粤华包Ｂ(200986)2004年年度报告（英文版）

佛山华新包装股份有限公司 FOSHAN HUAXIN PACKAGING CO.,LTD 2004 ANNUAL REPORT April. 1. 2005 Important: The Board of Directors and directors of Foshan Huaxin Packaging Co., Ltd. (hereinafter referred to as the “the Company”) hereby confirms that there are no important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individually and/or jointly, for the reality, accuracy and completion of the whole contents. This Report is prepared in both English and Chinese language. Should there be difference in undersanding the two versions, the Chinese version shall prevail. Director Liang Weidong absent from the Board meeting due to business travel. Director Wang Qi was entrusted to exercise the right of voting. Independent Director Liang Jinsong absent the meeting as well. Wang Qi, Chairman of the Board, Tan Shanghui, the person in charge of accounting affairs and Mao Zhizhu, manager of the Financial Department hereby ensure that the financial report enclosed in this 2004 Annual Report is a true and complete report. 1 Contents Section 1 Company Information Section 2 Financial Highlights Section 3 Changes in Share Capital and Particulars about Shareholders Section 4. Directors, Supervisors, Senior Executives and Staff Section 5. Administrative Structure Section 6 Shareholders’ General Meeting Section 7 Report of the Board of Directors Section 8 Report of the Supervisory Committee Section 9 Significant Events Section 10 Financial Report Section 11 Documents Available for Inspection 2 I. Company Profile 1. Legal Name in Chinese: 佛山华新包装股份有限公司 Legal Name in English: Foshan Huaxin Packaging Co., Ltd. 2. Legal Representative: Wang Qi 3. Secretary of the Board: Cheng Haiyan Address: 18/F, Jinghua Bldg., Jihua Rd., Foshan Tel: 0757-83981729、83992076 Fax: 0757-83992026 E-mail: chenhy@fshxp.com 4. Registered Address: No. 18, Jihua Wu Road, Foshan Office Address: 18th Floor, Jinghua Building, Jihua Wu Road, Foshan Post Code: 528000 Company Website: http://www.fshxp.com E-mail: ： zhuaxin@163.com 5. Newspapers Designated for Disclosing the Information: Securities Times, Hong Kong Commercial Daily Internet Web Site Designated by China Securities Regulatory Commission: http://www.cninfo.com.cn Place Where the Annual Report is Prepared and Placed: The Board Office 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: Foshan Huaxin Packaging B Code of the Stock: 200986 7. Other Relevant Information 1) Date of first registration: June 21, 1999 Registration with: Guangdong Municipal Administration for Industry and Commerce. 2) Business License No.: 19035257-5 3) Taxation Registration No.: ST Zi No. 440601707682279 4) Certified public accountants engaged: Domestic certified public accountants: Guangdong Zhengzhong Jujiang Certified Public Accountants Address: 10/F, Yuehai Group Bldg., 555#, Dongfeng E. Road, Guangzhou Tel.: (020) 83859808 Fax: (020) 83800977 International certified public accountants: KPMG Certified Public Accountants Address: 8F, Prince’s Building, Hong Kong Tel.:（00852）28267126 Fax:（00852）28452588 3 II. Financial Highlights 1. Financial and business Highlights In RMB Total profit 101,609,395.71 Net profit 89,952,537.72 Net profit after deduction of the 89,780,078.51 nonrecurring gain/loss Profit from principal business 87,756,365.74 Profit from other business lines 1,551,300.60 Operating profit 27,640,183.41 Investment income 73,707,910.46 Subsidy income -- Net amount of non-operating income and 261,301.84 expenses Net cash flows arising from operating 58,343,514.75 activities Net increase of cash and cash equivalents 70,255,399.56 Notes: The non-recurring gains/losses amounting to RMB 172,459.21 in 2004 consist of the following parts: (1) Net non-operating income and expenses amounting to RMB 261,301.84; (2) Total income tax and minority shareholders’ gains and losses amounting to RMB -88,842.63. 2. Summary of Accounting/Financial Data over the Past Three Years In RMB Items 2004 2003 2002 After adjustment Before adjustment After adjustment Before adjustment Income from principal 592,388,037.27 606,531,159.61 606,531,159.61 740,610,675.54 740,610,675.54 businesses Net profit 89,952,537.72 96,453,236.65 96,453,236.65 95,711,067.10 95,711,067.10 Total assets 1,591,392,595.17 1,289,959,140.57 1,289,959,140.57 1,382,039,889.06 1,382,039,889.06 Shareholders’ equity 996,148,467.26 954,383,429.54 954,383,429.54 903,200,192.89 854,855,192.89 (Excluding minority shareholder’s equity) 4 Earnings per share 0.205 0.219 0.219 0.218 0.218 (Fully Diluted) Earnings per share 0.205 0.219 0.219 0.218 0.218 (Weighted average) Earnings per share 0.204 0.211 0.211 0.209 0.209 after deduction of non- recurring loss/gains (Fully Diluted) Net assets per share 2.27 2.17 2.17 2.06 1.95 Net assets per share 2.25 2.16 2.16 2.04 1.93 after adjustment Net cash flow arising 0.13 0.11 0.11 0.25 0.25 from business activities per share Net assets-income ratio 9.03% 10.11% 10.11% 10.60% 11.20% (Fully Diluted) Net assets-income ratio 9.26% 10.45％ 10.45％ 10.88％ 11.19% (Weighted average) Earnings per share 9.01% 9.70% 9.70% 10.18% 10.76% ratio after deduction of the non-recurring gains and loss (Fully Diluted) 3. Net Profit and the Differences as Audited by Domestic and International Certified Accountants In 2004, the Company’s net profit audited according to the domestic enterprise accounting system is RMB 89,953.00 thousand and that audited according to the international accounting standards is RMB 95,650.00 thousand; the differences and causes arising from the two types of auditing are as follows: Net Profit (RMB thousand ) According to the international accounting standard 95,650.00 1. Amortization of the balance of the equity investment -892.90 2. Governmental subsidies -4,310.00 3. Others -494.10 According to the Enterprise Accounting System 89,953.00 Profit statement prepared in accordance with the Rules for Public Companies to Disclose Information and Prepare Statements (No. 9) promulgated by China Securities Regulatory 5 Commission is as follows: Profit in the 2004 2003 report period Net assets-income Earnings per share Net assets-income Earnings per share ratio % (RMB) ratio % (RMB) Fully Weighted Fully Weighted Fully Weighted Fully Weighted diluted average diluted average diluted average diluted average Profit from principal 8.810 9.036 0.200 0.200 10.477 10.831 0.228 0.228 businesses Operating 2.775 2.846 0.063 0.063 4.678 4.836 0.102 0.102 profit Net profit 9.030 9.262 0.205 0.205 10.106 10.447 0.219 0.219 Net profit after deduction of 9.013 9.245 0.204 0.204 9.697 10.025 0.211 0.211 non- recurring loss/gain 5. Changes in Shareholders’ Equity in the Report Period In RMB Surplus Statutory Total of Capital public Undistributed Items Share capital public public Shareholders’ reserve profit reserve welfare fund Equity Year beginning 439,500,000.00 253,606,482.00 78,630,677.78 26,210,225.93 182,646,269.76 954,383,429.54 Increase in the report 157,500.00 13,492,880.66 4,497,626.89 89,952,537.72 103,602,918.38 year Decrease in the report 61,837,880.66 61,837,880.66 year Year end 439,500,000.00 253,763,982.00 92,123,558.44 30,707,852.82 210,760,926.82 996,148,467.26 Reasons of changes： 1. Increase of capital public reserve: Huafeng Paper Co., Ltd., one of the Company’s subsidiaries, stated the governmental financial support fund amounting to RMB 210,000.00 for its waste water biochemical treatment project completed in the report period according to Foshan Municipal Environmental Protection Bureau as the capital public reserve. The Company recognizes the capital public reserve amounting to RMB 157,500.00 based on its investment proportion in the Company. 2. Increase in the surplus public reserve and statutory public welfare fund is due to the 6 allotment of the profit in the report year. 3. Increase of the retained profit is due to retaining of earnings in the report year; 4. Increase in shareholders’ equity is due to the retaining of the profit in the report year. III. Changes in Share Capital and Particulars about Shareholders 1. Change in Share Capital (1). Statement of Change in the Company’s Shares In ’000 shares Increase/Decrease Of the Change (+,-) Shares Bonus Shares Shares Others Sub- Before placed shares converted issued total After the the from public additionally Change Change capital reserve I. Non-scirculating shares 1. Promoters’ shares 290,000 290,000 Including: State-owned shares Domestic legal 290,000 290,000 person shares Foreign legal person shares Others 2. Raised legal person shares 3. Employees’ shares 4. Preference shares or others Total non-circulating 290,000 290,000 shares Ⅱ . Listed circulating shares 1. RMB common shares 7 Incl: shares held by directors and supervisors 2. Foreign shares 149,500 149,500 listed domestically 3. Foreign shares listed abroad 4. Others Total shares listed 149,500 149,500 439,500 439,500 Ⅲ. Total shares (2) Issuing and Listing Previous issuing and listing (In RMB and ’000 shares) Year Type Date Price Qty. Listing Trade Total date volume share capital 2000 B-shares June 14, 1.78 130.000 June, 2000 130,000 420,000 2000 2000 Over-placed July, 2000 1.78 19.500 July, 2000 19,500 439,500 B-shares ① Approved by China Securities Regulatory Commission with the Document CSRC Issuing Zi [2000] No. 65, the Company issued 149.5 million domestically listed foreign shares (B shares) in 2000. Plus the Company’s promoter’s shares totaling 290 million shares, the Company’s share capital is 439.5 million shares; ② In the report year, there was no change in the Company’s total share capital or the structure; ③ The Company has no employees’ shares. 2. Shareholders (1) Ended Dec. 31, 2004, the Companry had totally 21781 shareholders. (2) Ended Dec. 31, 2004, Top 10 major shareholders 8 In shares Increase/d Listed Non-listed Proportion Share type ecrease of negotiable negotiable (%) No Shareholders shares in shares shares the report period. 1 Foshan Huaxin Development Co., 0 286532200 65.20 Legal Ltd. person shares 2 DEUTSCHE BANK AG LONDON 2844033 0.65 Circulating - B shares 3 Wu Haoyuan 1149699 0.26 Circulating -27100 B shares 4 SURE WIDE INTERNATIONAL 1009600 0.23 Circulating LIMITED -9600 B shares RUIH 5 Li Shunqing 996500 0.23 Circulating -20600 B shares 6 PIAO JOY GUANGSHI 720900 0.16 Circulating - B shares 7 Luo Manling 690600 0.16 Circulating 0 B shares 8 Zhang Chanci 580000 0.13 Circulating - B shares 9 Foshan Xinhui Industrial 495400 0.11 Legal Development Co., Ltd. 0 person shares 10 Guangdong Technology Innovation 495400 0.11 Legal Investment Co., Ltd. 0 person shares Total 7991332 287523000 67.24 (3) Top 10 shareholders of negotiable shares ended Dec. 31, 2004 In Shares Increase/ Listed Non-listed decrease negotiable negotiable In total of shares shares shares Nature of No. Shareholders share in the shares capital % report period 9 1 DEUTSCHE BANK AG LONDON 2844033 0.65 Negotiable - B-shares 2 Wu Haoyuan 1149699 0.26 Negotiable -27100 B-shares 3 SURE WIDE INTERNATIONAL 1009600 0.23 Negotiable LIMITED -9600 B-shares RUIH 4 Li Shunqing 996500 0.23 Negotiable -20600 B-shares 5 PIAO JOY GUANGSHI 720900 0.16 Negotiable - B-shares 6 Luo Manling 690600 0.16 Negotiable 0 B-shares 7 Zhang Chanci 580000 0.13 Negotiable - B-shares 8 Li Fang 450000 0.10 Negotiable - B-shares 9 Pi Lihua 402200 0.09 Negotiable - B-shares 10 HKIT/006-113039-431 398968 0.09 Negotiable B-shares Total 9242500 2.10 Negotiable B-shares Notes: ① There exists not business relations between the Company and its holding shareholder and other top 9 shareholders and they are not persons of concerted action either; however the Company has no idea on whether there exists any business relations among its top 9 shareholders or they are persons of concerted action. ② There were no shares held by the shareholders holding over 5% pledged in the report period. (4) About the Company’s holding shareholder: Foshan Huaxin Development Co., Ltd. (FHD) holds 286,532,200 of the Company’s state legal person shares (non-negotiable), taking 65.2% of the total share capital. FHD was incorporated on May 27, 1993; its legal representative is Xiao Jianwei; its registered capital is RMB 457.93 million; its business scope: production, manufacture and distribution of packing materials, paper, cable, wire, new materials; distribution of packing machinery and repairing services, amplifiers and fittings, decoration materials, and drinks; information consulting, etc. Foshan Huaxin Development Co., Ltd. has 7 legal person shareholders, of which Foshan Gongying Investment Holding Co., Ltd. holds 62.1% of the registered capital in FHD; while the actual controller of Foshan Gongying Investment Holding Co., Ltd. is Foshan Municipal Commission of State Assets. 10 Relationship in Ownership and Shareholding between the Company and its actual controller: Foshan Gongying Investment Holding Co., Ltd. 62.11% Foshan Huaxin Development Co., Ltd. 65.2% Foshan Huaxin Packing Co., Ltd. IV. Directors, Supervisors, Senior Executives 1. Directors, Supervisors, Senior Executives and Staff (1) Background Information Shares held Sex Names Age Title Office term Year Year beginning end Wang Qi male 51 Chairman of the Jun,02 to Jun, 05 0 0 Board Liang male 42 Vice-Chairman of Jun,02 to Jun, 05 0 0 Weidong the Board Tan male 54 Director & General Jun,02 to Jun, 05 0 0 Shanghui Manager Zhang male 39 Director Jun,02 to Jun, 05 0 0 Chaoyang He Jichang male 48 Director Jun,02 to Jun, 05 0 0 Huang Xin male 43 Director Jun,03 to Jun, 06 0 0 Ma male 41 Independent Jun,02 to Jun, 05 0 0 Zhengwu director Tan male 39 Independent Jun,02 to Jun, 05 0 0 Jingsong director Sun male 56 Independent Jun, 03. – Jun. 05 0 0 Shengai director 11 Chen female 53 Chairman of Jun, 03 – Jun, 05 0 0 Zeqing Supervisory Committee Feng male 38 Supervisor Jun,02 to Jun, 05 0 0 Daming Huang male 52 Supervisor Jun,02 to Jun, 05 0 0 Dabiao Zhang Zhe female 47 Supervisor Jun, 03 – Jun, 05 0 0 Che Jiali male 47 Deputy General Jun,02 to Jun, 05 0 0 Manager Chen male 39 Deputy General Jun,02 to Jun, 05 0 0 Haiyan Manager & Secretary of the Board Lu Liang male 32 Deputy General Jan, 04 – Jun, 05 0 0 Manager Note: Directors and supervisors taking office in shareholder companies Names Organizations engaged in Title Wang Qi Foshan Huaxin Development Co., General manager Ltd. Chen Foshan Huaxin Development Co., Secretary of the CPC Zeqing Ltd. Committee and Deputy general manager (2) The main work experience of current directors, supervisors and senior executives and the posts or concurrent posts held by them at the units other than corporate shareholders Chairman of the board of directors: Wang Qi, born in 1953, is an MBA and economy analyst. He once served as the general manager of Foshan Huaxin Composite Materials Co., Ltd. From 1995 to February 2000, he served as the board chairman of Huaxin Development and Foshan Huaxin Packaging Co., Ltd. He now serves as vice board chairman and general manager of Huaxin Development Co., Ltd. Vice chairman of the board of directors: Liang Weidong, born in 1962, is an MBA of Australia Murdoch University. He once served as deputy section chief at Foshan Overseas Chinese Affairs Office and Foreign Affairs Office and director and deputy general manager of Hong Kong Foshan Development Co., Ltd., and general manager of Foshan Industrial Investment Management Co., Ltd.,and general manager of Foshan Gongying Investment Holding Co.,Ltd; He now serves as vice secrecary of Foshan Cnancheng District Committee of CPC and Administrative vice Governor of Foshan Chancheng Government. 12 Director and general manager: Tan Shanghui, born in 1950, is an MBA and engineer. He once served as deputy general manager of Huaxin Composite Materials Co., Ltd. and Huaxin Development and concurrently as general manager of Huafeng Paper Industry. He now serves as director and general manager of Foshan Huaxin Packaging Co., Ltd. Director: Zhang Chaoyang, born in 1964, is a graduate who graduated from mechanical engineering department of Luoyang Engineering College. He once served as section chief of Foshan Economic Committee., and vice section-chief of organization Department of Foshan committee of CPC. And deputy general manager of Foshan Industrial Investment Management Co., Ltd., He now serves as General Secretary of Foshan Gongying Investment Holding Co.,Ltd Committee of CPC and the vice general manager. Director: He Jichang, born in 1956, is a University graduate and engineer. He once served as deputy division chief of Guangdong Economic Commission and deputy general manager of Guangdong Ipek Environmental Protection Industry (Group) Co., Ltd. He now serves as general manager of Guangdong Guangye Education Development Company and Guangdong Guangye Education and Training Center. Director: Huang Xin, born in 1962, is a university graduate. He has served successively as section director of Chemical Industry and Light Industry Dept. of Ministry of Material and manager of Industrial Investment Dept. and Asset Management Dept. of China Material Development Investment Corporation. Independent director: Ma Zhengwu, born in 1963, is an MBA. He graduated from Beijing Chemical Industry University in 1985. He served successively as deputy director and deputy secretary of Beijing Leather Factory, deputy division chief of China Packaging Corporation, deputy division chief and division chief of Ministry of Material and Ministry of Domestic Trade and general manager of China Material Development Investment Corporation. He now serves as chairman of the board of directors of China Chengtong Holding Co. Independent director: Tan Jingsong, born in 1965, is an associate professor and Chinese C.P.A.. He graduated from China People's University in 1990 and obtained the degree of Master of Economics (Accounting). He once served as director of Accounting Department of Management School of Zhongshan University and now serves as vice president and associate professor of Management School of Zhongshan University. Independent director: Sun Shengai, born in 1949, is a university graduate and lawyer. He once served as director of Legal Affairs Dept. of Guangdong Subcommission of China Council for the Promotion of International Trade and Guangdong International Economic and Trading Law Office. He now serves as arbitrator of China International Trade Arbitration Commission, Guangzhou Arbitration Commission and Foshan Arbitration Commission and partner and chief consultant of Guangdong Huanyu Jingmao Law Office. 13 Chairman of the supervisory committee: Chen Zeqing, born in 1951, is a junior college graduate, senior political engineer and assistant economy analyst. He served successively as the secretary of General Party branch of Foshan Lamp Manufacturing Works, deputy secretary of Foshan Communist Youth League and deputy general manager of Foshan Light Industrial Company. He now serves as secretary of Party committee, deputy general manager and chairman of labor union of Huaxin Development. Supervisor: Feng Daming, born in 1966, is a university graduate and economy analyst. He once served as section staff of Foshan Economic Committee and director of Financial Audit Dept. of Foshan Industrial Investment Management Co., Ltd. and also the general manager assistant and director of Operation Management Dept. of Foshan Gongying Investment Holding Co.,Ltd .He now serves as vice-chief of state-owned Assets Management Office of Foshan Chancheng Government. Supervisor: Huang Dabiao, born in 1952, is a junior college graduate and assistant economy analyst. He once served as deputy director of Guangdong Deqing County Foodstuff Factory and manager of Production Dept. and chairman of labor union of Tetra Huaxin (Foshan) Packaging Co., Ltd. He now serves as deputy general manager of Huaxin (Foshan) Color Printing Co., Ltd. Supervisor: Zhang Zhe, born in 1957, is a junior college graduate and economy analyst. He once served as deputy section chief and section chief of Office of Administration Dept. of National Material Administration. He now serves as manager of Assets Dept. of China Chemical Industry and Light Industry Corporation. Deputy general manager: Chen Jiali, born in 1957, is a junior college graduate and engineer. He once served as deputy chief of Production Technology & Energy Section of Guangdong Shilu Copper Industry Co., manager of Operation Dept. of Foshan Huaxin Composite Materials Co., Ltd. and manager of Sales Dept. of Huaxin Tetra (Foshan) Packaging Co., Ltd. He now serves as deputy general manager of Foshan Huaxin Packaging Co., Ltd. and Tetra Huaxin (Foshan) Packaging Co., Ltd. Deputy general manager and secretary to the board of directors: Chen Haiyan, born in 1965, is a master, MBA and engineer. She once studied at Central China Science and Engineering University, Tianjin University and U.K. Staffordshire University. She once served as deputy manager of Production Dept. of Huaxin Composite Materials Co., Ltd. and Huaxin Tetra ( Foshan ) Packaging Co., Ltd., general manager assistant and manager of Enterprise Management Dept. of Foshan Huaxin Development Co., Ltd. She now serves as deputy general manager and secretary to the board of directors of the Company. Deputy general manager: Lu Liang, born in 1972, is a master, MBA and economy analyst. He once majored in industrial and commercial administration at International Department 14 of Foshan University and studied at U.K. Staffordshire University. He once served as general manager assistant and director of Investment & Development Dept. of Foshan Industrial Investment Co., Ltd. and director of Foshan Chanbende Development Co., Ltd. and Foshan Huaxin Development Co., Ltd. He now serves as deputy general manager of the Company. (3) Annual remuneration A. Regarding the remuneration of directors , supervisors and senior executives of the Company, annual salary system was implemented according to the plan determined by shareholders' general meeting and the board of directors. The limit of annual salary was determined according to the operating results of the Company. The total annual remuneration of the current directors, supervisors and senior executives of the Company is RMB 2.394 million. The total annual remuneration of the top three directors receiving the annual remuneration of the highest amount is RMB 0.64 million. The total annual remuneration of the top 3 senior executives receiving the annual remuneration of the highest amount is RMB 1.4918 million. B. In the report period, the Company further improved independent director system. The annual allowance for an independent director is RMB 38,000. The expenses of performance of their duties were borne by the Company. C. Range of annual remuneration of directors , supervisors and senior executives of the Company: RMB 0.6 million - RMB 0.65 million: 1 person; RMB 0.5 million - RMB 0.55 million: 2 persons; RMB 0.45 million - RMB 0.55 million: 1 person; RMB 0.25 million - RMB 0.30 million: 1 person. D. The current board chairman Wang Qi, vice board chairman Liang Weidong and directors Zhang Chaoyang, He Jichang and Huang Xin did not receive remuneration from the Company. Supervisors Chen Zeqing, Feng Daming and Zhang Zhe did not receive remuneration from the Company. The above personnel received remuneration from the units they served. (4) Directors, supervisors and senior executives leaving their post in the report period Through the recommendation by Foshan Industrial Investment Management Co., Ltd. (now renamed as Foshan Gongying Investment Holding Co., Ltd.) and nomination by the general manager of the Company, the first meeting of the second board of directors of the Company in 2004 held on January 8, 2004 apointed Mr. Lu Liang as deputy general manager of the Company. His term of office will expire in July 2005. The 6th meeting of the second board of directors of the Company in 2004 held on August 9, 2004 approved Mr. Zhou Qihong's resignation from the post of deputy general manager of the Company. 15 Supervisor Mr. Wu Tie died of an accident. 2. Employees of the Company Employees of the Company and professional structure: The Company has 1594 in-service employees, including 917 production employees, 73 sales employees, 105 technical employees, 33 financial employees and 95 administrative employees. 733 employees have the education of secondary technical school or above. The Company has 423 retired employees. V. Company Administration Structure 1. Status of corporate administration Since its listing, the Company has constantly improved its corporate administration structure, regulated its operation and formulated relevant rules and management systems strictly according to the Company Law, the Securities Law and the requirements of relevant laws and regulations of CSRC including Guidelines for Administration of Listed Companies. It has also formulated Regulations on Management of Relationship with Investors according to relevant requirements of CSRC and Shenzhen Stock Exchange. At present, the actual conditions of corporate administration basically complied with the requirements announced by CSRC in respect of the administration of listed companies. 2. Particulars about duty performance of independent directors (1) Attendance of board meetings by independent directors According to the requirements of Guiding Opinions on the Establishment of Independent Director System at Listed Companies issued by CSRC, the Company now has three independent directors, i.e., Mr. Ma Zhengwu, Mr. Tan Jingsong and Mr. Sun Shengai. The independent directors of the Company seriously performed their duties, actively participated in decision making of the board of directors of the Company in respect of major issues, expressed independent opinions on major issues including the change of senior executives of the Company and new project investment and really safeguarded the Company's overall interests and the interests of investors. Name of The supposed Attendance in Attendance Absence Remarks independent times of person (times) through agent (times) director attendance this (times) year Ma Zhengwu 7 7 0 0 Tan Jingsong 7 5 0 2 Being away on business Sun Shengai 7 7 0 0 (2) Objection made by independent directors to relevant matters: In the report period，independent directors of the Company did not make objection to the proposals of the board of directors or other important issues of the Company. 16 3. The relationship between the Company and its controlling shareholder The Company was strictly independent of its the largest shareholder, Foshan Huaxin Development Co., Ltd., in respect of business, personnel, assets, organs and finance and had independent and complete business and the ability of independent operation. (1) As for business, the Company was completely independent from its controlling shareholder and had completely independent business and the ability of independent operation. (2) As for personnel, the Company was independent of its controlling shareholder. Its general manger, deputy general managers, secretary to the board of directors and finance personnel received remuneration from the Company, who did not hold any important position at corporate shareholders. (3) As for assets, the assets input by the controlling shareholder in the Company were independent, complete and had clear property right. The controlling shareholder did not occupy the Company's assets or dominate or interfere with the operation and management of the Company's assets. (4) As for organization, the Company established an organizational structure that is completely independent of its controlling shareholder. The board of directors, the supervisory committee and internal organs of the Company operated independently according to the Company Law, the Securities Law and relevant laws and regulations. The largest shareholder acted according to relevant codes of conduct and did not directly or indirectly interfere with the Company's decision making and operating activities by overstepping the authority of the shareholders' general meeting. (5) As for finance, the Company established its own accounts. Its controlling shareholder did not interfere with the Company's accounting activities. The Company independently operated, carried out accounting and paid taxes. 4. Appraisal of the senior executives of the Company and status of implementation of stimulation mechanism in the report period In the report period, the Company appraised its senior executives according to the principles on remuneration and equity incentive system adopted at 2002 annual shareholders' general meeting and relevant detailed rules for implementation adopted by the remuneration committee of the board of directors and the board of directors of the Company and set the limit of incentive remuneration for senior executives based on such appraisal. VI. Brief Introduction of Shareholders' General Meeting The Company held 2003 annual shareholders' general meeting at its meeting room on 17 May 26, 2004. 1. Holding of shareholders' general meeting The announcement of the board of directors of the Company on holding 2003 annual shareholders' general meeting was published on Securities Times and Hong Kong Commercial Daily over 30 days in advance on April 13, 2004. The notice concerning the postponement of the shareholders' general meeting and addition of proposals was published on Securities Times and Hong Kong Commercial Daily on May 12, 2004. The board of directors of the Company was responsible for convening 2003 annual shareholders' general meeting. 18 shareholders and agents authorized by shareholders were present at the meeting, representing 292536205 shares which account for 66.56% of the total voting shares of the Company. Of these shareholders, 11 were shareholders holding negotiable B shares, representing 3031605 shares. 18 valid votes were received, representing 292536205 shares. It complied with the provisions of the Company Law and the Articles of Association of the Company. 2. Resolutions of the shareholders' general meeting 2003 annual shareholders'general meeting voted on proposals item by item by open ballot and adopted following 13 resolutions item by item. The announcement of the resolutions of this meeting was published on Securities Times and Hong Kong Commercial Daily on May 27, 2004. Lawyer Ma Yunyan of Shenzhen Xinda Law Office witnessed this meeting and issued legal opinion. The Lawyer held the opinion that the convening and holding of this meeting, the qualification of the persons present at this meeting and the voting procedure of this meeting complied with the provisions of laws and regulations and the Articles of Association of the Company and the resolutions of this meeting were legal and valid. (1) 2003 work report of the board of directors of the Company (2) 2003 report of the supervisory committee of the Company (3) 2003 final accounting report of the Company (4) 2004 profit distribution preplan of the Company (5) 2003 annual report of the Company and its summary (6) The proposal for the Company's satisfaction of conditions for secondary offering and listing of B shares (7) The proposal for the Company's secondary offering of domestically listed foreign investment shares (B shares) 18 (8) The proposal concerning of the feasibility report on the utilization of the proceeds raised through the Company's secondary offering of domestically listed foreign investment shares (B shares) (9) The proposal concerning Guangdong Zhengzhong Zhujiang Certified Public Accountants' special report on the utilization of the proceeds previously raised (10) The proposal concerning the statement of the board of directors of the Company on the utilization of the proceeds previously raised (11) The proposal concerning the preplan for the disposal of undistributed profit before the secondary offering of B shares (12) The proposal for amending the Articles of Association of the Company (13) The proposal for engaging certified public accountants of the Company for 2004 3. Particulars about the election and replacement of director and supervisors No directors or supervisors were replaced in the report period. VII. Report of the Board of Directors 1. Brief analysis of financial position Due to the rise in price of raw materials, the Company's income and profit from main operation somewhat decreased. The output and sales volume of high-class coated manila, the key product of the Company, somewhat increased over the previous year. However, the rise in price of raw materials and fuels affected the profit growth of this product to a certain extent. As the profit of Tetra Huaxin (Foshan) Packaging Co., Ltd., one of the Company's joint ventures, somewhat increased, the Company's investment income increased. 2. Operating status of the Company (1) Scope of main operation and its operating status The Company is engaged in papermaking, printing and packaging industry and mainly produces and sells high-class and high-quality packaging materials and packaging products including high-class coated manila, soft packing boxes for liquid food (tetra pack), color printed packaging products and new-type aluminum and plastic compound paper cans. The Company comes out top in the industry in terms of production and operation scale, product quality and class, ability of technological innovation and comprehensive profit making level. The key products of the Company include high-class coated manila, color printed packaging products and aluminum and plastic compound paper cans. In the report period, the continuous rise in the price of raw materials, coal, electricity and 19 oil brought great pressure on the cost of production and manufacturing. Besides, the intensification of market competition suppressed product price to a certain extent. The profitability of the whole company was somewhat affected. Facing the above-mentioned unfavorable business environment, the Company minimized the influence of such environment through improving production capacity, reducing wastage and enhancing quality management level. For the year, the income from main operation of the Company was RMB 0.592 billion, a decrease of 2.3% over the same period of the previous year. Its profit from main operation was RMB 0.088 billion, a decrease of 12.2% over the same period of the previous year. Its net profit was RMB 0.09 billion, a decrease of 6.7% over the same period of the previous year. The net profit after deduction of non-recurring gains and losses was RMB 0.089 billion, a decrease of 3% over the same period of the previous year. ① Composition of income from main operation and profit from main operation in terms of product/ industry classification Product / industry Income from Proportion of Profit from Proportion of classification main operation income from main operation profit from (In RMB’000) main operation (In RMB’000) main operation （%） （%） High-class coated 528,989.10 89.3% 78,038.80 88.8% manila Color printed 60,525.80 10.2% 7,968.70 9.1% packaging products Compound paper 7,189.40 1.2% 1,918.10 2.2% cans and others ② Composition of income from main operation and profit from main operation in terms of regional distribution Most of the income from main operation and profit from main operation came from South China. ③ Status of production of main products whose income accounts for over 10% of income from main operation The products whose income accounts for over 10% of the income from main operation of the Company are high-class coated manila and color printed packaging products. Their sales income, sales cost and gross profit rate are as follows: Product description Sales income (unit: RMB Sales cost (unit: RMB’000) Gross profit ‘000) rate (%) High-class coated 528,989.10 450,950.30 14.8% manila Color printed 60,525.80 52,557.10 13.2% packaging products 20 ④ As compared with those in the previous report period, the main operation and its structure in the report period did not change much. (2) Operating status of main joint ventures Tetra Huaxin (Foshan) Packaging Co., Ltd. ("Tetra Huaxin") is mainly engaged in the production and sales of soft packing boxes for liquid food (tetra packs). The Company owns 25% of capital contributions of Tetra Huaxin. In the report period, Tetra Huaxin continued to thoroughly and widely promote the development of system management projects and obtained remarkable results. Its output, sales volume and profit set a new record. The profit of Tetra Huaxin is a key part of the Company's profit. (3) Particulars about main suppliers and customers The accumulative amount of the Company's purchase from the top 5 suppliers accounted for 37.70% of its total purchase amount. The amount of the Company's sales to the top 5 customers accounted for 13.49% of the total amount of its total sales income. (4) Problems and difficulties occurred in operation and their solutions As project personnel misunderstood environmental protection examination and approval procedure, the progress of Huafeng capacity expansion project the Company prepared to construct in Zhuhai was affected by national environmental protection campaign and the construction of the project was suspended for a time. The management of the Company paid close attention to this matter, actively communicated with relevant national department and obtained the understanding and support of national environmental protection department and the approval of the environmental impact assessment report by State Environmental Protection Administration so as to minimize relevant influence. 3. Investment in the report period (1) Utilization of raised proceeds In the report period, the Company did not have newly raised proceeds. By the end of the report period, the projects utilizing the proceeds raised by the Company through the issue of B shares in 2000 were completely the same with the investment projects promised in the prospectus. The raised proceeds that have been invested account for 100% of total raised proceeds. The raised proceeds of RMB 19.01 million unused in the previous report period were invested as planned in Huaxin (Foshan) Color Printing Co., Ltd. for the expansion of production and operation scale. As of December 31, 2004, RMB 19.01 million had been invested. RMB 7.81 million was used to purchase foreign advanced flexible-plate printing machines. RMB 2.99 million was used to pay 30% of the payment for land. RMB 1.68 million was applied to the design of new factory and infrastructure. The new factory project of Huaxin (Foshan) Color Printing Co., Ltd. made substantial progress in 2004. New factory project team was established on May 5, 2004. Through comprehensive comparison of development prospect, land price, distance, facilities, scale of industrial park, construction conditions and geological conditions, Changao District of 21 Foshan was finally selected as the site for new factory. After the completion of the work including environmental impact assessment, project establishment, design, obtainment of construction project planning permit, tendering and bidding for pile foundation construction and obtainment of provisional license, the foundation stone laying ceremony of the new factory was held on December 2, 2004. The piling work for the main workshop and office building was completed before the Spring Festival. Foreign advanced flexible -plate printing machines were imported in November 2004 and have been put into production. According to the current project schedule, the new factory will be built up and put into production on November 28, 2005. (2) Other investment project utilizing non-raised funds The negotiation over part of main equipment and contract signing were completed for the capacity expansion project of Foshan Huafeng Paper Industrial Co., Ltd. in 2004. Many design liaison meetings were held and the preliminary design of hot spot station, main control building and general descending station and the major part of engineering design of pulping and papermaking workshops were completed. The purchasing in respect of thermal power station, pulping and papermaking workshops, feedwater treatment, sewage treatment and architectural engineering was carried out as planned. Meanwhile, the civil works of this capacity expansion project proceeded in order and personnel have gradually been in place. The amount of signed contract is RMB 840 million, including cash payment of RMB 240 million. In order to increase the production and business operation scale and raise the grade of the products with introduced equipment from abroad and to make full use of the favourable policies of the state and reduce the cost of investment when Huaxin (Foshan) Color Printing Co., Ltd moves to new site of the factory, Huaxin (Foshan) Color Color Printing Co., Ltd has purchased Peral River Color Printing Factory of Foshan chancheng District at the price of RMB 150,000 on March 9,2005,the Peral River Color Printing Factory changed into the Peral River Color Printing Co., Ltd with registered capital of 1.5 million and Huaxin (Foshan) color printing Co., Ltd invests 1.35 million , taking the rate of 90%;Foshan Huafeng Paper Co., Ltd invests 0.15 million, taking the rate of 10%. 4. Financial position and operating results of the Company Main reasons for the change in the Company's financial indicators as compared with the previous year In RMB Item End of 2004 End of 2003 Amount of increase or Proportion of decrease increase or decrease % Total assets 1,591,392,595.17 +301,433,454.60 +23.37 1,289,959,140.57 Long-term 292,855,070.18 25,620,000.00 +267,235,070.18 +1043.07 liabilities Shareholders' 996,148,467.26 954,383,429.54 +41,765,037.72 +4.38 equity Profit from main 87,756,365.74 99,991,910.78 -12,235,545.04 -12.24 operation 22 Net profit 89,952,537.72 -6,500,698.93 -6.74 96,453,236.65 Net increase in cash and cash 70,255,399.56 -2,936,133.47 +73,191,533.03 - equivalents Reasons for change： 1. Increase of total assets: Increase of monetary capital and construction in progress; 2. Decrease of profit from main operation: Despite the increase of sales volume of white board paper over the previous year, the decline of selling price resulted in slight drop of gross profit rate over the previous year; 3. Increase of shareholders' equity: Profit making in current period; 4. Increase of long-term liabilities: Increase of project loans for the capacity expansion project of Foshan Huafeng Paper Industrial Co., Ltd.; 5.Increase of net increase in cash and cash equivalents: Increase of long-term loans borrowed by the Company from banks. 5. The Company's business plan for 2005 In addition to adapting to complicated and changeful market situation and carrying out production and operation well, the Company should spare no efforts to complete the implementation of two big projects, i.e., non-local capacity expansion of Huafeng and site removal and capacity expansion of color printing factory, in 2005. Facing quick-changing market, the Company will actively change mode of thinking, enhance its adaptability and adapt to environmental change through scientific allocation of internal resources and effective utilization of external resources to make the operation of its overall system generate the best economic effect. (1) As for project construction, the Company should follow the work policy of "objectiveness, strictness, system and objective", keep clear understanding of the issues including construction period, fund organization, non-local investment and relocation and pay attention to the systematicness and thoroughness of project organization to ensure the smooth progress of the above-mentioned two projects. (2) To change market concept, gain new understanding of the market environment where it is in, adapt to environmental change and adjustment and establish new marketing system. (3) To vigorously promote technological innovation, strengthen personnel training, integrate flow of human resources, materials, funds and information, strive to attain optimal effect of resource allocation and effectively ensure smooth production and operation this year. 23 6. Routine Work of the Board of Directors (1) Board meetings and resolutions in the report period In the report period, the Company held 7 board meetings. The particulars and summary of the meetings are as follows: 1) The 1st meeting of the second board of directors in 2004 was held on January 8, 2004. The meeting examined and adopted the following resolutions: The Proposal Concerning the Company's Providing Loan Guarantee to Foshan Huafeng Paper Industrial Co., Ltd. The Proposal Concerning the Company's Appointing Lu Liang As Deputy General Manager The announcement of the resolutions of this meeting was published on Securities Times and Hong Kong Commercial Daily on January 10, 2004. 2) The 2nd meeting of the second board of directors in 2004 was held by correspondence on January 12, 2004. The meeting examined and adopted the following resolutions: The Proposal Concerning the Increase of Investment Budget of Capacity Expansion Project of Foshan Huafeng Paper Industrial Co., Ltd. 3) The 3rd meeting of the second board of directors in 2004 was held on April 8, 2004. The meeting examined and adopted the following resolutions: 2003 Work Summarization of the Company 2003 Final Accounting Report of the Company 2003 Profit Distribution Preplan of the Company 2003 Annual Report and Summary of 2003 Annual Report 2003 Work Report of the Board of Directors Plan for Remuneration of Management of the Company for 2003 The Proposal for Amending the Articles of Association of the Company Report on the Company's Work Objective and Plan for 2003 The Proposal for Retaining Certified Public Accountants of the Company for 2004 Regulations on Management of Relationship with Investors The Proposal for Holding 2003 Annual Shareholders' General Meeting of the Company The announcement of the resolutions of this meeting was published on Securities Times and Hong Kong Commercial Daily on April 13, 2004. 4) The 4th meeting of the second board of directors in 2004 was held on April 21, 2004. The meeting examined and adopted the following resolutions: The Report of the Company for the First Quarter of 2004; The announcement of the resolution of this meeting was published on Securities Times and Hong Kong Commercial Daily on April 23, 2004. 24 5) The 5th meeting of the second board of directors in 2004 was held on May 9, 2004. The meeting examined and adopted the following resolutions: The Company's Decision on Postponing the Holding of 2003 Annual Shareholders' General Meeting The proposal concerning the Company's satisfying conditions for the issue and listing of domestically listed foreign investment shares (B shares) The proposal concerning the secondary offering of domestically listed foreign investment shares (B shares) The proposal concerning the feasibility report on the utilization of the proceeds raised through the secondary offering of domestically listed foreign investment shares (B shares) The special report of Guangdong Zhengzhong Zhujiang Certified Public Accountants on the utilization of the proceeds previously raised The statement of the board of directors on the utilization of the proceeds previously raised The proposal concerning the preplan for the disposal of undistributed profit before the secondary offering of B shares Auditing opinions on increase of proposals to be examined at 2003 annual shareholders' general meeting by the controlling shareholder and the supervisory committee of the Company The announcement of the resolution of this meeting was published on Securities Times and Hong Kong Commercial Daily on May 12, 2004. 6) The sixth meeting of the second board of directors in 2004 was held on August 9, 2004. The meeting examined and adopted the following resolutions: 2004 Semiannual Report and Summary of Semiannual Report The Proposal Concerning the Resignation of Zhou Qihong from the Position of Deputy General Manager of the Company The announcement of the resolution of this meeting was published on Securities Times and Hong Kong Commercial Daily on August 11, 2004. 7) The 7th meeting of the second board of directors in 2004 was held on October 21, 2004. The meeting examined and adopted the following resolutions: Report of the Company for the Third Quarter of 2003 The Proposal for Adjusting the Accounting Policies of the Company The announcement of the resolution of this meeting was published on Securities Times and Hong Kong Commercial Daily on October 22, 2004. (2) Implementation by the board of directors of the resolutions of the shareholders' general meeting: In the report period, the board of directors of the Company was able to conducted work strictly according to the resolutions of the shareholders' general meeting and seriously implemented the same. 25 The Company timely disclosed and announced the important content of the resolutions of the above board meetings according to relevant regulations and requirements on information disclosure. 7. Profit distribution preplan for 2004 As audited by the domestic certified public accountants, i.e., Guangdong Zhengzhong Zhujiang Certified Public Accountants Co., Ltd., and the overseas certified public accountants, i.e., KPMG Hong Kong, retained by the Company for 2004 respectively according to Chinese accounting standards for business enterprises and international accounting standards, the after-tax profit of the Company for 2004 was RMB 89,952,537.72 and RMB 95,650,000.00 respectively. According to the provisions of Detailed Rules for Implementation of the Regulations on Domestically Listed Foreign Investment Shares of Joint Stock Limited Companies and the Articles of Association of the Company, dividends shall be distributed based on the lower of the cumulative after-tax distributable profit determined respectively according to Chinese accounting standards for business enterprises and international accounting standards. After allocations of RMB 13,492,880.66 for statutory common reserve fund and statutory public welfare fund, the result of the net profit for this year, i.e., RMB 89,952,537.72, plus year-beginning cumulative undistributed profit of RMB 182,646,269.76 and minus dividends of RMB 48,345,000 distributed for 2003, i.e., RMB 210,760,926.82, is the profit available for distribution for this year. In consideration of the fund demand of high-class coated white board paper capacity expansion project of Zhuhai Branch of Foshan Huafeng Paper Industrial Co., Ltd. and the new factory project of Huaxin (Foshan) Color Printing Co., Ltd., it was proposed that the profit for 2004 should not be distributed temporarily and the cumulative undistributed profit of RMB 210,760,926.82 should be carried forward for distribution in the next year. This profit distribution preplan is to be submitted to the shareholders' general meeting of the Company for examination. 8. Other matters (1) In the report period, the selected newspapers for information disclosure are Securities Times and Hong Kong Commercial Daily, remaining unchanged. (2) According to the requirements of the CSRC Circular on Certain Issues Relating to Standardization of Fund Transfer Between Listed Companies and Their Related Parties and Guarantees Provided by Listed Companies (ZJF (2003) No. 56 Document) ("the Circular"), the certified public accountants performing audit for the Company issued special statement on the status of fund occupation by controlling shareholder of the Company and other related parties. According to the special statement, the controlling shareholder of the Company and other related parties did not occupy funds of the Company as of December 31, 2004. 26 In the opinion of independent directors, the Company did not provide guarantee to others as of December 31, 2004. The Company seriously performed the obligation of information disclosure of external guarantee strictly according to relevant provisions of Listing Rules and the Articles of Association of the Company. According to the requirements of ZJF (2003) No. 56 Document, the Company amended the Articles of Association of the Company, especially revised or supplemented the articles concerning the examination and approval procedure of external guarantee, the qualifications of the objects of guarantee, etc. in the Articles of Association of the Company. (3) In the report period, the Company did not enter into important project contracts for providing significant guarantee to other companies, for entrusting other companies with money management or for holding in trust, contracting for or leasing the assets of other companies nor did other companies enter into important project contracts for holding in trust, contracting for or leasing the assets of the Company. VIII. Report of the Supervisory Committee 1. Work of the supervisory committee in the report period In 2004，the supervisory committee of the Company performed its duties and seriously conducted supervising work according to the Company Law, the Articles of Association of the Company and relevant provisions of other laws and regulations. The members of the supervisory committee attended all board meetings and shareholders' general meetings held by the Company as non-voting delegates, effectively supervised the holding procedure of meetings, decision-making procedure, resolutions, information disclosure and the status of implementation of the resolutions of the shareholders' general meeting by the board of directors as well as the lawfulness and legal compliance of the duty performance of the Company's directors, managers and other senior executives and played its due role of supervision. The supervisory committee of the Company held 4 meetings in total in 2004. The basic information about these meetings is as follows: (I) The 1st meeting of the second supervisory committee was held on April 8, 2004. 5 supervisors were supposed to attend the meeting. 4 of them were actually present and 1 of them asked for leave of absence. The meeting examined and adopted the following resolutions: 1. 2003 report of the supervisory committee of the Company; 2. 2003 final accounting report of the Company; 3. 2003 profit distribution preplan; 4. 2003 annual report of the Company and its summary. The announcement of the above resolutions was published on Securities Times and Hong 27 Kong Commercial Daily on April 13, 2004. (II) The 2nd meeting of the second supervisory committee of the Company was held on May 8, 2004. 5 supervisors were supposed to attend the meeting and all of them were actually present. The meeting examined and adopted the following resolutions: The Provisional Proposal for Adding the Matters Concerning Secondary Offering of B Shares to the Matters to be Examined at 2003 Annual Shareholders' General Meeting of the Company The announcement of the above resolution was published on Securities Times and Hong Kong Commercial Daily on May 12, 2004. (III) The 3rd meeting of the second supervisory committee of the Company was held on August 9, 2004. 5 supervisors were supposed to attend the meeting and all of them were actually present. The meeting examined and adopted the following resolutions: 2004 semiannual report of the Company and its summary. The announcement of the above resolution was published on Securities Times and Hong Kong Commercial Daily on August 11, 2004. (IV) The 4th meeting of the second supervisory committee of the Company was held in the manner of voting by correspondence on October 21, 2004. 5 supervisors were supposed to vote and 4 of them actually voted. The meeting examined and adopted the following resolutions: 1. Report of Foshan Huaxin Packaging Co., Ltd. for the Third Quarter of 2004 2. The Proposal for Adjusting the Accounting Policies of the Company The announcement of the above resolutions was published on Securities Times and Hong Kong Commercial Daily on October 22, 2004. 2. Opinions of the supervisory committee on the operation of the Company according to law In the report period, the supervisory committee of the Company supervised the whole course of the Company's operation according to law. In its opinion, the Company's decision-making procedure complied with the provisions of the Company Law, the Securities Law and the Articles of Association of the Company. The Company has established a set of relatively perfect internal control system. The directors, independent directors, managers and other senior executives of the Company diligently performed their duties, were incorruptible and self-disciplined and made unremitting efforts to promote the development of the Company in the report period. No such personnel were 28 found to violate laws, regulations and the Articles of Association of the Company or harm the interests of the Company and shareholders when they performed duties. 3. Opinions of the supervisory committee on the inspection of the financial affairs of the Company In the opinion of the supervisory committee, the Company had sound financial system and standardized financial management. The standard unqualified auditor's reports on the Company's financial affairs for 2004 and the statements on relevant matters respectively issued by Guangdong Zhengzhong Zhujiang Certified Public Accountants Co., Ltd. and KPMG Hong Kong retained by the Company as domestic and overseas auditing bodies objectively, fairly and truly reflected the Company's financial position and operating results. 4. Opinions of the supervisory committee on the investment projects of the Company utilizing raised proceeds The supervisory committee checked the investment projects of the Company utilizing raised proceeds and held the opinion that the Company strictly implemented the Regulations on the Use and Management of Raised Proceeds and the raised proceeds were used as promised in the prospectus. Through repeated demonstration of relevant projects, raised proceeds of RMB 19.01 million carried forward for use in the report period were invested in the construction of the Company's color printing project as promised in the prospectus. 5. Opinions of the supervisory committee on other matters In the report period, the Company neither was involved in any material lawsuit nor provided guarantee to its controlling shareholder and its related parties or any natural person in any way. IX. Important Events 1. The Company was not involved in any material lawsuit or arbitration in the report period. 2. In the report period, the Company did not enter into important project contracts for providing significant guarantee to other companies, for entrusting other companies with money management or for holding in trust, contracting for or leasing the assets of other companies nor did other companies enter into important project contracts for holding in trust, contracting for or leasing the assets of the Company. According to the requirements of the CSRC Circular on Certain Issues Relating to Standardization of Fund Transfer Between Listed Companies and Their Related Parties and Guarantees Provided by Listed Companies (ZJF (2003) No. 56 Document) ("the 29 Circular"), the Company conducted self inspection and found its controlling shareholder and other related parties did not occupy its funds nor did it provide guarantee to others in violation of relevant regulations. In the opinion of independent directors, the Company did not provide significant guarantee to others as of December 31, 2004. The Company seriously performed the obligation of information disclosure of external guarantee strictly according to relevant provisions of Listing Rules and the Articles of Association of the Company. According to the requirements of ZJF (2003) No. 56 Document, the Company amended the Articles of Association of the Company, especially revised or supplemented the articles concerning the examination and approval procedure of external guarantee, the qualifications of the objects of guarantee, etc. in the Articles of Association of the Company. 3. Important loan contracts of the Company and guarantee provided to subsidiaries in the report period. (1) Foshan Huaxin Development, the parent company of the Company, signed the Contract for Guarantee of Maximum Amount (Contract No.: GBZ476630120042027) with Bank of China Foshan Branch on September 29, 2004. According to the contract, this company shall provide guarantee for all debts owed by the Company to Bank of China Foshan Branch for the period from September 30, 2004 to September 30, 2008 and shall bear joint and several liability for this guarantee. The sum of the balance of the principals of loans secured by this guarantee shall not exceed RMB 100 million. So far, the Company has obtained a loan of RMB 5 million from Bank of China Foshan Branch. (2) According to FNYJZ (2004) No. 88 Loan Contract signed by the Company and Agricultural Bank of China Foshan Branch Huada Sub-branch on December 22, 2004, the Company shall obtained a loan of RMB 15 million from Agricultural Bank of China Foshan Branch Huada Sub-branch at the annual interest rate of 5.58%. Foshan Huaxin Development Co., Ltd., the parent company of the Company, shall provide guarantee for this loan and bear joint and several liability for this guarantee. So far, Agricultural Bank of China Foshan Branch Huada Sub-branch has granted a loan of RMB 10 million to the Company. (3) According to No. GDK476630120021152 and No. GDK476630120021153 Loan Contract signed by Foshan Huafeng Paper Industrial Co., Ltd., a subsidiary of the Company, and Bank of China Foshan Branch on December 26, 2002, this company shall obtain a loan of RMB 2500 million from Bank of China Foshan Branch at the annual interest rate of 5.022% for the term from December 27, 2002 to December 27, 2007. The Company shall provide guarantee for this loan and bear joint and several liability for this guarantee. (4) The Company signed XYYJBZ (Foshan) No. 200402020141 Medium (Long)-term Loan Contract with Xingye Bank Guangzhou Branch on February 2, 2004. According to 30 the contract, the Company shall provide guarantee for all debts owed by Foshan Huafeng Paper Industrial Co., Ltd., a subsidiary of the Company, to Xingye Bank Guangzhou Branch for the period from February 2, 2004 to February 1, 2009 and bear joint and several liability for this guarantee. The top limit of the principal of loans secured by this guarantee is RMB 250 million. So far, this company has obtained a loan of RMB 250 million from Xingye Bank Guangzhou Branch at the annual interest rate of 5.58% for the term from February 2, 2004 to February 1, 2009. (5) The Company signed 2004 ZGBZ No. 15 Contract for Guarantee of Maximum Amount with Construction Bank of China Foshan Branch on February 1, 2004. According to the contract, the Company shall provide guarantee for all debts owed by Foshan Huafeng Paper Industrial Co., Ltd., a subsidiary of the Company, to Construction Bank of China Foshan Branch, for the period from February 1, 2004 to January 31, 2007 and bear joint and several liability for this guarantee. The top limit of the principal of loans secured by this guarantee is RMB 300 million (including the amount of RMB converted from foreign currency). So far, this company has obtained a loan of Euro 1,480,340.00 from Construction Bank of China Foshan Branch, at the floating interest rate, i.e., the sum of three-month LIBOR and (margin) 181BPS (which floats once every three months), for the term from April 28, 2004 to April 27, 2009. 4. In the report period, the Articles of Association of the Company was amended. The content of the amendment of the Articles of Association of the Company and the resolutions adopted by the shareholders' general meeting were fully disclosed on Securities Times and Hong Kong Commercial Daily on April 13, 2004 and May 27, 2004. 5. The engagement or dismissal of certified public accountants' firm and payment of remuneration: In the report period, as resolved by the shareholders' general meeting of the Company, the Company continued to engage Guangdong Zhengzhong Zhujiang Certified Public Accountants Co., Ltd. and KPMG Hong Kong as its domestic and overseas accounting audit bodies. The above certified public accountants' firms have provided audit services to the Company for five consecutive years since 2000. The decision-making procedure concerning the remuneration for certified public accountants' firms: The shareholders' general meeting authorizes the board of directors in relevant aspect and the board of directors shall determine the limit of audit remuneration according to relevant charging standards and amount of work. The Company paid RMB 0.38 million and HKD 0.58 million respectively to Guangdong Zhengzhong Zhujiang Certified Public Accountants Co., Ltd. and KPMG Hong Kong as audit fee. 6. In the report period, the board of directors of the Company and its directors were not investigated by CSRC, administratively punished or publicly criticized by CSRC or publicly condemned by Shenzhen Stock Exchange. 31 7. The Company was not involved in other important events in the report period. X. Financial Report The financial report is attached hereinafter XI. List of Documents Available for Inspection Investors and relevant departments may consult the following documents at the office of the board of directors of the Company: 1. The financial statements bearing the seal and signature of the Company's legal representative, financial controller and the person in charge of the accounting organ. 2. The auditor's report bearing the seal of the certified public accountants and the signature of C.P.A. 3. The original of all the Company's documents and the original manuscripts of announcements publicly disclosed on the newspapers designated by China Securities Regulatory Commission in the report period. 4. The original of 2004 annual report bearing the signature of the chairman of the board of directors of the Company. Chairman of the board of directors: Wang Qi The Board of Directors of Foshan Huaxin Packaging Co., Ltd. April. 1. 2005 32 Foshan Huaxin Packaging Company Limited 佛山华新包装股份有限公司 (Incorporated as a joint stock company in the People’s Republic of China with limited liability) 31 December 2004 33 Report of the auditors to the shareholders of Foshan Huaxin Packaging Company Limited (Incorporated as a joint stock company in the People’s Republic of China with limited liability) Respective responsibilities of directors and auditors We have audited the accompanying consolidated balance sheet of Foshan Huaxin Packaging Company Limited and its subsidiaries (the “Group”) as of 31 December 2004 and the related consolidated statements of income and cash flows for the year then ended, set out on pages 35 to 63, which have been prepared in accordance with International Financial Reporting Standards promulgated by the International Accounting Standards Board. These consolidated financial statements are the responsibility of the directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. This report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Basis of opinion We conducted our audit in accordance with International Standards on Auditing as promulgated by the International Federation of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as of 31 December 2004, and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards promulgated by the International Accounting Standards Board. Certified Public Accountants Hong Kong, China, 31 March 2005 34 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) Consolidated income statement for the year ended 31 December 2004 (Expressed in Renminbi) Note 2004 2003 Rmb’000 Rmb’000 Revenue 2 592,388 606,531 Cost of sales (504,632) (506,539) Gross profit 87,756 99,992 Other operating income, net 10,375 3,047 Selling expenses (17,039) (14,796) Administrative expenses (42,473) (39,530) Profit from operations 38,619 48,713 Financial income 4 2,159 341 Financial expenses 4 (10,212) (3,460) Share of profit of an associate 89,709 83,539 Profit before taxation 120,275 129,133 Income tax expense 5(a) - company and subsidiaries (4,408) (6,150) - associate (13,443) (16,275) Profit after taxation 102,424 106,708 Minority interests (6,774) (10,153) Profit for the year 16 95,650 96,555 ========= ========= Basic earnings per share 6 Rmb 0.22 Rmb 0.22 ========= ========= No separate consolidated statement of recognised gains and losses has been prepared as the net profit for the year would be the only component of this statement. The notes on pages 40 to 63 form part of these financial statements. 35 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) Consolidated balance sheet at 31 December 2004 (Expressed in Renminbi) Note 2004 2003 Rmb’000 Rmb’000 Assets Non-current assets Property, plant and equipment 7 654,298 666,011 Lease prepayments 8 48,498 40,241 Intangible assets 9 (2,399) (2,829) Construction in progress 10 239,139 23,318 Investment in an associate 11 164,376 183,514 Other investments 12 3,214 3,214 1,107,126 913,469 --------------- --------------- Current assets Inventories 13 84,081 86,931 Accounts receivable 98,016 89,691 Bills receivable 36,074 32,865 Dividends receivable from an associate 36,379 - Deposits, prepayments and other receivables 26,014 16,971 Cash and cash equivalents 14 171,101 109,728 451,665 336,186 --------------- --------------- Total assets 1,558,791 1,249,655 ========= ========= The notes on pages 40 to 63 form part of these financial statements. 36 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) Consolidated balance sheet at 31 December 2004 (continued) (Expressed in Renminbi) Note 2004 2003 Rmb’000 Rmb’000 Equity, minority interests and liabilities Capital and reserves Share capital 15 439,500 439,500 Reserves 16 523,940 476,635 Total equity 963,440 916,135 --------------- --------------- Minority interests 185,347 153,467 --------------- --------------- Liabilities Non-current liabilities Interest-bearing bank loans 17 292,235 25,000 --------------- --------------- Current liabilities Interest-bearing bank loans 17 15,000 57,470 Taxation 5(d) 867 1,315 Loan from an associate - 30,000 Amounts due to immediate holding company - 176 Accounts payable 79,586 40,192 Other payables and accrued expenses 22,316 25,900 117,769 155,053 --------------- --------------- Total liabilities 410,004 180,053 --------------- --------------- Total equity, minority interests and liabilities 1,558,791 1,249,655 ========= ========= Approved and authorised for issue by the board of directors on 31 March 2005 ) ) ) Directors ) ) The notes on pages 40 to 63 form part of these financial statements. 37 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) Consolidated statement of cash flows for the year ended 31 December 2004 (Expressed in Renminbi) Note 2004 2003 Rmb’000 Rmb’000 Operating activities Profit before taxation 120,275 129,133 Adjustments for: - Depreciation 40,535 39,498 - Amortisation 452 453 - Interest income (2,159) (341) - Interest expense 10,118 3,278 - Gain on disposal of property, plant and equipment (60) (327) - Net loss on disposal of subsidiaries - 93 - Provision for inventory 14 - - Provision for bad and doubtful debts 457 - - Share of profit of an associate (89,709) (83,539) Cash flows from operating activities before changes in working capital 79,923 88,248 Decrease/(increase) in inventories 2,836 (25,140) Increase in accounts receivable and bills receivables (11,991) (2,100) (Increase)/decrease in deposits, prepayments and other receivables (9,043) 5,096 Decrease in amounts due to related companies - (18,003) (Decrease)/increase in amount due to immediate holding company (176) 3,019 Increase in accounts payable 4,440 7,487 Decrease in other payables and accrued expenses (3,584) (13,622) Cash generated from operations 62,405 44,985 PRC income tax paid (4,856) (11,781) Cash flows from operating activities 57,549 33,204 --------------- --------------- The notes on pages 40 to 63 form part of these financial statements 38 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) Consolidated statement of cash flows for the year ended 31 December 2004 (continued) (Expressed in Renminbi) Note 2004 2003 Rmb’000 Rmb’000 Investing activities Interest received 2,159 341 Dividends received 67,715 54,331 Payment for acquisitions of property, plant and equipment and construction in progress (205,127) (37,050) Increase of lease prepayment (9,139) - Disposal of subsidiaries, net of cash disposed of - 5,827 Capital injection to an associate (8,690) (3,725) Proceeds from disposal of property, plant and equipment 83 2,669 Cash flows from investing activities (152,999) 22,393 --------------- --------------- Financing activities Interest paid (14,702) (3,278) New bank loans 286,077 - Repayment of bank loans (61,312) (41,741) (Repayment of)/new loan from associate (30,000) 30,000 Capital injection from minority shareholder 36,179 20,602 Dividends paid (48,345) (48,345) Dividends paid to minority shareholder (11,074) (11,199) Cash flows from financing activities 156,823 (53,961) --------------- --------------- Net increase in cash and cash equivalents 61,373 1,636 Cash and cash equivalents at 1 January 109,728 108,092 Cash and cash equivalents at 31 December 14 171,101 109,728 ========= ========= The notes on pages 40 to 63 form part of these financial statements. 39 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) Notes to the consolidated financial statements (Expressed in Renminbi) 1 Significant accounting policies Foshan Huaxin Packaging Company Limited (the “Company”) is a company domiciled in the People’s Republic of China (the “PRC”). The consolidated financial statements of the Company for the year ended 31 December 2004 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in an associate. The Group is principally engaged in the production and sale of paper packaging products and printing and sale of packaging products. (a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and its interpretations adopted by the International Accounting Standards Board (“IASB”). (b) Basis of preparation The consolidated financial statements are presented in Renminbi Yuan, rounded to the nearest thousand. They are prepared on the historical cost basis. The accounting policies set out below have been applied consistently by the Group. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of polices and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The IASB has issued a number of new and revised IFRS and IAS (“new IFRS”) which are effective for accounting periods beginning on or after 1 January 2005. The Group has not early adopted these new IFRS in the financial statements for the year ended 31 December 2004. The Group has already commenced an assessment of the impact of these new IFRS but is not yet in a position to state whether these new IFRS would have a significant impact on its results of operations and financial position. 40 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 1 Significant accounting policies (continued) (c) Basis of consolidation (i) Subsidiaries Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control effectively ceases. (ii) Associate An associate is an entity in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group’s share of the total recognised gains and losses of the associate on an equity accounted basis, from the date that significant influence commences until the date that significant influence effectively ceases. When the Group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate. (iii) Transactions eliminated on consolidation Intragroup balances and transactions and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity against the investment in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (d) Translation of foreign currencies Transactions in foreign currencies are translated to Renminbi Yuan at the foreign exchange rates ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Renminbi Yuan at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. 41 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 1 Significant accounting policies (continued) (e) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 1(m)). The cost of property, plant and equipment constructed by the Group includes the cost of materials, direct labour and an appropriate proportion of fixed and variable overheads. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognised in the income statement as an expense as incurred. Gains or losses arising from the retirement or disposal of property, plant and equipment, are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recogised as income or expense in the income statement on the date of retirement or disposal. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives, after taking into account their estimated residual values, of items of property, plant and equipment. The estimated useful lives are as follows: Buildings 40 years Plant and machinery 20 years Furniture, fixtures and office equipment 5 years Motor vehicles 8 years Assets are depreciated from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and ready for its intended use. (f) Lease prepayments Lease prepayments represent fees for land use rights paid to the PRC’s land bureau. Land use rights are carried at cost and amortised on a straight-line basis over the period of the rights of 50 years. (g) Intangible assets (i) Goodwill Goodwill arising on an acquisition represents the excess of the cost of acquisition over the fair value of the net identifiable assets acquired. Goodwill is stated at cost less accumulated amortisation and impairment losses (see note 1(m)). Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of 10 years. 42 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 1 Significant accounting policies (continued) (g) Intangible assets (continued) (ii) Negative goodwill Negative goodwill arising on an acquisition represents the excess of the fair value of the net identifiable assets acquired over the cost of acquisition. To the extent that negative goodwill relates to an expectation of future losses and expenses that are identified in the plan of acquisition and can be measured reliably, but which have not yet been recognised, it is recognised in the income statement when the future losses and expenses are recognised. Any remaining negative goodwill, but not exceeding the fair values of the non-monetary assets acquired, is recognised in the income statement over the weighted average useful life of those assets that are depreciable/amortisable. Negative goodwill in excess of the fair values of the non-monetary assets acquired is recognised immediately in the income statement. Amortisation is credited to the income statement on a straight-line basis over the estimated useful life of 10 years. (h) Construction in progress Construction in progress represents properties under construction and equipment purchased prior to installation, and is stated at costs less impairment losses (see note 1(m)). Cost comprises direct costs for construction as well as interest incurred directly contributable to the construction or acquisition during the periods of construction or installation. Capitalisation of these costs ceases and the construction in progress is transferred to fixed assets when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided in respect of construction in progress until it is completed and ready for its intended use. (i) Investments Unlisted investments held by the Group are classified as being available-for-sale and are stated at cost, less provision for impairment losses (see note 1(m)). A provision is made where, in the opinion of management, there is an impairment in value of an investment. Investments available-for-sale are recognised/derecognised by the Group on the date it commits to purchase/sell the investments. On derecognition, the difference between the net proceeds received or receivable and the carrying amount of the investments are accounted for in the income statement. 43 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 1 Significant accounting policies (continued) (j) Inventories Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. (k) Trade and other receivables Trade and other receivables are stated at their cost less allowance for any amounts expected to be irrecoverable. All allowance is provided for based upon the evaluation of the recoverability of these accounts at the balance sheet date. (l) Cash and cash equivalents Cash and cash equivalents comprise cash balances and deposits with banks and other financial institutions with an initial term of less than three months. (m) Impairment The carrying amounts of the Group’s assets, other than inventories (see note 1(j)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. (i) Calculation of recoverable amount The recoverable amount of assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. 44 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 1 Significant accounting policies (continued) (m) Impairment (continued) (ii) Reversals of impairment An impairment loss in respect of goodwill is not reversed unless the loss was caused by a specific external event of an exceptional nature that is not expected to recur, and the increase in recoverable amount relates clearly to the reversal of the effect of that specific event. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (n) Interest-bearing borrowings Interest-bearing borrowings recognized initially at cost, less attributable transaction cost, are stated at their carrying amount. (o) Dividends Dividends are recognised as a liability in the period in which they are declared. (p) Income tax Income tax expense for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using the tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amounts of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. 45 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 1 Significant accounting policies (continued) (p) Income tax (continued) A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (q) Provisions A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (r) Revenue recognition (i) Goods sold In relation to the sale of goods, revenue is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer, and no significant uncertainties remain regarding recovery of the consideration due, associated costs or the possible return of goods. (ii) Interest income Interest income from bank deposits is accrued on a time-apportioned basis on the principal outstanding and at the rate applicable. (s) Expenses (i) Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the terms of the respective leases. (ii) Financial income and expenses Financial income and expenses comprise interest payable on borrowings, interest receivable on funds invested and foreign exchange gains and losses. All interest and other costs incurred in connection with borrowings are expensed as incurred as part of net financing costs, except to the extent that they are capitalised as being directly attributable to the acquisition or construction of an asset which necessarily takes a substantial period of time to get ready for its intended use. 46 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 1 Significant accounting policies (continued) (t) Employee benefits Pursuant to the relevant laws and regulations in the PRC, the Group joined a defined contribution retirement scheme for the employees arranged by a governmental organisation. The Group entities make contributions to the retirement scheme at the applicable rates based on the employees’ salaries. The required contributions under the retirement scheme are charged to the income statement when they are due. (u) Segment reporting A segment is a distinguishable component of the Group that is engaged in providing products (business segment), which is subject to risks and rewards that are different from those of other segments. 2 Segment reporting Segment information is presented in respect of the Group’s business segments. The format is based on the Group’s management and internal reporting structure. Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly, income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. The Group’s principal activities are the production, printing and sale of packaging products. The Group’s results are almost entirely attributable to its production, printing and sale of products in the PRC. Accordingly, no geographical segmental analysis is provided. 47 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 2 Segment reporting (continued) The Group comprises the following main business segments. Production and sale Printing and sale of packaging products of packaging products Consolidated 2004 2003 2004 2003 2004 2003 Rmb’000 Rmb’00 Rmb’000 Rmb’000 Rmb’000 Rmb’000 0 Total revenue from external Customers 531,862 551,888 60,526 54,643 592,388 606,531 ======= ======= ======= ======= ======= ======= Segment result 44,969 57,541 (5,045) (4,494) 39,924 53,047 ======= ======= ======= ======= ======= ======= Unallocated expenses - - - - (1,305) (4,334) Profit from operations 38,619 48,713 ======= ======= Net financing costs - - - - (8,053) (3,119) Share of profit of an associate 89,709 83,539 - - 89,709 83,539 Income tax expense - - - - (17,851) (22,425) Minority interests - - - - (6,774) (10,153) Profit for the year 95,650 96,555 ======= ======= Segment assets 1,068,974 847,566 112,098 105,155 1,181,072 952,721 Investment in associate 164,376 183,514 - - 164,376 183,514 Unallocated assets - - - - 213,343 113,420 Total assets 1,558,791 1,249,655 ======= ======= Segment liabilities 87,031 57,543 13,152 9,812 100,183 67,355 Unallocated liabilities - - - - 309,821 112,698 Total liabilities 410,004 180,053 ======= ======= Segment capital expenditure for the year 242,993 36,162 10,812 590 253,805 36,752 Unallocated capital expenditure for the year - - - - - 298 Total capital expenditure 253,805 37,050 ======= ======= Segment depreciation charge for the year 36,883 34,796 3,619 4,688 40,502 39,484 Unallocated depreciation charge for the year - - - - 33 14 Total depreciation charge 40,535 39,498 ======= ======= Amortisation charge for the year 660 661 222 222 882 883 ======= 48 ======= ======= ======= ======= ======= Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 3 Personnel expenses 2004 2003 Rmb’000 Rmb’000 Wages, salaries and other staff costs 35,114 31,872 Contribution to defined contribution retirement scheme 2,545 1,891 37,659 33,763 ======== ======== Certain employees of the Group participate in a defined contribution retirement scheme operated by the PRC municipal government. The Group is required to contribute to the staff retirement scheme at a rate of 15% and 10% of salary cost in the first and the second half-year of 2004 respectively (2003: 15% for the whole year). A member of the retirement scheme is entitled to pension benefits equal to a fixed portion of the salary at the retirement date. The Group has no obligation to make payments in respect of pension benefits associated with this scheme other than the annual contribution described above. 4 Financial income and expenses 2004 2003 Rmb’000 Rmb’000 Financial income Interest income (2,159) (341) ======== ======== Financial expenses Interest expense incurred 14,702 3,278 Less: Interest expense capitalised (4,584) - Net foreign exchange loss 94 182 10,212 3,460 ======== ======== 49 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 5 Income tax expense (a) Income tax expense recognised in the consolidated income statement represents: 2004 2003 Rmb’000 Rmb’000 Current tax expense Provision for PRC income tax for the year 19,133 20,958 (Over)/under-provision of PRC income tax relating to previous years (1,282) 1,467 17,851 22,425 ======== ======== (i) The Company The PRC income tax rate applicable to the Company is 33%. No provision for income tax has been made for the Company as it sustained a tax loss during the year. (ii) Subsidiaries Pursuant to the state tax regulations, income tax applicable to the subsidiaries is at a preferential tax rate of 27% ruling in coastal cities. Pursuant to the relevant approvals from the local tax authority, a subsidiary of the Group was exempted from enterprise income tax and local income tax on operating profits for its first two profit making years and was thereafter entitled to a 50% reduction on income tax and exemption from local income tax for a period of three years. The tax exemption/reduction period ended in 2003. The subsidiary has been classified as an Advanced Technology Enterprise in 2003 and was granted for enjoying another three-year (from 2004 to 2006) 50% enterprise income tax reduction period after the expiry of the abovementioned tax exemption/reduction period. During the three-year reduction period, the local income tax of 3% is also exempted by Guangdong Provincial Government. Accordingly, the provision for PRC income tax for the year is calculated at the rate of 12% (2003: 12%) on the estimated assessable profits for the year. Another subsidiary of the Group sustained a tax loss during the year and no provision has been made for income tax. (iii) The Associate The associate of the Group was classified as a high technological enterprise by Department of Science and Technology of Guangdong Province since 1992. Pursuant to the state tax regulations, the income tax for 2004 has been provided at 15% of the taxable income, i.e. the rate ruling in Foshan High-Tech Research and Development Zone where the associate is established. (b) No provision for deferred taxation has been made as there have been no material temporary timing differences during 2003 and 2004. 50 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 5 Income tax expense (continued) (c) Reconciliation of effective tax rate: 2004 2003 Rmb’000 Rmb’000 Profit before taxation 120,275 129,133 ======== ======== Income tax at applicable tax rates 15,869 17,061 Non-deductible items 1,415 2,927 Effect of losses of the Company and a subsidiary 2,367 1,317 (Over)/under-provision of PRC income tax relating to previous years (1,282) 1,467 Others (518) (347) Income tax expense 17,851 22,425 ======== ======== (d) Taxation in the consolidated balance sheet represents: 2004 2003 Rmb’000 Rmb’000 Balance at 1 January 1,315 9,092 Through disposal of subsidiaries - (2,146) Provision for PRC income tax for the year 4,408 6,150 Payments made during the year (4,856) (11,781) Balance at 31 December 867 1,315 ======== ======== 6 Earnings per share Basic earnings per share The calculation of basic earnings per share at 31 December 2004 was based on the profit for the year of Rmb95,650,000 (2003: Rmb96,555,000) and the weighted average number of shares outstanding at 31 December 2004 of 439,500,000 (2003: 439,500,000). Diluted earnings per share No diluted earnings per share is calculated as there were no dilutive potential shares during 2003 and 2004. 51 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 7 Property, plant and equipment Furniture, fixtures Plant and and office Motor Buildings machinery equipment vehicles Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Cost: At 1 January 2004 220,613 589,076 20,937 10,774 841,400 Additions - 7,878 3,419 718 12,015 Transfer from construction in progress (note 10) 4,893 11,701 107 129 16,830 Disposals - (753) - (66) (819) At 31 December 2004 225,506 607,902 24,463 11,555 869,426 ------------- -------------- -------------- ------------- ------------- Accumulated depreciation: At 1 January 2004 20,039 140,484 9,145 5,721 175,389 Charge for the year 4,009 30,296 5,005 1,225 40,535 Written back on disposals - (730) - (66) (796) At 31 December 2004 24,048 170,050 14,150 6,880 215,128 ------------- -------------- -------------- ------------- ------------- Net book value: At 31 December 2004 201,458 437,852 10,313 4,675 654,298 ======== ======== ======== ======== ======== At 31 December 2003 200,574 448,592 11,792 5,053 666,011 ======== ======== ======== ======== ======== Security No property, plant and equipment was pledged to secure bank loans as at 31 December 2004. As at 31 December 2003, property, plant and equipment with a total carrying value of Rmb3,885,000 were pledged to secure bank loans (see note 17). 52 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 8 Lease prepayments Rmb’000 Cost: At 1 January 2004 43,466 Addition 9,139 At 31 December 2004 52,605 --------------- Accumulated amortisation: At 1 January 2004 3,225 Charge for the year 882 At 31 December 2004 4,107 --------------- Carrying value: At 31 December 2004 48,498 ========= At 31 December 2003 40,241 ========= 9 Intangible assets Negative Goodwill goodwill Total Rmb’000 Rmb’000 Rmb’000 Cost: At 1 January 2004 and 31 December 2004 960 (5,264) (4,304) --------------- --------------- --------------- Accumulated amortisation: At 1 January 2004 224 (1,699) (1,475) Charge for the year 96 (526) (430) At 31 December 2004 320 (2,225) (1,905) --------------- --------------- --------------- Carrying value: At 31 December 2004 640 (3,039) (2,399) ========= ========= ========= At 31 December 2003 736 (3,565) (2,829) ========= ========= ========= 53 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 10 Construction in progress 2004 2003 Rmb’000 Rmb’000 At 1 January 23,318 28,289 Additions during the year 232,651 25,865 Through disposal of subsidiaries - (15,211) Transfer to property, plant and equipment (note 7) (16,830) (15,625) At 31 December 239,139 23,318 ======== ======== The interest rates per annum at which borrowing costs was capitalised for the year ended 31 December 2004 by the Group ranged from 3.873% to 5.580% (2003: nil). 11 Investment in an associate 2004 2003 Rmb’000 Rmb’000 Share of net assets of the associate 164,376 183,514 ======== ======== Details of the associate are as follows: Percentage of Place of effective equity establishment held by the Group Principal Name of company and operation 2004 2003 activity Tetra Pak (Foshan) Packaging PRC 25% 25% Manufacture and Company Limited sale of paper package for soft drinks The registered capital of the associate was increased from US$55,000,000 to US$67,000,000 in 2003. As at 31 December 2004, the Company has paid up 50% of its portion of the additional capital contribution. The remaining amount of US$1,500,000 is to be injected within three years from the date of issuance of the revised business license of the associate, i.e. 23 December 2003. 54 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 12 Other investments 2004 2003 Rmb’000 Rmb’000 Unlisted equity investments available-for-sale, at cost 3,214 3,214 ======== ======== 13 Inventories 2004 2003 Rmb’000 Rmb’000 Raw materials 49,764 58,940 Work in progress 3,001 2,853 Finished goods 31,445 25,253 Less: general provision for finished goods (129) (115) 84,081 86,931 ======== ======== 14 Cash and cash equivalents Cash and cash equivalents as at 31 December 2003 and 2004 represent cash at bank and in hand. 15 Share capital 2004 2003 Rmb’000 Rmb’000 Registered, issued and paid up capital: 290,000,000 domestic shares of Rmb1 each 290,000 290,000 149,500,000 ‘B’ shares of Rmb1 each 149,500 149,500 439,500 439,500 ======== ======== The registered capital of the Company comprises 290,000,000 domestic shares of Rmb1 each and 149,500,000 ‘B’ shares of Rmb1 each. All shares rank pari passu in all material respects. 55 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 16 Reserves Statutory Statutory Public Capital surplus Welfare Retained reserve reserve Reserve earnings Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Balance at 1 January 2003 210,233 44,401 22,201 151,590 428,425 Profit for the year - - - 96,555 96,555 Transfer to PRC statutory reserves, net of minority interests’ share (note (b) & (c)) - 9,645 4,823 (14,468) - Dividends paid - - - (48,345) (48,345) Balance at 31 December 2003 210,233 54,046 27,024 185,332 476,635 ======== ======== ======== ======= ======== Balance at 1 January 2004 210,233 54,046 27,024 185,332 476,635 Profit for the year - - - 95,650 95,650 Transfer to PRC statutory reserves, net of minority interests’ share (note (b) & (c)) - 8,995 4,498 (13,493) - Dividends paid - - - (48,345) (48,345) Balance at 31 December 2004 210,233 63,041 31,522 219,144 523,940 ======== ======== ======== ======= ======== 56 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 16 Reserves (continued) Notes: (a) Capital reserve This reserve represents the excess of net assets assumed and the net proceeds received from shares issued by the Company, over the nominal value of the shares issued by the Company. (b) Statutory surplus reserve According to the current PRC Company Law and the Company’s articles of association, the Company is required to transfer 10% of its profit after taxation to the statutory surplus reserve until the reserve reaches 50% of the registered capital. For the purpose of calculating the transfer to this reserve, the profit after taxation shall be the amount determined under PRC accounting standards. The transfer to this reserve must be made before distribution of dividends to shareholders. Statutory surplus reserve can only be used to make good previous years’ losses, if any, and for capitalisation issue provided that the balance after such issue is not less than 25% of the registered capital. (c) Statutory public welfare reserve According to the current PRC Company Law and the Company’s articles of association, the Company is required to transfer 5% to 10% (at the discretion of the Board of Directors) of its profit after taxation (determined under PRC accounting standards) to the statutory public welfare reserve. This reserve can only be used on capital expenditure for the collective benefits of the Company’s employees such as the construction of dormitories, canteens and other staff welfare facilities. This reserve is non-distributable other than in liquidation. The transfer to this reserve must be made before distribution of dividends to shareholders. The Directors have resolved to transfer 5% (2003: 5%) of the current year’s profit after tax to this reserve on 31 March 2005. (d) Distributable retained earnings According to the Company’s Articles of Association, the retained earnings available for distribution are the lower of the amount determined under PRC accounting standards and amount determined under IFRS. As of 31 December 2004, the retained earnings available for distributions were 210,761,000 (2003: Rmb182,646,000), after taking account of the current year’s proposed final dividend and the transfers to other reserves. 57 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 16 Reserves (continued) (e) Dividend (i) Pursuant to a resolution passed at the Directors’ meeting held on 31 March 2005, the directors do not recommend the payment of final dividend in respect of the year ended 31 December 2004 (2003: Nil). (ii) Dividend paid during the year is as follows: 2004 2003 Rmb’000 Rmb’000 Final dividend of Rmb0.11 per ordinary share for the year ended 31 December 2003 (2002: Rmb0.11) 48,345 48,345 ======== ======== Pursuant to a resolution passed at the Company’s Annual General Meeting held on 26 May 2004, final dividend of Rmb 0.11 per ordinary share for the year ended 31 December 2003 totaling Rmb 48,345,000 was declared and was subsequently paid to shareholders in 2004. 17 Interest-bearing bank loans (a) The bank loans of the Group were repayable as follows: 2004 2003 Rmb’000 Rmb’000 Secured Due within 1 year - 2,470 --------------- --------------- Unsecured Due within 1 year 15,000 55,000 Due after 2 years but within 5 years 292,235 25,000 307,235 80,000 --------------- --------------- 307,235 82,470 ========= ========= 58 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 17 Interest-bearing bank loans (continued) (a) The bank loans of the Group were repayable as follows: (continued) Including in the loans due within one year is an amount of Rmb15,000,000 (2003: Rmb55,000,000) which is guaranteed by the immediate holding company. At 31 December 2003, certain bank loans were secured over the Group’s property, plant and equipment with a carrying value of Rmb3,885,000, which were wholly repaid in 2004. (b) The interest rates and terms of repayment of the Group’s bank loans are as follows: Interest Interest At 31 December Rate Type 2004 Short-term bank loans Renminbi denominated loan - Due in 2005 5.0445% Variable 5,000 - Due in 2005 5.580% Variable 10,000 Long-term bank loans Renminbi denominated loans - Due in 2007 5.022% Variable 25,035 - Due in 2009 5.580% Variable 250,261 Euro denominated loans - Due in 2009 3.873% Variable 16,939 18 Financial instruments and concentration of risks Financial assets of the Group principally include cash and cash equivalents, accounts, bills and other receivables, dividends receivable from an associate and investments. Financial liabilities of the Group principally include accounts and other payables and accrued expenses and bank loan and loan from an associate. Accounting policies for financial assets and liabilities are set out in note 1. (a) Interest rate risk The interest rates and terms of repayment of the bank loans of the Group are disclosed in note 17. 59 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 18 Financial instruments and concentration of risks (continued) (b) Credit risk Credit risk represents the accounting loss that would be recognised at the reporting date if counterparties failed to perform completely as contracted. The Group does not have significant exposure to any individual customer or counterparty. To reduce exposure to credit risk, the Group performs ongoing credit evaluations of the financial condition of its customers but generally does not require collateral. The Group deposits substantially all the cash and cash equivalents with the four largest state-owned banks of the PRC. The Group is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments but, based on the Group’s credit assessment and the past repayment records of the counterparties, management does not expect any material counterparty to fail to meet its obligations. At balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. (c) Foreign currency risk The Group incurs foreign currency risk on cash and cash equivalents of Rmb14,113,000 (2003: Rmb11,530,000) that are denominated in Hong Kong dollars and United States dollars and interest-bearing bank loan of Rmb16,673,000 (2003: Nil) that are denominated in Euro. Fluctuation of the exchange rates of Hong Kong dollars, United States dollars and Euros against Renminbi Yuan will affect the Group’s financial position. (d) Fair value The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of IAS 32 and IAS 39. Fair value estimates, methods and assumptions, set forth below for the Group’s financial instruments, are made to comply with the requirements of IAS 32 and IAS 39, and should be read in conjunction with the Group’s consolidated financial statements and related notes. The estimated fair value amounts have been determined by the Group using market information and valuation methodologies considered appropriate. However, considerable judgement is required to interpret market data to develop the estimates of fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Group could realise in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The following summarises the major methods and assumptions used in estimating the fair values of the Group’s financial instruments. The fair values of cash and cash equivalents, accounts, bills and other receivables, and dividends receivable from an associate and accounts and other payables and accrued expenses, loan from an associate and bank loans are not materially different from their carrying values due to the short-term nature of these instruments. 60 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 18 Financial instruments and concentration of risks (continued) (d) Fair value (continued) There are no quoted market prices for unlisted equity investments. Accordingly, a reasonable estimate of fair value not be made without incurring excessive costs. Unlisted equity investments are stated at cost less impairment losses. The fair value of the long-term bank loan is Rmb288,612,000 (2003: Rmb24,593,000), which differs from its carrying amount of, Rmb292,235,000 (2003: Rmb25,000,000) as shown in the balance sheet. The fair value has been determined by discounting the relevant cash flows using current interest rates for similar instruments. 19 Operating lease commitments Minimum lease payments under non-cancellable operating leases in respect of properties are payable as follows: 2004 2003 Rmb’000 Rmb’000 Within one year 624 563 Between one and five years 273 352 897 915 ======== ======== The leases typically run for an initial period of one to five years, with an option to renew the lease after that date. None of the leases includes contingent rentals. During the year ended 31 December 2004, Rmb1,796,530 was recognised as an expense in the income statement in respect of operating leases (2003: Rmb1,522,000). 20 Capital commitments At 31 December 2004, the Group had capital commitments as follows: 2004 2003 Rmb’000 Rmb’000 Authorised and contracted for 678,648 21,106 Authorised but not contracted for 375,446 1,191,947 1,054,094 1,213,053 ======== ======== These capital commitments are for the construction of a new production plant and additional capital contribution to an associate. 61 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 21 Related party transactions The following is a summary of the significant transactions carried out in the normal course of business between the Group and its holding companies: Note 2004 2003 Rmb’000 Rmb’000 Bank loan guarantee (a) 15,000 55,000 Rental expenses (b) 352 352 Interest expenses (c) 293 600 Disposal of subsidiaries (d) - 19,020 ======== ======== Notes: (a) Included in the loan is an amount of Rmb15,000,000 (2003: Rmb55,000,000) which is guaranteed by the immediate holding company. (b) Rental expenses represented the payment to the immediate holding company for the use of office by the Company. (c) In 2004, interest expenses arose from an interest-bearing loan at a rate of 3% was paid to the associate. (d) Disposal of subsidiaries The Company disposed of all of its equity interests in two subsidiaries to its ultimate holding company with a cash consideration of Rmb19,020,000. The Company’s control in these subsidiaries ceased on 1 January 2003. 22 Group companies Control of the Group The Company is a subsidiary of Foshan Huaxin Development Company Limited, the immediate holding company, which in turn is a subsidiary of Foshan Municipal Industrial Investment Management Limited( 佛山市工业投资管理有限公司 ), the ultimate holding company. 62 Foshan Huaxin Packaging Company Limited Financial statements for the year ended 31 December 2004 (Prepared under International Financial Reporting Standards) 22 Group companies (continued) Details of the Group’s principal subsidiaries Percentage of equity interest Place of Registered held by the establishment Principal Name of company capital Group and operation activities 2004 2003 Foshan Huafeng Paper US$121,390,000 75% 75% PRC Manufacture Company Limited and sale of (“Foshan Huafeng”) high value coated white paper board Huaxin (Foshan) Colour US$6,600,000 75% 75% PRC Printing and Printing Company sale of Limited (“Huaxin packaging Colour Print”) products In 2004, the registered capital of Foshan Huafeng was increased to US$121,390,000, of which US$80,505,425 was paid up at 31 December 2004. During the year, the registered capital of Huaxin Colour Printing was increased to US$6,600,000 which was fully paid up at 31 December 2004. 63