Foshan Huaxin Packaging Co., Ltd.
Semi-Annual Report 2011
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 Number of negotiable B shares: 171.925 million shares
1
Contents
I. Important Statement…………………………………………………………………3
II. Company Profile……………………………………………………………………4
III. Change of Share Capital and Shares Held by Principal Shareholders………….…7
IV. Particulars about the Directors, Supervisors and Senior Managements………...…9
V. Report of the Board of Directors…………………………………………….……10
VI. Significant Events……………………………………………………………..…15
VII. Financial Report…………………………………………………………………22
VIII. Documents Available for Reference…………………………………………100
2
Foshan Huaxin Packaging Co., Ltd.
Semi-Annual Report 2011
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. Ji Xiangdong, the Chief Finance Officer (and Vice GM) hereby declares that the
financial report enclosed in this Semi-Annual Report is authentic and integrated.
III. The Semi-Annual Financial Report 2011 has not been audited.
3
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: He Jianfeng
Address: 18/F, Jinghua Bldg., No. 18 Jihua Road 5th, Foshan City
Tel: 0757-83992076
Fax: 0757-83992026
Email: hejf@fshxp.com
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: 440000000005147
Tax registration number: Guo-shui-zi No. 440601707682279
4
(II) Main financial data and indices
Unit: RMB Yuan
Increase/decrease compared
At the end of the reporting At the period-end of last
with the period-end of last
period year
year (％)
Total assets (Yuan) 6,168,466,187.03 6,160,497,078.63 0.13%
Owners’ equity attributable to shareholders of
1,488,961,616.52 1,427,254,656.19 4.32%
the listed company (Yuan)
Share capital (Share) 505,425,000.00 505,425,000.00 0.00%
Net assets per share attributable to
shareholders of the listed company 2.95 2.82 4.61%
(Yuan/share)
In the reporting period The same period of last Increase/decrease
(from Jan. to Jun.) year year-on-year (％)
Total operating income (Yuan) 2,102,171,927.10 1,905,987,412.15 10.29%
Operating profit (Yuan) 123,697,083.83 126,646,614.55 -2.33%
Total profit (Yuan) 126,922,082.31 120,603,503.60 5.24%
Net profit attributable to shareholders of the
61,778,472.29 60,449,957.51 2.20%
listed company (Yuan)
Net profit attributable to shareholders of the
listed company after deducting non-recurring 61,272,707.45 63,575,096.81 -3.62%
gain and loss (Yuan)
Basic EPS (Yuan/share) 0.122 0.120 1.67%
Diluted EPS (Yuan/share) 0.122 0.120 1.67%
Weighted average ROE (%) 4.24% 4.45% -0.21 percentage points
Weighted average ROE after deducting
4.20% 4.68% -0.48 percentage points
non-recurring gain and loss (%)
Net cash flows from operating activities
-180,509,727.53 -26,301,171.33 -586.32%
(Yuan)
Net cash flows per share from operating
-0.357 -0.052 -586.54%
activities (Yuan/share)
(III) Non-recurring gains and losses
In “Net profit deducted non-recurring gains and losses” at the first half year of 2011,
the deducted items and relevant amounts were as follows:
Unit: RMB Yuan
Non-recurring gains and losses Amount Remark (if applicable)
Gain/loss from non-current assets disposal 484,682.40
Government subsidies recognized into current gains and losses,
excluding those subsidies which are closely related to the normal
3,631,163.60
business of the Company and are enjoyed at fixed amounts or
proportions according to certain government policies
Other non-operating incomes and expenses besides the items above -890,847.52
5
Effect on income tax -699,576.81
Effect on minority interests -2,019,656.83
Total 505,764.84 -
(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:
ROE EPS
Jan.-Jun. 2011
Fully diluted Weighted average Basic EPS Diluted EPS
Net profit attributable to ordinary shareholders
4.15 4.24 0.122 0.122
of the Company
Net profit attributable to ordinary shareholders
of the Company after deducting non-recurring 4.12 4.20 0.121 0.121
profit and loss
(Ⅴ) Difference between PRC GAAP and IFRS
There existed no difference between PRC GAAP and IFRS for the Company in the
current period.
6
III. Change of Share Capital and Shares Held by Principal
Shareholders
(I) Change of share capital
There was no change in share capital of the Company in the reporting period
(II) The shareholders of the Company totaled to 17,470 as of the end of reporting
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. 2011:
Shares held by the top ten shareholders
Nature of Proportion of Non-tradable shares Shares pledged or
Name of shareholders Total shares held
shareholder shares held held frozen
State-owned
Foshan Huaxin Development Co., Ltd. 65.20% 329,512,030 329,512,030
corporation
Domestic natural
Zhan Changcheng 0.52% 2,640,600
person
Foreign natural
Wu Haoyuan 0.37% 1,878,141
person
Domestic natural
Zhu Shijie 0.27% 1,355,200
person
GUOTAI JUNAN Foreign
0.27% 1,345,538
SECURITIES(HONGKONG) LIMITED corporation
Foshan Chan Ben De Development Co., State-owned
Ltd 0.23% 1,139,420 1,139,420
corporation
Domestic natural
Chen Cirou 0.21% 1,063,509
person
Domestic natural
Liu Bin 0.19% 965,600
person
Foreign natural
PANG,KWOK SHI 0.14% 696,405
person
Domestic natural
Ma Zeqi 0.13% 670,000
person
① There exists no related-party relationship between the first principal shareholder of the
Company—Foshan Huaxin Development Co., Ltd.—and other shareholders mentioned above.
Explanation on associated relationship
And they are not parties acting in concert as stipulated in the Measures for the Administration of
among the aforesaid shareholders or
Disclosure of Shareholder Equity Changes of Listed Companies.
acting-in-concert
② It is unknown whether other shareholders exist related relationship or whether it belongs to
action-in-concert regulated in Measures for the Administration of Disclosure of Shareholder
7
Equity Changes of Listed Companies.
③ In the reporting period, the shares held by shareholders of the Company 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
Zhan Changcheng 2,640,600 Domestically listed foreign shares
Wu Haoyuan 1,878,141 Domestically listed foreign shares
Zhu Shijie 1,355,200 Domestically listed foreign shares
GUOTAI JUNAN SECURITIES(HONGKONG)
1,345,538 Domestically listed foreign shares
LIMITED
Chen Cirou 1,063,509 Domestically listed foreign shares
Liu Bin 965,600 Domestically listed foreign shares
PANG,KWOK SHI 696,405 Domestically listed foreign shares
Ma Zeqi 670,000 Domestically listed foreign shares
Lin Qingle 635,800 Domestically listed foreign shares
Lin Qiongzhi 585,580 Domestically listed foreign shares
It is unknown whether there exists related-party relationship among
Explanation on related-party relationship and
tradable share holders above and whether they are acting-in-concert
action-in-concert among shareholders mentioned
parties as stipulated in the Measures for the Administration of
above
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 in the reporting period.
8
IV. Particulars about the Directors, Supervisors and Senior
Managements
(I) In the reporting period, none of the directors, supervisors and senior
managements is holding the stocks of the Company.
(II) Changes of directors, supervisors and senior executives of the Company
during the reporting period:
1. On 3 Jun. 2011, the Company convened the Annual Shareholders’ General Meeting
for Y2010, which, by means of cumulative voting, elected Tong Laiming, Wang Qi,
Wang Jun, Yan Su, Huang Xin, and Yang Weixing as directors of the 5th Board of
Directors, elected Zhu Zhengfu, Zhao Wei, and Yang Zhenyu as independent directors
of the 5th Board of Directors, and elected Hong Jun and Huang Jianrong as
supervisors of the 5th Supervisory Committee. Besides, the Workers Congress of the
Company elected Yang Yinghui as the employee-representative supervisor.
2. On 3 Jun. 2011, the Company convened the 1st Session of the 5th Board of Directors
in 2011, which, by means of voting, elected Tong Laiming as the chairman of the
Board of Directors, elected Wang Qi as the deputy chairman of the Board of Directors,
and engaged Wang Qi as the general manager of the Company.
3. On 3 Jun. 2011, the Company convened the 1st Session of the 5th Supervisory
Committee in 2011, which voted Hong Jun as the chairman of the Supervisory
Committee.
4. On 27 Jun. 2011, the Company convened the 2nd Session of the 5th Board of
Directors in 2011, which approved on engaging Ji Xiangdong, Chen Yuenong, Zhou
Qihong, Qiu Ruquan, Liu Wenbo, Liu Hanwen, and Chen Jiali as deputy general
managers of the Company.
9
V. Report of the Board of Directors
(I) Discussion and analysis of the overall performance
Since the start of 2011, the government had been strengthening macro-economic
control to combat inflation by using the monetary policy for quite a few times, which
increased the public financing cost and made it harder to get financing. Meanwhile,
the government beefed up its efforts to adjust the industrial structure while exerting
stricter control over energy consumption and pollution discharge. Also, rising costs of
labor, raw materials, etc., as well as other cost pressures, generally created many
difficulties for the operation of the Company.
In terms of raw materials, with a general rise in international prices of bulk
commodities, prices of raw materials for paper-making also continued to go up. To be
specific, the price of softwood pulp kept increasing to show a record high; the price of
wasted paper increased by around 12% on an average basis; and boosted by power
demands, coal prices went up bit by bit starting from this March, showing an average
growth of 7%.
In terms of markets for products, starting from the second half of last year, white
paperboard prices bottomed out slowly. The production capacity newly increased in
recent years was being digested by the market bit by bit. The newly increased
production capacity for white paperboard and white cardboard since last year
exceeded 1.2 million tons, causing a fiercer competition in the domestic market of
high-end white paperboard. In terms of the Company’s white cardboard business, the
overall demand for the first half of 2011 was steady, with sufficient export orders but
a relatively low gross profit rate due to cost pressures and exchange rate fluctuations.
Considering the said market situation, the Company seized every possible opportunity,
gave full play to its scale advantage, carried out delicacy management, and exploited
internal potentials. As a result, the Company basically withstood the pressure from
rising costs and gave a slightly better business performance. For the reporting period,
the Company achieved operating revenues of RMB 2,102,171,900, up 10.29% from a
year earlier; a total profit of RMB 126,922,100, up 5.24% from a year earlier; and a
net profit attributable to owners of the Company of RMB 61,778,500, up 2.20% as
compared with the same period of last year.
1. Explanation on significant changes in the asset structure in the reporting
period compared with the same period of last year
Unit: RMB Yuan
30 Jun. 2011 31 Dec. 2010
YoY
Items increase/dec
Proportion in Proportion in total
Amount Amount rease (%)
total assets assets
Monetary funds 164,023,498.30 2.66 391,385,073.02 6.35 -58.09
Accounts receivable 1,085,347,059.50 17.60 661,137,695.51 10.73 64.16
10
Prepayments 81,476,915.26 1.32 388,689,501.67 6.31 -79.04
Notes receivable 17,403,869.73 0.28 213,272,240.32 3.46 -91.84
Payroll payable 16,250,306.96 0.26 37,665,386.25 0.61 -56.86
Taxes and fares payable -27,000,980.52 --- 11,182,141.42 0.18 -341.47
Interest payable 14,687,706.80 0.24 22,809,545.70 0.37 -35.61
Other payables 123,223,718.76 2.00 91,152,227.51 1.48 35.18
Non-current liabilities due
250,000,000.00 4.05 360,000,000.00 5.84 -30.56
within one year
Long-term borrowings 125,000,000.00 2.03 255,000,000.00 4.14 -50.98
Explanation on changes:
(1) Monetary funds at the end of the reporting period decreased 58.09% as compared
with the opening amount, which was mainly because some sales incomes were not
collected in time in the reporting period.
(2) Accounts receivable at the end of the reporting period increased 64.16% as
compared with the opening amount, which was mainly because some sales incomes
were not collected in time in the reporting period.
(3) Prepayments at the end of the reporting period decreased 79.04% as compared
with the opening amount, which was mainly because prepayments were settled
according to contracts upon the arrival of goods in the reporting period.
(4) Notes payable at the end of the reporting period decreased 91.84% as compared
with the opening amount, which was mainly because banker’s acceptance bills were
paid upon maturity.
(5) Payroll payable at the end of the reporting period decreased 56.86% as compared
with the opening amount, which was mainly because salaries and bonuses for
employees drawn at the period-begin were paid.
(6) Taxes and fares payable at the end of the reporting period decreased 341.47% as
compared with the opening amount, which was mainly because the income tax
payable and stock preparation increased and some input VAT was not yet deducted.
(7) Interest payable at the end of the reporting period decreased 35.61% as compared
with the opening amount, which was mainly because the Company paid the interest
for the medium-term notes in the reporting period.
(8) Other payables at the end of the reporting period increased 35.18% as compared
with the opening amount, which was mainly because the transactions and amounts
with the Company’s parent company—Foshan Huaxin Development Co.,
Ltd.—increased.
(9) Non-current liabilities due within 1 year at the end of the reporting period
decreased 30.56% as compared with the opening amount, which was mainly because
mature bank loans were repaid.
(10) Long-term borrowings at the end of the reporting period decreased 50.98% as
11
compared with the opening amount, which was mainly because mature bank loans
were repaid.
2. Explanation on significant year-on-year changes in operating income and
expense items during the reporting period
Unit: RMB Yuan
YoY
Items Jan.-Jun. 2011 Jan.-Jun. 2010
increase/decrease (%)
Operating revenues 2,102,171,927.10 1,905,987,412.15 10.29
Operating costs 1,787,922,745.25 1,579,050,537.72 13.23
Business taxes and
7,867,768.95 2,395,958.57 228.38
surtaxes
Asset impairment loss 1,329,716.29 314,965.83 322.18
Operating profit 123,697,083.83 126,646,614.55 -2.33
Total profit 126,922,082.31 120,603,503.60 5.24
Income tax expense 21,156,988.46 6,567,716.86 222.14
Explanation on changes:
(1) Business taxes and surtaxes increased 228.38% from a year earlier, which was
mainly because two subsidiaries—Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. and
Huaxin (Foshan) Color Printing Co., Ltd.—started to pay the city maintenance tax
and educational surcharge since Dec. 2010; and all subsidiaries started to pay the local
educational surcharges since Jan. 2011.
(2) Asset impairment loss increased 322.18% from a year earlier, which was mainly
due to the increase of bad-debt provisions in the reporting period.
(3) Income tax expense increased 222.14% from a year earlier, which was mainly the
subsidiary—Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd.—made a great loss that
was not compensated last year, while there was no such an event in the reporting
period.
3. Analysis and explanation on cash flows in the reporting period
Unit: (RMB) Yuan
YoY
Items Jan.-Jun. 2011 Jan.-Jun. 2010 increase/decrease
(%)
Net cash flows from operating activities -180,509,727.53 -26,301,171.33 -586.32
Net cash flows from investing activities 38,474,341.68 43,405,242.82 -11.36
12
Net cash flows from financing activities 33,159,547.91 -32,106,421.74 203.28
Explanation on changes:
(1) Net cash flows from operating activities as of the current period were down
586.32% year on year, which was mainly because some sales incomes were not
collected in time in the current period.
(2) Net cash flows from financing activities as of the current period were up 203.28%
year on year, which was mainly due to the increase of bank borrowings in the current
period.
(Ⅱ) Main operations in the reporting period
1. Scope of main businesses
In the reporting period, the major products of the Company were white paperboard,
coated white board with grey back and color-printing packaging paper.
2. Operation of main businesses
(1) Main businesses regarding industries and products
Unit: RMB Ten thousand
Main businesses regarding industries
Year-on-year Year-on-year Year-on-year
increase/ increase/ increase/
Industries or Operating Gross profit
Operating cost decrease of decrease of decrease of
products income ratio (%)
operating operating cost operating cost
income (%) (%) (%)
Manufacture 207,358.55 177,722.21 14.29% 14.57% 18.93% -3.14%
Main businesses regarding products
White paperboard 160,667.03 137,310.99 14.54% 37.86% 45.17% -4.30%
White cardboard 37,430.01 33,100.27 11.57% -33.26% -31.21% -2.64%
Printing products 9,261.51 7,310.95 21.06% 10.73% 8.61% 1.54%
(2) Main business income regarding regions
Main business income (Unit: RMB Ten
Regions Year-on-year increase/ decrease (%)
thousand)
Domestic 181,210.82 11.30
Foreign 26,147.73 38.27
(3) No significant changes occurred in the structures of profit and main
businesses in the reporting period when compared with the previous reporting
period.
(4) No significant changes occurred in the profitability (gross profit ratio) of the
13
Company’s main businesses in the reporting period when compared with the
previous reporting period.
3. Other businesses which had significant influence on net profit in the reporting
period
In the reporting period, Tetra Pak Huaxin (Foshan) Packaging Co., Ltd.—the
Company’s affiliated company—achieved a net profit of RMB 121,729,400, 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 met in operation
The mounting debt crises in American and European countries still have a great
impact on the Company’s export. The domestic production capacity for white
cardboard, white paperboard and coated craft paper, the Company’s main products,
have all increased, which will narrow the room for paper prices to rise and leads to a
fiercer competition. Meanwhile, the main raw materials—wood pulp and wasted
paper—are in short supply and their prices remain at relatively high levels, causing
cost pressure on the Company. The aforesaid factors have intensified the Company’s
operating pressure.
(Ⅲ) Investment in the reporting period
1. Use of raised funds
No funds were raised in the reporting period.
2. Significant investment projects of non-raised funds
There were no significant investment projects of non-raised funds in the reporting
period.
14
VI Significant Events
(I) Corporate governance
In accordance with the Company Law, the Securities Law and other laws and
regulations issued by the CSRC and the Shenzhen Stock Exchange, the Company had,
ever since its listing, continuously perfected its corporate governance structure,
regulated the operation and formulated a series of governance rules. The actual
corporate governance situation of the Company was basically in compliance with the
requirements of relevant regulatory documents issued by the CSRC and the Shenzhen
Stock Exchange. In the coming 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 link 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 2011.
(III) Equities of other listed companies, financial enterprises (commercial banks,
securities companies, insurance companies, trust companies, futures companies,
etc.) and to-be-listed companies held by the Company up to the end of the
reporting period
Unit: (RMB) Yuan
Gains Change of
Equity
Initial Carrying and owners’
Name of the Number of proportion Accountin Source of
investment value at losses in equity in
investee shares held in the g title shares
amount period-end reporting reporting
investee
period period
By making an
Long-term
investment in
Guangdong equity
113,558.00 0 share 0.0004% 113,558.00 0.00 0.00 the
Development Bank investmen
establishment
t
of the investee
Available-
Zhuhai Port Co., 1,854,600.0 385,537.00 4,668,853.0 for-sale
0.11% 0.00 -170,407.35 By purchase
Ltd. 0 shares 7 financial
assets
15
1,968,158.0 385,537.00 4,782,411.0
Total 0.00 --170,407.35
0 shares 7
(IV) Significant lawsuits and arbitrations
Concerning the lawsuit filed by Foshan Huafeng Paper Co., Ltd. (hereinafter referred
to as “Huafeng Paper”)—a controlled 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 reporting period
was as follows:
Guangdong High Court accepted the said case and set up a collegial bench to try the
case.
Currently, the case is still in the substantive hearing procedure. And the Company will
disclose in a timely manner any new progress on the case.
(V) Significant related-party transactions
Related-party transactions concerning routine operation:
In the reporting period, there were such transactions between the Company’s
controlled subsidiaries and other related parties, of which the details were specified in
the Notes to the Financial Statements.
Proportion in
the total
Type of Transaction
transaction Settlement
related-party Related party amount Pricing principle
amount in method
transaction (RMB’0000)
transactions of
the same kind
Foshan Huaxin Pricing
Purchasing Bank bills and
Import & Export 1,162.54 11.34% according to
raw materials transfers
Co., Ltd. market value
Foshan Huaxin Pricing
Purchasing Bank bills and
Import & Export 238.22 3.00% according to
raw materials transfers
Co., Ltd. market value
China National Pricing
Purchasing Bank bills and
Paper-Industry 4,925.20 3.44% according to
raw materials transfers
Investment Corp. market value
16
Guangdong Pricing
Purchasing Bank bills and
Chengtong 306.66 0.21% according to
raw materials transfers
Logistics Co., Ltd. market value
Pricing
Purchasing Hunan Juntai Pulp Bank bills and
4,528.26 3.17% according to
raw materials & Paper Co., Ltd. transfers
market value
Foshan Huaxin Pricing
Selling Bank bills and
Import & Export 83.54 0.05% according to
products transfers
Co., Ltd. market value
Tetra Pak Huaxin
Pricing
Treatment of (Foshan) Bank bills and
20.68 --- according to
wasted water Packaging Co., transfers
market value
Ltd.
(VI) Credits and liabilities for non-operating purposes
1. According to the Loan Contract signed between the Company and its parent
company Foshan Huaxin Development Co., Ltd., up to 30 Jun. 2011, the outstanding
loan balance owed by the Company to Foshan Huaxin Development Co., Ltd. stood at
RMB 93,029,900.
2. According to the Agreement on Internal Use of Medium Term Notes of China
Chengtong Holding Group Ltd. for 2010 signed between the Company and
Chengtong Group, up to 30 Jun. 2011, China Chengtong Holding Group Ltd raised
and provided medium term notes of RMB 500 million for the Company, which was
used for the Company’s bank loan repayment and working capital supplementation,
with the interest rate being 4.23% and the annual underwriting fee rate being 3‰ for
the said issue.
(VII) Significant contracts and their implementation in the reporting period
1. The Company did not conduct significant transactions involving holding in trust,
contracting or leasing other companies’ assets, nor vice versa in the reporting 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 reporting period
and there existed no such transactions carried down from the previous periods.
3. Significant guarantees provided by the Company in the reporting period
Up to 30 Jun. 2011, the balance of external guarantees for which the Company still
had liability stood at RMB 572.68 million, with all of them being guarantees for
controlled subsidiaries, including a guarantee balance of RMB 95 million for Zhuhai
Huafeng Paper Co., Ltd, a guarantee balance of RMB 381.68 million for Zhuhai
S.E.Z. Hongta Renheng Paper Co., Ltd., a guarantee balance of RMB 46 million for
Foshan Chengtong Paper Co., Ltd., and a guarantee balance of RMB 50 million for
Huaxin (Foshan) Color Printing Co., Ltd.. None of the guarantees were overdue.
Unit: (RMB) Ten thousand
External guarantees provided by the Company (excluding those for subsidiaries)
Name of the guaranteed Disclosure Guarantee Date of Actual Type of Term of Impleme Guarantee
17
date and line occurrence amount of guarantee guarantee ntation for a related
serial No. of (Date of guarantee accompli party or not
the signing shed or
announceme agreement) not
nt about the
guarantee
line
Total actual external guarantees
Total external guarantee lines examined
0.00 incurred in the reporting period 0.00
and approved in the reporting period (A1)
(A2)
Total balance of actual external
Total external guarantee lines examined
0.00 guarantees at the period-end 0.00
and approved at the period-end (A3)
(A4)
Guarantees provided for subsidiaries
Disclosure
date and
Date of Impleme
serial No. of
occurrence Actual ntation Guarantee
the Guarantee Type of Term of
Name of the guaranteed (Date of amount of accompli for a related
announceme line guarantee guarantee
signing guarantee shed or party or not
nt about the
agreement) not
guarantee
line
Foshan Chengtong Paper 2010.09.07/2 2010.06.28-2011.
6,000.00 2010.10.26 1,550.00 Warrandice No Yes
Co., Ltd. 010-024 06.28
Foshan Chengtong Paper 2010.08.07/2 2010.07.27-2011.
14,000.00 2010.07.27 220.00 Warrandice No Yes
Co., Ltd. 010-022 07.26
Foshan Chengtong Paper 2010.08.07/2 2010.01.01-2013
4,000.00 2010.08.27 2,830.00 Warrandice No Yes
Co., Ltd. 010-022 .12.31
Zhuhai S.E.Z. Hongta 2010.11.05/2 2010.09.29-2012
23,000.00 2010.10.08 16,000.00 Warrandice No Yes
Renheng Paper Co., Ltd. 010-028 .03.29
Zhuhai S.E.Z. Hongta 2010.08.07/2 2010.08.02-2011.
10,000.00 2010.07.30 5,000.00 Warrandice No Yes
Renheng Paper Co., Ltd. 010-022 08.02
Zhuhai S.E.Z. Hongta 2010.08.07/2 2010.07.15-2012
20,000.00 2010.07.01 12,168.00 Warrandice No Yes
Renheng Paper Co., Ltd. 010-022 .07.15
Zhuhai S.E.Z. Hongta 2010.10.13/2 2010.08.25-2011.
15,000.00 2010..10.11 5,000.00 Warrandice No Yes
Renheng Paper Co., Ltd. 010-026 12-31
Huaxin (Foshan) Color 2010.08.07/2 2010.01.01-2013
6,000.00 2010.07.29 5,000.00 Warrandice No Yes
Printing Co., Ltd. 010-022 .12.31
Zhuhai Huafeng Paper 2010.09.06/2 2010.07.30-2011.
42,000.00 2010.07.30 9,500.00 Warrandice No Yes
Co., Ltd 010-024 07.30
Total guarantees lines for subsidiaries Total actual guarantees for
examined and approved in the reporting 180,000.00 subsidiaries incurred in the 0.00
period (B1) reporting period (B2)
Total guarantee lines for subsidiaries 140,000.00 Total balance of actual 57,268.00
18
examined and approved at the period-end guarantees for subsidiaries at the
(B3) period-end (B4)
Total guarantees of the Company (Total of the two above)
Total guarantee lines examined and Total actual guarantees incurred
180,000.00 0.00
approved in the reporting period (A1+B1) in the reporting period (A2+B2)
Total balance of actual
Total guarantee lines examined and
140,000.00 guarantees at the period-end 57,268.00
approved at the period-end (A3+B3)
(A4+B4)
Proportion of the total balance of actual guarantees at the period-end (A4+B4) in
38.46%
net assets of the Company
Among which:
Amount of guarantees provided for shareholders, actual controller and other
0.00
related parties (C)
Amount of debt guarantees provided directly or indirectly for parties with
0.00
asset-liability ratio exceeding 70% (D)
Proportion of total guarantee amount exceeding 50% of the Company’s net
0.00
assets (E)
Total amount of the above three guarantees (C+D+E) 0.00
All guarantees provided by the Company are for its
Explanation on possibility of taking several and joint liability involving controlled subsidiaries. Currently, all the involved
immature guarantees subsidiaries are in normal production and operation, without
risk of insolvency.
(VIII) Particular explanation and independent opinion from independent
directors on capital occupation by related parties and the Company’s provision
of 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;
2. After our careful examinations and checks according to relevant regulations, it was
found that: in the reporting 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 controlled subsidiaries, and the
19
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.
(IX) Interviews and visits received in the reporting period
Reception time Reception place Way of reception Visitor Main discussion and materials provided
Particulars about the Company’s production
2011.4.6 The Company On-site visit Ye Guanfeng
and operation
Particulars about the Company’s production
2011.4.18 The Company On-site visit Li Qingquan
and operation
Particulars about the Company’s production
2011.5.17 The Company By telephone Chen Wei
and operation
Particulars about the Company’s production
2011.6.23 The Company By telephone Lin Liqiang
and operation
(X) In the reporting 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.
(XI) In the reporting 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.
(XII) Engagement of CPA firm
On 3 Jun. 2011, the Company convened the 2010 Annual Shareholders’ General
Meeting, at which the proposal on engaging a CPA firm for the year 2011 was
examined and approved. And the Company decided to engage BDO China Shu Lun
Pan Certified Public Accountants as the auditing agency for its 2011 annual financial
report.
(XIII) Index for disclosed information
Announcement
Date of disclosure Announcement
No.
2011-001 2011-01-28 Announcement on Estimated Business Growth
2011-002 2011-01-28 Announcement on Change of Senior Executives
2011-003 2011-03-02 Abstract of the 2010 Annual Report
20
Announcement on Resolutions Made at the First Session of the Fourth Board of Directors for
2011-004 2011-03-02
2011
Announcement on Resolutions Made at the First Session of the Fourth Supervisory Committee
2011-005 2011-03-02
for 2011
2011-006 2011-03-02 Announcement on Provision of External Guarantees
2011-007 2011-03-02 Announcement on Routine Related-party Transactions
2011-008 2011-04-12 Announcement on Change of the Accounting Policy
2011-009 2011-04-23 Abstract of the Report on the First Quarter of 2011
Announcement on Resolutions Made at the Third Session of the Fourth Board of Directors for
2011-010 2011-05-13
2011
Announcement on Resolutions Made at the Third Session of the Fourth Supervisory Committee
2011-011 2011-05-13
for 2011
2011-012 2011-05-13 Notice on Convening the 2010 Annual Shareholders’ General Meeting
Independent Opinions from Independent Directors on Director Candidates for the Fifth Board of
2011-013 2011-05-13
Directors
2011-014 2011-05-13 Statements of the Nominators of Independent Directors for the Board of Directors
2011-015 2011-05-13 Statements of Independent Director Candidates
2011-016 2011-06-04 Announcement on Resolutions Made at the 2010 Annual Shareholders’ General Meeting
2011-017 2011-06-04 Announcement on Resolutions Made at the First Session of the Fifth Board of Directors for 2011
Announcement on Resolutions Made at the First Session of the Fifth Supervisory Committee for
2011-018 2011-06-04
2011
2011-019 2011-06-14 Announcement on Share Trading Suspension
2011-020 2011-06-21 Announcement on Progress of Significant Events and Share Trading Restoration
Announcement on Resolutions Made at the Second Session of the Fifth Board of Directors for
2011-021 2011-06-28
2011
The above-mentioned provisional announcements and periodic reports in the
reporting 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. 2011 Unit: (RMB) Yuan
Closing balance Opening balance
Items
Consolidation The Company Consolidation The Company
Current Assets:
Monetary funds 164,023,498.30 15,269,287.63 391,385,073.02 17,008,759.12
Transactional financial assets
Notes receivable 251,447,465.49 261,728,377.81
Accounts receivable 1,085,347,059.50 661,137,695.51
Accounts paid in advance 81,476,915.26 81,054.50 388,689,501.67 73,114.00
Interest receivable
Dividend receivable
Other accounts receivable 20,853,866.54 1,194,807,753.10 24,167,563.04 1,227,005,774.13
Inventories 1,088,908,694.53 883,960,311.00
Non-current assets due within 1 year
Other current assets
Total current assets 2,692,057,499.62 1,210,158,095.23 2,611,068,522.05 1,244,087,647.25
Non-current assets:
Available-for-sale financial assets 4,668,853.07 4,869,332.31
Held-to-maturity investments
Long-term accounts receivable
Long-term equity investment 183,479,487.66 1,410,045,200.63 212,924,170.60 1,439,259,408.86
Investing property 15,222,004.24 15,502,218.60
Fixed assets 3,124,407,004.58 1,667,349.90 3,157,454,864.75 1,843,255.84
Construction in progress 12,802,093.92 17,900,881.67
Engineering materials
Disposal of fixed assets
Production biological assets
Oil-gas assets
Intangible assets 95,017,443.95 572,730.00 96,911,507.87 606,420.00
R&D expense
Goodwill 9,129,025.01 9,129,025.01
Long-term deferred expenses
Deferred income tax assets 31,682,774.98 34,736,555.77
Other non-current assets
Total of non-current assets 3,476,408,687.41 1,412,285,280.53 3,549,428,556.58 1,441,709,084.70
Total assets 6,168,466,187.03 2,622,443,375.76 6,160,497,078.63 2,685,796,731.95
22
Balance Sheet (II)
Prepared by Foshan Huaxin Packaging Co., Ltd. 30 Jun. 2011 Unit: (RMB) Yuan
Closing balance Opening balance
Items
Consolidation The Company Consolidation The Company
Current liabilities:
Short-term borrowings 1,383,131,567.42 448,000,000.00 1,082,228,627.46 318,000,000.00
Transactional financial liabilities
Notes payable 17,403,869.73 213,272,240.32
Accounts payable 672,622,922.72 606,982,707.12
Accounts received in advance 22,527,980.17 15,149,722.47
Employee’s compensation payable 16,250,306.96 73,278.13 37,665,386.25 2,068,006.86
Tax payable -27,000,980.52 71,447.42 11,182,141.42 29,122.48
Interest payable 14,687,706.80 5,933,333.36 22,809,545.70 19,877,263.23
Dividend payable 133,758.00 133,758.00 133,758.00 133,758.00
Other accounts payable 123,223,718.76 95,674,741.77 91,152,227.51 56,430,989.51
Non-current liabilities due within 1
250,000,000.00 250,000,000.00 360,000,000.00 360,000,000.00
year
Other current liabilities
Total current liabilities 2,472,980,850.04 799,886,558.68 2,440,576,356.25 756,539,140.08
Non-current liabilities:
Long-term borrowings 125,000,000.00 255,000,000.00 130,000,000.00
Bonds payable
Long-term payables 500,000,000.00 500,000,000.00 500,000,000.00 500,000,000.00
Specific payables
Estimated liabilities 8,632,000.00 8,632,000.00
Deferred income tax liabilities 422,137.95 452,209.84
Other non-current liabilities 3,888,000.00 3,888,000.00
Total non-current liabilities 637,942,137.95 500,000,000.00 767,972,209.84 630,000,000.00
Total liabilities 3,110,922,987.99 1,299,886,558.68 3,208,548,566.09 1,386,539,140.08
Owners’ equity (or shareholders’ equity)
Paid-up capital (or share capital) 505,425,000.00 505,425,000.00 505,425,000.00 505,425,000.00
Capital reserves 262,543,641.97 250,531,482.00 262,615,153.93 250,531,482.00
Less: Treasury stock
Surplus reserves 129,236,472.97 129,236,472.97 129,236,472.97 129,236,472.97
Retained profits 591,756,501.58 437,363,862.11 529,978,029.29 414,064,636.90
Foreign exchange difference
Total equity attributable to owners of the
1,488,961,616.52 1,322,556,817.08 1,427,254,656.19 1,299,257,591.87
Company
Minority interests 1,568,581,582.52 1,524,693,856.35
Total owners’ equity 3,057,543,199.04 1,322,556,817.08 2,951,948,512.54 1,299,257,591.87
Total liabilities and owners’ equity 6,168,466,187.03 2,622,443,375.76 6,160,497,078.63 2,685,796,731.95
23
Income Statement
Prepared by: Foshan Huaxin Packaging Co., Ltd. Jan.-Jun. 2011 Unit: (RMB) Yuan
Reporting period Same period of last year
Items
Consolidation The Company Consolidation The Company
I. Total operating revenues 2,102,171,927.10 1,905,987,412.15
Including: Sales income 2,102,171,927.10 1,905,987,412.15
II. Total operating costs 2,008,676,724.09 7,135,742.92 1,806,099,550.21 11,733,309.49
Including: Cost of sales 1,787,922,745.25 1,579,050,537.72
Taxes and associate charges 7,867,768.95 2,395,958.57
Selling and distribution expenses 86,261,528.91 83,953,631.14
Administrative expenses 61,846,307.67 5,453,018.48 64,515,064.87 5,781,776.73
Financial expenses 63,448,657.02 1,682,724.44 75,869,392.08 5,951,532.76
Asset impairment loss 1,329,716.29 314,965.83
Add: Gain/(loss) from change in fair value (“-”
means loss)
Gain/(loss) from investment (“-” means
30,201,880.82 30,432,355.53 26,758,752.61 26,758,752.61
loss)
Including: share of profits in associates and joint
30,201,880.82 30,432,355.53 26,758,752.61 26,758,752.61
ventures
Foreign exchange gains (“-” means loss)
III. Business profit (“-” means loss) 123,697,083.83 23,296,612.61 126,646,614.55 15,025,443.12
Add: non-operating income 5,209,554.32 2,612.60 1,240,862.04 8,175.00
Less: non-operating expense 1,984,555.84 7,283,972.99
Including: loss from non-current asset disposal
IV. Total profit (“-” means loss) 126,922,082.31 23,299,225.21 120,603,503.60 15,033,618.12
Less: Income tax expense 21,156,988.46 6,567,716.86
V. Net profit (“-” means loss) 105,765,093.85 23,299,225.21 114,035,786.74 15,033,618.12
Attributable to owners of the Company 61,778,472.29 23,299,225.21 60,449,957.51 15,033,618.12
Minority shareholders’ income 43,986,621.56 53,585,829.23
VI. Earnings per share
(I) Basic earnings per share 0.122 0.120
(II) Diluted earnings per share 0.122 0.120
Ⅶ. Other comprehensive incomes -170,407.35 -222,840.39
Ⅷ. Total comprehensive incomes 105,594,686.50 23,299,225.21 113,812,946.35 15,033,618.12
Attributable to owners of the Company 61,706,960.33 23,299,225.21 60,356,441.88 15,033,618.12
Attributable to minority shareholders 43,887,726.17 53,456,504.47
24
Cash Flow Statement
Prepared by: Foshan Huaxin Packaging Co., Ltd. Jan.-Jun. 2011 Unit: (RMB) Yuan
Reporting period Same period of last year
Items
Consolidation The Company Consolidation The Company
I. Cash flows from operating activities:
Cash received from sale of commodities and rendering of
1,704,409,221.72 1,628,543,928.00
service
Tax refunds received 302,150.61
Other cash received relating to operating activities 22,418,609.75 74,157,174.84 92,926,587.31 89,749,017.68
Subtotal of cash inflows from operating activities 1,727,129,982.08 74,157,174.84 1,721,470,515.31 89,749,017.68
Cash paid for goods and services 1,606,374,975.28 1,452,036,337.85
Cash paid to and for employees 97,458,855.57 5,125,693.29 93,921,972.41 3,769,049.34
Various taxes paid 118,901,655.32 1,080.80 130,034,101.30 766,585.58
Other cash payment relating to operating activities 84,904,223.44 13,156,832.59 71,779,275.08 327,406,681.25
Subtotal of cash outflows from operating activities 1,907,639,709.61 18,283,606.68 1,747,771,686.64 331,942,316.17
Net cash flows from operating activities -180,509,727.53 55,873,568.16 -26,301,171.33 -242,193,298.49
II. Cash flows from investing activities:
Cash received from retraction of investments 59,646,563.76 59,646,563.76 63,533,038.22 63,533,038.22
Net cash received from disposal of fixed assets, intangible
202,042.64 38,000.00 24,644.00 14,050.00
assets and other long-term assets
Other cash received relating to investing activities
Subtotal of cash inflows from investing activities 59,848,606.40 59,684,563.76 63,557,682.22 63,547,088.22
Cash paid to acquire fixed assets, intangible assets and
21,374,264.72 19,530.00 20,152,439.40
other long-term assets
Cash paid for investment 119,121,995.05
Other cash payments relating to investing activities
Subtotal of cash outflows from investing activities 21,374,264.72 19,530.00 20,152,439.40 119,121,995.05
Net cash flows from investing activities 38,474,341.68 59,665,033.76 43,405,242.82 -55,574,906.83
III. Cash Flows from Financing Activities:
Cash received from capital contributions 103,230,199.29
Including: Cash received from minority shareholder
103,230,199.29
investments by subsidiaries
Cash received from borrowings 1,298,993,491.86 390,700,000.00 1,819,728,496.37 800,215,000.00
Other cash received relating to financing activities
Subtotal of cash inflows from financing activities 1,298,993,491.86 390,700,000.00 1,922,958,695.66 800,215,000.00
Repayment of borrowings 1,170,929,538.97 460,700,000.00 1,902,531,147.10 534,715,000.00
Cash paid for interest expenses and distribution of
94,633,225.95 47,278,073.41 52,533,970.30 2,040,954.15
dividends or profit
Including: dividends or profit paid by subsidiaries to
minority shareholders
Other cash payments relating to financing activities 271,179.03
Sub-total of cash outflows from financing activities 1,265,833,943.95 507,978,073.41 1,955,065,117.40 536,755,954.15
Net cash flows from financing activities 33,159,547.91 -117,278,073.41 -32,106,421.74 263,459,045.85
25
IV. Effect of foreign exchange rate changes on cash and cash
-957,277.78 -210,456.58
equivalents
V. Net increase in cash and cash equivalents -109,833,115.72 -1,739,471.49 -15,212,806.83 -34,309,159.47
Add: Opening balance of cash and cash equivalents 273,854,613.40 17,008,759.12 329,035,163.08 76,393,266.55
VI. Closing balance of cash and cash equivalents 164,021,497.68 15,269,287.63 313,822,356.25 42,084,107.08
26
Consolidated Statement of Changes in Owners’ Equity (I)
Prepared by: Foshan Huaxin Packaging Co., Ltd. Jan.-Jun. 2011 Unit: (RMB) Yuan
Reporting period
Equity attributable to owners of the Company
Items Less:
Paid-up capital (or share General risk Minority interests Total owners’ equity
Capital reserve treasury Surplus reserve Retained profit Others
capital) reserve
stock
I. Balance at the end of the previous year 505,425,000.00 262,615,153.93 129,236,472.97 529,978,029.29 1,524,693,856.35 2,951,948,512.54
Add: change of accounting policy
Correction of errors in previous periods
II. Balance at the beginning of the year 505,425,000.00 262,615,153.93 129,236,472.97 529,978,029.29 1,524,693,856.35 2,951,948,512.54
III. Increase/ decrease of amount in the year (“-” means
-71,511.96 61,778,472.29 43,887,726.17 105,594,686.50
decrease)
(I) Net profit 61,778,472.29 43,986,621.56 105,765,093.85
(II) Gains and losses directly recorded into owners’
-71,511.96 -98,895.39 -170,407.35
equity
1. Net fair value changes of available-for-sale financial
-71,511.96 -98,895.39 -170,407.35
assets
27
2. Effect of other owners’ equity changes of the investees
under the equity method
3. Income tax effects concerning owners’ equity items
4. Other
Subtotal of (I) and (II) -71,511.96 61,778,472.29 43,887,726.17 105,594,686.50
(III) Capital paid in and reduced by owners
1. Capital paid in by owners
2. Amounts of share-based payments recognized in
owners’ equity
3. Others
(IV) Profit distribution
1. Appropriations to surplus reserves
2. Appropriations to general risk provisions
3. Appropriations to owners (or shareholders)
4. Other
(V) Internal carry-forward of owners’ equity
1. New increase of capital (or share capital) from
capital public reserves
28
2. New increase of capital (or share capital) from
surplus reserves
3. Surplus reserves for making up losses
4. Other
IV. Closing balance 505,425,000.00 262,543,641.97 129,236,472.97 591,756,501.58 1,568,581,582.52 3,057,543,199.04
Consolidated Statement of Changes in Owners’ Equity (II)
Prepared by: Foshan Huaxin Packaging Co., Ltd. Jan.-Jun. 2011 Unit: (RMB) Yuan
Last year
Equity attributable to owners of the Company
Items Less: Minority Total owners’
Paid-up capital (or
Capital reserve treasury Surplus reserve General risk reserve Retained profit Others interests equity
share capital)
stock
I. Balance at the end of the previous year 505,425,000.00250,779,385.44 125,274,475.42 413,628,149.08 1,339,047,782.70 2,634,154,792.64
Add: change of accounting policy
Correction of errors in previous periods
II. Balance at the beginning of the year 505,425,000.00250,779,385.44 125,274,475.42 413,628,149.08 1,339,047,782.70 2,634,154,792.64
III. Increase/ decrease of amount in the
11,835,768.49 3,961,997.55 116,349,880.21 185,646,073.65 317,793,719.90
year (“-” means decrease)
(I) Net profit 120,311,877.76 100,321,514.09 220,633,391.85
29
(II) Gains and losses directly recorded
435,947.90 602,881.55 1,038,829.45
into owners’ equity
1. Net fair value changes of
435,947.90 602,881.55 1,038,829.45
available-for-sale financial assets
2. Effect of other owners’ equity changes
of the investees under the equity method
3. Income tax effects concerning owners’
equity items
4. Other
Subtotal of (I) and (II) 435,947.90 120,311,877.76 100,924,395.64 221,672,221.30
(III) Capital paid in and reduced by
11,399,820.59 103,230,199.29 114,630,019.88
owners
1. Capital paid in by owners 103,230,199.29 103,230,199.29
2. Amounts of share-based payments
recognized in owners’ equity
3. Others 11,399,820.59 11,399,820.59
(IV) Profit distribution 3,961,997.55 -3,961,997.55
1. Appropriations to surplus reserves 3,961,997.55 -3,961,997.55
2. Appropriations to general risk
provisions
3. Appropriations to owners (or
shareholders)
4. Other
30
(V) Internal carry-forward of owners’
equity
1. New increase of capital (or share
capital) from capital public reserves
2. New increase of capital (or share
capital) from surplus reserves
3. Surplus reserves for making up
losses
(VI)Other -18,508,521.28 -18,508,521.28
IV. Closing balance 505,425,000.00262,615,153.93 129,236,472.97 529,978,029.29 1,524,693,856.35 2,951,948,512.54
Statement of Changes in Owners’ Equity of the Company
Prepared by: Foshan Huaxin Packaging Co., Ltd. Jan.-Jun. 2011 Unit: (RMB) Yuan
31
Reporting period Last year
Items Less: Less:
Paid-up capital Paid-up capital
Capital reserve treasury Surplus reserve Retained profit Total owners’ equity Capital reserve treasury Surplus reserve Retained profit Total owners’ equity
(or share capital) (or share capital)
stock stock
I. Balance at the end of the previous year 505,425,000.00 250,531,482.00 129,236,472.97 414,064,636.90 1,299,257,591.87 505,425,000.00 250,531,482.00 125,274,475.42 378,406,658.95 1,259,637,616.37
Add: change of accounting policy
Correction of errors in previous periods
II. Balance at the beginning of the year 505,425,000.00 250,531,482.00 129,236,472.97 414,064,636.90 1,299,257,591.87 505,425,000.00 250,531,482.00 125,274,475.42 378,406,658.95 1,259,637,616.37
III. Increase/ decrease of amount in the year (“-” means
23,299,225.21 23,299,225.21 3,961,997.55 35,657,977.95 39,619,975.50
decrease)
(I) Net profit 23,299,225.21 23,299,225.21 39,619,975.50 39,619,975.50
(II) Gains and losses directly recorded into owners’
equity
1. Net fair value changes of available-for-sale financial
assets
2. Effect of other owners’ equity changes of the investees
under the equity method
3. Income tax effects concerning owners’ equity items
4. Other
Subtotal of (I) and (II) 23,299,225.21 23,299,225.21 39,619,975.50 39,619,975.50
(III) Capital paid in and reduced by owners
1. Capital paid in by owners
2. Amounts of share-based payments recognized in
owners’ equity
(IV) Profit distribution 3,961,997.55 -3,961,997.55
1. Appropriations to surplus reserves 3,961,997.55 -3,961,997.55
2. Appropriations to owners (or shareholders)
(V) Internal carry-forward of owners’ equity
1. New increase of capital (or share capital) from
capital public reserves
2. New increase of capital (or share capital) from
surplus reserves
3. Surplus reserves for making up losses
IV. Closing balance 505,425,000.00 250,531,482.00 129,236,472.97 437,363,862.11 1,322,556,817.08 505,425,000.00 250,531,482.00 129,236,472.97 414,064,636.90 1,299,257,591.87
32
FOSHAN HUAXIN PACKAGING CO., LTD.
NOTES TO FINANCIAL STATEMENTS
For the six months ended 30 June 2011
[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, thus, the total share capital was changed into
RMB 505,425,000.00. The Company is mainly engaged in the paper making, paper
package and printing industry.
As at 31 Dec. 2010, the Company accumulatively issued 505,425,000 shares in
number and the registered capital stood at RMB 505,425,000. The Company mainly
manufactures (operated by subsidiary companies under the Company) and sells
packaging materials, and packaging products, materials for decoration and aluminum
and plastic compound materials; sells and maintains package machinery; invests in
industry in terms of package and printing. Main products include high-grade coated
white paperboard, high-grade coated white board and color packages printing
products. The registration place of the Company is at No. 18, Jihua Road 5th, Foshan
City, Guangdong Province. The headquarters of the Company locates at 18/F, Jinghua
Bldg., Jihua Road, Foshan City.
II. Main accounting policies, accounting estimates and prior period errors
(I) Preparation basis of financial statement
With going-concern assumption as the basis, the Company prepares its financial
statement in light of the actual transactions and matters, as well as the accounting
standard for business enterprise-basic standard and other relevant regulations.
(II) Statement for complying with the accounting standard for business
enterprise
33
The financial statements prepared by the Company are in compliance with the
requirements of the accounting standard for business enterprise, and have reflected the
Company’s financial status, operating results and cash flows in an accurate and
complete way.
(III) Fiscal period
The fiscal year of the Company is the solar calendar year, which is from January 1 to
December 31.
(IV) Standard currency of accounts
The Company adopts Renminbi as a standard currency of accounts.
(V) Accounting process of business combinations under the same control and not
under the same control
1. Business combination under the same control
The assets and liabilities that the combining party obtains in a business combination
shall be measured on the basis of their carrying amount in the combined party on the
combining date. As for the balance between the carrying amount of the net assets
obtained by the combining party and the carrying amount of the consideration paid by
it (or the total par value of the shares issued), the additional paid-in capital shall be
adjusted. If the additional paid-in capital is not sufficient to be offset, the retained
earnings shall be adjusted.
The direct cost for the business combination of the combining party shall, including
the expenses for audit, assessment and legal services, be recorded into the profits and
losses at the current period.
The handling fees, commissions and other expenses for the issuance of equity
securities for the business combination shall be credited against the surplus of equity
securities; if the surplus is not sufficient, the retained earnings shall be offset.
The accounting policy adopted by the combined party is different from that adopted
by the Company, the Company shall, according to accounting policy it adopts, adjust
the relevant items in the financial statements of the combined party, and shall,
pursuant to the present Standard, recognize them on the basis of such adjustment.
2. Business combination not under the same control
The Company shall, on the acquisition date, measure the assets given and liabilities
incurred or assumed by an enterprise for a business combination in light of their fair
values, and shall record the balances between them and their carrying amounts into
the profits and losses at the current period.
The Company shall distribute the combination costs on the acquisition date。
The Company shall recognize the positive balance between the combination costs and
the fair value of the identifiable net assets it obtains from the acquiree as business
reputation. The Company shall record the negative balance between the combination
costs and the fair value of the identifiable net assets it obtains from the acquiree into
the profit and loss of the current period.
34
As for the assets other than intangible assets acquired from the acquiree in a business
combination (not limited to the assets which have been recognized by the acquiree), if
the economic benefits brought by them are likely to flow into the enterprise and their
fair values can be measured reliably, they shall be separately recognized and
measured in light of their fair values. As for any intangible asset acquired in a
combination, if the fair value can be measured reliably, it shall be separately
recognized as an intangible asset and shall measured in light of its fair value. As for
the liabilities other than contingent liabilities acquired from the acquiree, if the
performance of the relevant obligations is likely to result in any out-flow of economic
benefits from the enterprise, and their fair values can be measured reliably, they shall
be separately recognized and measured in light of their fair values. As for the
contingent liabilities of the acquiree obtained in a combination, if their fair values can
be measured reliably, they shall be separately recognized as liabilities and shall be
measured in light of their fair values.
(VI) Preparation methods for consolidated financial statements
The scope of consolidated financial statements shall be confirmed based on the
control. All subsidiaries of the Company shall be included into the consolidated
financial statement.
The accounting policies and accounting period adopted by the subsidiaries that are
included into the scope of consolidated financial statement consistent with those the
Company adopts. If the accounting policies and accounting period adopted by a
subsidiary are different from those adopted by the Company, necessary adjustments
shall be made to the financial statements under the accounting policies and accounting
period adopted by the Company.
The consolidated financial statements shall, on the basis of the financial statements of
the Company and its subsidiaries, be prepared by the Company after the long term
equity investments in the subsidiaries are adjusted through the equity method.
Consolidated financial statement shall be prepared by the parent company after the
effects of the internal transactions between the Company and its subsidiaries and
between its subsidiaries themselves on the consolidated balance sheets, consolidated
income statement, consolidated cash flow and consolidated statement of change in
owners’ equity are offset.
For the deficit of current period exceeding the share in the beginning of owner’s
equity, the balance shall offset against the minority shareholder’s equity.
During the reporting period, for the added subsidiary companies for business
combination under the same control, shall adjust the beginning balance of the
consolidated balance sheet, and shall involve the incomes, expenses and profits of the
subsidiary companies incurred from the beginning of the current period to the end of
reporting period into consolidated income statement; and shall include the cash flow
of the subsidiary companies from the beginning of the current period to the reporting
period into the consolidated cash flow.
35
During the reporting period, for the added subsidiary companies for business
combination not under the same control, shall not adjust the beginning balance of the
consolidated balance sheet; and shall involve the incomes, expenses and profits of the
subsidiary companies incurred from the acquisition date to the end of reporting period
into the consolidated income statement; and shall include the cash flow from the
acquisition date to the end of reporting period into the consolidated cash flow.
During the reporting period, for the Company settling the subsidiary companies, the
incomes, expenses and profits from the beginning to the settlement date shall be
involved into the consolidated income statement; the consolidated cash flow statement
shall include the cash flow from the beginning of the current period to the settlement
date.
(VII) Recognition standard for cash and cash equivalents
When preparing the cash flow statement, the term “cash” refers to cash on hand and
deposits that are available for payment at any time. The term “cash equivalents” refers
to short-term ( within 3 months from the purchase date) and highly liquid investments
that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of change in value.
(VIII) Business of foreign currencies and the transaction of foreign currency
statements
1. Business of foreign currencies
As for a foreign currency transaction, the amount in the foreign currency shall be
translated into the amount in the Renminbi at the spot exchange rate of the transaction
date.
The foreign currency monetary items shall be translated as the spot exchange rate on
the balance sheet date, the balance occurred thereof shall be recorded into the profits
and losses at the current period except that the balance of exchange arising from
foreign currency 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, of which the amount of
functional currency shall not be changed. The foreign currency non-monetary items
measured at the fair value shall be translated at the spot exchange rate on the
confirming date of fair value, of which the balance of exchange shall be included into
the profit and loss of the current period or capital reserve.
2. Translation for foreign currency financial statements
The assets and liabilities items in the balance sheets shall be translated as a spot
exchange rate on the balance sheet date. Among the owner’s equity items, except the
one as “retained profits”, others shall be translated at the spot exchange rate at the
time when they are incurred. The income and expense items in the profit statements
shall be translated at the spot exchange rate of the transaction date. The balance arisen
from the translation of foreign currency financial statement in the compliance with the
36
aforesaid methods shall be presented separately under the owner’s equity item of the
balance sheet.
When disposing an overseas business, the Company shall shift the balance, which is
presented under the items of the owner’s equities in the balance sheet and arises from
the translation of foreign currency financial statements related to this oversea business,
into the disposal profits and losses of the current period. If the overseas business is
disposed of partially, the Company shall calculate the balance arising from the
translation of foreign currency statements of the part of disposal based on the disposal
rate and shall shift them into the profits and losses of the current period.
(IX) Financial instruments
Financial instruments include financial assets and liabilities and equity instruments.
1. Categorization of financial instruments
The Management team shall divide the financial instruments pursuant to the purpose
to acquire the said financial assets or undertake the financial liabilities: (1) the
financial assets and liabilities which are measured at their fair values and of which the
variation is included in the current profits and losses, including transactional financial
assets and liabilities (and the designated financial assets and liabilities which are
measured at their fair values and of which the variation is included in the current
profits and losses) ; (2) the investments which will be held to their maturity;(3) loans
and the account receivables; (4) financial assets available for sale; and (5) other
financial liabilities.
2. Measurement of financial instruments
(1) The financial assets (financial liabilities) which are measured at their fair values
and of which the variation is included in the current profits and losses
The initial amount of the financial assets and financial liabilities shall be recognized at
fair value (excluding cash dividends that have been declared but not yet distributed or
bond interests that have matured but not yet received) when they are acquired. The
transaction expense thereof shall be directly recorded into the profits and losses of the
current period.
The interests or cash dividends acquired, during the holding period, shall be
recognized as investment income, and at the end of reporting period, the change in the
fair value shall be recorded into the profits and losses of the current period.
When financial assets and financial liabilities are disposed, the balance between fair
value and initial amount shall be recognized as investment income, at the same time,
the profits and losses arising from the change in the fair value of financial assets and
financial liabilities shall be adjusted.
(2) Held-to-maturity investments
When held-to-maturity investments are acquired, its initial amount shall be recognized
37
the sum between the fair value (excluding bond interests that have matured but not yet
received) and the transaction expense thereof.
During the holding period, interest income is recognized as investment income based
on amortized cost and actual interest rate (where there is very small gap between
actual interest rate and nominal rate of which interests income shall be measured at
the nominal rate). The actual interest rate is determined upon acquisition and remains
unchanged during the expected holding period or a shorter period for applicable.
When held-to-maturity investments are disposed, the difference between the acquired
price and investment book value shall be recorded into the investment income.
(3) Accounts receivable
The creditor’s rights arising from selling goods or providing service by the Company
and other creditor’s rights to other enterprises held by the company that are not quoted
in an active market, including accounts receivable, notes receivable, other receivables,
long-term receivables, etc., the contract or agreement price should be taken as the
initial recognition amount. If it has the nature of financing, it shall be recognized by
present value.
Difference between the amount received and book value of the receivables shall be
included into the profit or loss of the current period upon collection or disposal.
(4) Available-for-sale financial assets
When available-for-sale financial assets are acquired, its initial amount shall be
recognized at the fair value (excluding cash dividends that have been declared but not
yet distributed or bond interests that have matured but not yet received) plus
transaction expense thereof.
The interests or cash dividends acquired, during the holding period, shall be
recognized as investment income. At the end of reporting period, it shall be measured
at the fair value and the change in fair value thereof shall be recorded into the capital
reserves (Other Capital Reserves).
Difference between the amount received and the book value of the financial assets
shall be recognized as investment gain or loss upon disposal. Meanwhile, the
accumulated changes in fair value previously recognized in the owners’ equity are
transferred into investment gain or loss.
(5) Other financial liabilities
Other financial liabilities shall be initially recognized at fair value plus transaction
costs. The subsequent measurement shall be made by adopting amortized costs.
3. Recognition and measurement of transfer of financial assets
Where an enterprise has transferred nearly all of the risks and rewards relating to the
ownership of the financial asset to the transferee, it shall stop recognizing the
38
financial asset. If it retains nearly all of the risks and rewards relating to the ownership
of the financial asset, it shall not stop recognizing the financial asset.
Substance over form philosophy should be adopted to determine whether the transfer
of a financial asset can satisfy the conditions as described in these Standards for
de-recognition of a financial asset. An enterprise shall differentiate the transfer of a
financial asset into the entire transfer and the partial transfer of financial assets. If the
transfer of an entire financial asset satisfies the conditions for stop recognition, the
difference between the amounts of the following 2 items shall recorded in the profits
and losses of the current period:
(1) The carrying amount of the transferred financial asset;
(2) The aggregate consideration received from the transfer, and the accumulative
amount of the changes of the fair value originally recorded in the owner’s equities (in
the event that the financial asset involved in the transfer is a financial asset available
for sale).
If the transfer of partial financial asset satisfies the conditions for stopping recognition,
the carrying amount of the entire financial asset transferred shall be allocated at their
respective relevant fair value, between the portion whose recognition has stopped and
the portion whose recognition has not stopped, and the difference between the
amounts of the following 2 items:
(1) The carrying amount of the portion whose recognition has stopped;
(2) The aggregate consideration of the portion whose recognition has 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 stopped (in the event that the financial asset involved in the transfer is
a financial asset available for sale).
The transfer of financial assets does not meet the de-recognition condition, the
financial assets shall continue to be recognized, and the consideration received will be
recognized as financial liabilities.
4. Termination of recognition of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in
part may the recognition of the financial liability be terminated in all or partly. Where
the Company (debtor) enters into an agreement with a creditor so as to substitute the
existing financial liabilities by way of any new financial liability, and if the
contractual stipulations regarding the new financial liability is substantially different
from that regarding the existing financial liability, it shall terminate the recognition of
the existing financial liability, and shall at the same time recognize the new financial
liability.
Where the Company makes substantial revisions to some or all of the contractual
stipulations of the existing financial liability, it shall terminated the recognition of the
existing financial liability or part of it, and at the same time recognize the financial
39
liability after revising the contractual stipulations as a new financial liability.
Where the recognition of a financial liability is totally or partially terminated, the
Company concerned shall include into the profits and losses of the current period the
gap between the carrying amount which has been terminated from recognition and the
considerations it has paid (including the non-cash assets it has transferred out and the
new financial liabilities it has assumed).
Where the Company buys back part of its financial liabilities, it shall distribute, on the
report day, the carrying amount of the whole financial liabilities in light of the
comparatively fair value of the part that continues to be recognized and the part whose
recognition has already been terminated. The gap between the carrying amount which
is distributed to the part whose recognition has terminated and the considerations it
has paid (including the non-cash assets it has transferred out and the new financial
liabilities it has assumed) shall be recorded into the profits and losses of the current
period.
5. Determination of the fair value of financial instruments
As for the Company’s financial assets and liabilities measured at their fair values,
where there is an active market, the closing quoted prices in the active market shall be
used to determine the fair values thereof. Where there is no active market for a
financial assets and financial liabilities, the Company concerned shall adopt value
appraisal techniques (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 liabilities assumed, the fair value thereof shall be determined on the basis
of the transaction price of the market.
6. Withdrawal of financial assets impairment
(1) Provision for impairment of available-for-sale financial assets
If the fair value of financial assets available for sale has greatly dropped at the end of
reporting period, or after considering of all the relevant factors and expecting decrease
trend is non-temporary, the impairment shall be recognized, accumulated losses due to
decreases in fair value previously recognized directly in capital reserve are reversed
and charged to impairment loss.
(2) Provision for impairment of held-to-maturity investments
Measurement for impairment loss of held-to-maturity investments shall be disposed in
accordance with the measurement method for impairment loss of accounts receivable.
(X) Accounts receivable
1. Recognition standards and withdrawal methods for bad debt provisions for
accounts receivable with a significant single amount
40
Where an account receivable exceeds 10 million, or an other account receivable
exceeds five million, it is recognized as a significant single amount.
How a bad debt provision is withdrawn for an account receivable with a significant
single amount: An impairment test shall be conducted on the account receivable, and
the difference of the expected future cash flow’s present value less than its book value
shall be withdrawn as the bad debt provision and recorded into current gains/losses.
Where an impairment test is conducted on an account receivable and no impairment
occurs, the account receivable shall be included in an account receivable group with
similar credit risk and tested again.
2. Account receivables with an insignificant single amount but for which a single bad
debt provision is withdrawn
When a single bad debt provision can be withdrawn for an account receivable: There
is objective evidence proving that the account receivable may have been impaired. For
instance, the debtor is cancelled, bankrupt or dead and the account receivable still
cannot be recovered or the generated cash flow is seriously inadequate after the
bankrupt’s estates or heritages are used for the debt repayment.
How to withdraw a bad debt provision for an account receivable: Where there is
objective evidence proving that an account receivable may have been impaired, the
account receivable shall be separated from the relevant group and an independent
impairment test shall be conducted on the account receivable so as to recognize the
impairment loss.
3. Withdrawal of bad debt provisions for accounts receivable on the group basis
Account receivable groups are defined by their ages.
The aging approach is adopted in the withdrawal of bad debt provisions for accounts
receivable on the group basis.
For account receivable groups where the aging approach is adopted in the withdrawal
of bad debt provisions for them
Account age Withdrawal rate for accounts Withdrawal rate for other
receivable (%) accounts receivable (%)
1-3 months --- ---
4-12 months 5 5
1－2 years 10 10
2－3 years 20 20
Over 3 years 50 50
(XI) Inventory
41
1. Category
Inventory are classified as materials in transit, raw materials, revolving materials,
merchandise inventory, goods in process, goods sent out, goods in outside processing
and etc.
2. Pricing method for outgoing inventories
The inventory shall be measured in the light of the weighted average method when
outgoing inventory.
3. Recognition of net realizable value and withdrawal of provision for falling price of
inventory
At the period-end, the Company shall make an overall checking to inventory,
thereafter, the provision for falling price of inventory shall be measured according to
its cost or its net realizable value, whichever is lower.
Finished goods, merchandise inventories, and available for sale materials which are
applied directly for sales of stock inventory, under normal producing process, to the
amount after deducting the estimated sale expense and relevant taxes from the
estimated sell price of the inventory, the net realizable value has been recognized.
Material inventories which need to be processed, under normal producing process, to
the amount after deducting the estimated cost of completion, estimated sale expense
and relevant taxes from the estimated sale price of produced finished goods, the net
realizable value has been recognized. The net realizable value of inventories held for
the execution of a sales contract or labor contract shall be calculated on the basis of
the contract price. If an enterprise holds more inventories than the quantities
subscribed in the sales contract, the net realizable value of the excessive inventories
shall be calculated on the basis of the general sales price.
Ordinarily the Company shall make provision for falling price of inventories on the
ground of each item of inventories. For inventories with large quantity and relatively
low unit prices, the provision for falling price of inventories shall be made on the
ground of the categories of inventories. For the inventories related to the series of
products manufactured and sold in the same area, and of which the final use or
purpose is identical or similar thereto, and if it is difficult to measure them by
separating them from other items, the provision for falling price of inventories shall
be made on a combination basis.
If the factors causing any write-down of the inventories have disappeared, the amount
of write-down shall be resumed and be reversed from the provision for the loss on
decline in value of inventories that has been made. The reversed amount shall be
included in the current profits and losses.
4. Inventory system for inventories: Perpetual inventory system.
5. Amortization methods for low-value consumption goods and packings
42
(1) The one-off write-off approach is adopted for low-value consumption goods;
(2) The one-off write-off approach is adopted for packings.
(XII) Long-term equity investment
1. Recognition of investment cost
(1) Long-term equity investment under business combination
For the merger of enterprises under the same control, if the consideration of the
Company is that it makes payment in cash, transfers non-cash assets, bear its debts or
issuance of 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 consideration paid by the Company shall offset against the
capital reserve. If the capital reserve is insufficient to dilute, the retained earnings
shall be adjusted. The direct cost for the business combination of the combining party
shall, including the expenses for audit, assessment and legal services, be recorded into
the profits and losses at the current period.
For the merger of enterprises not under the same control, the combination costs shall
be the fair values, on the acquisition date, of the assets paid, the liabilities incurred or
assumed and the equity securities issued by the acquirer in exchange for the control
on the acquiree and all relevant direct costs incurred to the Company for the business
combination, including intermediary fees paid for auditing, legal, evaluating and
consulting services for the business combination, as well as other relevant
administrative expenses (the expense on trading equity or debt securities issued as the
combination consideration and recorded into current gains/losses when incurred, the
initially recognized amount recorded into equity or debt securities). For a business
combination realized by two or more transactions of exchange, the combination costs
shall be the summation of the costs of all separate transactions. Where any future
event that is likely to affect the combination costs is stipulated in the combination
contract or agreement, if it is likely to occur and its effects on the combination costs
can be measured reliably, the Company shall record the said amount into the
combination costs.
(2) Long-term equity investment by other methods
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 a long-term equity investment of an investor shall be the value
(excluding cash dividends that have been declared but not yet distributed) stipulated
in the investment contract or agreement except the unfair value stipulated in the
contract or agreement.
43
As for a non-monetary assets transaction, under the premise that the transaction is
commercial in nature and the fair value of the assets received or surrendered can be
measured reliably, the initial cost of the fair value of the long-term equity investment
received shall be recognized based on the fair value of the assets surrendered, unless
there is any exact evidence showing that the fair value of the assets received is more
reliable. Where any non-monetary assets transaction does not meet the conditions as
prescribed in the above premises at the same time, the book value and relevant
payable taxes of the assets surrendered shall be the initial cost of the long-term equity
investment received.
The initial cost of a long-term equity investment obtained by debts restructuring shall
be recognized based on the fair value.
2. Subsequent measurement and gain/loss recognition
(1) Subsequent measurement
The long-term equity investment that the Company carries out to its subsidiary
companies shall be measured based on cost method, and adjust based on the equity
method when preparing the consolidated financial statements.
The long-term equity investment that does not do joint control or does not have
significant influences on the invested entity, and entity, and has no offer in the active
market and its fair value cannot be reliably measured shall be measured at the cost
method.
The long-term equity investment that does joint control or significant influences over
the Company shall be measured by employing the equity method. If the initial cost of
a long-term equity investment is more than the investing enterprise' attributable share
of the fair value of the invested entity's identifiable net assets for the investment, the
initial cost of the long-term equity investment may not be adjusted. If the initial cost
of a long-term equity investment is less than the investing enterprise' attributable
share of the fair value of the invested entity's identifiable net assets for the investment,
the difference shall be included in the current profits and losses.
Disposal for any change is made to the owner's equity other than the net profits and
losses of the invested entity: in case the shareholding proportion remained unchanged,
the Company shall, in accordance with the shareholding proportion, calculate the
proportion it shall enjoy or undertake, and adjust book value of long-term equity
investment, and increase or decrease capital reserve (other capital reserve)
simultaneously.
(2) Recognition of profits and losses
Under the cost method, the Company shall recognize investment income in the light
of the attributable share of the profits or cash dividends declared to distribute by the
invested entity except for money paid actually or cash dividends or profit that have
been declared but not yet distributed included in consideration when obtaining
investment.
44
Under the equity method, the Company shall handle to the net losses of the invested
enterprise recognized by it: (1) offset book value of long-term equity investment; (2)
if the book value of long-term equity investment is insufficient to dilute, investment
loss shall be recognized based on the book value of other long-term rights and
interests which substantially form the net investment made to the invested entity, to
offset book value of long-term receivables items; and (3) through the above treatment,
where the Company still has the obligation to undertake extra losses as per investment
contracts or agreements, the obligation that is expected to undertake shall be
recognized the project liabilities, and recorded into losses on investment of the current
period.
If the invested entity realizes any profits later, the Company shall, after the amount of
its attributable share of the un-recognized losses, treat based on reverse order, and
write down the book balance of projected liabilities recognized, resume the book
value of other long-term rights and interests which substantially form the net
investment made to the invested entity and long-term equity investment, and
recognize investment income simultaneously.
3. Recognition basis of joint control and significant influences of invested enterprises
The term "joint control" means control over an economic activity as specified by
contract, which exists only when the investing parties that need to share the power of
control in important financial and operating decision-making agree unanimously. The
term "significant influence" means having the power to participate in the formulation
of financial and operating policies of an enterprise, but not the power to control or
jointly control the formulation of these policies together with other parties.
4. Impairment reserve of long-term equity investment
Under the significant influence, for the long-term equity investment that there is no
offer in the active market and of which the fair value cannot be reliably measured, of
which impairment loss shall be confirmed at the balance between the book value and
the present value recognized as the discount rate of market income rate to the future
cash flow of the assets.
Other long-term equity investment with the sign of impairment except for the
goodwill formed by merger of enterprises, where the recoverable amount of single
item long-term equity investment is lower than its carrying value, the difference shall
be recognized as impairment loss.
The goodwill formed by merger of enterprises shall be subject to an impairment test at
least at the end of each year no matter whether there is sign of impairment.
Once any loss of impairment of the long-term equity investment is recognized, it shall
not be switched back in the future accounting periods.
(XIII) Investment real estates
The term "investment real estates" refers to the real estates held for generating rent
45
and/or capital appreciation, including (1) the right to use any land which has already
been rented; (2) The right to use any land which is held and prepared for transfer after
appreciation; and (3) The right to use any building which has already been rented.
The Company shall make a measurement to the investment real estate through the cost
pattern. As for investment real estates measured by employing the cost pattern, i.e.
building used for rental, its depreciation policy consistent with that for fixed assets;
while for land use right used for rental, its amortization policy consistent with that for
intangible assets.
Where there is sign of impairment, the Company shall estimate the recoverable
amount of the investment real estates. Where the recoverable amount of single item
investment real estates is lower than its carrying value, of which the balance shall be
recognized as impairment loss.
Once any loss of impairment of the investment real estates is recognized, it shall not
be switched back in the future accounting periods.
(XIV) Fixed assets
1. Recognized standard of fixed assets
The term "fixed assets" refers to the tangible assets that simultaneously possess the
features as follows: they are held for the sake of producing commodities, rendering
labor service, renting or business management; and their useful life is in excess of one
fiscal year. No fixed asset may be recognized unless it simultaneously meets the
conditions as follows:
(1) The economic benefits pertinent to the fixed asset are likely to flow into the
enterprise; and
(2) The cost of the fixed asset can be measured reliably.
2. Category of fixed assets and depreciation
The Company shall withdraw the depreciation of fixed assets by adopting the
straight-line method, and recognized depreciation rate in the light of the category of
fixed assets, expected useful life, and expected net salvage value.
If it is reasonable to be certain that the Company will obtain the ownership of the
leased asset when the lease term expires, the leased asset shall be fully depreciated
over its useful life. If it is not reasonable to be certain that the Company will obtain
the ownership of the leased asset at the expiry of the lease term, the leased asset shall
be fully depreciated over the shorter one of the lease term or its useful life.
Depreciation life and annual depreciation rate of each fixed assets are as below:
Category Depreciation life (Y) Rate of salvage Annual deprecation
46
value（%） rate（%）
Housing and building 40 10 2.25
Machinery equipments 20-30 10 3-4.50
Transportation vehicle 8 10 11.25
Other 5-10 10 9-18
3. Impairment test and impairment reserve withdrawal method for fixed assets
The Company shall, at the end of every reporting period, make a judgment on whether
there is any sign of possible fixed assets impairment.
Where there is sign of impairment, the Company shall estimate the recoverable
amount of the fixed assets. The recoverable amount shall be determined in light of the
higher one of the net amount of the fair value of the fixed assets minus the disposal
expenses and the current value of the expected future cash flow of the fixed assets.
Where the recoverable amount of the fixed assets is lower than its carrying value, its
carrying value shall be recorded down to the recoverable amount, and the reduced
amount shall be recognized as impairment loss on fixed assets and recorded as the
profit or loss for the current period. Simultaneously, a provision for the impairment of
the fixed assets shall be made.
After the loss of fixed asset impairment has been recognized, the depreciation of the
impaired fixed asset shall be adjusted accordingly in the future periods so as to
amortize the post-adjustment carrying value of the fixed asset systematically
(deducting the expected net salvage value) within the residual service life of the fixed
asset.
Once any loss of impairment of the fixed assets is recognized, it shall not be switched
back in the future accounting periods.
Where there is any evidence indicating a possible impairment of fixed 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 single fixed asset belongs.
4. Recognition standards and pricing method for fixed assets acquired under finance
leases
Where one of the following provisions is regulated in the rental agreement signed
between the Company and the leaser, is shall be recognized as an asset acquired under
finance leases:
(1) The ownership of the leased asset is transferred to the Company after the term of
lease expires;
(2) The Company has the option to buy the asset at a price which is far lower than the
47
fair value of the asset at the date when the option becomes exercisable.
(3) The lease term covers the major part of the use life of the leased asset; and
(4) In the case of the lessee, the present value of the minimum lease payments on the
lease beginning date amounts to substantially all of the fair value of the leased asset.
On the lease beginning date, the Company shall record the lower one of the fair value
of the leased asset and the present value of the minimum lease payments as the
entering value in an account, recognize the amount of the minimum lease payments as
the entering value in an account of long-term account payable, and treat the balance
between the recorded amount of the leased asset and the long-term account payable as
unrecognized financing charges.
(XV) Constructions in progress
1. Category
Construction in progress shall be measured by the established projects.
2. Standard and time point of construction in progress transferring into fixed assets
All expenditure occurred before the assets are brought to the expected conditions for
use shall be recognized as the entering value of fixed assets. The construction in
progress of fixed assets has been reached to the expected conditions for use but has
not yet has handle completion and settlement procedures, the construction in progress
shall be transferred into the fixed assets at the appraisal value in accordance with
construction budget, cost or actual cost since the date that the construction in progress
reaches to the expected conditions for use, and the depreciation of the fixed assets
shall withdrawn in the light of the depreciation policy of fixed assets. After
completion and settlement procedures, the Company shall adjust the original
provisional estimate price at the actual cost, but not adjust original depreciation
withdrawn.
3. Withdrawal method of provision for impairment of construction in progress
The Company shall, at the end of every reporting period, make a judgment on whether
there is any sign of possible impairment of construction in progress.
Where there is sign of impairment, the Company shall estimate the recoverable
amount of the construction in progress. The recoverable amount shall be determined
in light of the higher one of the net amount of the fair value of the construction in
progress minus the disposal expenses and the current value of the expected future cash
flow of the construction in progress.
Where the recoverable amount of the construction in progress is lower than its
carrying value, its carrying value shall be recorded down to the recoverable amount,
and the reduced amount shall be recognized as impairment loss on construction in
progress and recorded as the profit or loss for the current period. Simultaneously, a
provision for the impairment of the construction in progress shall be made.
48
Once any loss of impairment of the construction in progress is recognized, it shall not
be switched back in the future accounting periods.
Where there is any evidence indicating a possible impairment of construction in
progress, the Company shall, on the basis of single item construction in progress,
estimate the recoverable amount. Where it is difficult to do so, it shall determine the
recoverable amount of the asset group on the basis of the asset group to which the
construction in progress belongs.
(XVI) Borrowing costs
1. Recognition principle of capitalization of borrowing costs
Where the borrowing costs incurred to the Company can be directly attributable to the
acquisition and construction or production of assets eligible for capitalization, it shall
be capitalized and recorded into the costs of relevant assets. Other borrowing costs
shall be recognized as expenses 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.
The borrowing costs shall not be capitalized unless they simultaneously meet the
following requirements:
(1) The asset disbursements have already incurred, which shall include the cash,
transferred non-cash assets or interest bearing debts paid for the acquisition and
construction or production activities for preparing assets eligible for capitalization;
(2) The borrowing costs has already incurred; and
(3) The acquisition and construction or production activities which are necessary to
prepare the asset for its intended use or sale have already started.
2. Capitalization period
The capitalization period shall refer to the period from the commencement to the
cessation of capitalization of the borrowing costs, excluding the period of suspension
of capitalization of the borrowing costs.
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.
When the part of projects in the qualified asset under acquisition and construction or
production are completed separately and is ready for use alone, the capitalization of
the borrowing costs of such part of assets shall be ceased.
Where each part of an asset under acquisition and construction or production is
49
completed separately and is ready for use or sale during the continuing construction of
other parts, but it can not be used or sold until the asset is entirely completed, the
capitalization of the borrowing costs shall be ceased when the asset is completed
entirely.
3. The period of suspension of capitalization of the borrowing costs
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. If the interruption is a
necessary step for making the qualified asset under acquisition and construction or
production ready for the intended use or sale, the capitalization of the borrowing costs
shall continue. The borrowing costs incurred during such period shall be recognized
as expenses, and shall be recorded into the profits and losses of the current period, till
the acquisition and construction or production of the asset restarts.
4. Measurement of capitalization amount
The interest expense of specially borrowing (minus the income of interests earned on
the unused borrowing loans as a deposit in the bank or as a temporary investment) and
ancillary expenses shall be capitalized before the qualified asset under acquisition and
construction or production is ready for the intended use or sale.
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 of the general borrowing used. The capitalization rate shall be
calculated and determined in light of the weighted average interest rate of the general
borrowing.
Where there is any discount or premium, the amount of discounts or premiums that
shall be amortized during each accounting period shall be determined by the real
interest rate method, and an adjustment shall be made to the amount of interests in
each period.
(XVII) Intangible assets
1. Pricing method
(1) Innitial measurement
The intangible assets shall be initially measured according to its cost.
The cost of outsourcing intangible assets shall include the purchase price, relevant
taxes and other necessary expenditures directly attributable to intangible assets for the
expected purpose. Where the payment of purchase price for intangible assets is
delayed beyond the normal credit conditions, which is of financing intention, the cost
of intangible assets shall be determined on the basis of the current value of the
purchase price.
For intangible assets obtained through debt restructuring, which are pay a debt by the
debtor, its entering value shall be recognized based on the fair value of such intangible
assets. The balance between book value for debt restructuring and the fair value of the
intangible assets shall be recorded into the profits and losses of the current period.
As for a non-monetary assets transaction, under the premise that the transaction is
50
commercial in nature and the fair value of the assets received or surrendered can be
measured reliably, the initial cost of the fair value of the intangible assets received
shall be recognized based on the fair value of the assets surrendered, unless there is
any exact evidence showing that the fair value of the assets received is more reliable.
Where any non-monetary assets transaction does not meet the conditions as prescribed
in the above premises at the same time, the book value and relevant payable taxes of
the assets surrendered shall be the initial cost of the intangible assets received.
As for intangible assets through business combination under the same control, its
entering value shall be recognized based on the book value of combined party. As for
intangible assets through business combination not under the same control, its
entering value shall be recognized at its fair value.
The cost of self-developed intangible assets shall include: materials used, service cost,
registration fee when developing such intangible assets, and amortization expenses of
other patent right used in the course of development and interest expense eligible for
capitalization, as well as other direct cost incurred before the expected purposes of use
of such intangible assets are realized.
(2) Subsequent measurement
The Company shall analyze and judge the service life of intangible assets, when it
obtains intangible assets.
With regard to intangible assets with limited service life, shall be amortized by the
straight-line method within the period when the intangible asset can bring economic
benefits to the Company; If it is unable to forecast the period when the intangible
asset can bring economic benefits to the Company, it shall be regarded as an
intangible asset with uncertain service life and not be amortized.
2. Evaluation of useful life of intangible assets with limited useful life
With regard to intangible assets with limited useful life, the following factors shall be
considered when the useful life is estimated: (1) general life cycle of products
manufactured with the said assets, information of useful life of similar assets obtained;
(2) estimation over the present phase and future development tendency in the respect
of technology and technics; (3) market demand of products manufactured with the
said assets and of labor service provided by the said assets; (4) action taken by present
or potential competitor; (5) expected maintain expenditure for which it keeps
economic benefit capacity brought by the said assets, and expenditure capacity paid in
advance by the Company; (6) such laws, regulations or the similar restriction related
with control period of the said assets, i.e. concession period and tenancy duration; and
(7) relevance of useful life of other assets held by the Company.
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.
The Company shall, at the end of every reporting period, check the useful life of the
said intangible assets and amortization method.
3. Judgment of intangible assets with uncertain service life
In accordance with composite factors such as contractual right or other statutory rights
of intangible assets, situation of same industry, historical experiences and proof of
professional, if it is unable to forecast the period when the intangible asset can bring
51
economic benefits to the enterprise, it shall be regarded as an intangible asset with
uncertain service life.
The Company shall, at the end of every reporting period, check the useful life of the
said intangible assets with uncertain service life.
4. Withdrawal of impairment reserve of intangible assets
As for intangible assets with certain service life, where there is sign of impairment,
the Company shall make an impairment test at the period-end.
As for intangible assets with uncertain service life, the Company shall make an
impairment test at the end of every reporting period.
The Company shall make impairment test to the intangible assets and estimate its
recoverable amount. The recoverable amount shall be determined in light of the
higher one of the net amount of the fair value of the intangible assets minus the
disposal expenses and the current value of the expected future cash flow of the
intangible assets.
Where the recoverable amount of the intangible assets is lower than its carrying value,
its carrying value shall be recorded down to the recoverable amount, and the reduced
amount shall be recognized as impairment loss on intangible assets and recorded as
the profit or loss for the current period. Simultaneously, a provision for the
impairment of the intangible assets shall be made.
After the loss of intangible asset impairment has been recognized, the depreciation of
the impaired intangible asset shall be adjusted accordingly in the future periods so as
to amortize the post-adjustment carrying value of the intangible asset systematically
(deducting the expected net salvage value) within the residual service life of the
intangible asset.
Once any loss of impairment of the intangible assets is recognized, it shall not be
switched back in the future accounting periods.
Where there is any evidence indicating a possible impairment of intangible assets, the
Company shall, on the basis of single item intangible assets, estimate the recoverable
amount. Where it is difficult to do so, it shall determine the recoverable amount of the
asset group on the basis of the asset group to which the intangible assets belongs.
5. Standard for classifying research and development to the Company’s R&D projects
The term "research" refers to the creative and planned investigation to acquire and
understand new scientific or technological knowledge.
The term "development" refers to the application of research achievements and other
knowledge to a certain plan or design, prior to the commercial production or use, so as
to produce any new material, device or product, or substantially improved material,
device and product.
The research expenditures for its internal research and development projects of the
Company shall be recorded into the profit or loss for the current period.
6. Standard for capitalization of development expenditures
The development expenditures for its internal research and development projects of
the Company may be capitalized 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
52
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.
(XVIII) Long-term deferred expenses
1. Amortization method
Long-term deferred expense shall be amortized on an average within the period of
benefit.
2. Amortization Period
Amortization period of long-term deferred expenses shall be recognized at benefit
period.
(XIX) Assets transfer with a repurchase agreement
A repurchase agreement for selling product or transferring assets shall be signed
between the Company and the purchaser when the Company sells its products and
transfers other assets, thereafter, the Company shall judge that sale of product meets
the recognition conditions of revenue or not in accordance with the clauses of the
agreement. If after-sales repurchase belongs to financing transaction, the Company
fails to recognize sales revenue when delivering products and assets. The positive
balance between the repurchase price and sales price shall be withdrawn interests on
schedule during the repurchase period, and included into financial expense.
(XX) Estimated debts
Such matters as lawsuits, guarantee for a debt, loss contract, restructuring involved by
the Company, which are likely to need to deliver assets or provide labor service in the
future, and their amount can be measured in a reliable way, shall be recognized as
estimated debts.
1. Recognition standard of estimate debts
The obligation pertinent to a contingency shall be recognized as an estimated debt
when the following conditions are satisfied simultaneously:
(1) That obligation is a current obligation of the company;
(2) It is likely to cause any economic benefit to flow out of the Company as a result of
performance of the obligation; and
(3) The amount of the obligation can be measured in a reliable way.
2. Measurement
The estimated debts shall be initially measured in accordance with the best estimate of
the necessary expenses for the performance of the current obligation.
To determine the best estimate, an enterprise shall take into full consideration of the
risks, uncertainty, time value of money, and other factors pertinent to the
Contingencies. If the time value of money is of great significance, the best estimate
shall be determined after discounting the relevant future outflow of cash.
The best estimate shall be conducted in the light of the following situations:
If there is a sequent range for the necessary expenses and if all the outcomes within
this range are equally likely to occur, the best estimate shall be determined in
accordance with the middle estimate (average number of bound) within the range.
If there is not a sequent range for the necessary expenses, or although there is a
53
sequent range for the necessary expenses but all possible outcomes are not the same
within the scope, i.e. If the Contingencies concern a single item, best estimate shall be
determined in the light of the most likely outcome; If the Contingencies concern two
or more items, the best estimate should be calculated and determined in accordance
with all possible outcomes and the relevant probabilities.
Where some or all of the expenditures for paying off estimated debts are expected to
be reimbursed by a third party, the reimbursement should be separately recognized as
an asset when it is virtually received. The amount of the reimbursement should not
exceed the carrying amount of the liability recognized.
(XXI) Revenue
1. Recognition of revenue from selling goods
The significant risks and rewards of ownership of the goods have been transferred to
the buyer by the enterprise; The enterprise retains neither continuous management
right that usually keeps relation with the ownership nor effective control over the sold
goods; The relevant amount of revenue can be measured in a reliable way; The
relevant economic benefits may flow into the enterprise; and the relevant costs
incurred or to be incurred can be measured in a reliable way.
2. Recognition method of revenue from abalienating the right to use assets
The relevant economic benefits are likely to flow into the enterprise; and the amount
of revenues can be measured in a reliable way. The revenue from abalienating the
right to use assets shall be recognized in the light of the following methods:
A. 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
B. 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.
3. Thereunder and methods for the schedule of completion of contract when
recognizing revenue from providing labor services and construction contracts by
employing the percentage-of-completion method
If the Company can, on the date of the balance sheet, reliably estimate the outcome of
a transaction concerning the labor services it provides, it shall recognize the revenue
from providing services employing the percentage-of-completion method. Schedule of
completion under the transaction concerning the providing of labor services shall be
recognized in the light of the measurement of the work completed.
The Company shall ascertain the total revenue from the providing of labor services in
accordance with the received or to-be-received price of the party that receives the
labor services as stipulated in the contract or agreement, unless the received or
to-be-received price as stipulated in the contract or agreement is unfair. The Company
shall, on the date of the balance sheet, ascertain the current revenue from providing
labor services in accordance with the amount of multiplying the total amount of
revenues from providing labor services by the schedule of completion then deducting
the accumulative revenues from the providing of labor services that have been
recognized in the previous accounting periods. At the same time, the enterprise shall
carry forward the current cost of labor services in accordance with the sum of
multiplying the total amount of revenues arising from the providing of labor services
54
by the schedule of completion and then deducting the accumulative revenues from the
providing of labor services.
If the Company 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:
(1) 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
(2) 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.
(XXII) Government subsidies
1. Category
A Government grant means the monetary or non-monetary assets obtained free by the
Company from the government consist of the Government grants pertinent to assets
and Government grants pertinent to income.
2. Accounting treatments
The Government grants related to long-term assets such as purchase and construction
of fixed assets and intangible assets, shall be recognized as deferred income, and
recorded into non-operating income by installment in the light of the useful life of
assets constructed and purchased.
For the Government grants pertinent to incomes: (1) Those subsidies used for
compensating the related future expenses or losses of the Company shall be
recognized as deferred income and shall included in the non-operating income during
the period when the relevant expenses are recognized; or (2) Those subsidies used for
compensating the related expenses or losses incurred to the Company shall be directly
recognized as the current profits and losses into non-operating income.
(XXIII) Deferred income tax assets and deferred income tax expenses
1. Recognition of deferred income tax assets
The Company shall recognize the deferred income tax assets arising from a deductible
temporary difference to 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.
2. Recognition of deferred income tax liabilities
The Company shall recognize the accrued taxable temporary difference of the current
period and prior periods as the deferred income tax liabilities. But except for goodwill,
the transaction is no business combination and taxable temporary difference at the
time of transaction, the accounting profits will not be affected, nor will the taxable
amount (or the deductible loss) be affected.
(XXIV) Accounting treatment of operating lease and finance lease
1. Accounting treatment of operating lease
(1) Rent charge paid for leasing assets shall be apportioned at the straight-line method
and recorded into the current expense within the overall rent period including
rent-free period. The initial direct expense paid by the Company related to lease
transaction shall be included into the current expense.
Where the lessor undertakes the expenses related to the lease that should be
55
undertaken by the Company, the Company shall deduct such expense from total rental,
and such deducted rental fee shall be apportioned within the rent period and included
into the current expense.
(2) Rent charge received for renting out assets shall be apportioned at the straight-line
method and recognized as rental income within the overall rent period including
rent-free period. The initial direct expense paid by the Company related to lease
transaction shall be included into the current expense. In the event of the larger
amount, it shall be capitalized and recoded into the current income by installment
within the overall lease period.
Where the Company undertakes the expenses related to the lease that should be
undertaken by the lessor, the Company shall deduct such expense from total rental
income, and such deducted rental fee shall be apportioned within the rent period.
2. Accounting treatment of finance lease
(1) Assets acquired under finance leases: On the lease beginning date, the Company
shall record the lower one of the fair value of the leased asset and the present value of
the minimum lease payments on the lease beginning date as the entering value in an
account, recognize the amount of the minimum lease payments as the entering value
in an account of long-term account payable, and treat the balance between the
recorded amount of the leased asset and the long-term account payable as
unrecognized financing charges.
The Company shall adopt the effective interest rate method to calculate and recognize
the unrecognized financing charge in the current period, which shall be amortized
within the lease period of assets and recorded into the financial expenses.
(2) Assets rented under finance leases: On the beginning date of the lease term, the
balance between the sums of the finance lease receipts, the initial direct costs and the
unguaranteed residual value, and the sum of their present values shall be recognized
as unrealized financing income, which shall be recognized as lease income during
each period of lease receipt thereafter. The initial direct costs incurred related to rent
transaction shall be measured into initial measurement of financial lease receipts;
accordingly, the income recognized in the lease period shall be reduced.
(XXV) Change in major accounting policies and accounting estimates
1. Change in accounting policies
During the reporting period, accounting policies remained unchanged.
2. Change in accounting estimates
During the reporting period, accounting estimates remained unchanged.
(XXVI) Corrections of previous accounting errors
1. Retrospective restatement method
During the reporting period, there is no previous accounting errors need to be
corrected by the retrospective restatement method
2. Prospective application method
During the reporting period, there is no previous accounting errors need to be
corrected by the prospective application method.
III. Taxation
(I) Main taxes and tax rate
56
Category of taxes Tax base Tax rate
VAT Taxable income or labor service 17%
Business tax Taxable operating income 5%
Tax for maintaining and building cities Circulating tax 7%
Extra charges of education funds Circulating tax 3%
Local extra charges of education funds Circulating tax
Enterprise income tax Amount of taxable income 25%
(II) Tax preference and official documents
According to the Circular on issuing the Second Name List of Hi-tech Enterprise in
Guangdong Province for Y2009(YKGZi(2010) Document No. 42) jointly issued by
Science & Technology Department of Guangdong Province, Fiance Department of
Guangdong Province, National Tax Bereau of Guangdong Province and Local Tax
Bereau of Guangdong Province, the Company’s shareholding subsidiary company
Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. was recognized as Second Batch of
Hi-tech Enterprise in Guangzong Province for Y2009, and gained Certificate for
Hi-tech Enterprise (Certificate No. : GR200944000873, with three years of validity).
So the subsidiary can enjoy the relevant tax preference for Hi-tech enterprise since
Y2009(include Y2009) for three years, whose CIT rate was 15%.
57
Ⅳ. Business combination and consolidated financial statement
The following amount is expressed in RMB ten thousand unless otherwise special explanation.
(Ⅰ) Major Subsidiaries
1. Subsidiaries gained through establish or investment ways, etc.
The The Included in
Other
Registered Business Registered Paid-in proportion of proportion of consolidated
Subsidiaries Categories Business scope essential
place nature capital capital holding voting rights statements or
investment
shares（%） （%） not
Foshan Huazhi Subordinated Foshan Service 500 Purchase and sale 500 --- 100 100 Yes
Waste Paper Recycling company of industry of waste paper and (indirectly) (indirectly)
Co., Ltd. Shareholding waste newspaper
subsidiary
Pearl River Color Subordinated Foshan Manufacturing 150 Printing other 150 --- 100 100 Yes
Printing Co., Ltd. of company of printed materials, (indirectly) (indirectly)
Chancheng District, Shareholding design &
Foshan subsidiary production and
release of
advertising
Foshan Huaxin Wholly-owned Foshan Manufacturing 300 Investing in 300 --- 100 100 Yes
Jinfeng Industrial Co., subsidiary industry
Ltd
Foshan Chengtong Shareholding Foshan Manufacturing 30,000 Manufacturing and 22,500 --- 75 75 Yes
Paper Co., Ltd subsidiary selling of
high-class paper
and paper board;
export & import of
goods
Kunshan Focai Shareholding Suzhou Manufacturing 500 Sales of packaging 500 --- 100 100 Yes
Packaging & Printing subsidiary & printing
Co., Ltd. materials
2. Subsidiaries through business combination under the same control
58
Other The proportion The proportion Included in
Registered Business Registered Paid-in of holding of voting rights
Subsidiaries Categories Business scope essential consolidated
place nature capital capital
investment shares（%） （%） statements or not
Huaxin (Foshan) Shareholding Foshan Manufacturing USD1,280 Process and 7,267.41 --- 75 75 Yes
Color Printing subsidiary printing of
Co., Ltd packaging or
decorating
printing products,
domestic and
export sales of
products
Zhuhai Huafeng Subordinated Zhuhai Manufacturing 98,456 Manufacturing 106,897.15 --- 100(indirectly) 100 (indirectly) Yes
Paper Co., Ltd company of and selling of
Shareholding high-class paper
subsidiary and paper board
3. Subsidiaries obtained through enterprise combination not under the same control
Included in
Other The proportion The proportion
Registered Business Paid-in consolidated
Subsidiaries Categories Registered capital Business scope essential of holding of voting rights
place nature capital statements or
investment shares（%） （%）
not
Zhuhai S.E.Z. Shareholding Zhuhai Manufacturing USD24,360.9909 Manufacturing 92,757.07 --- 41.9653 41.9653 Yes
Hongta Renheng subsidiary and selling of
Paper Co., Ltd. high-class
packaging paper
board
59
English Translation for Reference Only
(Ⅱ) Explanation on change in consolidation scope in the reporting period
1. In the reporting period, the consolidation scope remained unchanged.
Ⅴ. Notes to the consolidated financial statements
The following amount is expressed in RMB unless otherwise special explanation.
(Ⅰ) Monetary funds
Closing amount Opening amount
Items
Foreign currency Exchange rate Translated to RMB Foreign currency Exchange rate Translated to RMB
Cash:
-RMB 260,551.13 279,818.91
-HKD 70,254.34 0.8316 58,423.51 73,869.39 0.8509 62,855.46
-USD 19,071.37 6.4716 123,422.28 11,537.59 6.6227 76,410.00
Subtotal 442,396.92 419,084.37
Bank deposit:
-RMB 120,778,756.94 229,076,267.61
-HKD 841,020.15 0.8316 696,407.25 4,354,339.97 0.8509 3,702,615.54
-USD 6,375,533.50 6.4716 41,258,563.72 6,007,343.01 6.6227 39,780,055.00
-EURO 88,781.98 9.3612 831,105.87 3.98 8.8065 35.05
Subtotal 163,564,833.78 272,558,973.20
Other
monetary fund
-RMB 16,267.60 118,404,984.33
-USD 0 306.69 6.6227 2,031.12
Subtotal 16,267.60 118,407,015.45
Total 164,023,498.30 391,385,073.02
Of which: Breakdown of restricted monetary fund
Items Closing amount Opening amount
Margin for bank acceptance bill 2,000.62 117,530,459.62
Total 2,000.62 117,530,459.62
(Ⅱ) Notes receivable
1. Types of notes receivable
Type Closing amount Opening amount
Bank acceptance bill 251,447,465.49 261,728,377.81
Total 251,447,465.49 261,728,377.81
2. Pledged notes receivable is of RMB 57,436,894.58.
3. The bank acceptance bills that the Company has discounted but not yet due at the
end of period totaling RMB 59,550,675.60, and the due dates are from Jul. 2011 to
Sep. 2011 respectively.
4. The bank acceptance bills that the Company has made endorsement but not yet due
at the end of period totaling RMB 344,504,958.37, and the due dates are from Jul.
2011 to Dec. 2011 respectively. Of which, the top five are as followed:
Note receivable issuing unit Issuing date Due date Amount Remarks
Shantou Yuedong Printing Materials Co., Ltd. 25 Apr. 2011 25 Oct. 2011 15,000,000.00
Shantou Yuedong Printing Materials Co., Ltd. 30 Mar. 2011 30 Sep. 2011 14,000,000.00
Shantou Jinshi Printing Co., Ltd 25 Apr. 2011 25 Oct. 2011 10,000,000.00
Shantou Yuedong Printing Materials Co., Ltd. 26 Apr. 2011 25 Oct. 2011 10,000,000.00
Shantou Yuedong Printing Materials Co., Ltd. 28 Jan. 2011 28 Jul. 2011 7,800,000.00
60
English Translation for Reference Only
Total 56,800,000.00
5. There was no notes receivable changed to accounts receivable for the incapable
cashing of the issuers at the end of period.
(Ⅲ) Accounts receivable
1. Composing of accounts receivable
Closing amount Opening amount
Book balance Provision for bad debts Book balance Provision for bad debts
Categories Proportion Proportion Proportion Proportio
to total to total to total n to total
Amount Amount Amount Amount
amount amount amount amount
(%) (%) (%) (%)
Accounts 10,047,398.58 0.88 10,047,398.58 100 10,047,398.58 1.4110,047,398.58 100
receivable which
are individually
significant and
individually
withdrawn the
provision for bad
debts
Accounts 38,866,789.61 3.41 33,713,460.51 86.74 38,866,789.61 5.4533,713,460.51 86.74
receivable which
are not individually
significant and
individually
withdrawn the
provision for bad
debts
Accounts
receivable
withdrawn the
provision for bad
debts under
combination
Combination-Agin 1,089,981,179.07 95.71 9,787,448.67 0.90664,313,057.57 93.14 8,328,691.16 1.25
g analysis method
Subtotal of 1,089,981,179.07 95.71 9,787,448.67 0.90664,313,057.57 93.14 8,328,691.16 1.25
combination
Total 1,138,895,367.26 100 53,548,307.76 4.70713,227,245.76 10052,089,550.25 7.30
Explanation on the categories of accounts receivable
(1) Among the combination, accounts receivable withdrawn the provision for bad debts by aging
analysis method
Closing amount Opening amount
Aging Book balance Book balance
Provision for bad Provision for bad
Proportion debts Proportion debts
Amount Amount
(%) (%)
1-3 months 842,439,334.14 77.29 --- 565,714,443.60 85.15 ---
4-12 months 232,587,816.34 21.34 3,815,293.31 80,901,678.37 12.18 4,045,083.90
Subtotal (within
1,075,027,150.48 98.63 3,815,293.31 646,616,121.97 97.33 4,045,083.90
1 year)
1-2 years 6,799,077.80 0.62 3,039,722.51 7,228,558.58 1.09 722,855.86
2-3 years 4,898,368.40 0.45 1,179,580.26 5,578,123.73 0.84 1,115,624.75
Over 3 years 3,256,582.39 0.30 1,752,852.59 4,890,253.29 0.74 2,445,126.65
Total 1,089,981,179.07 100 9,787,448.67 664,313,057.57 100 8,328,691.16
(2) Explanation on accounts receivable which are not individually significant, but are
assessed at high risk level through credit risk combination: Where there is any
evidence indicating a possible impairment of accounts receivable, it should be
separated from the relevant combination and be carried out the impairment test, then
estimated impairment and made the provision for bad debts.
2. The provision for bad debts of accounts receivable with significant single amounts
61
English Translation for Reference Only
or which are not significant but individually carried the impairment test
Withdrawal
Provision for bad
Content Book balance proportion Remark
debts
(%)
Guangdong Regall Group Co., Ltd. 10,047,398.58 10,047,398.58 100 Under the lawsuit
Dongguan Second Light Materials Demanded for many times
4,516,409.08 4,516,409.08 100
Supply Co., Ltd but didn’t recover
Zhuhai East Zhengtai Power Equipment 2,925,825.54 2,633,242.98 90 Applied to the court for
Co., Ltd. compulsory execution but
with little possibility
Foshan Jiahe Paper Trading Co., Ltd. 4,902,239.70 2,451,119.85 50 Difficult to recover
Guangzhou Yixin Color Printing Demanded for many times
1,917,358.32 1,917,358.32 100
Machine Co., Ltd. but didn’t recover
Already win the lawsuit, and
Shenzhen Xieji Industry Co., Ltd. 3,760,350.10 1,880,175.05 50
still under execution
Zhongfei Trade Co., Ltd., Yueyang Demanded for many times
1,589,682.46 1,589,682.46 100
Economic Technology Development but didn’t recover
Foshan City Materials Industry Demanded for many times
1,351,827.19 1,351,827.19 100
Company but didn’t recover
Zhuhai Gongbei Ronghui Trade Co., Already win the lawsuit, and
1,016,655.73 914,990.16 90
Ltd. still under execution
Others 16,886,441.49 16,458,655.42 97.47 Difficult to recover
Total 48,914,188.19 43,760,859.09
3. There were no particulars about accounts receivable that the Company withdrew
the provision for debt in previous period based on total or large proportion, but
recover based on total or large proportion during the reporting period.
4. During the reporting period, there was no accounts receivable by reorganization or
other ways or the accumulated withdrawing of provision for bad debts before
reorganization.
5. There was no accounts receivable being written off actually during the reporting
period.
6. There was no accounts receivable due from shareholders with more than 5%
(including 5%) of the voting shares of the Company.
7. The top 5 arrearages in accounts receivable
Proportion to total
Relationship with the
Name of entities Amount Aging accounts receivable
Company
(%)
No. 1 Irrelevant party 50,096,400.98 Within 1 year 4.40
No. 2 Irrelevant party 38,351,368.30 Within 1 year 3.37
No. 3 Irrelevant party 35,896,395.25 Within 1 year 3.15
No. 4 Irrelevant party 34,494,999.43 Within 1 year 3.03
No. 5 Irrelevant party 33,112,264.00 Within 1 year 2.91
Total 191,951,427.96 16.86
8. Particulars about accounts receivable from relevant parties at the end of the period
Closing balance Opening balance
Name of entities Book balance Provision for Provision for
Book balance
bad debts bad debts
Guangdong Guanhao High-tech Co., Ltd. 280,808.00 --- --- ---
(Ⅳ) Advance to the supplier
1. Analysis for aging
Closing balance Opening balance
Aging Proportion Proportion
Amount Amount
(%) (%)
Within 1 year 73,226,704.33 89.88 383,562,835.43 98.68
1-2 years 7,057,563.49 8.66 4,118,909.84 1.06
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English Translation for Reference Only
2-3 years 1,192,647.44 1.46 180,917.67 0.05
Over 3 years --- --- 826,838.73 0.21
Total 81,476,915.26 100 388,689,501.67 100
2. Particulars about the top five prepayments
Relationship
Reason for non-liquidation in
Name of entities with the Amount Period
time
Company
No. 1 Irrelevant party 30,000,000.00 Within 1 Payment for materials advance to
year supplier according to contract,
and has not received the materials
No. 2 Irrelevant party 17,744,800.00 Within 1 Payment for materials advance to
year supplier according to contract,
and has not received the materials
No. 3 Irrelevant party 6,608,203.80 Within 1 Payment for materials advance to
year supplier according to contract,
and has not received the materials
No. 4 Irrelevant party 4,875,804.05 Within 1 Payment for materials advance to
year supplier according to contract,
and has not received the materials
No. 5 Irrelevant party 1,797,430.00 Within 1 Payment for materials advance to
year supplier according to contract,
and has not received the materials
Total 61,026,237.85
3. At the end of period, there was no advance to the suppliers due from shareholders
with more than 5% (including 5%) to the voting shares of the Company.
(Ⅴ) Other accounts receivable
1. Breakdown
Closing balance Opening balance
Category Book balance Provision for bad debts Book balance Provision for bad debts
Proportion Proportion Proportion Proportion
Amount Amount Amount Amount
(%) (%) (%) (%)
Other 6,000,000.00 18.27 6,000,000.00 100 6,000,000.00 16.54 6,000,000.00 100
significant
accounts
receivable and
make
individual
provision for
bad debts
Other no 3,965,296.26 12.07 3,854,731.26 97.21 3,965,296.26 10.92 3,854,731.26 97.21
significant
accounts
receivable but
make
provision for
bad debts
individually
Other
accounts
receivable
withdraw the
provision for
bad debts
according to
the
combination
Combination- 22,878,198.68 69.66 2,134,897.14 9.33 26,320,936.40 72.54 2,263,938.36 8.60
Aging analysis
method
Subtotal 22,878,198.68 69.66 2,134,897.14 9.33 26,320,936.40 72.54 2,263,938.36 8.60
combination
Total 32,843,494.94 100 11,989,628.40 36.51 36,286,232.66 100 12,118,669.62 33.40
63
English Translation for Reference Only
(1) Among the combination, other accounts receivable withdrawn the provision for
bad debts by aging analysis method
Closing balance Opening balance
Aging Book balance Book balance
Provision for bad Provision for bad
Proportion debts Proportion debts
Amount Amount
(%) (%)
1-3 months 9,413,995.91 41.15 --- 14,329,669.86 54.44 ---
4-12 months 5,660,816.66 24.74 87,185.36 4,773,573.52 18.14 238,678.68
Subtotal of within 15,074,812.57 65.89 87,185.36 19,103,243.38 72.58 238,678.68
1years
1-2 years 3,408,701.96 14.90 319,026.26 2,789,765.63 10.60 278,976.56
2-3 years 1,645,232.24 7.19 370,946.56 1,558,935.23 5.92 311,787.05
Over 3 years 2,749,451.91 12.02 1,357,738.96 2,868,992.16 10.90 1,434,496.07
Total 22,878,198.68 100 2,134,897.14 26,320,936.40 100 2,263,938.36
(2) Explanation on other accounts receivable which are not individually significant,
but are assessed at high risk level through credit risk combination: Where there is any
evidence indicating a possible impairment of other accounts receivable, it should be
separated from the combination and carried out individual impairment test, then
estimate the impairment and withdraw the provision for bad debts.
2. Impairment provision for accounts receivable with significant single amounts or
which are not significant but impairment test is individually carried out.
Withdrawal
Provision for bad
Content Book balance proportion Reason
debts
(%)
Zhuhai Yidecheng Industrial 6,000,000.00 6,000,000.00 100 Loans in 2003, difficult to recover
Co., Ltd
Zhuhai Municipal Construction 2,000,000.00 2,000,000.00 100 Advances for road construction
Commission before 2001, and difficult to
recover
Jiangmen Pengjiang Jinghua 1,105,650.00 995,085.00 90 90% of the payment for brush-ray
Sieve Plate Manufacturing Co., machine used in experiment,
Ltd. while the machines can’t be used
for unsuccessful experiment, so
make the impairment provision
after estimating the salvage value
Shenchi Industrial Co., Ltd. 500,000.00 500,000.00 100 Loans before 1993, difficult to
recover
Other 359,646.26 359,646.26 100
Total 9,965,296.26 9,854,731.26 98.89
3. There were no other accounts receivable that the Company withdrew the provision
for bad debts in previous period based on total or large proportion, but recover based
on total or large proportion or by reorganizations or other ways during the reporting
period.
4. There was no other accounts receivable being actually written off in the reporting
period.
5. There was no other accounts receivable due from shareholders with more than 5%
(including 5%) of the voting shares of the Company.
6. For the detailed nature and content of other accounts receivable with significant
amount, please refer to the Notes Ⅶ.
7. The top five arrearages in other accounts receivable at the period-end.
Relationship Proportion to total
Nature and
Name of entities with the Amount Aging other receivables
content
Company (%)
Over 3
No. 1 Irrelevant party 6,000,000.00 18.27 Loan
years
No. 2 Irrelevant party 2,532,816.23 Within 3 7.71 Court fees
years without final
64
English Translation for Reference Only
settlement, etc.
Irrelevant party Advance for
Over 3
No. 3 2,000,000.00 6.09 road
years
construction.
4-12
No. 4 Irrelevant party 1,190,877.77 3.63 Current account
months
Over 3
No. 5 Irrelevant party 1,105,650.00 3.37 Others
years
Total 12,829,344.00 39.06
8. There was no other accounts receivable due from affiliated parties at the end of the
period.
(Ⅵ) Inventory
1. Category
Closing balance Opening balance
Item Provision for Provision for
Book balance Book value Book balance Book value
falling price falling price
Raw materials 530,919,888.61 9,377,849.44 521,542,039.17 342,792,185.41 11,141,798.74 331,650,386.67
Low-value 70,444,755.85 --- 70,444,755.85 29,232,226.68 --- 29,232,226.68
consumption
and packing
Materials in
64,090,112.30 --- 64,090,112.30 42,185,579.26 --- 42,185,579.26
transit
Merchandise
442,773,150.57 9,941,363.36 432,831,787.21 499,053,862.18 18,161,743.79 480,892,118.39
inventory
Total 1,108,227,907.33 19,319,212.80 1,088,908,694.53 913,263,853.53 29,303,542.53 883,960,311.00
As at the end of the period, no inventory was used for guarantee.
2. Provision for falling price of inventory
Book balance at the Withdrawn the Decrease in current period Book balance at the
Category
year-begin current period Written back Written off period-end
Raw materials 11,141,798.74 --- --- 1,763,949.30 9,377,849.44
Merchandise --- --- 8,220,380.43
18,161,743.79 9,941,363.36
inventory
Total 29,303,542.53 --- --- 9,984,329.73 19,319,212.80
As the provision for falling price of inventory at period-end was measured on the
differences of cost over net realizable value, the determination of net realizable value
follows: under normal production process, to the amount after deducting the estimated
sale expense and relevant taxes from the estimated sell price of the inventory, the net
realizable value has been recognized.
(Ⅶ) Available-for-sale financial assets
Items Closing fair value Opening fair value
(1) Equity instrument available for sale 4,668,853.07 4,869,332.31
Total 4,668,853.07 4,869,332.31
Note: Equity instrument available-for-sale is shares subject to trading moratorium
amounting to 385,537 shares of Zhuhai Port Co., Ltd. held by Zhuhai S.E.Z Hongta
Renheng Paper Co., Ltd. after completing share merger reform. Since the end of 2007,
the said shares had been transferred to circulating shares.
65
English Translation for Reference Only
(Ⅷ) Investment on associated enterprises and affiliated enterprises
(Unit: RMB’000)
Shareholding Proportion of voting Total operating
Total assets at the Total liabilities at Total net assets at the Net profit of current
Invested enterprise proportion right in invested revenue of current
period-end the period-end period-end period
(%) enterprise (%) period
I. Affiliated enterprise
Tetra Huaxin (Foshan) Packaging Co.,
25 25 116,362.52 45,642.38 70,720.14 58,650.50 12,172.94
Ltd.
Guangdong Chengtong Logistics Co.,
24 24 3,159.26 415.59 2,743.67 1,853.04 -96.03
Ltd.
(Ⅸ) Long-term equity investment
Particulars about long-term equity investment
Interpretations of Impair
Shareholding
Proportion of difference between Impair ment
proportion in
Accounting Increase/decreas voting right in the equity percentage ment provisi Cash dividends
Invested enterprise Investment cost Opening balance Closing balance invested
method e invested and voting right reserve on on on current period
enterprise
enterprise (%) percentage in the s current
(%)
invested company period
Tetra Huaxin (Foshan) Packaging Co., Ltd. Equity
145,945,947.55 206,014,566.72 -29,214,208.23 176,800,358.49 25 25 --- --- --- 59,646,563.76
method
Guangdong Chengtong Logistics Co., Ltd. Equity
7,200,000.00 6,796,045.88 -230,474.71 6,565,571.17 24 24 --- --- --- ---
method
Subtotal of equity method 153,145,947.55 212,810,612.60 -29,444,682.94 183,365,929.66 --- --- --- --- --- ---
Guangdong Development Bank Stock Ltd., Cost
113,558.00 113,558.00 --- 113,558.00 0.000428 0.000428 --- --- --- ---
Corp. method
Subtotal of cost method 113,558.00 113,558.00 --- 113,558.00 --- --- --- --- --- ---
Total 153,259,505.55 212,924,170.60 -29,444,682.94 183,479,487.66 --- --- --- --- --- ---
66
English Translation for Reference Only
(Ⅹ) Investment real estate
Increase in current Decrease in
Items Opening balance Closing balance
period current period
1. Original book value 19,306,115.52 --- --- 19,306,115.52
(1) House and building 19,306,115.52 --- --- 19,306,115.52
2. Accumulative depreciation and 3,803,896.92 280,214.36 --- 4,084,111.28
amortization
(1) House and building 3,803,896.92 280,214.36 --- 4,084,111.28
3. Total net value of investment real 15,502,218.60 --- 280,214.36 15,222,004.24
estate
(1) House and building 15,502,218.60 --- 280,214.36 15,222,004.24
4. Total provision for impairment of --- --- --- ---
investment real estate
(1) House and building --- --- --- ---
5. Total book value 15,502,218.60 --- 280,214.36 15,222,004.24
(1) House and building 15,502,218.60 --- 280,214.36 15,222,004.24
Depreciation and amortization amounted to RMB 280,214.36 in current period.
(Ⅺ) Fixed assets-original value and accumulative depreciation
1. Fixed assets
Opening book Decrease in
Item Increase in current period Closing book balance
balance current period
I. Total original value 4,477,005,495.18 36,596,968.91 19,811,786.87 4,493,790,677.22
Including: house and
1,117,217,379.60 4,710,625.86 --- 1,121,928,005.46
building
Machinery equipment 3,187,840,476.60 28,990,684.42 16,899,958.47 3,199,931,202.55
Transportation vehicle 53,324,730.58 2,302,358.99 2,911,828.40 52,715,261.17
Other 118,622,908.40 593,299.64 --- 119,216,208.04
Withdrawal in current Decrease in
period current period
II. Total accumulative
1,241,464,142.45 70,454,073.31 20,621,031.10 1,291,297,184.66
depreciation
Including: house and
243,296,225.59 15,041,434.26 --- 258,337,659.85
building
Machinery equipment 906,616,956.49 48,146,751.89 17,906,562.94 936,857,145.44
Transportation vehicle 35,382,648.89 2,068,049.27 2,714,468.16 34,736,230.00
Other 56,168,311.48 5,197,837.89 --- 61,366,149.37
III. Total fixed
3,235,541,352.73 --- --- 3,202,493,492.56
assets-net book value
Including: house and
873,921,154.01 --- --- 863,590,345.61
building
Machinery equipment 2,281,223,520.11 --- --- 2,263,074,057.11
Transportation vehicle 17,942,081.69 --- --- 17,979,031.17
Other 62,454,596.92 --- --- 57,850,058.67
IV. Total impairment
78,086,487.98 --- --- 78,086,487.98
reserves
Including: house and
--- --- --- ---
building
Machinery equipment 78,086,487.98 --- --- 78,086,487.98
Transportation vehicle --- --- --- ---
Other --- --- --- ---
V. Total fixed
3,157,454,864.75 --- --- 3,124,407,004.58
assets-book value
Including: house and
873,921,154.01 --- --- 863,590,345.61
building
Machinery equipment 2,203,137,032.13 --- --- 2,184,987,569.13
Transportation vehicle 17,942,081.69 --- --- 17,979,031.17
Other 62,454,596.92 --- --- 57,850,058.67
Total 3,157,454,864.75 --- --- 3,124,407,004.58
During the reporting period, fixed assets-original value transferred from construction
67
English Translation for Reference Only
in progress amounted to RMB 24,131,532.60.
2. As at the end of period, fixed assets that failed to complete property right certificate
Reason that failed to complete property right Expected date for
Items Book value
certificate completion
On the process of gathering materials or failed to
House and building 508,344,473.40 2011
complete the transfer procedure
Total 508,344,473.40
Subsidiary Foshan Chentong Paper Co., Ltd. took on the local assets of Foshan
Huafeng had been sold out and corresponding liabilities for production and business,
up until the reporting date relevant real estate failed to complete property right
certificate.
3. There were no temporary idle fixed assets at the period-end.
4. There were no fixed assets for mortgage at the period-end.
(Ⅻ) Construction in process
1. Construction in process
Balance at period-end Balance at year-begin
Items Impairment Impairment
Book balance Book value Book balance Book value
reserves reserves
Reform project
of Huafeng 5,176,327.65 --- 5,176,327.65 --- --- ---
production line
Color printing
7,017,617.34 --- 7,017,617.34 --- --- ---
equipment
Project of
production line
434,470.17 --- 434,470.17 328,146.70 --- 328,146.70
of Chengtong
Plant
Software 113,914.53 113,914.53 113,914.53 113,914.53
7+1Speedmaster
--- --- --- 17,148,564.12 --- 17,148,564.12
Press
Close Circuit
Cooling Tower 28,995.00 --- 28,995.00 87,179.49 --- 87,179.49
(FB-07N)
Settlement of
UV dryer in
FBZ 420 Flexo --- --- --- 192,307.60 --- 192,307.60
Print Zone I and
II
Gravure Still
Picture Control 30,769.23 --- 30,769.23 30,769.23 --- 30,769.23
System
Total 12,802,093.92 --- 12,802,093.92 17,900,881.67 --- 17,900,881.67
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2. Of which: change in significant construction in process
Including:
Accumulated Interest
Proportion of interest
Opening Transfer into Other interest capitalization Fund Balance at the
Name of project Budget Increase this year input to Project process capitalization
balance fixed assets decrease capitalization rate this source period-end
budget (%) amount this
amount period (%)
period
Reform project
of Zhuhai Other
--- 5,176,327.65 --- --- Unfinished --- --- --- 5,176,327.65
Huafeng source
production line
Color printing Other
--- 7,017,617.34 --- --- Unfinished --- --- --- 7,017,617.34
equipment source
7+1Speedmaster EUR1.8 Other
17,148,564.12 67,004.27 17,215,568.39 --- Completed --- --- --- ---
Press million source
Total 17,148,564.12 12,260,949.26 17,215,568.39 --- --- --- --- 12,193,944.99
69
English Translation for Reference Only
3. There were no impairment reserves for construction in process at the period-end.
(ⅩⅢ) Intangible assets
Book balance at Increase in current Decrease in current Book balance at the
Items
year-begin period period period-end
1. Total original book value 135,845,215.54 42,194.87 --- 135,887,410.41
(1) Land use right 123,998,578.84 --- --- 123,998,578.84
(2) Development of coated cow
7,871,956.77 --- --- 7,871,956.77
card paper
(3) Research of new technics
2,524,768.29 --- --- 2,524,768.29
for papermaking
(4) Other 1,449,911.64 42,194.87 --- 1,492,106.51
2. Total accumulative
38,933,707.67 1,936,258.79 --- 40,869,966.46
amortization
(1) Land use right 30,910,650.59 1,636,621.99 --- 32,547,272.58
(2) Development of coated cow
5,059,305.76 170,463.50 --- 5,229,769.26
card paper
(3) Research of new technics
2,524,768.29 --- --- 2,524,768.29
for papermaking
(4) Other 438,983.03 129,173.30 --- 568,156.33
3. Total net book value of
96,911,507.87 --- --- 95,017,443.95
intangible assets
(1) Land use right 93,087,928.25 --- --- 91,451,306.26
(2) Development of coated cow
2,812,651.01 --- --- 2,642,187.51
card paper
(3) Research of new technics
--- --- --- ---
for papermaking
(4) Other 1,010,928.61 --- --- 923,950.18
4. Total intangible assets
--- --- --- ---
impairment reserves
(1) Land use right --- --- --- ---
(2) Development of coated cow
--- --- --- ---
card paper
(3) Research of new technics
--- --- --- ---
for papermaking
(4) Other --- --- --- ---
Total book value of intangible
96,911,507.87 --- --- 95,017,443.95
assets
(1) Land use right 93,087,928.25 --- --- 91,451,306.26
(2) Development of coated cow
2,812,651.01 --- --- 2,642,187.51
card paper
(3) Research of new technics
--- --- --- ---
for papermaking
(4) Other 1,010,928.61 --- --- 923,950.18
There were no intangible assets for mortgage or guarantee at the period-end.
(ⅩⅣ.) Goodwill
Increase Decrease Impairment
Name of invested enterprises or issues that in in Balance at the reserves at
Opening balance
created goodwill current current period-end the
period period period-end
Zhuhai S.E.Z Hongta Renheng Paper Co.,
9,129,025.01 --- --- 9,129,025.01 ---
Ltd.
Total 9,129,025.01 --- --- 9,129,025.01 ---
Note: On 30 Jun. 2009, the Company acquired the control of Zhuhai S.E.Z. Hongta
Renheng Paper Co., Ltd. through business combination no under the same control
with a combination cost of RMB 808,448,700 and acquired recognized fair value of
the company amounted to RMB 7,993,197,000. Goodwill of RMB 9,129,025.01 was
formed at the positive balance between combination cost and identifiable net assets of
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the invested party. At the period-end, combining analysis on estimated recoverable
amount of portfolio of assets group to this company’s two production lines equipment
and present value of expected future cash flow of assets, the Company did not find an
impairment sign of goodwill, therefore, the Company had not need to withdrawn the
provision for impairment.
(ⅩⅤ) Deferred income tax assets and deferred income tax liabilities
1. Deferred income tax assets recognized
Items Closing balance Opening balance
Deferred income tax assets:
Assets impairment reserves 27,548,019.38 28,289,660.26
Withholding unpaid wages 2,314,955.60 5,152,095.51
Withholding sales agent fee --- ---
Projected liabilities/estimated losses on product
1,294,800.00 1,294,800.00
quality assurance
Deferred income 525,000.00 ---
Subtotal 31,682,774.98 34,736,555.77
Deferred income tax liabilities:
Estimated value of transactional financial instruments
--- ---
and derivative financial instruments
Fair value changes of tradable financial assets
422,137.95 452,209.84
recorded into capital reserves
Subtotal 422,137.95 452,209.84
2. Assets caused for temporary differences or temporary differences in related to
liability items
Items Temporary difference amount
Taxable temporary difference items
Fair value changes 2,814,253.00
Subtotal 2,814,253.00
Deductible differences items
Assets impairment reserves 164,789,213.38
Deprecation difference between fixed assets accounting and
13,086,370.67
taxation
Estimated liabilities/ estimated losses on product quality
8,632,000.00
assurance
Deferred income 2,100,000.00
Subtotal 188,607,584.05
(ⅩⅥ) Provision for assets impairment
Decrease this period
Increase this
Items Opening balance Written Closing balance
period Written off
back
Bad debt reserve 64,208,219.87 1,329,716.29 --- --- 65,537,936.16
Provision for falling
29,303,542.53 --- --- 9,984,329.73 19,319,212.80
price of inventory
Provision for fixed
78,086,487.98 --- --- --- 78,086,487.98
assets impairment
Total 171,598,250.38 1,329,716.29 --- 9,984,329.73 162,943,636.94
(ⅩⅦ) Short-term loan
1. Category of short-term loan
Items Closing balance Opening balance
Credit loan 181,772,800.00 136,227,000.00
Guaranteed loan 968,000,000.00 855,000,000.00
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Trade financing 233,358,767.42 91,001,627.46
Total 1,383,131,567.42 1,082,228,627.46
2. There were no expired outstanding short-term loans.
3. Among closing balance of guaranteed loan, loan of RMB 448 billion borrowed by
the Company, RMB 50 million borrowed by subdidiary Zhuhai S.E.Z. Hongta
Renheng Paper Co., Ltd., as well as RMB 90 million borrowed by Zhuhai Huafeng
Paper Co., Ltd. were provided the suretyship of joint liabilities by China National
Paper-industry Investment Corporation. The loan of RMB 260 million by Zhuhai
S.E.Z. Hongta Renheng Paper Co., Ltd, RMB 95 million borrowed by Zhuhai
Huafeng Paper Co., Ltd. as well as RMB 25 million borrowed by Huaxin (Foshan)
Color Printing Co., Ltd. were provided the suretyship of joint liabilities by the
Company.
4. Trade financing loan of RMB 86,048,544.63 of subsidiary Zhuhai S.E.Z. Hongta
Renheng Paper Co., Ltd., RMB 43,094,461.47 of Zhuhai Huafeng Paper Co., Ltd. as
well as RMB 3,074,128.89 of Huaxin (Foshan) Color Printing Co., Ltd. were
provided suretyship of joint liabilities by China National Paper-industry Investment
Corporation. And loan of RMB 21,580,899.08 of Zhuhai S.E.Z. Hongta Renheng
Paper Co., Ltd., RMB 18,706,028.30 of Foshan Chengtong Paper Co., Ltd. were
provided the suretyhship of joint liabilities by the Company. While remains loan of
Foshan Chengtong Paper Co., Ltd. were provided the surety ship of joint liabilities by
itself.
(ⅩⅧ ) Notes payable
Category Closing balance Opening balance
Bank acceptance bill 17,403,869.73 213,272,240.32
Total 17,403,869.73 213,272,240.32
Explanation for notes payable: Guarantee money of RMB 2,000.62 would be
deposited into relevant note payable.
(ⅩⅨ ) Accounts payable
1. Account age analysis
Items Closing balance Opening balance
Within 1 year 659,197,164.44 594,366,229.66
1-2 years 11,109,702.28 10,947,412.15
2-3 years 1,851,872.19 17,467.00
Over 3 years 464,183.81 1,651,598.31
Total 672,622,922.72 606,982,707.12
2. There was no accounts payable due from shareholders with more than 5%
(including 5%) of the voting shares of the Company.
3. Particulars about amount due to related parties in closing balance
Name of entity Closing balance Opening balance
Foshan Huaxin Import and Export Co., Ltd 1,250,432.10 4,310,637.91
China National Paper-industry Investment Corporation 39,805,693.37 ---
Guangdong Guanhao High-tech Co., Ltd. 33,286.50 ---
Hunan Juntai Pulp & Paper Co.,Ltd 52,980,599.07
Total 94,070,011.04 4,310,637.91
4. Significant accounts payable with account age over one year
Reason for Remark (Note if
Name of entity Amount
nonpayment the amount was
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paid back on the
report date)
Anhui Jiangwei Cable Group Co., Ltd. 3,025,312.65 Margin
Zhuhai Changsh Construction Engineering Co., Margin
2,581,200.00
Ltd.
Albany International (China) Co., Ltd. 2,571,066.38 Margin
METSOPaperINC 1,124,814.90 Margin
Zhuhai Gas Company 819,425.16 Margin
Total 10,121,819.09
(ⅩⅩ ) Accounts payable
1. Account age analysis
Items Closing balance Opening balance
Within 1 year 22,402,525.36 15,094,083.22
1-2 years 66,251.38 3,160.00
2-3 years 7,034.23 29,990.40
Over 3 years 52,169.20 22,488.85
Total 22,527,980.17 15,149,722.47
2. There was no accounts payable due from shareholders with more than 5%
(including 5%) of the voting shares of the Company.
3. Particulars about related parties of prepayments on closing balance
Name of entity Closing balance Opening balance
Foshan Huaxin Import and Export Co., Ltd --- 47,698.56
Total --- 47,698.56
(ⅩⅪ ) Payroll payables
Increase in current Decrease in current
Items Opening balance Closing balance
period period
(1) Wage, bonus,
32,863,458.68 65,472,157.86 87,262,239.79 11,073,376.75
allowance and subsidies
(2) Employee welfare 645,932.47 3,311,811.50 3,634,811.50 322,932.47
(3) Social insurance --- 9,632,359.14 9,630,061.24 2,297.90
(4) Housing fund --- 1,321,278.80 1,321,278.80 ---
(5) Dismissal welfare --- 432,200.98 432,200.98 ---
(6) Other 4,155,995.10 1,716,982.05 1,021,277.31 4,851,699.84
Total 37,665,386.25 81,886,790.33 103,301,869.62 16,250,306.96
Among payroll payable, there were of RMB 0 due to default.
RMB 4,851,699.84 was paid for labor unions and education of employees.
Balance of “Employee welfare” was from the provision for bonus funds and welfare
funds of subsidiary Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. during the
reporting period.
(ⅩⅫ ) Tax payable
Items Closing balance Opening balance
VAT -39,780,344.52 -12,992,406.79
Business tax 216,981.10 211,137.07
Urban maintenance and construction tax 407,248.73 1,335,798.53
Extra charges of education funds 277,259.68 572,485.08
Enterprise income tax 9,300,192.15 19,636,174.00
Individual income tax 32,978.08 209,804.77
Housing property tax 1,602,608.17 111,538.28
Stamp tax 138,315.99 1,968,399.00
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Items Closing balance Opening balance
Land VAT 120,000.00 ---
Tenure tax 596,032.18 ---
Embankment protection expense 78,659.66 120,123.22
Other 9,088.26 9,088.26
Total -27,000,980.52 11,182,141.42
(ⅩⅩⅢ ) Interest payable
Items Closing balance Opening balance
Straight long-term loan interest 6,078,203.36 19,838,816.68
Short-term interest payable 8,609,503.44 2,970,729.02
Total 14,687,706.80 22,809,545.70
(ⅩⅩⅣ) Dividend payable
Reason for
Name of entities Closing balance Opening balance unsettlement over
one year
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
(ⅩⅩⅤ ) Other payable
1. Account age analysis
Account age Closing balance Opening balance
Within 1 year 117,988,532.44 84,037,749.04
1-2 years 1,225,313.45 6,206,542.17
2-3 years 3,704,119.36 584,447.89
Over 3 years 305,753.51 323,488.41
Total 123,223,718.76 91,152,227.51
2. Among the closing balance, other payables due from shareholders with more than
5% (including 5%) of the voting shares of the Company are as follows:
Name of entity Closing balance Opening balance
Foshan Huaxin Development Co., Ltd. 95,674,741.77 53,029,894.51
Total 95,674,741.77 53,029,894.51
3. Particulars about amount due from related parties on closing balance
Name of entities Closing balance Opening balance
Foshan Huaxin Development Co., Ltd. 95,674,741.77 53,029,894.51
Guangdong Chengtong Logistics Co., Ltd. 443,146.47 12,791,826.29
Total 96,117,888.24 65,821,720.80
4. Explanation for significant other accounts payable with accounting age of over one
year
Remark (Note if the
Name of entities Amount Reason for nonpayment amount was paid back
after the reporting date)
Deducting logistics guarantee
Yunnan Yuxi Tengyin Logistics Co., Ltd. 1,050,000.00
money for Y2009
Deducting paper
Guangdong Xinliang Container
transportation and logistics
Transportation Co., Ltd. 750,000.00
guarantee money for Y2009
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Total 1,800,000.00
5. Other significant accounts payable
Name of entities Amount Nature or content Remark
Foshan Huaxin Development Co., Ltd. 95,674,741.77 Current money
Prepayment for
Dongguan Jintian Paper Co.,Ltd 7,320,586.84
sorting waste paper
Total 102,995,328.61
(ⅩⅩⅥ) Non-current liabilities due within one year
Item Closing balance Opening balance
Long-term borrowings due within one year 250,000,000.00 360,000,000.00
Total 250,000,000.00 360,000,000.00
1. Long-term borrowings due within one year
Item Closing balance Opening balance
Guaranteed borrowing 250,000,000.00 360,000,000.00
Total 250,000,000.00 360,000,000.00
There were no borrowings gained from extension of overdue loan on long-term
borrowings due within one year.
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2. List of long-term borrowings due within 1 year
Closing balance
Entity Beginning date Ending date Currency Rate (%) Foreign currency Domestic currency
amount amount
Agricultural Bank of China Limited Foshan Huada
10 Sep. 2008 9 Sep. 2011 RMB Floating Rate --- 30,000,000.00
Sub-branch
Agricultural Bank of China Limited Foshan Huada
25 Sep. 2008 23 Sep. 2011 RMB Floating Rate --- 30,000,000.00
Sub-branch
Agricultural Bank of China Limited Foshan Huada
10 Dec. 2009 9 Dec. 2011 RMB Floating Rate --- 60,000,000.00
Sub-branch
Agricultural Bank of China Limited Foshan Huada
2 Feb. 2010 1 Feb. 2012 RMB Floating Rate --- 60,000,000.00
Sub-branch
Agricultural Bank of China Limited Foshan Huada
28 Apr. 2010 27 Apr. 2012 RMB Floating Rate --- 30,000,000.00
Sub-branch
Agricultural Bank of China Limited Foshan Huada
17 Jun. 2010 16 Jun. 2012 RMB Floating Rate --- 40,000,000.00
Sub-branch
Total --- 250,000,000.00
3. Note: Long-term borrowings of RMB 0.25 million of the Company was provided the joint guarantee liabilities by China National
Paper-industry Investment Corporation.
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(27) Long-term borrowings
1. Category
Item Closing balance Opening balance
Guaranteed borrowing 125,000,000.00 255,000,000.00
Of which: Agricultural Bank of China Limited Foshan Huada
--- 130,000,000.00
Sub-branch
China Construction Bank Foshan Branch 25,000,000.00 25,000,000.00
China Merchants Bank Shenzhen Chegongmiao Sub-branch 100,000,000.00 100,000,000.00
Total 125,000,000.00 255,000,000.00
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2. Long-term borrowings
Closing balance Opening balance
Beginning Foreign Foreign Domestic
Entity Ending date Currency Rate (%) Domestic currency
date currency currency currency
amount
amount amount amount
China Merchants Bank Shenzhen Chegongmiao Benchmark interest rate
15 Jul. 2010 15 Jul. 2012 RMB --- 100,000,000.00 --- ---
Sub-branch decrease 5%
Benchmark interest rate
Bank of China Limited Foshan Branch 11 Aug. 2010 10 Aug. 2013 RMB --- 25,000,000.00 --- ---
decrease 5%
Total --- 125,000,000.00 --- ---
3. Note: Within the Long-term borrowings, RMB 0.1 billion of the Company’s subsidiary— Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd. and
RMB 25 million of the Company’s subsidiary— Huaxin (Foshan) Color Paper Co., Ltd. were provided the joint guarantee liabilities by the
Company.
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(28) Long-term payables
1. Particulars about the top five long-term payables
Rate Accrued Conditions
Entity Term Opening balance Closing balance
(%) interest for loan
China Chengtong Holding
Group Co., Ltd. 500,000,000.00 4.8 --- 500,000,000.00
Total 500,000,000.00 --- --- 500,000,000.00
2. Note: RMB 0.5 billion of China Chengtong Holidng Group Co., Ltd. issued
medium-term note and financed for the Company recorded as closing balance with a
term of service of 5 years and comes to expire on 24 Mar. 2015. If investors failed to
exercise repurchase option, then medium-term note on the aspect of repurchase in this
term expires on 24 Mar. 2013 and adopt simple annual interest method to account at
the coupon rate of 4.8%.
(29) Estimated liabilities
Increase this
Items Opening balance Decrease this period Closing balance
period
Claim and compensation for
8,632,000.00 --- --- 8,632,000.00
selling products
Total 8,632,000.00 --- --- 8,632,000.00
(30) Other non-current liabilities
Items Closing balance Opening balance
Desulfurization project of finance bureau 1,188,000.00 1,188,000.00
Funds on energy-saving and emission-reduction 2,700,000.00 2,700,000.00
Total 3,888,000.00 3,888,000.00
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(31) Share capital
Increase/decrease in changes this period (+/-)
Items Opening balance Capitalization of Closing balance
Issuance of Bonus
public reserve Other Subtotal
new shares shares
fund
1. Unlisted tradable shares
(1) Sponsor’s share 333,500,000.00 --- --- --- --- --- 333,500,000.00
Including: --- --- --- --- --- --- ---
State-owned shares --- --- --- --- --- --- ---
Shares held by domestic corporation 333,500,000.00 --- --- --- --- --- 333,500,000.00
Shares held by foreign corporation --- --- --- --- --- --- ---
Others --- --- --- --- --- --- ---
(2) Raised corporation shares --- --- --- --- --- --- ---
(3) Employee shares --- --- --- --- --- --- ---
(4) Preference shares or others --- --- --- --- --- --- ---
Total of unlisted tradable shares 333,500,000.00 --- --- --- --- --- 333,500,000.00
2. Listed tradable shares
(1) RMB ordinary shares --- --- --- --- --- --- ---
(2) Domestically listed foreign shares
171,925,000.00 --- --- --- --- --- 171,925,000.00
(B-share)
(3) Overseas listed foreign shares --- --- --- --- --- --- ---
(4) Others --- --- --- --- --- --- ---
Total listed tradable shares 171,925,000.00 --- --- --- --- --- 171,925,000.00
Total 505,425,000.00 --- --- --- --- --- 505,425,000.00
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(32) Capital reserves
Increase this Decrease this
Items Opening balance Closing balance
period period
1. Capital premium (or share capital
premium)
(1) Capital from investors 250,531,482.00 --- --- 250,531,482.00
(2) Others 11,399,820.59 --- --- 11,399,820.59
Subtotal 261,931,302.59 --- --- 261,931,302.59
2. Other capital reserves
(1) Other changes in owners’ equity --- --- --- ---
of invested units excluding net
gains and losses
(2) Gains or losses from changes in 683,851.34 --- 71,511.96 612,339.38
fair value of financial assets
available for sales
Subtotal 683,851.34 --- 71,511.96 612,339.38
Total 262,615,153.93 --- 71,511.96 262,543,641.97
(33) Surplus reserves
Items Opening balance Increase this period Decrease this period Closing balance
Statutory surplus
129,236,472.97 --- --- 129,236,472.97
reserves
Total 129,236,472.97 --- --- 129,236,472.97
(34) Retained profit
Items Balance Withdrawal or distributable proportion
Before adjustment: Retained profit at the end of last
529,978,029.29
year
Adjustment：Total retained profit at the year-begin (+/-) ---
After adjustment: Retained profit at the year-begin
529,978,029.29
Add: net profit attributable to the owners of the
61,778,472.29
Company in this period
Less: Withdrawal of statutory surplus reserves ---
Withdrawal of discretionary surplus reserves ---
Withdrawal of reserve fund ---
Withdrawal of corporate development fund ---
Withdrawal of bonus funds for employees ---
Withdrawal of provision for general risk ---
Dividend payable for common shares ---
Capitalization of dividend of common shares ---
Retained profit at period-end 591,756,501.58
(35) Operating income and operating cost
1. Operating income and operating cost
Occurred amount in Occurred amount in the
Items
current period same period of last year
Main business income 2,073,585,503.80 1,817,269,286.89
Other business income 28,586,423.30 88,718,125.26
Main business cost 1,777,222,103.80 1,497,487,680.08
Other business cost 10,700,641.45 81,562,857.64
2. Main business listed according to industry
Occurred amount in current period Occurred amount in the same period of last year
Name of industry
Operating income Operating cost Operating income Operating cost
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(1) Industries 2,073,585,503.80 1,777,222,103.80 1,809,942,622.61 1,494,344,739.29
(2) Service --- --- 7,326,664.28 3,142,940.79
Total 2,073,585,503.80 1,777,222,103.80 1,817,269,286.89 1,497,487,680.08
3. Main business listed according to products
Occurred amount in current period Occurred amount in the same period of last year
Name of product
Operating income Operating cost Operating income Operating cost
White board
374,300,050.43 331,002,672.48 560,859,068.06 481,166,309.84
paper
White card paper 1,606,670,316.55 1,373,109,942.74 1,165,442,477.54 945,863,775.16
Printing products 92,615,136.82 73,109,488.58 83,641,077.01 67,314,654.29
Logistics service --- --- 7,326,664.28 3,142,940.79
Total 2,073,585,503.80 1,777,222,103.80 1,817,269,286.89 1,497,487,680.08
4. Main business listed according to regions
Name of Occurred amount in current period Occurred amount in the same period of last year
region Operating income Operating cost Operating income Operating cost
Domestic
1,812,108,233.69 1,537,625,332.30 1,628,162,348.53 1,325,657,463.83
sales
Export 261,477,270.11 239,596,771.50 189,106,938.36 171,830,216.25
Total 2,073,585,503.80 1,777,222,103.80 1,817,269,286.89 1,497,487,680.08
5. Income from main business of the top five clients of the Company
Total income from main Proportion in all operating
Name or listing No. of clients
business income of the Company
No. 1 173,637,646.63 8.26
No. 2 172,029,682.56 8.18
No. 3 135,812,090.12 6.46
No. 4 52,283,528.97 2.49
No. 5 34,530,185.63 1.64
Total 568,293,133.91 27.03
(36) Business tax and surcharges
Occurred amount in
Occurred amount in Accounting
Items the same period of
current period standard
last year
Business tax --- 373,921.89
Urban maintenance and construction tax 4,259,860.61 1,007,507.02
Educational surtax 2,012,323.27 368,691.84
Embankment protection cost 585,958.21 645,837.82
River clean-up costs 1,009,626.86 ---
Total 7,867,768.95 2,395,958.57
(37) Sales expenses, administrative expenses and financial expenses
1. Sales expense
Occurred amount in Occurred amount in the
Items
current period same period of last year
Total sales expenses 86,261,528.91 83,953,631.14
2. Administrative expenses
Occurred amount in Occurred amount in the
Items
current period same period of last year
Total administrative expenses 61,846,307.67 64,515,064.87
3. Financial expenses
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Occurred amount in Occurred amount in the
Items
current period same period of last year
Interest expenses 68,616,369.97 71,840,756.52
Less: interest income 2,997,625.24 366,376.52
Loss from exchange 15,146.38 435,752.77
Less: exchange income 6,903,056.01 514,208.91
Other 4,717,821.92 4,473,468.22
Total 63,448,657.02 75,869,392.08
(38) Losses of assets impairment
Occurred amount in Occurred amount in the
Items
current period same period of last year
Losses of bad debts 1,329,716.29 314,965.83
Total 1,329,716.29 314,965.83
(39) Investment income
1. Breakdown of investment income
Occurred amount in Occurred amount in the
Items
current period same period of last year
Long-term equity investment income accounted by
30,201,880.82 26,758,752.61
equity method
Total 30,201,880.82 26,758,752.61
2. Long-term equity investment income accounted by equity method
Occurred amount in Occurred amount in the
Name of invested entity
current period same period of last year
Of which：Tetra Pak (Foshan) Packaging Co., Ltd. 30,432,355.53 26,758,752.61
Guanddong Chengtong Logistics Co., Ltd. -230,474.71 ---
Total 30,201,880.82 26,758,752.61
3. Explanation of investment income: There was no significant restrict in remitting of
investment income of the Company.
(40) Non-operating income
Amount recorded in
Occurred amount in
Occurred amount in non-recurring gains
Items the same period of
current period and losses of current
last year
period
Total gains from disposal of non-current assets 578,638.24 10,075.00 578,638.24
Of which: gains from disposal of fixed assets 578,638.24 10,075.00 578,638.24
Gains from disposal of intangible
--- --- ---
assets
Government subsidy 3,631,163.60 585,948.00 3,631,163.60
Relocation compensation --- --- ---
Others 999,752.48 644,839.04 999,752.48
Total 5,209,554.32 1,240,862.04 5,209,554.32
(41) Non-operating income
Amount recorded in
Occurred amount in
Occurred amount in non-recurring gains
Items the same period of
current period and losses of current
last year
period
Total losses from disposal of non-current assets 93,955.84 7,155,771.80 93,955.84
Of which: losses from disposal of fixed assets 93,955.84 7,155,771.80 93,955.84
Penalty, compensation and late fee 1,890,600.00 --- 1,890,600.00
Donation expenses --- --- ---
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Others --- 128,201.19 ---
Total 1,984,555.84 7,283,972.99 1,984,555.84
(42) Income tax expense
Occurred amount in Occurred amount in the
Items
current period same period of last year
Income tax in current period accounted in accordance
18,103,207.67 6,567,716.86
with tax law and relevant regulations
Adjustment of deferred income tax 3,053,780.79 ---
Total 21,156,988.46 6,567,716.86
(43) Calculation process of basic EPS and diluted EPS
Occurred amount in Occurred amount in the
Items
current period same period of last year
Basic EPS 0.1222 0.1196
Diluted EPS 0.1222 0.1196
Calculation formula for data above:
1. Basic EPS
Basic EPS= 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 refers to 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 reporting period; Si refers to the number of
shares increased due to issuance of new shares or debt for equity swap during the
reporting period; Sj refers to the number of shares decreased due to stock repurchase
during the reporting period; Sk refers to the number of split-share during the reporting
period; M0 refers to the number of months during the reporting period; Mi refers to
the number of months from the next month to the end of the reporting period for
increase of shares; Mj refers to the number of months from the next month to the end
of the reporting period for decrease of shares
2. Diluted EPS
Diluted EPS =[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 bonds, etc.)
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.
Due to that the Company has not issued any convertible bonds, share options,
warrants and other diluted potential ordinary shares, the measurement of diluted EPS
is as the same as that of basic EPS.
(44) Other comprehensive income
Occurred amount in Occurred amount in the
Item
current period same period of last year
1. Gains / losses from financial assets available for sales -200,479.24 -262,165.16
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Less: income tax influence arising from financial assets -30,071.89 -39,324.77
available for sale
Net amount transferred into current gains / losses which was --- ---
recorded into other comprehensive income in prior period
Subtotal -170,407.35 -222,840.39
2. Amount undertook in other comprehensive income of the --- ---
invested entity by adopting equity method
Less: influence of income tax arising from amount undertook --- ---
in other comprehensive income of the invested entity by
adopting equity method
Net amount transferred into current gains and losses which was --- ---
recorded into other comprehensive income in prior period
Subtotal --- ---
3. Amount of gains or losses arising from cash flow hedging --- ---
instrument
Less: income tax influence arising from cash flow hedging --- ---
instrument
Net amount transferred into current gains and losses which was --- ---
recorded into other comprehensive income in prior period
Adjustment of initial recognition amount transferred to the --- ---
hedged item
Subtotal --- ---
4. Translation difference of foreign currency financial --- ---
statement
Less: Net amount transferred to gains and losses of current --- ---
period from disposal of overseas operation
Subtotal --- ---
5. Others --- ---
Less: income tax affect arising from accounts recorded in other --- ---
comprehensive income
Net amount transferred into current gains and losses which was --- ---
recorded into other comprehensive income in prior period
Subtotal --- ---
Total -170,407.35 -222,840.39
(45) Notes to cash flow statement
1. Cash received from other operating activities
Occurred amount in
Items
current period
Total 22,418,609.75
Of which: Interest income of bank deposits 1,524,602.73
Income of government subsidy 3,631,163.60
Insurance claim 687,772.76
Current account received from Zhuhai Chengcheng Printing Co., Ltd. 1,217,750.67
Income from collecting wastes 953,752.48
2. Other cash paid relevant to operation activities
Occurred amount in
Items
current period
Total 84,904,223.44
Of which: product transport expense 15,682,537.62
Business entertainment expense 6,399,963.91
Lease expense 5,208,144.78
Business trip expense 2,169,455.27
Office expense 1,296,603.06
Agency fee 2,008,852.95
(46) Supplementary information to cash flow statement
1. Supplementary information to cash flow statement
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Occurred amount in
Occurred amount in
Items the same period of
current period
last year
1. Transferring net profit into cash flows of operating activities
Net profit 105,765,093.85 114,035,786.74
Add: assets impairment reserves 1,329,716.29 ---
Depreciation of fixed assets, oil and gas assets and productive
70,734,287.67 73,786,055.36
biological assets
Amortization of intangible assets 1,936,258.79 3,134,957.78
Amortization of long-term deferred expenses --- 2,060,407.81
Loss for disposal of fixed assets, intangible assets and other -484,682.40 7,145,696.80
long-term assets (income is listed as “-”)
Abandonment loss from fixed assets (income is listed as “-”) --- ---
Losses on change in fair value (income is listed as “-”) --- ---
Financial expense (income is listed as “-”) 63,448,657.02 76,314,224.74
Losses arising from investment (income is listed as “-”) -30,201,880.82 -26,758,752.61
Decrease of deferred income tax assets (increase is listed as “-”) 3,053,780.79 ---
Increase of deferred income tax liabilities (decrease is listed as “-”) -30,071.89 ---
Decrease of inventories (increase is listed as “-”) -194,964,053.80 -310,068,319.18
Decrease in operating receivables (increase is listed as “-”) -170,269,821.21 145,994,935.75
Increase in operating payables (decrease is listed as “-”) -30,827,011.82 -111,946,164.52
Other --- ---
Net cash flows arising from operating activities -180,509,727.53 -26,301,171.33
2. Significant investing and financing activities which do not involve
cash receipts and payments
Conversion of debt into capital --- ---
Convertible corporate bonds due within 1 year --- ---
Fixed assets brought in by financing lease --- ---
3. Net change in cash and cash equivalents
Closing balance of cash 164,021,497.68 313,822,356.25
Less: Opening balance of cash 273,854,613.40 329,035,163.08
Add: Closing balance of cash equivalents --- ---
Less: Opening balance of cash equivalents --- ---
Net increase in cash and cash equivalents -109,833,115.72 -15,212,806.83
2. Composing of cash and cash equivalents
Occurred amount in the
Occurred amount in
Items same period of last
current period
year
I. Cash 164,021,497.68 313,822,356.25
Of which: cash on hand 442,396.92 557,294.25
Bank deposit for payment at any moment 163,564,833.78 312,946,830.46
Other monetary capital for payment at any moment 14,266.98 318,231.14
Deposit in Central Bank available for payment --- ---
Due from banks --- ---
Call loans to banks --- ---
II. Cash equivalents --- ---
Of which: bond investment due within 3 months --- ---
III. Closing balance of cash and cash equivalents 164,021,497.68 313,822,356.25
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VI. Related parties and related transactions
(I) Particulars about the parent company of the Company (Unit: RMB’0000)
Proportion of
Registered Legal Business Registered shareholding Proportion of Ultimate Organization
Name of parent company Relationship Type
place representative nature capital of the voting rights controlling party code
Company
45,793 65.2 65.2 China Chengtong 19353992-5
Foshan Huaxin Development Tong
Parent company Limited company Foshan Manufacturing Holding Group
Co., Ltd. Laiming
Co., Ltd.
China National Paper-industry 131,729 65.31 65.31 China Chengtong 10000890-7
Investment Corporation, which Holding Group
was originally named as China Actual Tong Integrated Co., Ltd.
State-owned Beijing
National Materials controller Laiming industry
Development& Investment
Corporation
Limited company 256,016 65.42 65.42 China Chengtong 71092254-4
China Chengtong Holding Ultimate Integrated
(solely Beijing Ma Zhengwu Holding Group
Group Co., Ltd. controller industry
state-owned ) Co., Ltd.
Statement of particulars about parent company of the Company:
On 28 Jun. 2005, Foshan Gongying Investment Holding Co., Ltd. transferred 62.1142% shares (capital contribution was RMB 284,440,000) of Foshan Huaxin
Development Co., Ltd. to China National Materials Development & Investment Corporation, which has changed its name to China National Paper-industry
Investment Corporation. Foshan Huaxin Development Co., Ltd is the parent company and holds 65.2% shares of the Company, China National Paper-industry
Investment Corporation originally holds 0.11% shares of the Company, so that China National Paper-industry Investment Corporation held 65.31% shares of the
Company directly and indirectly and becomes actual controller of the Company. China Chengtong Holding Group Co., Ltd. holds 100% shares of China National
Paper-industry Investment Corporation and has become the ultimate controller of the Company through holding 0.11% shares of the Company by its subsidiary,
China Packaging Corporation.
(II) Subsidiaries of the Company
Unit: RMB’0000
Register Legal Business Proportion of Proportion of Organization
Full-name of subsidiaries Relationship Type Registered capital
ed place representative nature shares held (%) voting right (%) code
Limited Manufactu 30,000 75 75 68641217-2
Foshan Chengtong Paper Co., Ltd. Shareholding subsidiary Foshan Yan Su
company ring
Limited Manufactu USD1,280 75 75 72111733-X
Huaxin (Foshan) Color Printing Co., Ltd. Shareholding subsidiary Foshan Chen Jiali
company ring
Subsidiary of Limited Huang Xin Manufactu 98,456 100 (Indirect) 100 (Indirect) 61762142-1
Zhuhai Huafeng Paper Co., Ltd. Zhuhai
shareholding subsidiary company ring
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English Translation for Reference Only
Zhuhai S.E.Z. Hongta Renheng Paper Co., Shareholding subsidiary Limited Tong Manufactu USD24,360.9909 41.9653 41.9653 61750210-7
Zhuhai
Ltd. company Laiming ring
Foshan Huazhi Waste Paper Recycling Co., Subsidiary of Limited Chen Haiyan Service 500 100 (Indirect) 100 (Indirect) 77620148-3
Foshan
Ltd. shareholding subsidiary company industry
Pearl River Color Printing Co., Ltd. of Subsidiary of Limited Chen Jiali Manufactu 150 100 (Indirect) 100 (Indirect) 70817367-9
Foshan
Chancheng District, Foshan shareholding subsidiary company ring
Limited Chen Haiyan Manufactu 300 100 100 67889495-X
Foshan Huaxin Jinfeng Industrial Co., Ltd Wholly-owned subsidiary Foshan
company ring
Kunshan Focai Packaging and Priting Co., Limited Chen Manufactu 500 100 100 56030722-X
Wholly-owned subsidiary Suzhou
Ltd. company Zhenran ring
(III) Joint ventures and associated companies of the Company
Unit: RMB’0000
Registration Legal Business Registered Shareholding proportion Proportion of voting right of the
Invested enterprise Type
place representative Nature capital of the enterprise (%) enterprise in invested entities (%)
Tetra Huaxin (Foshan) Packaging Co., Sino-foreign joint
Foshan Li Hexun Manufacturing USD6,700 25 25
Ltd. venture
Service 3,000 24 24
Guangdong Chengtong Logistics Co., Ltd. Limited company Zhuhai Li Xiangyang
industry
(IV) Other related parties of the Company
Relationship between the Company and other
Name Organization code
related parties
Foshan Huaxin Import & Export Co., Ltd. Under the control of actual controller 19354411-8
Zhanjiang Guanlong Paper Industry Co., Ltd. Under the control of actual controller 61827072-3
Guangdong Guanhao High-tech Co., Ltd. Under the control of actual controller 61780353-2
Qingdao Chengtong Fuel Co., Ltd. Under the control of ultimate controller 73728500-4
Hunan Juntai Pulp & Paper Co., Ltd. Under the control of actual controller 79030861-5
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(V) Related transaction
1. Transaction between subsidiaries, which existed control relationship and brought
into scope of consolidated financial statements, and between subsidiaries and parent
company has been offset.
2. Related transactions on purchasing goods and receiving labor service
Unit: RMB’0000
Occurred amount in Occurred amount in the
current period same period of last year
Pricing way and
Content of
decision-making process of Proportion of
Name of related party related Proportion of
related transaction the same kind
transaction Amount the same kind Amount
transaction
transaction (%)
(%)
Foshan Huaxin Import Raw material Negotiating to price according 1,162.54 1,717.68
11.34 1.83
& Export Co., Ltd. to market value
Foshan Huaxin Import Paper Negotiating to price according 238.22
3.00 --- ---
& Export Co., Ltd. to market value
China National Raw material Negotiating to price according 4,925.20 11,087.87
Paper-industry to market value
3.44 11.83
Investment
Corporation
Guangdong Chengtong Raw material Negotiating to price according 306.66
0.21 --- ---
Logistics Co., Ltd. to market value
Hunan Juntai Pulp & Negotiating to price according
Raw material 4,528.26 3.17 --- ---
Paper Co., Ltd. to market value
Total 11,160.88 12,805.55
3. Related transaction on sales of goods and providing labor service
Unit: RMB’0000
Occurred amount in
Occurred amount in
the same period of last
current period
Pricing way and year
Content of
decision-making process Proportion Proportion
Name of related party related
of related transaction of the of the
transaction
Amount same kind Amount same kind
transaction transaction
(%) (%)
Foshan Huaxin Import & Export Negotiating to price
White Board 83.54 0.05 33.50 0.02
Co., Ltd. according to market value
Disposal of Negotiating to price 20.68 --- --- ---
Tetra (Foshan) Packaging Co., Ltd.
waste water according to market value
Total 104.22 33.50
4. Related tenancy
(1) Rental situation of the Company
Pricing
Name of Categories of assets Beginning basis for Rental income recognized in
Name of lessor Ending date
lessee rented date rental 2011
income
Administration fee amounted
Office room located 18/F, to RMB 544,200.00 for the use
Foshan Huaxin 31 Dec. 2011
The Jinghua Building, Jihua Market of office place in 2011, and
Development Co., th 1 Jan. 2006 on contract
Company 5 Road, Foshan with price carport administration fee
Ltd. renewal
area of 907 square meters amounted to RMB 25,200.00
each year.
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5. Related guarantees
Amount of Beginning Executed or
Guarantor party Guarantee party Maturity date
guarantee date not
Foshan Huaxin Packaging Co., Foshan Chengtong Paper Co.,
60,000,000 2010.06.28 2011.06.28 No
Ltd. Ltd.
Foshan Huaxin Packaging Co., Foshan Chengtong Paper Co.,
140,000,000 2010.07.27 2011.07.26 No
Ltd. Ltd.
Foshan Huaxin Packaging Co., Foshan Chengtong Paper Co.,
40,000,000 2010.01.01 2013.12.31 No
Ltd. Ltd.
Foshan Huaxin Packaging Co., Zhuhai S.E.Z. Hongta Renheng
230,000,000 2010.09.29 2012.03.29 No
Ltd. Paper Co., Ltd.
Foshan Huaxin Packaging Co., Zhuhai S.E.Z. Hongta Renheng
100,000,000 2010.08.02 2011.08.02 No
Ltd. Paper Co., Ltd.
Foshan Huaxin Packaging Co., Zhuhai S.E.Z. Hongta Renheng
200,000,000 2010.07.15 2012.07.15 No
Ltd. Paper Co., Ltd.
Foshan Huaxin Packaging Co., Zhuhai S.E.Z. Hongta Renheng
150,000,000 2010.08.25 2011.12.31 No
Ltd. Paper Co., Ltd.
Foshan Huaxin Packaging Co., Huaxin (Foshan) Color Printing
60,000,000 2010.01.01 2013.12.31 No
Ltd. Co., Ltd.
Foshan Huaxin Packaging Co.,
Zhuhai Huafeng Paper Co., Ltd. 420,000,000 2010.07.30 2011.07.30 No
Ltd.
Foshan Huaxin Packaging Co.,
Ltd., Huaxin (Foshan) Color
Printing Co., Ltd., Foshan
China National Paper-industry
Chengtong Paper Co., Ltd., 220,000,000 2010.05.27 2011.05.27 Yes
Investment Corporation
Zhuhai Huafeng Paper Co.,
Ltd.,and Zhuhai S.E.Z. Hongta
Renheng Paper Co., Ltd.
China National Paper-industry Zhuhai S.E.Z. Hongta Renheng
206,000,000 2010.04.26 2013.04.26 No
Investment Corporation Paper Co., Ltd.
China National Paper-industry
Zhuhai Huafeng Paper Co., Ltd. 306,000,000 2010.04.26 2013.04.26 No
Investment Corporation
China National Paper-industry Foshan Huaxin Packaging Co.,
615,000,000 2010.04.16 2013.04.16 No
Investment Corporation Ltd.
China National Paper-industry Foshan Huaxin Packaging Co.,
48,000,000 2010.08.17 2011.08.17 No
Investment Corporation Ltd.
China National Paper-industry Foshan Huaxin Packaging Co.,
100,000,000 2010.01.15 2011.01.14 Yes
Investment Corporation Ltd.
6. Other related transactions
(1) Capital loans and borrowings
According to Borrowing Contact signed by Foshan Huaxin Development Co., Ltd.
and the Company, balance of borrowings from Foshan Huaxin Development Co., Ltd.
was RMB 93,029,894.51 up to the period-end. Interest rate was recognized according
to capital cost of lenders, and interest for borrowing paid up by the Company totaled
RMB 2,939,772.47 in this period.
(2) Capital of medium term notes raised by related parties
With service term of about 5 years, maturity date as 24 Mar. 2015, issuance interest
rate of 4.23%, as well as yearly issuance underwriting rate as 3‰, medium term notes
of RMB 500,000,000 were raised by the ultimate controller of the Company, China
Chengtong Holding Group Co., Ltd., and were provided to the Company to pay back
bank loans and supplement current capital. In addition, the Company was asked to
share part of issuance charges, for instance, legal fee, in compliance with the
proportion of capital amount it used to capital raised in the issuance of medium term
notes of Y2010. On 9 Mar. 2010, the two parties signed the Agreement on the Usage
of Internal Entrusted Loans of Capital of Medium Term Notes, with stipulated service
term of about 5 years and maturity date as 24 Mar. 2015. If an investor chooses to
execute home-sales option, the maturity date of medium term notes of Y2010 in
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English Translation for Reference Only
home-sales part would be 24 Mar. 2013, with coupon rate of 4.8%. With the adoption
of annually calculated simple interest, interest per year would be paid once a year to
China Chengtong Holding Group Co., Ltd., which would uniformly fulfill external
payments for interest. Up to Mar. 2010, the Company had received accounts of
medium terms notes of RMB 500,000,000, and counted interest of RMB
13,400,000.00 for the reporting period.
7. Receivables from and payables to related parties
(1) Accounts receivable from related parties of the Company
Closing balance Opening balance
Item Related party Bad debt Bad debt
Book balance Book balance
provision provision
Accounts
receivable
Guangdong Guanhao High-tech Co., Ltd. 280,808.00 --- --- ---
(2) Accounts payable to related parties of the Company
Item Related party Closing balance Opening balance
Accounts
payable
Foshan Huaxin Import & Export Co., Ltd. 1,250,432.10 4,310,637.91
China National Paper-industry Investment
39,805,693.37 ---
Corporation
Guangdong Guanhao High-tech Co., Ltd. 33,286.50 ---
Hunan Juntai Pulp & Paper Co., Ltd. 52,980,599.07 ---
Other payables
Foshan Huaxin Development Co., Ltd. 95,674,741.77 53,029,894.51
Guanddong Chengtong Logistics Co., Ltd. 443,146.47 12,791,826.29
Accounts
received in
advance
Foshan Huaxin Import & Export Co., Ltd. --- 47,698.56
Long-term
payables
China Chengtong Holding Group Co., Ltd. 500,000,000.00 500,000,000.00
Interests payable
China Chengtong Holding Group Co., Ltd. 5,933,333.36 18,533,333.34
Ⅶ. Contingent events
(I) Contingent liabilities due to pending lawsuits and arbitrations, as well as financial
influence thereof
1. As at the period-end, Guangdong Regall Group Co., Ltd. (hereinafter referred to as
“Regall Group”) owed a goods payment of RMB 10,047,398.58 to the Company’s
subsidiary Zhuhai S.E.Z Hongta Renheng Paper Co., Ltd. (hereinafter referred to as
“Hongta Renheng”) (with an account age over three years). On 28 Mar. 2008, the said
two parties signed an agreement on repayment with wood pulp. According to the said
agreement, Regall Group should repay with wood pulp as the consideration, which
should be executed before 15 May 2008. However, Regall Group has not
accomplished the execution according to the said agreement. Up until 31 Oct. 2008,
only RMB 3,099,200.00 had been executed as consideration for the debt. On 29 Oct.
2008, Hongta Renheng sent a Notice on Terminating Agreement to Regall Group, but
Regall Group asked to continue the execution of the Agreement. On 6 Dec. 2008,
Hongta Renheng submitted a bill of compliant on the goods payment dispute to
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Guangzhou Huangfu People’s Court, requesting the Court to terminate the agreement
on repayment with wood pulp and asking Regall Group to repay the goods payment of
RMB 10,047,398.58 and take the responsibilities thus caused. On 28 Jun. 2009, the
Court issued the Civil Judgment Letter (2009) HMEC Zi No. 72, deciding to declare
the Company’s Notice on Terminating Agreement legally null. Hongta Renheng
appealed to Guangzhou Intermediate People’s Court against the decision and
Guangzhou Intermediate People’s Court ruled that the case should be remanded for
retrial in the Court of the first instance. On 12 Jun. 2010, the Court issued the Civil
Judgment Letter (2010) HMEC Zi No. 1, deciding to declare the Agreement on Set
Debt off with Pulp Payment legal and effective. However, as Regall Group wasn’t
able to fulfill liability of supplying pulp, it should pay RMB 9,786, 596.96 back to
Hongta Renheng. Regall Group appealed to Guangzhou Intermediate People’s Court
against the decision and the second trial was taken by the court in Oct. 2010. Then
Guangzhou Intermediate People’s Court made the judgment for the second trial on 25
Nov. 2010, keeping the same with that of the first trial. Hongta Renheng has
withdrawn 100% bad debt provision for the said account receivable at full amount.
2. As at the period-end, Zhuhai East Zhengtai Power Equipment Co., Ltd. owed a
goods payment of RMB 2,925,825.54 to Hongta Renheng. In line with Civil
Judgment (2010) XMEC Zi No. 641, Hongta Renheng won the appeal and Zhuhai
East Zhengtai Power Equipment Co., Ltd. should pay loans of RMB 2,405,789.44 and
its penalty back to Hongta Renheng as a result. Zhuhai East Zhengtai Power
Equipment Co., Ltd. filed an appeal against the sentence. The court dismissed the
appeal in the second trial and the decision was upheld on 12 Oct. 2010. As Zhuhai
East Zhengtai Power Equipment Co., Ltd. hasn’t executed the verdict yet, Hongta
Renheng has applied to the court for enforcement. Hongta Renheng withdrew 90%
bad debt provision for the said account receivable in last period, yet didn’t change the
ratio of bad debt provision in this period due to uncertainty of receiving goods
payment.
3. As at the period-end. Shenzhen Xieji Industry Co., Ltd. owed a goods payment of
RMB 3,760,350.10 to Hongta Renheng. Hongta Renheng submitted a bill of
compliant dispute to Shenzhen Futian District People’s Court, and the case was in
court of first instance on 23 Nov. 2010. Up to the closing date of the report, the case
has been ongoing. Hongta Renheng has withdrawn 50% bad debt provision for the
said account receivable.
(II) Contingent liabilities formed due to the Company’s provision of guarantees
for other entities, as well as financial influence thereof
The Company had no contingent liabilities due to the Company’s provision of
guarantees for other entities.
(III) Other contingent liabilities
As at the period-end, for the Company and its subsidiaries, undue banker’s acceptance
bills which had been discounted valued RMB 59,550,675.60, with the mature dates
between Jul.-Sep. 2011. And undue banker’s acceptance bills with endorsement
valued RMB 344,504,958.37, with the mature dates between Jul.-Dec. 2011.
VIII. Commitment events
(I) Significant commitment events
Other significant financial commitment events
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As at the period-end, margin of RMB 2,000.62 had been deposited into bank
acceptance bills issued by the Company and its subsidiaries.
(II) Particulars about fulfillment of previous of commitments
No.
IX. Events after balance sheet date
No.
X. Other important events
(I) Lease
Operating lease
Assets leased by the Company are as follows:
Book value as at Book value as at
Type of assets leased
period-end period-begin
Houses and buildings 15,222,004.24 15,502,218.60
Total 15,222,004.24 15,502,218.60
(II) Assets and liabilities measured at fair value
Unit: RMB Yuan
Gain/loss
Impairment
from fair Accumulative fair
provision
Item Opening balance value value changes Closing balance
for this
changes this recorded into equity
period
period
Financial assets
1. Financial assets measured by fair value
and of which the change was recorded in
--- --- --- --- ---
gains and losses of the period (excluding
derivative financial assets)
2. Derivative financial assets --- --- --- --- ---
3. Financial assets available for sale 4,869,332.31 --- -71，511.96 --- 4,668,853.07
Subtotal of financial assets 4,869,332.31 --- -71，511.96 --- 4,668,853.07
Investing properties --- --- --- --- ---
Production biological assets --- --- --- --- ---
Others --- --- --- --- ---
Subtotal of items above 4,869,332.31 --- -71，511.96 --- 4,668,853.07
Financial liabilities --- --- --- --- ---
(III) Other significant events that need to be disclosed
The Company entered into the Joint Venture Agreement with STORAENSO
PACKAGING BOARDS ASIAOY (hereinafter referred to as “Stora Enso”) on 28 Oct.
2005, in which the both parties purchased the assets of Foshan Huafeng Paper Co.,
Ltd. Zhuhai Branch Company (Foshan Huafeng Paper Co., Ltd. is now renamed as
Zhuhai Huafeng Paper Co., Ltd, and hereinafter referred to as Zhuhai Huafeng for
short), 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 USD 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
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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 Nov. 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 Zhuhai Huafeng. Unilateral statistics from Zhuhai Huafeng Paper Co., Ltd., such
economic losses totaled to about RMB 58 million, including expense on rebuilding,
claim from suppliers, 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 regarded 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 STORAENSO PACKAGING BOARDS ASIAOY for loss
to the Company, in order to safeguard the legal rights of Zhuhai Huafeng Paper Co.,
Ltd.. The said dispute case on agreement transfer has been accepted by Zhuhai
Intermediate Court on 20 Aug. 2007.
On 25 Jun. 2010, the verdict in the Civil Ruling Paper (2007 ZZFMSC Zi No. 52)
from the Guangdong Zhuhai Intermediate People's Court was made and the content is
mainly as follows:
(1) The defendant Stora Enso shall pay for increased cost due to project reconstruction
and claims for compensation totaling RMB 1,711,000 to the accuser Foshan Huafeng
Paper Co., Ltd within 10 days since this verdict is legally effective; as for the amount
that has not occurred in reality, the Court shall not decide for this case and the accuser
may claim it by other legal means;
(2) The defendant Stora Enso shall pay for engineering management expense and
wage for staff as well as other salary and engineering interest due to project
reconstruction and claims for compensation totaling RMB 21,486,695.04 to the
accuser Foshan Huafeng Paper Co., Ltd. within 10 days since this verdict is legally
effective;
(3) As for the court acceptance fee of RMB 331,291 and auditing expense of RMB
67,500, Foshan Huafeng Paper Co., Ltd. shall pay RMB 206,743 and Stora Enso
Packing Boards Asia Oy shall pay RMB 191,848.
Now, both the accuser Zhuhai Huafeng (originally named as Foshan Huafeng Paper
Co., Ltd.) and the defendant Stora Enso Packing Boards Asia Oy appealed to the
Guangdong Higher People’s Court. In Dec. 2010, Zhuhai Huafeng received the Notice
of Judging Appeal from the Guangdong Higher People’s Court, informing that the
Court would form a collegiate bench to try the case.
94
English Translation for Reference Only
The above verdict has not been executed yet and judicial procedures of appeals from
both parties are being proceeded. Therefore, there’s great uncertainty about receiving
back the claim. Zhuhai Huafeng has not declared a confirmation in accordance with
the said verdict. Zhuhai Huafeng is now in normal way of production and operation.
Final verdict of the case won’t have any negative effect on production and operation
of Zhuhai Huafeng.
Ⅺ. Notes to main items in financial statements of the Company
(I) Other receivables
1. Other receivables disclosed by categories
Closing balance Opening Balance
Bad debt Bad debt
Book balance Book balance
Category provision provision
Proporti Proportio Proporti Proportio
Amoun Amoun
Amount on n Amount on n
t t
(%) (%) (%) (%)
Other receivables with
single amount significant
--- --- --- --- --- --- --- ---
and single allotment of bad
debt provision
Other receivables with
single amount insignificant
--- --- --- --- --- --- --- ---
and single allotment of bad
debt provision
Other receivables with
allotment of bad debt
provision by combinations
Combination—Aging
--- --- --- --- --- --- --- ---
analysis method
Combination—Consolidate
1,194,807,753.10 100 --- --- 1,227,005,774.13 100 --- ---
d statement unit
Subtotal of combination 1,194,807,753.10 100 --- --- 1,227,005,774.13 100 --- ---
Total 1,194,807,753.10 100 --- --- 1,227,005,774.13 100 --- ---
Explanation for categories of other receivables:
Companies included in consolidated scope of the Company operate well and didn’t
withdraw bad debt provisions for funds flows between each other.
2. There were no other receivables without actual write-off in the reporting period.
3. There were no debts owed by shareholders holding over 5% (5% included) voting
rights of other receivables at the period-end.
4. Particulars about other receivables
Proportion to
Relation Nature total amount
Name of the entity with the or Amount Aging of other
Company content receivables
（%）
Current Within 1
Zhuhai Huafeng Paper Co., Ltd. Subsidiary 427,726,265.94 35.80
account year
Zhuhai S.E.Z. Hongta Renheng Paper Current Within 1
Subsidiary 422,578,556.67 35.37
Co., Ltd. account year
Current Within 1
Foshan Chengtong Paper Co., Ltd. Subsidiary 341,483,635.27 28.58
account year
Current Within 1
Huaxin (Foshan) Color Printing Co., Ltd Subsidiary 2,972,523.22 0.25
account year
Within 1
Other 46,772.00 ---
year
Total 1,194,807,753.10 100
5. Particulars about other accounts receivable from related parties
Relation with the Proportion to total
Name of the entity Amount
Company amount of other
95
English Translation for Reference Only
receivables（%）
Zhuhai Huafeng Paper Co., Ltd. Subsidiary 427,726,265.94 35.80
Zhuhai S.E.Z. Hongta Renheng Paper Co., Ltd. Subsidiary 422,578,556.67 35.37
Foshan Chengtong Paper Co., Ltd. Subsidiary 341,483,635.27 28.58
Huaxin (Foshan) Color Printing Co., Ltd Subsidiary 2,972,523.22 0.25
Total 1,194,760,981.10 100
96
English Translation for Reference Only
(II) Long-term equity investment
Unit: RMB Yuan
Explanation
for
disaccord of
Sharehol Proportio Withdra
shareholdin
ding n of wal of
g Impai
Account proportio voting impair
Increase / proportion rment Cash dividends
Invested equity ing Investment cost Opening balance Closing balance n in right in ment
Decrease and provis of this period
method invested invested provisio
proportion ion
equity entity n of this
of voting
(%) (%) period
right in
invested
entity
Tetra Huaxin (Foshan) Packaging Co., Equity
145,945,947.55 206,014,566.72 -29,214,208.23 176,800,358.49 25 25 --- --- --- 59,646,563.76
Ltd. Method
Subtotal 145,945,947.55 206,014,566.72 -29,214,208.23 176,800,358.49 --- --- --- --- --- ---
Huaxin (Foshan) Color Printing Co., Cost
72,674,145.03 72,674,145.03 -- 72,674,145.03 75 75 -- -- -- --
Ltd Method
Foshan Huaxin Jinfeng Industrial Co., Cost
3,000,000.00 3,000,000.00 -- 3,000,000.00 100 100 -- -- -- --
Ltd Method
Cost
Foshan Chengtong Paper Co., Ltd. 225,000,000.00 225,000,000.00 -- 225,000,000.00 75 75 -- -- -- --
Method
Zhuhai S.E.Z. Hongta Renheng Paper Cost
927,570,697.11 927,570,697.11 -- 927,570,697.11 41.9653 41.9653 -- -- -- --
Co., Ltd. Method
Kunshan Focai Packaging and Priting Cost
5,000,000.00 5,000,000.00 -- 5,000,000.00 100 100 -- -- -- --
Co., Ltd. Method
Subtotal 1,233,244,842.14 1,233,244,842.14 -- 1,233,244,842.14
Total 1,379,190,789.69 1,439,259,408.86 -29,214,208.23 1,410,045,200.63
97
(III) Investment incomes
1. Breakdown of investment incomes
Occurred amount in Occurred amount in the
Item
current period same period of last year
Income from long-term equity investments accounted by
30,432,355.53 26,758,752.61
equity method
Of which: Tetra Huaxin (Foshan) Packaging Co., Ltd. 30,432,355.53 26,758,752.61
Total 30,432,355.53 26,758,752.61
2. Explanation of invest incomes: there is no significant restriction to investment
income transfer in the Company.
XII. Supplementary information
(I) Breakdown of non-recurring gains and losses of current period
Item Amount Explanation
Gain/loss from disposing non-current assets; 484,682.40
Tax refunds and reduction due to unauthorized approval or nonexistence of
---
official approval documents;
Government subsidies recorded in gain/loss in current period (excluding those
closely related to the Company’s business and enjoyed by the Company by 3,631,163.60
certain amounts stipulated by the government);
Capital occupation fees from non-financial enterprises recorded into gain/loss in
---
current period;
Income from investment cost of acquiring subsidiaries, joint ventures and
affiliated enterprises less than recognizable net asset fair value of invested units ---
that should be enjoyed by the Company when finishing the investment;
Gain/loss from exchange of non-monetary assets; ---
Gain/loss from entrusting others with investments or asset management; ---
Various asset impairment provisions for inevitable factors such as natural
---
disasters;
Gain/loss from debt restructuring; ---
Expenses on enterprise reorganization such as expense on staff arrangements
---
and integration expense;
Gain/loss from transactions with unfair transaction prices exceeding fair value; ---
Net gain/loss for current period of subsidiaries from enterprise mergers under
---
same control from period-begin to merger dates;
Gain/loss from contingent events not related to the Company’s normal business
---
operation;
Gain/loss from fair value changes of transactional financial assets and liabilities
held by the Company and investment incomes from disposing transactional
---
financial assets and liabilities and financial assets available for sale except for
effective hedging business related to the Company’s normal business operation;
Transferring back impairment provisions for accounts receivable on which an
---
impairment test is individually conducted
Gain/loss from entrusted financing; ---
Gain/loss from fair value changes in investing properties concerning which fair
---
value mode is adopted for subsequent measurement;
Effect on gain/loss for current period from one-off adjustment on gain/loss for
current period according to requirements of taxation law, accounting law and ---
other laws and regulations;
Custodian fees from operation entrustment; ---
Other non-operating incomes and expenses except for items above; -890,847.52
Other gain/loss items that satisfy definition of non-recurring gain/loss ---
Effect on income tax; -699,576.81
Effect on minority interest income (after-tax) -2,019,656.83
Total 505,764.84
(II)ROE and EPS
98
Weighted average EPS
Profit as of the reporting period
ROE (%) Basic EPS Diluted EPS
Net profit attributable to common shareholders of the
4.24 0.1222 0.1222
Company
Net profit attributable to common shareholders of the
4.20 0.1212 0.1212
Company after deducting non-recurring gains and losses
Calculation formula for data above:
Weighted average ROE= P/（E0＋NP÷2＋Ei×Mi÷M0－Ej×Mj÷M0±Ek×Mk÷M0）
Of which: Of which: P refers to Net profit attributable to common shareholders of the
Company or net profit attributable to common shareholders of the Company after
deducting non-recurring gains and losses; NP refers net profit attributable to common
shareholders of the Company; E0 refers to opening net assets attributable to common
shareholders of the Company; Ei refers to additional net assets attributable to common
shareholders of the Company due to new share issuance or turning debts into shares in
the reporting period; Ej refers to reduced net assets attributable to common
shareholders of the Company due to buy-back business or cash dividends in the
reporting period; M0 refers to the number of months during the reporting period; Mi
refers to the number of months from the next month when net assets increased to the
end of the reporting period; Mj refers to the number of months from the next month
when net assets decreased to the end of the reporting 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
reporting period.
XIII. Approval of financial statements
These financial statements have been approved by the Board of Directors of the
Company on 29 Aug. 2011.
Foshan Huaxin Packaging Co., Ltd. (official seal affixed)
29 Aug. 2011
99
Section VIII Documents Available for Reference
1. The semi-annual report for Y2011 carrying the chairman’s signature.
2. Financial statements with the signatures of the Legal Representative, the person in
charge of the accounting work and the person in charge of the accounting organ.
3. Original copies of all the documents and announcements of the Company disclosed
on the newspapers and periodicals designated by CSRC in the reporting period.
Chairman of the Board: Tong Laiming
Board of Directors of Foshan Huaxin Packaging Co., Ltd.
29 August 2011
100
