.40
============= ============= ========== === ============
=
(XIX) Short-term loan
Type Closing balance Opening balance
================================== =============== ================
Guaranteed loan 933,050,114.21 617,488,134.71
Credit borrowing 200,000,000.00 ---
Secured borrowings 140,623,335.75 ---
Collateral loan 340,000,000.00 ---
Total 1,613,673,449.96 617,488,134.71
=============== ================
Of which,62
(1) Closing amount of loans in USD is RMB 4,285,455.39, converting into RMB
29,277,802.68. Closing amount of loans in HKD is RMB 3,864,067.50, converting
into RMB 3,406,484.63.
(2) No overdue short-term loan. Yunnan Investing & Financing Guarantee Co., Ltd.
provides the joint responsibility guarantee for the guaranteed loan of Zhuhai S.E.Z
Hongta Renheng Paper Co., Ltd., China Chengtong Holding Group Co., Ltd., China
Materials Development Investment General Corporation, Foshan Huaxin
Development Co., Ltd. provide the joint responsibility guarantee for the guaranteed
loan of the Company, Foshan Huafeng Paper Co., Ltd and Huaxin (Foshan) Color
Printing Co., Ltd. (both subsidiaries of the Company). The Company provide the joint
responsibility guarantee for the loan of Foshan Huafeng Paper Co., Ltd and Huaxin
(Foshan) Color Printing Co., Ltd.. Please see the Note X (IV) 6 (3) for details.
(3) Credit borrowing of RMB 200,000,000.00 is a loan Foshan Huaxin Development
Co., Ltd. lent Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd.
(4) The pledged objection of such secured borrowings of RMB 120,000,000 is the
75% equities of Zhuhai Hengshun Supply Chain Logistical Service Co., Ltd. held by
Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd., And RMB 20,623,300 is import
documentary borrowing.
(XX) Notes payable
Type Closing balance Opening balance
=================================== ============= =============
Bank acceptance bill 350,754,816.78 54,510,322.25
------------- -------------
Total 350,754,816.78 54,510,322.25
============= =============
(XXI) Accounts payable
1. In balance of accounts payable at the period-end, no arrearage due to shareholders
which holding over 5% (including 5%) of shares with voting right.
2. No account payable with aging over one year at the period-end.
3. Accounts payable-foreign currency balance
Closing balance Opening balance
--------------------------------- ---------------------------------
Currency
Original currency
Rate of
exchange
Converting into
RMB
Original currency
Rate of
exchange
Converting into
RMB
===== ============= ====== ============= ============= ====== =============
USD 1,428,617.36 6.8319 9,760,170.94 3,599,800.83 6.8346 24,603,198.75
HKD 9,995,199.43 0.88158 8,811,567.91 25,876,102.97 0.8819 22,819,876.45
EUR 8,702.00 9.6408 83,894.24 3,377.00 9.6590 32,618.44
------------- -------------
Total 18,655,633.09 47,455,693.64
============= =============63
(XXII) Accounts in advance
1. In closing balance, no arrearage due to shareholders which holding over 5%
(including 5%) of shares with voting right.
2. No item received in advance with aging over one year at the period-end.
3. Accounts in advance – foreign currency balance
Closing balance Opening balance
--------------------------------- ----------------------------------
Currency
Original currency
Rate of
exchange
Converting into
RMB
Original currency
Rate of
exchange
Converting into
RMB
===== ============ ======= ============= ============ ======= =============
USD --- --- --- 29,974.06 6.8346 204,722.90
HKD --- --- --- 1,080,013.60 0.8819 950,411.90
EUR --- --- --- 773.54 9.6590 7,743.13
------------- -------------
Total 1,162,877.93
============= =============
(XXIII) Payable for employee
Items
Opening
balance
Increase for the
current period
Payable for the
current period
Closing balance
======================= =========== ============ ============ ============
Salary, premium, allowance and
subsidy
10,443,471.94 52,412,153.84 57,970,823.95 4,884,801.83
Employee benefits/welfare --- 7,867,442.97 5,544,037.86 2,323,405.11
Social insurance 239,005.00 4,873,680.32 5,183,405.43 -70,720.11
Housing provident fund 3,323.43 289,211.20 297,273.24 -4,738.61
Labor union expenditure and
employee education expenses
419,349.02 6,057,328.24 4,189,843.72 2,286,833.54
------------ ------------- ------------- ------------
Total 11,105,149.39 71,499,816.57 73,185,384.20 9,419,581.76
=========== ============= ============= ============
(XXIV) Taxes payable
Type of taxation Closing balance Opening balance
=================================== =============== ===============
VAT 293,076.64 -27,559,665.85
City maintenance and construction tax 2,071.31 10,318.83
Business tax 135,966.72 229,754.14
Enterprise income tax -6,491,619.83 -5,857,183.09
Individual income tax 594,847.41 155,808.86
Stamp tax 7,568.26 4,172.06
Tax for land use 705,082.02 729,523.3264
Housing property tax 105,402.36 105,402.36
Embankment protection expense 30,925.46 35,017.63
Educational surtax 887.62 4,422.36
--------------- ---------------
Total
-4,615,792.03 -32,142,429.38
=============== ===============
Note: Closing balance of enterprise income tax payable is negative number, which
was because that the enterprise income tax paid in advance by Foshan Huafeng Paper
Co., Ltd. failed to withdraw.
(XXV) Interests payable
Items Closing balance Opening balance
=================================== ============== ==============
Interests payable with aging within one year 29,180,122.64 11,681,609.01
-------------- --------------
Total 29,180,122.64 11,681,609.01
============== ==============
(XXVI) Dividend payable
Name of investors Closing balance Opening balance
=================================== ============== ==============
Foshan Xinhui Industrial Development Co., Ltd. 54,494.00 54,494.00
Foshan Light Industry Company 79,264.00 79,264.00
-------------- --------------
Total 133,758.00 133,758.00
============== ==============
(XXVII) Other payables
Items Closing balance Opening balance
=================================== ============== ==============
Loan of Foshan Huaxin Development Co., Ltd. 2,705,000.00 2,705,000.00
China Materials Investment Corp. 90,000,000.00 ---
Margin and guarantee deposit 3,285,967.61 4,080,000.00
Temporary accounts payable 1,446.81 4,559,870.71
Other 768,999.32 11,319,575.05
-------------- --------------
Total
96,761,413.74 22,664,445.76
============== ==============
1. Among the closing balance, RMB 90,000,000.00 and RMB 3,203,004.48 are the
arrearages that the Company owed China Materials Investment Corp. and Foshan
Huaxin Development Co., Ltd. respectively, two shareholders holding over 5%65
(including 5%) of shares with voting right. Please refer to Note X (IV) 5 for details.
2. Other payables with the greater amount as at the year-end
Name of creditors Amount Contents
=================================== ============== ==============
China Materials Investment Corp. 90,000,000.00 Borrow money
Foshan Huaxin Development Co., Ltd. 3,203,004.48 Borrow money and
current payment
=================================== ============== ==============
(XXVIII) Other current liabilities
Items Closing balance Opening balance
=================================== ============== ==============
Principal of short-term financing bills 500,000,000.00 500,000,000.00
Less: discount amount --- ---
Real financing amount 500,000,000.00 500,000,000.00
Add: discount amortization --- ---
Less: balance of service charge for offering 333,333.30 1,333,333.32
Accrued expenses such as cost of freight 60,771,462.47
-------------- --------------
Total 560,438,129.17 498,666,666.68
============== ==============
Note: Note: The Company issued RMB 500 million worth of one-year short-term
financing bills of Foshan Huaxin Packaging Co., Ltd. on 2 Sep. 2008 with par value
of RMB 100 for every 100 Yuan. The interest period is from 4 Sep. 2008 to 3 Sep.
2009.
(XXXI) Long-term Loan
Units Currency
Terms of
loan
Closing
balance
Opening
balance
Remark
==================== ====== ======== =========== =========== ============================
Agricultural Bank of
China, Foshan Huada
Sub-branch
CNY Guarantee 380,000,000.00 380,000,000.00 Joint Liability Guarantee is provided
by China Materials Development
Investment General Corporation
China Construction
Bank Corporation,
Foshan Branch
CNY Guarantee 60,000,000.00 60,000,000.00 Joint Liability Guarantee is provided
by the Company for the loan of its
subsidiary, Foshan Huafeng Paper
Co., Ltd.
----------- -----------
Total 440,000,000.00 440,000,000.00
=========== ===========
(XXX) Long-term accounts payable
Items Closing balance Opening balance Remark66
Yunnan Hongta Group Co., Ltd. 72,277,325.43 --- interest-free
Yanlord Industries Pte. Ltd. 11,205,432.43 --- interest-free
Total 83,482,757.86 ---
(XXXI) Accrued liabilities
Items Closing balance Opening balance
Guarantee money for product quality 14,090,000.00 ---
Total 14,090,000.00 ---
Accrued liabilities are a compensation estimated by Zhuhai S.E.Z Hongta Renheng
Co., Ltd. for quality of the sold products, as well as short settlement of loss by
insurance company.
(XXXII) Deferred income tax liabilities
Closing balance Opening balance
------------------------- --------------------------
Items
Deferred income
tax liabilities
Temporary
difference
Deferred income
tax liabilities
Temporary
difference
================== ============ ============ =========== ============
Change in fair value 18,937,523.29 76,912,900.78 --- ---
------------ ------------ ----------- ------------
Total 18,937,523.29 76,912,900.78 --- ---
============ ============ =========== ============
The Company made the appraisal to net identifiable assets as at 30 Jun. 2008 of
Foshan Huafeng Paper Co., Ltd. and Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd.,
both subsidiaries of the Company, and the corresponding appreciation is calculated as
deferred income tax liabilities at the end of reporting period.
(XXXIII) Other non-current liabilities
Items Closing balance Opening balance
=================================== ============== ==============
Deferred income 1,320,000.00 1,320,000.00
-------------- --------------
Total 1,320,000.00 1,320,000.00
============== ==============
(XXXIV) Share capital
Opening balance
Increase/decrease for the current period
(+,-)
Closing balance
--------------- ----------------------------------- ----------------
Items
Number
proporti
on
Issua
nce of
new
share
Bonus
shares
Capitalization
of
share
capital
Other Subtotal Number
proporti
on67
======================= ========= ===== ==== ======== ====== ==== ======== ========= =====
I. Unlisted shares
1. Sponsor’s shares 333,500,000 65.99% --- --- --- --- --- 333,500,000 65.99%
Including:
Shares held by the State --- --- --- --- --- --- --- --- ---
Shares held by domestic legal
person
333,500,000 65.99% --- --- --- --- --- 333,500,000 65.99%
Shares held by foreign legal
person
--- --- --- --- --- --- --- --- ---
Other --- --- --- --- --- --- --- --- ---
2. Raised legal person’s shares --- --- --- --- --- --- --- --- ---
3. Inner employee shares --- --- --- --- --- --- --- --- ---
4. Preferred shares or other --- --- --- --- --- --- --- --- ---
Including: transferred allotted
shares
---
--- --- --- --- --- ---
---
---
--------- ----- ---- ------ ------ ---- ---- --------- -----
Total unlisted shares 333,500,000 65.99% --- --- --- --- --- 333,500,000 65.99%
--------- ----- ---- ------ ------ ---- ---- --------- -----
II. Listed shares
1. RMB ordinary shares ---- --- --- --- --- --- --- --- ---
2. Domestically listed foreign
shares
171,925,000 34.01% --- --- --- --- --- 171,925,000 34.01%
3. Overseas listed foreign shares --- --- --- --- --- --- --- --- ---
4. Other --- --- --- --- --- --- --- --- ---
--------- ----- ---- -------- ------ ---- ---- --------- -----
Total listed shares 171,925,000 34.01% --- --- --- --- --- 171,925,000 34.01%
--------- ----- ---- -------- ------ ---- ---- --------- -----
III. Total shares 505,425,000 100% --- --- --- --- --- 505,425,000 100%
========= ===== ==== ======== ===== ==== ======== ========= =====
Note: The above-mentioned paid-in capital has been inspected and verified by
Guangdong Hengxin Delu Certified Public Accountants Co., Ltd., issuing the Capital
Verification Report with (2007) HDZY No. 25.
(XXXV) Capital reserve68
Items Opening balance
Increase for the
current period
Decrease for the
current period
Closing balance
=============== ============== ============= ============= =============
Share premium 250,531,482.00 --- --- 250,531,482.00
Other capital reserve 3,232,500.00 --- 3,232,500.00 ---
-------------- ------------- ------------- --------------
Total 253,763,982.00 --- 3,232,500.00 250,531,482.00
============== ============= ============= ==============
(XXXVI) Surplus reserve
Items Opening balance
Increase for the
current period
Decrease for the
current period
Closing balance
=============== ============== ============= =========== ==============
Statutory surplus
public reserve
125,274,475.42 --- --- 125,274,475.42
-------------- ------------- ----------- --------------
Total 125,274,475.42 --- --- 125,274,475.42
============== ============= =========== ==============
(XXXVII) Retained profit
Items Amount
============================================== ===============
Opening retained profit 384,755,182.00
Add: net profit for the current period 11,156,984.75
Less: withdrawing statutory surplus public reserve ---
Withdrawing arbitrary surplus public reserve ---
Distributing dividend of common shares ---
Transferring into capital ---
Closing retained profit 395,912,166.75
============================================== ===============
(XXXVIII) Operating income and operating cost
1. Operating income
Items Current amount Amount of last period
============================= ================ ================
Income form main operation 572,252,462.97 826,025,453.30
Other operating income 1,940,981.93 4,993,720.32
---------------- ----------------
Total 574,193,444.90 831,019,173.62
================ ===============
Sales revenue from the top five customers69
Items Current amount Amount of last period
=================================== ================ ===============
Total sales revenue from the top five customers 117,763,022.95 105,721,518.24
Proportion in total operating income (%) 20.58% 12.72%
=================================== ================ ===============
2. Operating cost
Items Current amount Amount of last period
=================================== ================ ===============
Cost on main operation 561,438,243.09 705,808,534.70
Other business expenditure 748,574.15 849,227.30
---------------- ---------------
Total 562,186,817.24 706,657,762.00
================ ===============
3. Category of main operation income and cost according to products
Current amount Amount of last period
------------------------------- --------------------------------
Items
Income from main
operation
Cost on main operation Income from main
operation
Cost on main
operation
========== ================ ================ =============== ===============
White board
paper
511,537,329.07 513,991,481.09 768,372,722.46 660,033,146.61
Printing 64,973,168.97 51,704,797.07 62,718,077.39 50,232,893.05
Offsetting each
other among
industries
within the
Company
-4,258,035.07 -4,258,035.07 -5,065,346.55 -4,457,504.96
---------------- ---------------- --------------- ---------------
Total 572,252,462.97 561,438,243.09 826,025,453.30 705,808,534.70
================ ================ =============== ===============
4. Category of main operation income and cost according to area
Current amount Amount of last period
------------------------------- ---------------------------
Area
Income from main
operation
Cost on main operation Income from main
operation
Cost on main
operation
========== ================ ================ ============== ==============
Home sales 539,483,603.31 528,457,792.91 665,845,487.44 566,021,158.77
Export sales 32,768,859.66 32,980,450.18 160,179,965.86 139,787,375.93
---------------- ---------------- -------------- --------------
Total 572,252,462.97 561,438,243.09 826,025,453.30 705,808,534.70
================ ================ ============== ==============
5. Operating income and operating cost in the reporting period decreased respectively
by RMB 256,825,728.72 and RMB 144,470,944.76 over the same period of last year,70
or 30.90% and 20.44%, which was mainly due to the impact of the financial crisis on
Foshan Huafeng Paper Co., Ltd.. Affected by the financial crisis, the market demand
and selling prices of the said company’s product—high-class coated white
paper—experienced a considerable drop compared with the same period of last year.
Meanwhile, the gross profit rate also decreased significantly due to the reduced
production and the increased fixed cost per unit.
(XXXIX) Business tax and extra
Items Current amount Amount of last period
=================================== ================ ===============
City maintenance and construction tax 7,497.00 ---
Education surtax 3,213.00 ---
Embankment protection cost 348,398.28 360,733.54
---------------- ---------------
Total 359,108.28 360,733.54
================ ===============
(XL) Sales expense
Items Current amount
Amount of last
period
=================================== ============== ==============
Sales expense 20,071,354.31 27,136,153.79
=================================== ============== ==============
(XLI) Administrative expense
Items Current amount
Amount of last
period
=================================== ============== ==============
Administrative expense 36,520,388.07 36,607,305.81
=================================== ============== ==============
(XLII) Financial expense
Category Current amount
Amount of last
period
=================================== ============== ==============
Interest expense 39,105,220.67 42,326,187.57
Less: interest revenue 1,277,617.02 3,906,462.28
Exchange loss --- ---
Less: exchange profit 104,239.21 1,323,458.48
Other 2,242,941.06 2,069,439.87
-------------- --------------
Total 39,966,305.50 39,165,706.68
============== ==============71
(XLIII) Loss on assets impairment
Items Current amount
Amount of last
period
=================================== ============== ==============
Loss on bad debts --- ---
Loss on falling price of inventory -10,300,000.00 ---
Loss on impairment of long-term investment --- ---
-------------- --------------
Total -10,300,000.00 ---
============== ==============
On 30 Jun. 2009, the market price of the coated white board paper manufactured by Foshan
Huafeng Paper Co., Ltd., the subsidiary controlled by the Company, was pushed up than that as at
31 Dec. 2008, resulting in recovery of net realizable value, therefore, the reserve for falling price
of inventory amounting to RMB 10,300,000 withdrawn on 31 Dec. 2008 shall be written off.
(XLIV) Investment income
Items Current amount
Amount of last
period
=================================== ============== ==============
Income from disposal of equity investment 47,891,412.67 ---
Attributable share of the net profits and losses
recognized under equity method of the invested
entity
30,539,639.52 32,985,717.68
-------------- --------------
Total 78,431,052.19 32,985,717.68
============== ==============
Note: (1) There was no significant restriction to investment income transfer in the
Company.
(2) Income from disposal of equity investment is from the assets invested by the
Company in Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd., i.e., the difference
between the carrying value of the 75% shares of Foshan Huafeng Paper Co., Ltd. and
its fair value.
(XLV) Non-operating income
Items Current amount
Amount of last
period
=================================== ============== ==============
Income from disposal of fixed assets 456,632.60 ---
Funds for technology renovation from financial
subsidies
--- 225,000.00
Other 130,585.00 94，943.85
-------------- --------------
Total 587,217.60 319,943.8572
============== ==============
(XLVI) Non-operating expense
Items Current amount
Amount of last
period
=================================== ============== ==============
Loss on disposal of fixed assets --- 6,479.06
Penalties and fines paid --- 23,454.09
Donation outlay 3,000.00 ---
Other --- 3,000.00
-------------- --------------
Total 3,000.00 32,933.15
============== ==============
(XLVII) Income tax expense
Items Current amount
Amount of last
period
=================================== ============== ==============
Current income tax expense 1,002,647.07 1,339,259.30
Deferred income tax expense 1,250,000.00 ---
-------------- --------------
Total 2,252,647.07 1,339,259.30
============== ==============
(XLVIII) Notes to cash flow statement
1. Other cash received related with operating activities
Items Current amount
Amount of last
period
=================================== ============== ==============
Total 36,131,040.88 31,427,790.93
============== ==============
Including: Interest revenue 830,360.03 913,304.53
Margin received --- 660,000.00
Governmental subsidy --- 225,000.00
Rental income 618,492.00 994,441.00
============== ==============
2. Other cash paid related with operating activities
Items Current amount
Amount of last
period
============================================== ============== ==============
Total 22,813,910.81 69,633,756.69
============== ==============
Including: transportation expenses for products 6,404,252.62 ---
Bank charge 320,113.29 ---
Car road toll 246,861.09 ---73
Business entertainment 824,383.52 ---
Export charges 942,007.77 ---
Office expenses 221,080.08 ---
Operating expense --- 31,773,993.84
Guarantee deposit paid --- 300,000.00
============== ==============
3. Supplemental information of cash flow statement
Supplemental information Current amount
Amount of last
period
=============================================== =============== ==============
1. Transferring net profit into cash flows of operating activities:
Net profit 2,152,094.22 53,024,980.88
Add: Reserve for assets impairment -10,300,000.00 ---
Depreciation of fixed assets, oil and gas assets and
productive biological assets
51,881,901.80 48,445,185.99
Amortization of intangible assets 766,180.52 761,829.54
Amortization of long-term deferred expenses 992,226.84 -22,283,797.23
Loss for disposal of fixed assets, intangible assets and
other long-term assets (income is listed as “-”)
-406,849.33 6,479.06
Losses on scrapping of fixed assets (income is listed as
“-”)
--- ---
Losses on change in fair value (income is listed as “-”) --- ---
Financial expense (income is listed as “-”) 39,105,220.67 32,801,182.61
Losses arising from investment (income is listed as “-”) -78,431,052.19 -32,985,717.68
Decrease of deferred income tax assets (increase is listed
as “-”)
1,250,000.00 ---
Increase of deferred income tax liabilities (decrease is
listed as “-”)
18,937,523.29 ---
Decrease of inventories (increase is listed as “-”) 195,788,545.75 -53,764,398.84
Decrease in operating receivables (increase is listed as
“-”)
-149,124,742.52 126,261,785.29
Increase in operating payables (decrease is listed as “-”) -23,943,556.70 -3,048,128.33
Other --- ---
Net cash flows arising from operating activities 48,667,492.35 149,219,401.29
(2) Investing and financing activities that do not involving
significant cash receipts and payments
Conversion of debt into capital --- ---
Reclassify convertible bonds to be expired within one
year as current liabilities
--- ---
Fixed assets financed by financing leases --- ---
(3) Change in cash and cash equivalents
Closing balance of cash 737,865,971.01 76,092,273.5274
Less: opening balance of cash 208,091,895.59 63,767,336.50
Add: Closing balance of cash equivalents --- ---
Less: Opening balance of cash equivalents --- ---
Net increase in cash and cash equivalents 529,774,075.42 12,324,937.02
=============================================== =============== ==============
4. Cash and cash equivalent
Items Current amount
Amount of last
period
============================================== ============== =============
I. Cash 737,865,971.01 76,092,273.52
Including: Cash on hand 351,173.02 270,164.37
Bank deposit used for payment at any moment 650,234,980.04 70,809,971.92
Other monetary funds used for payment at any moment 87,279,817.95 5,012,137.23
(2) Cash equivalents --- ---
Of which: Bonds investment to be expired within three months --- ---
(3) Balance of cash and cash equivalents at the end of the period 737,865,971.01 76,092,273.52
Of which: Cash and cash equivalents restricted when parent
company and the Group
--- ---
============================================== ============== ==============
IX. Notes to the financial statement of parent company
(I) Other receivables
1. Composing of other receivable
Closing balance Opening balance
---------------------------------- ---------------------------------
Items
Book balance
Proport
ion
Reserve for
bad debts
Book balance
Proport
ion
Reserve for
bad debts
===========-======= ================ ====== =========== =============== ===== ===========
Accounts receivable
with significant single
amounts
1,356,014,703.90 99.99% --- 1,417,255,533.89 99.99% ---
Accounts receivable
with insignificant
single amounts but
with significant credit
risk
97,135.97 0.01% 97,135.97 97,135.97 0.01% 97,135.97
Other insignificant 2,283.38 --- 298.81 2,283.38 --- 298.81
---------------- ------ ----------- --------------- ------ -----------
Total
1,356,114,123.2
5
100% 97,434.78
1,417,354,953.2
4
100% 97,434.78
==============
==
=====
=
=========
==
=============
==
=====
=
==========
=
2. Aging analysis75
Closing balance Opening balance
--------------------------------- -------------------------------
Items
Book balance Proportion
Reserve for bad
debts
Book balance
Proportio
n
Reserve for bad
debts
============ =============== ====== ========== ============== ====== ==========
1-3 months 232,665,910.72 17.16% --- 247,665,910.72 17.47% ---
4-12 months 251,687,365.21 18.56% 288.21 253,550,411.48 17.89% 288.21
1-2 years 484,899,761.97 35.76% 10.60 494,286,845.69 34.87% 10.60
2-3 years 244,456,998.08 18.02% --- 244,456,998.08 17.25% ---
Over 3 years 142,404,087.27 10.50% 97,135.97 177,394,787.27 12.52% 97,135.97
--------------- ------ ---------- --------------- ------ ----------
Total 1,356,114,123.25 100% 97,434.78 1,417,354,953.24 100% 97,434.78
=============== ====== ========== ============== ====== ==========
3. Other receivables with significant single amounts
Name of debtor Arrearage Proportion
withdrawn
Reason
========================== ================ ======== =========================
Foshan Huafeng Paper Co., Ltd. 553,669,196.09 --- Subsidiary companies that can be
controlled, and with normal
production and operation, a little
probability for loss of bad debts
Huaxin (Foshan) Color Printing Co.,
Ltd.
89,463,460.51 --- Subsidiary companies that can be
controlled, and with normal
production and operation, a little
probability for loss of bad debts
Foshan Chengtong Paper Co., Ltd. 678,848,852.63 --- Subsidiary companies that can be
controlled, and with normal
production and operation, a little
probability for loss of bad debts
Zhuhai S.E.Z Hongta Renheng Paper
Co., Ltd.
30,000,000.00 --- Subsidiary companies that can be
controlled, and with normal
production and operation, a little
probability for loss of bad debts
=========================== ================ ======== =========================
4. In closing balance, no arrearage due to shareholders which holding over 5%
(including 5%) of shares with voting right.
5. The top 5 arrearage in other receivables at the year-end
Name of debtor Arrearage Kind or contents
Term limit
of arrearage
Proportion in
total other
receivables
========================= ================ ============== ======== ============
Foshan Chengtong Paper Co., Ltd. 678,848,852.63 funds appropriated One month 50.06%
Foshan Huafeng Paper Co., Ltd. 553,669,196.09 funds appropriated Rolling for 40.83%76
many years
Huaxin (Foshan) Color Printing Co.,
Ltd.
89,463,460.51 funds appropriated Rolling for
many years
6.60%
Zhuhai S.E.Z Hongta Renheng Paper
Co., Ltd.
30,000,000.00 funds appropriated One month 2.21%
Other 300,000.00 Current payment One month 0.02%
========================= ================ ============== ======== ============
6. Other receivables of related parties as at the year-end took up 99.7% of total other
receivables.
(II) Long-term equity investment
Closing balance Opening balance
--------------------------- ---------------------------
Items
Book balance
Reserve for
impairment
Book balance
Reserve for
impairment
=================== ================ ========== =============== ==========
Investment in subsidiaries 899,303,063.00 --- 790,126,950.64 ---
Investment in affiliated
enterprises
228,496,616.01
---
197,956,976.49
---
---------- --------------- ----------
Total 1,127,799,679.01 --- 988,083,927.13 ---
================ ========== =============== ==========
1. Long-term equity investment measured at cost method
(1) Investment measured at cost method in subsidiary companies
Name of investing enterprise
Proportion of
shares held
Initial investment
amount
Opening balance
Increase for the
current period
Decrease for the
current period
Closing balance
============================= ======== ============= ============= ============ ============ =============
Foshan Huafeng Paper Co., Ltd.
Indirect
100%
800,295,306.86
746,190,450.61
--- 746,190,450.61
0.00
Huaxin (Foshan) Color Printing Co., Ltd. Direct 75% 40,936,500.03 40,936,500.03 31,737,645.00 ---
72,674,145.03
Foshan Huaxin Jinfeng Industrial Co.,
Ltd.
Direct 100% 3,000,000.00 3,000,000.00 --- --- 3,000,000.00
Zhuhai S.E.Z Hongta Renheng Paper
Co., Ltd.
Direct
40.176%
--- ---
819,128,917.97
---
819,128,917.97
Foshan Chengtong Paper Co., Ltd. Direct 75% --- --- 4,500,000.00 --- 4,500,000.00
----------- ----------- ----------- ----------- -----------
Total 844,231,806.89 790,126,950.64 855,366,562.97 746,190,450.61 899,303,063.00
========= ========= ========= ========= =========
(2) Other equity investment measured at equity method: naught
2. Long-term equity investment measured at equity method
Increase/decrease for Name of investing the current period
enterprise
Initial investment
amount
Additional
investment
Opening balance
----------------------------
Closing balance77
Net gains and
losses adjusted
based on equity
method
Cash dividends
distributed
Change
in other
equity
============= ========== ==== ========== ========= ========== ==== ==========
Affiliated enterprise:
Tetra Huaxin (Foshan)
Packing Co., Ltd.
145,945,947.55 --- 197,956,976.49 30,539,639.52 --- --- 228,496,616.01
---------- ---- ---------- --------- ---------- ---- ----------
Total 145,945,947.55 --- 197,956,976.49 30,539,639.52 --- --- 228,496,616.01
========== ==== ========== ========= ========== ==== ==========
Name of investing enterprise
Registratio
n place
Business
nature
Proportion
of shares
held by the
Company
Voting right
proportions in
investing
enterprise
Total net assets at
the period-end
Total operating
income for the
current period
Net profit for the
current period
============== ===== ======= ====== ======== ========= =========== =========
Affiliated enterprise:
Tetra Huaxin (Foshan)
Packing Co., Ltd.
Foshan Sino-foreign
joint venture
enterprise
25% 25% 707,630,569.95 523,286,778.64 122,158,558.08
============== ===== ======= ====== ======== ========= =========== =========
(III) Investment income
Items Current amount Amount of last period
========================================== ============== ==============
Attributable share of the net profits and losses recognized under
equity method of the invested entity
30,539,639.52 32,985,717.68
Dividend distribution measured in the light of cost method declared
by the invested company
--- 19,421,612.31
Income from equity disposal (at cost method) 9,874,887.93
-------------- --------------
Total 40,414,527.45 52,407,329.99
============== ==============
Note: (1) There was no significant restriction to investment income transfer in the
Company.
(2) Income from disposal of equity investment calculated at cost method is the
difference between the carrying value of the 75% shares of Foshan Huafeng Paper Co.,
Ltd. and its fair value.
ⅩⅩ.
Related Party Relationship and Transactions
(Ⅰ) Recognition standard of related parties
According to the Accounting Standards for Business Enterprises No.36—Disclosure of Related78
Parties, when a party controls, jointly controls or exercises significant influence over another party,
or when two or more parties are under the control, joint control or significant influence of the
same party, the related party relationships are constituted.
According to the Administrative Measures for Information Disclosure of Listed
Companies (Decree No.40 of CSRC), the special related legal person and related
natural person are also recognized as related parties.
(Ⅱ) Related parties with control relationship
1. Particulars about related parties with control relationship
(1) Related parties controlling the Company
Name of
enterprise
Registration
place
Main businesses
Relations
hip with
the
Company
Natural of
business
Legal
representa
tive
Organization
code
======= ===== ============================== ====== ===== ====== ==========
Foshan
Huaxin
Developmen
t Co., Ltd.
Foshan
Manufacturing and trading of: packaging materials,
paper, cable, wire, new materials; trading of;
packaging machinery and maintenance, amplifier
and parts, decoration materials, beverages;
Information and consulting service.
(Manufacturing items are operated by the
subsidiaries)
Parent
company
Limited
company
Tong
Laiming
19353992-5
China
Materials
Investment
Corp. *
Beijing Main businesses: Investment and development of
important industrial materials; sales of metal
materials (rare metal excluded), construction
materials, wood, cement, chemical materials and
products, garment, paper, rubber, tires,
electro-mechanic products, wire & cable, industrial
boilers, crops, automobile (including sales of cars
to final users) (items limited by national
government excluded); Import & export business
in the above range of products for home market
(only those products in the approved merchandise
list, excluding import and export business operated
by designated enterprises or governmental
departments); assembling with supplied parts,
processing with supplied materials and samples,
and compensation trade; counter-trading business.
Sideline: technical consultancy and service related
to material development.
Actual
controller
ownership
by the
whole
people
Tong
Laiming
10000890-7
China
Chengtong
Holding
Group Co.,
Beijing
Operation and management of assets; entrustment
management; merger and acquisition; investment
management and consultation; logistical service,
import & export business and sales of steels
Ultimate
controller
Limited
company
(state-ow
ned
Ma
Zhengwu
71092254-479
Ltd. * corporate)
======= ===== ============================== ====== ===== ====== ==========
* On June 28, 2005, Foshan Gongying Investment Holdings Co., Ltd. transferred its 62.1142%
equity of Foshan Huaxin Development Co., Ltd. (investment amount of RMB 284.44 million) to
China Materials Investment Corp.. Owing to the fact that Foshan Huaxin Development Co., Ltd.
was the parent company of the Company and held 65.2% equity of the Company, and the fact that
China Materials Investment Corp. already held 0.11% equity of the Company, China Materials
Investment Corp. directly and indirectly held 65.31% equity of the Company, who became the
actual controller of the Company. China Chengtong Holding Group Co., Ltd. held 100% equity of
China Materials Investment Corp., which thus made it the ultimate controller of the Company.
(2) Related parties controlled by the Company
For details, please refer to Note Ⅶ (I).
2. Registered capital of related parties with controlling relationship and its changes
Name of enterprise
Amount at
period-begin
(Unit: ‘0000)
Increase in
current period
(Unit: ‘0000)
Decrease in
current
period
(Unit: ‘0000)
Amount at
period-end
(Unit: ‘0000)
================================ ============ ========= ========= ============
Foshan Huaxin Development Co., Ltd. CNY45,793 --- --- CNY45,793
China Chengtong Holding Group Co., Ltd. CNY256,016 --- --- CNY256,016
China Materials Investment Corp. CNY131,729 --- --- CNY131,729
Foshan Huafeng Paper Co., Ltd. USD12,139 --- --- USD12,139
Huaxin (Foshan) Color Printing Co., Ltd. USD660 USD620 --- USD1,280
Foshan Huazhi Wasted Paper Recovery Co., Ltd CNY500 --- --- CNY500
Foshan Chancheng District Pearl River Color
Printing Co., Ltd.
CNY150
--- ---
CNY150
Foshan Huaxin Jinfeng Industry Co., Ltd. CNY300 --- --- CNY300
Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. USD9,800 USD11,306.13 --- USD21,106.13
Zhuhai Hengshun Supply Chain Logistic Service
Co., Ltd.
CNY3,000 --- --- CNY3,000
Foshan Chengtong Paper Co., Ltd. --- CNY600 --- CNY600
================================ ============ ========= ========= ============
3. Shares held by the related parties with controlling relationship and its changes
Amount at period-begin
Increase in current
period
Decrease in
current period
Amount Name of enterprise at period-end
------------------ --------------- --------- -----------------80
Amount Proportion Amount
Proport
ion
Amount
Proport
ion
Amount
Proportio
n
======================== =========== ===== ======== ==== ==== ==== =========== =====
Foshan Huaxin Development Co., Ltd 329,512,030.00 65.20%,
direct
--- --- --- --- 329,512,030.00 65.20%,
direct
China Materials Investment Corp. 569,710.00 0.11%,
direct
--- --- --- --- 569,710.00 0.11%,
direct
Foshan Huafeng Paper Co., Ltd. 746,192,321.86 75%, direct 1,064,928,358
.84
100%,
indirect
746,192
,321.86
75%,
direct
1,064,928,358.84 100%,
indirect
Huaxin (Foshan) Color Printing Co.,
Ltd.
40,936,500.03 75%, direct 31,737,645.0 75%,
direct
--- --- 72,674,145.03 75%,
direct
Foshan Huazhi Wasted Paper
Recovery Co., Ltd
5,000,000.00 100%,
indirect
--- --- --- --- 5,000,000.00 100%,
indirect
Foshan Chancheng District Pearl River
Color Printing Co., Ltd.
1,500,000.00 100%,
indirect
--- --- --- --- 1,500,000.00 100%,
indirect
Foshan Huaxin Jinfeng Industry Co.,
Ltd.
3,000,000.00 100%, direct --- --- --- --- 3,000,000.00 100%,
direct
Zhuhai S.E.Z Hongta Renheng Paper
Co., Ltd.
--- --- USD84,795,9
79.00
40.176
%,
direct
--- --- USD84,795,979.00 40.176%,
direct
Zhuhai Hengshun Supply Chain
Logistic Service Co., Ltd.
--- --- 22,500,000.00 75%,
indirect
--- --- 22,500,000.00 75%,
indirect
Foshan Chengtong Paper Co., Ltd. --- --- 4,500,000.00 75%,
direct
--- --- 4,500,000.00 75%,
direct
======================== =========== ===== ======== ==== ==== ==== =========== =====
(III) Related parties without control relationship
Name of enterprise Organization code
Relationship with the
Company
================================ ================ ==================
Tetra Huaxin (Foshan) Packaging Co., Ltd. 61762144-8 Affiliated company
Foshan Huaxin Import & Export Co., Ltd.
19354411-8 Under the same parent
Company
Qingdao Chengtong Fuel Co., Ltd.
73728500-4 Under the same actual
controller
Dragon State International Co., Ltd.
Under the same ultimate
controller81
================================ ================ ==================
(IV) Related transactions
1. Concerning the subsidiary companies with control relationship which were
included in the Company’s consolidated accounting statements, their transactions with
each other and with the parent company had been offset.
2. Pricing principle of related transactions
The prices were decided upon negotiation based on market prices.
3. Goods purchased from related parties
The current period The last period
---------------------- ----------------------
Name of enterprise
Amount
(RMB’0000)
Proportion in
same kinds of
transactions
(%)
Amount
(RMB’0000)
Proportion in
same kinds of
transactions
(%)
=========================== =========== ======== =========== ========
Qingdao Chengtong Fuel Co., Ltd. 1,270.11 19.76 6,202.65 66.00
Foshan Huaxin Import & Export Co., Ltd. 203.60 3.20 --- ---
----------- -------- ----------- --------
Total 1,473.71 22.96 6,202.65 66.00
=========== ======== =========== ========
4. Goods sold to related parties
The current period The last period
---------------------- ----------------------
Name of enterprise
Amount
(RMB’0000)
Proportion in
same kinds of
transactions
(%)
Amount
(RMB’0000)
Proportion in
same kinds of
transactions
(%)
=========================== =========== ======== =========== ========
Foshan Huaxin Import & Export Co., Ltd. 5970.68 10.43 99.53 0.12
----------- -------- ----------- --------
Total 5970.68 10.43 99.53 0.12
=========== ======== =========== ========
5. Unsettled amount with related parties
Amount at period-end Amount Items at period-begin
---------------------- ----------------------82
Balance
Allowance for
doubtful
accounts
Balance
Allowance
for doubtful
accounts
============================= ============== ======== ============== ========
Accounts receivable:
Tetra Huaxin (Foshan) Packaging Co.,
Ltd.
--- --- 30,000.00 ---
Foshan Huaxin Import & Export Co., Ltd. 57,367,222.74 --- --- ---
Accounts paid in advance:
Foshan Huaxin Import & Export Co., Ltd. 33,908,371.20 --- --- ---
Other receivables:
Dragon State International Co., Ltd. --- --- 9,152,282.16 ---
Notes payable:
Qingdao Chengtong Fuel Co., Ltd. --- --- 40,710,322.25 ---
Accounts payable:
Qingdao Chengtong Fuel Co., Ltd. 5,993,076.19 --- 13,447,754.84 ---
Foshan Huaxin Import & Export Co., Ltd. 416,632.32 --- 811,263.61 ---
Other payables:
China Materials Investment Corp. 90,000,000.00 --- --- ---
Foshan Huaxin Development Co., Ltd. 3,203,004.48 --- 2,794,874.48 ---
Dragon State International Co., Ltd. 201,383.02 --- 201,383.02 ---
Short-term borrowings:
Foshan Huaxin Development Co., Ltd. 200,000,000.00 --- --- ---
============================= ============== ======== ============== ========
6. Other related transactions
(1) Leasing of office building
The Company entered the agreement with Foshan Huaxin Development Co., Ltd. to rent its
907-square-metre office area located at the 18/F Jinghua Building, Jihua 5th Road, Foshan, with
the term of lease lasting from 1 Jan. 2006 to 31 Dec. 2007. Upon its expiration on 31 Dec. 2007,
the term of lease was extended to 31 Dec. 2009. The Company committed to pay office building
use fee of RMB 326,520.00 and parking fee of RMB 25,200.00 to Foshan Huaxin Development
Co., Ltd. per year during the leasing period.
(2) Loans with related parties83
1. According to the Loan Contract signed between the Company and Foshan Huaxin Development
Co., Ltd., the balance of the loan that the Company got from Foshan Huaxin Development Co.,
Ltd. stood at RMB 2,705,000.00, with the loan interest rate determined by the bank deposit
interest rate at the same period. Meanwhile, the balance of the loan that the Company’s holding
subsidiary Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. from Foshan Huaxin Development Co.,
Ltd. stood at RMB 200,000,000.00, with the loan interest rate determined by the bank’s current
capital loan interest rate at the same period.
2. According to the relevant agreement signed between the Company and Dragon State
International Co., Ltd., the latter should, in accordance with the bank’s one-year loan interest rate
at the same period, paid RMB 9,387,083.72 as compensation to the Company due to the fact that
Foshan Huafeng Paper Co. Ltd. and Huaxin (Foshan) Color Printing Co., Ltd. did not implement
the reciprocal investment obligation with the Company. And the compensation amount in question
was received by the Company in the report period.
(3) Guarantees provided for and by related parties
During the report period, there existed no external guarantees (excluding guarantees provided for
holding subsidiaries) or illegal guarantees provided by the Company. As at 30 Jun. 2009, the
Company provided guarantees totaling RMB 452 million for its holding subsidiaries, accounting
for 35.39% of the Company’s net assets.
Unit: RMB’0000
Name of subsidiary Balance of guarantee
Foshan Huafeng Paper Co., Ltd.
41,700
Huaxin (Foshan) Color Printing Co., Ltd.
3,500
Total
45,200
Notes: Concerning the above-mentioned balance of guarantee provided for Foshan Huafeng Paper
Co., Ltd., RMB 28 million was jointly provided by China Materials Investment Corp, Foshan
Huaxin Development Co., Ltd. and the Company, and RMB 170 million jointly by China
Chengtong Holding Group Co., Ltd. and the Company;
Concerning the above-mentioned balance of guarantee provided for Huaxin (Foshan) Color
Printing Co., Ltd., RMB 25 million was jointly provided by China Materials Investment Corp,
Foshan Huaxin Development Co., Ltd. and the Company;
Meanwhile, China Materials Investment Corp. and Foshan Huaxin Development Co., Ltd.
provided joint guarantees for the Company amounting to RMB 50 million;
And China Materials Investment Corp. provided guarantees for the Company
reaching RMB 648 million, while Foshan Huaxin Development Co., Ltd. for the
Company reaching RMB 50 million.
XI. Contingent events
(I) Contingent liabilities due to lawsuit and arbitration pending84
There was no contingent liability due to lawsuit and arbitration pending.
(II) Contingent liabilities formed due to external guarantee up to 30 June 2009
Ended 30 June 2009, no external guarantee existed in the Company. As to guarantee provided by
the Company for its subsidiaries, please refer to Note X (IV) 6.
XII. Commitment events
1. In accordance with the Guarantee Contract with (2005) ZGWD Zi. No 5 and (2006) ZGWD Zi
No. 6 signed between the subsidiary company of the Company --- Foshan Huafeng Paper Co., Ltd.
and China Construction Bank Corporation Foshan Branch on 7 June 2006, the loan of maximum
amount of RMB 62,741,600.00 and RMB 43,044,200.00 (including equivalence foreign currency)
provided by the said bank to the said company from 1 March 2004 to 31 December 2009 were
guaranteed with house and building located in No. 17, Hebin Road, Foshan with appraisal value
amounting to RMB 62,741,600.00 and land as well as house and building with appraisal value of
RMB 43,044,200.00 as mortgages.
As at the end of reporting period, Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd., the subsidiary of
the Company, provided pledge guarantee for the short-term loan of RMB 120 million from 31 Jul.
2008 to 31 Jul. 2009 from Bank of China Zhuhai Branch with 75% equities of Zhuhai Hengshun
Supply Chain Logistical Service Co., Ltd. held by it as pledged assets, and provided the mortgage
guarantee with highest amount of credit of RMB 290 million for all main contracts signed with
Bank of Communications Zhuhai Branch during from 30 Nov. 2006 to 30 Nov. 2009 and
mortgage guarantee with highest amount of credit of RMB 200 million for all main contracts
signed with such bank during from 22 May 2008 to 30 Nov. 2009 with self-owned properties
(original value: RMB 400,539,129.76, net value: RMB 289,963,709.50) and land use right
(original value: RMB 62,547,304.90, net value: RMB 48,199,073.47) as the mortgage (the
certificate No. YFDZ Zi No. 1248028, No. 1248029, No. 1248031, No. 1248032, No. 1248047,
No. 1248048, No. 1248051, No. 1248233, No. 1248234, No. 1248236 and No. 1248238 and
YFDZ Zi No. C5617915, No. C5617916, No. C5617917, No. C3961436, No. C3961437 and No.
C3961435. Also, the properties with the certificate No. YFDZ Zi No. 1248049, No. 1248050, No.
1248226 and No. 1248239 are included into the same red line plan, together with the land are
made registration of mortgage right), and provided the mortgage guarantee with highest amount of
credit of RMB 130 million for all main contracts signed with Bank of Communications Zhuhai
Branch during from 22 May 2008 to 30 Nov. 2009 with machinery, office equipment and other
(original value: RMB 1,474,372,011.25, net value: RMB 778,295,277.94) as the mortgage. Ended
30 Jun. 2009, the balance the Company borrowed from Bank of Communications Zhuhai Branch
is RMB 910,620,000, open a letter of credit is RMB 19,828,600, as well as bank acceptance bill of
RMB 23,245.48
XIII. Events after balance sheet date
Naught
XIV. Other events
(I) Leasing
Operating lease
Various assets leased by the Company as follows:85
Type Closing carrying value Opening carrying value
============================== ================ ================
House and building 10,798,859.06 11,025,316.46
---------------- ----------------
Total 10,798,859.06 11,025,316.46
================ ================
(III) Other significant events
1. The Company entered into the Joint Venture Agreement with STORAENSO
PACKAGING BOARDS ASIAOY on 28 October 2005, in which the both purchased
the assets of Foshan Huafeng Paper Co., Ltd. Zhuhai Branch Company, the subsidiary
company of the Company, at the price of RMB 710,265,723.03, and together set up a
joint venture company, namely STORAENSO HUAXIN (ZHUHAI) PACKAGING
PAPER LTD., through assets merger. The said joint venture company’s total
investment amount was USD 98 million with registered capital of USD 49 million as
well as operating duration of 50 years. Of which, the Company invested in RMB 9.8
million, STORAENSO PACKAGING BOARDS ASIAOY invested in USD 39.2
million.. As approved by Department of Foreign Trade and Economic Cooperation of
Guangdong Province with YWJMZ Zi [2005] No. 673, the joint venture company has
obtained certificate of approval for foreign-funded enterprise with SWZYHZZ Zi
[2005] No. 0043. Owing to the said purchase, Foshan Huafeng Paper Co., Ltd. Zhuhai
Branch Company’s project on production expansion of 300,000-ton high-class coated
white board at place out of Zhuhai under construction was changed into project on
production of liquid package paper board with production scale of 300,000 tons.
However, the Company had a notice from STORAENSO PACKAGING BOARDS
ASIAOY on 29 November 2005, in which STORAENSO PACKAGING BOARDS
ASIAOY decided to give up the said investment and refuse handle the procedure
related with enterprise corporate business license of joint-venture company because
rate of return on profit from project on liquid package paper board was no all
idealization, as a result, the Assets Transfer Agreement failed to be continued to carry
out, as well as significant economic losses to Foshan Huafeng Paper Co., Ltd..
Unilateral statistics from Foshan Huafeng Paper Co., Ltd., such economic losses
totaled to about RMB 58 million, including expense on rebuilding, claim on customer
or vendor, engineering management expense during rebuilding, salary for staffs and
project interests during the delay period. Due to unilateral termination of the
cooperation from STORAENSO PACKAGING BOARDS ASIAOY, in accordance
with the Clause 22.1 and 22.2 in the Agreement, “if any part in the Joint Venture
Agreement fails to implement any obligation under the Agreement…, the said party
shall be regard that it violate this agreement”, STORAENSO PACKAGING
BOARDS ASIAOY “shall undertake duties for direct and real loss (excluding indirect)
for abiding party due to its breach of contract.”
The Company considered that STORAENSO Huaxin (Zhuhai) Packaging Paper Ltd. failed to be
established due to unilateral termination of the cooperation from STORAENSO PACKAGING
BOARDS ASIAOY, resulting in a great of cost put into the project of coated white board in
Zhuhai by the Company, for which the Company take proceedings against STORAENSO86
PACKAGING BOARDS ASIAOY for loss to the Company, in order to safeguard the legal rights
of Foshan Huafeng Paper Co., Ltd.. The said dispute case on agreement transfer has been accepted
by Zhuhai Intermediate Court on 20 Aug. 2007.
But STORAENSO PACKAGING BOARDS ASIAOY proposed an objection to right
of jurisdiction in this case. On 20 November 2007, as judged by Zhuhai Intermediate
People's Court with Civil Judgment (2007) ZZFMSC Zi No. 52, the Court rejected the
said objection on right of jurisdiction in this case. STORAENSO PACKAGING
BOARDS ASIAOY has appeal from the judgment of Zhuhai Intermediate People's
Court to Guangdong Higher People Court. On 16 June 2008, Guangdong Higher
People's Court made the final order with written civil ruling (2008) YGFLMZ Zi No.
65, overruling the appeal of STORAENSO PACKAGING BOARDS ASIAOY,
maintaining the first trial as well.
In Jan. 2008, Foshan Huafeng Paper Co., Ltd. received the notice from Singapore
International Arbitration Center (SIAC), in which STORAENSO PACKAGING
BOARDS ASIAOY has recourse to arbitration. In Mar. 2008, SIAC has notified
Foshan Huafeng Paper Co., Ltd. of the formation of arbitration court.
Receiving the notice of responding to action from Zhuhai Intermediate Court in November 2008,
the Company, as a defendant, was notified to participate in the proceedings on the assets transfer
agreement dispute Foshan Huafeng Paper Co., Ltd. bringing a suit against STORAENSO
PACKAGING BOARDS ASIAOY.
The case has been currently entering the substantive hearing. On 10 Feb. 2009, Zhuhai
Intermediate Court convened both parties to conduct the first hearing, in which the both parties
exchanged the evidence, and made the hearing of evidence to the application on evidence of
economic losses submitted by Foshan Huafeng Paper Co., Ltd..
On 24 Mar. 2009, the Company received a notice of responding to action from
Supreme People's Court of the People's Republic of China, in which the Court
accepted the petition for retrial on the right of jurisdiction in such dispute case on
assets transfer agreement made by STORAENSO PACKAGING BOARDS ASIAOY.
In Apr. 2009, the Company got the civil ruling paper ((2009) MSZ No. 285) from
Supreme People's Court of the People's Republic of China, in which the Court has
formed collegiate bench for hearing the retrial case, and dismissed the petition for
retrial on the right of jurisdiction in such dispute case on assets transfer agreement
between the joint venture and Huafeng Paper made by STORAENSO PACKAGING
BOARDS ASIAOY.
At present, the hearing of such case and arbitral procedure is in the process. Being a
larger uncertainty in whether the Company could withdraw claim payment through
such judicial procedure as judgment and execution, moreover, the Company failed to
judge the effect on the profit of the Company in the reporting period due to the
aforesaid case. At present, the Company’s production and operation are in good
working order.
2. Guangdong Regall Group Co., Ltd (hereinafter refer to as “Regall Group”) owed Zhuhai S.E.Z
Hongta Renheng Paper Co., Ltd, controlling subsidiary of the Company, RMB 12,977,931.88 for
more than three years as of 28 Mar. 2008. The two parties signed debt agreement. According to the87
agreement, Regall Group would pay debts in kind with wood pulp, which would be implemented
before 15 May 2008. However, Regall Group only paid debts in kind amounting to RMB
3,099,200.00 as of 31 Oct. 2008. Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd issued notice to
terminate the agreement on 29 Oct. 2008, but Regall Group demanded to continue to implement
the agreement. Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd appealed to the People’s Court of
Huang Pu District on debt dispute on 6 Dec. 2008 and claimed that Regall Group paid debt RMB
10,047,398.58 (50% of the foresaid payment has been withdrawn bad debt provision) and bear
responsibility of violating agreement. Regall Group counterclaim to affirm that Notice to
terminate the agreement was invalid and claimed that Zhuhai S.E.Z Hongta Renheng Paper Co.,
Ltd pay court fees and fees for counterclaim. On 28 Jun. 2009, according to Civil Judgment (2009)
HMECZ No. 72issued by the People’s Court of Huang Pu District, Notice to terminate the
agreement issued by Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd (plaintiff) to Regall Group
(defendant) was invalid, litigation from Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd was ignored
and it was judged that Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd would pay court fees
amounting to RMB 82,084 and defendant would pay RMB 100 for counterclaim.
3. In accordance with the resolutions of the temporary Board meeting of Foshan Huafeng Paper
Co., Ltd., the subsidiary of the Company, on 6 Oct. 2008, it agreed to sell its assets and liabilities
related with the businesses located in Foshan to Foshan Huaxin Jinfeng Industrial Co., Ltd. (after a
change to Huaxin (Foshan) Color Printing Co., Ltd.). Subsequent to finishing assets sale, Foshan
Huafeng Paper Co., Ltd. also gave consent to increase capital in Zhuhai Special Economic Zone
Hongta Yanlord Paper Co., Ltd. by its original shareholders, the Company and Dragon State
International Limited, at the evaluation of 75% equity and 25% equity held respectively by the
said shareholders. After capital increase, Foshan Huafeng Paper Co., Ltd. would become into their
wholly-owned subsidiary.
At the 6th meeting of the 4th Board of Directors for the year 2008 held on 8 Oct. 2008, Foshan
Huaxin Packaging Co., Ltd. increasing capital in Zhuhai Special Economic Zone Hongta Renheng
Paper Co., Ltd. and the material assets reorganization preplan was approved. On the same day,
both the Company and Dragon State International Limited signed the Framework Agreement on
Capital Increase with all three companies, Yunan Hongta Group Co., Ltd., Yanlord Industries Pte.
Ltd. and Zhuhai Special Economic Zone Hongta Renheng Paper Co., Ltd.. According to this
agreement, both the Company and Dragon State International Limited carried out additional
investment in Zhuhai Special Economic Zone Hongta Renheng Paper Co., Ltd. at the appraisal
value (base date of assets appraisal 30 June 2008) of 75% equity and 25% equity of Zhuhai
Huafeng (a enterprise after Foshan Huafeng Paper Co., Ltd. sold its assets and liabilities related
with the businesses located in Foshan) held respectively by the Company and Dragon State
International Limited. On the base of such appraisal value, Zhuhai Huafeng has calculated
additional investment in Zhuhai Special Economic Zone Hongta Renheng Paper Co., Ltd. in the
light of the paid-up amount invested by Dragon State International Limited although USD
10,233,793.55 is still not paid in full by Dragon State International Limited. After finishing the
transaction, the Company and Dragon State International Limited respectively holds 40.1760%
equity and 13.3920% equity of Zhuhai Special Economic Zone Hongta Renheng Paper Co., Ltd.,
and Yunan Hongta Group Co., Ltd. and Yanlord Industries Pte. Ltd. respectively holds 32.5024%
equity and 13.9296% equity of Zhuhai Special Economic Zone Hongta Renheng Paper Co., Ltd..88
Taking up over 50% of voting right in the Board of Zhuhai Special Economic Zone Hongta
Renheng Paper Co., Ltd. as well as control to its production and operation, a control relationship
to Zhuhai Special Economic Zone Hongta Renheng Paper Co., Ltd. is held by the Company.
Dragon State International Limited has paid investment in full in Foshan Huafeng Paper Co., Ltd.
on 7 Nov. 2008.
As approved by the Ministry of Commerce of the People’s Republic of China with
(approval document) SZP [2009] No, 23 document “Apply of MOFCOM on Giving
Consent to Increase Capital in Zhuhai Special Economic Zone Hongta Yanlord Paper
Co., Ltd.” on 12 Mar. 2009, the MOFCOM was in agreement with the capital increase
in Zhuhai Special Economic Zone Hongta Yanlord Paper Co., Ltd. with the total
investment amount reaching to USD 310.74 million from USD 197.67 million, as
well as registered capital of USD 211,061,305 from USD 98,000,000. The Newly
increased registered capital is paid by the Company and Dragon State International
Limited at the evaluation of 75% equity and 25% equity of Foshan Huafeng Paper Co.,
Ltd. held respectively by the said shareholders. Foshan Huafeng Paper Co., Ltd.
Foshan Huafeng Paper Co., Ltd. had become a domestically-funded enterprise from
the foreign-invested enterprise.
On 24 Mar. 2009, the Reply Concerning Equity Transfer of Foshan Huafeng Paper Co., Ltd.
(YWJMZZ [2009] No. 263) was issued by Guangdong Foreign Trade Economic Cooperation
Department.
On 27 May 2009, the Reply Concerning Approving the Material Asset Reorganization Plan of
Foshan Huaxin Packaging Co., Ltd. (ZJXK [2009] No.426) was issued by CSRC.
On 5 Jun. 2009, Huafeng Paper received the Notice of Approving the Change of Registration
(FHBTN Zi [2009] No.0900366038) issued by Foshan Administrative Bureau for Industry and
Commerce, and became a subsidiary wholly-owned by Hongta Renheng.
On 29 Jun. 2009, Hongta Renheng received the Notice of Approving the Change of
Registration (ZHBTW Zi [2009] No.0900125957) issued by Zhuhai Administrative
Bureau for Industry and Commerce, as well as the Business License for Enterprise as
a Legal Person with the registration number as 440400400028253. According to the
Notice of Approving the Change of Registration, after the change, the registered
capital of Hongta Renheng would be increased to USD 211,061,305 and its business
scope would be changed to include the production and sale of self-made high-class
packaging paper boards. And the equity structure of Hongta Renheng after alteration
was as follows: Dragon State International Limited contributed USD 28,265,326,
holding 13.39% shares; Foshan Huaxin Packaging Co., Ltd. contributed USD
84,795,979, holding 40.176% shares; Yunnan Hongta (Group) Co., Ltd. contributed
USD 68,600,000, holding 32.5% shares; Yanlord Industries Pte. Ltd. contributed USD
29,400,000, holding 13.93% shares. So far, the equity change of Hongta Renheng was
completed, which marked the substantive completion of this material asset
reorganization.
In accordance with the relevant provisions of the Accounting Standard for Business
Enterprise No. 20-Busienss Combinations, such assets restructuring is the enterprise
combination not under the same control.
As at 30 Jun. 2009, Foshan Huaxin Packaging Co., Ltd. (the acquirer) had obtained89
actually the control on Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. (the acquiree),
which met for the relevant terms for determining the purchasing date. Therefore, the
balance sheet of Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. is included in the
consolidation scope of the Company’s financial statement.
XV. Non-recurring gains and losses
Items Jan.-Jun. 2009 Jan.-Jun. 2008
========================================= ============= =============
Gains/losses from disposal of non-current assets 456,632.60 -6,479.06
Government subsidies recorded into profit and loss of the
current period
--- 225,000.00
Other non-operating income and expense 130,585.00 68,489.76
Other non-recurring gains and losses 234,801.56 2,993,027.31
Income from equity disposal 47,891,412.67 ---
Donation outlay -3,000.00 ---
------------- -------------
Subtotal 48,710,431.83 3,280,038.01
------------- -------------
Less: Influence on income tax 130,106.28 25,862.51
Quotient shared by minority shareholders 146,054.40 71,752.68
Net non-recurring gains and losses 48,434,271.15 3,182,422.82
============= =============
Note: Date mentioned above table, “+” shows profit or income, “-” shows loss or
expense
XVI. Return on equity and earnings per share
Return on equity（%） Earnings per share（RMB/share）
------------------------------- -------------------------------
Fully diluted Weighted average EPS-Basic EPS-diluted
--------------- --------------- --------------- ---------------
Profit as of the
report period
Jan.-Jun.
2009
Jan.-Jun.
2008
Jan.-Jun.
2009
Jan.-Jun.
2008
Jan.-Jun.
2009
Jan.-Jun.
2008
Jan.-Jun.
2009
Jan.-Jun.
2008
================ ======= ======= ======= ======= ======= ======= ======= =======
Net profit attributable
to common shareholder
of the Company
0.87 3.73 0.88 3.80 0.0221 0.0945 0.0221 0.0945
Net profit after
deducting
non-recurring gains and
losses attributable to
common shareholder of
the Company
-2.92 3.48 -2.92 3.55 -0.0738 0.0882 -0.0738 0.088290
================ ======= ======= ======= ======= ======= ======= ======= =======
Calculation formula on return on equity and earnings per share
1. Fully diluted return on equity
Fully diluted return on equity =P÷E
Of which: P refers to Net profit attributable to common shareholder of the Company
or net profit after deducting non-recurring gains and losses attributable to common
shareholder of the Company; E refers to net assets at the period-end attributable to
common shareholders of the Company. “Net profit attributable to common
shareholder of the Company” excluded minority interest, “net profit after deducting
non-recurring gains and losses attributable to common shareholder of the Company”
would be calculated based on consolidated net profit after deducting minority interests;
deducting non-recurring gain and loss of parent company (the Company should
consider influence of income tax) and non-recurring gain and loss of each subsidiary
(the Company should consider influence of income tax) ; “net assets at the period-end
attributable to common shareholders of the Company” excluded minority interests.
2. Weighted average return on equity
Weighted average return on equity =P/ （ E0 ＋ NP÷2 ＋ Ei×Mi÷M0 －
Ej×Mj÷M0±Ek×Mk÷M0）
Of which: P refers to Net profit attributable to common shareholder of the Company
or net profit after deducting non-recurring gains and losses attributable to common
shareholder of the Company; NP refers to net profit attributable to common
shareholders of the Company; E0 refers to net assets at the period-begin attributable
to common shareholders of the Company; Ei refers to net assets increased due to
issuance of new share or debts for equity swap or attributable to common
shareholders of the Company; Ej refers to net assets decreased due to repurchased or
dividends in cash or attributable to common shareholders of the Company; M0 refers
to the number of months during the report period; Mi refers to the number of months
from the next month when net assets increased to the end of the report period; Mj
refers to the number of months from the next month when net assets decreased to the
end of the report period; Ek refers to change of increase/decrease of net assets due to
other transaction events; Mk refers to the number of months from the next month
when other net assets changed the end of the report period
3. Earnings per share-basis
Earnings per share-basis =P÷S
S=S0＋S1＋Si×Mi÷M0－Sj×Mj÷M0－Sk
Of which: P refers to net profit attributable to shareholders holding ordinary shares or
net profit attributable to shareholders holding ordinary shares after deducting
non-recurring gains and losses; S weighted average number of ordinary shares issued
out; S0 refers to total number of shares at the period-begin; S1 refers to the number of
shares increased due to transferring capital reserve into share capital or dividend
distribution of shares during the report period; Si refers to the number of shares
increased due to issuance of new shares or debt for equity swap during the report
period; Sj refers to the number of shares decreased due to stock repurchase during the91
report period; Sk refers to the number of split-share during the report period; M0
refers to the number of months during the report period; Mi refers to the number of
months from the next month to the end of the report period for increase of shares; Mj
refers to the number of months from the next month to the end of the report period for
decrease of shares
4. Earnings per share-diluted
Earnings per share-diluted =[P+（potential diluted interests of ordinary shares
recognized as expense－transfer fee）×（1- income tax rate）]/（S0＋S1＋Si×Mi÷M0
－Sj×Mj÷M0—Sk+ weighted average amount of ordinary shares increased due to
warrant, share options、convertible bond)）
Of which, P refers to net profit attributable to shareholders holding ordinary shares or
net profit attributable to shareholders holding ordinary shares after deducting
non-recurring gains and losses. The Company shall consider all influence on potential
diluted interests of ordinary shares when the Company calculated diluted earnings per
share, till to minimum diluted EPS.
XVII. Approval of financial statement
The said financial statement has been approved by the Board of Directors of the Company on
31 Jul. 2009.
Foshan Huaxin Packing Co., Ltd.
31 Jul. 2009
VIII. Documents Ready for Inquiring
1. Semi-Annual Report 2009 carrying the personal signature and seal of the Chairman of
the Board;
2. Financial Report with signatures and seals of the legal representative, Chief Financial
Officer and Person in charge of accounting organs;
3. Originals of all the Company’s documents and manuscripts of public notices disclosed
in the newspapers designated by China Securities Regulatory Commission in the report
period;
Board of Directors of Foshan Huaxin Packaging Co., Ltd.
Chairman of the Board: Tong Laiming
31 Jul., 2009
