股份有限公司hao.rising.cn

1佛山华新包装股份有限公司佛山华新包装股份有限公司佛山华新包装股份有限公司佛山华新包装股份有限公司FOSHANHUAXINPACKAGINGCO.
,LTDANNUALREPORT2008Mar.
26,20092I.
ImportantnotesandcontentsImportantnotes:TheBoardofDirectors,theSupervisoryCommitteeswellasdirectors,supervisorsandseniorexecutivesofFoshanHuaxinPackagingCo.
,Ltd(hereinafterreferredtoas"theCompany")herebyconfirmthattherearenoimportantomissions,fictitiousstatementsorseriousmisleadinginformationcarriedinthisreport,andshalltakeallresponsibilities,individuallyand/orjointly,fortheauthenticity,accuracyandcompletenessofthewholecontents.
ThisReportispreparedinbothChineseandEnglishversions.
Shouldtherebedifferenceinunderstandingthetwoversions,theChineseversionshallprevail.
ChairmanoftheBoardMr.
TongLaiming,GeneralManagerMr.
WangQiandChiefFinancialOfficerMr.
JiXiangdongherebydeclarethatthefinancialreportenclosedinthisAnnualReport2008isauthenticandcomplete.
GuangdongDahuaDeluCertifiedPublicAccountantsCo.
,LtdissuedAuditReportfortheCompanywithunqualifiedopinion.
3ContentsI.
ImportantNotesandContents…2II.
CompanyProfile…4III.
AbstractofAccountingDataandBusinessData5IV.
ChangesinSharesCapitalandParticularsaboutShareholders…7V.
Directors,SupervisorsandSeniorExecutivesandEmployees……….
.
……10VI.
CorporateGovernanceStructure…16VII.
BriefIntroductionofShareholders'GeneralMeeting…24VIII.
ReportoftheBoardofDirectors…25IX.
ReportoftheSupervisoryCommittee…41X.
SignificantEvents…44XI.
FinancialReport…51XII.
DocumentsAvailableforInspection…514II.
CompanyProfile1.
LegalNameinChinese:佛山华新包装股份有限公司LegalNameinEnglish:FoshanHuaxinPackagingCo.
,Ltd2.
LegalRepresentative:TongLaiming3.
SecretaryoftheBoard:ZhouQihongAddress:the18thFloor,JinghuaBldg.
,JihuaRd.
,FoshanTel:0757-83981729,83992076Fax:0757-83992026E-mail:hf_zhouqh@fshxp.
com4.
RegisteredAddress:No.
18,the5thJihuaRoad,FoshanOfficeAddress:18thFloor,JinghuaBuilding,the5thJihuaRoad,FoshanPostCode:528000Website:http://www.
fshxp.
comE-mail:hejf@fshxp.
com5.
NewspapersDesignatedforDisclosingtheInformation:SecuritiesTimesandTaKungPao(HK)InternetWebsiteDesignatedbyChinaSecuritiesRegulatoryCommission:http://www.
cninfo.
com.
cnPlaceWheretheAnnualReportisPreparedandPlaced:OfficeoftheBoard6.
StockExchangeListedwith:ShenzhenStockExchangeShortFormoftheStock:FoshanHuaxinPackagingBCodeoftheStock:2009867.
OtherRelevantInformation(1)Dateoffirstregistration:Jun.
21,1999Registrationwith:GuangdongMunicipalAdministrationforIndustryandCommerce(2)BusinessLicenseNo.
:19035257-5(3)TaxationRegistrationNo.
:NTZiNo.
440601707682279(4)Certifiedpublicaccountantsengaged:Domesticcertifiedpublicaccountants:GuangdongDahuaDeluCertifiedPublicAccountantsCo.
,LtdAddress:No.
16,18,KangningRoad,Zhuhai,GuangdongTel.
:(0756)2114788Fax:(0756)22176435III.
AbstractofAccountingDataandBusinessDataI.
Mainaccountingdataandbusinessdataoffiscalyearof2008IndexBusinessdata(Unit:RMB)Operatingprofit40,124,340.
05Totalprofit40,073,062.
15Totalprofitattributabletoshareholdersoflistedcompany42,588,844.
36Totalprofitafterdeductingnon-recurringgainsandlossesattributabletoshareholdersoflistedcompany36,900,782.
27Netcashflowfromoperatingactivities-27,817,792.
61Itemsdeductingnon-recurringgainsandlossesanditsamountIndexBusinessdata(Unit:RMB)Gainsandlossesondisposalofnon-currentassets12,680.
80Governmentsubsidymeasuredintogainsandlossesofcurrentperiod225,000.
00Capitaloccupiedfromnon-financialenterpriserecordedintocurrentgainsandlosses5,774,689.
89Netothernon-operationincome/expense-288,958.
70Less:Impactonenterpriseincometax26,923.
35Quotientofsharesheldbyminorityshareholders8,426.
55Netamountofnon-recurringgainsandlosses5,688,062.
09II.
Mainaccountingdataandfinancialindicesinthepastthreeyears1.
MainaccountingdataUnit:RMBYuan20082007Increase/decreasecomparedwithlastyear(%)2006OperatingIncome1,412,674,165.
821,269,510,406.
9511.
28%673,543,663.
61TotalProfit40,073,062.
15119,215,623.
37-66.
39%94,664,715.
47Netprofitattributabletothelistedcompanies'shareholders42,588,844.
36110,720,644.
39-61.
53%92,048,266.
31Netprofitafterdeductingnon-recurringgainsandlossesattributabletoshareholdersoflistedcompany36,900,782.
27105,023,467.
91-64.
86%89,690,699.
03Netcashflowfromoperatingactivities-27,817,792.
6167,039,489.
50-141.
49%-133,179,152.
28Bytheendof2008Bytheendof2007Increase/decreasecomparedwithlastyear(%)Bytheendof2006Totalassets3,425,460,446.
523,015,150,085.
8813.
61%2,760,133,721.
03Owners'equity(orshareholders'equity)1,269,218,639.
421,226,629,795.
063.
47%1,137,884,150.
67Capitalstock505,425,000.
00505,425,000.
000.
00%439,500,000.
0062.
MainfinancialindexUnit:RMBYuan20082007Increase/decreasecomparedwithlastyear(%)2006Basicearningspershare(Yuan/share)0.
080.
22-63.
64%0.
18Dilutedearningspershare(Yuan/share)0.
080.
22-63.
64%0.
18Basisearningspershareafterdeductingnon-recurringgainsandlosses(Yuan/share)0.
070.
21-66.
67%0.
177Fullydilutedreturnonnetassets(%)3.
36%9.
03%-5.
67%8.
09%Weightedaveragereturnonnetassets(%)3.
41%9.
37%-5.
96%8.
43%Fullydilutedreturnonnetassetsafterdeductingnon-recurringgainsandlosses(%)2.
91%8.
56%-5.
65%7.
88%Weightedaveragereturnonnetassetsafterdeductingnon-recurringgainsandlosses(%)2.
96%8.
88%-5.
92%8.
21%Netcashflowpersharearisingfromoperatingactivities(Yuan/share)-0.
060.
13-146.
15%-0.
30Bytheendof2008Bytheendof2007Increase/decreasecomparedwithlastyear(%)Bytheendof2006Netassetspershareattributabletoshareholdersoflistedcompany(Yuan/share)2.
512.
433.
29%2.
597IV.
ChangesinShareCapitalandParticularsabouttheShareholdersI.
Changesinsharecapital(I).
StatementofchangesinsharecapitaloftheCompanyUnit:ShareBeforethechangeIncrease/decreaseinthechange(+,-)AfterthechangeAmountProportion(%)IssuanceofnewsharesBonussharesCapitalizationofpublicreservefundOtherSubtotalAmountProportion(%)I.
Unlistedtradableshares333,500,00065.
98%333,500,00065.
98%1.
Sponsor'sshare333,500,00065.
98%333,500,00065.
98%Including:State-ownedsharesSharesheldbydomesticcorporation333,500,00065.
98%333,500,00065.
98%SharesheldbyforeigncorporationOthers2.
Raisedcorporationshares3.
Employeeshares4.
PreferencesharesorothersII.
Listedtradableshares171,925,00034.
02%171,925,00034.
02%1.
RMBordinaryshares2.
Domesticallylistedforeignshares171,925,00034.
02%171,925,00034.
02%3.
Overseaslistedforeignshares4.
OthersIII.
Totalshares505,425,000100.
00%505,425,000100.
00%(II).
Issuanceandlistingofstocks1.
TheCompanyhadn'tissuedorlistedanynewsharesinpastthreeyears.
2.
TheCompanyhasnoemployees'sharesII.
Introductiontoshareholders1.
ParticularsaboutsharesheldbythetoptenshareholdersandthetoptenshareholdersholdingtradablesharesUnit:ShareTotalshareholders19,336SharesheldbythetoptenshareholdersNameofshareholdersNatureofshareholderProportionofsharesheldTotalsharesheldNon-tradablesharesheldSharespledgedorfrozenFoshanHuaxinDevelopmentCo.
,LtdState-ownedcorporation65.
20%329,512,030329,512,0300WUHAOYUANForeignnaturalperson0.
32%1,602,54100PANG,KWOKSHIForeignnaturalperson0.
14%730,60500PIAOJOYGUANGSHIDomesticnaturalperson0.
13%639,28900LINQINGLEForeignnaturalperson0.
13%635,80000LINCHUBINDomesticnaturalperson0.
12%613,13400LINQIONGZHIDomesticnaturalperson0.
12%585,58000GuangdongTechnologyReformState-ownedcorporation0.
11%569,710569,71008InvestmentCo.
,LtdChinaMaterialDevelopmentandInvestmentGeneralCorporationState-ownedcorporation0.
11%569,710569,7100FoshanAssetsManagementCenterState-ownedcorporation0.
11%569,710569,7100SharesheldbythetoptenshareholdersholdingtradableshareNameofshareholdersTradablesharesheldVarietyofsharesWUHAOYUAN1,602,541DomesticallylistedforeignsharesPANG,KWOKSHI730,605DomesticallylistedforeignsharesPIAOJOYGUANGSHI639,289DomesticallylistedforeignsharesLINQINGLE635,800DomesticallylistedforeignsharesLINCHUBIN613,134DomesticallylistedforeignsharesLINQIONGZHI585,580DomesticallylistedforeignsharesZHANCHANGCHENG567,595DomesticallylistedforeignsharesCHENPINGHUA531,000DomesticallylistedforeignsharesCAOSHENGCHUN487,945DomesticallylistedforeignsharesTANGYI472,122DomesticallylistedforeignsharesExplanationonassociatedrelationshipamongthetoptenshareholdersoracting-in-concert①ChinaMaterialDevelopmentandInvestmentGeneralCorporationisthecontrollingshareholderoftheprincipalshareholderoftheCompany,FoshanHuaxinDevelopmentCo.
,Ltd.
,thereforeChinaMaterialDevelopmentandInvestmentGeneralCorporationhasassociatedrelationshipswiththeCompanyandthecontrollingshareholdersoftheCompany,FoshanHuaxinDevelopmentCo.
,Ltd.
②TheCompanyisnotawareofwhetherothershareholdersexistsrelatedrelationshiporwhethertheybelongtoaction-in-concertregulatedinAdministrativeMeasuresonInformationDisclosureofChangesinShareholdingofListedCompanies.
③Inthereportperiod,thesharesheldbyshareholdersoftheCompanyholdingover5%(including5%)werenotpledgedorfrozen.
2.
TheintroductionofthecontrollingshareholderoftheCompany:AbouttheCompany'scontrollingshareholder:FoshanHuaxinDevelopmentCo.
,Ltd(hereinafterreferredtoas"FHD")holds329,512,030oftheCompany'sstate-ownedcorporateshares(non-tradable),taking65.
2%ofthetotalsharecapital.
FHDwasincorporatedonMay27,1993;itslegalrepresentativeisTongLaiming;itsregisteredcapitalisRMB457.
93million;itsbusinessscope:production,manufactureanddistributionofpackingmaterials,papermaking,cable,wire,newmaterials;distributionofpackingmachineryandrepairingservices,amplifiersandfittings,decorationmaterials,anddrinks;informationconsulting,etc.
FoshanHuaxinDevelopmentCo.
,Ltd.
has4corporateshareholders,ofwhichChinaMaterialDevelopmentandInvestmentCorporationholds66.
7874%oftheregisteredcapitalinFHD;ChinaMaterialDevelopmentandInvestmentCompanyregisteredthroughStateAdministrativeBureauinJune,1988andnowiswhollystate-ownedenterpriseofChinaChengtongHoldingGroup.
ChinaChengtongHoldingGroup(hereinafterrefertoas"ChinaChengtong")wasChinaChengtongGroupformerlyandwassetupinaccordancewiththeadmissionticketNMHEZi(1998)DocumentNo.
189issuedbyStateAdministrationforDomesticTradeonJan.
22,1998asalargescalelogistic9enterprisegroupapprovedbyStateAdministrationforIndustryandCommerceBureauandmanagedbySASAC.
ChinaChengtongownedthelargestchainlogisticdistributionandallotmentnetworkandmetaldistributionnetworkinthemainlandandtransportationnetcombiningseas,railways,highwayandairlines.
InaccordancewiththeCircularonEstablishingandPerfectingthePilotWorkofBoardofDirectorsinState-ownedCompaniesbyCentralEnterprisespromulgatedbySASACinJune2004,ChinaChengtongisselectedbytheSASACasthepilotstandardBoardofDirectorsinthefirstsevenpilotenterprisesforestablishingandperfectingtheBoardofDirectors.
ChinaChengtonghasbeenonarapiddevelopingwayandmovetowardsthegoalofinternationalmodernenterprises.
TheregisteredcapitaloftheChengtongisRMB1,546,950,000andLegalRepresentativeisMr.
MaZhengwu,theregisteredaddressisNorthernYuetanStreetNo.
25,WesternDistrictofBeijing.
Theregisterednumberofbusinesslicenseis1000001002867.
ThemajorbusinessoftheCompanyisstoragelogisticandmetaltrade,etc.
RelationshipofOwnershipandShareholdingbetweentheCompanyanditsactualcontroller:SASAC100%ChinaChengtongHoldingGroupCo.
,Ltd100%78.
26%ChinaMaterialsDevelopmentInvestmentGeneralCorporationJiachengEnterpriseDevelopmentCo.
,Ltd66.
79%6.
62%65.
2%0.
11%FoshanHuaxinDevelopmentCo.
,LtdFoshanHuaxinPackagingCo.
,Ltd10V.
Directors,SupervisorsandSeniorExecutivesandEmployeesI.
Directors,supervisorsandseniorexecutives(I)BasicinformationNamePositionGenderAgeOfficetermSharesheldatyear-beginSharesheldatyear-endTotalremunerationdrawnfromtheCompanyinthereportingperiod(RMB'0000)RemunerationdrawnfromshareholderentitiesorotherrelatedpartiesornotTongLaimingChairmanoftheBoardMale392008.
05-2011.
0500YesWangQiViceChairmanoftheBoardMale552008.
05-2011.
0500YesTanShanghuiDirectorMale582008.
05-2011.
0500NoYanSuDirectorMale382008.
05-2011.
0500YesHuangXinDirectorMale462008.
05-2011.
05006.
00YesYangWeixingDirectorMale382008.
05-2011.
0500YesZhuZhengfuIndependentDirectorMale442008.
05-2011.
05002.
53NoZhongLiuhanIndependentDirectorMale552008.
05-2011.
05003.
8NoGeYunIndependentDirectorFemale462008.
05-2011.
05003.
8NoSunSheng'aiIndependentDirectorMale602005.
06-2008.
05001.
58ZhouQihongSecretaryoftheBoardMale412008.
05-2011.
050025.
53NoHongJunChairmanoftheSupervisoryCommitteeMale492008.
05-2011.
05000.
00YesHuangJianrongSupervisorMale522008.
05-2011.
05000.
00YesPengDanhongSupervisorFemale372008.
05-2011.
05000.
00YesWangQiGeneralManagerMale552008.
05-2011.
050025.
87YesTanShanghuiExecutiveDeputyGeneralManagerMale582008.
05-2011.
050030.
16NoChenHaiyanDeputyGeneralManagerMale432008.
05-2011.
050026.
07NoChenJialiDeputyGeneralManagerMale512008.
05-2011.
05000.
00YesLuLiangDeputyGeneralManagerMale362008.
05-2011.
050025.
23NoJiXiangdongCFOMale342008.
05-2011.
050027.
54NoTotal----178.
11Note:TheCompanyhadn'tcarriedoutEquityIncentivePlantillnow.
Noneofdirectors,supervisors,andseniorexecutivesheldthestockoptionandsharessubjecttomoratoriuminthereportingperiod.
Postheldbydirectors,supervisorsandseniorexecutivesoftheCompanyinShareholders'CompaniesNameCompanyPositionEngagementdurationWangQiFoshanHuaxinDevelopmentCo.
,LtdViceChairmanoftheBoardFromFeb.
2000uptonowTongLaimingChinaMaterialDevelopmentandInvestmentGeneralCorporationGeneralManagerFromApr.
2005uptonowYanSuChinaMaterialDevelopmentandInvestmentGeneralChiefAccountantFrom2006uptonow11CorporationYangWeixingFoshanChanBenDeDevelopmentCo.
,LtdGeneralManagerFromJun.
2007uptonowHuangXinFoshanHuaxinDevelopmentCo.
,LtdViceGeneralManagerFromMay2008uptonowHongJunChinaMaterialDevelopmentandInvestmentGeneralCorporationSecretaryandViceSecretaryoftheCPCFromSep.
2007uptonowHuangJianrongFoshanHuaxinDevelopmentCo.
,LtdDirectorofAdministrationOfficeFrom2002toMay2008Postheldbydirectors,supervisorsandseniorexecutivesoftheCompanyinotherunitsexceptShareholders'CompaniesNameCompanyPositionEngagementdurationZhuZhengfuKunlunLawFirmDirectorFrom1998uptonowZhongLiuhanFoshanDongjianGroupCo.
,LtdChairmanoftheBoardFromJul.
2001uptonowGeYunGuangdongInstituteofCertifiedPublicAccountantDeputySecretary-GeneralFromSep.
2004uptonow(II)Themainworkexperienceofcurrentdirectors,supervisorsandseniorexecutivesandthepostsorconcurrentpostsheldbythemattheunitsotherthancorporateshareholdersChairmanoftheBoard:TongLaiming,bornin1969,isamasterofeconomicsandcertifiedpublicaccountant.
FromMay2000toSep.
2001,heheldapostasManagerinBeijingDiweilepuScience-TradingCo.
,Ltd;fromSep.
2001toApr.
2005,hehasholdpostsinChinaMaterialDevelopmentandInvestmentGeneralCorporationastheAssistantGeneralManagerandconcurrentlyManagerofFinancialManagementDepartment,DeputyGeneralManagerandCFO.
HehasservedasGeneralManageraswellasLegalRepresentativeinChinaMaterialDevelopmentandInvestmentGeneralCorporationfromApril2005uptonow;fromFeb.
2006uptonow,hasbeenactingasChairmanoftheBoardinFoshanHuaxinDevelopmentCo.
,Ltd;HehasbeenactingasChairmanoftheBoarinFoshanHuaxinPackagingCo.
,Ltd.
ViceChairmanoftheBoard&GeneralManager:WangQi,bornin1953,wasaMBAdegreeholderandeconomist.
FromJan.
1995toMay2008,heholdpostsinFoshanHuaxinDevelopmentCo.
,LtdastheChairmanoftheBoard,ViceChairmanoftheBoardandGeneralManager;fromJun.
1999toMay2008,heservedinFoshanHuaxinPackagingCo.
,LtdasChairmanoftheBoard.
FromMay2008uptonow,hehasbeentakingthepostsofViceChairmanandGeneralManagerofChinaMaterialDevelopmentandInvestmentGeneralCorporation.
FromJul.
2008uptonow,hehasbeentakingthepostofFoshanHuaxinPackagingCo.
,LtdasViceSecretaryoftheCPC.
Director&ExecutiveDeputyGeneralManager:TanShanghui,bornin1950,isanMBAdegreeholderandseniorengineer.
HeonceservedasGeneralManagerinFoshanHuafengPaperCo.
,Ltdfrom1999toMay2008;From2004toJun.
2006,heheldaconcurrentpostasGeneralManagerinFoshanHuafengPaperCo.
,Ltd.
HeisservingasExecutiveDeputyGeneralManagerinFoshanHuaxinPackagingCo.
,LtdsinceMay2008.
Director:YanSu,bornin1970,isanMBAdegreeholder,senioraccountant,CPAandCTA.
FromAug.
2000toApr.
2006,successivelyheldpostsinHuaxingImport&ExportCo.
,LtdasManagerofFinancingDepartment,ChiefEconomistandDeputy12GeneralManager;FromApr.
2006uptonow,hetookpostinChinaMaterialDevelopmentandInvestmentGeneralCorporationasAssistantofGeneralManager,ChiefFinancialOfficer,nowalsoasChiefAccountant.
HeactedasViceSecretaryofPartyCommitteeofFoshanHuaxinDevelopmentCo.
,LtdfromJun.
2007toJul.
2008.
Director:HuangXin,bornin1962,masterdegreeholder.
FromDec.
1993toMar.
2006,hesuccessivelyservedasDeputyGeneralManager,ManagerofOperationDept.
Ⅱ,ManagerofIndustrialDept,DeputyManagerofStratagemInvestmentDept.
andManagerofAssetManagementDept.
inChinaMaterialDevelopmentInvestmentCorporation.
HeheldapostinFoshanHuaxinPackagingCo.
,LtdasaDeputyGeneralManagerfromMar.
2006.
HehasbeenactingasDeputyGeneralManagerinFoshanHuaxinDevelopmentCo.
,LtdsinceMay2008.
Director:YangWeixing,bornin1970,isabachelordegreeholderandeconomist.
FromDec.
1999toAug.
2006,hesucessivelytookpostsasViceDirectorofAssetsOperationDepartmentinFoshanIndustryInvestmentHoldingCo.
,Ltd,ManagerofPropertyManagementDepartment,AssistantofGeneralManagerandDeputyGeneralMangerinFoshanChanBenDeDevelopmentCo.
,LtdandDeputyGeneralManagerinFoshanTaijiWineCo.
,Ltd;HehasbeenactingasGeneralManagerinFoshanChanBenDeDevelopmentCo.
,LtdsinceJun.
2007.
IndependentDirector,ZhuZhengfu,bornin1964,isadoctoraldegreeholderandlawyer.
Since1993,hehadsuccessivelyworkedasDirectorofFinance&PropertyDepartmentinGuangdongEconomicandTradeLawFirms,partnerofGuangdongDaluLawFirm;DeputyDirectorofLandLawAdvisoryServicesCenterofGuangdong,whichbelongstoGuangdongProvincialDepartmentofLandandResources.
HehasbeenactingasdirectorandpracticepartnerofGuangdongKunlunLawFirmsince1998.
IndependentDirector:ZhongLiuhan,bornin1953,isaneconomist.
HeservedasChairmanoftheBoardinFoshanDongjianGroupCompanyfromOct.
1994toJun.
2001.
HehasbeenholdingapostinFoshanDongjianGroupCo.
,LtdastheChairmanoftheBoardandconcurrentlySecretaryofthePartyCommitteesinceJuly2001.
IndependentDirector:GeYun,bornin1962,isanmasterineconomicsandCPA.
SheservedasdirectorofOperationRegulationsDepartmentanddirectorofTrainingDepartmentinAssociationofPublicAccountantsGuangdongProvincefromFeb.
1997toSep.
2004.
ShehasbeenholdingapostinAssociationofPublicAccountantsGuangdongProvinceasDeputySecretary-GeneralsinceSep.
2004.
ChairmanoftheSupervisoryCommittee:HongJun,bornin1959,isapostgraduatedegreeholderandsenioreconomist.
From1992toSep.
2007,hesuccessivelytookpostsasViceChiefofAppointment&DismissionOffice,PersonnelDivisioninMaterialsDepartment,ViceChiefofCadreOfficeofPersonnelOrganinDomesticTradeDepartmentandGeneralManagerofHumanResourceDepartmentinChinaChengtongHoldingGroupCo.
,Ltd;hehasbeenholdingapostasSecretaryandViceSecretaryoftheCPCinChinaMaterialDevelopmentandInvestmentGeneralCorporationsinceSep.
2007;ConcurrentlyhehasbeenactingasSecretaryoftheCPCinFoshanHuaxinPackagingCo.
,LtdsinceJul.
2008aswellasChairmanofthe13BoardofFoshanHuaxinPackagingCo.
,LtdsinceMay2008.
Supervisor:HuangJianrong,bornin1956,isaMBAdegreeholderandSeniorPoliticalWorker.
FromMay1990toMay2008,hesuccessivelyactedasDeputyDirectorGeneralofFoshanSecrecyBureau,ViceSecretaryoftheCPCandDeputyGeneralManagerinFoshanPetroleumChemicalIndustryCo.
,Ltd,SecretaryofEnterpriseManagementDepartmentaswellasSecretaryofDisciplineInspectionCommitteeinFoshanZhongliManagementCo.
,Ltd,DirectorofAdministrationOffice,DirectorofthePartyCommitteeOfficeandViceSecretaryofDisciplineInspectionCommitteeinFoshanHuaxinDevelopmentCo.
,Ltd;hehasbeenholdingpostsastheChairmanoftheSupervisoryCommitteeinFoshanHuaxinDevelopmentCo.
,LtdsinceMay2008;Concurrently,hehasbeenholdingpostsasManagerofHumanResourceDepartmentsinceMar.
2008andViceSecretaryofDisciplineInspectionCommitteeandDirectorofCommunistPartyOfficeinFoshanHuaxinPackagingCo.
,Ltd.
Supervisor:PengDanhong,bornin1971,postgraduatedegreeholder,isindustrialeconomistandHumanResourceSpecialist.
FromJun.
1999toMar.
2008,shewasclerkofDevelopmentPlanningDepartmentandHumanResourceDepartmentaswellasDeputyManagerandManagerinFoshanHuaxinPackagingCo.
,Ltd;fromAug.
2006toJul.
2008,actedasManagerofHumanResourceDepartment,DirectorofGeneralManagerOfficeandAssistantofGeneralManagerinFoshanHuafengPaperCo.
,Ltd;ShehasbeenholdingapostinFoshanHuafengPaperCo.
,LtdasDeputyGeneralManagersinceJul.
2008andViceSecretaryoftheCPCsinceDec.
2008.
SecretaryoftheBoard:ZhouQihong,wasbornin1967,masterdegree,engineer.
HeevertookthepostofDeputyGeneralManagerinFoshanHuaxinPackingCo.
,LtdfromJul.
1999toAug.
2004;HesucessivelyservedasGeneralMangerinFoshanHuafengPaperCo.
,LtdfromMar.
2001toMay2004andasDeputyGeneralMangerinFoshanHuaxinDevelopmentCo.
,LtdfromAug.
2004toJul.
2006.
HehasbeenservingasSecretaryoftheBoardinFoshanHuaxinPackingCo.
,LtdsinceSep.
2006.
DeputyGeneralManager:ChenHaiyan,bornin1965,isapostgraduateandMBAdegreeholder,andengineer.
HeoncetookthepostofSecretaryoftheBoardinFoshanHuaxinPackingCo.
,LtdfromJuly1999toSep.
2006.
HehasbeenholdingpostinFoshanHuaxinPackingCo.
,LtdasDeputyGeneralMangersinceJul.
2002.
HeevertookthepostofChairmanoftheBoardandconcurrentlyGeneralManagerinHuaxin(Foshan)ColorPrintingCo.
,LtdfromNov.
2003toJul.
2006.
HehasbeenconcurrentlyactingasGeneralMangerinFoshanHuafengPaperCo.
,LtdsinceJul.
2006.
DeputyGeneralManager:ChenJiali,bornin1957,isajuniorcollegegraduateandengineer.
HehasbeenservingasDeputyGeneralManagerinHuaxinTetra(Foshan)PackagingCo.
,LtdsinceFeb.
1997;HehasbeenasctingasDeputyGeneralManagerinFoshanHuaxinPackingCo.
,LtdsinceJuly1999.
HenowconcurrentlyservesasChairmanoftheBoardinHuaxin(Foshan)ColorPrintingCo.
,Ltd.
DeputyGeneralManager:LuLiang,bornin1972,MBAandeconomist.
HeonceservedasAssistanttoGeneralManageraswellasHeadofInvestmentDevelopmentDept.
inFoshanIndustrialInvestmentCo.
,Ltd.
fromAug.
1998toDec.
2003.
HehasbeenservingasDeputyGeneralManagerinFoshanHuaxinPackingCo.
,LtdsinceJan.
2004.
HeconcurrentlytooktheSecretaryofCPCinFoshanHuafengPaperCo.
,14LtdfromJul.
2006toJun.
2008.
HenowservesasViceSecretaryofCPCinFoshanHuaxinPackingCo.
,LtdsinceJul.
2008.
ChiefFinancialOfficer:JiXiangdong,bornin1974,aMBAdegreeholderandCPA.
HehasservedasDeputyManagerofAuditingDept.
inBeijingZhongTianHuaZhengCertifiedPublicAccountantsfromSep.
2002toJul.
2004.
HeheldthepostsinChinaMaterialsDevelopmentInvestmentCorporationasDeputyMangerandManagerofFinancialDeptfromAug.
2004toMay2007.
hehasbeenservingasChiefFinancialOfficerinFoshanHuaxinPackingCo.
,LtdsinceMay2007.
(III)Annualremuneration1.
Remunerationofdirectors,supervisorsandseniorexecutivesoftheCompanywasfixedonaccordingtotheplandeterminedbyshareholders'generalmeetingandtheboardofdirectorsandimplementedannualsalarysystemaccordingtotheoperatingresultsoftheCompany.
Thetotalannualremunerationofthecurrentdirectors,supervisorsandseniorexecutivesoftheCompanyisRMB178.
11million.
2.
Inthereportingperiod,allowanceforanindependentdirectorwasRMB38,000peryear.
TheexpensesofperformanceoftheirdutieswerebornebytheCompany.
3.
CurrentChairmanofBoardTongLaiming,ViceChairmanofBoardWangQi(fromJan.
toJun.
2008)anddirectors,namelyYanSu,YangWeixingandHuangxin(fromJul.
toDec.
2008)didn'tdrawremunerationfromtheCompany.
Supervisors,namelyHongJunandPengDanhongdidnotdrawremunerationfromtheCompany.
Theabovepersonneldrewremunerationfromtheunitstheyserved.
(IV)Directors,supervisorsandseniorexecutivesleavingtheirpostsinthereportingperiodInthereportperiod,proposalonreelectionoftheBoardofDirectorsandtheSupervisoryCommitteewasreviewedandapprovedonShareholder'sGeneralMeeting2007dated20May2008.
DirectorHeJichangandindependentdirectorSunSheng'airesignedfromtheirpostsduetoexpirationofofficeterm;supervisorsChenZeqing,ChenMing,HuangDabiaoandHuangWeijiresignedfromtheirpostsduetoexpirationofofficeterm.
Inthereportperiod,the1stMeetingofthe4thBoardofDirectors2008washeldon20May2008,atwhichreviewedandapprovedthenewexecutives.
HuangXinresignedfromDeputyGeneralManageroftheCompanyduetojobtransfer.
II.
EmployeesoftheCompanyEmployeesoftheCompanyandprofessionalstructure:TheCompanyhas2,162in-serviceemployees,including972productionstaff,136salesstaff,166technicalstaff,45financialstaff,1026administrativestaffand741otherstaff.
Classifiedaccordingtoeducationbackground,218employeesholdbachelordegreeorabove,292employeeshavecollegediplomaand1652employeesareoforunderdegreeofsecondarytechnologicalschool,seniormiddleschoolortechnicalschool.
Thereare3retiredemployeeswhomtheCompanywillbeartheexpenseswhile1715retiredstafftheCompanywon'tbear.
Thestaffaboveincludedstafffromsubsidiaryholdingcompany.
16ⅥⅥⅥⅥCorporateGovernance1.
OverallStatusofCorporateGovernanceUndertheguidanceofChinaSecuritiesRegulatoryCommissionOfficialBulletinNo.
27﹝2008﹞andrelateddocumentsofCSRCGuangdongRegulatoryBureau,theCompany,onthebasisofconsolidatingtheachievementsofthespecialcampaignforcorporategovernancein2007,continuedtostepupthecampaignin2008.
Accordingtorequirementsofthesaiddocuments,theCompanyconductedaself-inspectionregardingtherectifyingprogressoftheto-be-rectifiedissuesintheReportonCorporateGovernanceRectificationpublishedbytheCompanyon13Oct.
2007.
AndthentheCompanydiscloseditsReportonRectifyingProgressConcerningCorporateGovernanceon30Jul.
2008.
Duringthereportingperiod,theCompanycontinuouslyperfecteditscorporategovernancestructure,builtupamodernenterprisesystem,andregulateditsoperationinaccordancetoCompanyLaw,SecuritiesLawandotherrelevantlawsandregulations.
Inviewofthis,theBoardofDirectorsbelievesthattheactualsituationoftheCompany'scorporategovernanceisbasicallyinlinewiththerequirementsoftheCodeofCorporateGovernanceforListedCompanies,whichisdetailedasfollows:(Ⅰ)AboutshareholdersandShareholders'GeneralMeeting:accordingtotheRegulatoryOpinionsofShareholders'GeneralMeetingofListedCompanies,theCompanyfurtherstandardizedtheconveningoftheShareholders'GeneralMeeting,soastoensurethefullexerciseofallshareholders'legalrightsandinterests,aswellasthefairtreatmentforallshareholders,especiallyminorityshareholders.
(Ⅱ)AboutthecontrollingshareholdersandthelistedCompany:thecontrollingshareholdersactedaccordingtorules,anddidnotgobeyondtheShareholders'GeneralMeetingfordirectorindirectinterferenceintheCompany'sdecisionsandbusinessactivities;theCompanywasseparatedfromitscontrollingshareholdersinsuchaspectsaspersonnel,assets,financialaffairs,organsandbusinessactivities.
TheBoardofDirectors,theBoardofSupervisorsandtheCompany'sotherinternalorgansworkedindependently;thetransactionsbetweentheCompanyanditscontrollingshareholders,aswellasotherrelatedparties,wereconductedinafairandjustway.
(Ⅲ)AboutthedirectorsandtheBoardofDirectors:directorsoftheCompanywereelectedinstrictcompliancewiththestipulationintheCompanyLawandtheArticlesofAssociationoftheCompany.
AndthenumberofdirectorsandthestructureoftheBoardofDirectorswereinaccordancetotherequirementsoflawsandregulations.
Inaddition,alldirectorsoftheCompany,accordingtoRulesofProceduresfortheBoard,attendedtheBoardmeetingsinaconscientiousandresponsiblemanner.
(Ⅳ)AboutsupervisorsandtheBoardofSupervisors:thenumberofsupervisorsand17thestructureoftheBoardofSupervisorswereinlinewiththerequirementsoflawsandregulations.
AndallthesupervisorsoftheCompanyconscientiouslyperformedtheirdutiesbysupervisingthelegitimacyofdutyperformanceofthedirectors,managersandotherseniormanagementpersonnel.
(Ⅴ)Abouttheperformanceappraisalsystemandtheincentive&restrainingmechanism:theperformanceappraisalsystemandtheincentive&restrainingmechanismwereestablishedintheCompanytoworkimpartiallyandtransparently.
(Ⅵ)Aboutinformationdisclosureandtransparency:theSecretaryoftheBoardofDirectorswasassignedbytheCompanytotakechargeofinformationdisclosure.
Instrictcompliancewithrelevantlawsandregulations,aswellastheInformationDisclosureRules,relevantinformationwasdisclosedintimewithauthenticity,accuracyandcompleteness.
Anditwasmadesurethatallshareholderswerefairlytreatedintermsofinformationdisclosure.
(Ⅶ)Aboutinterestedparties:theCompanyfullyrespectedandprotectedthelegalrightsandinterestsofitsinterestedparties,andmanagedtoreachabalanceamonginterestsofitsshareholders,employees,thesocietyandotherinterestedparties,soastopromotetheCompany'scontinuousandhealthydevelopment.
(Ⅷ)Aboutmanagementoftherelationshipwithinvestors:theCompanyhadspecially-appointedstafftomanagetherelationshipwithinvestors,andestablishedaplatformofcommunicationwithinvestors.
Andthephonescallsandlettersfrominvestorswerecarefullyansweredandrepliedindetails.
Meanwhile,theinvestorsvisitingtheCompanyinpersonwerewellreceived.
2.
Particularsaboutdutyperformanceofindependentdirectors(Ⅰ)AttendanceofindependentdirectorsattheBoardmeetingsDuringthereportingperiod,theindependentdirectorsoftheCompany,instrictcompliancewithstipulationsintheWorkingSystemforIndependentDirectors,earnestlyandhonestlyperformedtheirdutiesbyattendingrelevantmeetings,understandingindepththeCompany'soperationstatusandprogressofmajorissues,providingprofessionallyrationalsuggestionsconcerningtheCompany'soperationanddevelopment,andexpressingtheirindependentopinionsregardingtheCompany'srelatedtransactions,externalguarantyaffairsandfundtransferwithassociatedparties.
Asindependentdirectors,theyplayedapositiveroleinpromotingascientificdecision-makingmechanismintheBoardofDirectors,stimulatingtheCompany'sdevelopmentandprotectingtheinterestsoftheCompanyandtheinvestors.
18NamesofindependentdirectorsThesupposedtimesofattendanceinthisperiodAttendanceinperson(times)Entrustedattendance(times)Absence(times)RemarksSunSheng'ai5500LeftthepostuponexpirationofthetermofofficeonMay,2008ZhuZhengfu8710ElectedasIndependentDirectoronMay,2008ZhongLiuhan131300Re-electedasIndependentDirectoronMay,2008GeYun131300Re-electedasIndependentDirectoronMay,2008(Ⅱ)ObjectionmadebyindependentdirectorsDuringthereportingperiod,theindependentdirectorsoftheCompanydidnotmakeanyobjectiontotheproposalsoftheBoardofDirectorsorotherimportantissuesoftheCompany.
3.
RelationshipbetweentheCompanyanditscontrollingshareholderFoshanHuaxinDevelopmentCo.
,Ltd.
wasthelargestshareholderoftheCompany,fromwhichtheCompanywascompletelyseparatedinsuchaspectsasbusiness,personnel,assets,organsandfinancialaffairs.
TheCompanywasfullycapableofrunningitsindependentandcompletebusiness.
(Ⅰ)Intermsofbusiness,theCompanywascompletelyindependentfromitscontrollingshareholderandwasfullycapableofrunningitscompletelyindependentbusiness.
(Ⅱ)Intermsofpersonnel,theCompanywasalsoindependentfromitscontrollingshareholder.
ItsGeneralManager,DeputyGeneralManager,SecretaryoftheBoardofDirectorsandfinancialpersonnelallreceivedremunerationfromtheCompany,whoalsodidnotholdanyimportantpositioninthecontrollingshareholderentity.
(Ⅲ)Intermsofassets,theassetsinvestedbythecontrollingshareholderintheCompanywereindependentandcompletewithaclearindicationofownership.
ThecontrollingshareholderdidnotmisappropriateorcontroltheCompany'sassets,orinterferewiththeCompany'smanagementofsuchassets.
(Ⅳ)Intermsoforgans,theCompany'sorganizationalstructurewascompletely19independentfromitscontrollingshareholder.
TheCompany'sBoardofDirectors,BoardofSupervisorsandotherinternalorgansworkedindependentlyaccordingtotheCompanyLaw,SecuritiesLawandotherrelevantlawsandregulations.
Thelargestshareholderbehavedaccordingtorules,anddidnotgobeyondtheCompany'sShareholders'GeneralMeetingfordirectorindirectinterferenceintheCompany'sdecision-makingandbusinessactivities.
(Ⅴ)Intermsoffinancialaffairs,theCompanymaintaineditsownaccounts.
ItscontrollingshareholderdidnotinterferewiththeCompany'saccountingactivities.
AndtheCompanyoperated,carriedoutaccountingandpaidtaxesinanindependentmanner.
4.
ImplementationofappraisalandincentivemechanismsforseniorexecutivesinthereportingperiodDuringthereportingperiod,accordingtotheprinciplesconcerningremunerationandequityincentivesformulatedattheShareholders'GeneralMeetingintheyear2004,aswellasotherrelevantrulesapprovedbytheBoardofDirectorsandtheRemunerationCommittee,theCompanyconductedaperformanceappraisalofitsseniorexecutivesandsettherangeofincentiveremunerationforseniorexecutivesbasedontheappraisalresults.
5.
Self-evaluationoftheCompany'sinternalcontrol(Ⅰ)OverviewoftheCompany'sinternalcontrolduringthereportingperiodDuringthereportingperiod,inaccordancewiththeCompanyLaw,SecuritiesLaw,CodeofCorporateGovernanceforListedCompanies,InternalControlGuideforListedCompaniesandotherrelevantlawsandregulations,theCompanycontinuouslyperfecteditscorporategovernance,standardizedtherelationshipwithitscontrollingshareholder,andenhanceditscontrolofroutineassociatedtransactions.
Meanwhile,theCompanyalsoendeavoredtoimprovethedocumentsconcerningtheinternalcontrolsystem,andpromotestandardizedoperation,whichbasicallyguaranteedtheeffectiveexecutionoftheinternalcontroloftheCompanyasalistedcompany,andlaidasolidfoundationfortheCompany'slong-termdevelopment.
Duringthereportingperiod,accordingtorelevantregulationsofChinaSecuritiesRegulatoryCommissionandShenzhenStockExchange,theCompanyfurtherimproveditsexistingrulesandregulationsbyformulatingnewrulesandregulationssuchasWorkingSystemofIndependentDirectors'AnnualReport,WorkRulesforGeneralManager,WorkingRegulationoftheAuditCommittee'sAnnualAuditandSystemforProtectingInsideInformation.
AndthementionedrulesandregulationswereputintopracticeafterthereviewandapprovaloftheBoardofDirectors.
20TheBoardofDirectorsbelievedthattheCompany'sexistinginternalcontrolsystemanditsrelevantsystemswerebasicallyestablishedandeffectivelyexecuted,thattheywereabletomeettherequirementsoftheCompany'smanagementanddevelopment,thattheycouldreasonablyguaranteetrueandfairfinancialstatements,andthattheycouldensurethehealthinessoftheCompany'sbusinessactivitiesandtheCompany'scontrolofoperationalrisks.
(Ⅱ)MajoractivitiesofinternalcontrolTheorganizationalstructureofinternalcontrolofFoshanHuaxinPackagingCo.
,Ltdisdemonstratedasfollows.
TheinternalauditingdivisionwasspeciallyestablishedbytheCompanytoindependentlyconducttheinternalauditandsupervisionaccordingtolawsandtheCompany'srelevantregulations,underthedirectleadershipoftheAuditCommitteeoftheBoard.
Specificallyspeaking,thedivisionwasmainlyresponsibleforirregularlyauditingtheincomeandexpenditureofalldepartments,supervisingproductionandoperation,providingreasonableassessmentontheauthenticity,legitimacyandrationalityoftheCompany'seconomicperformance,andsupervisingtheCompany'sinternalcontrolaswellasitsexecution.
211.
ThecontrolandmanagementoftheCompany'sshareholdingsubsidiaries:①theCompanyappointedthedirectors,supervisorsandotherseniorexecutivestoitsshareholdingsubsidiarieswiththeirresponsibilitiesandpowerclearlystated.
②theCompanyconvenedregularlytoanalyzethebusinessperformanceofitsshareholdingsubsidiaries,andexaminedtheirmonthly,quarterlyandannualfinancialreports.
③theCompany,throughbudgetmanagement,carriedoutaneffectiveperformanceassessmentofitssubsidiaries.
2.
Theinternalcontroloverrelatedtransactions:AccordingtotheManagementRulesforRelatedTransactions,theCompanymadespecificstipulationintermsoftheprinciplesofrelatedtransactions,relatedparties,associationrelationship,decision-makingproceduresofassociatedtransactionsaswellastheprocedureofdisclosinginformationconcerned.
Besides,theCompanyannuallysubmittedtotheBoardandtheShareholders'GeneralMeetingthe"ProposalonRoutineRelatedTransactions"accordingtoitsneedofoperationanddevelopment.
TheCompany'srelatedtransactionseveryyearwasstrictlyinlinewiththeManagementRulesforRelatedTransactions.
3.
Theinternalcontrolonprovidingexternalguaranty:TheCompany'sinternalcontrolovertheprovisionofexternalguarantywasinlinewiththeprinciplesoflegality,prudence,mutualbenefitandsafety.
AndtheindependentdirectorsadequatelyperformedtheirdutiesthroughexpressingtheirindependentopinionsconcerningtheCompany'sprovisionofguarantytoanyotherparty.
4.
Theinternalcontrolontheuseofraisedcapital:Inthereportingperiod,theCompanydidnotraiseandusecapital.
TheManagementRulesfortheUseofRaisedCapitalwasestablishedtofurtherregulatetheuseandmanagementoftheraisedcapital.
5.
Theinternalcontrolovermajorinvestments:TheCompanyestablishedtheManagementRulesforExternalInvestment,inwhichspecificrulesweremadeonthebasicprinciplesofexternalinvestment,andtheprocedureofexamination,approvalandmanagementforexternalinvestment.
AllinvestmentdecisionsoftheCompanyfollowedtheprocedureofexaminationandapprovalinstrictcompliancewithrelevantlaws,regulations,ArticlesofAssociationandotherrelevantrulesoftheCompany.
6.
Theinternalcontroloverinformationdisclosure:TheManagementRulesforInformationDisclosurewasestablishedintheCompany.
AccordingtotheRules,theSecretaryoftheBoardofDirectorswasthepersoninchargeofinformationdisclosure.
AndtheOfficeoftheBoardservedasthedepartmentinchargeofinformationdisclosure,whichwasunderthedirectleadershipoftheBoardSecretary.
WithathoroughanddeepknowledgeoftheCompany'soperation,performanceanddevelopmentstrategies,theBoardSecretarywasresponsibleformanagingthe22relationshipwithinvestors.
(Ⅲ)ProblemsexistingintheinternalcontrolandrectificationplanCurrently,theCompanyenjoysasoundinternalcontrolsystem.
Still,alongwiththeCompany'sgrowth,itsinternalcontrolsystemshouldbeconstantlyperfected,withspecialattentionpaidtothemanagementofsubsidiariesandthecontractmanagementsystem.
Intermsoftheexecutionoftheinternalcontrolsystem,theCompanyneedstoenhancetheeducationandtrainingoninternalcontrol,soastoincreasethestaff's,especiallythemanagementteam'sawarenessofriskscontrol;italsoneedstogivefullerplaytosuchorgansasthespecialcommitteesoftheBoardandthelegaladvisingdepartment.
InviewofthesaiddeficienciesintheCompany'sinternalcontrol,thefollowingmeasuresaretobetakenforimprovementbytheCompanyintheyear2009:1.
Tofurtherstrengthentheinternalauditdepartment,andensurethedepartment'scontrolandsupervisionofallbusinessactivities,soastoestablishacoherent,systematicandeffectiveinternalcontrolsystem.
2.
ToupdateandimprovetheCompany'smanagementofsubsidiariesanditscontractmanagementsystem,soastomeettheneedsoftheCompany'sdevelopment;toconstantlyimprovetheauthorizationmechanismandscopeoftheBoardandothermanagementpersonnelonmajorissues,andbetterthesupervisionmechanismtoregulatethedecision-making;topayattentiontobetteringtheNominationCommittee,StrategicPlanningCommittee,RemunerationandAppraisalCommitteeandAuditCommittee,andrefiningthework,soastoensuretheBoard'seffectivesupervisiononthemanagersandtogivefullplaytoallthesaidCommittees.
3.
TocontinuouslystrengtheninternalcontrolaccordingtotheGuidelineforInternalControlfromShenzhenStockExchangeandCSRC;toenhancetrainingforthedirectors,supervisors,otherseniorexecutivesandstaff,soastoperfectthecorporategovernancestructureandimprovetheoperation.
(Ⅳ)Overallself-evaluationoftheCompany'sinternalcontrolDuringtheyear2008,inaccordancewiththeCompanyLaw,SecuritiesLaw,CodeofCorporateGovernanceforListedCompanies,InternalControlGuideforListedCompaniesandotherrelevantlawsandregulations,theCompanycontinuouslyperfecteditscorporategovernance,standardizedtherelationshipwithitscontrollingshareholder,andenhanceditscontrolofroutineassociatedtransactions.
Meanwhile,theCompanyalsoendeavoredtoimprovethedocumentsconcerningtheinternalcontrolsystem,andpromotestandardizedoperation,whichbasicallyguaranteedtheeffectiveexecutionoftheinternalcontroloftheCompanyasalistedcompany,and23laidasolidfoundationfortheCompany'slong-termdevelopment.
Thepackagingandpaper-makingindustryiscurrentlyexperiencingarisingcompetition,whichhasadirectimpactontheCompany'sinternalcontrolenvironment.
AlongwiththegrowthoftheCompany,aswellasitsexpansionofmarket,scaleandbusiness,newchallengesareposedontheCompany'sinternalcontrol.
Inviewofthat,theCompanyisto,throughinnovationinsystems,management,workingmethodsandideas,andaccordingtotherequirementsofregulatoryauthoritiesandtheactualneedsoftheCompany'sdevelopment,continuetopromotealltheworkconcerninginternalcontrol,andconstantlyincreasetheefficiencyandeffectivenessoftheCompany'sinternalcontrol.
(Ⅴ)OpinionsfromtheSupervisoryBoardontheCompany'sself-evaluationofitsinternalcontrolFordetails,pleaserefertoSectionⅨReportoftheSupervisoryBoardofthisannualreport.
(Ⅵ)IndependentopinionsfromindependentdirectorsontheCompany'sself-evaluationofitsinternalcontrolAccordingtotherequirementsoftheCircularoftheShenzhenStockExchangeon2008AnnualReportsofListedCompanies,FoshanHuaxinPackagingCo.
,Ltd.
conductedaself-evaluationconcerningtheCompany'sinternalcontrol.
AsindependentdirectorsoftheCompany,weherebyexpressedouropinionontheCompany'sself-evaluationofitsinternalcontrolasfollows:TheCompany'sinternalcontrolandmanagementsystemhadbeenestablished,basicallycoveringeverylinkofitsoperation.
Incompliancewithrelevantlawsandregulations,aswellastherequirementsofsupervisoryauthorities,theCompanyadequatelyandeffectivelycontrolledandmanageditsmajoractivitiessuchasrelatedtransactions,provisionofexternalguaranty,majorinvestmentsandinformationdisclosure,whichguaranteedtheCompany'snormaloperationandmanagement.
Tosumup,wewereoftheopinionthatthereportontheCompany'sself-evaluationofitsinternalcontrolwasatrueandobjectivereflectionoftheactualsituationoftheCompany'sinternalcontrol.
24ⅦⅦⅦⅦBriefIntroductiontoShareholders'GeneralMeetingⅠⅠⅠⅠ.
AnnualShareholders'GeneralMeetingTheShareholders'GeneralMeeting2007washeldatthemeetingroomoftheCompanyon20May2008,ofwhichtheresolutionswerepublishedonSecuritiesTimesandTaKungPao(HK)dated21May2008.
ⅡⅡⅡⅡProvisionalShareholders'GeneralMeetings1.
The1stProvisionalShareholders'GeneralMeeting2008washeldatthemeetingroomoftheCompanyon5Jun.
2008,ofwhichtheresolutionswerepublishedinSecuritiesTimesandTaKungPao(HK)dated6Jun.
2008.
2.
The2ndProvisionalShareholders'GeneralMeeting2008washeldatthemeetingroomoftheCompanyon15Aug.
2008,ofwhichtheresolutionswerepublishedinSecuritiesTimesandTaKungPao(HK)dated16Aug.
2008.
3.
The3rdProvisionalShareholders'GeneralMeeting2008washeldatthemeetingroomoftheCompanyon15Dec.
2008,whichwasacombinationofattendancevotingandinternetvoting.
AndtheresolutionsofthemeetingwerepublishedonSecuritiesTimesandTaKungPao(HK)dated16Dec.
2008.
25ⅧⅧⅧⅧReportoftheBoardofDirectors.
ⅠⅠⅠⅠReviewoftheCompany'soperatingstatusduringthereportingperiod(ⅠⅠⅠⅠ)OverviewoftheCompany'sperformanceduringthereportingperiodTheyear2008sawaslowdownoftheChineseeconomy.
Withaloominginternationalfinancialcrisis,andageneralrecessionintheworld'smajoreconomiessuchastheUS,EuropeandJapan,Chinamaintainedasteadyeconomicperformancewithamildslowdown.
AccordingtothepreliminarystatisticsreleasedbytheNationalBureauofStatistics,in2008,Chinaachievedayear-on-yearGDPgrowthof9.
0%,amarkeddecreasecomparedtothegrowthof13%in2007.
Intheyear,theGDPgrowthrateshowedagradualdecreasefromthefirstquartertothefourthquarter,withthegrowthrateofthefourthquarterreachingasever-yearlow.
Themarketdemandofthepaper-makingindustryiscloselyrelatedtothesituationofthenationaleconomy.
Consequently,duetotheeconomicprosperityinthefirsthalfof2008,theCompanyexperiencedaboomingmarketwithasharpriseofcost.
However,theCompanyencounteredarapidlyfallingmarketwithaconsiderablepricedecreaseofthebulkrawmaterialsinthesecondhalfoftheyear,mainlybecauseofthesignificanteconomicslowdownandtheinternationalfinancialtsunamiduringtheperiod.
Theyear2008witnessedtheupsanddownsofChina'smacro-economy,aswellastheCompany'spassingthroughaperiodofcriticalchallenge.
Inthefaceofacomplexandchangeableinternationalanddomesticeconomicsituation,theCompany'smanagementteam,undertheleadershipofChinaChengtongGroupandChinaMaterialDevelopmentandInvestmentGeneralCorporation,activelydealtwiththecrisis,overcameaseriesofdifficulties,andtrieditsbesttomaintaintheCompany'ssteadydevelopment.
InspiteoftheCompany'sefforts,itsbusinessperformanceintheyearstillshowedadeclineduetoanespeciallyharshexternalenvironmentasawhole.
Duringthereportingperiod,theCompanyachievedanoperationrevenueofRMB1,412,674,200,aincreaseof11.
28%overlastyear;anoperatingprofitamountingtoRMB40,124,300,decreasingby65.
24%overlastyear;anetprofitattributabletotheshareholdersoftheparentcompanyreachingRMB42,588,800,downby61.
53%fromthepreviousyear;andanetprofitafterdeductingthenon-recurringgainsandlossesamountingtoRMB36,900,800,adropof64.
86%overlastyear.
(ⅡⅡⅡⅡ)Scopeofmainoperationanditsoperatingstatus1.
ScopeofmainoperationTheCompanyisengagedinthepaper-making,printingandpackagingindustry.
Itmainlyproducesandsellshigh-classandhigh-qualitypackagingmaterialsandpackagingproductsincludinghigh-classcoatedwhiteboard,softpackagingboxesforliquidfood(tetrapack),color-printedpackagingproducts,etc.
.
Amongthem,themainproductsoftheCompanyarehigh-qualitycoatedwhiteboardandcolor-printed26packagingproducts.
2.
Incomeandprofitofmainbusiness(1)AccordingtoproductsIndustryIncomefrommainoperation(Unit:Yuan)Costofmainoperation(Unit:Yuan)Profitratioofmainoperation(%)Increase/decreaseofoperationincomeoverlastyear(%)Increases/decreaseofmainoperationcostoverlastyear(%)Increases/decreaseofprofitratioofmainoperationoverlastyear(%)Whiteboardpaper1,281,092,076.
571,116,491,374.
5212.
85%11.
78%9.
66%1.
69%Printingproducts128,846,302.
87100,609,048.
2221.
92%8.
33%6.
59%1.
28%(2)AccordingtoregionsRegionsMainbusinessincome(Unit:Yuan)Increase/decreaseofmainbusinessincomeoverlastyear(%)Domestic1,167,771,719.
9355.
92%Foreign244,902,445.
89___-52.
95%(ⅢⅢⅢⅢ)MainsuppliersandcustomersDuringthereportingperiod,thecombinedamountofsalestothetopfivecustomersreachedRMB150,552,495.
16,takingup10.
66%oftheCompany'stotalsales.
AndthecombinedpurchasefromthetopfivesuppliersamountedtoRMB328,878,212.
01,accountingfor19.
55%oftheCompany'stotalpurchase.
(ⅣⅣⅣⅣ)AssetscompositionoftheCompanyanditschangesduringthereportingperiodUnit:(RMB)Yuan20082007ItemsAmountProportionintotalassetsAmountProportionintotalassetsIncrease/decreaseoverlastyear(%)TotalAssets3,425,460,446.
521003,015,150,085.
8810013.
61%Currencycapital208,091,895.
596.
0863,767,336.
502.
12226.
33%Prepayment70,122,453.
302.
053,637,855.
820.
121,827.
58%27Inventory335,648,893.
099.
80186,800,021.
236.
2079.
69%Constructioninprogress1,176,195.
540.
0439,423,119.
781.
31-97.
02%Engineermaterial--13,629,040.
020.
46-100.
00%Notespayable54,510,322.
251.
609,155,830.
910.
31495.
37%Interestpayable11,681,609.
010.
351,391,185.
090.
05739.
69%Otherpayables22,664,445.
760.
6736,286,574.
751.
21-37.
54%Long-termborrowings440,000,000.
0012.
85179,334,850.
005.
95145.
36%Notes:1.
Thecurrencycapitalincreasedby226.
33%comparedtolastyear,mainlybecausetheCompanycollectedmoreloansanddidnotusealloftheexpandedbankloans.
2.
Theprepaymentincreasedby1,827.
58%overlastyear,mainlyduetothelargeamountofprepaymentcausedbythepurchaseofrawmaterialsbyFoshanHuafengPaperCo.
,Ltd.
.
3.
Theinventoryincreasedby79.
69%,mainlyduetotheinventoryincreasebyFoshanHuafengPaperCo.
,Ltd.
andadecliningdemandonthemarket.
4.
Theconstructioninprogressdecreasedby97.
02%,mainlybecausemostoftheconstructionsinprogresswerecompletedandturnedintothefixedassetsattheendofthisperiod.
5.
Theengineermaterialdecreasedby100.
00%,mainlybecausetheconstructionswerecompletedandthesurplusmaterialwasturnedintoinventory.
6.
Thenotespayableincreasedby495.
37%,mainlybecausetheamountofunduebanker'sacceptancebillsheldbyFoshanHuafengPaperCo.
,Ltd.
waslarge.
7.
Theinterestpayableincreasedby739.
69%,mainlyduetoalargeamountofinterestwithdrawalcausedbytheCompany'sshort-termdebtofRMB500million.
8.
Otherpayablesdecreasedby37.
54%,mainlybecausetheCompanypaidoffmoredebtstotheparentCompany—FoshanHuaxinDevelopmentCo.
,Ltd.
.
9.
Thelong-termborrowingsincreasedby145.
36%,mainlybecauseoftheCompany'sincreasedabilitytohandlelong-termborrowings.
(Ⅴ)SignificantchangesofmajorfinancialdatainthereportingperiodUnit:(RMB)YuanItemsY2008Y2007Increase/decreaseoverlastyear(%)Salesexpenses47,231,627.
3131,760,154.
8748.
72%28Administrativeexpenses79,378,739.
6154,659,328.
2045.
23%Financialexpenses82,182,027.
5047,324,512.
8873.
66%Assetsimpairmentloss11,136,522.
266,439,391.
2872.
95%Incomefrominvestments58,258,692.
6895,306,219.
03-38.
88%Notes:1.
Thesalesexpensesincreasedby48.
72%overlastyear,mainlybecausethehigh-classcoatedwhiteboardprojectofFoshanHuafengPaperCo.
,Ltd.
withanannualproductionof300,000tonswasformallyputintooperationinZhuhaiinthesecondhalfoftheyear2007,whichexpandedthesalesexpenses.
2.
Theadministrativeexpensesincreasedby45.
23%fromthepreviousyear,mainlybecausethehigh-classcoatedwhiteboardprojectofFoshanHuafengPaperCo.
,Ltd.
withanannualproductionof300,000tonswasformallyputintooperationinZhuhaiinthesecondhalfoftheyear2007,whichexpandedtheadministrativeexpenses.
3.
Thefinancialexpensesincreasedby73.
66%comparedtolastyear,mainlybecausethehigh-classcoatedwhiteboardprojectofFoshanHuafengPaperCo.
,Ltd.
withanannualproductionof300,000tonswasformallyputintooperationinZhuhaiinthesecondhalfoftheyear2007.
Anditsinterestexpenseswereincludedintheadministrativeexpenses,whichnaturallyexpandedtheadministrativeexpenses.
4.
Theassetsimpairmentlossincreasedby72.
95%overlastyear,mainlyduetotheincreasinginventoryofFoshanHuafengPaperCo.
,Ltd.
andthesignificantpricedecreaseofthecompany'sproductscausedbymarketfactors.
5.
Theincomefrominvestmentsdecreasedby38.
88%overlastyear,mainlybecauseTetraPakHuaxin(Foshan)PackagingCo.
,Ltd.
,theCompany'saffiliatedcompany,wasaffectedbytheMelamineIncidentinthemarket,whichledtopoorsalesofitsproductsinthefourthquarter.
(ⅥⅥⅥⅥ)CashflowstructureoftheCompanyinthereportingperiodUnit:(RMB)YuanItemsY2008Y2007Increase/decreaseNetcashflowcausedbyoperationactivities-27,817,792.
6167,039,489.
50-141.
50%Netcashflowcausedbyinvestmentactivities-404,549.
41-197,504,757.
6499.
80%Netcashflowcausedbyfinancingactivities172,546,901.
1181,332,883.
33112.
15%Netincreaseincashandcashequivalents144,324,559.
09-49,132,384.
81393.
74Notes:1.
Thenetcashflowcausedbyoperationactivitiesdecreasedby141.
50%overlastyear,mainlyduetoasignificantpricedecreaseoftheproductsofFoshanHuafeng29PaperCo.
,Ltdcausedbyafallingmarketdemand.
2.
Thenetcashflowcausedbyinvestmentactivitiesincreasedby99.
80%fromthepreviousyear,mainlybecausethehigh-classcoatedwhiteboardprojectofFoshanHuafengPaperCo.
,Ltd.
withanannualproductionof300,000tonswasformallyputintooperationinZhuhaiinthesecondhalfoftheyear2007,whichledtoasignificantdecreaseoffixedassetsandotherlong-termassetspurchasedandconstructedduringthisperiod.
3.
Thenetcashflowcausedbyfinancingactivitiesincreasedby112.
15%comparedtolastyear,mainlybecauseoftheCompany'sincreasedbankloans.
4.
Thenetincreaseincashandcashequivalentsincreasedby393.
74%fromthepreviousyear,mainlybecausetheCompanycollectedmoreloansanddidnotusealloftheexpandedbankloans.
(VII)OperationandPerformanceAnalysisofMajorHoldingSubsidiariesandJointStockSubsidiariesoftheCompany1.
FoshanHuafengPaperCo.
,Ltd:thisenterprisehasaregistrationcapitalofUSD121,390,000,withcoatedwhiteboardasitsmajorproduct.
TheCompanyholds75%equitiesofthisenterprise.
Attheendofthereportingperiod,totalassetsofthisenterprisewasRMB2,943,973,100.
Inthisyear,theCompany'sbusinessrevenuewasRMB1,290,298,400,withanoperatingprofitofRMB-11,322,500andanetprofitofRMB-10,160,300.
In2008,FoshanHuafengPaperCo.
,Ltdexperiencedasharpdecreaseinprofit,whichwasmainlyattributedtothedrasticfluctuationofthepapermakingindustry'smarket.
Inthefirsthalfyearof2008,duetothefactorofOlympicGamesandagoodmarketexpectation,themarketdemandforwhiteboardswasoverenlarged,boostingariseinthepriceofvariouspaperstodifferentdegrees,andresultinginprosperityofbothproductionandsales.
YetsinceJun.
of2008,theexportprocessingindustryshranksubstantially,withaslowdeclineinmarketdemandandadecreaseinprice,asaresultoftheadjustmentofthestateindustrialpolicy,theimplementationoftightmonetarypolicyandthenewLaborLaw,aswellastheappreciationofRMB.
Asitgraduallybecameclearthattheforeignmarketdemanddecreased,thebacklogshoardedbycustomerscouldnotbeclearedupquickly.
Moreover,withthepressureofnewlyincreased800,000tonscapacityin2007,thesituationofsupplyexceedingdemandinducedgreatbacklogpressureonthewhiteboardindustry,withpriceofproductsgraduallydecreasingandsalessubstantiallyshrinking.
Ontheotherhand,themajorrawmaterialssuchaspetrol,wastepaper,andcoalexperiencedsubstantialincreaseinpriceinthefirsthalfyear,inducingthecostofproductionremainedhighforalongtime.
InOct.
,theinternationalfinancialcrisisfurtherdeteriorated,causingashapedecreaseinpriceofbulkcommodityglobally.
Thepriceofpaper,togetherwiththepriceofrawmaterialslikenonferrousmetalsandwastepaper,droppednearly50%inonlyamonth.
However,thedecreaseofpaperpricefailedtostimulateaneffectiveincreaseinsalesvolume,asthedistributorsofthisenterpriseheldapessimisticattitudetowardsfuturedemand.
Itisobviousthat,ashapedecreaseindemandfor30whitebroadsbothathomeandabroadcausedbytheinternationalfinancialcrisisin2008isthemajorreasonforthebusinessdecreaseofFoshanHuafengPaperCo.
,Ltd.
2.
Huaxin(Foshan)ColorPrintingCo.
,Ltd:thisenterprisehasaregistrationcapitalofUSD6,600,000withpressworkasitsmajorproduct.
TheCompanyholds75%equitiesofthisenterprise.
Attheendofthereportingperiod,totalassetsofthisenterprisewasRMB240,429,100.
Inthisyear,theCompany'sbusinessrevenuewasRMB130,679,400,withanoperatingprofitofRMB3,712,800andanetprofitofRMB3,420,600.
Theenterprise'sbusinessofcolorprintingremainedstableinafluctuating/vibratingmarket.
Inthefirsthalfyearof2008,thepriceofrawmaterialsforprintingclimbedupcontinuouslyandimposedgreatcostpressureonHuaxin(Foshan)ColorPrintingCo.
,Ltd.
Inthesecondhalfyear,thepriceofpaperproductsdroppedsubstantially,easingthecostpressureandincreasingthegrossmargin.
AsthecustomersofHuaxin(Foshan)ColorPrintingCo.
,Ltdmainlyfacedtodomesticmarket,theydidnotsufferfromthedirectimpactofthefinancialcrisis,withlittleinfluenceonthebusiness.
Atthesametime,theenterprisetooktheleadindevelopingthebusinessofBarCodeprintingoffoodandmedicine,becomingoneofthefewenterprisescontrollingthebusinessofBarCodeprintingoffoodandmedicine.
Thisbusinesshasbecomeanewgrowthpoint,ensuringastableoperationoftheenterprise.
3.
TetraPakHuaxin(Foshan)PackagingCo.
,Ltd:thisenterprisehasaregistrationcapitalofUSD67,000,000,withTetrapackagingmaterialasitsmajorproduct.
TheCompanyholds25%equitiesofthisenterprise.
Attheendofthereportingperiod,totalassetsofthisenterprisewasRMB1,252,410,700.
Inthisyear,theCompany'sbusinessrevenuewasRMB1,224,560,600,withanetprofitofRMB233,034,800.
In2008,thejointstocksubsidiariesoftheCompany,TetraPakHuaxin(Foshan)PackagingCo.
,Ltd,experiencedaslightdecreaseinprofitcomparedtothatof2007,whichwasmainlyattributedtotheeventofmelaminemilk.
Inrecentyears,dairyproductmarketwitnessedrapiddevelopmentandflourishedevenfurtherintheyearofOlympicGames.
FromJan.
toAug.
in2008,thesalesofTetraHuaxinpackagingpaperforliquors,showedamomentumofstablegrowthinsalesvolume.
ButinlateSep.
,undertheinfluenceofSanluMilkPowderEvent,inwhichpoisonousmaterialmelaminewasfoundaddedinthemilkpowder,Chinamilkindustrywasputunderqueryofcustomersbothathomeandabroad,triggeringtrustcrisisofChinamilkindustryandaplungeofdairyproductssalesvolume.
ThesalesofTetraPak,whichisthemostcommonusedpackagingmaterialforliquormilks,droppedsubstantially,correspondingtothedecreaseinliquormilkssalesvolume.
Moreover,theslowdownofstateeconomicgrowthweakenedtheconsumptionpoweroftheresidents,exertingarelativelybiginfluenceontheoperatingperformanceofTetraPakHuaxin(Foshan)PackagingCo.
,Ltdin2008.
31II.
DevelopmentandFutureOutlook(I)DevelopmentTrendofThisIndustryandMarketStructureFacedbytheCompany1.
DevelopmentTrendofThisIndustry:Currently,Chinapapermakingindustryisnowexperiencingacriticalperiodoftransition,withsharpcontradictionsbetweensupplyanddemandofmediumandhighgradecommodities.
APolicyfortheDevelopmentofPaperIndustryreleasedbyNationalDevelopmentandReformCommissionhaspointedoutthedirectionoffuturedevelopmentforthepapermakingindustry,whichmainlyincludes:(1)Longitudinaldevelopment,whichmeanstoimprovetheself-supplycapabilityoffiberresources,promotetheintegratedprojectofforestandpaperasthemajordirectionofindustrialdevelopment,expandthescaleofforestrybusiness,aswellasrestructurethenon-woodfiberresources,soastoestablishasmoothupstreamlink,breakthroughthebottleneckofdomesticrawmaterialssupplyandbreakthepatternofdependingontheforeignsupplyofwoodpulp,relyingonitsowncapability.
(2)Horizontalintegration,whichmeanstodeveloptheCompanyintoalarge-scalepulp-makingandpapermakingenterprisegroupwithstronginternationalcompetitiveness,aswellasimprovetheconcentrationdegreeoftheindustry,soastorealizescaleeffect.
(3)Introductionofrecyclingeconomy,whichmeanstoreducetheconsumptionoffiberresourcesandtheemissionofpollutants,andpayspecialattentiontoimprovetheeconomiceffectivenessandenvironmentqualityoftheCompany.
2.
MarketCompetitionPatternFacedbytheCompanyTheCompanybelongstolightmanufacturingindustry,anditsbusinessmainlyinvolvescoatedwhiteboardindustry,packageprintingindustryandsoftpackageforliquidfood(TetraPak)industry.
Papermakingindustryisoneofthemajorbasicrawmaterialindustriesofnationaleconomy,withhighdegreeofindustrialrelevancy.
Withthechangeofdomesticeconomicenvironment,papermakingindustrywasconfrontedwithasituationthatthepriceofbothrawmaterialsandproductsdecreasedsharply,presentingacriticalchallengetotheprofitabilityofpapermakingenterprises.
AccordingtothestatisticsreleasedbyChinaPaperAssociation,forthefirsttimeanegativegrowthappearedinChinapapermakingindustryinSep.
2008,revealingachangeofthesituationthattheproductivityofpapercouldnotmeasureuptothedemand,whichhadpersistedsincethefoundationofthecountry.
Withtheinfluenceoftheinternationalfinancialcrisisandthefactorofsupplyanddemand,especiallythegloomyeconomyofdownstreamexportenterprises,itisforecastedthat,inthenexttwoorthreeyears,thewhiteboardindustryisunlikelytorecovertoitsboomin2007and2008.
However,withthefocus32ofthenationaleconomicpolicyshiftingtostimulatedomesticdemand,especiallyaseriesofmeasurestakentoguidethecontinuouslyincreasingconsumptionpowerofruralresidents,anewperiodofboomwilloccurinruralmarket,withtheincreasingdemandforbulkcommoditiesandconsumergoods,includingbigorsmallelectricalhouseholdappliances,toys,foodanddrinksetc.
.
Asaresult,productivityofconsumergoodsmanufacturingindustry,whichwastosatisfytheexportmarket,wouldshiftquicklytothedomesticmarket,whichnodoubtwillhaveapositiveeffectonthedevelopmentofcoatedwhiteboardmarket.
Inpackageprintingindustry,duetothecontinuousdevelopmentofourcountry'seconomyandimprovementofpeople'slivingstandard,packageprintingindustryhasdevelopedrapidly.
Withlittlepollutionyetlarge-scaleemploymentoflaborforce,packageprintingindustryhasbrightoutlookofdevelopment.
Huaxin(Foshan)ColorPrintingCo.
,LtdlocatesontheprintingindustrybeltofthePearlRiverDelta,withGuangdongProvinceasitscenter.
Therefore,itsmajorcustomersmainlyfacetodomesticmarket.
Since2008,thecolorprintingindustryhasbeenputundertheinfluenceoftheinternationalfinancialcrisis,theadjustmentofnationalexportpolicy,andthesharpdecreaseinforeigndemand,causingmanyexport-orientedprintingcompaniesinGuangdongprovinceshiftingtodevelopdomesticmarketvigorously,andasaresultmakingthecompetitionfiercerincolorprintingindustryinthePearlRiverDelta.
Insuchkeencompetitionenvironment,Huaxin(Foshan)ColorPrintingCo.
,Ltd,relyingonadvancedequipmentsandtechnologies,aswellasmaturemanagementsystem,hasacquiredstrongcompetitivenessandbrightmarketoutlookinpackageprintingindustry.
Insoftpackageforliquidfood(TetraPak)industry,thejointstocksubsidiariesoftheCompany,TetraPakHuaxin(Foshan)PackagingCo.
,Ltdhasparticularcompetitiveedgeswithitsproductsrankingamongthetopglobally.
TetraPakproducedbytheenterpriseiswithhightechnologicalcontentandhighaddedvalue,thuspossesseshugemarketpotentialandenormousroomforgrowthindomesticmarket.
Itsproductsarewidelyappliedtodrinksproducedbymanywell-knownenterprisesbothathomeandabroad,aswellasexportedtoHongKongandSoutheastAsia.
Currentlytheproductionscaleofitsproductshasreachedabove6,500,000,000.
SincetheinfluenceofMelamineMilkEventmaylastforsometime,andtheslowdownofnationaleconomywillweakentheconsumptionpowerofresidents,suchsituationswillexertsomenegativeinfluenceontheproductionandoperationofTetraPakHuaxin(Foshan)PackagingCo.
,Ltdin2009.
(II)OpportunitiesandStrategiesforFutureDevelopmentoftheCompany1.
OpportunitiesforFutureDevelopment(1)Thepriceofsuchrawmaterialsaspulps,wastepaperetc.
graduallydecreases.
Besides,thedeclineofcrudeoilpricewillenablethecostofchemicalrawmaterialsandtransporttomaintainatarelativelylowlevelforsometime,releasingthecostpressureonpapermakingindustry;33(2)Tomakegreateffortstoimprovethelevelofexportcommodities'packaging,anddevelopvigorouslynewmaterialsforpackage;todevelopgreenpackage,whichisthedevelopmenttrendofpapermakingandpackingindustryinthefuture;(3)Suchexternalfactorsasthefinancialcrisisetc.
leadstomoreandmorefiercecompetitioninthemarket,speedsuptheprocessofindustryshakeoutandprovidesarareopportunityforintegrationofpapermakingindustry;(4)WiththeappreciationofRMB,thepurchasecostoftherawmaterialsindomesticpapermakingenterpriseswilldecrease,sowillthecostofproduction.
2.
StrategiesforFutureDevelopment(1)Throughintegrationofupstreamresources,reductionofcosts,aswellasestablishmentofasmoothandcompleteindustrialchaincombiningplanting,pulp-making,papermaking,printing,andpackaging,toformspecialcompetitiveedgesofitsown,andacquiretheleadingoreventheleadershippositioninplanting,pulp-makingandpapermaking,aswellasprintingandpackagingindustry.
(2)Toimplementindustrialupgradestrategy,enterthefieldoffoodpackagingpaper,whichisstillblankindomesticmarket,throughmergingandrecombinationaswellasutilizingparticularresources,soastooccupythedomesticmarketoffoodpackagingpaper.
(3)Totrytomakethecapitalmarketperformitsbestfunctioninfinancing,layingaresourcefoundationfortheimplementationofnextstrategy;(4)TospeeduptheresourcesdistributionofthefoodpackagemanufacturingindevelopedcitiesofChina,forminganetworkalloverthecountry,offeringservicestocompletepackage,offeringcomprehensiveandall-directionalservicestocustomers.
Moreover,todeveloptogetherwithcustomersbyhelpingcustomerstoachieve,aswellastofurtherstrengthenthecorecompetitivenessandprofitabilityoftheCompanybyestablishingstrategicpartnershipwithcustomers.
(III)WorkPlanoftheCompanyin20091.
Torenewthemanagementconceptsandmethods,accordingtothechangeofthemarket,developnewproducts,optimizetheproductmix,andimproveprofitability;2.
Toenhancetheimplementationofpaperpackagingindustrystrategy,payingspecialattentiontospeedupthepromotionofliquorpackagingpaperproject;3.
Toexpandfinancingchannels,conductcapitaloperationactively,andensurethattheinvestmentprojectsoftheCompanyareimplementedasscheduled;4.
Toestablishandimplementriskmanagementsystem,soastoconductprevention34ofrelevantriskpoints;5.
ToadjustandoptimizetheoperationandmanagementmodeoftheGroup,aswellasthefunctionallocalizationofheadquarters;6.
Toinnovatethesafetymanagementwork,andenhancesafety,managementandsupervisionthroughadministrativemeans.
(IV)FutureFundRequirementandApplicationPlanTheCompanybelongstocapitalintensiveindustryandresource-constrainedindustry,andthedevelopmentofCompanyisaccompaniedbystartingnewprojectsaswellasincreasingdemandsforcapital.
IftheimportantassetsreorganizationprojectofincreasingfundstocontrolZhuhaiHongtaRenhengPaperCo.
,Ltdcanbesuccessfullyimplemented,thebusinessscaleandproductivityoftheCompanywillbefurtherexpanded,andfundrequirementwillalsobeincreased.
Accordingtofundrequirementofstrategiesforfuturedevelopment,theCompanywilladoptmeasuresasfollowtoensuresufficientfunding:1.
Tomakereasonableuseofself-owncapital,expandsaleschannelactively,soastospeeduptherecoveryoffunds,andimproveassetliquidityoftheCompany;2.
Toactivelyestablishfavorablecommunicationandcooperationrelationshipswithlocalfinancialinstitutesandseekloansupportfromcommercialbanks;3.
Toenhancethetrackandstudyofcapitalmarketpoliciesaswellasmonetarymarketpolicies,trytorealizerefinancingincapitalmarkettoraisefund,byissuingcorporatebond,short-termfinancingbondsandincreasingissuesinstocks.
(V)MajorRisksandCountermeasures1.
TheRiskofMacroeconomicFluctuationThemarketdemandofpapermakingindustryiscloselyrelatedtothedegreeofprosperityofnationaleconomy,whichwillexertgreatinfluenceonthesupplyanddemandrelationofpapermakingindustry.
Lastyear,theinternationalfinancialcrisisdeteriorated,leadingtoeconomicdeclinesinmajoreconomies.
Theeconomyofourcountrygenerallymaintainedstablewithaslighttendencytowardsdecline,andtheinfluenceoftheinternationalfinancialcrisiswilllastforalongtimetocome.
Undersuchsituations,theChinesegovernmenthasdulyadoptedapositivefiscalpolicyandarelativelyloosemonetarypolicy,butwhethersuchmeasurescanreverseeconomytransitionandmaintainarapidandcontinuousgrowthofeconomyremainsuncertain.
Iftheeconomygrowthsloweddown,itwoulddefinitelyrestrainthedemandforpackagingpaperboards,andasaresult,haveanegativeeffectonthepapermakingindustry.
Inordertoavoidtheinfluenceofmacroeconomicfluctuation,theCompanyintendsto35expandproductionscaleontheonehand,andatthesametime,focuswillbeplacedonthedevelopmentofadvancedpackagingpaperforliquorfoods,withhightechnologicalcontentandhighaddedvalue,soastochangethecurrentsimpleproductmix.
TheCompanywillacquireandcontrolrelevantindustrialresourcesquicklyandeffectively,upgradetheindustryandfurtherconsolidateitspositioningreenpackagemarket,bymeansofindustrialinvestmentcombinedwithcapitaloperation,aswellasmerging,joint-stockandreorganizationetc.
.
Theexpansionofproductionscalewilllayasolidfoundationforimplementingtheintegratedprojectofforest,pulpandpaper,controllingupstreamresources,aswellasestablishingacompleteindustrialchain,soastoimprovethecapabilityoftheCompanytooperatesustainablyaswellaswithstandrisks.
2.
TheRiskofMarketCompetitionInrecentyears,withthecontinuousexpansionofdomesticpapermakingproductivity,in2007,forthefirsttime,totalproductionexceededtotalconsumption,withthetotalproductionofpapermakingindustryreaching73,500,000tonsin2007,upby13.
08%comparedwith65,000,000tonsoflastyear,andthetotalconsumptionreaching72,900,000tons,upby10.
45%comparedwith66,000,000tonsoflastyear.
Althoughmarketcompetitionvariesaccordingtodifferentkindsofpapers,yetingeneral,themarketcompetitionisbecomingfiercer.
Especially,aconsiderablepartofdownstreamcustomersofpackagingpaperareexport-orientedenterprises,whichhavesufferedgreatimpactfromtheeconomicrestructuring.
Suchimpactsonthemwillinevitablybeconductedtoupstreampackagingpapermakingenterprises,bringingaboutfiercecompetitioninpackagingpaperindustry,whichinducespressureonbusinessperformanceoftheCompany.
Withtheimpactofthefinancialcrisisonexportmarketandrelevantindustries,andwiththeincreasinglysaturatedmarketofcoatedwhiteboardsinthePearlRiverDelta,todevelopnewmarketspacehasbecomeanecessarypathfortheCompanytoseekfurthergrowth.
Inordertodoso,theCompanywillfocusonexploringwhiteboardmarketinmainlandwithdomesticsalesasmajortarget,basedonthestate'snewapproachofstimulatingdomesticdemandsandtransformingwaystoachieveeconomicgrowth.
Ontheonehand,theCompanywillreinforcethemomentumtodevelopcustomersinotherprovinces,developthebusinessintoneighboringprovincesandareasbymeansofdirectsales,aswellasconsolidateandexpandthesalesareainSouthChinamarket.
Ontheotherhand,theCompanywilldevelopvigorouslyitsdistributor'steaminkeyprovincesorcitiesofmainland,fosteradistributor'steamwithqualification,capabilityandcredibility,establishmoremarketingchannels,soastofurtherexpanditsmarketshare.
Moreover,logisticsdistributioncentersinotherprovincesaswellaslogisticsdistributiontransfercenterswithrelativelylargescaleandradiationscopewillbeestablishedtomaketheCompany'sproductsmoreresponsivetothelocalmarkets.
III.
Investment36(I)UtilizationofRaisedProceedsTheCompanyhadnotraisedanyproceedsinthereportperiod,norwasthereanyproceedsraisedinpreviousperiodsandstillusedinthereportingperiod.
(II)ImportantInvestmentProjectswithNon-RaisedProceedsTheCompanyhadnotinvestedanyimportantprojectwithnon-raisedproceeds.
IV.
SignificantAccountingMistakesinPreviousPeriodThejoint-stocksubsidiaryoftheCompany,TetraPakHuaxin(Foshan)PackagingCo.
,Ltdrestateditsintangibleassetsandotherintangibleassetsattheendof2007.
Afterrestatement,theintangibleassetsshouldbeamortizedbeforetheendof2007.
Afterrestatementandcorrection,the2007annualnetprofitincreasedbyRMB1,067,246.
92,the2008retainedearningsdecreasedbyRMB6,591,819.
25,includingadecreaseofundistributedprofitsbyRMB5,932,637.
32andadecreaseofsurplusreservesbyRMB659,181.
93.
V.
RoutineWorkoftheBoardofDirectors(I)MeetingsandResolutionsinthereportingperiodInthereportingperiod,theCompanyheld13meetings:1.
The1stmeetingofthe3rdBoardofDirectorswasheldinmannerofvotingbycorrespondenceonJan.
14,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandTaKungPaoonJan.
15,2008.
2.
The2ndmeetingofthe3rdBoardofDirectorswasheldinmannerofpresentvotingonMar.
25,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandHongKongTaKungPaoonMar.
27,2008.
3.
The3rdmeetingofthe3rdBoardofDirectorswasheldinmannerofvotingbycorrespondenceonApr.
21,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandHongKongTaKungPaoonApr.
22,2008.
4.
The4thmeetingofthe3rdBoardofDirectorswasheldinmannerofpresentvotingonApr.
23,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandHongKongTaKungPaoonApr.
25,2008.
5.
The5thmeetingofthe3rdBoardofDirectorswasheldinmannerofvotingbycorrespondenceonMay12,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandTaKungPaoonMay13,2008.
6.
The1stmeetingofthe4thBoardofDirectorswasheldinmannerofpresentvotingonMay20,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandHongKongTaKungPaoonMay21,2008.
7.
The2ndmeetingofthe4thBoardofDirectorswasheldinmannerofvotingby37correspondenceonJun.
12,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandHongKongTaKungPaoonJun.
13,2008.
8.
The3rdmeetingofthe4thBoardofDirectorswasheldinmannerofvotingbycorrespondenceonJul.
29,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandHongKongTaKungPaoonJul.
30,2008.
9.
The4thmeetingofthe4thBoardofDirectorswasheldinmannerofvotingbycorrespondenceonJul.
31,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandHongKongTaKungPaoonAug.
1,2008.
10.
The5thmeetingofthe4thBoardofDirectorswasheldinmannerofvotingbycorrespondenceonAug.
12,2008,onwhichthesemi-annualreportandsummerywereapproved.
11.
The6thmeetingofthe4thBoardofDirectorswasheldinmannerofpresentvotingonOct.
8,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandHongKongTaKungPaoonOct.
27,2008.
12.
The7thmeetingofthe4thBoardofDirectorswasheldinmannerofvotingbycorrespondenceonOct.
22,2008,onwhichthethirdquarterlyreportwasapproved.
13.
The8thmeetingofthe4thBoardofDirectorswasheldinmannerofvotingbycorrespondenceonNov.
20,2008,andnoticeonresolutionsofthismeetingwaspublishedonSecuritiesTimesandHongKongTaKungPaoonNov.
27,2008.
(II)ImplementationoftheResolutionsoftheShareholders'GeneralMeetingbytheBoardofDirectorsIn2008,theBoardofDirectorswasabletoimplementtheresolutionsoftheShareholders'GeneralMeetingseriously,accordingtoitsdutiesstipulatedbytheArticlesofAssociation,aswellasmodifytheArticlesofAssociation,determinetheauditingchargeofaccountants,inaccordancewiththeauthoritydelegatedtotheBoardofDirectorsbytheShareholders'GeneralMeeting.
VI.
SummaryReportonthePerformanceoftheRemunerationCommitteeundertheBoardofDirectorsTheRemunerationCommittee'sOpinionsontheremunerationofDirectorsandSeniorExecutivesoftheCompanyinthereportingperiod:ThedisclosedannualremunerationofDirectorsandSeniorExecutivesoftheCompanyinthereportingperiodwascheckedandapprovedbytheRemunerationandAppraisalCommittee.
AllmembersoftheCommitteeagreethatin2008,theCompanyexecutedthepreviouslyformulatedRemunerationRulesforDirectorsandSeniorExecutivesaswellasrelevantAppraisalandIncentiveRulesstrictly,andtheproceduresofformulatingmechanismaswellasAppraisalandIncentiveRules,andtheprocedureofcompensationmanagementwereinaccordancewiththeprovisions38ofrelatedlaws,regulationsandtheArticlesofAssociation.
VII.
PerformanceoftheAuditCommitteeundertheBoardofDirectorsTremendousworkhasbeendoneonauditingbytheAuditCommitteein2008,withtheformationofExecutionoftheAuditCommitteePlus/andAnnualSummaryReportonAuditWorkofGuangdongDahuaDelvCertifiedPublicAccountantsCo.
,Ltdin2008:AccordingtorelevantrequirementsinNoticeoftheChinaSecuritiesRegulatoryCommissiononProperlyHandlingthe2008AnnualReportsofListedCompaniesandtheRelatedWorkaswellasNoticeonPromulgatingtheStandardsConcerningtheContentsandFormatsofInformationDisclosurebyCompaniesOfferingSecuritiestothePublicNo.
2—ContentsandFormatsofAnnualReports(Revisedin2007),theannualauditingoftheCompanyin2008byGuangdongDahuaDelvCertifiedPublicAccountantsCo.
,Ltd(hereinaftercalledtheCertifiedPublicAccountants)wasconcludedasfollows:(1)DeterminationoftheGeneralAuditingPlanBeforetheCertifiedPublicAccountantsconductedauditing,throughconsultationwiththeCertifiedPublicAccountants,theAuditCommitteedrewoutaplanforauditingoftheCompanyin2008,andsubmittedtherelevantmaterialsabouttheplanforauditingoftheCompanyin2008toIndependentDirectors,viaChiefFinancialOfficeroftheCompany.
(2)CheckandApprovaloftheFinancialStatementsPreparedbytheCompanyOnJan.
15,2009,the1stmeetingoftheAuditCommitteein2009washeldintheCompanyBoardroom,onwhichtheFinancialStatementsin2008preparedbytheCompanywasexaminedandapproved.
Aftercomparingsuchfinancialdataastotalassets,primeoperatingrevenues,netprofits,operatingexpenses,administrativeexpenses,andfinancialexpensesetc.
withthatin2007AnnualReport,themeetingagreedthattherelevantdatainthefinancialstatementspreparedbytheCompanyreflectedtheassetsandliabilitiesoftheCompanybyDec.
31,2008aswellastheproductionandoperationachievementin2008,andthatthe2008annualfinancialauditingoftheCompanyshouldbecarriedout,basedonthefinancialstatementspreparedbytheCompany,providingrelevantwrittenapprovalopinions.
(3)TheCertifiedPublicAccountantsprovidedthepreliminaryauditopinions,andtheAuditCommitteeexaminedandapprovedthefinancialstatements,aswellasprovidedopinionsinwrittenform.
OnMar.
9,2009,theCertifiedPublicAccountantsissuedthepreliminaryauditopinionontheFinancialStatementsasscheduledinthegeneralauditingplan.
The2ndmeetingoftheAuditCommitteein2009washeldonMar.
9,2009,onwhichthefinancialstatementswiththepreliminaryauditopinionwasexaminedandapproved39again.
Themeetingagreedthattherelevantdatainthe2008financialstatementsoftheCompanyreflectedtheassetsandliabilitiesoftheCompanybyDec.
31,2008aswellastheproductionandoperationachievementin2008,andthatthe2008annualreportandannualreportsummaryoftheCompanyshouldbeprepared,basedonthefinancialstatements.
Meanwhile,theAuditCommitteerequiredtheCertifiedPublicAccountantsshouldfinishauditingassoonaspossible,accordingtothegeneralauditingplan,soastoensuretheCompanydisclosesthe2008annualreportasscheduled.
(4)Thefinalversionoftheauditors'reportonthe2008annualfinancialstatementsoftheCompanywasfinished,andotherrelevantdocumentsaboutthe2008annualauditwereissuedbytheCertifiedPublicAccountants,drawingasuccessfulconclusiontothe2008annualauditoftheCompany.
OnMar.
16,2009,theCertifiedPublicAccountantsaccomplishedthefinalversionoftheauditors'reportasscheduledinthegeneralauditplan,andissuedtheSpecialStatementonFundAppropriationandFundTransferamongtheAffiliatedPartiesofFoshanHuaxinPackingCo.
,Ltd,basedonNoticeonPromulgatingtheStandardsConcerningtheContentsandFormatsofInformationDisclosurebyCompaniesOfferingSecuritiestothePublicNo.
2—ContentsandFormatsofAnnualReports(Revisedin2007)aswellasrelevantrequirementsoftheCompany.
(5)GeneralCommentsonAnnualAuditConductedbytheCertifiedPublicAccountantsIntheAuditCommittee'sopinion,GuangdongDahuaDelvCertifiedPublicAccountantsCo.
,LtddesignatedbytheCompanystrictlyfollowedthePracticeGuidelineofindependent,objectiveandfairinconductingauditoftheCompany,scrupulouslyfulfillitsdutyandfavorablyaccomplishedtheauditingaboutthe2008annualreport.
(6)ReviewofproposalsrelatedwiththeProposalonRenewedEmploymentofCertifiedPublicAccountantsbytheAuditCommitteeThe3rdmeetingoftheAuditCommitteefortheyear2009washeldon18Mar.
2009,atwhichthefollowingproposalswereexaminedandapprovedwith4votesinfavor,0againstand0abstention:①.
FinancialFinalReportoftheCompany2008②.
ProposalonEngagementofCertifiedPublicAccountantsfor2009GiventherelativelyfavorableoperationandtheserviceleverofGuangdongDahuaDeluCertifiedPublicAccountantsCo.
,Lt,theCompanycontinuedtoengageGuangdongDahuaDeluCertifiedPublicAccountantsCo.
,Ltasauditor,offeringtheauditingserviceforthefinancialstatementsoftheCompanyandotherrelatedconsultingserviceforoneyear.
.
WorkAssignmentReportofAuditCommitteeandSummaryReport2008for③AuditingWorkofGuangdongDahuaDeluCertifiedPublicAccountantsCo.
,Ltd.
40VIII.
Profitdistributionpreplanfor2007AsauditedbyGuangdongDahuaDeluCertifiedPublicAccountantsCo.
,Ltd,theCompanyachievedthenetprofitofRMB42,588,844.
36for2008.
Asaresult,theprofitavailablefordistributiontothewholeshareholderswasRMB384,755,182.
00.
InviewofthatthematerialsassetsreorganizationprojectisinexaminationbyCSRC,ifsuchprojectwasimplementedsmoothly,theCompany'soperationscaleandproductioncapacitywouldbefurtherexpanded,resultinginincreaseoffunddemand,therefore,theCompanywouldneedtofinancingbyloanandotherways.
TheCompanywouldplantonotdistributeprofitfortheyear2008inordertostriveforstable,healthyandfastdevelopmentoftheCompany.
TheretainedprofitoftheCompanywouldbeusedtosupplementoftheworkingcapital.
IX.
OthermattersSecuritiesTimesandHongKongTaKungPaoarerespectivelydesignatedasthedomesticandoverseasnewspapersbytheCompanyforinformationdisclosure.
41IXReportoftheSupervisoryBoardI.
WorkoftheSupervisoryBoardinthereportingperiod:Inthereportingperiod,theCompany'sSupervisoryBoardperformedtheirresponsibilitiesofsupervisioninaccordancewiththeCompanyLaw,SecuritiesLawandArticlesofAssociationoftheCompanyandonbehalfofallshareholders.
ThesupervisorsattendedallBoardMeetingsandShareholders'GeneralMeetingheldbytheCompany,conductedefficientsupervisionontheholdingprocedureofmeeting,decision-makingprocedure,resolution,informationdisclosureandstatusofimplementationoftheresolutionsoftheShareholders'GeneralMeetingbytheBoardofDirectorsaswellasthelawfulnessandlegalcomplianceofthedutyperformanceoftheCompany'sdirectors,managersandotherseniorexecutives.
TheyhaveplayedtheirdueroletosupervisethestandardoperationandhealthydevelopmentoftheCompanyandprotectedlegalrightsoftheCompanyandtheshareholders.
TheCompany'sSupervisoryBoardheldalltogethersixmeetingsin2008,withthedetailsasfollows:(1)OnMarch25,2008,the1stmeetingofthe3rdSupervisoryBoard2008washeld.
5supervisorsweresupposedtoattendthemeetingand3actuallypresent.
SupervisorsChenMingandMiBaogangfailedtoattendthemeetingforbusinessreasonsandauthorizedSupervisorsChenZeqingandHuangDabiaoinwritingthefullpowertovoteinsteadrespectively.
TherelevantresolutionswerepublishedinSecuritiesTimesandTaKungPaoonMarch27,2008.
(2)OnApril21,2008,the2ndmeetingofthe3rdSupervisoryBoard2008washeldbyvotingincorrespondence,atwhich5supervisorswerepresent,meetingtherequirement.
TheCompany'sFirstQuarterlyReport2008wasexaminedandapprovedatthemeeting.
(3)OnApril23,2008,the3rdmeetingofthe3rdSupervisoryBoard2008washeldbyvotingincorrespondence.
5supervisorsweresupposedtoattendthemeetingand3actuallypresent.
SupervisorsChenMingandMiBaogangfailedtoattendthemeetingforbusinessreasonsandauthorizedSupervisorsChenZeqingandHuangDabiaoinwritingthefullpowertovoteinsteadrespectively.
TherelevantresolutionswerepublishedinSecuritiesTimesandTaKungPaoonApril25,2008.
(4)OnMay20,2008,the1stmeetingofthe4thSupervisoryBoardwasheld.
ThethreeSupervisorssupposedtoattendthemeetingwereallpresent.
TherelevantresolutionswerepublishedinSecuritiesTimesandTaKungPaoonMay21,2008.
(5)OnAugust12,2008,the2ndmeetingofthe4thSupervisoryBoardwasheldbyvotingincorrespondence.
ThethreeSupervisorssupposedtoattendthemeetingwereallpresent.
TheInterimReport2008wasexaminedandapprovedatthemeeting.
42(6)OnOctober22,2008,the3rdmeetingofthe4thSupervisoryBoardwasheldbyvotingincorrespondence.
ThethreeSupervisorssupposedtoattendthemeetingwereallpresent.
TheCompany'sThirdQuarterlyReport2008wasexaminedandapprovedatthemeeting.
Ⅱ.
IndependentopinionsoftheSupervisoryBoardInaccordancewiththeCompanyLawandArticlesofAssociation,theCompany'sSupervisoryBoardexpressedthefollowingindependentopinionsontherelatedparticulars:(1)LawfuloperationoftheCompany:In2008,theCompany'sSupervisoryBoardconductedsupervisionthroughthewholecourseontheCompany'slawfuloperation.
TheBoardbelievedthattheCompany'sdecision-makingprocedurecomplieswiththeprovisionsoftheCompanyLaw,theSecuritiesLawandtheArticlesofAssociation,andthattheCompanyhadestablishedarelativelycompleteinternalcontrolsystem.
TheCompany'sDirectors,IndependentDirectors,managersandotherseniorexecutivesperformedtheirdutieshonestlyandexercisedstrictselfdisciplineandmadepersistenteffortstopromotethedevelopmentoftheCompany.
Whenperformingtheirduties,therewerenosuchthingsasviolatinglaws,regulationsandtheArticlesofAssociation,orharmingtheinterestsoftheCompanyanditsshareholders.
(2)OpinionsontheinspectionofthefinancialstatusoftheCompanyTheSupervisoryBoardbelievedthattheCompanyhadsoundfinancialsystemandstandardizedfinancialmanagement.
Thestandardunqualifiedauditor'sreportsontheCompany'sfinancialstatusfor2008andthestatementsonrelevantmattersrespectivelyissuedbyGuangdongDahuaDeluCertifiedPublicAccountantsCo.
,Ltd.
,theCompany'sdomesticauditingagency,objectively,fairlyandtrulyreflectedtheCompany'sfinancialstatusandoperatingachievement.
(3)OpinionsonthecapitalraisedanditsutilizationTheSupervisoryCommitteehadcheckedtheutilizationofthecapitalraised.
TheCompanyhadnonewcapitalraisedinthereportingperiodandinvestmentofnon-raisedcapitalcompliedwiththeinterestoftheCompany'sshareholdersanditslong-termdevelopment.
(4)OpinionsontherelatedtransactionInthereportingperiod,therelatedtransactionsexistingbetweentheCompanyandtherelatedpartieswereequalwithfairvalue,whichdidnotharmtheinterestoftheCompanyanditsshareholders.
(5)OpinionsonpurchaseandsalesofassetsInthereportingperiod,neitherdidtheCompanyhaveanypurchaseandsalesofassets,nordiditprovideguaranteeinanywayfortheshareholdersandtherelated43partiesoranynaturalperson.
(6)OpinionsonSelf-evaluationforinternalcontrol1.
TheCompanyestablishedandperfectedtheinternalcontrolsystemforalldepartmentsintheCompanyinaccordancetotherelatedregulationsfromCSRCandShenzhenStockExchange,thebasicprincipleoftheinternalcontrolanditsrealcondition,assuringthenormalbusinessoperationandthesafetyandintegrityoftheCompany'sassets.
2.
Theintegrityoftheorganizationstructureoftheinternalcontrol,theinternalauditdepartmentandthestaffingoftheCompanyassuredtheimplementationandsupervisionofthekeycampaignfortheinternalcontroloftheCompanytobefullyefficient.
3.
In2008,theCompanyhadnoaffairwhichdisobeyedGuidelinesofShenzhenStockExchangefortheInternalControlandtheinternalcontrolsystemoftheCompany.
Tosumup,theSupervisoryBoardbelievedthattheself-evaluationoninternalcontroloftheCompanyreflectedtheactualstatusoftheCompany'sinternalcontrolall-sidedly,trulyandaccurately.
44XSignificantEvents1.
SignificantlawsuitsandarbitrationsBasicdetailonthedisputecaseoftransferagreement,inwhichtheCompany'sholdingsubsidiaryFoshanHuafengPaperCo.
,Ltd(hereinafterrefertoasHuafengPaper)appealsStoraEnsoPackingBoardsAsiaOy(hereinafterrefertoasStoraEnso),hasalreadybeenfullydisclosedinthepreviousperiodicalreport.
Bythisreportthecasemovesasfollows:InNovember2008,theCompanyreceivedthenoticeofrespondencetoactionfromZhuhaiIntermediatePeople'sCourt,informingthatthecourthadacceptedthedisputecaseoftransferagreementinwhichHuafengPaperindictsStoraEnsoasdefendant,andthattheCompanyshouldparticipateinthiscaseasco-defendant.
TheprocesshowtheCompanybecomesco-defendantisasfollows:InOctober2005,theCompanyandStoraEnsosignedJointVentureContract,inwhichthetwosidespromisedtosetupStoraEnsoHuaxin(Zhuhai)PackingBoardCompanyLimited(hereinafterrefertoasJointVentureCorporation)throughjointventure.
StoraEnsoalsosignedtheAgreementonAssetsAcquisitionwithHuafengPaperinthenameofJointVentureCompany.
StoraEnsothenwithdrewfromthejointventureproject,causingafailuretotheimplementationandfulfillmentoftheAgreementonAssetsAcquisition.
InAugust2007,HuafengPaperbroughtanaccusationagainstStoraEnsoinZhuhaiIntermediatePeople'sCourt,anddemandedarescissionofagreementandeconomiclosscompensationofover58millionyuan.
Duringtheproceeding,thedefendant,StoraEnsoappliedtoZhuhaiIntermediatePeople'sCourtCompanyforaddingtheCompanyasco-defendant.
AmongthecivilbillstheCompanyreceives,thereisnoaccusationfromtheplaintiffHuafengPaperagainsttheCompany.
OnDec.
31,2008,theCompanyreceivedanoticefromZhuhaiIntermediatePeople'sCourtwhichapprovedStoraEnso'sapplicationonproofpostponementandtheproofprovidingdatewouldbeputofftillonFeb.
5,2009.
Becausethelawsuitaboveneedstobetriedaccordingtotheprocedure,itentailssubstantialdegreeofuncertaintythatwhethercompensationcanbereceivedthroughjudicialprocessassentenceandexecutionofthecaseabove.
TheCompanythereforecannotmakeaccuratejudgmentonhowthiscasewillinfluenceit.
TheCompanywilltimelydisclose,inpacewiththecase,therelevantprogressandwhetheritwillaffecttheCompany'sprofit.
TheCompany'sbusinessoperationissofarnormal.
II.
OtherinvestmentsoftheCompany(1)InvestmentinsecuritiesoftheCompanyInthereportingperiod,theCompanydidnotconductinvestmentinsecurities.
45(2)EquityofotherlistedcompaniesheldbytheCompanyInthereportingperiod,theCompanydidnotholdequityofanyotherlistedcompanies.
(3)Equityofnon-listedfinancialenterprisesandcompaniestobelistedheldbytheCompanyUnit:RMBYuanNameInitialinvestmentamountNumberofsharesheldEquityproportioninthatofthiscompanyBookvalueattheperiod-endProfitandlossinthereportperiodChangesintheowners'equityinthereportperiodAccountingtitleSourceofsharesXinjiangSub-branch,CommercialBankofFoshan100,00.
0000.
08%00.
000.
00Long-termequityinvestmentInvestmentbyestablishmentCommercialBankofFoshan3,000,000.
0002.
50%00.
000.
00Long-termequityinvestmentInvestmentbyestablishmentGuangdongDevelopmentBank113,558.
0000.
32%113,558.
000.
000.
00Long-termequityinvestmentInvestmentbyestablishmentTotal,212,558.
000-113,558.
000.
000.
00Long-termequityinvestment-Note:Provisionforassetimpairmentisalreadyincludedinthebookvalue.
Ⅲ.
SignificanteventsonassetpurchaseandsalesandthereorganizationofassetsInordertoenlargetheproductionscaleoftheCompanyandfocusondevelopingadvancedbaseboardforliquidfoodpackagingwhichyieldsahighaddedvalueandproducedwithadvancedtechnology,andoptimizethesingleproductmix,the46Companyintendstoestablishaholdingsubsidiary,ZhuhaiHongtaRenhengPaperCo.
,Ltd.
(hereinafterrefertoas"HongtaRenheng").
TheprojectbelongstomaterialassetreorganizationeventoftheCompanyandthebriefingandprocessoftheprojectisasfollows:TheoriginalshareholderofHongtaRenhenggaveupthepreemptiverightforthenewlyissuedcapital,asaresultofwhichtheCompanyandtherelatedpartyLongbangInternationalCo.
,Ltd.
(hereinafterrefertoas"LongbangInternational")couldhavesubscribedtheincreasecapital,paidwiththeirrespectiveequityofFoshanHuafengPaperCo.
,Ltd.
,andthusbecomingnewshareholdersofthecompany.
Afterthisincreasecapital,theCompanyandLongbangInternationalown40.
18%and13.
39%equityofHongtaRenhengrespectively.
TheCompanywillbecomethefirstmajorshareholderofHongtaRenheng,owningthecontrollinginterest.
Accordingtothe12thcalculatingstandardintheAdministrativeMeasuresfortheMaterialAssetReorganizationsofListedCompanies(hereinafterrefertoas"MeasuresforReorganizations"),thetotalamountofthistransactionisRMB2,774,390,100,withanoperationrevenueofRMB1,659,508,300andanetassetofRMB1,036,173,000.
Alltheindicationsabovemeetthe11thprovisiononstandardofmaterialassetreorganizationintheMeasuresforReorganizations.
ThetransactionbelongstoexpandingreorganizationoftheCompanyandcomplieswiththeCompany'sstrategicplanningandinterestsoftheshareholders.
ControllingsubsidiaryHongtaRehenghelpstoimprovetheCompany'sproductivityandlong-termgrowthpotential,whichconformstothecountry'sindustrialpoliciesandthedevelopmenttendencyoftheindustry.
Italsofavorstheenterpriseresourceoptimization,achievementofscaleeconomies,promotioninthemarketpositionandarapiddevelopmentoftheenterprise.
ThetransactiondoesnoharmtothecontinuityoftheCompany'soperationbusinessandthestabilityofthemanagementstaff,andtheinterestsoftheminorityshareholdersarefullyexpressedandguaranteedaswell.
OnDecember15,2008,the3rdinterimShareholders'GeneralMeeting2008ofHuaxinPackagingwasheld,atwhichtheplanonthematerialreorganizationandrelevantresolutionwasdeliberated.
RelevantreportingdocumentswerethensubmittedtoCSRC,andthematerialassetreorganizationispresentlyunderdiscussionofCSRC.
Thereexistuncertaintiesontheratificationandapprovalbytherelatedgovernmentdepartmentsonthismaterialassetreorganizationanditstime.
Theexactvaluedatecannotbeconfirmedasrelevantproceduresareneededforthistransactionevenifthematerialassetreorganizationisapproved.
Ⅳ.
TheimplementationoftheshareincentiveplaninthereportingperiodInthereportingperiod,therewasnoimplementationoftheshareincentiveplan.
V.
EventsonsignificantrelatedtransactionoftheCompanyinthereportingperiodRelatedtransactionconcerningtheCompany'sdailyoperation:47Inthereportingperiod,theCompanyconductedrelatedtransactionwiththerelatedpartyQingdaoChengtongFuelCo.
,Ltd.
(hereinafterrefertoasChengtongFuel).
FordetailsoftherelatedtransactionpleaserefertotheFinancialStatementsAppendedNote.
1.
AbouttherelatedpartyThemainbusinessscopeofQingdaoChengtongFuelCo.
,Ltd.
wasstorageservices,technicalserviceintransportationandwholesaleofcoal,ofwhichtheregisteredcapitalwasRMB10million.
TheCompanyandChengtongFuelwerecontrolledbyChineseMaterialExploitationandInvestmentParentCompanyasChengtongFuelwastheholdingsubsidiaryofChineseMaterialExploitationandInvestmentParentCompanyand66.
7874%equityoftheFoshanHuaxinDevelopmentCo.
,LtdwasheldbyChineseMaterialExploitationandInvestmentParentCompany.
ChengtongFuelwastherelatedlegalpartyfortheCompanybasedontheseconditemin10.
1.
3oftheRulesforListingofStocks.
2.
TransactioncontentandamountByDec031,2008,theCompany'sholdingsubsidiary,FoshanHuafengPaperCo.
,Ltd.
hadpurchasedtotally144,000tonsofbituminouscoalandwhitecoal.
ThetransactionamountstoRMB90,862,800,takingup52.
67%oftheamountintransactionofthesametype.
3.
PricingpolicyandwayofpaymentThetransactionpricewasbasedonthemarketpriceandinlinewiththefairandreasonablepricingprincipal.
Thetwopartiesfixedtransactionpricethroughnegotiationandpaidbybankbillandbygiro.
4.
ToexplainnecessityandpersistenceforrelatedtransactionTransactionbetweentheCompanyandChengtongFuelwasnecessaryasitallowedtheCompanytomakegooduseoftheresourcesandadvantagesoftherelatedparty,strengthentheadvantageofconcentrativepurchaseandenhanceefficiency,thusreducingthepurchasecost,realizetheresourceoptimizationdistributionandmaximizeeconomicefficiency.
InordertoensurethepersistenceandtimelinessofcoalsupplytoHuafengPaperandreducepurchasecost,therelatedtransactionofpurchasingcoalfromChengtongFuelbyHuafengPaperwasacontinuousbusinessinthedailyoperation,whichwasexpectedtoexistinacertainperiodoftime.
5.
ImpactoftherelatedtransactionontheindependenceofthelistedCompanyThetransactionwasnecessaryforthenormalbusinessoftheholdingsubsidiaryHuafengPaper.
Thetransactionwasfairandfavorabletoeachother,whichwouldnotharmthebenefitoftheCompanyoraffecttheinindependenceofthelistedcompany,norwouldtheCompanyrelygreatlyontherelatedpartyduetosuchtransaction.
48VI.
Significantcontractanditsexecution(1)Inthereportingperiod,therewerenosucheventsassignificantfinancingtrust,entrustment,contracting,leaseofothercompanies'assetsbytheCompanyandviceversa.
(2)Inthereportperiod,significantguaranteeoftheCompanyByDec.
31,2007,theexternalguaranteebalancethattheCompanydidnotfreefromtheguaranteeresponsibilitywasRMB451,998,500,whichwasallusedforguaranteetotheholdingsubsidiaries,RMB412,998,500forFoshanHuafengPaperCo.
,Ltd.
andRMB39millionforHuaxin(Foshan)ColorPrintingCo.
,Ltd.
.
Thetwoguaranteesarebothjointguarantee.
TheCompanydidnothaveoverdueexternalguarantee.
Unit:RMB'0000Ⅶ.
EventsofcommitmentInthereportingperiod,neithertheCompanynortheshareholdersholdingover5%sharesoftheCompanymadeorhadevermadeanycommitmentthatwouldinfluencetheoperationachievementandfinancialstatusoftheCompany.
ExternalguaranteefromtheCompany(notincludingtheguaranteeforsubsidiaries)GuaranteepartyDateofsigningAmountforguaranteeTypeofguaranteePeriodofguaranteeExecutedornotFortherelatedpartyornotNoTotalguaranteeamountinthereportperiod0.
00Totalguaranteebalanceattheendofthereportperiod0.
00GuaranteeforthesubsidiariesfromtheCompanyTotalguaranteeamountforthesubsidiariesinthereportperiod106,874.
79Totalguaranteebalanceforthesubsidiariesattheendofthereportperiod45,199.
85TotalguaranteeamountfromtheCompany(includingtheguaranteeforthesubsidiaries)Totalguaranteeamount45,199.
85TheproportionofthetotalguaranteeamountinthenetassetoftheCompany35.
62%Including:Guaranteeamountofferedtoshareholders,actualcontrollersandrelatedparties0.
00Guaranteeamountfordebtofferedtotheguaranteepartywhoseasset-liabilityratiowasover70%directlyorindirectly3,900.
00Partoftheamountofthetotalguaranteeover50%0.
00Totalguaranteefortheabove3,900.
00PossiblejointliabilityforguaranteeundueAllexternalguaranteesoftheCompanyareguaranteesforsubsidiaries.
ThesubsidiariesofCompanyaresofaroperatingnormallyandbearnoriskoffailingtopayup.
49Ⅷ.
Engagementordismissalofcertifiedpublicaccounts'firmandpaymentofremuneration:Inthereportingperiod,withtheapprovaloftheShareholders'GeneralMeeting2007,theCompanyengagedGuangdongHengxinDeluCertifiedPublicAccountantsCo.
,Ltd.
asitsaccountingagencyfor2008.
ThisaccountingagencyhasprovidedtheCompanyauditingservicesfor3yearinsuccession.
GuangdongHengxinDeluCertifiedPublicAccountantCo.
,Ltd.
wasacquiredandmergedbyShenzhenDahuaTianchengCertifiedPublicAccountantsCo.
,Ltd.
andrenamedas"GuangdongDahuaDeluCertifiedPublicAccountantsCo.
,Ltd.
".
Inordertoensurethecontinuityoftheauditingbusiness,the1stinterimShareholders'GeneralMeeting2009approvedtoengageGuangdongDahuaDeluCertifiedPublicAccountantsCo.
,Ltd.
astheCompany'sfinancialauditingagencyin2009toprovideauditingservicesfortheCompany.
TheShareholders'MeetingauthorizedtheBoardofDirectorsonthedecision-makingprocedureconcerningtheremunerationforthecertifiedpublicaccountants'firm.
TheBoardofDirectorsdeterminedthelimitofremunerationaccordingtorelevantchargingstandardsandamountofwork.
TheauditfeepaidforGuangdongDahuaDeluCertifiedPublicAccountantsCo.
,Ltd.
isRMB500,000in2008.
Ⅸ.
DenouncementfromCSRCandStockExchangeinthereportingperiodInthereportingperiod,noneoftheCompany,itsDirectors,Supervisors,SeniorExecutives,shareholders'actualcontrollersaswellasthebuyersreceivedanyinspectionfromauthorities,enforcementmeasurefromjudicialdisciplineinspectiondepartments,transfertojudicialorgans,prosecutionforcriminalliability,inspectionfromCSRC,oradministrativepunishmentandcirculatedanoticeofcriticismfromCSRCandbebannedfromsecuritiesmarket,orcognizanceofunsuitablepersons,punishmentfromotheradministrativeandpublicdenouncementfromStockExchange.
Ⅹ.
OthersignificanteventsOnSept.
2,2008,theCompanysucceededinitsfirstissueofshort-termfinancingbillsin2008withatotalactualissuanceofRMB500million.
ThecapitalwouldmainlybeusedforcomplementingtheCompany'scurrentcapital,improvingcapitalstructureandreducingcapitalcost.
Ⅺ.
InterviewandvisitsinthereportingperiodInthereportingperiod,accordingtotherequirementofGuidelinesonFairInformationDisclosureofListedCompanies,theCompanyandrelatedinformationdisclosureobligorstrictlyobeyedtheprincipleoffairinformationdisclosurewithoutdiscriminatorybehaviororspillingnon-publicinformationselectivelyandprivatelytospecifiedpersoninadvance.
TheCompanyreceivedvisitorsbytwoways,namelyphonecallandinterviewwithshareholders.
Overtheyear,theCompanypatientlyansweredthequestionsoftheshareholdersduringreceptionandprovidedthemtherelevantpublicdisclosureinformation.
50InterviewsandvisitsinthereportingperiodDateLocationWayofreceptionVisitorTopicsdiscussedandinformationprovidedMay20,2008TheCompanyFieldresearchWangRongxuanfromSecuritiesDailyMajorbusinessandoperationoftheCompanySept.
9,2008MeetingroomoftheCompanyFieldresearchDirectorXueJingfromGuotaiJunan(HongKong)CapitalLimited,ChenHuafromBeijingHeadquarter,GuotaiJunanSecuritiesMajorbusinessandoperationoftheCompanyDec.
15,2008TheCompanyFieldresearchHuoYuliandHeJingfromShanghaiSecuritiesNewsMajorbusinessandoperationoftheCompanyandsignificantassetreorganizationDec.
22,2008TheCompanyFieldresearchWuYinfromSecuritiesDailyMajorbusinessandoperationoftheCompanyandsignificantassetreorganization51SectionXIFinancialReportThefinancialreportisattachedhereinafterSectionXIIListofDocumentsAvailableforInspectionInvestorsandrelevantdepartmentsmayconsultthefollowingdocumentsattheofficeoftheboardofdirectorsoftheCompany:1.
ThefinancialstatementsbearingthesealandsignatureoftheCompany'slegalrepresentative,financialcontrollerandthepersoninchargeoftheaccountingorgan.
2.
Theauditor'sreportbearingthesealofthecertifiedpublicaccountantsandthesignatureofC.
P.
A.
3.
TheoriginalofalltheCompany'sdocumentsandtheoriginalmanuscriptsofannouncementspubliclydisclosedonthenewspapersdesignatedbyChinaSecuritiesRegulatoryCommissioninthereportperiod.
4.
Theoriginalof2008annualreportbearingthesignatureofthechairmanoftheboardofdirectorsoftheCompany.
ByorderofBoardofDirectorsofFoshanHuaxinPackagingCo.
,Ltd.
ChairmanoftheBoard:TongLaiming26March200952Auditors'ReportHDGSZ[2009]No.
48TotheShareholdersofFoshanHuaxinPackagingCo.
,Ltd:WehaveauditedthefinancialstatementsofFoshanHuaxinPackagingCo.
,Ltd(theCompany)whichcomprisetheBalancesheetandconsolidatedBalanceSheetasat31December2008,andtheIncomeStatementandConsolidatedIncomeStatement,StatementofChangesinEquityandConsolidatedStatementofChangesinEquity,aswellasCashFlowStatementandConsolidatedCashFlowStatementfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotes.
I.
Themanagementlevel'sresponsibilityforthefinancialstatementsThemanagementlevelisresponsibleforthepreparationandthetrueandfairpresentationofthesefinancialstatementsinaccordancewithAccountingStandardsforBusinessEnterprisesofthePeople'sRepublicofChina.
Theseresponsibilitiesincludedesigning,implementingandmaintaininginternalcontrolrelevanttothepreparationandthetrueandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.
II.
Auditor'sresponsibilityOurresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.
WeconductedourauditinaccordancewithIndependentAuditStandardspromulgatedbytheChineseInstituteofCertifiedPublicAccountants.
Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceastowhetherthefinancialstatementsarefreefrommaterialmisstatement.
Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.
Theproceduresselecteddependontheauditor'sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.
Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity'spreparationandtrueandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity'sinternalcontrol.
Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebythedirectors,aswellasevaluatingtheoverallpresentationofthefinancialstatements.
Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.
IIIAuditopinionInouropinion,theaccompanyingconsolidatedfinancialstatementsgiveatrueandfairviewofthefinancialpositionoftheGroupasof31December2008,andoftheresultsofitsoperationsandcashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandards.
53GuangdongDaHuaDeLuCertifiedPublicAccountantsCPA:DuXiaoqiangZhuhai·ChinaCPA:YuDonghong26March200954ConsolidatedBalanceSheetAsat31Dec.
2008KHTable01PreparedbyFoshanHuaxinPackagingCo.
,LtdUnit:RMBYuanAssetsNoteClosingbalanceBeginningbalanceLiabilitiesandowner'sequityNoteClosingbalanceBeginningbalanceCurrentAssets:Currentliabilities:MonetaryfundsV.
(1)208,091,895.
5963,767,336.
50Short-termborrowingsV.
(18)617,488,134.
71481,839,691.
89Transactionfinancialasset--Transactionfinancialliabilities--NotesreceivableV.
(2)47,440,393.
1659,669,620.
10NotespayableV.
(19)54,510,322.
259,155,830.
91AccountreceivableV.
(3)238,416,506.
08263,746,811.
88AccountpayableV.
(20)264,477,215.
08195,690,685.
23AccountpaidinadvanceV.
(4)70,122,453.
303,637,855.
82AccountreceivedinadvanceV.
(21)13,728,197.
7620,204,812.
16Interestreceivable--Employee'scompensationpayableV.
(22)11,105,149.
394,027,568.
82DividendreceivableV.
(5)-34,140,000.
00TaxpayableV.
(23)-32,142,429.
38-2,482,848.
18OtheraccountreceivableV.
6)36,934,269.
6421,060,306.
72InterestpayableV.
(24)11,681,609.
011,391,185.
09InventoriesV.
(7)335,648,893.
09186,800,021.
23DividendpayableV.
(25)55133,758.
00133,758.
00Non-currentassetsduewithin1year--OtheraccountpayableV.
(26)22,664,445.
7636,286,574.
75Othercurrentassets--Non-currentliabilitiesduewithin1yearV.
(27)-258,481,674.
99Totalcurrentassets936,654,410.
86632,821,952.
25OthercurrentliabilitiesV.
(28)498,666,666.
68412,912,500.
00Non-currentassets:Totalcurrentliabilities1,462,313,069.
261,417,641,433.
66Availableforsalefinancialassets--Non-currentliabilities:Heldtomaturityinvestments--Long-termborrowingsV.
(29)440,000,000.
00179,334,850.
00Long-termaccountreceivable--Bondspayable--Long-termequityinvestmentV.
(8)198,070,534.
49159,799,644.
88Long-termpayables--InvestingpropertyV.
(9)11,025,316.
4611,478,231.
26Specificpayables--FixedassetsV.
(10)2,195,528,165.
592,084,520,822.
42Accruedliabilities--ConstructioninprogressV.
(11)1,176,195.
5439,423,119.
78Deferredtaxliabilities--EngineeringmaterialV.
(12)-13,629,040.
02Othernon-currentliabilitiesV.
(30)1,320,000.
001,320,000.
00Disposaloffixedassets--Totalnon-currentliabilities441,320,000.
00180,654,850.
0056Productionbiologicalassets--Totalliabilities1,903,633,069.
261,598,296,283.
66Oil-gasassets--Owner'sequity:IntangibleassetsV.
(13)62,775,368.
6464,221,719.
36SharecapitalV.
(31)505,425,000.
00505,425,000.
00DevelopmentexpenseV.
(14)7,748,092.
27-CapitalreservesV.
(32)253,763,982.
00253,763,982.
00Goodwill--Less:Treasurystock--Long-termdeferredexpensesV.
(15)6,895,053.
005,087,221.
02SurplusreservesV.
(33)125,274,475.
42118,570,535.
83DeferredtaxassetsV.
(16)5,587,309.
674,168,334.
89RetainedprofitsV.
(34)384,755,182.
00348,870,277.
23Othernon-currentassets--Foreignexchangedifference--Totalofnon-currentassets2,488,806,035.
662,382,328,133.
63Totalowners'equityattributabletoparentcompany1,269,218,639.
421,226,629,795.
06Minorityinterest252,608,737.
84190,224,007.
16Totalowner'sequity1,521,827,377.
261,416,853,802.
22Totalassets3,425,460,446.
523,015,150,085.
88Totalliabilitiesandowner'sequity3,425,460,446.
523,015,150,085.
88Legalrepresentative:ChiefFinancialOfficer:AccountingManager:57BalanceSheet31Dec.
2008KHTable01PreparedbyFoshanHuaxinPackagingCo.
,LtdUnit:RMBYuanAssetsNoteClosingbalanceBeginningbalanceLiabilitiesandowner'sequityNoteClosingbalanceBeginningbalanceCurrentAssets:Currentliabilities:Monetaryfunds30,851,611.
3124,921,687.
13Short-termborrowings280,000,000.
00150,000,000.
00Transactionfinancialasset--Transactionfinancialliabilities--Notesreceivable--Notespayable--Accountreceivable--Accountpayable--Accountpaidinadvance6,149,168.
11-Accountreceivedinadvance--Interestreceivable--Employee'scompensationpayable479,364.
75501,779.
75Dividendreceivable-124,931,529.
10Taxpayable169,547.
79180,429.
31OtheraccountreceivableVI.
(1)1,417,257,518.
46910,387,437.
97Interestpayable10,546,500.
00-InventoriesDividendpayable58--133,758.
00133,758.
00Non-currentassetsduewithin1year--Otheraccountpayable6,516,424.
3924,024,575.
77Othercurrentassets--Non-currentliabilitiesduewithin1year-110,000,000.
00Totalcurrentassets1,454,258,297.
881,060,240,654.
20Othercurrentliabilities498,666,666.
68412,912,500.
00Non-currentassets:Totalcurrentliabilities796,512,261.
61697,753,042.
83Availableforsalefinancialassets--Non-currentliabilities:Heldtomaturityinvestments--Long-termborrowings380,000,000.
00110,000,000.
00Long-termaccountreceivable--Bondspayable--Long-termequityinvestmentVI.
(2)988,083,927.
13946,813,037.
52Long-termpayables--Investingproperty--Specificpayables--Fixedassets1,610,873.
381,100,792.
04Accruedliabilities--Constructioninprogress--Deferredtaxliabilities--Engineeringmaterial--Othernon-currentliabilities--Disposaloffixedassets--Totalnon-currentliabilities380,000,000.
00110,000,000.
0059Productionbiologicalassets--Totalliabilities1,176,512,261.
61807,753,042.
83Oil-gasassets--Owner'sequity:Intangibleassets--Sharecapital505,425,000.
00505,425,000.
00Developmentexpense--Capitalreserves250,531,482.
00250,531,482.
00Goodwill--Less:Treasurystock--Long-termdeferredexpenses--Surplusreserves125,274,475.
42118,570,535.
83Deferredtaxassets--Retainedprofits386,209,879.
36325,874,423.
10Othernon-currentassets--Totalowner'sequity1,267,440,836.
781,200,401,440.
93Totalofnon-currentassets989,694,800.
51947,913,829.
56Totalassets2,443,953,098.
392,008,154,483.
76Totalliabilitiesandowner'sequity2,443,953,098.
392,008,154,483.
76Legalrepresentative:ChiefFinancialOfficer:AccountingManager:60ConsolidatedIncomeStatementPreparedbyFoshanHuaxinPackagingCo.
,LtdYear2008Unit:RMBYuanItemsNoteAmountin2008Amountin2007I.
OperatingincomeV.
(35)1,412,674,165.
821,269,510,406.
95Less:OperatingcostV.
(35)1,210,189,228.
551,109,026,954.
79SalesTaxandExtraChargesV.
(36)690,373.
22184,977.
83SellinganddistributionexpensesV.
(37)47,231,627.
3131,760,154.
87AdministrativeexpensesV.
(38)79,378,739.
6154,659,328.
20Financialexpenses("-"meansloss)V.
(39)82,182,027.
5047,324,512.
88LossonassetsimpairmentV.
(40)11,136,522.
266,439,391.
28Add:Gain/(loss)fromchangeinfairvalue("-"meansloss)--Gain/(loss)frominvestment("-"meansloss)V.
(41)58,258,692.
6895,306,219.
03Including:incomeforminvestmentonaffiliatedenterpriseandjointlyenterprise58,258,692.
6895,306,219.
03II.
Operatingprofit("-"meansloss)40,124,340.
05115,421,306.
13Add:non-operationincomeV.
(42)425,582.
494,200,863.
52Less:non-businessexpenseV.
(43)476,860.
39406,546.
28Including:lossfromnon-currentassetdisposal20,131.
95305,600.
88III.
Totalprofit("-"meansloss)40,073,062.
15119,215,623.
37Less:IncometaxexpenseV.
(44)-829,059.
80759,434.
35IV.
Netprofit("-"meansloss)40,902,121.
95118,456,189.
02Ofwhich:Attributabletoparentcompany42,588,844.
36110,720,644.
39Minorityinterests-1,686,722.
417,735,544.
63V.
Earningspershare(I)basicearningspershare0.
080.
22(II)dilutedearningspershare0.
080.
22Legalrepresentative:ChiefFinancialOfficer:AccountingManager:61IncomeStatementYear2008PreparedbyFoshanHuaxinPackagingCo.
,LtdKHTable2Unit:RMBYuanItemsNoteAmountin2008Amountin2007I.
Operatingincome-242,154.
18Less:Operatingcost-234,829.
23SalesTaxandExtraCharges--Sellinganddistributionexpenses--Administrativeexpenses8,430,025.
408,535,868.
05Financialexpenses("-"meansloss)2,131,845.
94-993,115.
25Lossonassetsimpairment-42,443.
85139,878.
63Add:Gain/(loss)fromchangeinfairvalue("-"meansloss)--Gain/(loss)frominvestment("-"meansloss)VI.
(3)77,679,461.
1096,255,737.
47Including:incomeforminvestmentonaffiliatedenterpriseandjointlyenterprise58,258,692.
6895,306,219.
03II.
Operatingprofit("-"meansloss)67,160,033.
6188,580,430.
99Add:non-operationincome362.
24-Less:non-businessexpense121,000.
00945.
40Including:lossfromnon-currentassetdisposal--III.
Totalprofit("-"meansloss)67,039,395.
8588,579,485.
59Less:Incometaxexpense--IV.
Netprofit("-"meansloss)67,039,395.
8588,579,485.
59V.
Earningspershare(I)basicearningspershare**(II)dilutedearningspershare**Legalrepresentative:ChiefFinancialOfficer:AccountingManager:62ConsolidatedCashFlowStatementYear2008KHTable03PreparedbyFoshanHuaxinPackagingCo.
,LtdUnit:RMBYuanItemsNoteAmountin2008Amountin2007I.
Cashflowsfromoperatingactivities:Cashreceivedfromsaleofcommoditiesandrenderingofservice1,705,971,627.
581,239,147,166.
94Taxrefundsreceived-115,326.
09OthercashreceivedrelatingtooperatingactivitiesV.
(45)4,258,183.
588,147,648.
96Subtotalofcashinflowsfromoperatingactivities1,710,229,811.
161,247,410,141.
99Cashpaidforgoodsandservices1,522,990,342.
151,048,622,333.
37Cashpaidtoandforemployees88,858,905.
6067,493,605.
65Varioustaxespaid33,401,760.
5519,274,397.
67PaymentofcashrelatingtooperatingactivitiesV.
(45)92,796,595.
4744,980,315.
80Subtotalofcashoutflowsfromoperatingactivities1,738,047,603.
771,180,370,652.
49Netcashflowsfromoperatingactivities-27,817,792.
6167,039,489.
50II.
CashFlowsfrominvestmentactivities:Cashreceivedfromreturnofinvestments--Cashreceivedfrominvestmentincome54,127,803.
00113,462,814.
19Netcashreceivedfromdisposaloffixedassets,intangibleassetsandotherlong-termassets43,800.
0038,000.
00Netcashreceivedfromdisposalofsubsidiaryorotheroperatingbusinessunits--Othercashreceivedrelatingtoinvestmentactivities--Subtotalofcashinflowsfrominvestmentactivities54,171,603.
00113,500,814.
19Cashpaidtoacquirefixedassets,intangibleassetsandotherlong-termassets51,768,652.
41311,005,571.
83Cashpaidtoinvestment--Netcashpaidbysubsidiariesandotheroperatingbusinessunits--Paymentofcashrelatingtootherinvestmentactivities2,807,500.
00-Subtotalofcashoutflowsfrominvestmentactivities54,576,152.
41311,005,571.
83Netcashflowsfrominvestmentactivities-404,549.
41-197,504,757.
6463III.
CashFlowsfromFinancingActivities:Cashreceivedfromabsorbinginvestment61,767,285.
22-Including:Cashreceivedfromincreaseinminorityinterest61,767,285.
22-Cashreceivedfromborrowings1,875,770,887.
531,115,959,191.
72Othercashreceivedrelatingtofinancingactivities--Subtotalofcashinflowsfromfinancingactivities1,937,538,172.
751,115,959,191.
72Cashrepaymentsofamountsborrowed1,680,276,674.
99983,561,253.
39Cashpaidinterestexpensesanddistributionofdividendsorprofit82,714,596.
6551,065,055.
00Including:dividendsorprofitpaidtominorityinterest--Othercashpaymentsrelatingtofinancingactivities2,000,000.
00-Sub-totalofcashoutflowsfromfinancingactivities1,764,991,271.
641,034,626,308.
39Netcashflowfromfinancingactivities172,546,901.
1181,332,883.
33IV.
Effectofforeignexchangeratechangesoncashandcashequivalents--V.
Increaseincashandcashequivalents144,324,559.
09-49,132,384.
81Add:Cashandcashequivalentsatyear-begin63,767,336.
50112,899,721.
31VI.
Cashandcashequivalentsattheendoftheyear208,091,895.
5963,767,336.
50Legalrepresentative:ChiefFinancialOfficer:AccountingManager:64ConsolidatedCashFlowStatementYear2008KHTable03PreparedbyFoshanHuaxinPackagingCo.
,LtdUnit:RMBYuanItemsAmountin2008Amountin2007I.
Cashflowsfromoperatingactivities:Cashreceivedfromsaleofcommoditiesandrenderingofservice--Taxrefundsreceived--Othercashreceivedrelatingtooperatingactivities8,315,818.
3119,144,805.
91Subtotalofcashinflowsfromoperatingactivities8,315,818.
3119,144,805.
91Cashpaidforgoodsandservices--Cashpaidtoandforemployees5,098,959.
849,654,158.
68Varioustaxespaid391,958.
1349,863.
74Paymentofcashrelatingtooperatingactivities502,176,716.
75214,363,155.
26Subtotalofcashoutflowsfromoperatingactivities507,667,634.
72224,067,177.
68Netcashflowsfromoperatingactivities-499,351,816.
41-204,922,371.
77II.
CashFlowsfrominvestmentactivities:--Cashreceivedfromreturnofinvestments--Cashreceivedfrominvestmentincome164,340,100.
59113,462,814.
19Netcashreceivedfromdisposaloffixedassets,intangibleassetsandotherlong-termassets--Netcashreceivedfromdisposalofsubsidiaryorotheroperatingbusinessunits--Othercashreceivedrelatingtoinvestmentactivities--Subtotalofcashinflowsfrominvestmentactivities164,340,100.
59113,462,814.
19Cashpaidtoacquirefixedassets,intangibleassetsandotherlong-termassets720,860.
00724,008.
00Cashpaidtoinvestment3,000,000.
00-Netcashpaidbysubsidiariesandotheroperatingbusinessunits--Paymentofcashrelatingtootherinvestmentactivities2,807,500.
00-Subtotalofcashoutflowsfrominvestmentactivities6,528,360.
00724,008.
00Netcashflowsfrominvestmentactivities157,811,740.
59112,738,806.
19III.
CashFlowsfromFinancingActivities:--Cashreceivedfromabsorbinginvestment--Cashreceivedfromborrowings1,362,200,000.
00652,990,000.
00Othercashreceivedrelatingtofinancingactivities--65Subtotalofcashinflowsfromfinancingactivities1,362,200,000.
00652,990,000.
00Cashrepaymentsofamountsborrowed1,012,730,000.
00557,765,000.
00Cashpaidinterestexpensesanddistributionofdividendsorprofit21,991,612.
22Othercashpaymentsrelatingtofinancingactivities2,000,000.
00-Sub-totalofcashoutflowsfromfinancingactivities1,014,730,000.
00579,756,612.
22Netcashflowfromfinancingactivities347,470,000.
0073,233,387.
78IV.
Effectofforeignexchangeratechangesoncashandcashequivalents--V.
Increaseincashandcashequivalents5,929,924.
18-18,950,177.
80Add:Cashandcashequivalentsatyear-begin24,921,687.
1343,871,864.
93VI.
Cashandcashequivalentsattheendoftheyear30,851,611.
3124,921,687.
13Legalrepresentative:ChiefFinancialOfficer:AccountingManager:6667ConsolidatedStatementofChangeinOwners'EquityYear2008KHTable04PreparedbyFoshanHuaxinPackagingCo.
,LtdUnit:RMBYuan20082007Owners'equityattributabletoparentcompanyOwners'equityattributabletoparentcompanyItemsPaid-upcapital(orsharecapital)CapitalreserveLessen:treasurystockSurpluspublicreserveRetainedprofitsOthersMinorityequityTotalofowners'equityPaid-upcapital(orsharecapital)CapitalreserveLessen:treasurystockSurpluspublicreserveRetainedprofitsOthersMinorityequityTotalofowners'equityI.
balanceattheendoflastyear505,425,000.
00253,763,982.
00-118,570,535.
83348,870,277.
23-190,224,007.
161,416,853,802.
22439,500,000.
00253,763,982.
00-111,231,258.
82347,720,929.
98-181,000,322.
741,333,216,493.
54Add:Changeofaccountingpolicy752,764.
93-5,920,189.
03-1,804,645.
94-4,868,308.
02Correctionoferrorsinpreviousperiod765,906.
62-6,893,159.
55---7,659,066.
17II.
balanceatthebeginningofthisyear505,425,000.
00253,763,982.
00-118,570,535.
83348,870,277.
23-190,224,007.
161,416,853,802.
22439,500,000.
00253,763,982.
00-109,712,587.
27334,907,581.
40-182,804,968.
681,320,689,119.
35III.
Increase/decreaseofamountinthisyear("-"---6,703,939.
5935,884,904.
77-62,384,730.
68104,973,575.
0465,925,000.
00--8,857,948.
5613,962,695.
83-7,419,038.
4896,164,682.
8768meansdecrease)(I)Netprofit----42,588,844.
36--1,686,722.
4140,902,121.
95---110,720,644.
39-7,735,544.
63118,456,189.
02(II)Gain/losslistedtoowners'equitydirectly1.
Netamountonchangesinbookvalueoffinancialassetsavailableforsale2.
Effectonchangesinotherowners'equityofinvestedunitsunderequitymethod3.
Effectonincometaxrelatedtoitemslistedtoowners'equity694.
OthersSubtotalof(I)and(II)----42,588,844.
36--1,686,722.
4140,902,121.
95----110,720,644.
39-7,735,544.
63118,456,189.
02(III)Inputanreducedcapitalofowners70,580,696.
2170,580,696.
211.
Inputcapitalofowners70,580,696.
2170,580,696.
212.
AmountofSharesincludedintheowners'equity3.
Others(IV)Profitdistribution---6,703,939.
59-6,703,939.
59--6,509,243.
12-6,509,243.
12---8,857,948.
56-30,832,948.
56--316,506.
15-22,291,506.
151.
Withdrawingsurpluspublicreserve---6,703,939.
59-6,703,939.
598,857,948.
56-8,857,948.
56--2.
Distributiontoallowners(shareholders)6,509,243.
12-6,509,243.
1221,975,000.
00--316,506.
15-22,291,506.
153.
Other70(V)Internalcarryingforwardofowners'equity65,925,000.
00----65,925,000.
00---1.
Newincreaseofcapital(sharecapital)fromcapitalreserves2.
Convertsurplusreservestocapital(sharecapital)3.
Surplusreservesmakeuplosses4.
Others65,925,000.
00----65,925,000.
00---IV.
Balanceattheendofthisperiod505,425,000.
00-125,274,475.
42384,755,182.
00-252,608,737.
841,521,827,377.
26505,425,000.
00253,763,982.
00-118,570,535.
83348,870,277.
23-190,224,007.
161,416,853,802.
22Legalrepresentative:ChiefFinancialOfficer:AccountingManager:71ConsolidatedStatementofChangeinOwners'EquityYear2008KQTable04PreparedbyFoshanHuaxinPackagingCo.
,LtdUnit:RMBYuan20082007ItemsPaid-upcapital(orsharecapital)CapitalreserveLessen:treasurystockSurpluspublicreserveRetainedprofitsTotalofowners'equityPaid-upcapital(orsharecapital)CapitalreserveLessen:treasurystockSurpluspublicreserveRetainedprofitsTotalofowners'equityI.
balanceattheendoflastyear505,425,000.
00250,531,482.
00-118,570,535.
83325,874,423.
101,200,401,440.
93439,500,000.
00253,763,982.
00-111,231,258.
82347,720,929.
981,152,216,170.
80Add:Changeofaccountingpolicy--------3,232,500.
00--752,764.
93-6,774,884.
36-10,760,149.
29Correctionoferrorsinpreviousperiod----765,906.
62-6,893,159.
55-7,659,066.
17II.
balanceatthebeginningofthisyear505,425,000.
00250,531,482.
00-118,570,535.
83325,874,423.
101,200,401,440.
93439,500,000.
00250,531,482.
00-109,712,587.
27334,052,886.
071,133,796,955.
34III.
Increase/decreaseofamountinthisyear("-"meansdecrease)---6,703,939.
5960,335,456.
2667,039,395.
8565,925,000.
00--8,857,948.
56-8,178,462.
9766,604,485.
59(I)Netprofit----67,039,395.
8567,039,395.
85----88,579,485.
5988,579,485.
59(II)Gain/losslistedtoowners'equitydirectly721.
Netamountonchangesinbookvalueoffinancialassetsavailableforsale2.
Effectonchangesinotherowners'equityofinvestedunitsunderequitymethod3.
Effectonincometaxrelatedtoitemslistedtoowners'equity4.
OthersSubtotalof(I)and(II)67,039,395.
8567,039,395.
85----88,579,485.
5988,579,485.
59(III)Inputanreducedcapitalofowners1.
Inputcapitalofowners2.
AmountofSharesincludedintheowners'equity3.
Others(IV)Profitdistribution---6,703,939.
59-6,703,939.
59----8,857,948.
56-30,832,948.
56-21,975,000.
001.
Withdrawing---6,703,939.
59-6,703,939.
59----8,857,948.
56-8,857,948.
56-73surpluspublicreserve2.
Distributiontoallowners(shareholders)21,975,000.
00-21,975,000.
003.
Other(V)Internalcarryingforwardofowners'equity65,925,000.
00----65,925,000.
00-1.
Newincreaseofcapital(sharecapital)fromcapitalreserves2.
Convertsurplusreservestocapital(sharecapital)3.
Surplusreservesmakeuplosses4.
Others65,925,000.
00----65,925,000.
00-IV.
Balanceattheendofthisperiod505,425,000.
00250,531,482.
00-125,274,475.
42386,209,879.
361,267,440,836.
78505,425,000.
00250,531,482.
00-118,570,535.
83325,874,423.
101,200,401,440.
93Legalrepresentative:ChiefFinancialOfficer:AccountingManager:--74FOSHANHUAXINPACKAGINGCO.
,LTD.
NOTETOFINANCIALSTATEMENTAsoftheyear2008(AllamountsinRMBYuanunlessotherwisestated)[Englishversionforreferenceonly]I.
CompanyprofilesFoshanHuaxinPackingCo.
,Ltd.
(hereinafterreferredtoastheCompany)waspromotedbyFoshanHuaxinDevelopmentCo.
,Ltd.
,asamainsponsor,underapprovalofPeople'sGovernmentofGuangdongProvincewithYBH(1999)No.
297documentandEconomicSystemReformCommitteeofGuangdongProvincewithYTG(1999)No.
032document,andjointlyinvestedbysevenshareholderssuchasFoshanMunicipalInvestmentGeneralCorporation,FoshanXinhuiIndustrialDevelopmentCo.
,Ltd.
,ChinaPackagingGeneralCorporation,ChinaMaterialDevelopment&InvestmentGeneralCorporation,GuangdongTechnicalReforming&InvestmentCo.
,Ltd.
,ChinaChemistry&LightIndustryGeneralCorporation,andFoshanLightIndustryCompanybypromotionwithtotalsharecapitalofRMB290,000,000atparvalueofRMB1pershare.
TheCompanyisjoint-stockcompanywhowasregisteredinAdministrationBureauforCommerce&IndustryofGuangdongProvinceonJune21,1999.
(BusinessLicenseNo.
40000000005147).
Intheyearof2000,theCompanysuccessfullyplaceddomesticallylistedforeignshares(Bshares)amountingto149,500,000bymeanofprivateplacing,whichwaslistedinShenzhenStockExchangefortrade.
Afteroffering,theCompany'stotalsharecapitalwasincreasedtoRMB439,500,000.
00.
InJune2007,theCompanydistributeddividendsof65,925,000shares,thus,thetotalsharecapitalwaschangedintoRMB505,425,000.
00.
TheCompanyisengagedinpapermaking,paperpackageandprintingindustryandmainlymanufactures(operatedbysubsidiarycompaniesundertheCompany)andsellspackagingmaterials,andpackagingproducts,materialsfordecorationandaluminumandplasticcompoundmaterials;sellsandmaintainspackagemachinery;investsinindustryintermsofpackageandprinting.
TheCompanyislocatedinNo.
18,Jihua5thRoad,Foshan,Guangdong.
FoshanHuafengPaperCo.
,LtdandHuaxin(Foshan)ColorPrintingCo.
,Ltd.
aretwoshareholdingsubsidiariesoftheCompany,ofwhichmainproductsincludehigh-classcoatedwhiteboardandcolorprintedpackagingproducts.
II.
MainaccountingpoliciesandaccountingestimatesadoptedbytheCompanyThefinancialstatementspreparedbytheCompanycomplywiththerequirementoftheAccountingStandardforBusinessEnterprises,andhadtrulyandcompletelyreflectedtheCompany'sfinancialstatus,operationresultsandcashflow.
(II)PreparationbasisforthefinancialstatementsWithsustainingoperationasapremise,theCompanypreparesthefinancialstatement.
(III)Fiscalyear--75ThefiscalyearoftheCompanyisthesolarcalendaryear,whichisfromJanuary1toDecember31.
(IV)StandardcurrencyofaccountsTheCompanyadoptsRenminbiasastandardcurrencyofaccounts.
(V)AccountingmeasurementattributeItemsinfinancialstatementsshallbeaccordedbasedonhistoricalcost.
Financialassetsandfinancialliabilitieswhicharemeasuredattheirfairvalues,ofwhichthevariationisrecordedintotheprofitsandlossesofthecurrentperiod,financialassetsavailableforsale,derivativefinancialinstrumentsshallbemeasuredinthelightoffairvalue;inventorieswhicharedelayedinpaymentoverthenormalcreditconditionwhenpurchasedandfixedassetsshallbeaccordedwithpresentvalueofpurchaseprice;inventorieswhichimpairmentlossoccurredshallbemeasuredbynetrealizablevalue;otherassetsdepreciationshallbemeasuredbyrecoverableamount(whichhigherbetweenfairvalueandpresentvalue);inventorysurplusassetsshallbemeasuredbyreplacementcost.
Theaccountingmeasurementattributeremainedunchanged.
(VI)RecognitionstandardforcashequivalentsCashequivalentsoftheCompanyrefertoshort-term(usuallyduewithin3monthssincethedayofpurchase)andhighcirculatinginvestments,whichareeasilyconvertibleintoknownamountofcashandwhoserisksinchangeofvalueareminimal.
(VII)ForeigncurrenttranslationForaforeigncurrencyoccurred,theamountintheforeigncurrencyshallbetranslatedintotheamountinthefunctionalcurrencyatanapproximateexchangeratewiththespotexchangerateofthetransactiondate.
Forthebalanceofforeigncurrencyattheperiod-endinvariousforeigncurrencyaccounts,theforeigncurrencymonetaryitemsshallbetranslatedatthespotexchangerateonthebalancesheetdate,thebalanceofexchangeshallberecordedintotheprofitsandlossesatthecurrentperiod;exceptthatthebalanceofexchangearisingfromforeigncurrencyborrowingsforthepurchaseandconstructionorproductionofassetseligibleforcapitalizationshallbemeasuredinthelightofcapitalizationprinciple.
Theforeigncurrencynon-monetaryitemsmeasuredatthehistoricalcostshallstillbetranslatedatthespotexchangerateonthetransactiondate;theforeigncurrencynon-monetaryitemsmeasuredatthefairvalueshallbetranslatedatthespotexchangerateonthefairvalueconfirmingdate,thedifferenceistakenasthechangesintheprofitandlossoffairvalue.
(VIII)Recognitionandmeasurementoffinancialinstruments1.
ClassificationoffinancialassetsandfinancialliabilitiesFinancialassetsshallbeclassifiedintothefollowingfourcategorieswhentheyareinitiallyrecognized:(1)thefinancialassetswhicharemeasuredattheirfairvaluesandthevariationofwhichisrecordedintotheprofitsandlossesofthecurrentperiod,includingtransactionalfinancialassetsandthefinancialassetswhicharemeasuredattheirfairvaluesandofwhichthevariationisincludedinthecurrentprofitsandlosses;(2)theinvestmentswhichwillbeheldtotheirmaturity;(3)loansandtheaccountreceivables;and(4)financialassetsavailableforsale.
--76Financialliabilitiesshallbeclassifiedintothefollowingtwocategorieswhentheyareinitiallyrecognized:(1)thefinancialliabilitieswhicharemeasuredattheirfairvaluesandofwhichthevariationisincludedinthecurrentprofitsandlosses,includingtransactionalfinancialliabilitiesandthedesignatedfinancialliabilitieswhicharemeasuredattheirfairvaluesandofwhichthevariationisincludedinthecurrentprofitsandlosses;and(2)otherfinancialliabilities.
2.
RecognitionbasisandmeasurementmethodWhentheCompanybecomesapartytoafinancialinstrument,itshallrecognizeafinancialassetorfinancialliability.
ThefinancialassetsandfinancialliabilitiesinitiallyrecognizedbytheCompanyshallbemeasuredattheirfairvalues.
Forthefinancialassetsandliabilitiesmeasuredattheirfairvaluesandofwhichthevariationisrecordedintotheprofitsandlossesofthecurrentperiod,thetransactionexpensesthereofshallbedirectlyrecordedintotheprofitsandlossesofthecurrentperiod;forothercategoriesoffinancialassetsandfinancialliabilities,thetransactionexpensesthereofshallbeincludedintotheinitiallyrecognizedamount.
TheCompanyshallmakesubsequentmeasurementonitsfinancialassetsaccordingtotheirfairvalue;theCompanyshallmakesubsequentmeasurementonitsfinancialassetsaccordingtotheirfairvalues,andmaynotdeductthetransactionexpensesthatmayoccurwhenitdisposesofthesaidfinancialassetinthefuture.
However,thoseunderthefollowingcircumstancesshallbeexcluded:(1)Theinvestmentshelduntiltheirmaturity,loansandaccountsreceivableshallbemeasuredonthebasisofthepost-amortizationcostsbyadoptingtheactualinterestratemethod;(2)Theequityinstrumentinvestmentsforwhichthereisnoquotationintheactivemarketandwhosefairvaluecannotbemeasuredreliably,andthederivativefinancialassetswhichareconnectedwiththesaidequityinstrumentandmustbesettledbydeliveringthesaidequityinstrumentshallbemeasuredonthebasisoftheircosts.
TheCompanyshallmakesubsequentmeasurementonitsfinancialliabilitiesonthebasisofthepost-amortizationcostsbyadoptingtheactualinterestratemethod,withtheexceptionofthoseunderthefollowingcircumstances:(1)Forthefinancialliabilitiesmeasuredattheirfairvaluesandofwhichthevariationisrecordedintotheprofitsandlossesofthecurrentperiod,theyshallbemeasuredattheirfairvalues,andnoneofthetransactionexpensesmaybededucted,whichmayoccurwhenthefinancialliabilitiesaresettledinthefuture;(2)Forthederivativefinancialliabilities,whichareconnectedtotheequityinstrumentforwhichthereisnoquotationintheactivemarketandwhosefairvaluecannotbereliablymeasured,andwhichmustbesettledbydeliveringtheequityinstrument,theyshallbemeasuredonthebasisoftheircosts.
(3)Forthefinancialguaranteecontractswhicharenotdesignatedasafinancialliabilitymeasuredatitsfairvalueandthevariationthereofisrecordedintotheprofitsandlossesofthecurrentperiod,andforthecommitmentstograntloanswhicharenotdesignatedtobemeasuredatthefairvalueandofwhichthevariationisrecordedintotheprofitsandlossesofthecurrentperiodandwhichwillenjoyaninterestratelowerthanthatofthemarket,asubsequentmeasurementshallbemadeaftertheyareinitiallyrecognizedaccordingtothehigheroneofthefollowing:i.
thebestestimatedamountasoutgoneduetoperformingtherelevantcurrentobligation;orii.
thesurplusafteraccumulativeamortizationasdeterminedaccordingtotheeffectiveinterestmethodissubtractedfromtheinitiallyrecognizedamount.
3.
Recognitionandmeasurementoftransferoffinancialassets--77WheretheCompanyhastransferrednearlyalloftherisksandrewardsrelatedtotheownershipofthefinancialassettothetransferee,itshallstoprecognizingthefinancialasset.
Ifitretainednearlyalloftherisksandrewardsrelatedtotheownershipofthefinancialasset,itshallcontinuetorecognizetheentirefinancialassettobetransferredandshallrecognizetheconsiderationitreceivesasafinancialliability.
WheretheCompanydoesnottransferorretainnearlyalloftherisksandrewardsrelatedtotheownershipofafinancialasset,itshalldealwithitaccordingtothecircumstancesasfollows,respectively:(1)Ifitgivesupitscontroloverthefinancialasset,itshallstoprecognizingthefinancialasset;(2)Ifitdoesnotgiveupitscontroloverthefinancialasset,itshall,accordingtotheextentofitscontinuousinvolvementinthetransferredfinancialasset,recognizetherelatedfinancialassetandrecognizetherelevantliabilityaccordingly.
Ifthetransferofanentirefinancialassetsatisfiestheconditionsforstoppingrecognition,thedifferencebetweentheamountsofthefollowing2itemsshallberecordedintheprofitsandlossesofthecurrentperiod:(1)Thebookvalueofthetransferredfinancialasset;(2)Thesumofconsiderationreceivedfromthetransfer,andtheaccumulativeamountofthechangesofthefairvalueoriginallyrecordedintheowner'sequities.
Ifthetransferofpartialfinancialassetsatisfiestheconditionstostoptherecognition,theentirebookvalueofthetransferredfinancialassetshall,betweentheportionwhoserecognitionhasbeenstoppedandtheportionwhoserecognitionhasnotbeenstopped,beapportionedaccordingtotheirrespectiverelativefairvalue,andthedifferencebetweentheamountsofthefollowing2itemsshallbeincludedintotheprofitsandlossesofthecurrentperiod:(1)Thebookvalueoftheportionwhoserecognitionhasbeenstopped;(2)Thesumofconsiderationoftheportionwhoserecognitionhasbeenstopped,andtheportionoftheaccumulativeamountofthechangesinthefairvalueoriginallyrecordedintheowner'sequitieswhichiscorrespondingtotheportionwhoserecognitionhasbeenstopped.
4.
DeterminationofthefairvalueoffinancialassetsandfinancialliabilitiesAsforthefinancialassetsorfinancialliabilitiesforwhichthereisanactivemarket,thequotedpricesintheactivemarketshallbeusedtodeterminethefairvaluesthereof.
Wherethereisnoactivemarketforafinancialinstrument,theenterpriseconcernedshalladoptvalueappraisaltechniques(thevalueappraisaltechniquesmainlyincludethepricesadoptedbytheparties,whoarefamiliarwiththecondition,inthelatestmarkettransactionupontheirownfreewill,thecurrentfairvalueobtainedbyreferringtootherfinancialinstrumentsofthesameessentialnature,thecashflowcapitalizationmethodandtheoptionpricingmodel,etc.
)todetermineitsfairvalue.
Asforthefinancialassetsinitiallyobtainedorproducedatsourceandthefinancialliabilitiesassumed,thefairvaluethereofshallbedeterminedonthebasisofthetransactionpriceofthemarket.
5.
ImpairmentinspectionandwithdrawalmethodofimpairmentprovisionforfinancialassetsandfinancialliabilitiesTheCompanyshallcarryoutaninspection,onthebalancesheetday,onthecarryingamountofthefinancialassetsotherthanthosemeasuredattheirfairvaluesandofwhichthevariationisrecordedintotheprofitsandlossesofthecurrentperiod.
Animpairmenttestshallbemadeonthefinancialassetswithsignificantsingleamounts.
Withregardtothefinancialassetswithinsignificantsingleamounts,itshallbeincludedinacombinationoffinancialassetswithsimilarriskfeaturessoastoconductanotherimpairmenttest.
Where,uponindependenttest,thefinancial--78asset(includingthosefinancialassetswithsignificantsingleamountsandthosewithinsignificantamounts)hasnotbeenimpaired,itshallbeincludedinacombinationoffinancialassetswithsimilarriskfeaturessoastoconductanotherimpairmenttest.
Whereafinancialassetwhichismeasuredonthebasisofpost-amortizationcostsandforwhichthereisanyobjectiveevidenceprovingthattheimpairmentoccurred,theimpairmentlossesshallberecognizedinaccordancewiththebalancebetweenbookvalueandthecurrentvalueofthepredictedfuturecashflow.
Wherethereisaverysmallgapbetweenthepredictedfuturecashflowofashort-termaccountreceivableitemandthecurrentvaluethereof,thepredictedfuturecashflowisnotrequiredtobecapitalizedwhendeterminingtherelevantimpairment-relatedlosses.
Whereanequityinstrumentinvestmentforwhichthereisnoquotedpriceintheactivemarketandwhosefairvaluecannotbereliablymeasured,oraderivativefinancialassetwhichisconnectedwiththeequityinstrumentandwhichmustbesettledbydeliveringtheequityinstrument,suffersfromanyimpairment,thegapbetweenthecarryingamountoftheequityinstrumentinvestmentorthederivativefinancialassetandthecurrentvalueofthefuturecashflowofsimilarfinancialassetscapitalizedaccordingtothereturnsratioofthemarketatthesametimeshallberecognizedasimpairment-relatedlosses.
Whereafairvalueoffinancialassetsavailableforsaledropsbyabigmarginornotcontemporarilyinanticipation,itsimpairmentlossesshallberecognized,theaccumulativelossesarisingfromthedecreaseofthefairvalueoftheowner'sequitywhichwasdirectlyincludedshallbetransferredoutandrecordedintoimpairmentlosses.
(IX)WithdrawalmethodforreserveforbaddebtsofaccountsreceivableAreserveforbaddebtsshall,inaccordancewiththebalanceofitscurrentvalueoffuturecashflow'sloweringthanitsbookvalue,bewithdrawnonaccountsreceivable(includingaccountsreceivableandotherreceivables)withsignificantsingleamountsandthatthereisanyobjectiveevidenceshowsthatithasbeenimpairedandoneswithinsignificantsingleamountsbutwiththegreaterriskaftercombinationbasedoncreditriskfeatures;Awithdrawalproportionforbaddebtsreserveshall,basedontheactuallossrateofaccountsreceivablecombinationwithsameagingandcombiningthepresentsituation,beconfirmedonaccountsreceivable(includingaccountsreceivableandotherreceivables)withinsignificantsingleamountsandthosewithsignificantsingleamountsandtherehasnotbeenimpairedafterindependenttest,Withdrawalproportionsofbaddebtsreserveareasfollows:AgingWithdrawalproportion1-3months-4-12months5%1-2years10%2-3years20%Over3years50%(X)Recognitionandmeasurementofinventories1.
Theterm"inventories"referstofinishedproductsormerchandisepossessedbyanenterpriseforsaleinthedailyofbusiness,orworkinprogressintheprocessofproduction,ormaterialsand--79suppliestobeconsumedintheprocessofproductionorofferinglaborservice.
2.
Thesendingoutinventoriesshallbemeasuredbyplannedcost.
3.
Onthedateofbalancesheet,theinventoriesshallbemeasuredwhicheverislowerinaccordancewiththecostandthenetrealizablevalue.
TheCompanyshallmakeprovisionforlossondeclineinvalueofinventoriesonthegroundofthebalanceofthecostofinventoriesishigherthanthenetrealizedvalue.
Suchmerchandiseinventoryforsaledirectlyasfinishedgoodsinventories,merchandiseandmaterialsforsale,theirnetrealizablevalueshallbetheamountafterdeductingestimatedsaleexpenseandrelevanttaxesfromtheestimatedsalepriceoftheinventoriesincourseofnormalproductionandoperation;thenetrealizablevalueofmaterialsinventoriesforprocessingshallbetheamountafterdeductingtheestimatedcostofcompletion,estimatedsaleexpenseandtherelevanttaxesfromtheestimatedsalepriceoffinishedproductsincourseofnormalproductionandoperation;onthebalancesheetdate,forinventorieswiththecontractpriceandinventorieswithoutthecontractpriceinthesameinventories,theirnetrealizablevalueshallbemeasuredseparately,andcomparingwiththeircorrespondingcosts,theiramountsofprovisionforlossondeclineinvalueofinventorieswithdrawnorcarriedforwardshallbeconfirmedrespectively.
4.
Inventorysystemforinventories:Perpetualinventorysystemshallbeadopted.
5.
TheCompanyshallamortizetheeasilyconsumedproductsoflowvalueandpackingarticlesandsuppliesbyemployingtheone-offwrite-offmethod.
(XI)Recognitionandmeasurementoflong-termequityinvestment1.
Recognitionofinitialinvestmentcostoflong-termequityinvestment(1)Forthemergerofenterprisesunderthesamecontrol,iftheconsiderationofthemergingenterpriseisthatitmakespaymentincash,transfersnon-cashassetsorbearitsdebtsorissueequitysecurities,itshall,onthedateofmerger,regardtheshareofthebookvalueoftheowner'sequityofthemergedenterpriseastheinitialcostofthelong-termequityinvestment.
Thedifferencebetweentheinitialcostofthelong-termequityinvestmentandthebookvalueofmergerconsiderationpaidorthetotalamountoftheparvalueofshareissuedshalloffsetagainstthecapitalreserve.
Ifthecapitalreserveisinsufficienttodilute,theretainedearningsshallbeadjusted.
(2)Forthemergerunderdifferentcontrol,theCompany,onthedateofmerger,regardsthefairvalueofthemergerconsiderationpaidandvariousdirectcostsastheinitialcostofthelong-termequityinvestment.
(3)Besidesthelong-termequityinvestmentsformedbythemergerofenterprises,theinitialcostofalong-termequityinvestmentobtainedbymakingpaymentincashshallbethepurchasecostwhichisactuallypaid;theinitialcostofalong-termequityinvestmentobtainedonthebasisofissuingequitysecuritiesshallbethefairvalueoftheequitysecuritiesissued;theinitialcostofalong-termequityinvestmentofaninvestorshallbethevaluestipulatedintheinvestmentcontractoragreementexcepttheunfairvaluestipulatedinthecontractoragreement.
2.
Along-termequityinvestmentthatiscontrolledbytheCompanyshallbeaccountedby--80employingthecostmethod,andshallbemadeanadjustmentbyemployingtheequitymethodwhenitworksoutconsolidatedfinancialstatements.
Along-termequityinvestmentthatdoesnotdojointcontrolordoesnothavesignificantinfluenceontheCompany,andentity,andhasnoofferintheactivemarketanditsfairvaluecannotbereliablymeasured,shallbemeasuredbyemployingthecostmethod.
Along-termequityinvestmentthatdoesjointcontrolorsignificantinfluencesovertheCompanyshallbeaccountedbyemployingtheequitymethod.
3.
Recognitionmeasurementforincomefromlong-termequityinvestmentThepriceofalong-termequityinvestmentmeasuredbyemployingthecostmethodshallbeincludedatitsinitialinvestmentcost.
Ifthereareadditionalinvestmentsordisinvestments,thecostofthelong-termequityinvestmentshallbeadjusted.
Thedividendsorprofitsdeclaredtodistributebytheinvestedentityshallberecognizedasthecurrentinvestmentincome.
Theinvestmentincomerecognizedbytheinvestingenterpriseshallbelimitedtotheamountreceivedfromtheaccumulativenetprofitsthatariseaftertheinvestedentityhasacceptedtheinvestment.
Wheretheamountofprofitsorcashdividendsobtainedbytheinvestingentityexceedstheaforesaidamount,itshallberegardedasrecoveryofinitialinvestmentcost.
Thepriceofalong-termequityinvestmentmeasuredbyemployingtheequitymethodshall,inaccordancewiththeattributableshareofthenetprofitsorlossesoftheinvestedentity,recognizetheinvestmentprofitsorlossesandadjustthebookvalueofthelong-termequityinvestment.
Theinvestingenterpriseshall,inthelightoftheprofitsorcashdividendsdeclaredtodistributebytheinvestedentity,calculatetheproportionitshallobtain,andshallreducethebookvalueofthelong-termequityinvestmentcorrespondingly.
Whereanychangeismadetotheowner'sequityotherthanthenetprofitsandlossesoftheinvestedentity,thebookvalueofthelong-termequityinvestmentshallbeadjustedandbeincludedintheowner'sequity.
Whendisposingofalong-termequityinvestment,thedifferencebetweenitsbookvalueandtheactualpurchasepriceshallbeincludedinthecurrentprofitsandlosses.
Ifanychangeotherthanthenetprofitsandlossesoftheinvestedentityoccursandisincludedintheowner'sequity,theportionpreviouslyincludedintheowner'sequityshall,whendisposingofalong-termequityinvestmentmeasuredbyemployingtheequitymethod,betransferredtothecurrentprofitsandlossesaccordingtoacertainproportion.
4.
Onthebalancesheetdate,whereanlong-termequityinvestmentforwhichitismeasuredbyemployingthecostmethod,thereisnoquotedpriceintheactivemarketandwhosefairvaluecannotbereliablymeasured,thereisanyobjectiveevidenceprovingthatsuchlong-termequityinvestmenthasbeenimpaired,shallbewithdrawnprovisionforimpairmentoflong-termequityinvestmentinthelightofthegapbetweenthebookvalueoflong-termequityinvestmentandcurrentvalueofthefuturecashflowofsimilarinvestmentaccordingtothereturnratioofthemarketatthesametime,.
Whereotherinvestmentforwhichthereexistimpairmentsigns,shallbewithdrawnprovisionforimpairmentoflong-termequityinvestmentinthelightofthemethodmentionedinII(XVI)intheNotestotheFinancialStatement.
5.
Recognitionbasisofjointcontrolandsignificantinfluencesovertheinvestingenterprises:thejointcontrolshallberecognizedinthelightofthecontroloveraneconomicactivityinaccordancewiththecontractsandagreements,whichdoesnotexistunlesstheinvestingpartiesoftheeconomicactivitywithoneanassentonsharingthecontrolpowerovertherelevantimportantfinancialandoperatingdecisions.
Significantinfluencesshallberecognizedinthelightofthe--81powertoparticipateinmakingdecisionsonthefinancialandoperatingpoliciesofanenterprise,butnottocontrolordojointcontroltogetherwithotherpartiesovertheformulationofthesepolicies.
Whereaninvestingenterpriseisabletohavesignificantinfluencesonaninvestedentity,theinvestedentityshallbeitsassociatedentity.
(XII)Recognitionandmeasurementofinvestmentrealestates1.
Investmentrealestatesinclude:therighttouseanylandwhichhasalreadybeenrented;therighttouseanylandwhichisheldandpreparedfortransferafterappreciation;andtherighttouseanybuildingwhichhasalreadybeenrented.
2.
Theinitialmeasurementoftheinvestmentrealestateshallbemadeatitscost.
TheCompanyshallmakeasubsequentmeasurementtotheinvestmentrealestatethroughthecostpattern3.
Aninvestmentrealestatesmeasuredthroughthecostpatternshallbewithdrawnadepreciationandmadeanamortizationbyemployingthesamemethodwithfixedassetsandintangibleassets.
4.
Whereaninvestmentrealestatesmeasuredthroughthecostpatternforwhichthereexistimpairmentsignsonthebalancesheet,shallbewithdrawnprovisionforimpairmentofinvestmentrealestatesinthelightofthemethodmentionedinII(XVI)intheNotestotheFinancialStatement.
(XIII)Recognitionandmeasurementoffixedassets1.
Fixedassetsreferstothetangibleassetsthatsimultaneouslypossessthefeaturesasfollows:(1)theyareheldforthesakeofproducingcommodities,renderinglaborservice,rentingorbusinessmanagement;and(2)theirusefullifeisinexcessofonefiscalyear.
2.
Nofixedassetsmayberecognizedunlessitsimultaneouslymeetstheconditionsasfollows:(1)theeconomicbenefitspertinenttothefixedassetsarelikelytoflowintotheenterprise;and(2)thecostofthefixedassetscanbemeasuredreliably.
Wherethesubsequentexpenditurerelatedwithfixedassets,meetingtheaforesaidrecognitioncondition,shallbemeasuredintothecostofthefixedassets,whilenotmeetingtheaforesaidrecognitioncondition,itshallbemeasuredintotheprofitsandlossesofthecurrentperiod.
3.
Theinitialmeasurementoffixedassetsshallbemadeatitscost.
4.
TheCompanyshallaccountthedepreciationofthefixedassetsbyemployingthestraight-linemethod.
CategoryoffixedassetUsefullifeExpectednetsalvagevalueAnnualdepreciationrate(%)Houseandbuilding40years10%2.
25%Machineryequipment20-30years10%3-4.
50%Transportequipment8years10%11.
25%Other5-10years10%9-18%5.
Afixedassets,forwhichitisstoppedtouseforsixmonthsinsuccessionduetorunningunderitsproductioncapacityornaturaldisasters,shallberecognizedidlefixedassets.
TheCompanyshallwithdrawdepreciationofidlefixedassetsbyemployingthemethodwithotherfixedassets.
--826.
Onthebalancesheetdate,whereafixedassetsforwhichthereexistimpairmentsigns,shallbewithdrawnprovisionforimpairmentoffixedassetsinthelightofthemethodmentionedinII(XVI)intheNotestotheFinancialStatement.
(XIV)Recognitionandmeasurementofconstructioninprogress1.
Noconstructioninprogressmayberecognizedunlessitsimultaneouslymeetstheconditionsasfollows:a.
theeconomicbenefitsarelikelytoflowintotheCompany,andb.
thecostoftheconstructioninprogresscanbemeasuredreliably.
Theconstructioninprogressshallbemeasuredinthelightoftheactualcostwhentheassetscompleteandachieveestimatedusablestatus.
2.
Constructionsinprogressarecarrieddowntofixedassetsaccordingtotheiractualcostswhencompletingandachievingestimatedusablestatus.
Thefixedassetsthathavebeencompletedandreachedestimatedusablestatusbuthavenotyetbeenthroughcompletionandsettlementproceduresarechargedtoanaccountaccordingtotheirestimatevalues;adjustmentwillbeconducteduponconfirmationoftheiractualvalues.
3.
Onthebalancesheetdate,whereaconstructioninprogressforwhichthereexistimpairmentsigns,shallbewithdrawnprovisionforimpairmentoftheconstructioninprogressinthelightofthemethodmentionedinII(XVI)intheNotestotheFinancialStatement.
(XV)Recognitionandmeasurementofintangibleassets1.
Theintangibleassetsshallbeinitiallymeasuredaccordingtoitscost.
2.
Inaccordancewithsuchintegrativefactorsasintangibleasset'scontractualrightorotherstatutoryrights,sameindustrysituation,historicalexperienceaswellasexpertdiscussion,ifitisabletoforecasttheperiodwhentheintangibleassetscanbringeconomicbenefittotheCompany,itshallberegardedasanintangibleassetwithcertainservicelife;ifitisunabletoforecasttheperiodwhentheintangibleassetscanbringeconomicbenefittotheCompany,itshallberegardedasanintangibleassetwithuncertainservicelife.
3.
Withregardtointangibleassetswithlimitedusefullife,thefollowingfactorsshallbeconsideredwhentheusefullifeisestimated:(1)generallifecycleofproductsmanufacturedwiththesaidassets,informationofusefullifeofsimilarassetsobtained;(2)estimationoverthepresentphaseandfuturedevelopmenttendencyintherespectoftechnologyandtechnics;(3)marketdemandofproductsmanufacturedwiththesaidassetsandoflaborserviceprovidedbythesaidassets;(4)actiontakenbypresentorpotentialcompetitor;(5)expectedmaintainexpenditureforwhichitkeepseconomicbenefitcapacitybroughtbythesaidassets,andexpenditurecapacitypaidinadvancebytheCompany;(6)suchlaws,regulationsorthesimilarrestrictionrelatedwithcontrolperiodofthesaidassets,i.
e.
concessionperiodandtenancyduration;and(7)relevanceofusefullifeofotherassetsheldbytheCompany.
4.
Withregardtointangibleassetswithlimitedservicelifeshallbeamortizedreasonablyinaccordancewiththeexpectedrealizationpatternoftheeconomicbenefitswhichrelevanttotheintangibleassetswithintheservicelife,ifitisunabletodeterminetheexpectedrealizationpatternreliably,intangibleassetsshallbeamortizedbythestraight-linemethod.
Intangibleassetswithuncertainservicelifemaynotbeamortized,buttheCompanyshallchecktheservicelifeofthesaidintangibleassetsforeveryyear,andmakeimpairmenttesting.
--835.
Onthebalancesheetdate,theCompanyshallcheckfutureeconomicbenefitcapacityisexpectedtobebroughtbytheintangibleassettoit.
AndthesaidintangibleassetsshallbewithdrawnprovisionforimpairmentinthelightofthemethodmentionedinII(XVI)intheNotestotheFinancialStatement.
6.
TheresearchexpendituresforitsinternalresearchanddevelopmentprojectsoftheCompanyshallberecordedintotheprofitorlossforthecurrentperiod.
ThedevelopmentexpendituresforitsinternalresearchanddevelopmentprojectsoftheCompanymaybeconfirmedasintangibleassetswhentheysatisfythefollowingconditionssimultaneously:(1)Itisfeasibletechnicallytofinishintangibleassetsforuseorsale;(2)Itisintendedtofinishanduseorselltheintangibleassets;(3)Theusefulnessofmethodsforintangibleassetstogenerateeconomicbenefitsshallbeproved,includingbeingabletoprovethatthereisapotentialmarketfortheproductsmanufacturedbyapplyingtheintangibleassetsorthereisapotentialmarketfortheintangibleassetsitselfortheintangibleassetswillbeusedinternally;(4)Itisabletofinishthedevelopmentoftheintangibleassets,andabletouseorselltheintangibleassets,withthesupportofsufficienttechnologies,financialresourcesandotherresources;and(5)Thedevelopmentexpendituresoftheintangibleassetscanbereliablymeasured.
(XVI)Impairmentofassets1.
TheCompanyshall,onthebalancesheetdate,makeajudgmentofassets(excludinginventories,equityinstrumentinvestmentwithoutquotedpriceintheactivemarketandwhosefairvaluecannotbereliablymeasured,investmentrealestatesmeasuredbyfairvaluepattern,consumptivebiologicalassets,assetsformedbyconstructioncontracts,deferredincometaxassets,unsecuredresidualvalueofthelessorinafinancialleasingandassetsoutoffinancialassets)onwhetherthereisanysignofpossibleassetsimpairment.
Withthereisanyevidenceindicatingapossibleimpairmentofassets,theCompanyshall,onthebasisofsingleitemassets,estimatetherecoverableamount.
Whereitisdifficulttodoso,itshalldeterminetherecoverableamountofthegroupassetsonthebasisoftheassetgrouptowhichtheassetbelongs.
2.
Therecoverableamountshallbedeterminedinlightofthehigheroneofthenetamountofthefairvalueofthesingleitemassets,assetsgroup,orcombinationofgroupassetsminusthedisposalexpensesandthecurrentvalueoftheexpectedfuturecashflowofthesingleitemassets,assetsgroup,orcombinationofgroupassets.
3.
Wheretherecoverableamountofthesingleassetsislowerthanitsbookvalue,itscorrespondingprovisionforimpairmentofassetsshallberecognizedshallbewithdrawninaccordingtothebalanceofthebookvalueofthesingleassetsandtherecoverableamount.
Wheretherecoverableamountofanassetgrouporacombinationofassetgroupsislowerthanitsbookvalue,itshallberecognizedasthecorrespondingimpairmentloss.
Theamountoftheimpairmentlossshallfirstchargeagainstthebookvalueoftheheadquarter'assetsandgoodwillwhichareapportionedtotheassetgrouporcombinationofassetgroups,thenchargeitagainstthebookvalueofotherassetsinproportiontotheweightofotherassetsintheassetgrouporcombinationofassetgroupswiththegoodwillexcluded.
Thechargesagainstthebookvalueoftheassetsaboveshallbetreatedastheimpairmentlossoftheassets(includingthegoodwill)andshallbewithdrawntheprovisionforimpairmentofsingleassets.
--844.
Onceanylossofassetimpairmentisrecognized,itshallnotbeswitchedbackinthefutureaccountingperiod.
(XVII)Recognitionandmeasurementofborrowingcosts1.
RecognitionprincipleforcapitalizationofborrowingcostsWheretheborrowingcostsincurredtotheCompanycanbedirectlyattributabletotheacquisitionandconstructionorproductionofassetseligibleforcapitalization,itshallbecapitalizedandrecordedintothecostsofrelevantassets.
Otherborrowingcostsshallberecognizedasexpensesonthebasisoftheactualamountincurred,andshallberecordedintothecurrentprofitsandlosses.
Theterm"assetseligibleforcapitalization"shallrefertothefixedassets,investmentrealestate,inventoriesandotherassets,ofwhichtheacquisitionandconstructionorproductionmaytakequitealongtimetogetreadyforitsintendeduseorforsale.
2.
Periodofcapitalizationofborrowingcosts(1)Theborrowingcostsshallnotbecapitalizedunlesstheysimultaneouslymeetthefollowingrequirements:(1)Theassetdisbursementshavealreadyincurred;(2)Theborrowingcostshasalreadyincurred;and(3)Theacquisitionandconstructionorproductionactivitieswhicharenecessarytopreparetheassetforitsintendeduseorsalehavealreadystarted.
(2)Suspensionofcapitalization:Wheretheacquisitionandconstructionorproductionofaqualifiedassetisinterruptedabnormallyandtheinterruptionperiodlastsformorethan3months,thecapitalizationoftheborrowingcostsshallbesuspended.
Theborrowingcostsincurredduringsuchperiodshallberecognizedasexpenses,tilltheacquisitionandconstructionorproductionoftheassetrestarts.
(3)Ceaseingofcapitalization:Whenthequalifiedassetunderacquisitionandconstructionorproductionisreadyfortheintendeduseorsale,thecapitalizationoftheborrowingcostsshallbeceased.
3.
CapitalizedamountofborrowingcostsAsforspecificallyborrowedloansfortheacquisitionandconstructionorproductionofassetseligibleforcapitalization,theto-be-capitalizedamountofinterestsshallbedeterminedinlightoftheactualcost(includingamortizationofdepreciationorpremiumrecognizedbytheactualratemethod)incurredofthespeciallyborrowedloanatthepresentperiodminustheincomeofinterestsearnedontheunusedborrowingloansasadepositinthebankorasatemporaryinvestment;Whereageneralborrowingisusedfortheacquisitionandconstructionorproductionofassetseligibleforcapitalization,theCompanyshallcalculateanddeterminetheto-be-capitalizedamountofinterestsonthegeneralborrowingbymultiplyingtheweightedaverageassetdisbursementofthepartoftheaccumulativeassetdisbursementsminusthegeneralborrowingbythecapitalizationrate(weightedaveragerate)ofthegeneralborrowingused.
Duringtheperiodofcapitalization,theamountofinterestcapitalizedduringeachaccountingperiodshallnotexceedtheamountofinterestactuallyincurredtotherelevantborrowingsinthecurrentperiod.
Duringtheperiodofcapitalization,theexchangebalanceonforeigncurrencyborrowingsshallbecapitalized,andshallberecordedintothecostofassetseligibleforcapitalization.
Fortheancillaryexpenseincurredtoaspecificallyborrowedloan,thoseincurredbeforeaqualifiedasset--85underacquisition,constructionorproductionisreadyfortheintendeduseorsaleshallbecapitalizedattheincurredamountwhentheyareincurred;thoseincurredafteraqualifiedassetunderacquisitionandconstructionorproductionisreadyfortheintendeduseorsaleshallberecordedintotheprofitsandlossesofthecurrentperiod.
Theancillaryexpensesarisingfromageneralborrowingshallberecognizedasexpensesattheirincurredamountwhentheyareincurred,andshallberecordedintotheprofitsandlossesofthecurrentperiod.
(XVIII)Recognitionprincipleofrevenue1.
SellinggoodsNorevenuefromsellinggoodsmayberecognizedunlessthefollowingconditionsaremetsimultaneously:a.
Thesignificantrisksandrewardsofownershipofthegoodshavebeentransferredtothebuyerbytheenterprise;b.
Theenterpriseretainsneithercontinuousmanagementrightthatusuallykeepsrelationwiththeownershipnoreffectivecontroloverthesoldgoods;c.
Therelevantamountofrevenuecanbemeasuredinareliableway;d.
Therelevanteconomicbenefitsmayflowintotheenterprise;ande.
Therelevantcostsincurredortobeincurredcanbemeasuredinareliableway.
2.
ProvidinglaborservicesIftheCompanycan,onthedateofthebalancesheet,reliablyestimatetheoutcomeofatransactionconcerningthelaborservicesitprovides(Theoutcomeofatransactionconcerningtheprovidingoflaborservicescanbemeasuredinareliableway,meansthatthefollowingconditionsshallbemetsimultaneously:a.
Theamountofrevenuecanbemeasuredinareliableway;b.
Therelevanteconomicbenefitsarelikelytoflowintotheenterprise;c.
Thescheduleofcompletionunderthetransactioncanbeconfirmedinareliableway;andd.
Thecostsincurredortobeincurredinthetransactioncanbemeasuredinareliableway),itshallrecognizetherevenuefromprovidingservicesemployingthepercentage-of-completionmethod.
AndtheCompanyshallascertainthescheduleofcompletionunderthetransactionconcerningtheprovidingoflaborservicesinaccordancewiththemeasurementoftheworkcompleted.
Ifanenterprisecannot,onthedateofthebalancesheet,measuretheresultofatransactionconcerningtheprovidingoflaborservicesinareliableway,itshallbeconductedinaccordancewiththefollowingcircumstances,respectively:a.
Ifthecostoflaborservicesincurredisexpectedtobecompensated,therevenuefromtheprovidingoflaborservicesshallberecognizedinaccordancewiththeamountofthecostoflaborservicesincurred,andthecostoflaborservicesshallbecarriedforwardatthesameamount;orb.
Ifthecostoflaborservicesincurredisnotexpectedtocompensate,thecostincurredshouldbeincludedinthecurrentprofitsandlosses,andnorevenuefromtheprovidingoflaborservicesmayberecognized.
3.
AbalienatingtherighttouseassetsNorevenuefromabalienatingofrighttouseassetsmayberecognizedunlessthefollowingconditionsaremetsimultaneously:a.
therelevanteconomicbenefitsarelikelytoflowintotheenterprise;andb.
theamountofrevenuescanbemeasuredinareliableway.
Theamountofinterestrevenueshouldbemeasuredandconfirmedinaccordancewiththelengthoftimeforwhichtheenterprise'scashisusedbyothersandtheactualinterestrate;ortheamountofroyaltyrevenueshouldbemeasuredandconfirmedinaccordancewiththeperiodandmethodofcharging--86asstipulatedintherelevantcontractoragreement.
(XIX)Recognitionandmeasurementofincometaxes1.
Wherethereisdifferencebetweenthebookvalueoftheassetsorliabilitiesanditstaxbase(Asforanitemthathasnotbeenrecognizedasanassetorliability,ifitstaxbasecanbedeterminedinlightofthetaxlaw,thedifferencebetweenthetaxbaseanditsbookvalue),thedeferredincometaxassetsorthedeferredincometaxliabilitiesshallbedeterminedaccordingtotheapplicabletaxrateinthecourseofprospectiverecoveringassetsordischargingliabilities.
2.
TheCompanyshallrecognizethedeferredincometaxassetsinaccordancewiththeextentoftheamountofthetaxableincomewhichitismostlikelytoobtainandwhichcanbedeductedfromthedeductibletemporarydifference.
Onthebalancesheetdate,wherethereisanyexactevidenceshowingthatitislikelytoacquiresufficientamountoftaxableincometaxinafutureperiodtooffsetagainstthedeductibletemporarydifference,thedeferredincometaxassetsunrecognizedinpriorperiodsshallberecognized.
3.
Thecarryingamountofdeferredincometaxassetsshallbereexaminedonbalancesheetday.
Ifitisunlikelytoobtainsufficienttaxableincometaxestooffsetthebenefitofthedeferredincometaxassets,thecarryingamountofthedeferredincometaxassetsshallbewrittendown.
Whenitisprobabletoobtainsufficienttaxableincometaxes,suchwrite-downamountshallbesubsequentlyreversed.
4.
Onthebasisofmeasuringandrecognizingincometaxesofthecurrentperiod(incometaxespayableofthecurrentperiod)anddeferredincometax(orincome),thesummationofboththeincometaxesofthecurrentperiodanddeferredincometaxofanenterpriseshallberecognizedasincometaxexpensesorincomesintheincomestatement,butexcludinginfluenceonincometaxduetothetransactionsoreventsdirectlyrecognizedastheowner'srightsandinterests.
(XX)PreparationmethodoftheconsolidatedfinancialstatementParentcompanyshallbringallsubsidiariesunderitscontrolintotheconsolidationscopeofconsolidatedfinancialstatement.
InlinewiththeAccountingStandardforBusinessEnterpriseNo.
33–ConsolidatedFinancialStatement,theconsolidatedfinancialstatementshallbepreparedbyparentcompanyonthebasisofthebothfinancialstatementofparentcompanyanditssubsidiariesafteradjustinglong-termequityinvestmentoveritssubsidiariesbasedonequitymethodinaccordancewithotherrelevantinformation.
(XXI)ExplanationonchangeinaccountingpoliciesandaccountingestimatesTherewasnochangeinaccountingpoliciesandaccountingestimatesduringthereportingperiod.
(XXI)Explanationonprior-periodcorrectionsofsignificantaccountingerrorsThejoint-stocksubsidiaryoftheCompany,TetraPakHuaxin(Foshan)PackagingCo.
,Ltdrestateditsintangibleassetsandotherintangibleassetsattheendof2007.
Afterrestatement,theintangibleassetsshouldbeamortizedbeforetheendof2007.
Afterrestatementandcorrection,the2007annualnetprofitincreasedbyRMB1,067,246.
92,the2008retainedearningsdecreasedbyRMB6,591,819.
25,includingadecreaseofundistributedprofitsbyRMB5,932,637.
32andadecreaseofsurplusreservesbyRMB659,181.
93.
--87III.
TaxesMaintaxestypesandtaxrateareapplicabletotheCompanyasfollows:1.
Value-addedtax(VAT)VATwaspaidbasedontaxrateof17%.
2.
BusinesstaxBusinesstaxwaspaidbasedontaxrateof5%oftaxableincomepayable.
3.
CitymaintenanceandconstructiontaxCitymaintenanceandconstructiontaxwasbasedontaxrateof7%ofturnovertaxpayable.
4.
EducationalsurtaxEducationsurtaxwasbasedontaxrateof3%ofturnovertaxpayable.
5.
EmbankmentprotectioncostEmbankmentprotectioncostwasbasedontaxrateof3%ofturnovertaxpayable.
6.
IncometaxIncometaxwaspaidbasedon25%oftaxableincome.
On29July2003,asapprovedbyDepartmentofForeignTradeandEconomicCooperationofGuangdongProvincewiththeReplyonSupplementaryContractandSupplementaryArticlesofAssociationofFoshanHuafengPaperCo.
,Ltd.
bytheJointVenture(YWJMZZi[2003]No.
432document),thetotalinvestmentinFoshanHuafengPaperCo.
,Ltd.
,theshareholdingsubsidiaryoftheCompany,hasincreasedtoUSD239.
57millionfromUSD95million,witharegisteredcapitalincreasingtoUSD121.
39millionfromUSD73.
2million.
SuchincreasedinvestmentwasusedforestablishingasubbranchinZhuhai.
On13May2008,receivingtheReplyonFoshanHuafengPaperCo.
,Ltd.
EnjoyingPreferentialCITPoliciesonAdditionalInvestment(YGSH[2008]No.
236document)fromtheStateTaxBureauofGuangdongProvince,inaccordancewithprovisionstatedinSupplementaryCircularoftheMinistryofFinance,theStateAdministrationofTaxationofthePeople'sRepublicofChina,onIssuesRelevanttoEnjoymentbyForeign-investedEnterprisesofPreferentialCITPoliciesonAdditionalInvestments(GSH[2003]No.
368document)andNoticeoftheStateAdministrationofTaxationonIssuesconcerningtheTimeLimitsforHandlingtheExaminationandApprovalMattersasSetoutintheIncomeTaxLawofthePeople'sRepublicofChinaforForeign-InvestedEnterprisesandForeignEnterprises(GSH[2008]No.
213document),theadditionalinvestmentinFoshanHuaxinPaperCo.
,Ltd.
shallbecalculatedseparatelyandenjoytheregularexemptionfromorreductionofincometaxstipulatedintheClause1oftheArticle8ofIncomeTaxLawofThePeople'sRepublicofChinaforForeign-InvestedEnterpriseswithandForeignEnterprise.
Year2007wasthefirstprofit-makingyearforthesubsidiary,therefore,theCIPwasexemptedbetween2007and2008,andCITshouldbehalfreductedfrom2009to2011.
AsapprovedbytheStateTaxBureauofFoshanChanchengDistrict,Huaxin(Foshan)ColorPrintingCo.
,Ltd.
,ashareholdingsubsidiaryoftheCompany,enjoyedpreferentialtaxationpoliciesof"two-yearCITexemptionandthree-year50%CITreduction"sinceyear2006,thatistosay,theCIPwasexemptedbetween2006and2007,andCITshouldbehalfreductedfrom2008to2010.
--88IV.
Enterprisecombinationandconsolidatedfinancialstatement(I)Subsidiarycompany1.
SubsidiariesobtainedthroughenterprisecombinationsunderthesamecontrolProportionofsharesheldbytheCompanyFullnameofunitsinvestedRegistrationplaceOrganizationcodeRegisteredcapitalNaturalofbusinessandbusinessscopeActualinvestmentamountuptotheyear-endRealnetinvestmentbalanceoversubsidiariesdirectlyindirectly====FoshanHuafengPaperCo.
,Ltd.
Foshan61762142-1USD121.
39millionManufacturingandsellingofhigh-classpaperandpaperboard746190500---75%---Huaxin(Foshan)ColorPrintingCo.
,Ltd.
Foshan72111733-XUSD6.
6millionProcessandprintingofpackagingordecoratingprintingproductssoldinbothdomesticandoverseasmarket40936500---75%---====2.
SubsidiariesobtainedthroughenterprisecombinationsnotunderthesamecontrolProportionofsharesheldbytheCompanyFullnameofunitsinvestedRegistrationplaceOrganizationcodeRegisteredcapitalNaturalofbusinessandbusinessscopeActualinvestmentamountuptotheyear-endRealnetinvestmentbalanceoversubsidiariesdirectlyindirectly====FoshanHuazhiWastedPaperRecyclingCo.
,Ltd.
Foshan77620148-3CNY5millionPurchasingandsellingwastedpaper,wastednewspaper5million------100%FoshanChanchengZhujiangColorPrintingCo.
,Ltd.
Foshan70817367-9CNY1.
5millionOtherprinting,advertisementdesigningandreleasing1.
5million------100%FoshanHuaxinJinfengIndustrialCo.
,Ltd.
Foshan67889495-XCNY3millionInvestingindustrial3million---100%---====(II)ChangeinscopeoftheconsolidatedfinancialstatementduringthereportingperiodFoshanHuaxinJinfengIndustrialCo.
,Ltd.
wasbroughtintothescopeofconsolidatedstatement,whichwassetupbytheCompanyon12Sep.
2008.
(III)Minorityinterests--89nameofsubsidiariesMinorityinterestsAmountofminorityshareholder'sgainsandlossesoffsetfromminorityshareholders'equityBalanceoflossesasofthisperiodbornebyminorityshareholderofsubsidiariesexceedingshareenjoyedbyminorityshareholdersinowner'sequityattheperiod-beginoffsetfromowner'sequityofparentcompany======FoshanHuafengPaperCo.
,Ltd.
236,906,618.
06------Huaxin(Foshan)ColorPrintingCo.
,Ltd.
15,702,119.
78------======V.
NotestotheconsolidatedfinancialstatementUnlessotherwisenotedinthefollowingitems,amountattheyear-endreferstodateasatDec.
31,2008,amountattheyear-beginreferstodateasatDec.
31,2007,amountinthisyearreferstodatafromJan.
1,2008toDec.
31,2008,amountinlastyearreferstodatafromJan.
1,2007toDec.
31,2007.
(1)Monetaryfund31Dec.
200831Dec.
2007ItemsOriginalcurrencyRateofexchangeAmountconvertedintoRMBOriginalcurrencyRateofexchangeAmountconvertedintoRMBCash—CNY------172,923.
47------60,788.
71Bankdeposit—HKD1,676,974.
720.
88191,478,923.
463,893,171.
640.
936383,602,221.
99Bankdeposit—USD1,733,606.
726.
834611,848,508.
49356,991.
947.
30462,602,498.
08Bankdeposit—CNY------178,636,818.
67------51,829,566.
17Othermonetaryfund—CNY------15,954,721.
50------5,672,261.
55Total208,091,895.
5963,767,336.
501.
Monetaryfundasattheyear-endhasincreasedbyRMB144,324,559.
09thantheyear-begin,upby226.
33%,whichwasmainlyduetoexpeditingrecycleofpaymentforgoods,aswellasunusedpaymentfromaddedcapitalfrombankloan.
--902.
Othermonetaryfundasattheyear-endwasRMB15,954,721.
50,ofwhichRMB15,947,959.
77wasmargindepositedwiththebankwhenFoshanHuafengPaperCo.
,Ltd.
treatedbankacceptancebillandcreditletter,otherswasCreditCardDeposit.
3.
Exceptforstatementmentionedinabove"2",therewasnopaymentwithrestrictedrealizationduetomortgageorfreezingordepositedinoverseasaswellaswithpotentialrisk.
(2)NotesreceivableType31Dec.
200831Dec.
2007BankAcceptanceBill47,440,393.
1659,669,620.
10OtherTotal47,440,393.
1659,669,620.
101.
Bytheyear-end,notesreceivableofRMB11.
50millionhasbeenusedtoimpawnforbankacceptancebillofFoshanHuafengPaperCo.
,Ltd.
,thesubsidiaryoftheCompany.
2.
Bytheyear-end,RMB163,761,791.
93isthenotesthattheendorsementhasbeenmadebutnotyetdue;maturitydaterelatedtosuchnoteswouldbe1Jan.
2009to25Jun.
2009.
(3)Accountsreceivable1.
Composingofaccountsreceivable31Dec.
200831Dec.
2007ItemsBookbalanceproportionReserveforbaddebtsBookbalanceproportionReserveforbaddebtsAccountsreceivablewithsignificantsingleamounts66,675,677.
2826.
19%Accountsreceivablewithinsignificantsingleamountsbutwithsignificantcreditrisk17,141,297.
266.
73%14,343,445.
3316,005,413.
215.
73%13,795,939.
14Otherinsignificant170,808,858.
3467.
08%1,865,881.
47263,337,107.
6694.
27%1,799,769.
85Total254,625,832.
88100%16,209,326.
80279,342,520.
87100%15,595,708.
99--912.
Aginganalysis31Dec.
200831Dec.
2007AgingBookbalanceproportionReserveforbaddebtsBookbalanceproportionReserveforbaddebts1-3months211,371,115.
9083.
01%---236,686,069.
4984.
73%---4-12months20,841,635.
308.
19%1,042,081.
7619,535,695.
486.
99%976,784.
781-2years2,305,571.
680.
91%230,557.
176,000,834.
642.
15%600,083.
462-3years2,966,212.
741.
16%593,242.
541,114,508.
050.
40%222,901.
61Over3years17,141,297.
266.
73%14,343,445.
3316,005,413.
215.
73%13,795,939.
14Total254,625,832.
88100%16,209,326.
80279,342,520.
87100%15,595,708.
993.
AccountsreceivablewithsignificantsingleamountsNameofdebtorAmountProportionofprovisionwithdrawnReasonHangFung(HongKong)Co.
,Ltd.
27,076,634.
90---Agingwithin3monthsFoshanShundeDistrictRongguiYongfaTradeCo.
,Ltd15,384,632.
93---Agingwithin3monthsFoshanShundeDistrictKangsongPaperTradeCo.
,Ltd.
13,829,341.
38---Agingwithin3monthsXiamenJinyiTradeCo.
,Ltd.
10,385,068.
07---Agingwithin3months4.
Bytheyear-end,thereisnoarrearageduetoshareholderswhichholdingover5%(including5%)ofshareswithvotingright.
5.
Thetop5arrearageinaccountsreceivableattheyear-endNameofdebtorArrearageTermlimitofarrearageProportionintotalaccountsreceivableHangFung(HongKong)Co.
,Ltd.
27,076,634.
90Within3months10.
63%FoshanShundeDistrictRongguiYongfaTradeCo.
,Ltd15,384,632.
93Within3months6.
04%--92FoshanShundeDistrictKangsongPaperTradeCo.
,Ltd.
13,829,341.
38Within3months5.
43%XiamenJinyiTradeCo.
,Ltd.
10,385,068.
07Within3months4.
08%ShantouYongjiangTradeCo.
,Ltd.
8,503,033.
19Within3months3.
34%6.
Accountsreceivable–foreigncurrencybalance31Dec.
200831Dec.
2007TypeOriginalcurrencyRateofexchangeAmountconvertedintoRMBOriginalcurrencyRateofexchangeAmountconvertedintoRMBUSD3,181,558.
126.
834621,744,677.
112,861,351.
577.
304620,859,252.
94HKD61,309,109.
520.
881954,067,890.
5918,744,016.
040.
9363817,431,934.
96Total75,812,567.
7038,291,187.
90(4)Prepayments1.
Aginganalysis31Dec.
200831Dec.
2007AgingBookbalanceProportionBookbalanceProportionWithin1year68,510,649.
2697.
70%2,886,461.
8279.
35%1-2years1,433,783.
392.
04%751,394.
0020.
65%2-3years178,020.
650.
26%Total70,122,453.
30100%3,637,855.
82100%2.
PrepaymentsthatarematerialinamountNameofdebtorAmountNatureorContentsViridorResourceManagementLtd(CELLMARK)5,483,731.
60Paymentforgoods--93PeutePapierrecyclingB.
V.
4,735,473.
27PaymentforgoodsAPENTERPRISES(MACAO)COMMERCIAL4,548,427.
88PaymentforgoodsADVANCEAGRO3,912,118.
35Paymentforgoods(ISRINTERSEROHRohstoffeGmbH3,590,076.
52PaymentforgoodsINDOCHINAEUROPEBVBA3,352,119.
17Paymentforgoods3.
Bytheyear-end,thereisnoarrearageduetoshareholderswhichholdingover5%(including5%)ofshareswithvotingright.
4.
Prepayments–foreigncurrencybalance31Dec.
200831Dec.
2007TypeOriginalcurrencyRateofexchangeAmountconvertedintoRMBOriginalcurrencyRateofexchangeAmountconvertedintoRMBUSD7,501,156.
286.
834651,267,402.
74HKD31,137.
900.
881927,460.
20EURO2,900.
009.
659028,011.
10Total51,322,874.
04---(5)DividendsreceivableItems31Dec.
200831Dec.
2007Dividendsreceivablewithagingwithinoneyear---34,140,000.
00Total---34,140,000.
00(6)Otherreceivables1.
Composingofotherreceivables31Dec.
200831Dec.
2007ItemsBookbalanceProportionReserveforbaddebtsBookbalanceProportionReserveforbaddebts--94Significantsingleamounts21,461,155.
0456.
72%Insignificantsingleamountsbutwithsignificantcreditrisk655,113.
801.
73%376,124.
39875,040.
083.
93%437,520.
05Otherinsignificant15,719,495.
5641.
55%525,370.
3721,363,856.
9596.
07%741,070.
26Total37,835,764.
40100%901,494.
7622,238,897.
03100%1,178,590.
312.
Aginganalysis31Dec.
200831Dec.
2007ItemsBookbalanceProportionReserveforbaddebtsBookbalanceProportionReserveforbaddebts1-3months18,279,147.
3148.
31%---8,015,736.
0436.
05%---4-12months9,179,665.
1124.
26%38,128.
708,633,045.
3938.
82%421,136.
171-2years8,694,565.
3622.
98%281,786.
91847,101.
873.
81%83,210.
192-3years1,042,273.
822.
75%205,454.
761,183,619.
545.
32%236,723.
91Over3years640,112.
801.
70%376,124.
393,559,394.
1916.
00%437,520.
04Total37,835,764.
40100%901,494.
7622,238,897.
03100%1,178,590.
313.
Bytheyear-end,thereisnoarrearageduetoshareholderswhichholdingover5%(including5%)ofshareswithvotingright.
4.
Thetop5arrearageinotherreceivablesattheyear-endNameofdebtorAmountNatureorContentsTermlimitofarrearageProportionintotalotherreceivablesHangFung(HongKong)Co.
,Ltd.
12,308,872.
88PaymentforfreightsWithin2years32.
53%DragonStateInternationalLimited9,152,282.
16CompensatorypaymentWithin2years24.
19%Nien-YiIndustrialCorp.
2,379,823.
79CommissionWithin3months6.
29%SanshuiLubaoPaperPlant789,817.
89TransferringOCCwasterpaper1-2years2.
09%Fenglinian(HongKong)Ltd.
200,000.
00Come-and-gomoneyOver3years0.
53%--95(Huashan)(7)Inventory1.
Composingofinventory31Dec.
200831Dec.
2007ItemsBookbalanceReserveforfallingpriceBookbalanceReserveforfallingpriceRawmaterials152,661,518.
8630,029.
46104,451,088.
47276,234.
72Goodsinproduction3,840,896.
77---5,052,462.
19135,151.
19Finishedproduct190,468,328.
2011,750,282.
1577,520,733.
43568,925.
70PackingandLow-valueconsumptiongoods458,460.
87---756,048.
75---Total347,429,204.
7011,780,311.
61187,780,332.
84980,311.
612.
ReserveforfallingpriceofinventoryDecreasein2008ItemsBookbalanceasat31Dec.
2007Withdrawalin2008SwitchingbackWritingoffBookbalanceasat31Dec.
2008Rawmaterials276,234.
72---246,205.
26---30,029.
46Goodsinproduction135,151.
19---135,151.
19------Finishedproduct568,925.
7011,181,356.
45------11,750,282.
15Total980,311.
6111,181,356.
45381,356.
45---11,780,311.
61Note:Asattheyear-end,ifthecostofinventoriesishigherthanitsnetrealizablevalue,thereserveforfallingpriceofinventoriesshallbemade.
Thenetrealizablevalueisrecognizedthatinthedailybusinessactivitytheamountafterdeductingtheestimatedcostofcompletion,estimatedsaleexpenseandrelevanttaxesfromtheestimatedsalepriceofinventories.
3.
Inventoriesasattheyear-endhasincreasedbyRMB148,848,871.
86thantheyear-begin,upby79.
68%,whichwasmainlyduetoincreaseofnormalstoragequantityofinventoriesofFoshanHuafengPaperCo.
,Ltd.
anddemandreductionfrominfluencetomarket.
--96(8)Long-termequityinvestment31Dec.
200831Dec.
2007ItemsBookbalanceReserveforimpairmentBookbalanceReserveforimpairmentInvestinginaffiliatedenterprises197,956,976.
49---159,686,086.
88---Otherequityinvestment3,213,558.
003,100,000.
003,213,558.
003,100,000.
00Total201,170,534.
493,100,000.
00162,899,644.
883,100,000.
001.
Long-termequityinvestmentmeasuredbasedoncostmethodNameofinvestedenterpriseProportionofsharesheldInitialinvestmentamountBalanceasat31Dec.
2007Increasein2008Decreasein2008Balanceasat31Dec.
20082.
583%3,100,000.
003,100,000.
00------3,100,000.
00--97GuangdongDevelopmentBank0.
32%113,558.
00113,558.
00------113,558.
00Total3,213,558.
003,213,558.
00------3,213,558.
002.
Long-termequityinvestmentmeasuredbasedonequitymethodIncrease/decreasein2008NameofinvestedenterpriseInitialinvestmentamountAdditionalinvestmentBalanceasat31Dec.
2007NetgainsandlossesadjustedbasedonequitymethodCashdividendsdistributedOtherequitychangeBalanceasat31Dec.
2008Affiliatedenterprise:TetraHuaxin(Foshan)PackagingCo.
,Ltd.
145,945,947.
55---159,686,086.
8858,258,692.
6819,987,803.
07---197,956,976.
49Total145,945,947.
55---159,686,086.
8858,258,692.
6819,987,803.
07---197,956,976.
49NameofinvestedenterpriseRegistrationplaceBusinessnatureProportionofsharesVotingrightTotalnetassetsasat31Dec.
2008Totaloperatingincomein2008Netprofitin2008--98heldbytheCompanyproportionsininvestedenterpriseAffiliatedenterprise:TetraHuaxin(Foshan)PackagingCo.
,Ltd.
FoshanSino-foreignjointventure25%25%791,827,905.
981,224,560,556.
08233,034,770.
733.
Reserveforimpairmentoflong-termequityinvestmentNameofinvestedenterprise31Dec.
2007Increasein2008Decreasein200831Dec.
2008ReasonforwithdrawalFoshanUrbanCooperativeBankCo.
,Ltd.
3,100,000.
00------3,100,000.
00InsolvencyTotal3,100,000.
00------3,100,000.
00(9)InvestmentrealestateItemsBalanceasat31Dec.
2007Increasein2008Decreasein2008Balanceasat31Dec.
2008OriginalpriceHouseandbuilding18,670,864.
52------18,670,864.
52Total18,670,864.
52------18,670,864.
52AccumulativedepreciationHouseandbuilding7,192,633.
26452,914.
80---7,645,548.
06Total7,192,633.
26452,914.
80---7,645,548.
06Accumulativeamountof--99reserveforimpairmentHouseandbuildingTotalBookvalueHouseandbuilding11,478,231.
26------11,025,316.
46Total11,478,231.
26------11,025,316.
46(10)Fixedassets1.
OriginalpriceoffixedassetsType31Dec.
2007Increasein2008Decreasein200831Dec.
2008Houseandbuilding667,672,656.
4381,432,587.
019,954,861.
34739,150,382.
10Machineryequipment1,787,426,664.
13113,246,065.
00282,600.
001,900,390,129.
13Transportationequipment22,485,477.
981,078,387.
80264,728.
4923,299,137.
29Other27,940,903.
9523,684,661.
1513,880.
0051,611,685.
10Total2,505,525,702.
49219,441,700.
9610,516,069.
832,714,451,333.
62Ofwhich,originalpriceofprojectinconstructiontransferringfixedassetswasRMB88,346,389.
93in2007.
2.
AccumulativedepreciationType31Dec.
2007Increasein2008Decreasein200831Dec.
2008Houseandbuilding47,749,541.
5917,912,373.
59282,680.
0765,379,235.
11Machineryequipment351,109,061.
3573,957,718.
17233,120.
94424,833,658.
58Transportationequipment11,484,892.
123,175,303.
61155,360.
4914,504,835.
24Other10,460,051.
643,556,999.
9512,945.
8614,004,105.
73--100Total420,803,546.
7098,602,395.
32684,107.
36518,721,834.
66Note:BetweenNovemberandDecember2008,thenewfactorybuildingofHuaxin(Foshan)ColorPrintingCo.
,Ltd.
,asubsidiaryoftheCompany,wasclosedanaccount,asaresult,theCompanymadereclassificationtopaymentforconstructionestimatedtentativelyunderhouseandbuilding.
TheoriginalpriceofRMB9,838,661.
34hasdecreasedfromhouseandbuilding,aswellasaccumulativedepreciationofRMB225,469.
32tootherequipment.
3.
ReserveforimpairmentoffixedassetsType31Dec.
2007IncreaseinthisyearDecreaseinthisyear31Dec.
2008Machineryequipment201,333.
37------201,333.
37Total201,333.
37------201,333.
37Note:TheReserveforimpairmentoffixedassetswaswithdrawnbyHuaxin(Foshan)ColorPrintingCo.
,Ltd.
inaccordancewithexpectedrecoverableamountofsinglefixedassetsasattheendof2005lowerthanitsbookvalue.
4.
BookvalueoffixedassetsType31Dec.
200831Dec.
2007Houseandbuilding673,771,146.
99619,923,114.
84Machineryequipment1,475,355,137.
181,436,116,269.
41Transportationequipment8,794,302.
0511,000,585.
86Other37,607,579.
3717,480,852.
31Total2,195,528,165.
592,084,520,822.
42Note:TheworkshopofFoshanHuafengPaperCo.
,Ltd.
totalingto38,124.
91sq.
m.
(originalvalue:RMB146,759,239.
84;netvalueasat31Dec.
2008:RMB109,723,388.
31),whichwaslocatedinNo.
17,HebinRoad,Foshan,andthelanduserightofsuchplot,havebeenusedasamortgageforloan,andrelevantcertificateoftheotherrightsoflandhasbeenhandled.
TherighterisChinaConstructionBankCorporationFoshanBranch.
ThedebtmaturityistobeDec.
31,2009.
Bytheendof2008,theaforesaidborrowinghasbeenrepaidbutnotdischargingfrompledge.
5.
Bytheyear-end,thepropertyrightcertificateforworkshop(originalvalue:RMB508,968,794.
94)ofFoshanHuafengPaperCo.
,Ltd.
ZhuhaiBranchCompanyisunderhandle.
--1016.
FoshanHuafengPaperCo.
,Ltd.
ZhuhaiBranchCompany'sproductionlineonannualoutputof300,000-tonhigh-classcoatedwhiteboardandrelevantinfrastructureprojectshavenotyetbeenhandledfinalaccount.
Theexpenditureinvolvedintheconstructionisexpectedinaccordancewithbudgetaryestimateandactualsituationincurred,whilethefinalengineeringcostwillbeadjustedbasedonthesettlement.
(11)Constructioninprogress1.
ClassificationofprojectsDecreasein2008NameofprojectsBudget(RMB'000)31Dec.
2007Increasein2008TransferringintofixedassetsOtherdecrease31Dec.
2008ResourceoffundsExpansionof300,000-tonproject147,30021,305,158.
3530,610,415.
2251,915,573.
57------Borrowingfromfinancialinstitutionandself-financingRenovationprojectofproductionline1901,727,316.
273,786,548.
285,108,704.
62---405,159.
93Self-financingDesulfurizationproject4504,569,234.
491,203,368.
685,772,603.
17------Self-financingConstructionofnewwarehouse5104,135,082.
304,354,531.
148,107,683.
58381,929.
86---Borrowingfromfinancialinstitutionandself-financingProductionlineofeight-colorflexoprinting9305,485,725.
361,419,028.
566,904,753.
92------Borrowingfromfinancialinstitutionandself-financingRenovationprojectofpostworkingprocedureofoffsetprinting2602,024,996.
5053,128.
14397,069.
591,681,055.
05---Borrowingfromfinancialinstitutionandself-financingOther175,606.
511,781,774.
881,186,345.
78---771,035.
61Self-financingPreparationofnewprojects---8,961,635.
628,953,655.
707,979.
92---Self-financingTotal39,423,119.
7852,170,430.
5288,346,389.
932,070,964.
831,176,195.
54--1022.
Constructioninprogressreferstoanunfinishedprojectunderconstruction.
Asreviewedtotheactualconstructionofeachproject,thereisnosituationonreserveforimpairment.
3.
CapitalizationofborrowingcostmeasuredintoprojectcostNameofprojects31Dec.
2007Increasein2008Transferringintofixedassetsin2008Otherdecrease31Dec.
2008Constructionofnewwarehouse75,973.
02---75,973.
02------Renovationprojectofpostworkingprocedureofoffsetprinting81,725.
21---81,725.
21------Productionlineofeight-colorflexoprinting33,020.
36---33,020.
36------Total190,718.
59---190,718.
59------(12)ProjectmaterialType31Dec.
200831Dec.
2007Woolclothandnetting---4,925,829.
50Machinerycomponent---3,917,324.
97Electricmaterials---1,249,640.
99Water-heating---1,135,611.
80Bearing---959,698.
40Steels---758,174.
09Other---682,760.
27Total---13,629,040.
02(13)Intangibleassets1.
OriginalvalueofintangibleassetsItemsOriginalvalueasat31Dec.
2007Increasein2008Decreasein2008Originalvalueasat31Dec.
2008--103LanduserightofHuafengCo.
42,392,255.
88------42,392,255.
88LanduserightofHuaxinColorPrinting29,367,297.
44------29,367,297.
44Other477,810.
1084,840.
00---562,650.
10Total72,237,363.
4284,840.
00---72,322,203.
422.
AccumulativeamortizationItems31Dec.
2007Amortizationin2008Decreasein200831Dec.
2008LanduserightofHuafengCo.
5,884,643.
08847,845.
12---6,732,488.
20LanduserightofHuaxinColorPrinting2,080,228.
00587,346.
00---2,667,574.
00Other50,772.
9895,999.
60---146,772.
58Total8,015,644.
061,531,190.
72---9,546,834.
783.
BookvalueofintangibleassetsItems31Dec.
2007Increasein2008Decreasein200831Dec.
2008LanduserightofHuafengCo.
36,507,612.
80---847,845.
1235,659,767.
68LanduserightofHuaxinColorPrinting27,287,069.
44---587,346.
0026,699,723.
44Other427,037.
1284,840.
0095,999.
60415,877.
52Total64,221,719.
3684,840.
001,531,190.
7262,775,368.
64Note:a.
ThelanduserightofFoshanHuafengPaperCo.
,Ltd.
,whichwaslocatedinNo.
17,HebinRoad,Foshan,hasbeenusedasamortgageforloan(seetheNoteV(10)fordetail).
Bytheendof2008,theoriginalvalueisRMB32,978,923.
04,aswellasnetvalueisRMB--10426,528,834.
85.
b.
ThelanduserightcertificateofFoshanHuafengPaperCo.
,Ltd.
ZhuhaiBranchCompanyisundertransaction.
Bytheendof2008,theoriginalvalueisRMB9,413,332.
84,aswellasnetvalueisRMB9,130,932.
83.
(14)DevelopmentexpenseItems31Dec.
2007Increasein2008Amortizationin200831Dec.
2008AccountingtreatmentDevelopmentexpenseoncoatingcraftpaper---7,748,092.
27---7,748,092.
27Expenditureduringthedevelopmentphase,capitalizationTotal---7,748,092.
27---7,748,092.
27(15)Long-termdeferredexpenseItems31Dec.
2007Increasein2008Decreasein200831Dec.
2008Expendituresincurredonmajorrepairandimprovementoftherentedfixedassets5,087,221.
026,102,446.
574,294,614.
596,895,053.
00Total5,087,221.
026,102,446.
574,294,614.
596,895,053.
00(16)Deferredincometaxassets31Dec.
200831Dec.
2007ItemsDeferredincometaxassetsDeductibletemporarydifferenceDeferredincometaxassetsDeductibletemporarydifferenceProvisionforassetsimpairment5,587,309.
6725,685,665.
724,168,334.
8919,709,298.
21Total5,587,309.
6725,685,665.
724,168,334.
8919,709,298.
21--105(17)ProvisionforassetsimpairmentDecreasein2008ItemsBookbalanceasat31Dec.
2007Withdrawalin2008SwitchingbackWritingoffBookbalanceasat31Dec.
2008Provisionforbaddebt16,774,299.
30336,522.
26------17,110,821.
56Provisionforfallingpriceofinventory980,311.
6111,181,356.
45381,356.
45---11,780,311.
61Provisionforimpairmentoflong-termequityinvestment3,100,000.
003,100,000.
00Provisionforimpairmentoffixedassets201,333.
37201,333.
37Total21,055,944.
2811,517,878.
71381,356.
45---32,192,466.
54(18)Short-termloanType31Dec.
200831Dec.
2007Guaranteedloan617,488,134.
71481,839,691.
89Total617,488,134.
71481,839,691.
89Ofwhich:(1)Theforeigncurrencyloansasat31Dec.
2008includeUSD1,936,133.
19,convertingintoRMB13,224,594.
30,aswellasHKD6,194,020.
00,convertingintoRMB5,450,737.
60.
(2)Nooverdueshort-termloan.
ChinaChengtongHoldingGroupCo.
,Ltd.
,ChinaMaterialsDevelopmentInvestmentGeneralCorporation,FoshanHuaxinDevelopmentCo.
,Ltd.
providethejointresponsibilityguaranteefortheguaranteedloanoftheCompany,FoshanHuafengPaperCo.
,LtdandHuaxin(Foshan)ColorPrintingCo.
,Ltd.
(bothsubsidiariesoftheCompany).
TheCompanyprovidethejointresponsibilityguaranteefortheloanofFoshanHuafengPaperCo.
,LtdandHuaxin(Foshan)ColorPrintingCo.
,Ltd.
.
PleaseseetheNoteVII(IV)3fordetails.
(19)NotespayableType31Dec.
200831Dec.
2007Bankacceptancebill54,510,322.
259,155,830.
91--106Total54,510,322.
259,155,830.
91Note:Bankacceptancebillasat31Dec.
2008isthatChinaCITICBankFoshanBranchdrewtoFoshanHuafengPaperCo.
,Ltd.
,thesaidcompanydepositedinto30%ofmargindeposit,forwhichtheCompanyandChinaChengtongHoldingGroupCo.
,Ltd.
jointlyprovidetheresponsibilityguarantee.
(20)Accountspayable1.
Bytheyear-end,thereisnoarrearageduetoshareholderswhichholdingover5%(including5%)ofshareswithvotingright.
2.
Noaccountpayablewithagingoveroneyearattheyear-end.
3.
Accountspayableincludedthefollowingforeigncurrencybalance31Dec.
200831Dec.
2007TypeOriginalcurrencyRateofexchangeConvertingintoRMBOriginalcurrencyRateofexchangeConvertingintoRMBUSD3,599,800.
836.
834624,603,198.
751,125,652.
877.
30468,206,009.
34HKD25,876,102.
970.
881922,819,876.
4541,430,050.
970.
9363838,529,947.
38EURO3,377.
009.
659032,618.
44-20,235.
0010.
6669-215,705.
10Total47,455,693.
6446,520,251.
62(21)Accountreceivedinadvance1.
Bytheyear-end,thereisnoarrearageduetoshareholderswhichholdingover5%(including5%)ofshareswithvotingright.
2.
Noaccountpayablewithagingoveroneyearattheyear-end.
3.
Accountreceivedinadvanceincludedthefollowingforeigncurrencybalance31Dec.
200831Dec.
2007TypeOriginalcurrencyRateofexchangeConvertingintoRMBOriginalcurrencyRateofexchangeConvertingintoRMBUSD29,974.
066.
8346204,722.
90687,590.
257.
30465,012,532.
94HKD1,080,013.
600.
8819950,411.
904,977,400.
000.
936384,628,981.
98EURO773.
549.
65907,743.
13-----107Total1,162,877.
939,641,514.
92(22)EmployeespaypayableItems31Dec.
2007IncreaseinthisyearPayableinthisyear31Dec.
2008Wage,premium,allowanceandsubsidy3,664,209.
5580,653,819.
7773,874,557.
3810,443,471.
94Employeebenefits/welfare---2,851,354.
552,851,354.
55---Socialinsurance---9,454,488.
229,215,483.
22239,005.
00Housingprovidentfund-14,314.
00618,136.
70600,499.
273,323.
43Laborunionexpenditureandemployeeeducationexpenses377,673.
272,358,686.
932,317,011.
18419,349.
02Total4,027,568.
8295,936,486.
1788,858,905.
6011,105,149.
39(23)TaxespayableTypeoftaxation31Dec.
200831Dec.
2007VAT-27,559,665.
85-1,400,902.
03Citymaintenanceandconstructiontax10,318.
8310,611.
24Businesstax229,754.
14170,788.
42Enterpriseincometax-5,857,183.
09-1,343,547.
25Individualincometax155,808.
8642,179.
44Stamptax4,172.
062,832.
21Tenuretax729,523.
32---Housingpropertytax105,402.
36---Embankmentprotectionexpense35,017.
6330,642.
11Educationalsurtax4,422.
364,547.
68Total-32,142,429.
38-2,482,848.
18(24)InterestspayableItems31Dec.
200831Dec.
2007Interestspayablewithagingwithinoneyear11,681,609.
011,391,185.
09Total11,681,609.
011,391,185.
09--108(25)DividendpayableNameofinvestors31Dec.
200831Dec.
2007FoshanXinhuiIndustrialDevelopmentCo.
,Ltd.
54,494.
0054,494.
00FoshanLightIndustryCompany79,264.
0079,264.
00Total133,758.
00133,758.
00(26)OtherpayablesItems31Dec.
200831Dec.
2007LoanofFoshanHuaxinDevelopmentCo.
,Ltd.
2,705,000.
0023,235,000.
00Marginandguaranteedeposit4,080,000.
001,003,135.
90Temporaryaccountspayable4,559,870.
717,963,668.
49Other11,319,575.
054,084,770.
36Total22,664,445.
7636,286,574.
751.
Bytheyear-end,RMB2,794,874.
48isanarrearagethattheCompanyowedshareholderswhichholdingover5%(including5%)ofshareswithvotingright.
ThecreditorisFoshanHuaxinDevelopmentCo.
,Ltd.
.
PleaserefertoNoteVII(IV)5fordetails.
2.
Otherpayableswiththegreateramountasattheyear-endNameofcreditorsAmountContentsZhuhaiXinheLogisticalCo.
,Ltd.
5,407,404.
27CostoflogisticsFoshanHuaxinDevelopmentCo.
,Ltd.
2,794,874.
48Borrowingandcome-and-gomoneyGuangxiHedaPaperCo.
,Ltd.
1,631,621.
60Transportationcharges(27)Non-currentliabilitiesduewithinoneyearItems31Dec.
200831Dec.
2007Long-termloanduewithinoneyear---258,481,674.
99Total---258,481,674.
99--109Long-termloanduewithinoneyearBankTypeofcurrencyTermsofloans31Dec.
200831Dec.
2007AgriculturalBankOfChina,FoshanHuadaSub-BranchCNYGuarantee---110,000,000.
00ChinaConstructionBankCorporation,FoshanBranchEUROGuaranteeandmortgage---58,481,674.
99IndustrialBank,GuangzhouBranchCNYGuarantee---90,000,000.
00Total---258,481,674.
99(28)OthercurrentliabilitiesItemsandcontents31Dec.
200831Dec.
2007Principalofshort-termfinancingbillsfor2008500,000,000.
00420,000,000.
00Less:discountamount---17,010,000.
00Realfinancingamount500,000,000.
00402,990,000.
00Add:discountamortization---9,922,500.
00Less:balanceofofferingfee1,333,333.
32---Total498,666,666.
68412,912,500.
00Note:TheCompanyissuedRMB500millionworthofone-yearshort-termfinancingbillsofFoshanHuaxinPackingCo.
,Ltd.
on2Sep.
2008withparvalueofRMB100forevery100Yuan.
Theinterestperiodisfrom4Sep.
2008to3Sep.
2009.
(29)Long-termLoanUnitsTypeofcurrencyTermsofloans31Dec.
200831Dec.
2007RemarkAgriculturalBankOfChina,FoshanHuadaSub-BranchCNYGuarantee380,000,000.
0010,000,000.
00JointLiabilityGuaranteeisprovidedbyChinaMaterialsDevelopmentInvestmentGeneralCorporationFoshanHuaxinDevelopmentCo.
,Ltd.
CNYCredit---100,000,000.
00ChinaConstructionBankCNYGuarantee60,000,000.
0069,334,850.
00JointLiabilityGuaranteeisprovided--110Corporation,FoshanBranchbytheCompanyfortheloanofitssubsidiary,FoshanHuafengPaperCo.
,Ltd.
Total440,000,000.
00179,334,850.
00Note:Long-termloanasat31Dec.
2008hasincreasedbyRMB260,665,150.
00,upby145.
35%,whichwasmainlyduetoenhancementoflong-termfinancingfunction.
(30)Othernon-currentliabilitiesItems31Dec.
200831Dec.
2007Deferredincome1,320,000.
001,320,000.
00Total1,320,000.
001,320,000.
00(31)Sharecapital31Dec.
2007Increase/decreasein2008(+,-)31Dec.
2008ItemsNumberProportionIssuanceofnewshareBonussharesCapitalizationofsharecapitalOtherSubtotalNumberProportionI.
Unlistedshares1.
Sponsor'sshares333,500,00065.
99%333,500,00065.
99%Including:SharesheldbytheStateSharesheldbydomesticlegalperson333,500,00065.
99%333,500,00065.
99%SharesheldbyforeignlegalpersonOther2.
Raisedlegalperson'sshares3.
Inneremployeeshares4、PreferredsharesorotherIncluding:transferredallottedshares-----------111Totalunlistedshares333,500,00065.
99%333,500,00065.
99%II.
Listedshares1.
RMBordinaryshares2.
Domesticallylistedforeignshares171,925,00034.
01%171,925,00034.
01%3.
Overseaslistedforeignshares4.
OtherTotallistedshares171,925,00034.
01%171,925,00034.
01%III.
Totalshares505,425,000100%505,425,000100%Note:Theabove-mentionedpaid-incapitalhasbeeninspectedandverifiedbyGuangdongHengxinDeluCertifiedPublicAccountantsCo.
,Ltd.
,issuingtheCapitalVerificationReportwith(2007)HDZYNo.
25.
(32)CapitalreserveItems31Dec.
2007Increasein2008Decreasein200831Dec.
2008Sharepremium250,531,482.
00------250,531,482.
00Othercapitalreserve3,232,500.
00------3,232,500.
00Total253,763,982.
00------253,763,982.
00(33)SurplusreserveItems31Dec.
2007Increasein2008Decreasein200831Dec.
2008Statutorysurpluspublicreserve118,570,535.
836,703,939.
59---125,274,475.
42Total118,570,535.
836,703,939.
59---125,274,475.
42(34)RetainedprofitItemsAmount--112Retainedprofitasat31Dec.
2007beforetheadjustment354,802,914.
55Modulation(+,-)-5,932,637.
32Retainedprofitasat31Dec.
2007348,870,277.
23Add:netprofitasofthisyear42,588,844.
36Less:withdrawingstatutorysurpluspublicreserve6,703,939.
59Withdrawingarbitrarysurpluspublicreserve---Distributingdividendofcommonshares---Transferringintocapital---Retainedprofitasat31Dec.
2008384,755,182.
00Note:Tenpercentofnetprofitshall,inaccordancewiththeArticlesofAssociationoftheCompanyandresolutionsmadebytheBoard,bewithdrawnasstatutorysurpluspublicreserve.
Formodulationonretainedprofitasat31Dec.
2007,pleaseseeNoteII(XXII)fordetails.
(35)Operatingincomeandoperatingcost1.
OperatingincomeItemsAmountin2008Amountin2007Incomefrommainoperation1,401,634,821.
481,258,781,957.
97Otheroperatingincome11,039,344.
3410,728,448.
98Total1,412,674,165.
821,269,510,406.
95SalesrevenuefromthetopfivecustomersItemsAmountin2008Amountin2007Totalsalesrevenuefromthefivecustomers150,552,495.
16161,650,200.
71Proportionintotalsalerevenue(%)10.
66%12.
73%2.
OperatingcostItemsAmountin2008Amountin2007Costofmainoperation1,208,796,864.
781,106,281,858.
19--113Otherbusinessexpenditure1,392,363.
772,745,096.
60Total1,210,189,228.
551,109,026,954.
793.
ClassificationofmainoperationincomeandcostAmountin2008Amountin2007ItemsIncomefrommainoperationCostofmainoperationIncomefrommainoperationCostofmainoperationWhiteboardpaper1,281,092,076.
571,116,491,374.
521,146,100,378.
291,018,154,035.
72Printing128,846,302.
87100,609,048.
22118,940,095.
6594,386,338.
44OffsettingeachotheramongindustrieswithintheCompany-8,303,557.
96-8,303,557.
96-6,258,515.
97-6,258,515.
97Total1,401,634,821.
481,208,796,864.
781,258,781,957.
971,106,281,858.
19(36)BusinesstaxandextraItemsAmountin2008Amountin2007Embankmentprotectioncost690,373.
22184,977.
83Total690,373.
22184,977.
83(37)SalesexpenseItemsAmountin2008Amountin2007Salesexpense47,231,627.
3131,760,154.
87Note:Salesexpensefortheyear2008hasincreasedbyRMB15,471,472.
44thanlastyear,upby48.
71%,whichwasmainlybecausethatFoshanHuafengPaperCo.
,Ltd.
ZhuhaiBranchCompany'sprojectwithannualoutputof300,000-tonhigh-classcoatedwhiteboardhasbeenputintoproductionformallyinthesecondhalfyear2007,asaresult,differenceinthescopeofsalesexpensebetweenyear2007and2008(38)Administrativeexpense--114ItemsAmountin2008Amountin2007Administrativeexpense79,378,739.
6154,659,328.
20Note:Administrativeexpensefortheyear2008hasincreasedbyRMB24,719,411.
41thanlastyear,upby45.
22%,whichwasmainlybecausethatFoshanHuafengPaperCo.
,Ltd.
ZhuhaiBranchCompany'sprojectwithannualoutputof300,000-tonhigh-classcoatedwhiteboardhasbeenputintoproductionformallyinthesecondhalfyear2007,asaresult,differenceinthescopeofadministrativeexpensebetweenyear2007and2008(39)FinancialexpenseTypeAmountin2008Amountin2007Interestexpense93,005,020.
5742,624,773.
87Less:interestrevenue2,293,343.
194,145,108.
33Exchangeloss2,563,918.
066,898,508.
47Less:exchangerevenue16,817,185.
7946,419.
12Other5,723,617.
851,992,757.
99Total82,182,027.
5047,324,512.
88Note:Financialexpensefortheyear2008hasincreasedbyRMB34,857,514.
62thanlastyear,upby73.
66%,whichwasmainlybecausethatFoshanHuafengPaperCo.
,Ltd.
ZhuhaiBranchCompany'sprojectwithannualoutputof300,000-tonhigh-classcoatedwhiteboardhasbeenputintoproductionformallyinthesecondhalfyear2007,asaresult,interestsexpenseisrecordedintothesubjectfor2008,aswellasthedifferenceinthescopeoffinancialexpensebetweenyear2007and2008(40)LossonassetsimpairmentItemsAmountin2008Amountin2007Lossonbaddebt336,522.
262,893,882.
11Lossonfallingpriceofinventories10,800,000.
00445,509.
17Lossonimpairmentoflong-terminvestment---3,100,000.
00Total11,136,522.
266,439,391.
28(41)Investmentincome--115ItemsAmountin2008Amountin2007Attributableshareofthenetprofitsand7lossesrecognizedunderequitymethodoftheinvestedentity58,258,692.
5895,306,219.
03Total58,258,692.
5895,306,219.
03Note:a.
TherewasnosignificantrestrictiontoinvestmentincometransferintheCompany.
b.
Investmentincomefortheyear2008hasreducedbyRMB37,047,526.
45,adropof38.
87%,whichwasmainlybecausethattheperformanceofTetraHuaxin(Foshan)PackingCo.
,Ltd.
(anaffiliatedcompanyoftheCompany)inthe4thquarterhasdecreasedbyabigmarginduefromthe"MelamineEvent".
(42)Non-operatingincomeItemsAmountin2008Amountin2007Incomefromdisposaloffixedassets32,812.
75386,412.
71Paymentbefailedtopay---3,261,280.
81Capitalfortechnologyrenovationfromgovernmentsubsidies225,000.
00525,000.
00Insuranceindemnity80,000.
00---Other87,769.
7428,170.
00Total425,582.
494,200,863.
52(43)Non-operatingexpenseItemsAmountin2008Amountin2007Lossfromdisposaloffixedassets20,131.
95305,600.
88Penalties---100,000.
00Donationscontributed124,000.
00---guaranteefundforthedisabled157,656.
45---Other175,071.
99945.
40Total476,860.
39406,546.
28--116(44)IncometaxexpenseItemsAmountin2008Amountin2007Incometaxexpenseofthecurrentperiod589,914.
981,171,948.
65Deferredincometaxexpense-1,418,974.
78-412,514.
30Total-829,059.
80759,434.
35(45)Notestocashflowstatement1.
OthercashreceivedrelatedwithoperatingactivitiesItemsAmountin2008Amountin2007Total4,258,183.
588,147,648.
96Including:Interestrevenue2,293,343.
191,175,933.
00Marginreceived1,700,000.
001,400,000.
00Governmentsubsidy225,000.
00---2.
OthercashpaidrelatedwithoperatingactivitiesItemsAmountin2008Amountin2007Total92,796,595.
4744,980,315.
80Including:transportationexpenseforproducts30,291,545.
5018,988,321.
73Bankcharges5,056,951.
182,806,661.
07Car-roadtoll4,738,948.
344,422,529.
55Propertymanagementfees4,152,573.
05858,486.
22Entertainmentexpenses4,080,036.
122,653,735.
53Exportexpenses2,233,286.
76876,749.
59Officeexpenses2,221,504.
592,237,423.
533.
Supplementalinformationofcashflowstatement--117SupplementalinformationAmountin2008Amountin20071.
Transferringnetprofitintocashflowsofoperatingactivities:Netprofit40,902,121.
95118,456,189.
02Add:Reserveforimpairmentofassets11,136,522.
266,439,391.
28Depreciationoffixedassets,oilandgasassetsandproductivebiologicalassets98,829,840.
8068,425,425.
35Amortizationofintangibleassets1,531,190.
721,513,492.
75Amortizationoflong-termdeferredexpenses4,294,614.
59842,952.
18Lossfordisposaloffixedassets,intangibleassetsandotherlong-termassets(incomeislistedas"-")-12,680.
80-80,811.
83Lossesonscrappingoffixedassets(incomeislistedasLossesonchangeinfairvalue(incomeislistedasFinancialexpense(incomeislistedas"-")93,933,520.
5740,127,178.
77Lossesarisingfrominvestment(incomeislistedas"-")-58,258,692.
68-95,306,219.
03Decreaseofdeferredincometaxassets(increaseislistedas"-")-1,418,974.
78-412,514.
30Increaseofdeferredincometaxliabilities(decreaseislistedasDecreaseofinventories(increaseislistedas"-")-159,648,871.
86-50,516,935.
39Decreaseinoperatingreceivables(increaseislistedas"-")-45,135,549.
92-148,811,969.
66Increaseinoperatingpayables(decreaseislistedas"-")-13,970,833.
46126,363,310.
36Other------Netcashflowsarisingfromoperatingactivities-27,817,792.
6167,039,489.
50(2)InvestingandfinancingactivitiesthatdonotinvolvingsignificantcashreceiptsandpaymentsConversionofdebtintocapital------Reclassifyconvertiblebondstobeexpiredwithinoneyearascurrentliabilities------Fixedassetsfinancedbyfinancingleases------(3)ChangeincashandcashequivalentsBalanceofcashattheendoftheperiod208,091,895.
5963,767,336.
50Less:Balanceofcashatthebeginningoftheperiod63,767,336.
50112,899,721.
31Add:Balanceofcashequivalentsattheendoftheperiod------Less:Balanceofcashequivalentsatthebeginningoftheperiod--------118Netincreaseincashandcashequivalents144,324,559.
09-49,132,384.
814.
CashandcashequivalentItemsAmountin2008Amountin2007I.
Cash208,091,895.
5963,767,336.
50Including:Cashonhand172,923.
4760,788.
71Bankdepositusedforpaymentatanymoment191,964,250.
6258,034,286.
24Othermonetaryfundsusedforpaymentatanymoment15,954,721.
505,672,261.
55(2)Cashequivalents------Ofwhich:Bondsinvestmentduewithinthreemonths------(3)Balanceofcashandcashequivalentsattheendoftheperiod208,091,895.
5963,767,336.
50Ofwhich:CashandcashequivalentsrestrictedwhenparentcompanyandtheGroup------(46)Segmentreporting1.
Mainreport---businesssegment(1)Segmentinformationfortheyear2008ItemsWhiteboardpaperPrintingOtheroffsetTotalI.
Operatingincome1,290,298,373.
83130,679,349.
95----8,303,557.
961,412,674,165.
82Ofwhich:incomefromforeigntrading1,281,994,815.
87130,679,349.
95------1,412,674,165.
82Incomefromamongsegments8,303,557.
968,303,557.
96---II.
Salesexpense42,905,005.
854,326,621.
46------47,231,627.
31III.
Operatingprofit/(loss)-11,322,476.
873,712,821.
2367,154,764.
11-19,420,768.
4240,124,340.
05IV.
Totalassets2,943,973,121.
81240,429,074.
762,446,953,712.
89-2,205,895,462.
943,425,460,446.
52V.
Totalliabilities1,964,762,840.
31177,470,595.
641,176,518,145.
61-1,415,118,512.
301,903,633,069.
26VI.
Supplementalinformation1.
Expenseofdepreciation95,829,711.
478,615,155.
98210,778.
66---104,655,646.
11--119andamortization2.
Capitalexpenditure165,987,799.
4220,649,843.
63720,860.
00---187,358,503.
05(2)Segmentinformationin2007ItemsWhiteboardpaperPrintingOtheroffsetTotalI.
Operatingincome1,153,821,732.
18121,705,036.
56242,154.
18-6,258,515.
971,269,510,406.
95Ofwhich:incomefromforeigntrading1,147,563,216.
21121,705,036.
56242,154.
18---1,269,510,406.
95Incomefromamongsegments6,258,515.
976,258,515.
97---II.
Salesexpense27,676,129.
104,084,025.
77------31,760,154.
87III.
Operatingprofit/(loss)22,915,838.
704,874,554.
8887,513,184.
07-949,518.
44114,354,059.
21IV.
Totalassets2,557,504,473.
15233,622,654.
032,014,746,303.
01-1,784,131,525.
063,021,741,905.
13V.
Totalliabilities1,612,820,230.
20174,077,585.
05807,753,042.
83-996,354,574.
421,598,296,283.
66VI.
Supplementalinformation1.
Expenseofdepreciationandamortization61,885,356.
678,799,189.
5197,324.
10---70,781,870.
282.
Capitalexpenditure155,684,279.
7430,944,540.
18724,008.
00---187,352,827.
922.
Secondaryreport---regionsegmentIncomefromforeigntradingItemsAmountin2008Amountin2007Domestic1,167,771,719.
93748,941,780.
36Overseas244,902,445.
89520,568,626.
59Total1,412,674,165.
821,269,510,406.
95VII.
Notestothefinancialstatementofparentcompany(I)Otherreceivables1.
Composingofotherreceivable--12031Dec.
200831Dec.
2007ItemsBookbalanceProportionReserveforbaddebtsBookbalanceProportionReserveforbaddebtsSignificantsingleamounts1,417,255,533.
8999.
99%---904,350,280.
3799.
32%---Insignificantsingleamountsbutwithsignificantcreditrisk97,135.
970.
01%97,135.
97278,983.
250.
03%139,491.
63Otherinsignificant2,283.
38---298.
815,898,052.
980.
65%387.
00Total1,417,354,953.
24100%97,434.
78910,527,316.
60100%139,878.
632.
Aginganalysis31Dec.
200831Dec.
2007ItemsBookbalanceProportionReserveforbaddebtsBookbalanceProportionReserveforbaddebts1-3months247,665,910.
7217.
47%---114,771,132.
3812.
61%---4-12months253,550,411.
4817.
89%288.
21344,088,760.
7637.
79%237.
001-2years494,286,845.
6934.
87%10.
60244,458,498.
0826.
85%150.
002-3years244,456,998.
0817.
25%---126,323,425.
9013.
87%---Over3years177,394,787.
2712.
52%97,135.
9780,885,499.
488.
88%139,491.
63Total1,417,354,953.
24100%97,434.
78910,527,316.
60100%139,878.
633.
OtherreceivableswithsignificantsingleamountsNameofdebtorAmountProportionofprovisionwithdrawnReasonFoshanHuafengPaperCo.
,Ltd.
1,285,468,048.
72---Subsidiarycompaniesthatcanbecontrolled,andwithnormalproductionandoperation,alittleprobabilityforlossofbaddebtsHuaxin(Foshan)ColorPrintingCo.
,Ltd.
122,635,203.
01---Subsidiarycompaniesthatcanbecontrolled,andwithnormal--121productionandoperation,alittleprobabilityforlossofbaddebtsDragonStateInternationalLimited9,152,282.
16---Relatedcompany,alittleprobabilityforlossofbaddebts4.
Bytheyear-end,thereisnoarrearageduetoshareholderswhichholdingover5%(including5%)ofshareswithvotingright.
5.
Thetop5arrearageinotherreceivablesattheyear-endNameofdebtorAmountNatureorContentsTermlimitofarrearageProportionintotalotherreceivablesFoshanHuafengPaperCo.
,Ltd.
1,285,468,048.
72FundappropriationRollingformanyyears90.
70%Huaxin(Foshan)ColorPrintingCo.
,Ltd.
122,635,203.
01FundappropriationRollingformanyyears8.
65%DragonStateInternationalLimited9,152,282.
16Compensation2yearsbelow0.
65%HuangDabiao36,714.
76PersonalloanOver3years---YeDaxian33,972.
74PersonalloanOver3years---6.
Otherreceivablesofrelatedpartiestookup99.
99%oftotalotherreceivables.
(II)Long-termequityinvestment31Dec.
200831Dec.
2007ItemsBookbalanceReserveforimpairmentBookbalanceReserveforimpairmentInvestinginsubsidiarycompanies790,126,950.
64---787,126,950.
64---Investinginaffiliatedenterprises197,956,976.
49---159,686,086.
88---Total988,083,927.
13---946,813,037.
52---1.
Long-termequityinvestmentmeasuredbasedoncostmethod--122(1)InvestmentmeasuredbasedoncostmethodinsubsidiarycompaniesNameofinvestedenterpriseProportionofsharesheldInitialinvestmentamountBalanceasat31Dec.
2007Increasein2008Decreasein2008Balanceasat31Dec.
2008FoshanHuafengPaperCo.
,Ltd.
75%800,295,306.
86746,190,450.
61------746,190,450.
61Huaxin(Foshan)ColorPrintingCo.
,Ltd.
75%40,936,500.
0340,936,500.
03------40,936,500.
03FoshanHuaxinJinfengIndustrialCo.
,Ltd.
100%3,000,000.
00---3,000,000.
00---3,000,000.
00Total844,231,806.
89787,126,950.
643,000,000.
00---790,126,950.
64(2)Otherequityinvestmentmeasuredbasedoncostmethod:naught2.
Long-termequityinvestmentmeasuredbasedonequitymethodIncrease/decreasein2008NameofinvestedenterpriseInitialinvestmentamountAdditionalinvestmentBalanceasat31Dec.
2007NetgainsandlossesadjustedbasedonequitymethodCashdividendsdistributedOtherequitychangeBalanceasat31Dec.
2008Affiliatedenterprise:TetraHuaxin(Foshan)PackagingCo.
,Ltd.
145,945,947.
55---159,686,086.
8858,258,692.
6819,987,803.
07---197,956,976.
49Total145,945,947.
55---159,686,086.
8858,258,692.
6819,987,803.
07---197,956,976.
49NameofinvestedenterpriseRegistrationplaceBusinessnatureProportionofsharesheldbytheCompanyVotingrightproportionsininvestedenterpriseTotalnetassetsasat31Dec.
2008Totaloperatingincomein2008Netprofitin2008--123Affiliatedenterprise:TetraHuaxin(Foshan)PackagingCo.
,Ltd.
FoshanSino-foreignjointventure25%25%791,827,905.
981,224,560,556.
08233,034,770.
73(III)InvestmentincomeItemsAmountin2008Amountin2007Attributableshareofthenetprofitsandlossesrecognizedunderequitymethodoftheinvestedentity58,258,692.
6895,306,219.
03Dividenddistributionmeasuredinthelightofcostmethoddeclaredbytheinvestedcompany19,420,768.
42949,518.
44Total77,679,461.
1096,255,737.
47TherewasnosignificantrestrictiontoinvestmentincometransferintheCompany.
--124VII.
Relationshipandrelatedtransaction(I)RecognitionstandardofrelatedpartiesInaccordancewiththeAccountingStandardforBusinessEnterpriseNo.
36-Relatedpartydisclosure,whenapartycontrols,jointlycontrolsorexercisessignificantinfluenceoveranotherparty,orwhentwoormorepartiesareunderthecontrol,jointcontrolorsignificantinfluenceofthesameparty,theaffiliatedpartyrelationshipsareconstituted.
InthelightoftheAdministrativeMeasuresfortheDisclosureofInformationofListedCompanies(CSRCNo.
40),thespecialrelatedlegalpersonandrelatednaturalpersonarerecognizedasrelatedparties.
(II)Relatedpartieswithcontrolrelationship1.
Relatedpartieswithcontrolrelationship(1)RelatedpartiescontrollingtheCompanyNameofenterpriseRegistrationplaceMainbusinessRelationshipwiththeCompanyNaturalofbusinessLegalrepresentativeOrganizationcodeFoshanHuaxinDevelopmentCo.
,Ltd.
FoshanManufacturingandtradingof:packagingmaterials,paper,cable,wire,newmaterials;tradingof;packagingmachineryandmaintenance,amplifierandparts,decorationmaterials,beverages;Informationandconsultingservice.
(Manufacturingitemsareoperatedbythesubsidiaries)ParentcompanyLimitedcompanyTongLaiming19353992-5ChinaMaterialDevelopment&InvestmentGeneralCorporation*BeijingMainbusinesses:Investmentanddevelopmentofimportantindustrialmaterials;salesofmetalmaterials(raremetalexcluded),constructionmaterials,cement,wood,chemicalmaterials,garment,paper,rubber,tire,electro-mechanicproducts,wire&cable,industrialboilers,crops,automobile(includingsalesofcarstofinalusers),(itemsparticularlystatedbynationalgovernmentexcluded).
Import&exportbusinessintheaboverangeofproducts(asapprovedbythemerchandiselist,importandexportbusinessadministratedcollectivelybythenationalgovernmentexcluded).
Technicalconsultantandservicerelatedtomaterialdevelopment.
ActualcontrollerownershipbythewholepeopleTongLaiming10000890-7ChinaChengtongHoldingGroupCo.
,Ltd.
*BeijngOperationandmanagementofcapital;entrustmentmanagement;mergerandacquisition,investmentmanagementandconsultation,logisticalservice,import&exportbusinessandsalesofsteelsActualcontrollerLimitedcompany(state-Ownedcorporate)MaZhengwu71092254-4--125*OnJune28,2005,FoshanGongyingInvestmentHoldingsCo.
,Ltd.
transferredits62.
1142%equityofFoshanHuaxinDevelopmentCo.
,Ltd.
(investmentamountofRMB284.
44million)toChinaMaterialsDevelopmentInvestmentGeneralCorporation.
OwingtothatFoshanHuaxinDevelopmentCo.
,Ltd.
istheparentcompanyoftheCompanyandholds65.
2%equityoftheCompany,furthermore,ChinaMaterialsDevelopmentInvestmentGeneralCorporationformerlyheld0.
11%equityoftheCompany,thus,ChinaMaterialsDevelopmentInvestmentGeneralCorporationheld65.
31%equityoftheCompanydirectlyandindirectly,whobecametheactualcontrolleroftheCompany.
ChinaChengtongHoldingGroupCo.
,Ltd.
held100%equityofChinaMaterialsDevelopmentInvestmentGeneralCorporation,thus,italsowastheactualcontrolleroftheCompany.
(2)RelatedpartiescontrolledbytheCompanyPleaseseeNoteIV(I)fordetails.
2.
RegisteredcapitalofrelatedpartieswithcontrollingrelationshipanditschangeNameofcompanies31Dec.
2007(TenthousandYuaninRMB)IncreaseinthisyearDecreaseinthisyear31Dec.
2008(TenthousandYuaninRMB)FoshanHuaxinDevelopmentCo.
,Ltd.
CNY45,793------CNY45,793ChinaChengtongHoldingGroupCo.
,Ltd.
CNY256,016------CNY256,016ChinaMaterialsDevelopmentInvestmentGeneralCorporationCNY131,729------CNY131,729FoshanHuafengPaperCo.
,Ltd.
USD12,139------USD12,139Huaxin(Foshan)ColorPrintingCo.
,Ltd.
USD660------USD660FoshanHuazhiWastedPaperRecoveryCo.
,Ltd.
CNY500------CNY500FoshanChanchengDistricPearlRiverColorPrintingCo.
,Ltd.
CNY150------CNY150FoshanHuaxinJinfengIndustrialCo.
,Ltd.
---CNY300---CNY3003.
Sharesheldbytherelatedpartieswithcontrollingrelationshipanditschange31Dec.
2007Increasein2008Decreasein200831Dec.
2008NameofcompaniesAmountRatioAmountRatioAmountRatioAmountRatioFoshanHuaxinDevelopmentCo.
,Ltd.
329,512,030.
0065.
20%329,512,030.
0065.
20%ChinaMaterialsDevelopmentInvestment569,710.
000.
11%569,710.
000.
11%--126GeneralCorporationFoshanHuafengPaperCo.
,Ltd.
746,192,321.
8675%746,192,321.
8675%Huaxin(Foshan)ColorPrintingCo.
,Ltd.
40,936,500.
0375%40,936,500.
0375%FoshanHuazhiWastedPaperRecoveryCo.
,Ltd.
5,000,000.
00100%5,000,000.
00100%FoshanChanchengDistricPearlRiverColorPrintingCo.
,Ltd.
1,500,000.
00100%1,500,000.
00100%FoshanHuaxinJinfengIndustrialCo.
,Ltd.
------3,000,000.
00100%3,000,000.
00100%(III)RelatedpartieswithoutcontrollingrelationshipNameofcompaniesOrganizationcodeRelationshipwiththeCompanyTetraHuaxin(Foshan)PackagingCo.
,Ltd.
61762144-8AffiliatedcompanyFoshanHuaxinImport&ExportCo.
,Ltd.
19354411-8UnderthesameparentCompanyQingdaoChengtongFuelCo.
,Ltd.
73728500-4UnderthesameactualcontrollerDragonStateInternationalLimitedControlledbythesameactualcontroller(IV)Relatedtransaction1.
ThesubsidiarycompanieswithcontrollingrelationshipandbroughtintotheconsolidationscopeofaccountingstatementoftheCompany,whosetransactionseachotherandtradingwithparentcompanyhasbeenoffset.
2.
PricingprincipleofrelatedtransactionMarketprice3.
Goodspurchasedfromrelatedparties20082007NameofcompanyAmount(TenthousandYuaninRMB)Proportioninsametransaction(%)Amount(TenthousandYuaninRMB)Proportioninsametransaction(%)--127QingdaoChengtongFuelCo.
,Ltd.
9,086.
2852.
674,185.
0545.
97FoshanHuaxinImport&ExportCo.
,Ltd.
53.
62Total9,139.
9052.
674,185.
0545.
974.
Goodssoldtorelatedparties20082007NameofcompanyAmount(TenthousandYuaninRMB)Proportioninsametransaction(%)Amount(TenthousandYuaninRMB)Proportioninsametransaction(%)FoshanHuaxinImport&ExportCo.
,Ltd.
437.
530.
3151.
240.
43Total437.
530.
3151.
240.
435.
Unsettledamountduetoassociatedparties31Dec.
200831Dec.
2007ItemsBalanceReserveforbaddebtBalanceReserveforbaddebtAccountsreceivableTetraHuaxin(Foshan)PackagingCo.
,Ltd30,000.
00FoshanHuaxinImport&ExportCo.
,Ltd.
77,915.
85---OtherreceivablesDragonStateInternationalLimited9,152,282.
163,031,784.
12---NotespayableQingdaoChengtongFuelCo.
,Ltd.
40,710,322.
25------AccountpayableQingdaoChengtongFuelCo.
,Ltd.
13,447,754.
84---1,046,484.
17---FoshanHuaxinImport&ExportCo.
,Ltd.
811,263.
61OtherpayablesFoshanHuaxinDevelopmentCo.
,Ltd.
2,794,874.
48---23,250,647.
13---DragonStateInternationalLimited201,383.
02Long-termloansFoshanHuaxinDevelopmentCo.
,Ltd.
100,000,000.
00-----1286.
Otherrelatedtransactions(1)LeasingofofficebuildingTheCompanyenteredtheagreementwithFoshanHuaxinDevelopmentCo.
,Ltd.
torentofficebuildingof907squaremeterslocatedatthe18/FJinghuaBuilding,Jihua5thRoad,Foshan,withtheleasetermfrom1Jan.
2006to31Dec.
2007.
Attheexpirationofthelease,theleasingcontractwasreneweduntil31Dec.
2009aswell.
TheCompanycommitted,duringtheleaseterm,topaymanagementfeeofRMB326,520andparkingfeeofRMB25,200foreveryyeartoFoshanHuaxinDevelopmentCo.
,Ltd.
.
(2)Loanduetorelatedpartiesa.
InaccordancewiththeContractonLoansignedbetweentheCompanyandFoshanHuaxinDevelopmentCo.
,Ltd,bytheendofyear,theloanbalancethattheCompanyborrowedfromFoshanHuaxinDevelopmentCo.
,LtdwasRMB2,705,000.
00.
TheborrowingratewasdeterminedattherateofinterestonBankdepositsforthesameterm.
AccruedinterestonloanisRMB629,153.
12in2008,aswellasRMB14,108,740.
15in2007.
b.
InaccordancewiththeAgreementsignedbetweentheCompanyandDragonStateInternationalLimited,owingtothatDragonStateInternationalLimitedfailedtoimplementtheequalinvestmentresponsibilitieswiththesameastheCompany,therefore,theCompanywillcalculaterelevantcompensationofRMB6,120,498.
04attheone-yearbanklendingrateforthesameperiod,aswellasRMB3,031,784.
12inlastyear.
(3)GuaranteeofrelatedpartiesAsat31Dec.
2008,ChinaMaterialsDevelopment&InvestmentGeneralCorporationandFoshanHuaxinDevelopmentCo.
,Ltd.
jointlyprovidethejointliabilityguaranteefortheCompany'sshort-termloanofRMB50million;ChinaMaterialsDevelopment&InvestmentGeneralCorporationprovidesthejointliabilityguaranteefortheCompany'sshort-termloanofRMB180million;FoshanHuaxinDevelopmentCo.
,Ltd.
providesthejointliabilityguaranteefortheCompany'sshort-termloanofRMB50million.
ChinaChengtongHoldingGroupCo.
,Ltd.
andtheCompanyjointlyprovidethejointliabilityguaranteefortheshort-termloanofFoshanHuafengPaperCo.
,Ltd.
(thesubsidiaryoftheCompany)amountingtoRMB103.
5million;theCompanyprovidesthejointliabilityguaranteefortheshort-termloanofFoshanHuafengPaperCo.
,Ltd.
amountingtoRMB148million;ChinaMaterialsDevelopment&InvestmentGeneralCorporation,FoshanHuaxinDevelopmentCo.
,Ltd.
andtheCompanyjointlyprovidethejointliabilityguaranteeforthebalanceonimportL/CnegotiationborrowingofFoshanHuafengPaperCo.
,Ltd.
amountingtoRMB379,802.
81andUSD396,131.
98(RMB3,086,188.
85);theCompanyprovidesthejointliabilityguaranteeforthebalanceonimportL/CnegotiationborrowingofFoshanHuafengPaperCo.
,Ltd.
amountingtoRMB14,653,000.
00,USD1,540,001.
21andHKD6,194,020.
00(RMB30,621,945.
86);ChinaChengtongHoldingGroupCo.
,Ltd.
andtheCompanyjointlyprovidethejointliabilityguaranteeforthebalanceonimportL/CnegotiationborrowingofFoshanHuafengPaperCo.
,Ltd.
amountingtoRMB13,280,000.
00.
ChinaMaterialsDevelopment&InvestmentGeneralCorporation,FoshanHuaxinDevelopmentCo.
,Ltd.
andtheCompanyjointlyprovidethejointliabilityguaranteefortheshort-termloanofHuaxin(Foshan)ColorPrintingCo.
,Ltd.
(thesubsidiaryoftheCompany)amountingtoRMB25million;theCompanyprovidesthejointliabilityguaranteefortheshort-termloanofHuaxin(Foshan)ColorPrintingCo.
,--129Ltd.
amountingtoRMB14million.
TheCompanyprovidesthejointliabilityguaranteeforthenotespayableofFoshanHuafengPaperCo.
,Ltd.
amountingtoRMB54,510,322.
25.
Andthesaidsubsidiarydepositsthemarginsandbankacceptancebillasmortgage.
ChinaMaterialsDevelopment&InvestmentGeneralCorporationprovidesthejointliabilityguaranteefortheCompany'slong-termloanofRMB380million;theCompanyprovidesthejointliabilityguaranteeforthelong-termloanofFoshanHuafengPaperCo.
,Ltd.
amountingtoRMB60million.
VIII.
Contingentevents(I)ContingentliabilitiesduetolawsuitandarbitrationpendingTherewasnocontingentliabilityduetolawsuitandarbitrationpending.
(II)Contingentliabilitiesformedduetoexternalguaranteeupto31Dec.
2008ForguaranteeprovidedbytheCompanyforitssubsidiaries,pleaseseeNoteVII(IV)6fordetails.
Exceptforthis,ended31Dec.
2008,noanyexternalguaranteeexistedintheCompany.
IX.
Commitmentevents1.
InaccordancewiththeGuaranteeContractwith(2005)ZGWDZi.
No5and(2006)ZGWDZiNo.
6signedbetweenthesubsidiarycompanyoftheCompany---FoshanHuafengPaperCo.
,Ltd.
andChinaConstructionBankCorporationFoshanBranchon7June2006,theloanofmaximumamountofRMB62,741,600.
00andRMB43,044,200.
00(includingequivalenceforeigncurrency)providedbythesaidbanktothesaidcompanyfrom1March2004to31December2009wereguaranteedwithhouseandbuildinglocatedinNo.
17,HebinRoad,FoshanwithappraisalvalueamountingtoRMB62,741,600.
00andlandaswellashouseandbuildingwithappraisalvalueofRMB43,044,200.
00asmortgages.
Uptotheendofyear2008,FoshanHuafengPaperhasbeenrepaidthesaidborrowing,buttheabove-mentionedhouseandbuildingandlandhavenotyetbeenreleasedfrommortgage.
2.
Asat31Dec.
2008,notesreceivableofFoshanHuafengPaperCo.
,Ltd.
totalingtoRMB11.
5millionhasbeenusedtothemortgageforissuingitsbankacceptancebill.
X.
EventsafterbalancesheetdateProfitdistributionplanoftheCompanyafterbalancesheetdateTheprofitdistributionpreplanfortheyear2008oftheCompanyisthat,inaccordancewiththeresolutionsofthe2ndmeetingofthe4thBoardofDirectorsfortheyear2009heldon26Mar.
2009,appropriating10%ofnetprofitasstatutorysurplusreserve,afterthis,theprofitavailablefordistributiontoinvestorsisRMB384,755,182.
00.
Therefore,neitherprofitdistributionnorcapitalizationofthecapitalpublicisconducted.
ThesaidpreplanshallbesubmittedtotheShareholders'GeneralMeeting2008forexaminedandapproval.
XI.
Otherevents(I)LeasingOperatinglease--130VariousassetsleasedbytheCompanyasfollows:typeBookvalueasat31Dec.
2008Bookvalueasat31Dec.
2007Houseandbuilding11,025,316.
4611,478,231.
26Total11,025,316.
4611,478,231.
26(II)GovernmentsubsidiesInviewofcompletinggovernmentinspectionbyHuaxin(Foshan)ColorPrintingCo.
,Ltd.
tothetechnologyrenovationfortheyear2004and2005,theremainingfundonspecialsupportfundforenterprisedevelopmentappropriatedbyChanchengDistrictofFoshaninFeb.
2008wasmeasuredasnon-operatingincome.
(III)Othersignificantevents1.
TheCompanyenteredintotheJointVentureAgreementwithSTORAENSOPACKAGINGBOARDSASIAOYon28October2005,inwhichthebothpurchasedtheassetsofFoshanHuafengPaperCo.
,Ltd.
ZhuhaiBranchCompany,thesubsidiarycompanyoftheCompany,atthepriceofRMB710,265,723.
03,andtogethersetupajointventurecompany,namelySTORAENSOHUAXIN(ZHUHAI)PACKAGINGPAPERLTD.
,throughassetsmerger.
Thesaidjointventurecompany'stotalinvestmentamountwasUSD98millionwithregisteredcapitalofUSD49millionaswellasoperatingdurationof50years.
Ofwhich,theCompanyinvestedinRMB9.
8million,STORAENSOPACKAGINGBOARDSASIAOYinvestedinUSD39.
2million.
.
AsapprovedbyDepartmentofForeignTradeandEconomicCooperationofGuangdongProvincewithYWJMZZi[2005]No.
673,thejointventurecompanyhasobtainedcertificateofapprovalforforeign-fundedenterprisewithSWZYHZZZi[2005]No.
0043.
Owingtothesaidpurchase,FoshanHuafengPaperCo.
,Ltd.
ZhuhaiBranchCompany'sprojectonproductionexpansionof300,000-tonhigh-classcoatedwhiteboardatplaceoutofZhuhaiunderconstructionwaschangedintoprojectonproductionofliquidpackagepaperboardwithproductionscaleof300,000tons.
However,theCompanyhadanoticefromSTORAENSOPACKAGINGBOARDSASIAOYon29November2005,inwhichSTORAENSOPACKAGINGBOARDSASIAOYdecidedtogiveupthesaidinvestmentandrefusehandletheprocedurerelatedwithenterprisecorporatebusinesslicenseofjoint-venturecompanybecauserateofreturnonprofitfromprojectonliquidpackagepaperboardwasnoallidealization,asaresult,theAssetsTransferAgreementfailedtobecontinuedtocarryout,aswellassignificanteconomiclossestoFoshanHuafengPaperCo.
,Ltd.
.
UnilateralstatisticsfromFoshanHuafengPaperCo.
,Ltd.
,sucheconomiclossestotaledtoaboutRMB58million,includingexpenseonrebuilding,claimoncustomerorvendor,engineeringmanagementexpenseduringrebuilding,salaryforstaffsand--131projectinterestsduringthedelayperiod.
DuetounilateralterminationofthecooperationfromSTORAENSOPACKAGINGBOARDSASIAOY,inaccordancewiththeClause22.
1and22.
2intheAgreement,"ifanypartintheJointVentureAgreementfailstoimplementanyobligationundertheAgreement…,thesaidpartyshallberegardthatitviolatethisagreement",STORAENSOPACKAGINGBOARDSASIAOY"shallundertakedutiesfordirectandrealloss(excludingindirect)forabidingpartyduetoitsbreachofcontract.
"TheCompanyconsideredthatSTORAENSOHuaxin(Zhuhai)PackagingPaperLtd.
failedtobeestablishedduetounilateralterminationofthecooperationfromSTORAENSOPACKAGINGBOARDSASIAOY,resultinginagreatofcostputintotheprojectofcoatedwhiteboardinZhuhaibytheCompany,forwhichtheCompanytakeproceedingsagainstSTORAENSOPACKAGINGBOARDSASIAOYforlosstotheCompany,inordertosafeguardthelegalrightsofFoshanHuafengPaperCo.
,Ltd.
.
ThesaiddisputecaseonagreementtransferhasbeenacceptedbyZhuhaiIntermediateCourton20Aug.
2007.
ButSTORAENSOPACKAGINGBOARDSASIAOYproposedanobjectiontorightofjurisdictioninthiscase.
On20November2007,asjudgedbyZhuhaiIntermediatePeople'sCourtwithCivilJudgment(2007)ZZFMSCZiNo.
52,theCourtrejectedthesaidobjectiononrightofjurisdictioninthiscase.
STORAENSOPACKAGINGBOARDSASIAOYhasappealfromthejudgmentofZhuhaiIntermediatePeople'sCourttoGuangdongHigherPeopleCourt.
On16June2008,GuangdongHigherPeople'sCourtmadethefinalorderwithwrittencivilruling(2008)YGFLMZZiNo.
65,overrulingtheappealofSTORAENSOPACKAGINGBOARDSASIAOY,maintainingthefirsttrialaswell.
InJan.
2008,FoshanHuafengPaperCo.
,Ltd.
receivedthenoticefromSingaporeInternationalArbitrationCenter(SIAC),inwhichSTORAENSOPACKAGINGBOARDSASIAOYhasrecoursetoarbitration.
InMar.
2008,SIAChasnotifiedFoshanHuafengPaperCo.
,Ltd.
oftheformationofarbitrationcourt.
ReceivingthenoticeofrespondingtoactionfromZhuhaiIntermediateCourtonXX2008,theCompany,asadefendant,wasnotifiedtoparticipateintheproceedingsontheassetstransferagreementdisputeFoshanHuafengPaperCo.
,Ltd.
bringingasuitagainstSTORAENSOPACKAGINGBOARDSASIAOY.
Thecasehasbeencurrentlyenteringthesubstantivehearing.
On10Feb.
2009,ZhuhaiIntermediateCourtconvenedbothpartiestoconductthefirsthearing,inwhichthebothpartiesexchangedtheevidence,andmadethehearingofevidencetotheapplicationonevidenceofeconomiclossessubmittedbyFoshanHuafengPaperCo.
,Ltd.
.
BeingalargeruncertaintyinwhethertheCompanycouldwithdrawclaimpaymentthroughsuchjudicialprocedureasjudgmentandexecution,theCompanyfailedtojudgetheinfluenceontheprofitofFoshanHuafengPaperCo.
,Ltd.
duetotheaforesaidcase.
FoshanHuafengPaperCo.
,Ltd.
hasbeenmakingproductionandoperationingoodworkingorder.
2.
InaccordancewiththeresolutionsofthetemporaryBoardmeetingofFoshanHuafengPaperCo.
,Ltd.
,thesubsidiaryoftheCompany,on6Oct.
2008,itagreedtosellitsassetsandliabilitiesrelatedwiththebusinesseslocatedinFoshantoFoshanHuaxinJinfengIndustrialCo.
,Ltd.
(afterachangetoHuaxin(Foshan)ColorPrintingCo.
,Ltd.
).
Subsequenttofinishingassetssale,FoshanHuafengPaperCo.
,Ltd.
alsogaveconsenttoincreasecapitalinZhuhaiSpecialEconomicZone--132HongtaYanlordPaperCo.
,Ltd.
byitsoriginalshareholders,theCompanyandDragonStateInternationalLimited,attheevaluationof75%equityand25%equityheldrespectivelybythesaidshareholders.
Aftercapitalincrease,FoshanHuafengPaperCo.
,Ltd.
wouldbecomeintotheirwholly-ownedsubsidiary.
Atthe6thmeetingofthe4thBoardofDirectorsfortheyear2008heldon8Oct.
2008,FoshanHuaxinPackagingCo.
,Ltd.
increasingcapitalinZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
andthematerialassetsreorganizationpreplanwasapproved.
Onthesameday,boththeCompanyandDragonStateInternationalLimitedsignedtheFrameworkAgreementonCapitalIncreasewithallthreecompanies,YunanHongtaGroupCo.
,Ltd.
,YanlordIndustriesPte.
Ltd.
andZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
.
Accordingtothisagreement,boththeCompanyandDragonStateInternationalLimitedcarriedoutadditionalinvestmentinZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
attheappraisalvalue(basedateofassetsappraisal30June2008)of75%equityand25%equityofZhuhaiHuafeng(aenterpriseafterFoshanHuafengPaperCo.
,Ltd.
solditsassetsandliabilitiesrelatedwiththebusinesseslocatedinFoshan)heldrespectivelybytheCompanyandDragonStateInternationalLimited.
Onthebaseofsuchappraisalvalue,ZhuhaiHuafenghascalculatedadditionalinvestmentinZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
inthelightofthepaid-upamountinvestedbyDragonStateInternationalLimitedalthoughUSD10,233,793.
55isstillnotpaidinfullbyDragonStateInternationalLimited.
Afterfinishingthetransaction,theCompanyandDragonStateInternationalLimitedrespectivelyholds40.
18%equityand13.
39%equityofZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
,andYunanHongtaGroupCo.
,Ltd.
andYanlordIndustriesPte.
Ltd.
respectivelyholds32.
50%equityand13.
93%equityofZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
.
TakingupsupermajorityvotingrightintheBoardofZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
aswellascontroltoitsproductionandoperation,acontrolrelationshiptoZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
isheldbytheCompany.
DragonStateInternationalLimitedhaspaidinvestmentinfullinFoshanHuafengPaperCo.
,Ltd.
on7Nov.
2008.
AsapprovedbytheMinistryofCommerceofthePeople'sRepublicofChinawith(approvaldocument)SZP[2009]No,23document"ApplyofMOFCOMonGivingConsenttoIncreaseCapitalinZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
"on12Mar.
2009,theMOFCOMwasinagreementwiththecapitalincreaseinZhuhaiSpecialEconomicZoneHongtaYanlordPaperCo.
,Ltd.
withthetotalinvestmentamountreachingtoUSD310.
74millionfromUSD197.
67million,aswellasregisteredcapitalofUSD211,061,305fromUSD98,000,000.
TheNewlyincreasedregisteredcapitalispaidbytheCompanyandDragonStateInternationalLimitedattheevaluationof75%equityand25%equityofFoshanHuafengPaperCo.
,Ltd.
heldrespectivelybythesaidshareholders.
FoshanHuafengPaperCo.
,Ltd.
ischangedinInvestmentByForeign-fundedEnterprisesinChina.
Theabove-mentionedreorganizationmattersareunderreviewingandapprovalbyCSRC.
3.
Owingtoeffectfromtyphoon"Hagupit",ZhuhaiGaolanPortEconomicZoneGaolanPetrochemicalZone(hereinaftercalledtheregion)subjecttosupertyphoonsuchasstrongwindsandtorrentialrains(instantaneouswindforceof14)on24Sep.
2008,thelosseswascausedtoFoshanHuafengPaperCo.
,Ltd.
ZhuhaiBranchlocatedintheRegion.
Bothrelevantequipmentandcurrentassetshasbeenarrangedinsurancecover.
FoshanHuafengPaperCo.
,Ltd.
hasbeen--133discussingtheclaimsettlementwithinsurancecompany.
ItisestimatedthatHuafengPaperwillobtaincompensationfromtheinsurancecompany.
XII.
Non-recurringgainsandlossesItems20082007Gains/lossesfromdisposalofnon-currentassets12,680.
8080,811.
83Governmentsubsidiesrecordedintoprofitandlossofthecurrentperiod225,000.
00525,000.
00Occupancyfeesacceptedbynon-financingenterpriserecordedintoprofitandlossofthecurrentperiod5,774,689.
892,860,488.
32Othernon-operatingincomeandexpense-288,958.
703,188,505.
41Othernon-recurringgainsandlosses------Subtotal5,723,411.
996,654,805.
56Less:Influenceonincometax26,923.
358,813.
42Quotientsharedbyminorityshareholders8,426.
55948,815.
66Netnon-recurringgainsandlosses5,688,062.
095,697,176.
48Note:Datementionedabovetable,"+"showsprofitorincome,"-"showslossorexpenseXIII.
ReturnonequityandearningspershareReturnonequity(%)Earningspershare(RMB/share)FullydilutedWeightedaverageFullydilutedWeightedaverageProfitasofthereportperiod20082007200820072008200720082007NetprofitattributabletocommonshareholderoftheCompany3.
368.
943.
419.
280.
080.
220.
080.
22Netprofitafterdeductingnon-recurringgainsandlossesattributabletocommonshareholderoftheCompany2.
918.
472.
968.
800.
070.
210.
070.
21--134Calculationformulaonreturnonequityandearningspershare1.
FullydilutedreturnonequityFullydilutedreturnonequity=P÷EOfwhich:PreferstoNetprofitattributabletocommonshareholderoftheCompanyornetprofitafterdeductingnon-recurringgainsandlossesattributabletocommonshareholderoftheCompany;Ereferstonetassetsattheperiod-endattributabletocommonshareholdersoftheCompany.
"NetprofitattributabletocommonshareholderoftheCompany"excludedminorityinterest,"netprofitafterdeductingnon-recurringgainsandlossesattributabletocommonshareholderoftheCompany"wouldbecalculatedbasedonconsolidatednetprofitafterdeductingminorityinterests;deductingnon-recurringgainandlossofparentcompany(theCompanyshouldconsiderinfluenceofincometax)andnon-recurringgainandlossofeachsubsidiary(theCompanyshouldconsiderinfluenceofincometax);"netassetsattheperiod-endattributabletocommonshareholdersoftheCompany"excludedminorityinterests.
2.
WeightedaveragereturnonequityWeightedaveragereturnonequity=P/(E0+NP÷2+Ei*Mi÷M0-Ej*Mj÷M0±Ek*Mk÷M0)Ofwhich:PreferstoNetprofitattributabletocommonshareholderoftheCompanyornetprofitafterdeductingnon-recurringgainsandlossesattributabletocommonshareholderoftheCompany;NPreferstonetprofitattributabletocommonshareholdersoftheCompany;E0referstonetassetsattheperiod-beginattributabletocommonshareholdersoftheCompany;EireferstonetassetsincreasedduetoissuanceofnewshareordebtsforequityswaporattributabletocommonshareholdersoftheCompany;EjreferstonetassetsdecreasedduetorepurchasedordividendsincashorattributabletocommonshareholdersoftheCompany;M0referstothenumberofmonthsduringthereportperiod;Mireferstothenumberofmonthsfromthenextmonthwhennetassetsincreasedtotheendofthereportperiod;Mjreferstothenumberofmonthsfromthenextmonthwhennetassetsdecreasedtotheendofthereportperiod;Ekreferstochangeofincrease/decreaseofnetassetsduetoothertransactionevents;Mkreferstothenumberofmonthsfromthenextmonthwhenothernetassetschangedtheendofthereportperiod3.
Earningspershare-basisEarningspershare-basis=P÷SS=S0+S1+Si*Mi÷M0-Sj*Mj÷M0-SkOfwhich:Preferstonetprofitattributabletoshareholdersholdingordinarysharesornetprofitattributabletoshareholdersholdingordinarysharesafterdeductingnon-recurringgainsandlosses;Sweightedaveragenumberofordinarysharesissuedout;S0referstototalnumberofsharesattheperiod-begin;S1referstothenumberofsharesincreasedduetotransferringcapitalreserveintosharecapitalordividenddistributionofsharesduringthereportperiod;Sireferstothenumberofshares--135increasedduetoissuanceofnewsharesordebtforequityswapduringthereportperiod;Sjreferstothenumberofsharesdecreasedduetostockrepurchaseduringthereportperiod;Skreferstothenumberofsplit-shareduringthereportperiod;M0referstothenumberofmonthsduringthereportperiod;Mireferstothenumberofmonthsfromthenextmonthtotheendofthereportperiodforincreaseofshares;Mjreferstothenumberofmonthsfromthenextmonthtotheendofthereportperiodfordecreaseofshares4.
Earningspershare-dilutedEarningspershare-diluted=[P+(potentialdilutedinterestsofordinarysharesrecognizedasexpense-transferfee)*(1-incometaxrate)]/(S0+S1+Si*Mi÷M0-Sj*Mj÷M0—Sk+weightedaverageamountofordinarysharesincreasedduetowarrant,shareoptions、convertiblebond))Ofwhich,Preferstonetprofitattributabletoshareholdersholdingordinarysharesornetprofitattributabletoshareholdersholdingordinarysharesafterdeductingnon-recurringgainsandlosses.
TheCompanyshallconsiderallinfluenceonpotentialdilutedinterestsofordinaryshareswhentheCompanycalculateddilutedearningspershare,tilltominimumdilutedEPS.
XIV.
ApprovaloffinancialstatementThesaidfinancialstatementhasbeenapprovedbytheBoardofDirectorsoftheCompanyon26March2009.
FoshanHuaxinPackingCo.
,Ltd.
26March2009