承 德 大 路 股 份 有 限 公 司 Chengde Dalu Co．，Ltd
Chengde Dalu Co., Ltd. Annual Report 2011
承 德 大 路 股 份 有 限 公 司 CHENGDE DALU CO．， LTD.
ANNUAL REPORT 2011
April 2012 Chengde · PRC
1 Chengde Dalu Co., Ltd. Annual Report 2011
Contents
Section I. Important Notice ------3
Section II. Company Profile------4
Section III. Summary of Accounting Highlights and Business Highlights------6
Section IV. Changes in Share Capital and Particulars about Shareholders------10
Section V. Particulars about Directors, Supervisors, Senior Executives and Employees------14
Section VI. Administrative Structure ------19
Section VII. Particulars about Shareholders’ General Meeting------25
Section VIII. Report of the Board of Directors------26
Section IX. Report of the Supervisory Committee------39
Section IX. Significant Events------41
Section XI. Financial Report------47
Section XII. Documents for Reference ------48
2 Chengde Dalu Co., Ltd. Annual Report 2011
Section I. Important Notice Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of Chengde Dalu Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents.
The 26th Meeting of the 4th Session of the Board deliberated and approved 2011 Annual Report and its summary of the Company. All the directors, supervisors and senior executives attended the board meeting.
Crowe Horwath CPA (special general partnership) audited the financial report of the Company and issued the qualified auditor‘s report with paragraph of emphasized matters for the Company. The Board of Director, Supervisory Committee and independent directors of the Company made definitions on the relevant matters; the investors are suggested to pay attention to read.
Mr. Yan Qizhong, Chairman of the Board of the Company, Mr. Wang Ansheng, Chief Financial Officer, and Liu Fengguo, Person in Charge of Accounting Organ hereby confirm that the Financial Report of 2011 Annual Report is authentic and complete.
Note: The report is prepared in bilingual versions of Chinese and English respectively, in the event of any discrepancy in understanding the two aforementioned versions, the Chinese version shall prevail.
3 Chengde Dalu Co., Ltd. Annual Report 2011
Section II. Company Profile
(I) Legal Name of the Company In Chinese: 承德大路股份有限公司 In English: CHENGDE DALU CO., LTD.
(II) Legal Representative: Yan Qizhong
(III)Secretary of Board of Directors: Yan Qizhong Contact Address: Xiabancheng Town, Chengde County, Hebei Province Tel: 86 (314)-3115048 3115049 Fax: 86 (314)-3111475 E-mail: [email protected]
(IV)Registered Address: Xiabancheng Town, Chengde County, Hebei Province Office Address: Xiabancheng Town, Chengde County, Hebei Province Post Code: 067400 Company‘s Internet Web Site: http://www.dxtex.com E-mail: [email protected]
(V)Newspapers Chosen for Disclosing the Information of the Company: Securities Times (domestic) and Hong Kong Commercial Daily (overseas) Internet Web Site for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Securities Department of the Company Contact Tel: (86) 314-3115049, 3115048
(VI)Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: ST DALU B Stock Code: 200160
(VII)Other Relevant Information of the Company Initial registered date: November 3, 1999 Registered address: Industry and Commerce Administration Bureau of Chengde City No. 1, Huangcheng East Rd., Chengde City Registered number for business license of the Company: 130000400001225 Registered number of taxation of the Company: 130821106576876 Organization Code Certificate: 106576876 The Certified Public Accountant engaged by the Company: Crowe Horwath CPA (special general partnership) Office address: 4/F, 2# Building, No. 16 Court, Middle Road, West 4th Ring Haidian Zone, Beijing
(VIII) Historical development background: Registration changes of the Company: Initial registration Second registration changes
4 Chengde Dalu Co., Ltd. Annual Report 2011
Date of 1999 – 11-3 2011-8-23 registration Industry and Commerce Office for Industry and Commerce Administration Administration Bureau of registration Bureau of Hebei Province Chengde City Address for No.316, Tiyu South Street, Shijiazhuang, No. 1, Huangcheng East Rd., registration Hebei Province Chengde City Registered number for business 1300001001372 1/1 130000400001225 license Registered number 130821106576876 130821106576876 of taxation Organization Code 106576876 106576876 Certificate
5 Chengde Dalu Co., Ltd. Annual Report 2011
Section III. Summary of Accounting Data and Business Highlights I. Summary of accounting data as of the year 2011 Items Amounts(RMB) Total operating income 515,150.00
Total profit 2,747,631.39
Net profit attributable to the shareholders of the listed 3,643,202.46 company Net profit attributable to the shareholders of the listed -14,020,621.88 company after deducting non-recurring gains and losses Net cash flow arising from operating activities -532,391.56
Notes: Items of non-recurring gains and losses and the amounts: Items of non-recurring gains 2011 Note (If 2010 2009 and losses applicable) Gains and losses from the 829,105,872. Debt restructuring 23
Governmental subsidy 17,900,000.0 19,125,000.00 - reckoned into current gains 0 and losses, but closely relevant to the Company‘s business except for the governmental subsidy enjoyed in quota or ration according to the national general standards Gains and losses from the 0.00 10,644,730.00 disposal of non-current asset -78,908,837. 70 Other non-operating income -35,799.64 280,915.03 and expenditure except for the -379,341,920 aforementioned items .31 Influenced amount of minority -200,376.02 -4,781,250.00 shareholders‘ gains/losses -38,409,535. 33 Impact on income tax 0.00 -411,676.61 - Total 17,663,824.3 - 24,857,718.42 4 332,445,578. 89
6 Chengde Dalu Co., Ltd. Annual Report 2011
II. Major accounting data and financial indexes over past three years ended the end of the report period (Unit: RMB)
1. Major accounting data Increase/decrease in this year 2011 2010 compared with 2009 that in last year (%) Before After After Before After adjustment adjustment adjustment adjustment adjustment Total operating 515,150.00 516,778.00 516,778.00 -0.32% 0.00 0.00 income(RMB) Operation -15,116,568.97 -23,065,703.21 -23,065,703.21 34.46% -137,628,650.87 -137,628,650.87 profit(RMB) Total 2,747,631.39 6,984,941.82 6,984,941.82 -60.66% 329,623,006.84 327,243,651.97 profit(RMB) Net profit 3,643,202.46 1,704,928.05 1,704,928.05 113.69% 186,014,467.46 91,450,169.52 attributable to shareholders of the listed company(RMB) Net profit -14,020,621.88 -23,152,790.37 -23,152,790.37 39.44% -221,422,306.04 -240,995,409.37 attributable to shareholders of the listed company after deducting non-recurring gains and losses(RMB) Net cash flow -532,391.56 -32,273,821.01 -32,273,821.01 98.35% -6,919,098.27 -6,919,098.27 arising from operating activities(RMB) Increase/decrease at the end of this At the end of year compared At the end of 2010 At the end of 2009 2011 with that at the end of last year (%) Before After After Before After adjustment adjustment adjustment adjustment adjustment Total 219,022,670.81 199,976,147.64 199,976,147.64 9.52% 183,328,923.59 190,703,503.14 assets(RMB) Total 240,950,260.50 224,632,050.60 224,632,050.60 7.26% 218,262,175.86 218,262,175.86 liability(RMB) Owners‘ equity -23,882,038.57 -27,525,241.03 -27,525,241.03 13.24% -51,338,938.68 -29,230,169.08 attributable to shareholders of listed company (RMB) Total share 706,320,000.00 706,320,000.00 706,320,000.00 0.00% 706,320,000.00 706,320,000.00 capital(Share)
7 Chengde Dalu Co., Ltd. Annual Report 2011
2. Major financial indexes (Unit: RMB) 2011 2010 Increase/decrease in 2009 this year compared with that in last year (%) Before After After adjustment Before After adjustment adjustment adjustment adjustment Basic earnings 0.0052 0.0024 0.0024 116.67% 0.26 0.13 per share (RMB/Share) Diluted earnings 0.0052 0.0024 0.0024 116.67% 0.26 0.13 per share (RMB/Share) Basic earnings 0.0199 0.0328 0.0328 -39.33% -0.31 -0.34 per share after deducting non-recurring gains and losses (RMB/Share) Weighted 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% average return on equity (%) Weighted 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% average return on equity after deducting non-recurring gains and losses (%) Net cash flow -0.001 -0.046 -0.046 -98.35% -0.0098 -0.0098 arising from operating activities per share (RMB/Share) At the At the end of 2010 Increase/decrease at At the end of 2009 end of the end of this year 2011 compared with that at the end of last year (%) Before After After adjustment Before After adjustment adjustment adjustment adjustment Net asset per share -0.034 -0.039 -0.039 -12.82% -0.07 -0.04 attributable to shareholders of listed company (RMB/share) Asset-liability ratio 110.01% 112.33% 112.33% -2.32% 119.05% 114.45% (%)
III. Detailed statement on Provision for the Devaluation of Asset Unit: RMB Items Book balance Increase in Decrease in this period Book balance
8 Chengde Dalu Co., Ltd. Annual Report 2011
at year-begin the report at period-end Reversal Turn-off period I. Bad debt reserve 44,360,872.5 11,618.23 44,372,490.8 9 2 II. Inventory falling price reserves III. Impairment of financial assets available for sale IV. Impairment of investment held to maturity V. Impairment of long-term 892,335,310. 892,335,310. equity investment 93 93 VI. Impairment of investment real estate VII. Impairment of fixed assets 35,361,563.0 35,361,563.0 1 1 VIII. Impairment of project materials IX. Impairment of construction 252,886,204. 252,886,204. in process 04 04 X. Impairment of production biological assets Including: Impairment of mature production biological assets XI. Impairment of oil assets XII. Impairment of intangible assets XIII. Impairment of goodwill XIV. Other Total 1,224,943,95 11,618.23 1,224,955,56 0.57 8.80
Losses from Devaluation of Asset Unit: RMB Items Occurred amount in the Occurred amount in last report period report period I. Bad debt losses 11,618.23 160,208.41 II. Loss on inventory value III. Loss of financial assets available for sale IV. Loss of investment held to maturity V. Loss of long-term equity investment VI. Loss of investment real estate VII. Loss of fixed assets VIII. Loss of project materials IX. Loss of construction in process 6,161,982.00 X. Loss of production biological assets XI. Loss of oil assets XII. Loss of intangible assets XIII. Loss of goodwill XIV. Other Total 11,618.23 6,322,190.41
9 Chengde Dalu Co., Ltd. Annual Report 2011
Note: ① Losses from withdrawal of bad debts in the report period was RMB11, 618.23.
10 Chengde Dalu Co., Ltd. Annual Report 2011
Section IV. Changes in Share Capital and Particulars about Shareholders I. Changes in Share Capital (I) Statement of changes in share Before the Change Increase/Decrease in the Change (+, -) After the Change Amount Proporti New Bonus Capitali Others Subtota Amount Proporti on shares shares zation l on issued of public reserve I. Unlisted 244,800 34.66% 244,800 34.66% shares ,000 ,000 1. Sponsor‘s 244,800 34.66% 244,800 34.66% shares ,000 ,000 Including: State-owned shares Domestic legal 23,147, 3.28% 23,147, 3.28% person‘s shares 309 309 Foreign legal person‘s shares Others 221,652 31.38% 221,652 31.38% ,691 ,691 2. Raised legal person‘s shares 3. Inner employees‘ shares 4. Preference shares or other II. Listed shares 461,520 65.34% 461,520 65.34% ,000 ,000 1. RMB ordinary shares 2. Domestically 461,520 65.34% 461,520 65.34% listed foreign ,000 ,000 shares 3. Overseas listed foreign shares 4. Other III. Total shares 706,320 100.00 706,320 100.00 ,000 % ,000 %
(II) Particulars about issuance and listing of shares 1. Issuance and listing over the previous years ended the report period. The previous three year ended by the period-end, the Company did not issue shares and derived securities 2. During the report period, there were no changes in the number and structure of the Company‘s shares and changes in structure of asset liabilities of the Company due to bonus share, capital public reserve transferring into share capital, rationed share, additional issuance, non-public offering, exercise of warrant, implementation of equity incentive plan, enterprise merger, convertible company‘s bonds transferring shares, disinvestments, listing
11 Chengde Dalu Co., Ltd. Annual Report 2011
of inner employees‘ shares or company‘s employee‘s shares, etc. 3. There were no inner employees‘ shares in the Company. II. About shareholders (I) Amount of shareholders and particulars about shares holding Ended Dec. 31, 2011, the Company had totally 22,668 shareholders, including 5 of sponsors‘ share and 22,663of domestically listed foreign share. Ended 31 March 2012, the Company had totally 22,448 shareholders, including 5 of sponsors‘ share and 22,443of domestically listed foreign share. Total shareholders at 22,668 Total shareholders at one 22,448 year-end of 2011 month-earlier of the date for annual report disclosed Particulars about shares held by the top ten shareholders Full name of Nature of Proportion Total of Numbers of Number of share Shareholders shareholder of shares shares held non-circulating pledged/frozen held shares held Chen Rong Domestic 29.49% 208,324,800 208,324,800 0 nature person GUOTAI JUNAN Overseas 8.54% 60,331,719 0 0 SECURITIES(HONGK legal person ONG) LIMITED Shanghai Wanguo (H.K) Overseas 3.82% 26,978,492 0 0 Securities legal person Chengde North Domestic 2.62% 18,517,651 18,517,651 0 Industrial Corporation non-state owned legal person Wang Zhengsong Domestic 1.89% 13,327,891 13,327,891 0 nature person Zhou Xiaomin Domestic 1.37% 9,654,111 0 0 nature person Yu Sanxi Domestic 1.24% 8,741,210 0 0 nature person Wang Wensheng Domestic 1.03% 7,258,007 0 0 nature person Peng Wei Domestic 0.42% 2,978,525 0 0 nature person Zhao Ziying Domestic 0.40% 2,821,916 0 0 nature person Particulars about shares held by the top ten shareholders of circulation shares Shareholders‘ name Number of circulation shares held Type of shares at the year-end GUOTAI JUNAN 60,331,719 Domestically listed foreign SECURITIES(HONGKONG) shares LIMITED Shanghai Wanguo (H.K) Securities 26,978,492 Domestically listed foreign shares
12 Chengde Dalu Co., Ltd. Annual Report 2011
Zhou Xiaomin 9,654,111 Domestically listed foreign shares Yu Sanxi 8,741,210 Domestically listed foreign shares Wang Wensheng 7,258,007 Domestically listed foreign shares Peng Wei 2,978,525 Domestically listed foreign shares Zhao Ziying 2,821,916 Domestically listed foreign shares Li Youhe 1,875,927 Domestically listed foreign shares Li Siquan 1,726,133 Domestically listed foreign shares Ye Guang 1,511,500 Domestically listed foreign shares Explanation on The Company is unknown whether there exists associated relationship or belongs to associated relationship consistent actor regulated by ―management method for acquisition of listed company‖ among the aforesaid among the above said shareholders. shareholders
(II) Particulars about controlling shareholder of the Company: The controlling shareholder of the Company is Chen Rong (the first largest shareholder of the Company), who is also actual controller of the Company. His information is as follows: Chen Rong: Male, aged 53 and Chinese nationality, whose does not enjoy the residence power in the other country or area and got the Master Degree. He takes the posts of the member of standing committee of the 9th and 10th of Shanghai Committee CPPCC; Vice-president of Shanghai Federation of Industry and Commerce; Vice-president of Shanghai Private Enterprises Association; Vice-chairman of National Bowling Association. And he is also the director of Guangzhou Yuyin Technology Co., Ltd., Chairman of Shanghai Zhonglu (Group) Co., Ltd. and Chairman of Zhonglu Co., Ltd. Mr. Chen Rong held the 208,324,800 sponsor‘s shares of the Company accounted for 29.49% in total shares of the Company and became the first largest shareholder and actual controller of the Company. He served as Chairman of the Company. On 7 June 2011, resignation of Mr. Chen Rong, director and chairman of the Company, was received by the Company; Mr. Chen Rong resigned director and chairman of the Company due to busy works. Mr. Chen Rong serves no position in the Company after resignation. Mr. Chen Rong took position in other units except the above said condition: Name Name of other units Position Office term from Received remuneration or not Chen Shanghai Zhonglu (Group) Co., Chairman 1998 -12 -3 Yes Rong Ltd. Chen Shanghai Zhonglu Bowling Chairman 1998 -7 -28 No Rong Entertainment Co, Ltd. Chen Shanghai Zhonglu Investment Chairman 1998 -9 -17 No Rong Co, Ltd. Chen Shanghai Zhonglu Bowling Director 1998 -12 -4 No Rong Investment Co, Ltd. Chen Shanghai Zhonglu Economy Chairman 1998 -10 -14 No Rong Development Co, Ltd.
13 Chengde Dalu Co., Ltd. Annual Report 2011
Chen Shanghai Zhonglu Film Co, Chairman 2001 -2 -27 No Rong Ltd. Chen Shanghai Yuanfa Food Sea Chairman 2006 -5 -22 No Rong Food Co., Ltd. Chen Shanghai Lvren Ecological Director 2006 -7 -18 No Rong Economy Technology Co., Ltd. Chen Shanghai Xiangxieli Advertise Director November 2007 No Rong Co.,Ltd. Chen Shandong Fengyuan Director October 2009 No Rong Electric-Coal Co., Ltd. Chen Guangdong High-Altitude Director December 2009 - No Rong Wind Power Technology Ltd. Chen Qast Software Group Director November 2009 No Rong
(III) In the report period, controlling shareholder and actual controller of the Company had changed In the report period, there were no changes in controlling shareholder and actual controller of the Company. (IV) Property right and controlling relationship between the actual controller and the Company is as follow:
Chen Rong 29.49 %
CHENGDE DALU CO., LTD.
(V) Particulars about legal person shareholders as of holding 10% shares (including 10%) The Company did not have legal person shareholders as of holding 10% shares (including 10%).
14 Chengde Dalu Co., Ltd. Annual Report 2011
Section V. Particulars about the Directors, Supervisors and Senior Executives and Employees
I. Particulars about directors, supervisors and senior executives (I)Basic information Title Sex Age Start dated End date of Holding Holding Reason Name of office office term share at share at of term the the change year-begin year-end Chen Chairman M 53 2008-11-03 2011-06-07 20,832,480 20,832,480 N/A Rong Yan Chairman M 57 2011-06-30 2011-11-03 0 0 N/A Qizhong Chen Jie Director M 58 2008-11-03 2011-11-03 0 0 N/A
Wang Director M 50 2008-11-03 2011-11-03 0 0 N/A Ansheng Liu Wei Independent M 42 2008-11-03 2011-11-03 0 0 N/A director Li Min Independent M 55 2008-11-03 2011-11-03 0 0 N/A director Yuan Supervisor M 34 2008-11-03 2011-11-03 0 0 N/A Runbing Wu Supervisor F 33 2008-11-03 2011-11-03 0 0 N/A Yijin Xu Xue Supervisor M 63 2008-11-03 2011-11-03 0 0 N/A
Hu Deputy GM M 57 2008-11-03 2011-11-03 0 0 N/A Wenxi Shi Deputy GM M 39 2008-11-03 2011-11-03 0 0 N/A Bainian Hao Bin GM M 48 2010-12-23 2011-06-27 0 0 N/A
Wang CFO M 50 2009-04-27 2011-11-03 0 0 N/A Ansheng Han Secretary of M 35 2010-07-15 2012-03-05 0 0 N/A Zhigang the Board In accordance with relevant regulations of ―Company Law‖ and ―Article of Association‖, Board of the Director and Supervisory Committee should election on its expiration due to office term of the 4th Session of the Board and Supervisory Committee has expired. Being solicited opinions from shareholders by nomination committee of the board, and examining qualifications for nominee, Lin Lixin, Zhao Yongsheng and Cheng Ducai were decided nominated as director candidate of the 5th session of the board; Cao Guohua and Fan Rongwei nominated as independent director candidate of the 5th session of the board, Xie Yu and Wei Lei nominated as supervisor candidate of the 5th session of supervisory committee and Hao Guangxin elected as staff supervisor by employee congress. And approved the ―proposal of election on expiration for the Board‖ on 23rd meeting of 4th
15 Chengde Dalu Co., Ltd. Annual Report 2011 session of the board; approved ―proposal of expiration for the supervisory committee‖ on 9th meeting of 4th session of supervisory committee‖. After approval without objection on independent director candidates from Shenzhen Stock Exchange, submitted together for deliberation with other director candidates for first extraordinary shareholders‘ general meeting of 2012. More details found in ―notice of convening the 1st extraordinary shareholders‘ general meeting for year of 2012‖ released on Securities Times, Hong Kong Commercial Daily and Juchao Website http://www.cninfo.com.cn dated 11 April 2012.
(II) Particulars about main work experience of directors, supervisor and senior executives in previous five years 1. Particulars about directors of the Company Yan Qichong: Male, aged 57 with a junior college background. He had been drafted in December 1974, and successively served as production scheduler, manager of business and financing dept., person in charge of enterprise daily preparation of publication dept. of party committee and professional chairman of general plant union in Shanghai Clock Components Factory and Shanghai Yuanfeng Woolen Mill Plant since 1977; he successively served as GM of Shanghai Zongze Industrial Co., Ltd, GM of Shanghai Jinjiang Food Co., Ltd and GM of Shanghai Yongche Industrial Co., Ltd. since 2002; no he serves as Chairman of the Company. Chen Jie: Male: aged 59, graduated from senior high school. He has been engaged in equity investment for a long time, had profound acquaintances on capital market and other element market, experienced in investment and is the Vice-chairman of Shanghai Pingjie Investment Consultation Co., Ltd. Now, he is the Director of the Company. After resignation of GM Mr. He Bin, before new GM elected from the Company, he executed routine works for purpose of normal operation of the Company. Wang Ansheng: Male, aged 50, once took post of accountant of service office in Tumen, Xi‘an of Agriculture Bank, deputy section chief and section chief of plan and information division of Agriculture Bank Yanta Branch in Xi‘an; section chief of capital organization; section chief of computer information; clients manager of credit and so on. Now he is in charge of General Manager of Shanxi Xiaote Trade LLC, from Dec. of 2007 to Aug. of 2009 he took charge in director of Xingmei Union Holding Co., Ltd. in 2009, he resigned the director of Xingmei. And presently he is the director and CFO of the Company. Li Min: Male, aged 55, member of Communist Party of China, Bachelor‘s Degree, Senior Accountant, Certified Public Accountant. He ever was the Section Chief and Deputy President of Shanghai Toys Electroplate No.1 Factory; President and Deputy Secretary of Party Committee of Staff Accounting School of Shanghai No.2 Light Industry Bureau. Now, he is the Chairman, Director Accountant and Party Secretary of Shanghai Jinglong CPAs; Independent Director of 3rd, 4th and 5th Board of Zhonglu Co., Ltd.; Independent Director of Stellar Megaunion Corporation. Now, he is the Independent Director of the Company. Liu Wei: Male, aged 42, on-study Master of Laws, Lawyer, Executive Co-partner of Guohao Law Group Firms, Co-partner of Guohao Law Group (Shanghai) Firms. Now, he is the Member of 4th Committee for Mergers, Acquisitions and Restructurings of Listed Companies in CSRC; Vice-director of Finance and Securities Committee of Shanghai Lawyers Association; he ever was elected as the Top Ten Excellent Lawyer in Shanghai with specializing in business of the company, stock and finance lawyer. In year 1993, he obtained the Qualification of Practicing Law Affairs Engaged in Securities Business presented by CSRC, and he actively supplied laws services for the large and medium enterprise and famous private enterprise since he was engaged in the securities law affairs for 16 years. He ever offered law services for issuance and listed in stock exchange,
16 Chengde Dalu Co., Ltd. Annual Report 2011 refinancing and debts restructurings for almost 200 listed companies and supplied perennial laws consultant services for several ten large enterprises. Now, he is the Independent Director of the Company. 2. Basic information of supervisors Yuan Runbing: Male, aged 34. He ever worked in Unilever, Roland Berger Strategy Consultants, Deloitte Touche Tohmatsu Certified Public Accountants. He joined in Pre-IPO Capital Partners in 2008 and has taken the post of Vice-president of Pre-IPO Capital Partners. He participated in several project on management and consultation, deeply participated in several IPO audit project on listing in Stock Exchange and annual audit project; he specialized in private investment analysis and enterprise internal control analysis and enterprise strategy management. He obtained the Master Degree on Enterprise Management Department of Fudan University, Bachelor Degree on Applied Physics Department of Lanzhou University. Now, he is the Supervisor of the Company. Wu Yijing: Female, aged 33, graduated from junior college, the Accountant of Shanghai Zhonglu (group) Co., Ltd. She ever worked in Shanghai Meizhao Culture Development Co., Ltd. Now, she is the Supervisor of the Company. Xu Xue: Male, aged 63. He took the post of Plant Director of Dixian Company Zhuji Thread-making Plant from Jun. 1995 to Apr. 1997; Plant Director of Dixian Company Paper Cartons Plant from Apr. 1997 to Mar. 2001; Deputy Secretary of General Party Branch of the Dixian Company from Jul. 2003 till now. He ever was the Chairman of the 3rd Supervisory Committee. And now he is the Supervisor of the Company.
3. Basic information of other senior executives Hao Bin, male, aged 48, with Chinese Nationality, graduated from Communication University of China, majored in Journalism Studies. Professional title was Associate Senior Reporter. He once took post of vice general manager of Guanghua RADIO AND TELEVISION Co., Ltd of the State Administration of Radio Film and Television, president of the boards of Xingmei Union Holding Co., Ltd (SZ000892), board CEO of Xingmei Publishing Group Co., Ltd (HK8010), director of Sun TV, chairman of Kunpeng Website and president of Overseas Chinese International (Beijing) Communication Co., Ltd. On 24 December 2010, engagement of Hao Bin as GM of the Company was approved in 18th Meeting of 4th Session of the Board; resignation of GM from Hao Bin was received by the Company on 27 June 2011 for personal reasons. Hu Wenxi: Male, aged 57, member of China Communist Party, graduated from junior college, Senior Economist. He ever Group Leader and Director of Workshop of Chengde Water Pump Plant and Hardware Maintenance Plant; Factory Director and Secretary of Chengde Magang General Plant, Water-heating Pieces Plant and Light Industry Machinery Plant; Deputy Director General of Chengde Economics and Trade Bureau; Chief Engineer of Chengde Industry Promotion Bureau; he withdrew to the second line of duty in April 2008 and exempted the administrative post. Now, he is the Deputy General Manager of the Company. Mr. Shi Bainian: Male, aged 39, Bachelor Degree (majored in economics management), was Director and General Manager of the Company. He successively took the post of Director of Tailoring Branch of Dixian Group, Director of Dyeing Manufacture and Director and General Manager of the Company. Now, he is the Deputy General Manager of the Company. Han Zhigang, male, 34, College Degree, member of National Paralegal Association and was assigned as department staff of management department of the Company, section chief of facility section, section chief of safety section and section chief energy-saving of water
17 Chengde Dalu Co., Ltd. Annual Report 2011 and electricity department as well as representative of security affairs for 3rd and 4th Session of the Board as well as secretary of the Board of 4th Session of the Board. On 5 March 2012, he resigned secretary of the Board for personal reasons, and serves no position for the Company.
(III) All present directors, supervisors and senior executives drew the annual remuneration from the Company in 2011 as follows: In accordance with the approval of 2009 Annual Shareholders‘ General Meeting, the allowance each year for independent director was RMB 60,000 (after tax); Deputy General Manager Hu Wenxi, Deputy General Manager Shi Bainian, Secretary of the Board Chen Zhiguo withdrew their remunerations as RMB 3,000 each month temporarily; Employee Supervisor Xu Xue withdrew his remuneration as RMB 2,000 each month temporarily; other directors and supervisors did not withdraw remunerations from the Company temporarily. Chairman Chen Rong did not withdraw remuneration from the Company. In year 2011, the Company actually paid remunerations to all the directors, supervisors and senior executives totaled to RMB 297,000. The Board of the Directors of the Company would finally confirm the annual remuneration of current directors, supervisors and senior executives according to restoration of productions of the Company, and handed into shareholders‘ general meeting for approval.
Name Title Total amount of Weather receiving from remuneration in units of shareholders or reporting period(Tax other related units included)
Chen Rong Chairman 0.00 Yes
Yan Qizhong Chairman 2.10 No
Chen Jie Director 0.00 Yes Wang Director 0.00 No Ansheng Liu Wei Independent director 6.30 No
Li Min Independent director 6.30 No
Yuan Supervisor 0.00 Yes Runbing Wu Yijin Supervisor 0.00 Yes
Xu Xue Supervisor 2.40 No
Hu Wenxi Deputy GM 3.70 No
Shi Bainian Deputy GM 3.70 No
He Bing GM 0.00 No
Wang CFO 2.40 No Ansheng (IV) Election or leaving position of directors, supervisors and senior executives; and engagement and dismissal of senior executives in the report period 1. On 7 June 2011, resignation of Mr. Chen Rong for busy works, director and chairman of
18 Chengde Dalu Co., Ltd. Annual Report 2011
the Company, was received by the Company. He hereby resigned director and chairman of the Board for the Company. On 30 June 2011, being deliberated and approved in 21st meeting of 4th session of the board, Mr. Yan Qizhong was elected as Chariman of the Company with office term same as to the session of the Board. 2. On 27 June 2011, former GM Mr. Hao Bin servers no GM for the Company due to personnel reasons. Before new GM elected, director Mr. Chen Jie will in charge of the routine works for normal operation of the Company guarantee. (V)Attendance of board meeting by directors Attending Whether the attending Due Presence meeting in Entrusted the meeting Name of the Absence Positions Presence in person way of presence in person in directors (times) (times) (times) communic (times) successive ation two times (times) or not Director of 4th Chen Rong Session of the 2 1 1 0 0 No Board Director of 4th Chen Jie Session of the 5 2 3 0 0 No Board Director of 4th Wang Session of the 5 2 3 0 0 No Ansheng Board Independent director of 4th Liu Wei 5 2 3 0 0 No Session of the Board Independent director of 4th Li Min 5 2 3 0 0 No Session of the Board Director of 4th Yan Qizhong Session of the 3 1 2 0 0 No Board
Explanations on absentee of the Board in person in successive two times No directors absent the Meeting in successively tow times Meetings of the Board held 5 during the year (times) Of which: site meetings 2 (times) Meetings held in way of 3 communication (times) Meetings held in way of both site and 0 communication (times) II. Particulars of workforce Till end of reporting period, the total number of staffs in posts was 136, including 28 people with college degree or above, a 20.58% of total staffs. The Company had no retired staffs that need the Company takes over.
19 Chengde Dalu Co., Ltd. Annual Report 2011
Section VI. Administrative Structure I. Administration of the Company In reporting period, the Company complied to laws and rules such as the Company Law, the Security Law, the Governance Rules of Listed Companies, the Stock Listing Rules for Shenzhen Stock Exchange and the Normalized Operation Norms for Listed Companies as well as requirements of Articles of Association, practically enhanced internal control system of the Company, fully exercised functions of various commissions of the board of directors, constantly improved integrate governance of the Company. In reporting period, the Company formulated the Administration Rules for Insiders of Internal Control, the Accountability System for Major Errors Made in Annual Report Information Disclosure and Internal Control System, thus further enriched internal control system, strictly normalized confidentiality, submission and usage of internal information, substantially boost standardized operation of the Company. 1. Shareholders and the Shareholders‘ General Meeting The Company set up Rules of Procedure of Shareholders‘ General Meeting and was able to convene and hold the Shareholders‘ General Meeting strictly according to the requirement of normative opinions of the Shareholders‘ General Meeting and the procedure of the meeting was legal. The Company ensures that all shareholders share the actual information of the Company equally and guarantee the legal rights of medium and small shareholders. 2. Relation of the controlling shareholder and the listed company In order to truly safeguard the whole interest of the Company, the Company has set up Behavior Criterion of Controlling Shareholder. The Company is completely independent from the controlling shareholder in terms of personnel, assets, finance, organization and business, owes independent business and ability of self operation. The Board of Directors, the Supervisory Committee and internal organization can operate independently. 3. Directors and the Board of Directors The Company elected directors strictly according to the procedure stated in the Articles of Association and engaged independent directors according to relevant requirements. All directors can take the responsibilities in a diligent attitude on behalf of the maximum interests of the Company and the shareholders. The Board of Directors established Rules of procedure of the Board of Directors, implemented patiently the regulations of the laws, regulations and the Articles of Association of the Company, treated all shareholders fairly and concentrated on the interest of relevant beneficial parties. Specialized commissions were set up in the board of directors such as audit commission, remuneration and appraisal commission, strategy commission and nomination commission. They respectively take over function of discussion and determination of significant events according to corresponding working details. 4. Supervisors and the Supervisory Committee The population and constitution of the board of supervisors conform to requirements of the Articles of Association, including 1 staff representative among the 3 members. The supervisors could carefully exert duties, take necessary check and supervision on finance, directors, general managers and other senior managerial personnel, thus maintain lawful interests of the Company. The procedure of assembling and holding of the board of supervisors conform to relevant rules of the Listing Rules, the Articles of Association and the Parliamentary Procedures of the Board of Supervisor. 5. For relevant beneficial parties The Company is able to fully respect and safeguard the legal rights and interests of the bank,
20 Chengde Dalu Co., Ltd. Annual Report 2011 other creditors, employees, customers and other parties of related interests. The Company pays special attention to social welfare, environmental protection and commonweal cause in the area, while protecting the Company‘s sustainable development and realizing the maximum of the shareholders‘ interests. 6. Information disclosure and transparency The Company authorized the secretary of the Board of Directors to be responsible for information disclosure, reception of the shareholders‘ interviewing and consultation. The Company could disclose relevant information in a true, accurate, complete and timely manner strictly according to provisions of laws, regulations and the Articles of Association so as to ensure equal chances for all shareholders to obtain information.
II. Establishment, perfection and performance of the related working systems for independent directors The Company has established Working Rules of Independent Directors, in accordance with regulations and requirements of Working Rules of Independent Directors, since taking the post in the Company, independent Directors Mr. Li Min and Mr. Liu Wei seriously fulfilled their duties, participated in each meeting of Board of Directors and shareholders‘ general meeting on time in the report period, and did not express different opinions on each proposal of the meeting of Board of Directors and other issues. They also actively inspected and researched the operations business developments and financial status, strictly supervised and guided the normal operation; actively took part in the decision-making of Board of Directors, expressed independent and object opinions on nominating directors and proposing to engage certified public accountants, and expressed scientific and reasonable opinions and suggestions with their specialized knowledge for several times on operation and development of the Company. They maintained interests of the Company and all shareholders and diligently perfect their responsibilities. In 2011, independent directors did not proposed any disagreement on relevant issues. In the report period, the Company totally held 5 Board meetings and the attending of independent directors is as follows: Name of Times of Board Presence in Entrusted Absence independent director meeting supposed person (Time) presence (Time) to attend in this (Time) year Li Min 5 5 0 0 Liu Wei 5 5 0 0
III. Separation in businesses, personnel, assets, organization and finance of the Company and control shareholders 1. In aspect of personnel: the labor, personnel and wage management of the Company is completely independent and the manager, deputy manager and other senior executives received salaries in the Company. 2. In aspect of assets: The Company as an independent legal person has full property right of legal person and has independent production system, accessorial production system and auxiliary equipment. Industrial property right, trademark, non-patent technology and other intangible assets all belong to the listed company. The Company has independent purchase and sales system. 3. In aspect of finance: The Company has independent financial department, whole, independent and normatively operated business accounting system and financial
21 Chengde Dalu Co., Ltd. Annual Report 2011 administration system and independent bank account. 4. In aspect of organization independence: The Company‘s organizations are wholly independent and the offices of the Company are wholly separated from the controlling shareholder. 5. In aspect of business: The Company is independent from the controlling shareholder in terms of businesses and has independent and whole business and operating ability.
IV. Particulars about the establishment and perfection of internal control (Details could be found in Self-assessment Report of Internal Control in 2011 on Juchao Website.)
1. Overall appraisal on the internal control status Based on the reality of its own, the Company had established a set of internal control system which was rather perfect, including Articles of Association, Procedures and Rules of Shareholders‘ General Meeting, Procedures and Rules of Board of Directors, Procedures and Rules of Supervisory Committee, Work Specification for General Manager, Management System of Raised Proceeds, Conduct Code for Controlling Shareholders, Investor Relationship Management System, Financial Management System, Information Disclosure Management System, Internal Report System for Significant Information, Shares Held by the Directors, Supervisors and Senior Management Officers of Listed Companies and the Changes Thereof, Administration System for Insiders of Internal Information, the Accountability System for Major Errors Made in Annual Report Information Disclosure, Internal Audit System, Work Specification for Independent Directors, Implementation Specification for Audit Committee, Work Rules on Annual Report for Audit Committee, Encouragement and Restraint Mechanism Approach for Management Team, Implementation Specification for Strategy Committee of Board of Directors, Implementation Specification for Remuneration and Appraisal Committee of Board of Directors, Implementation Specification for Nomination Committee of Board of Directors and Related Transaction Management System and other regulations and systems. The internal control system basically covered all operational step of the Company. The present internal control system of the company was basically completed, which could adapt demand of the Company‘s management and development, and basically reached the whole goal of internal control. The present internal control could provide reasonable guarantee for compiling true and fair financial statement, and provide guarantee for healthy operation of each business, and implementation of relevant laws, regulations of the state and internal bylaws of unit. Each internal control of the Company was persistently, smoothly and strictly implemented in each step of production and operation. The Company thought the internal control was effective. Accompanied with changes in operational and external environments, there was bound to be some systematical shortcomings or managerial loopholes during the corporate development, and effectiveness of the current internal control might change. The Company would comply with relevant requirements and further optimize internal control to make sure that it would always adapt to the developmental demands of the Company as well as the requirements of related national laws and rules.
2. Independent opinions of independent directors on self-evaluation report of internal control In accordance with requirements of the Security Law, the No. 2 Content and Pattern of Annual Report for Content and Pattern of Information Disclosure of Companies Publicly Issuing Securities (revised in 2012) issued by Shenzhen Stock Exchange, the Notice to
22 Chengde Dalu Co., Ltd. Annual Report 2011
2011 Annual Report of Listed Companies of Shenzhen Stock Exchange and Relevant Work, independent directors checked carefully internal control by principal of a factual and realistic work style, the independent directors believed that: the Company had built and perfected internal control covering various stages of the Company in accordance with the Internal Control Guidance for Listed Companies. The internal control of significant activities including controlling subsidiaries, related transaction, and usage of raised funds, significant investment, external guarantee and information disclosure was sufficient and effective, which ensured normal progress of production and operation of the Company. Internal control of the Company was reasonable, complete and valid.
3. Opinions of the board of supervisors on self-assessment report of internal control In accordance with requirements of the Security Law, the No. 2 Content and Pattern of Annual Report for Content and Pattern of Information Disclosure of Companies Publicly Issuing Securities (revised in 2012)issued by Shenzhen Stock Exchange, the Notice to 2011 Annual Report of Listed Companies of Shenzhen Stock Exchange and Relevant Work, the board of supervisors checked carefully internal control by principal of a factual and realistic work style, and they believed that: the Company could follow relevant rules of CSRC, Shenzhen Stock Exchange and other security supervision department, comply with basic principal of internal control. According to actual situation of the Company the Company built and completed internal control system covering various stages of the Company, ensured safety and completeness of the assets of the Company. Organization of internal control was complete, the internal audit department and installation of personnel is in place. Internal control system operated effectively. Self-evaluation of internal control was real, complete and objective in reflecting actual condition of internal control of the Company. In reporting period, the Company had no events against the Internal Control Guidance of Listed Companies.
4. Working plan and implementation schedule for establishment and perfection of internal control, starting implemented for year of 2012 by the Company I. Working plan of establishment of internal control Time: January 2012 to September 2012 1. Preparation phase of establishment of internal control Person in charge: Liu Fengguo Implementation range of internal control including Chengde Dalu Co., Ltd. and its wholly-owned subsidiary Chengde Rongyida Real Estate Development Co., Ltd. According to ―Basic Norms of Internal Control‖ and supporting guideline, leader of internal control and implementation team will put main procedures of the Company in order by actual condition of the Company, ensure consolidated in major business procedures of the internal control. 2. Put procedures into order and prepared risk list Person in charge: Liu Fengguo Wang Jianjun After recognition of internal control range, make orders on vary companies, reckoned in implementation range, and their major business procedures, recognized controlling target and key risk influence the realization of targets for preparing risk list. 3. Compare with list, spot defects Person in charge: Liu Fengguo Wang Jianjun Comparing current policies and mechanism with risk list prepared to find out internal control‘s flaws; 4. Plan out reformation
23 Chengde Dalu Co., Ltd. Annual Report 2011
Person in charge: Liu Fengguo Wang Jianjun Summarized and arranged defects found in internal control, analyze nature of defects and reasons as well as serious-ness, formulated corresponding reforming plan for internal control defects. 5. Implementation of reformation Person in charge: Liu Fengguo Wang Jianjun Reformulated and revised relevant internal control system in line with reforming plan, improved business procedures, allocating staff reasonably as well as job placement. 6. Examination of reforming results Person in charge: Wang Ansheng Based on reforming plan of internal control‘s defects, report reforming results regularly by principles. Leader of internal control team compare with reforming plan for results examined one by one. 7. Disclosed implementation of internal control by requirement Process of implementation of internal control, comparison of planning, difference reasons and countermeasures, according to requirement, should be submitted to Security Regulatory Bureau of Hebei Province and Shenzhen Stock Exchange by the Company. II. Self-assessment of internal control Time: October 2012 to December 2012 Main works are: 1. Formulated working plan of self-assessment for internal control, recognized companies and business process that reckoned in self-assessment range, determined detail time of evaluation and employees‘ placement; Person in charge: Wang Ansheng 2. Confirmed evaluation standards of flaws of internal control, including qualitative criteria and quantitative criterion while Defects including general defects, major defects and serious defects. Person in charge: every department and principle of subsidiary 3. Implemented self-assessment, prepared draft of internal control evaluation; Person in charge: every department and principle of subsidiary 4. Evaluated defects of internal control found in self-assessment, prepared collection of defects evaluations, proposed reforming plan and carry out reforming target list, supervise the implementation of reforming; Person in charge: every department and principle of subsidiary 5. Examine reforming results, prepared self-assessment report of internal control by works of self evaluation for internal control Person in charge: Wang Ansheng 6. Being deliberated by auditing committee of the Board and deliberated and approved by the Board, disclosed self-assessment report of internal control while released annual report of 2012 III. Plan of auditing for internal control Time: 1 January 2013 to annual report of 2012 disclosed 1. Confirm the engagement of CPA for internal control auditing work, the Company will cooperate with CPA for auditing works of internal control, carried out auditing opinions on design and efficiency of internal control based on date of 31 December 2012 and with audit report of internal control issued; 2. Disclosed self-assessment report of internal control and audit report of internal control while annual report of 2012 released.
24 Chengde Dalu Co., Ltd. Annual Report 2011
V. Appraisal and incentive mechanism of senior managerial personnel In reporting period, the Company followed requirements modern corporation distribution system of distribution according to work, conducted yearly salary system in operation section of the Company in accordance with principal of linking payment of administrators and operation performance, operation responsibility and operation risk. VI. Establishment and implementation of internal control of financial report The Company complied with laws, regulations and rules of finance department of State Council, formulated and implemented financial management system. The installation and division of accounting posts was clear, separated from each other and restrained each other with post duty system. In aspect of financial report, the Company had built a series of complete financial report system and internal control system of financial report. The production procedure of financial report was scientific and complete. As to the data, the core was controlled, the collection was efficient, and that analysis and handle was conducted. The Company implemented internal audit system. Specialized audit personnel took internal audit supervision on financial income and expenses. The internal audit department was responsible for and reported to audit commission of the board of directors. The Company conducted internal audit system. Specialized audit personnel took internal audit supervision on income and expense activities of the Company. Internal audit department was responsible for and submitted to the board of directors. As for annual report audit, the Company formulated the Annual Report Working Procedure for Audit Commission of the Board of Directors and the Annual Report Working Procedure for Independent Directors. Audit Commission and independent directors practically fulfilled duties with full responsibility diligently. The legal representative, chief accounting charger and charger of accounting institution were responsible for the authenticity and completeness of the Company. All the directors, supervisors and senior managerial personnel took responsibility for authenticity and completeness of the financial report. In reporting period, there found no major deficit in internal control on financial report.
VII. Established of accountability mechanism of major errors for disclosure of annual information The ―Accountability Mechanism of Major Errors for Disclosure of Annual Report Information‖ was deliberated and approved in 12th meeting of 4th session of the Board. No correction of major accounting errors, supplementation of major omission information and amendment of performance prediction occurred in the report period.
25 Chengde Dalu Co., Ltd. Annual Report 2011
Section VII. Particulars about Shareholders’ General Meeting
I. In the report period, the Company held one annual shareholders’ general meeting and two extraordinary shareholders’ general meetings:
(I) Annual Shareholders‘ General Meeting The Annual Shareholders‘ General Meeting of 2010 was held on 26 May 2011, resolution notice released on Securities Times, Hong Kong Commercial Daily and Juchao Website http://www.cninfo.com.cn dated 27 May 2011.
(II) Extraordinary shareholders‘ general meeting 1. The first extraordinary shareholders‘ general meeting of 2011 was held on 10 January 2011, resolution notice released on Securities Times, Hong Kong Commercial Daily and Juchao Website http://www.cninfo.com.cn dated 10 January 2011. 2. The second extraordinary shareholders‘ general meeting of 2011 was held on 30 June 2011, resolution notice released on Securities Times, Hong Kong Commercial Daily and Juchao Website http://www.cninfo.com.cn dated 1 July 2011.
26 Chengde Dalu Co., Ltd. Annual Report 2011
Section VIII. Report of the Board of Directors
I. Reviewing the operational situation of the Company in report period (I)Discussion and analysis on the management level In report period, the Company was in the transition period of re-organization. The Company obtains a room for debt burden and financial risk relieved through out bankruptcy re-organization. However, capital of the Company still in tight, and limited in time and condition, operational business still no recover in the report period. As the Company finished bankruptcy reorganization, its financial condition got improved. Input with assets of Chengde Rongyida Real Estate Development Co., Ltd. provided favorable condition for the Company to recover its main business ability. Under the correction guidance of the Board and effort form the whole staff, wholly-owned subsidiary—Rongyida Company has started the initial phases development of project of Dalu Qianyuan (commercial residence), which lay out a foundation for the operational recovery gradually of the Company. No main business production was recovered in the report period, real estate project of Rongyida Company still in process, therefore gains income of zero in main business production; the operating income amounting to -15,116,568.97 yuan, an 34.46 percent up y-o-y; net profit amounting to 2,728,313.27 yuan with 6.01 percent down y-o-y. The net profit attributable to owners‘ equity of parent company gains a y-o-y increase of 113.69 percent with3, 643,202.46 yuan. In report period, main business of the Company still in deficit, but subsidy of social guarantee 17.9 million yuan was allocated from People‘s Government of Chengde Country, Chengde City, Hebei Province, which realized net profit of 3,643,202.46 yuan for year of 2011.
(II) Main business and operation status 1. Scope of the main business: Manufacture and process of the knitting serials, woven serials, superior suit, children dress, package materials, paper and paper products, various yarns and synthesis silks; sales of the self-produced products, development and sales of the real estate, accommodation business and catering business. 2. Business results of the main business; In report period, no recovered in production neither any business operational of the Company. Thus, the main businesses still make a loss in this report period. (1) Classified according to industry and product Unit: RMB‘ 0000 Classified according to industries Classified according to Operating Operating Operating Increase/dec Increase/dec Increase/decr industries or products income cost profit ratio rease in rease in ease in (%) operating operating operating income over cost over profit ratio last year (%) last year (%) over last year (%) Sales of cotton yarn 0 0 0 - - - plain cloth and spinning & synthetic silks Sales of paper
27 Chengde Dalu Co., Ltd. Annual Report 2011
Classified according to products Sales of cotton yarn 0 0 0 - - - plain cloth and spinning & synthetic silks Sales of paper 0 0 0 - - -
(2)Main business classified according to areas Unit: RMB‘0000 Areas Operating income Increase/decrease in operating income over last year (%) Domestic 0 -100%
(3)Main customers: The total purchase amount from the top five suppliers amounted to RMB 0, accounting for 0% of the Company‘s total purchase amount of the year. The total sales amount to the top five customers amounted to RMB 0, accounting for 0% of the Company‘s total sales amount.
3. Analysis on constitution of assets of the Company in the report period ITEM 2011-12-31 2010-12-31 Amount Proportion in Amount Proportion total assets in total assets Total assets 100.00% 199,976,147.64 100% 219,022,670.81 Total assets - - Inventory 18.13% 17,742,081.41 8.87% 39,698,800.27 Inventory - - Long-term equity 2,215,729.65 1.01% 2,215,729.65 1.11% investment Fixed assets 60,092,006.51 27.44% 62,653,329.49 31.33% Construction in 3.07% 6,721,818.00 3.36% progress 6,721,818.00 Short-term loans 422,261.91 0.19% 0.21% 422,261.91 Long-term loans 6,801,600.00 3.11% 6,398,000.00 3.20%
Reason for material changes over the same period of last year: Reasons of increase of total assets: inventory increased in this period. Reasons of decrease of construction in progress: Reasons of increase of inventory: real estate project of subsidiary has not been completed in this period.
28 Chengde Dalu Co., Ltd. Annual Report 2011
Note: in the report period, the Company adopted historical cost method to measure main assets, and no item was measure by fair value.
Relevant analysis of financial data Item 2011 2010 Increase/decrease year-on-year Sales expenses - Administrative 12,102,079.62 11,862,757.29 2.02% expenses Financial expenses 3,487,822.06 4,752,650.63 -26.61% Income tax 19,318.12 4,082,172.06 -99.53%
Note: Reason for material changes over the same period of last year: Reason for change in sales expense: no resumption in production in the report year and no sales expense occurred; Reason for change in administrative expense: the expense increased in this period; Reason for change in financial expense: interest paid in this period decreased; Reason for change in income tax: taxable income decreased in this period.
4. Relevant analysis on constitution of cash flow: AMOUNT AT AMOUNT AT ITEM THIS PERIOD LAST PERIOD PROPORTION 2011 2010 I. Cash flows arising from operating
activities: Cash received from selling commodities 30,543,763.02 and providing labor services Cash received from interest, commission
charge and commission Net increase of capital borrowed Write-back of tax received Other cash received concerning 25,795,702.97 45,790,231.29 -43.67% operating activities Subtotal of cash inflow arising from 56,339,465.99 45,790,231.29 23.04% operating activities Cash paid for purchasing commodities 22,444,452.75 3,836,864.10 484.97% and receiving labor service Cash paid to and for employees 831,424.00 292,600.00 184.15% Cash paid for taxes 7,727,240.93 430,707.72 1694.08% Cash paid for other operating activities 25,868,739.87 73,503,880.48 -64.81% Subtotal of cash outflows from operating 56,871,857.55 78,064,052.30 -27.15% activities - Net cash flow from operating activities - 32,273,821.01 -98.35% 532,391.56 II. Cash flows from investing activities
29 Chengde Dalu Co., Ltd. Annual Report 2011
Cash received from return on investment
Cash received from investment income Net cash received from the disposal of fixed assets，intangible assets and other 40,085,130.00 -100.00% long-term assets Net amount of cash received from disposal of subsidiary and other operating units Other cash received concerning investing 19,500,000.00 -100.00% activities Subtotal of cash inflows from investing 59,585,130.00 -100.00% activities Cash paid to acquire or construct fixed assets, intangible assets and other 740,848.41 long-term assets Cash paid for investment Net increase of mortgaged loans Net cash received from subsidiaries and
other units Other cash paid concerning investing
activities Subtotal of cash outflows from investing 740,848.41 activities Net cash flows from investing activities 740,848.41 59,585,130.00 -98.76% III. Cash flows from financing
activities Other cash received concerning 14,800,000.00 50,000,000.00 -70.40% financing activities Subtotal of cash inflows from financing 14,800,000.00 50,000,000.00 -70.40% activities Cash paid for settling debts Cash paid for dividend and profit 283,616.44 2,228,635.58 -87.27% distributing or interest paying Including: Dividend and profit of 2,228,635.58 -100.00% minority shareholder paid by subsidiaries Other cash paid concerning financing 17,445,727.12 65,410,000.00 -73.33% activities Subtotal of cash outflow from financing 17,729,343.56 67,638,635.58 -73.79% activities Net cash flows arising from financing - - 17,638,635.58 -83.39% activities 2,929,343.56 IV. Influence on cash due to fluctuation - - -65.51% in exchange rate 2,732.43 7,921.27 V. Net increase of cash and cash - 9,664,752.14 -143.51% equivalents 4,205,315.96 Add: Balance of cash and cash 9,723,008.25 58,256.11 16590.11% equivalents at the period -begin
30 Chengde Dalu Co., Ltd. Annual Report 2011
VI. Balance of cash and cash equivalents 5,517,692.29 9,723,008.25 -43.25% at the period -end Reasons for significant changes compared with the same period of last year:
(1) Reasons for major changes of cash flows arising from operating activities: the house amount sale in advance and tax paid in advance was received in this period; (2) Reasons for net changes of cash flows arising from investing activities: disposing fixed assets in last period; (3) Reasons for changes of cash flows arising from financing activities: debt payment occurred in last period; (4) Reasons for significant difference between cash flows arising from operating activities and net profit in the report period: the Company resumes no production in this period with deficit in main business; the social security subsidy 17.9 million yuan was received by the Company from Government of Chengde County, which generated net profit for the Company of 3,643,202.46 yuan; house payment sales in advance was paid for the construction expenses.
5. Discussion and analysis on utilization of equipment, order-obtaining, sales and stockpiling of products, changes of main technicians of the Company At the end of 2008, the Company walked into procedure of bankruptcy and reorganization. Workers and technicians were terminated the labor relationship totally. Total 136 people in position in 2011 but without main business operating, gains no order.
6. Main holding subsidiaries and share-joining companies (1) Hebei Xiabancheng Knit Wears Co., Ltd. is the Company‘s wholly owned subsidiary, which was a Sino-foreign joint venture set up by Knitting General Plant, the predecessor of the Company and foreign enterprises, registered on Jul.9, 1991 with a registered capital of USD 4 million. The operating scope is: production and sale of textile. Its main products are all kinds of knit wears. On Feb. 8th, 2009, Xiabancheng Knit Company declared bankruptcy and unfinished the liquidation. (2) Chengde Dixian Fashion Co., Ltd. is a Sino-foreign joint venture, which was jointly invested by Japanese Y‘s Corporation and the Company. It registered on May 23, 2000 with registered capital of USD 24 million. The Company holds 75% equity of this company and Y‘s Corporation holds 25% respectively. The operating scope is: production and sale of yarn and synthetic silks. The main products are yarn and synthetic silks. On Feb. 8th, 2009, Dixian Fashion Company declared bankruptcy and unfinished the liquidation. (3) Chengde Xingye Papermaking Co., Ltd. was a papermaking company jointly established by Hong Kong Zhanxi International Co., Ltd. and the Company, with a registered capital of USD 100 million. The Company holds 75% equity of this company and Zhanxi Group holds 25% respectively. The operating scope is: production and sale of series of high-grade copperplate plate paper and craft board. Influenced by the shortage of fund, the production of Xingye Papermaking was completely ceased. On Dec. 8th, 2009, Xingye Papermaking was applied for bankruptcy and settlement. On May 8th, 2009, reconciliation agreement was reached between Xingye Papermaking and creditors. (4) Chengde Banhe Chemical Simulation Textile Co., Ltd. was share-holding company of controlling subsidiary of the Company, which was a Sino-foreign operating enterprise registered and set up on Sep.29, 2002 with its registered capital of USD 60 million. Dixian Fashion Co., Ltd., Japan Shanxia Trade Co., Ltd. and Hebei Xiaban Town Knitting Company respectively hold 40% and 35% and 25% equity of this company. The operating
31 Chengde Dalu Co., Ltd. Annual Report 2011 scope was: production and sale of different types of chemical simulation cloth with high quality, knitting cloth and different types of coloration finished cloth; the main products were high quality chemical simulation cloth, knitting cloth and different types of coloration finished cloth. On Feb. 8th, 2009, Chengde Banhe declared bankruptcy and unfinished the liquidation. (5) Chengde Dahua Paper Co., Ltd (original Chengde Japan Papermaking Co., Ltd.) was a Sino-foreign joint venture invested and set up by the company and Japan Papermaking Co., Ltd. The total investment was amounting to 11 billion YEN and the registered capital was 6.364 billion YEN. The Company and Japan Papermaking respectively hold 45% and 55% equity of this company. The joint venture mainly produces and sells all types of high-quality paper. The production scale is producing 150 thousand tons of various papers per year. In 2005, the 45% equity of Chengde Japan Papermaking Co., Ltd held by the Company were transferred to controlling subsidiary of Chengde Xingye Papermaking Co., Ltd, 55% equity of Chengde Japan Papermaking Co., Ltd held by Japan Papermaking Co., Ltd were transferred to Japan New Century Trading Co., Ltd. After transferring the equity, Chengde Japan Papermaking Co., Ltd changed its name to Chengde Dahua Paper Co., Ltd. The investment on Chengde Dahua Paper Co., Ltd was jointly finished by Chengde Xingye Papermaking Co., Ltd and Japan New Century Trading Co., Ltd. Equipment of the Company has not been installed completely, the Company became an uncompleted project (6) Suning Banhe Chemical Simulation Textile Co., Ltd is a shareholding subsidiary of the Company, which is a joint venture and invested and set up by the Company and Japan Shanxia Trade Co., Ltd on Nov.7, 2004. Its registered capital was USD 29 million; the Company invests USD 5.8 million which accounts for 20% of the registered capital. Suning Banhe carried out no operation officially so far. (7) Chengde County Rongyida Real Estate Development Co., Ltd. was found on Feb 20th, 2009. Its registered capital was RMB 10 million, business scope is: real estate development; textile, clothing manufacture, clothing import and export business; rental services. In Apr. 2009, Rongyida Company got assets from bankruptcy of the Company along with bankruptcy of subsidiaries through auction. On July 27, 2009, Mr. Wang Fei and Ms Chen Liping who are shareholders of Rongyida Company respectively signed equity transfer agreement with holding shareholder Mr. Chen Rong, Mr. Wang Fei and Ms Chen Liping respectively transferred 90% and 10% of equity of Chengde Rongyida Property Development Co., Ltd. to Mr. Chen Rong respectively with RMB 9 million and RMB 1 million. On the same day, Mr. Chen Rong transferred the received 100% equity of Rongyida Company to the Company with RMB 1.00. Rongyida Company became a wholly-owned subsidiary of the Company after equity transfer. Presently total capital of Chengde Rongyida Property Development Co., Ltd. is173, 299,393.66 yuan, and total liability is 120,156,142.34 yuan. The land currently owned by the Company is 1,180 mu, of which 540 mu can be transferred into commercial development land. Currently, Rongyida Company has one project—Dalu Qianyuan (commercial resident) in construction. The project has one year period for construction. 7. The condition of entities controlled by the Company for special purpose The Company has no administrative entities for special purpose.
(II) Prospect for future development of the Company 1. The development tendency in the industry of the Company and the market competition pattern the Company faced The Company engaged in the business of clothing, paper making and real estate. From a long-term planning, the Company will quit the paper-making business in a proper time and
32 Chengde Dalu Co., Ltd. Annual Report 2011 mainly engaged in the real estate and clothing business. Meanwhile, developed tourism industry for creating a tourism city. (1)Clothing industry plays a role in the traditional pillar industry of China for a long-term, the competition of textile fiercely in and out of China. Along with the economy development, the textile gets an improvement in industrial construction, and gains a better economy benefits. The textile industry was formulated a completion system on industry processing which possess a rich raw materials and a sufficient labor resources. Textile has its superiority competition in China and remains a room for development. The Company mainly engaged in the production of knitting clothes, and the clothes suspend for manufacture due to the insufficient capital supply. The Company will has a properly competitive-ness due to its completion textile industry chain and lower production cost, if there has enough capital for operation. (2) The industry of papermaking is the important industry which is closely linked with the development of national economy and social civilization. Papermaking is an intensively industry together with technique, capital, resources and energy, and also is an industry with high-pollution. Paper making was out of production since 2007, and no recovered till recently, the Company will quit the paper-making business in a proper time. (3) The Company newly steps in the real estate industry, and uses the advantage land resources, the Company determined its strategy of ―control the risks, early in construction, sooner in completion; rapid up opening and sales shortly; guarantee the return‖. Seize the rigid demand in market, promptly for preparation, development integrity; strive for a better performance in real estate market. (4)Location of the Company, Chengde, owes advantaged tourism resources, the Company considering developing service industry of star hotels in an appropriate time, for purpose of creating a tourism city.
2. Targets for year of 2012 In 2012, while focus on development of real estate, introduce fashion partners to recover fashion industry; furthermore, introduce industrial projects with hi-tech and high Value added concerned, which qualified local industry policies; considering develop hotel service industry and other tourism industry with purpose of cooperating with the construction plan of tourism city for Chengde City, resume profitability for main business as soon as possible.
3. Risks, and relevant solutions and measures to be taken (1) Macro-policy risk and countermeasures China now is just in procedure of rapid economic development. Unceasing release of new policy measures, and changes in laws and policy environment would bring certain uncertainties to the Company in implementing reform plan, operation, production and investment activities, also bring uncertainties to the development programming and strategy of the Company. Considering the policy risk, the Company will further research and analyze the changes of national policy and law regulation, fully and objectively appraise the influences of development strategy and operations of the Company brought by the changes of national policy and law regulations. On the basis of operation abiding to the law, assurance of the development goal of the Company and manufacturing operation abiding to the national laws and regulations, to adjust timely the development strategy and operations of the Company, hold the development chances brought by the changes of the national policy and laws and regulations; at the same time, to avoid the disadvantageous influences brought by the changes of the national policy and laws and regulations.
33 Chengde Dalu Co., Ltd. Annual Report 2011
(2) Market or business operation risks and countermeasures The Company has stopped operation for 2 years, so the original market has already been lost. At present, the Company has certain difficulty in resuming production and market, faced with griming test. With assistance from the government, the Company cooperates with potential industry investors who provide necessary capital, equipment, as well as technique. Through integrating original customer network and sales channels of the Company, and engaging the original skilled employees of the Company, the Company would gradually resume and develop the original industry.
(3)Financial risk and countermeasure Affected by various factors, serious operation crisis and financial crisis had happened to the Company since 2005. It was prosecuted by various creditors, and all assets of the Company were sealed up or frozen, thus financial crisis was getting further serious, and the Company had lost ability to make profit. End of the 2008, the Company staged in process of bankruptcy and restructure and discharges debts according to restructure plan, its debt burden and financial pressure would be effectively relieved
(4)Technique risk and countermeasure Due to operation of the Company had stopped for 2 years, facilities were seriously rotten, and technique workers were all off for holiday. When resuming production, it is not avoidable for the Company to lose skilled workers. Except the preference reengagement for the original skilled workers of it, the Company also would engage technique talented personnel from the same industry, domestic or overseas, with high remuneration; introduces and renews the original equipments; actively absorbs advanced technology of the same industry, domestic or overseas all available.
III. Investment of the Company 1. In the report period, there was no such situation that application of raised proceeds in the report period or application of proceeds started in previous periods while continuing to last in this report period. 2. In the report period, there was no investment with the non-raised proceeds of the Company.
IV. 1. Explanation of the Board on the non-standard Auditor’s Report issued by the CPAs The financial report of this period was audited by Crowe Horwath CPA (special general partnership) with qualified auditor‘s report with paragraph of emphasized matters carried out. Emphasis events Attention for user of financial statement: 1. As stated in Notes IV .1(1).③, Chengde Xingye Papermaking Co., Ltd. is a joint venture invested by DaLu Company and (Hong Kong) Century Win International Holding Co., Ltd. in 2001, the registered capital is USD 250,000,000.00 and the paid-in capital is USD 100,000,000.00. Shareholders' contribution of the registered capital is 40%, with DaLu Company invested USD 75,000,000.00 which account for 75% and (Hong Kong) Century Win International Holding Co., Ltd. invested USD 25,000,000.00 which account for 25%. On 28 Oct. 2002, upon approval with Wai Jing Zi Er Han [2001] No.969< Approval about the capital increase of Chengde Dexing Papermaking Co., Ltd > issued by
34 Chengde Dalu Co., Ltd. Annual Report 2011 the Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China, Chengde Xingye Papermaking Co., Ltd. has increased the registered capital from USD 100,000,000.00 to USD 250,000,000.00. The new registered capital should be paid within three years since obtaining the new business license according to the agreement and articles. But the new registered capital of Chengde Xingye Papermaking Co., Ltd. has not been fully paid by the investors within the stipulated term. Confirmed by the Companies Registry of Hong Kong SAR Government, Century Win International Holding Co., Ltd was declared to be dissolved on 20 May 2005. According to the ruling of Hebei superior People's Court with (2009) Ji Xing Er Zhong Zi 44 of 23 April 2009, Chengde Xingye Papermaking Co., Ltd was adjudicated as a mendacious foreign-invested enterprise which was established by the former shareholder Wangsuxian of the Company who was using the name of Century Win International Holding Co., Ltd. when making investment. 2.As stated in Notes V、6, registered capital of Dahua Paper Industry Co., Ltd after the transfer of equity shares and the capital increase is increased to JPY 6,364,000,000, of which USD 5,000,000 invested before has been verified by PRC Certified Public Accountants, the increased part has not. Chengde Industrial and Commercial Bureau withdrew the license of Dahua Paper Industry Co., Ltd on 28 April 2009 according to the ChengGongShang (2009) No.75 Document due to not submitting the annual inspection material of 2007. 3. As stated in Notes VII、3, Lirui sued the Company together with its subsidiary company Chengde Rongyida Real Estate Development Co., Ltd for infringement and appealed economic compensation of 15 million Yuan. The court heard the case on April 20, 2012, but by April 22, 2012 there are no trial results. 4. As at 31 Dec 2011, the owner‘s equity attributable to parent Company of the Company is RMB-23,882,038.57 and there was no operating revenue in year 2010 or 2011. So there's some uncertainty about the company‘s ability to continue as a going concern.
This section does not affect the above opinion. To the proceedings involved in qualified opinions with paragraph of emphasized matters provided by accountants, the board of directors of the Company made the following explanations:
The board of directors thought that, the proceedings involved in unqualified opinions with paragraph of emphasized matters provided by Crowe Horwath CPA (special general partnership) existed which were problems left in history, and could not have substantial influences on production and operation of the Company. The board of directors attached importance to the emphasized issues and qualified matters in the audit report, and is communicating with related department at present on negotiating the solutions. The Company will proactively responding to the above said lawsuits, and disclose status of the lawsuit in line with process timely. We believed that the Company would gradually go into the right path, and at the same time the above matters involved would be resolved soon.
2. Explanation of independent directors on the modified opinion issued by the CPAs In 2011, as for the financial statement of the Company, Beijing Crowe Horwath Certified Public Accountants Co., Ltd. audited the statement and issued unqualified audit report with emphasized matters. Independent directors of the Company thought that Special Explanation of the Board on the Matters Involved in Nonstandard Unqualified Auditor‘s
35 Chengde Dalu Co., Ltd. Annual Report 2011
Report accorded with the actual condition and they agreed with this explanation. While meanwhile, they demanded the board of directors, administrative level and financial department of the Company to pay great attention to the problems involved in the emphasized issues and qualified opinion of the audit report, and to solve the problems as soon as possible, thus to protect practical interest of vast middles and minor shareholders.
3. Explanation of the Board on correction of financial information of the Company报 In reporting period, no changes of accounting policy and accounting estimation occurred in the Company, and no particular about corrections of financial information for previously period.
V. Routine work of the Board of Directors (I) In the report period, the meetings and resolutions of the Board of Directors: 1. The 19th Meeting of 4th Session of the Board was held on 25 April 2011 at conference room of 1/F, No.832, Huamu Rd., Shanghai. The Meeting deliberated and approved the follow proposals: ―Work Report of the Board for year of 2010‖, ―Financial Report of 2010‖, ―Plan of Profit Distribution for year of 2010‖, ―Annual Report of 2010 and its Summary‖, ―Specific Explanation of Items involved in Modified Auditing Opinions from the Board‖, ―Self-assessment Report of Internal Control for year of 2010‖, ―Work Report of Independent Directors‖, ―Engagement of Auditing Institution for year of 2011‖, ―Retroactive Adjustment on Accounting Statement for year of 2009‖, ―First Quarterly Report and its Summary of 2011‖ and ―Convening Annual Shareholders‘ General Meeting of 2010‖. 2. The 20th Meeting of 4th Session of the Board was held on 14 June 2011 by communication. The Meeting deliberated and approved the proposal of director nomination of Yan Qizhong, Mr. Chen Jie in charger of the Board temporary and convening of 2nd extraordinary shareholders‘ general meeting of 2011. 3. The 21st Meeting of 4th Session of the Board was held on 30 June 2011 at conference room of 1/F, No.832, Huamu Rd., Shanghai. The Meeting deliberated and approved the proposal of ―Elected Mr. Yan Qizhong as Chairman of the Company‖. 4. The 22nd Meeting of 4th Session of the Board was held on 28 August 2011 by communication. The Meeting deliberated and approved the ―Semi-annual report of 2011 and its summary‖. 5. The 23rd Meeting of 4th Session of the Board was held on 25 October 2011 by communication. The Meeting deliberated and approved the ―Third quarterly report of 2011‖.
(II)Implementation of resolutions reached in Shareholders’ General Meeting by the Board In the report period, the Company did neither distribute profit, nor have executable equity incentive plan. In the report period, the Company didn‘t implement allotment and issuance of new shares.
(III) Implementation of audit committee of the board of directors Audit committee was constituted by 3 directors, including 2 independent directors. Audit committee strictly followed Implementation Regulations of Audit Committee and Annual Report Work Regulations of Audit Committee, audit committee seriously and actively started relevant work of auditing annual report, exerted the function of supervising and auditing, and audit committee made summary of auditing work in 2011 as follows:
36 Chengde Dalu Co., Ltd. Annual Report 2011
1. Confirming overall audit plan and check financial report Audit committee and financial department negotiated with Crowe Horwath CPA (special general partnership), and confirmed audit work arrangement of 2011. At the same time, audit committee checked financial statement of 2011 compiled by the Company and thought that: the Company could made financial calculation according to the regulations of New Accounting Standard, without any significant untruthfulness in report information; the financial statement of 2011 compiled by the Company basically reflected conditions of assets liability and operation achievement till Dec. 31, 2011, and agreed to start financial audit work in 2011 with the financial statement as basis. 2. Keeping normal communication with CPAs and paying attention to the progress of auditing During the auditing period, audit committee always kept communication with financial department and CPAs, and paid attention to the progress of auditing. The CPAs provided initial audit opinions, audit committee checked financial accounting statement, and formed written opinions that: the financial report of 2011 compiled by the Company basically reflected conditions of assets liability and operation achievement till Dec. 31, 2011, and agreed to compile Financial Report of 2011 with the financial statement as basis and submit the board of directors to approve. At the same time, audit committee again put forward the requirement that the CPAs complete the final draft of audit report in the last ten days of April according to overall audit plan to ensure the Company to disclose Annual Report 2011 as schedule. 3. Audit committee held meeting to discuss relevant matters on annual report After completing annual auditing, audit committee held meeting to discuss the following resolutions: Financial Report of 2011, Self-estimation Report of Internal Control of the Company 2011, Proposal on suggesting Reengaging Certified Public Accountants to the Board of Directors and Summary Report on Annual Audit Work in 2011 of Certified Public Accountants. Till then, the audit work of 2011 was totally completed. Audit committee would submit the board of directors to approve the above proposals. 4. Summary Report on Annual Audit Work in 2011 of Certified Public Accountants From Mar. 12, 2011 to Mar. 22, 2011, Crowe Horwath CPA (special general partnership) completed all audit procedure, obtained sufficient appropriate audit evidence, and submitted initial audit opinion to audit committee. In the process of auditing, Crowe Horwath CPA (special general partnership) strictly followed the basic principle of profession morality, possessed high professional level, adhere to independent, and kept profession caution; greatly completed the audit work of financial report of 2011, checked capital occupancy of holding shareholders and other related parties in 2011, and provided special explanation. Crowe Horwath CPA (special general partnership) provided unqualified auditor‘s report with paragraph of emphasized issues for the 2011 annual financial report of the Company. 5. Proposal on suggesting Reengaging Certified Public Accountants to the Board of Directors Crowe Horwath CPA (special general partnership) completed the audit work of annual report as schedule. In the audit work, Crowe Horwath CPA (special general partnership) seriously implemented each duty, strictly followed the basic principle of profession morality, possessed high professional level, adhere to independent, kept profession caution, and greatly completed the audit work of financial report. Audit committee suggested reengaging Crowe Horwath CPA (special general partnership) as audit institution of the Company for 2011. (IV) Performance of remuneration and examination committee
37 Chengde Dalu Co., Ltd. Annual Report 2011
On Nov 25th, 2009, the 11th Meeting of the 4th Board of Directors discussed and approved establishing Remuneration and Examination Committee, the Remuneration and Examination Committee was consisted of 3 directors, 2 of whom were independent directors. Remuneration and Examination Committee believed that: in 2011, the Company hadn‘t resumed production, the remunerations of the director, supervisory and senior executives temporarily would be conducted according to 2009 Annual Shareholders‘ General Meeting which was in accordance with real condition of the Company, re-approval would be conducted after the Company resumed production. The Company established Incentive and Restriction Mechanism Ways of Management Team, but because the Company took bankruptcy reorganization and hadn‘t resumed production, Incentive and Restriction Mechanism Ways of Management Team was still not be implemented, the Remuneration and Examination Committee wouldn‘t comment on it for the moment.
VI. Profit distribution preplan or preplan on converting capital public reserve into share capital in current year Audited by Crowe Horwath CPA (special general partnership), the net profit realized by the Company in 2011 attributable to shareholders of listed company amounted to RMB 3,643,202.46After offsetting losses in previous years, the undistributed profit of the Company amounted to RMB-1,257,759,031.84 till Dec 31st of 2011. The board of directors decided not to distribute profit in 2011, nor convert public reserve into share capital. The proposal still needs to be handed in to 2011 Shareholders‘ General Meeting for discussion.
Reason for why cash profit distribution preplan was not presented though profit was made in the report period, and utilization of the undistributed profit: In reporting period, main business of the Company still in the red, however, 17.9 million yuan of social security subsidy from Chengde County Government was received by the Company, which realized net profit of the Company for year of 2011 amounting to 3,643,202.46 yuan. Profit of 2011 will cover the deficit for previous years. Independent directors thought: the situation that the board of directors decided not to distribute profit in 2011, nor convert public reserve into share capital was in accordance to actual condition of the Company, and also met relevant regulations of Company Law and Article of Association. 2. Bonus Division of the Company in recent three years Year for Amount of cash Net profit attributable to Ratio of net profit bonus bonus shareholders of listed attributable to shareholders distribution (tax included) company in consolidated of listed company in statement of bonus year consolidated statement 2011 0 3,643,202.46 - 2010 0 1,704,928.05 - 2009 0 186,014,467.46 - The proportion of accumulative - cash bonus during recent three years in latest annual average net profit (%)
VII. Establishment and perfection particulars of management system respectively of inside information insiders and outside information users
38 Chengde Dalu Co., Ltd. Annual Report 2011
According to the requirements of documents such as Notice of Doing Well in 2009 Annual Report and Relevant Work of Listed Companies (CSRC Notice (2009) No.34) issued by CSRC, Notice of Doing Well in 2009 Annual Report Work of Listed Companies issued by Shenzhen Stock Exchange, the Administration Norms for Insiders of Internal Information made by the Company in Apr. of 2010 ruled that before internal information was legally disclosed, any insider was forbidden to leave out information, and to make use of it to make internal transaction. Thus the Company further determined content of many aspects such as storage of internal information and appraisal and file of exterior report and submission as well as measures for information divulge owing to failed implementation of confidentiality of relevant personnel, thus further enhanced confidentiality of internal information, effectively ensured the fairness of information disclosure, thus maintained legal interests of all the shareholders especially mediate and small shareholders.
VIII. Special explanation and independent opinion issued by independent directors on capital occupancy and external guarantee of related parties of the Company Following the spirits of ZJF No.56 (2003) document on Standardizing Capital Current and External Guarantee between Listed Company and Related Party and ZJF No.120 (2005) document on Standardizing External Guarantee of Listed Company, as independent directors of the Company, we made careful inspection on the external guarantee executed according to the aforementioned regulation and presented the following explanation on relevant problems, with an attitude of earnest and responsibility: Till the end of the report period, the Company has never provided guarantee for shareholder, actual controller and its related party, any non legal person unit and individual; controlling shareholder and other related party neither forced the Company to provide guarantee for others; the Company didn‘t provide guarantee violating any regulations.
IX. Statement of the board of directors on responsibility of internal control system Building and maintaining internal control system is the responsibility of the board of directors. In reporting period, under guidance and assistant of Hebei SRC and Shenzhen Stock Exchange, the Company took constant self-check and perfection on establishment and implementation of internal control system. Till end of reporting period, the internal control system was complete and the implementation was in place. No events affecting governance and operation were found. For reinforced and improved internal control of the Company, and guarantee favourable operation of the Company as well as in line with relevant requirement and supporting guideline of ―Basic Norms of Internal Control for Enterprises‖, the Company formulated a working plan of implementation of internal control for year of 2012, more details found in http://www.cninfo.com.cn. For ensuring the chronicity and validity of internal control system, the Company will periodically and occasionally supervise implementation of various internal control systems, constantly revised and perfected various systems according to relevant laws and rules, built systemic, scientific and effective risk discrimination and prevention system, as far as decreased risk of operation, standardized the operation of the Company.
X. Other proceedings The domestic media for information disclosure appointed by the Company is Securities Times; and Hong Kong Commercial Daily will replace Hong Kong Wen Wei Po for overseas media since 20 April 2011.
39 Chengde Dalu Co., Ltd. Annual Report 2011
Section IX. Report of Supervisory Committee
I. Particulars about meetings of Supervisory Committee during the report period and the resolutions During the report period, Supervisory Committee of the Company held three meetings, and particulars are as follows: 1. On 25 April 2011, the 8th meeting of the 4th session of supervisory committee was held at the meeting room located at 1/F, Huamu Road No., 832, Shanghai. The meeting reviewed and passed the following decisions: (1) Deliberated and approved the ―Work Report of Supervisory Committee of 2010‖; (2) Deliberated and approved the ―Financial Report of 2010‖; (3) Deliberated and approved the ―Annual Report of 2010 and its Summary‖; (4) Deliberated and approved the ―Special Statement of the Board of Directors on Events Concerning Non-standard Unqualified Audit Opinions; (5) Deliberated and approved the ―First Quarterly Report of 2011 and it‘s Summary‖; (6) Deliberated and approved the ―Self-assessment of Internal Control 2010‖; (7) Deliberated and approved the proposal of ―Retroactive Adjustment of Accounting Statement for year of 2009 by the Board‖ Resolutions of the meeting were published on Hong Kong Commercial Daily and Securities Times dated 25 April 2011. 2. On 28 August 2011 the Company held the 9th meeting of the 4th session of supervisory committee by means of communication voting which reviewed and passed the 2011 Semi-Annual Report and Summary. The decision was reported to Shenzhen Stock Exchange for file dated 29 August 2011. 3. On 25 October 2011, the Company held the 10th meeting of the 4th session of supervisory committee by means of communication voting which reviewed and passed the 2011 the 3rd Quarterly Report. The decision was reported to Shenzhen Stock Exchange for file on 26 October 2011.
II. Independent opinions of the Supervisory Committee on relevant matters in 2011 1. Independent opinions on legal operations of the Company from the Supervisory Committee According to relevant State laws and regulations, the Supervisory Committee of the Company supervised the holding procedures and resolutions of the Shareholders‘ General Meeting and the Board of Directors, implementation of the resolutions of the Shareholders‘ General Meeting by the Board, implementation of duties of the senior executives and the management system of the Company, and believed that, in 2011, the Board of the Company could normatively operate strictly according to Company Law, Securities Law, Listing Rules, Articles of Association of the Company, as well as other relevant regulations and systems in a patient and responsible way and its operation decisions were scientific and reasonable. The Board had further perfected internal management system and internal control to set up a good internal mechanism. The directors and managers of the Company had no behaviors against laws, regulations or Articles of Association of the Company, nor behaviors that had done harm to the interest of the Company in implementing their duties. 2. Inspection of the financial status of the Company The Supervisory Committee of the Company patiently and meticulously inspected the financial system and financial status of the Company, and believed that the Financial
40 Chengde Dalu Co., Ltd. Annual Report 2011
Report 2011 of the Company could truly reflect the financial status and operation achievement of the Company. 3. Independent opinions of the Supervisory Committee on the actual investment of the latest raised fund. In the report period, the Company did not raise fund. With the approval of ZJF〔2004〕 No.101 promulgated by CSRC, the Company has completed directional increasing 0.15 billion B shares in 2004. The total raised amount was HKD 0.498 billion. The raised fund have been used up according to the commitment of Prospectus, there were no changes on the projects of the raised fund. 4. Independent opinions of the Supervisory Committee on purchase and sales of assets In reporting period, the Company had no events about purchase and selling assets. 5. Independent opinions of the supervisory committee on related transactions of the Company In the report period, the related transaction occurred according to the market transaction term and relevant regulations; there were no harm to the Company, equity of the shareholder, losses of assets of the Company, and no insider dealings. 6. Self-evaluation of internal control The Company complied with relevant rules of CSRC and Shenzhen Stock Exchange, followed basic principal of internal control, built and perfected internal control system covering various stages of the Company in accordance with actual condition of its own, ensured normal operation of business, protected safety and completeness of the Company assets. In reporting period, the Company had no events against the Internal Control Guidance of Listed Companies issued by Shenzhen Stock Exchange and internal control of the Company. To sum up, the board of supervisors believed that self-evaluation on internal control system was comprehensive, real and accurate in reflecting actual condition of internal control of the Company. And the board of supervisors had no arguments about it. 7. Independent opinions of the supervisory committee on nonstandard Auditor‘s Report issued by the Certified Public Accountants In 2011, Crowe Horwath CPA (special general partnership) audited the financial report of the Company and issued unqualified auditor‘s report with paragraph of emphasized issues for the Company. Explanations of the Board of Director of the Company on particulars about the non-standard Auditor‘s Report issued by the Accountants were in accordance with the real status of the Company, and the Supervisory Committee agreed and did not have matters with special explanations.
41 Chengde Dalu Co., Ltd. Annual Report 2011
Section X. Iimportant Events I. In the report period, significant lawsuits of the Company 1. On 17 April 2011, Chengde Intermediate People‘s Court accepted Wang Shuxian‘s accuse about creditor‘s right disputes with Chengde Dalu Co., Ltd. On 27 April, the Company received copy documents of ―Appear Notice‖ and ―Civil Ruling Notice‖ from Hebei Chengde Intermediate People‘s Court. Plaintiff requesting the court to judge that bond 84,371,544.00 yuan returns by defendant and cases handling charges beared by defendant. More details found in ―notice of significant lawsuit‖ released on Securities Times, Hong Kong Commercial Daily and Juchao Website http://www.cninfo.com.cn. No ruling results of this case carried till end of this period. 2. On 5 December 2011, Intermediate People‘s Court of Chengde accepted case as: Li Rui appeal Chengde Rongyida Real Estate Development Co., Ltd. as defendant, wholly-owned subsidiary of the Company, Chengde Dalu Co., Ltd. as third party, for infringement dispute concerned. The Company received duplicates of‖ Notice of Appearance‖ and ―Civil Order‖ from Intermediate People‘s Court of Chengde, Hebei Province dated 15 December. The plaintiff asking for economic losses 15 million yuan from defendant and court fees and appraisal cost undertaken by defendant. More details found in ―Notice of Significant Lawsuit‖ released on Securities Time, Hong Kong Commercial Daily and Juchao website http://www.cninfo.com.cn dated 20 April 2012. The case judges no rules till end of this report period. 3. On 22 December 2011, concerning no any objective evidence, defendant Xu Xue made up a story on purpose and vilify plaintiff by spreading false information and reporting false information to media, which cause serious infringement of reputation of the Company, in purpose of interest protection, the Company appeal to People‘s Court of West City District of Beijing. Ended of March 2012, the Company received a Civil Ruling (2012) XMCZi No. 1093 from People‘s Court of West City District of Beijing with dismissal of the action from Chengda Dalu Co., Ltd. The Company takes opinion as defendant concealing facts that replied on purpose which affect fair judgment of the Court. Within legal terms, the Company will appeal to First Intermediate People‘s Court of Beijing.
II. Bankruptcy and related reforming issues in the report period 1. Bankruptcy and related reforming issues of the Company: on Nov. 1, 2008, the creditor – Chengde Xingchen Construction Engineering Co., Ltd. submitted application of bankruptcy and related reforming to Chengde Intermediate People‘s Court (hereinafter refer to as Chengde Intermediate Court). On Nov. 10, 2008, Chengde Intermediate Court made Civil Arbitrate Verdict (2008) CMPZ No. 9, which permitted the Company to reform and appointed settlement group as manager. During reforming period, on Dec. 13, 2008, the Company the Company submitted Reform Plan (Draft) of Chengde Dixian Textile Co., Ltd. (hereinafter refer to as Reform Plan (Draft)) to Chengde Intermediate Court. On Dec. 15, 2008, the 1st creditors meeting voted to Reform Plan (Draft) by the method of group vote, and the expiry date of submitting votes was Dec. 19, 2008. Till Dec. 19, 2008, employees‘ credit group and tax credit group had voted to approve Reform Plan (Draft); priority credit group and common credit group had voted not to approve Reform Plan (Draft). On Dec. 29, 2008, the Company submitted application for approving Reform Plan (Draft) to Chengde Intermediate Court. On Dec. 30, 2008, the Company received Civil Arbitrate Verdict (2008) CMPZ No. 9-2 from Chengde Intermediate Court, which said that: in the group voting of Reform Plan (Draft), employees‘ credit group and tax credit group approved Reform Plan (Draft); the liquidation plan of priority credit group (credit that enjoy guarantee right of specific assets) accorded with the regulations of Item II (I) in Article 87 of Law of the
42 Chengde Dalu Co., Ltd. Annual Report 2011
People's Republic of China on Enterprise Bankruptcy; the liquidation proportion that common credit right received according to regulations of Reform Plan (Draft) was not less than the liquidation proportion received according to bankruptcy liquidation procedure; Reform Plan (Draft) equally treated members in the same group, and the regulated liquidation order did not disobey the regulations of Article 113 in Law of the People's Republic of China on Enterprise Bankruptcy; the operation plan also had feasibility. The Reform Plan (Draft) accorded with the approval qualification regulated by Law of the People's Republic of China on Enterprise Bankruptcy. Hereby, according to regulations of Item II and III in Article 87 of Law of the People's Republic of China on Enterprise Bankruptcy, Chengde Intermediate People‘s Court judged as follows: (1) approved Reform Plan (Draft) of Chengde Dixian Textile Co., Ltd.; (2) terminated reform procedure of Chengde Dixian Textile Co., Ltd. The time limit of implementing reform plan was 24 months, and was calculated from the day when reform plan was permitted by Chengde Intermediate People‘s Court. Since got approval for its reform plan, the Company actively made implementation, and cleared all debt till Apr 24th of 2009 according to the reform plan. On Apr 27th of 2009, the Company received Civil Verdict (CMPZ (2008) No.9-5) issued by Hebei Chengde Intermediate People's Court, which confirmed that the debt clearness part in the reform plan had already been executed completely, and the court judged that: 1. since Apr 24th of 2009, administrant of Chengde Dixian Textile Co., Ltd. terminated its obligation as supervisor; 2. since Apr 24th of 2009, creditors who have not declared creditors‘ right over Chengde Dixian Textile Co., Ltd. during the reforming period could ask exertion right according to the clearness condition as being the same type of creditors‘ right regulated by the reform plan. 2. Bankruptcy liquidation of Xiabancheng Company: on Dec.8, 2008, the Company received Civil Arbitrate Verdict (2008) CMPZ No. 12 made by Hebei Chengde Intermediate People‘s Court that accepted application of Anxin Hongda Plastic Factory making bankruptcy liquidation of Hebei Xiabancheng Knitted Dress Co., Ltd. - wholly owned subsidiary of the Company. On Feb.18, 2008, the Company received Civil Arbitrate Verdict (2008) CMPZ No. 12-1 made by Hebei Chengde Intermediate People‘s Court, which declared that Hebei Xiabancheng Knitted Dress Co., Ltd. was bankrupted. Xianbancheng Company was currently under bankruptcy liquidation. 3. Bankruptcy liquidation of Fashion Company: on Dec.8, 2008, the Company received Civil Arbitrate Verdict (2008) CMPZ No. 11 made by Hebei Chengde Intermediate People‘s Court that accepted application of Chengde Xinda Energy-saving Electronical Equipment Co., Ltd. making bankruptcy liquidation of Chengde Dixian Fashion Co., Ltd. whose 75% equity was held by the Company. On Feb.18, 2008, the Company received Civil Arbitrate Verdict (2008) CMPZ No. 11-1 made by Hebei Chengde Intermediate People‘s Court, which declared that Chengde Dixian Fashion Co., Ltd. was bankrupted. The Fashion Company was now under bankruptcy liquidation. 4. Bankruptcy liquidation of Banhe Company: on Dec.8, 2008, the Company received Civil Arbitrate Verdict (2008) CMPZ No. 10 made by Hebei Chengde Intermediate People‘s Court that accepted application of Sun Weishan making bankruptcy liquidation of Chengde Banhe Chemical Fibber Simulation Textile Co., Ltd. – holding subsidiary of the Company. On Feb.18, 2008, the Company received Civil Arbitrate Verdict (2008) CMPZ No. 10-1 made by Hebei Chengde Intermediate People‘s Court, which declared that Chengde Banhe Chemical Fiber Simulation Textile Co., Ltd. – holding subsidiary of the Company was bankrupted. Banhe Company was at present under bankruptcy liquidation. 5. Xingye Papermaking Co., Ltd. applied for bankruptcy: on Dec.8, 2008, the Company
43 Chengde Dalu Co., Ltd. Annual Report 2011 received Civil Arbitrate Verdict (2008) CMPZ No. 13 made by Hebei Chengde Intermediate People‘s Court that accepted application of Chengde Yonghe Concrete Co., Ltd. making bankruptcy liquidation of Xingye Papermaking Co., Ltd. whose 75% equity was held by the Company. At present, Xingye Papermaking Co., Ltd. was in process of liquidation. Xingye Papermaking Co., Ltd. reached reconciliation agreement with creditor on May 8th, 2009.
III. The Company had no equity of other listed companies, share participating commercial bank, Security Company, insurance company, trust companies, futures companies and other financial enterprises.
IV. Purchases or sales of assets, takeovers or mergers The Company had no purchase and selling assets, consolidation and merger events in reporting period.
V. Particulars about the implementation of equity incentive plan in this report period The Company constituted equity incentive mechanism during the report period and would implement it when the conditions were mature. During the report period, no implementation of equity incentive plan occurred.
VI. Significant related transaction The Company had no significant related transaction in reporting period.
VII. Significant contract and performance of the contract 1. In the report period, the Company had no significant trusteeship, contract and lease of other companies‘ assets and vice visa. 2. Significant Guarantee During the report period, the Company provides no guarantee for subsidiaries, shareholders, actual controllers or its related parties. Neither did the Company provide guarantee for object with assets-liability ratio exceeding 70% in direct or indirect manner. 3. During the report period, the Company did not entrust cash- assets management issues or financing scheme to others. 4. The Company had no significant contract undisclosed.
VIII. In the report period of lasting to this report period, neither the Company nor shareholders with personal equity exceeding 5% made any commitment which exerted important influence upon the operation results and financial position of the Company.
IX. During the report period, directors, supervisors and senior executives conducted no stock purchase or stock sales which violated regulations.
X. Engagement and Removal of CPAs Firm During the report time, the Company engaged Crowe Horwath CPA (special general partnership) as the audit organ for 2011, as it was passed by the 19th Meeting of the 4th Board of Directors and approved by 2010 Annual Shareholders‘ General Meeting. Crowe Horwath CPA (special general partnership) had provided audit service for the Company for the 2nd year, and the audit charge of 2011 amounted RMB 0.5 million.
XI. Related issues of received investigation, administrative punishment or criticism
44 Chengde Dalu Co., Ltd. Annual Report 2011
through public notice from China Securities Regulatory Commission or condemn by the stock exchange in public the Board of Directors, the Supervisory Committee, directors, supervisors and other senior executives of the Company in the report period The present directors, supervisors, senior executives, shareholders, actual controllers and purchaser of the Company had never be investigated by authorized department, received compulsory measure from judicial department, be sent to judicial department or be investigated into criminal responsibility; also never received investigation, administrative punishment or criticism through public notice from China Securities Regulatory Commission, nor had they been condemned by the stock exchange in public either.
XII. In the report period, reception of research and interview In accordance with the principles of just, fair and publicity, to further regulate the behaviors of information disclosure for the listed companies and ensure justice for information disclosure, the Company received the research and media interviews in standardized way according to the regulations of Guideline on Fair Information Disclosure for Listed Companies promulgated by Shenzhen Stock Exchange. In the report period, the Company received visits and telephone communication from its investors for many times; the Company received them and replies strictly in accordance with relevant regulations; there occurred no such situations as selectively and privately reveal or leak non-public significant information to specific parties; and all these assure the fairness of information disclosure of the Company. Time Place Way Type Reception Contents discussed and material provided 2011-04-08 Security Telephone Individual Investor Profitability of the Department communicatio Company, no material n required 2011-04-15 Security Telephone Individual Investor Progress of real estate of Department communicatio the Company, no material n required 2011-04-28 Security Telephone Individual Investor Lawsuit of the Company, Department communicatio lawsuit notice required n 2011-04-29 Security Telephone Individual Investor Lawsuit of the Company, Department communicatio lawsuit notice required n 2011-05-05 Security Telephone Individual Investor Process of lawsuit of the Department communicatio Company, no material n required 2011-05-20 Security Telephone Individual Investor Condition of explanation Department communicatio of performance on net, n notice required 2011-06-09 Security Telephone Individual Investor Current status of the Department communicatio Company, no material n required 2011-06-15 Security Telephone Individual Investor New appointment of the Department communicatio director, no material n required 2011-06-28 Security Telephone Individual Investor Current status of the Department communicatio Company, no material n required 2011-07-18 Security Telephone Individual Investor Condition of sales of real Department communicatio estate, no material required n
45 Chengde Dalu Co., Ltd. Annual Report 2011
2011-08-19 Security Telephone Individual Investor Development target of the Department communicatio Company, no material n required 2011-08-27 Security Telephone Individual Investor Condition of sales of real Department communicatio estate, no material required n 2011-09-13 Security Telephone Individual Investor Process of recover of main Department communicatio business, no material n required 2011-09-22 Security Telephone Individual Investor Lawsuit of the Company, Department communicatio no material required n 2011-10-05 Security Telephone Individual Investor Current status of the Department communicatio Company, no material n required 2011-10-14 Security Telephone Individual Investor Current status of the Department communicatio Company, no material n required 2011-10-25 Security Telephone Individual Investor Condition of performance Department communicatio of 3rd quarterly, no material n required 2011-10-27 Security Telephone Individual Investor Condition of performance Department communicatio of 3rd quarterly, no material n required 2011-11-15 Security Telephone Individual Investor Development target of the Department communicatio Company, no material n required 2011-11-22 Security Telephone Individual Investor Development target of the Department communicatio Company, no material n required 2011-12-07 Security Telephone Individual Journalist Status of the Company, no Department communicatio material required n 2011-12-09 Security Telephone Individual Journalist Status of the Company, no Department communicatio material required n 2011-12-23 Security Telephone Individual Investor Lawsuit condition, no Department communicatio material required n 2011-12-29 Security Telephone Individual Investor Process of lawsuit of the Department communicatio Company, no material n required 2012-01-06 Security Telephone Individual Investor Condition of subsidy of the Department communicatio company, no material n required 2012-01-18 Security Telephone Individual Investor Condition of performance Department communicatio for year of 2011, n performance prediction required 2012-02-19 Security Telephone Individual Investor Status of the Company, no Department communicatio material required n 2012-03-26 Security Telephone Individual Investor Process of lawsuit of the Department communicatio Company, no material n required
46 Chengde Dalu Co., Ltd. Annual Report 2011
2012-03-30 Security Telephone Individual Investor Suspended condition, no Department communicatio material required n 2012-04-05 Security Telephone Individual Investor Suspended condition, no Department communicatio material required n 2012-04-10 Security Telephone Individual Investor Controlling shareholders of Department communicatio the Company, no material n required 2012-04-11 Security Telephone Individual Investor Condition of members of Department communicatio the Board, no material n required 2012-04-13 Security Telephone Individual Investor Condition of members of Department communicatio the Board, no material n required
XIII. Occupation of non-recurring proceeds by shareholders and their related parties During the report period, none occupation of the Company‘s fund by shareholders and the related parties took place.
XIV. Other Significant Events 1. In the report period, because the subsidiaries - Dixian Fashion Co., Ltd., Xiabancheng Knitwear Co., Ltd. and Banhe Chemical Simulation Textile Co., Ltd. was bankrupted, the aforesaid three companies was not in the range of consolidation statement in this period. 2. During the report period, after the approval of 2008 Shareholders‘ General Meeting and Verification of Hebei Administration Bureau of Industry and Commerce, the Company‘s name changed from ―Chengde Dixian Textile Co., Ltd.‖ to ―Chengde Dalu Co., Ltd. Short form of the Company‘s stock changed from ―ST Dixian‖ to ―ST Dalu‖ from Nov. 26th of 2009 while the stock code was still 200160 with the approval of Shenzhen Stock Exchange. 3. On 6 April 2012, former controlling shareholders of the Company, Mr. Chen Rong entered into equity transfer agreement with Mr. Wang Dong, 208,324,800 shares of the Company(a 29.49% in total share capital of the Company) held by Mr. Chen Rong were transferred to Mr. Wang Dong totally. After this equity transfer, Mr. Chen Rong holds no shares of the Company while Mr. Wang Dong held 29.49% shares of the Company, a controlling shareholders and actual controller of the Company. Relevant content found on Securities Times, Hong Kong Commercial Daily and Juchao Website http://www.cninfo.com.cn dated 10 April 2012.
47 Chengde Dalu Co., Ltd. Annual Report 2011
Section XI. Financial report
AUDITOR’S REPORT [English Translation for Reference Only]
GuoHao Shen Zi[2012] No.304A2078 To the Shareholders of Chengde Dalu Company Limited: We have audited the accompanying financial statements of Chengde Dalu Company Limited (hereinafter referred to as ―The Company‖), which comprise the consolidated and company balance sheets as at 31 December 2011, the consolidated and company income statements, the consolidated and company cash flow statements and the consolidated and company statements of changes in owners‘ equity for 2011 and notes to the financial statements. 1.MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Company‘s management is responsible for the preparation and fair presentation of the financial statements. This responsibility includes (1) preparing the financial statements in accordance with the requirements of Accounting Standards for Business Enterprises so that the financial statements provide a fair view of the actual situation; (2) designing, implementing and maintaining the necessary internal control so that the financial statements are free from material misstatement whether due to fraud or error. 2. ADUTITOR’S RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the China Stands on Auditing.. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider the internal control relevant to the entity ‗s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but
48 Chengde Dalu Co., Ltd. Annual Report 2011 not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 3. OPINION In our opinion, the consolidated and company financial statements present fairly, in all important respects, the financial position of the consolidated and company as at December31, 2011 and of the financial performance and cash flow for the year then ended in accordance with the Accounting Standards for Business Enterprises. 4. MATTERS TO BE FOCUSED Without qualifying our opinion, we draw attention of the users of the financial statements to the following events: 1. As stated in Notes IV .1(1).③, Chengde Xingye Papermaking Co., Ltd. is a joint venture invested by DaLu Company and (Hong Kong) Century Win International Holding Co., Ltd. in 2001, the registered capital is USD 250,000,000.00 and the paid-in capital is USD 100,000,000.00. Shareholders' contribution of the registered capital is 40%, with DaLu Company invested USD 75,000,000.00 which account for 75% and (Hong Kong) Century Win International Holding Co., Ltd. invested USD 25,000,000.00 which account for 25%. On 28 Oct. 2002, upon approval with Wai Jing Zi Er Han [2001] No.969< Approval about the capital increase of Chengde Dexing Papermaking Co., Ltd > issued by the Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China, Chengde Xingye Papermaking Co., Ltd. has increased the registered capital from USD 100,000,000.00 to USD 250,000,000.00. The new registered capital should be paid within three years since obtaining the new business license according to the agreement and articles. But the new registered capital of Chengde Xingye Papermaking Co., Ltd. has not been fully paid by the investors within the stipulated term. Confirmed by the Companies Registry of Hong Kong SAR Government, Century Win International Holding Co., Ltd was declared to be dissolved on 20 May 2005. According to the ruling of Hebei superior People's Court with (2009) Ji Xing Er Zhong Zi 44 of 23 April 2009, Chengde Xingye Papermaking Co., Ltd was adjudicated as a mendacious foreign-invested enterprise which was established by the former shareholder Wangsuxian of
49 Chengde Dalu Co., Ltd. Annual Report 2011 the Company who was using the name of Century Win International Holding Co., Ltd. when making investment. 2.As stated in Notes V、6, registered capital of Dahua Paper Industry Co., Ltd after the transfer of equity shares and the capital increase is increased to JPY 6,364,000,000, of which USD 5,000,000 invested before has been verified by PRC Certified Public Accountants, the increased part has not. Chengde Industrial and Commercial Bureau withdrew the license of Dahua Paper Industry Co., Ltd on 28 April 2009 according to the ChengGongShang (2009) No.75 Document due to not submitting the annual inspection material of 2007. 3. As stated in Notes VII、3, Lirui sued the Company together with its subsidiary company Chengde Rongyida Real Estate Development Co., Ltd for infringement and appealed economic compensation of 15 million Yuan. The court heard the case on April 20, 2012, but by April 22, 2012 there are no trial results. 4. As at 31 Dec 2011, the owner‘s equity attributable to parent Company of the Company is RMB-23,882,038.57 and there was no operating revenue in year 2010 or 2011. So there's some uncertainty about the company‘s ability to continue as a going concern.
This section does not affect the above opinion.
Crowe Horwath CPA. CPA China：
Beijing· China CPA China：
April 22, 2012
50 Chengde Dalu Co., Ltd. Annual Report 2011
CONSOLIDATED BALANCE SHEET CHENGDE DALU COMPANY LIMITED AS AT 31 DECEMBER 2011
(All amounts in RMB Yuan unless otherwise stated)
LIABILITIES AND SHAREHOLDERS' ASSETS NOTES 31 DEC.2011 31 DEC. 2010 NOTES 31 DEC.2011 31 DEC. 2010 EQUITY Current assets: Current liabilities:
Cash and cash equivalent Ⅴ.1 5,517,692.29 9,723,008.25 Short-term loans Ⅴ.14 422,261.91 422,261.91 Deposit reservation for Borrowings from the central bank balance Savings and deposits from other Funds for inter-bank lending banks and financial institutions Borrowings from other banks and Tradable financial assets financial institutions Notes receivable Transaction financial liabilities Accounts receivable Notes payable Prepaid accounts Ⅴ.3 21,059,096.25 20,084,632.25 Accounts payable Ⅴ.15 231,175.82 231,075.82 Premiums receivable Advances from customers Ⅴ.16 30,028,613.02 Reinsurance accounts Financial assets sold for receivable repurchase Reinsurance contract reserves Service charge & commissions receivable payable Interest receivable Employee compensation Ⅴ.17 6,707,882.20 6,395,486.60 Other receivables Ⅴ.2 33,632,142.25 30,485,301.52 Taxes payable Ⅴ.18 69,588,226.39 72,070,571.83 Buying back the sale of Interest payable financial assets Inventories Ⅴ.4 39,698,800.27 17,742,081.41 Other accounts payable Ⅴ.19 116,572,501.13 128,516,654.41 Non-current assets due within Reinsurance accounts payable one year Other current assets Ⅴ.5 1,093,527.39 1,093,527.39 Insurance contract reserves Receivings from vicariously traded securities Receivings from vicariously sold securities Long-term liabilities due within one year Other current liabilities TOTAL CURRENT ASSETS 101,001,258.45 79,128,550.82 TOTAL CURRENT LIABILITIES 223,550,660.47 207,636,050.57 Legal representative: Person in charge of accounting function:Person in charge of accounting department: 51 Chengde Dalu Co., Ltd. Annual Report 2011
CONSOLIDATED BALANCE SHEET (continued) CHENGDE DALU COMPANY LIMITED AS AT 31 DECEMBER 2011
(All amounts in RMB Yuan unless otherwise stated)
LIABILITIES AND SHAREHOLDERS' ASSETS NOTES 31 DEC.2011 31 DEC. 2010 NOTES 31 DEC.2011 31 DEC. 2010 EQUITY Non-current assets： Non-current liabilities:
Loans advanced to customers Long-term loans Ⅴ.20 6,801,600.00 6,398,000.00 Financial assets available for Bonds payable sale Investments held to maturity Long-term account payable
Long-term receivables Special accounts payable Ⅴ.21 10,598,000.03 10,598,000.03
Long-term equity investments Ⅴ.7 2,215,729.65 2,215,729.65 Estimated liabilities
Investment property Deferred income tax liabilities
Fixed assets - cost Ⅴ.8 60,092,006.51 62,653,329.49 Other non-current liabilities
Construction in progress Ⅴ.9 6,721,818.00 6,721,818.00 TOTAL NON-CURRENT LIABILITIES 17,399,600.03 16,996,000.03
Construction materials TOTAL LIABILITIES 240,950,260.50 224,632,050.60 Owners' equity(or shareholders' Disposal of fixed assets equity）： Productive biological assets Paid-in capital(or share capital) Ⅴ.22 706,320,000.00 706,320,000.00
Petroleum and natural gas Capital reserve Ⅴ.23 450,765,443.10 450,765,443.10
Intangible assets Ⅴ.10 24,202,279.25 24,823,780.73 Less: Inventory shares
Development expenses Special reserves
Goodwill Surplus reserves Ⅴ.24 76,791,550.17 76,791,550.17
Long-term prepayments Ⅴ.11 356,640.00 General risk provision
Deferred tax assets Retained earning Ⅴ.25 -1,257,759,031.84 -1,261,402,234.30
Other non-current assets Foreign currency translation Ⅴ.13 24,432,938.95 24,432,938.95 （other long-term assets） reserve TOTAL EQUITY BELONGS TO PARENT -23,882,038.57 -27,525,241.03 COMPANY Minority interests 1,954,448.88 2,869,338.07
TOTAL NON-CURRENT ASSETS 118,021,412.36 120,847,596.82 Total owners' equity -21,927,589.69 -24,655,902.96 TOTAL LIABILITY AND OWNERS' TOTAL ASSETS 219,022,670.81 199,976,147.64 219,022,670.81 199,976,147.64 EQUITY Legal representative: Person in charge52 of accounting function: Person in charge of accounting department: Chengde Dalu Co., Ltd. Annual Report 2011
BALANCE SHEET CHENGDE DALU COMPANY LIMITED AS AT 31 DECEMBER 2011
(All amounts in RMB Yuan unless otherwise stated)
LIABILITIES AND ASSETS NOTES 31 DEC.2011 31 DEC. 2010 NOTES 31 DEC.2011 31 DEC. 2010 SHAREHOLDERS' EQUITY
Current assets: Current liabilities:
Cash and cash equivalent 4,019.80 37,197.70 Short-term loans 422,261.91 422,261.91
Tradable financial Transaction financial assets liabilities Notes receivable Notes payable
Accounts receivable Accounts payable 218,802.27 218,802.27
Prepaid accounts 20,084,632.25 20,084,632.25 Advances from customers
Interest receivable Employee compensation 489,639.20 277,000.00
Other receivables Ⅺ.1 350,389.52 278,347.22 Taxes payable 169,855.54 -62,298.33
Inventories Interest payable Non-current asset due Dividendes payable within one year Other current assets Other accounts payable 101,813,353.28 117,654,080.62 Long-term liabilities due within 1 year Other current liabilities Total current Total current assets 20,439,041.57 20,400,177.17 103,113,912.20 118,509,846.47 liabilities Legal representative: Person in charge of accounting function: Person in charge of accounting department:
53 Chengde Dalu Co., Ltd. Annual Report 2011
BALANCE SHEET (continued) CHENG AS AT 31 DECEMBER 2011 (All amounts in RMB Yuan unless otherwise stated)
31 DEC. ASSETS NOTES 31 DEC.2011 LIABILITIES AND SHAREHOLDERS' EQUITY NOTES 31 DEC.2011 31 DEC. 2010 2010 非流动资产 Non-current liabilities: Financial assets available for sale Long-term loan Investments held to maturity Bonds payable Long-term receivables Long-term account payable Long-term equity investments Ⅺ.2 58,925,880.26 58,925,880.26 Special accounts payable 98,000.03 98,000.03 Investment property Estimated liabilities Fixed assets - cost Deferred income tax liabilities Construction in progress Other non-current liabilities Construction materials Disposal of fixed assets Total non-current liabilities 98,000.03 98,000.03 Productive biological assets Total liabilities 103,211,912.23 118,607,846.50 Petroleum and natural gas 所有者权益： Intangible assets Paid-in capital (or share capital) 706,320,000.00 706,320,000.00 Development expenses Capital reserve 449,365,886.69 449,365,886.69 Goodwill Less: Inventory shares Long-term prepayments Special reserves Deferred tax assets Surplus reserves 76,791,550.17 76,791,550.17 Other non-current assets（other General risk provision long-term assets） Retained earning -1,256,324,427.26 -1,271,759,225.93 TOTAL NON-CURRENT ASSETS 58,925,880.26 58,925,880.26 Total owners' equity -23,846,990.40 -39,281,789.07 TOTAL ASSETS 79,364,921.83 79,326,057.43 TOTAL LIABILITY AND OWNERS' EQUITY 79,364,921.83 79,326,057.43 Legal representative: Person in charge of accounting function: Person in charge of accounting department:
54 Chengde Dalu Co., Ltd. Annual Report 2011 CONSOLIDATED INCOME STATEMENT CHENGDE DALU COMPANY LIMITED Fiscal year 2011 (All amounts in RMB Yuan unless otherwise stated)
Items Notes 2011 2010 1. Total operating revenue 515,150.00 516,778.00 Of which: Operating revenue V.26 515,150.00 516,778.00 Interes income Premium income Service charge & commission income 2. Total operating cost 15,631,718.97 23,582,481.21 Of which: Operating costs Interest expense
Service charge & commission expense Surrender expense Net compensation expense
Net Provision for insurance contract reserve
Dividend expense for insurance policy Reinsurance expense Tax and additional expense V.27 30,199.06 644,882.88 Selling and distribution expenses General and administrative expenses V.28 12,102,079.62 11,862,757.29 Finance expense V.29 3,487,822.06 4,752,650.63 Impairement loss(gain) V.30 11,618.23 6,322,190.41 Add: Changing income of fair value(loss is listed with'"-") Investment income(loss is listed with'"-") Of which: income from associates or joint ventures Foreign exchange income Ⅲ. Operating profit(loss is listed with'"-") -15,116,568.97 -23,065,703.21 Add: Non-operating income V.31 18,851,504.06 30,103,042.80 Less: Non-operating expenses V.32 987,303.70 52,397.77 Including: Disposal loss of non-current asset Ⅳ. Profit before tax(loss is listed with'"-") 2,747,631.39 6,984,941.82 Less: Income tax V.33 19,318.12 4,082,172.06 Ⅴ. Net profit for the year(loss is listed with'"-") 2,728,313.27 2,902,769.76 Net profit attributed to the owmers of parent company 3,643,202.46 1,704,928.05 Minority shareholders -914,889.19 1,197,841.71 Ⅵ. Earnings per share （1）Basic earnings per share V.34 0.0052 0.0024 （2）Diluted earnings per share V.34 0.0052 0.0024 Ⅶ. Other profit Ⅷ. Profit in all 2,728,313.27 2,902,769.76 The total comprehensive profit attributable to parent company 3,643,202.46 1,704,928.05 The total comprehensive profit attributable to minority interest -914,889.19 1,197,841.71
Legal representative: Person in charge of accounting function: Person in charge of accounting department:
55 Chengde Dalu Co., Ltd. Annual Report 2011 INCOME STATEMENT CHENGDE DALU COMPANY LIMITED Fiscal year 2011 (All amounts in RMB Yuan unless otherwise stated)
Items Notes 2011 2010
1. Operating revenue
Less：Operating cost
Tax and additional expense
Selling and distribution expenses
General and administrative expenses 2,178,719.53 2,118,581.46
Finance expense 5,936.10 8,706.54
Impairement loss(gain) 292.00 17,228.41 Add: Changing income of fair value(loss is listed with'"- ") Investment income(loss is listed with'"-")
Of which: income from associates or joint ventures
2.Operating profit(loss is listed with'"-") -2,184,947.63 -2,144,516.41
Add: Non-operating income 17,900,000.00
Less: Non-operating expenses 280,253.70 52,397.77
Including: Disposal loss of non-current asset
3.Profit before tax(loss is listed with'"-") 15,434,798.67 -2,196,914.18
Less: Income tax
4.Net profit for the year(loss is listed with'"-") 15,434,798.67 -2,196,914.18
5.Earnings per share
（1）Basic earnings per share 0.0219 -0.0031
（2）Diluted earnings per share
6.Other profit
7.Profit in all 15,434,798.67 -2,196,914.18
Legal representative: Person in charge of accounting function:Person in charge of accounting department:
56 Chengde Dalu Co., Ltd. Annual Report 2011 CONSOLIDATED CASH FLOW STATEMENT CHENGDE DALU COMPANY LIMITED Fiscal year 2011
(All amounts in RMB Yuan unless otherwise stated)
Item NOTE FY2011 FY2010
1. CASH FLOWS FROM OPERATING ACTIVITIES：
Cash received from sale of goods or rendering of services 30,543,763.02 Net increase of deposit from customers and other financial institutions Net increase of borrowings from the central bank Net increase of borrowings from other financial institutions Premiums received from original insurance contracts Premiums received from reinsurance business Net increase of deposit and investments from insurer Net income from disposal of financial assets at fair value through profit and loss Cash received from interest, service charge and commission Net increase of borrowings from other banks Net increase of funds for repurchase business Refunds of taxes Other cash receipts relating to operating activities Ⅴ.35 25,795,702.97 45,790,231.29 Sub-total of cash inflows 56,339,465.99 45,790,231.29 Cash paid for goods and services 22,406,638.42 3,836,864.10 Net increase of loans advanced to customers Net increase of deposits in central bank and other financial institutions Compensation paid to original insurance contract Cash paid for interest, service charge and commission Cash paid for dividend expense for insurance policy
Cash paid to and on behalf of employees 831,424.00 292,600.00 Payments of all types of taxes 7,727,240.93 430,707.72 Other cash payments relating to operating activities Ⅴ.35 25,906,554.20 73,503,880.48 Sub-total of cash outflows 56,871,857.55 78,064,052.30 Net cash flows from operating activities -532,391.56 -32,273,821.01
Legal representative: Person in charge of accounting function: Person in charge of accounting department:
57 Chengde Dalu Co., Ltd. Annual Report 2011 CONSOLIDATED CASH FLOW STATEMENT（Continued） CHENGDE DALU COMPANY LIMITED Fiscal year 2011
(All amounts in RMB Yuan unless otherwise stated)
Item NOTE FY2011 FY2010
2. CASH FLOWS FROM INVESTING ACTIVITIES ： Cash received from return of investments Cash received from investment income
Net cash received from disposal of fixed,intangible and other long-term assets 40,085,130.00 Net cash received from the sale of subsidiaries and other entities
Other cash receipts relating to investing activities 19,500,000.00 Sub-total of cash inflows 59,585,130.00 Cash paid to acquire fixed assets, intangible assets and other long-term assets 740,848.41 Cash paid to acquire investments Net increase of pledge loans Net cash paid for acquiring subsidiaries and other entities Other cash payments relating to investing activities Sub-total of cash outflows 740,848.41 Net cash flows from investing activities -740,848.41 59,585,130.00 3. CASH FLOWS FROM FINANCING ACTIVITIES： Cash received from investments by others Of which: cash received by subsidiary which is invested by minority shareholder Cash received from borrowings Cash received from issuing debentures
Other cash receipts relating to financing activities Ⅴ.35 14,800,000.00 50,000,000.00 Sub-total of cash inflows 14,800,000.00 50,000,000.00 Cash repayments of amounts borrowed
Cash payments for distribution of dividends or profits and for interest expenses 283,616.44 2,228,635.58 Of which: dividends or profits distributed by subsidiary to minority shareholder
Other cash payments relating to financing activites Ⅴ.35 17,445,727.12 65,410,000.00 Sub-total of cash outflows 17,729,343.56 67,638,635.58 Net cash flows from financing activities -2,929,343.56 -17,638,635.58 4. EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH -2,732.43 -7,921.27 5. NET INCREASE IN CASH AND CASH EQUIVALENTS -4,205,315.96 9,664,752.14 Add：Cash and cash equivalents at the beginning of the year 9,723,008.25 58,256.11 6. Cash and cash equivalents at the end of the year 5,517,692.29 9,723,008.25
Legal representative: Person in charge of accounting function: Person in charge of accounting department:
58 Chengde Dalu Co., Ltd. Annual Report 2011 CASH FLOW STATEMENT CHENGDE DALU COMPANY LIMITED Fiscal year 2011
(All amounts in RMB Yuan unless otherwise stated)
Item NOTE FY2011 FY2010 1. CASH FLOWS FROM OPERATING ACTIVITIES： Cash received from sale of goods or rendering of services Refunds of taxes Other cash receipts relating to operating activities 541,232.52 1,759,994.70 Sub-total of cash inflows 541,232.52 1,759,994.70 Cash paid for goods and services Cash paid to and on behalf of employees 203,230.00 263,600.00 Payments of all types of taxes Other cash payments relating to operating activities 370,954.45 1,469,031.90 Sub-total of cash outflows 574,184.45 1,732,631.90 Net cash flows from operating activities -32,951.93 27,362.80 2. CASH FLOWS FROM INVESTING ACTIVITIES ： Cash received from return of investments Cash received from investment income Net cash received from disposal of fixed,intangible and other long-term assets Net cash received from the sale of subsidiaries and other entities Other cash receipts relating to investing activities Sub-total of cash inflows Cash paid to acquire fixed assets, intangible assets and other long-term assets Cash paid to acquire investments Net cash paid for acquiring subsidiaries and other entities Other cash payments relating to investing activities Sub-total of cash outflows Net cash flows from investing activities 3. CASH FLOWS FROM FINANCING ACTIVITIES： Cash received from investments by others Cash received from borrowings Cash received from issuing debentures Other cash receipts relating to financing activities Sub-total of cash inflows Cash repayments of amounts borrowed Cash payments for distribution of dividends or profits and for interest expenses Other cash payments relating to financing activites Sub-total of cash outflows Net cash flows from financing activities 4. EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH -225.97 -7,065.54 5. NET INCREASE IN CASH AND CASH EQUIVALENTS -33,177.90 20,297.26 Add：Cash and cash equivalents at the beginning of the year 37,197.70 16,900.44 6. Cash and cash equivalents at the end of the year 4,019.80 37,197.70 Legal representative: Person in charge of accounting function: Person in charge of accounting department:
59 Chengde Dalu Co., Ltd. Annual Report 2011
CONSOLIDATED STATEMENT OF CHANGES IN OWNER'S EQUITY CHENGDE DALU COMPANY LIMITED
Fiscal year 2011
(All amounts in RMB Yuan unless otherwise stated)
Year of 2011 Year of 2010
Owner's equity attributed to parent company Owner's equity attributed to parent company Minority Minority Total Item Total Less： shareholders' Less： General shareholde owners'equ Paid-in Capital Special Surplus General risk Retained owners'equity Paid-in Capital Special Surplus Retained Oth treasury O thers equity treasury risk rs' equity ity capital reserve reserves reserves provision earning capital reserve reserves reserves earning ers stock stock provision
I. Balance brought forward from previous year 706,320,000.00 450,765,443.10 76,791,550.17 -1,261,402,234.30 2,869,338.07 -24,655,902.96 706,320,000.00 450,765,443.10 76,791,550.17 -1,263,107,162.35 1,671,496.36 -27,558,672.72
Add: Changes in accounting policy
Correction of prior year errors
Others II. Balance at beginning of current 706,320,000.00 450,765,443.10 76,791,550.17 -1,261,402,234.30 2,869,338.07 -24,655,902.96 706,320,000.00 450,765,443.10 76,791,550.17 -1,263,107,162.35 1,671,496.36 -27,558,672.72 year III. Changes in current year 3,643,202.46 -914,889.19 2,728,313.27 1,704,928.05 1,197,841.71 2,902,769.76 (Decrease presented by '-' ) (Ⅰ) Net profit 3,643,202.46 -914,889.19 2,728,313.27 1,704,928.05 1,197,841.71 2,902,769.76
(Ⅱ) Other comprehensive income
Subtotal of (Ⅰ) and (Ⅱ) 3,643,202.46 -914,889.19 2,728,313.27 1,704,928.05 1,197,841.71 2,902,769.76 (Ⅲ) Input and reduced capital of owners 1．Capital input by owners
2．Amount of share-based payment recorded in owner's equity
3． Others
(Ⅳ) Profit distribution
1．Withdrawal of surplus reserves
2. Appropriating general risk
3．Distribution to owners ( shareholders)
4． Others
(Ⅴ) Internal carry-over of owner's equity
1．Capital reserves conversed to capital (share capital) 2．Surplus reserves conversed to capital (share capital)
3．Remedying loss with surplus reserves
4．Others
(Ⅵ) Specific-purpose reserve
1．Amount withdrawn for the period
2．Amount used for the period
（Ⅵ）Others
Ⅳ. Balance at end of current year 706,320,000.0 450,765,443.1 76,791,550.17 ############## 1,954,448.88 -21,927,589.69 706,320,000. 450,765,44 76,791,550.17 ############## 2,869,338.07 ########### 0 0 00 3.10 Legal representative: : Person in charge of accounting function: Person in charge of accounting department:
60 Chengde Dalu Co., Ltd. Annual Report 2011
STATEMENT OF CHANGES IN OWNER'S EQUITY CHENGDE DALU COMPANY LIMITED Fiscal year 2011 (All amounts in RMB Yuan unless otherwise stated)
Year of 2011 Year of 2010
General Item Less： General Total Less： Total Paid-in Capital Special Surplus Retained Paid-in Capital Special Surplus risk Retained treasury risk owners'equ treasury owners'equit capital reserve reserves reserves earning capital reserve reserves reserves provisi earning stock provision ity stock y on I. Balance brought forward from previous 706,320,000.00 449,365,886.69 76,791,550.17 -1,271,759,225.93 -39,281,789.07 706,320,000.00 449,365,886.69 76,791,550.17 -1,269,562,311.75 -37,084,874.89 year Add: Changes in accounting policy
Correction of prior year errors
Others
II. Balance at beginning of current year 706,320,000.00 449,365,886.69 76,791,550.17 -1,271,759,225.93 -39,281,789.07 706,320,000.00 449,365,886.69 76,791,550.17 -1,269,562,311.75 -37,084,874.89 III. Changes in current year (Decrease 15,434,798.67 15,434,798.67 -2,196,914.18 -2,196,914.18 presented by '-' ) (Ⅰ) Net profit 15,434,798.67 15,434,798.67 -2,196,914.18 -2,196,914.18
(Ⅱ) Other comprehensive income
Subtotal of (Ⅰ) and (Ⅱ) 15,434,798.67 15,434,798.67 -2,196,914.18 -2,196,914.18
(Ⅲ) Input and reduced capital of owners
1．Capital input by owners
2．Amount of share-based payment recorded in owner's equity
3． Others
(Ⅳ) Profit distribution
1．Withdrawal of surplus reserves
2．Distribution to owners ( shareholders)
3.Others
(Ⅴ) Internal carry-over of owner's equity
1．Capital reserves conversed to capital (share capital)
2．Surplus reserves conversed to capital (share capital)
3．Remedying loss with surplus reserves
4．Others
(Ⅵ) Specific-purpose reserve
1．Amount withdrawn for the period
2．Amount used for the period
（Ⅵ）Others 706,320,000.0 449,365,886.6 - 706,320,000 449,365,886.6 Ⅳ. Balance at end of current year 76,791,550.17 -23,846,990.40 76,791,550.17 -1,271,759,225.93 -39,281,789.07 0 9 1,256,324,427.2 .00 9 Legal representative: : Person in charge of accounting function:61 Person in charge of accounting department: Chengde Dalu Co., Ltd. Annual Report 2011 CHENGDE DALU COMPANY LIMITED Notes to the financial statements For the year ended 31 December 2011 (All amounts in RMB Yuan unless otherwise stated) [English Translation for Reference Only]
Ⅰ.GENERAL 1. Company profile
The former of Chengde Dalu Company Limited (hereinafter referred to as ―the Company‖) is Chengde Dixian Textile Company Limited (hereinafter referred to as ―Dixian Company‖), which was established in the People‘s Republic of China as a joint stock company approved by People‘s Government of Hebei Province (JI GU BAN(1999) No. 36) dated on 3 November 1999. There are five promoters of the Company, which are Mr. Shuxian Wang, North Industry Co., Ltd., Longfeng Cosmetic Co., Ltd., Red Star Plastic Product Co., Ltd. and Mr. Zhengsong Wang respectively. The initial registered capital of the Company is RMB 100,000,000, divided into 100,000,000 shares with a par value of RMB 1 Yuan each, Mr. Shuxian Wang holds 85,100,000 shares of them. On 13 November 2009, the decision of the board of directors agreed that the company changed its name to Chengde Dalu company Limited.
Upon the approval document No.[2000] 121 issued by the China Securities Regulatory Commission on 29 August 2000, the Company issued 100,000,000 domestic listed foreign shares (hereinafter referred to as ―B share‖) in Shenzhen Stock Exchange. And the Company increased issuance of 15,000,000 B shares between 29 September and 29 October 2000 by exercising an overallotment option. The registered capital of the Company after the issue of B shares was increased to RMB 215,000,000, divided into 215,000,000 shares with a par value of RMB 1 Yuan each.
According to the resolution of general meeting of shareholders on 12 March 2002, the Company distributed share bonus of 43,000,000 shares to all shareholders at the rate of every 10 shares send 2 shares and transferred capital reserves into capital at the rate of every 10 shares send 5 shares thus increased 107,500,000 shares to all shareholders. The registered capital of the Company was increased to RMB 365,500,000 after share bonus distribution and transferring.
According to the resolution of general meeting of shareholders on 22 July 2003, the Company distributed share bonus of 73,100,000 shares to all shareholders at the rate of every 10 shares send 2 shares. The registered capital of the Company was increased to RMB 438,600,000 after share bonus distribution.
Upon the approval of the Ministry of Commerce (of China) on 11 March 2004, the Company changed into foreign investment joint stock company
Upon the approval document No.[2004] 101 issued by the China Securities Regulatory Commission in July 2004, the Company increased its capital by issuing 150,000,000 B shares through private placement, of which 91,300,000 shares were bought by Hong Kong dollars and 58,700,000 shares were bought by RMB.
According to the resolution of general meeting of shareholders on 8 June 2006, the Company distributed share bonus of 117,720,000 shares to all shareholders at the rate of every 10 shares send 2 shares.
On 4 August 2004, the Intermediate People's Court of Shenzhen determined that promoter share 62 Chengde Dalu Co., Ltd. Annual Report 2011 of 112,324,800 shares held by Shuxian Wang be transferred to Chen Rong for compensate in the price of RMB 45,491,544. And in the same year, Intermediate People's Court of Dalian determined that promoter share of 96,000,000 shares held by Shuxian Wang be transferred to Chen Rong for compensate in the price of RMB 38,880,000.
On Novermber 11, 2009, Hebei provincial department of commerce issued ‗the reply of the approval on the capital increase, the change of shareholders and the Company‘s name of Chengde Di Xian knitting Co., Ltd.‘ with JZSWZZ (2009) No. 143, which approved the Company to reissue 150,000,000 domestic listed foreign shares within the P.R.C in the year of 2004, and distribute share‘s dividends by every 10 shares send 2 shares in the year 2006, and change the shareholder of 208,324,800 shares from Wang Shuxian to Chen Rong, and change the Company‘s name as Chengde Dalu Co., Ltd.
After increase of the shares and distribution, the Company's equity amounted to 70, 632 million shares and the registered capital is RMB 70,632 million which was verified by Zhong Lei accounting firm as Zhong Lei Yan Zi (2010) No.10009 issued in June 24, 2010.
On August 23, 2011, the Company renewed the Legal Representative‘s Operating License issued by Chengde Industrial and Commercial Administrative Bureau as No. 130000400001225; residence as ，XiaBan town ,Chengde City, Hebei Province; YanQiZhong becomes the legal representative; registered capital as well as paid-in capital of 70,632 million Yuan; the type of company is limited liability (Sino-foreign joint venture and listed).
2. Scope of operation
The company runs business by producing, processing and selling knitwear series, woven fabric series, superior quality suits, children's garments series, packaging materials, paper and paper products, all kinds of yarn paper and synthetic fiber. The company and its subsidiaries import raw materials of knitwear, woven fabric, and other raw materials and ancillary materials needed for production, as well as equipment and spare parts used for production.
The principal activity of Rongyida company,subsidiary of the company, is residential properties development.
Ⅱ MAIN ACCOUNTING POLICIES, ESTIMATES AND PRIOR PERIOD ERRORS.
1、 Preparation basis of the financial statements The financial statements of the company have been prepared based on going concern assumption and actual transactions and events occurred. It is prepared in accordance with the requirements of ―Accounting Standards for Business Enterprises - Basic Standard‖ and 38 Specific Standard issued by the Ministry of Finance of 15 February 2006, and application guidance, illustrations to the standards and related pronouncements.
2、 Statement of compliance with Accounting Standards for Business Enterprises The financial statements prepared by the company are comply with the requirements of Accounting Standards for Business Enterprises, and are truly and completely reflecting the financial positions as of December 31, 2011 of both the consolidated and the Company, as well as the operation results and cash flow in the year then ended both of the consolidated and the Company.
3、 Accounting period The fiscal year of the company is the solar calendar year, namely from January 1 to December 31.
63 Chengde Dalu Co., Ltd. Annual Report 2011 4、 Standard currency for bookkeeping RMB is the primary currency in main economic environments, thus the Company and its subsidiaries adopt RMB as the standard currency for bookkeeping.
5. Accounting treatment of the merging entities under common control and different control ⑴ Merger of entities under common control
A business combination under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and the control is not temporary.
Assets and liabilities that the combining party obtains in a business combination are measured on book value in the combined party on the combining date. In the consolidated balance sheet, the assets and liabilities of the combined party are measured pursuant to their carrying amount. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid or the total par value of the shares issued is recognized in capital reserve (share premium). If the capital reserve is not sufficient to offset, the retained earnings is adjusted. All direct expenses for the business combination of the combining party, including the expenses for audit, assessment and legal services, are recorded into the profits and losses at the current period. Transaction costs incurred by the acquirer for issuing debt securities as combination consideration are recognized in initial recognition amount of debt securities. Transaction costs incurred by the acquirer for issuing equity securities as combination consideration should offset the equity securities premium income. If the equity securities premium income not sufficient to offset, the retained earnings will be adjusted. ⑵ Merger of entities under different control
A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination.
Determine the combination costs respectively in light of the following circumstances: For a business combination realized by a transaction of exchange, the combination costs are the fair values on the acquisition date of the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the acquiree. All direct expenses for the business combination of the combining party, including the expenses for audit, assessment and legal services, are recorded into the profits and losses at the current period. Transaction costs incurred by the acquirer for issuing debt or equity securities as combination consideration are recognized in initial recognition amount of debt or equity securities.
For a long-term equity investment acquired by equity combination not under the same control, the combination costs (excluding cash dividends and profits due from investees) determined on the acquisition date are recognized as the initial investment cost for the acquiree‘s long-term equity investment. For identifiable assets and liabilities in accordance with recognition condition acquired by absorbing combination not under the same control, these assets and liabilities are recognized in light of their fair values on the acquisition date. If the acquisition cost is greater than the fair value of the part of identifiable net assets acquired on the acquisition date, the difference is recognized as goodwill. If the acquisition cost is lesser than the fair value of the part of identifiable net assets acquired on the acquisition date, the difference is recognized in profit or loss in corresponding period.
6. The preparation method for the consolidated financial statements ⑴ The scope of consolidation
The consolidated scope of the consolidated financial statements include: the Company and all its subsidiaries. For subsidiaries obtained under common control in the reporting period are included in the scope of consolidation from earliest initial declaration of financial statements to the end of the current period. For subsidiaries obtained not under common control in the reporting period are included in the scope of consolidation from the acquisition date to the end of the current period. For subsidiaries disposed in the reporting period are not included in the scope of consolidation 64 Chengde Dalu Co., Ltd. Annual Report 2011 from the acquisition date of disposition.
⑵ Accounting method of preparing consolidated financial statements
For any subsidiary acquired by the Company through corporate merger under the same control, when the consolidated financial statements for the current period are being prepared, it is deemed that the merged subsidiaries are entered into the merger scope of the Company when the final control party of the Company starts to perform control to it, and the number at the beginning of the period in the consolidated financial statements and previous comparable statement are modified correspondingly. While the Company is preparing the consolidated financial statements, the assets and liabilities of the merged subsidiary and their book values are combined into the consolidated balance sheet of the Company and the operating results of the merged subsidiary are combined into the consolidated profit statement of the Company since the final control party of the Company starts to perform control. When making consolidation, internal equity investment with the owner‘s equity of subsidiaries, internal investment income with the profit‘s distribution of subsidiaries, internal transactions (including unrealized internal transaction‘s profits and losses of parent company and subsidiaries brought into consolidation with affiliated enterprises and joint ventures), and internal creditor‘s rights with debts should be offset.
The accounting policies of the subsidies are in accordance with the company.
During the reporting period, the consolidated balance sheets will be adjusted initial number for the merger of enterprises under the same control. The consolidated balance sheets are not adjusted initial number for the merger of enterprises under different control or the disposal of subsidiaries.
The consolidated profit statement include the incomes, expenses and profits of the combining parties incurred from the beginning of the current period to the date of combination for the merger of enterprises under the same control. The consolidated profit statement include the incomes, expenses and profits of the combining parties incurred from the beginning of the acquisition date to the end of reporting for the merger of enterprises under different control. The consolidated profit statement include the incomes, expenses and profits of the combining parties incurred from the beginning of the current period to the disposal of subsidiaries date.
The consolidated cash flow statements include the cash flow of the parties to the combination from the beginning of the current period to the date of combination for the merger of enterprises under the same control. The consolidated cash flow statements include the cash flow of the parties to the combination from the beginning of the acquisition date to the end of reporting for the merger of enterprises under the different control. The consolidated cash flow statement includes the cash flow of the parties to the combination from the beginning of the current period to the disposal of subsidiaries date.
7. Recognition basis of cash and cash equivalents Cash refers to in-stock cash and bank savings which are available for payment whenever needed. Cash equivalent refers to the investment held by the Company with short term, strong liquidity and low risk of value fluctuation that is easy to be converted into cash of known amount.
8. Translation of businesses and accounts in foreign currency ⑴ Accounting method of foreign currency operations
The foreign currency transaction are converted into market exchange rates on the day in which the transaction took place when initially recorded；The foreign currency received as capital is transferred according to approximate exchange rate at sight of the date of the transaction. On balance sheet date, dispose foreign currency monetary item and foreign currency non-monetary item according to the following regulations:：
①Monetary item denominated in foreign currencies is translated using the spot rate at the balance sheet date. Translation differences arising from the translation are recognized in current profit or loss.
65 Chengde Dalu Co., Ltd. Annual Report 2011 ②Non-monetary items denominated in foreign currencies that are measured using historical costs are still measured using recording currency translated at the spot rate at transaction date.
③Non-monetary items denominated in foreign currencies that are measured using fair value adopts exchange rate at sight of fair value confirmation date. The difference between recording currency after translating and the original recording currency is disposed as fair value alteration and reckoned into profit and loss at current period. The difference between recording currency after translating of non-monetary item available for sale are reckoned into capital reserve.
9. Financial instruments ⑴ Classification ,principle and the methods of measurement of financial instrument.
① Classification of financial instrument: Financial instrument is the contract which forming an enterprise's financial assets and other units' financial liability or equity instrument, including: financial assets, financial liabilities and equity instrument.
The Company's financial assets and financial liabilities comprise financial assets or liabilities measured with fair value and their changes calculated into the current profits and losses, held-to-maturity investment, loans and receivables, available-for-sale financial assets.
② The principle and the methods of measurement for financial tools
A、 Financial assets or liabilities measured with fair value and their changes calculated into the current profits and losses
Principle: this kind of financial assets or liabilities comprise transaction financial assets or liability, directly designated financial assets or liabilities measured with fair value and their changes calculated into the current profits and losses. Transaction financial assets or liability mainly refers to stocks, bonds, funds for sale recently and derivatives not as effective hedging instruments or financial liabilities repurchased recently. Directly designated financial assets or liabilities measured with fair value and their changes calculated into the current profits and losses, mainly refers to designation based on risk management, strategic investment needs.
The methods of measurement for financial tools: financial assets or liabilities measured with fair value and their changes calculated into the current profits and losses when acquiring recognize fair value as the initial amount (deducting declared but unpaid cash dividends or to pay interest on the bonds but not yet received)
During the holding period, interest or cash dividends are recognized as investment income, fair value's changes are directly calculated into the current profits and losses at the balance sheet date.
When such financial assets are disposed in the future, the difference between fair value and initial amount are recognized as investment income, at the same time adjusting changes in fair value.
B、Held-to-maturity investment
Principle: Fixed rate bonds, floating rate corporate bonds and other non-derivative financial assets the Company has the positive intention and ability to hold to maturity which has fixed dates, fixed and determinable payments.
The methods of measurement for financial tools: fair value and the relevant transaction expenses are recognized as the initial amount when acquiring(deducting interest on the bonds but not yet received)
The Company adopts amortized costs for subsequent measurement and calculates interest income recorded in investment income according to actual interest rate (If there is no big difference
66 Chengde Dalu Co., Ltd. Annual Report 2011 between the actual interest rate and coupon rate, according to coupon rate). Actual interest rate is determined when Obtaining, it keeps unchanged in the expected duration or a shorter period.
When disposing or recovering, the difference of acquiring amount and book value is recognized as investment income.
Before the expiry date, if the company sale or re-classify a large amount of held-to-maturity investment (the larger is relative to the total amount of this kind of investment before sale or re-classification), then the rest of this kind of investment is classified as available-for-sale financial assets, and in the accounting period and the next two full fiscal year is no longer classified as held to maturity investments, with the following exceptions: the date of sale or re-classification is close to the maturity or redemption date (such as three months before maturity), the change of market interest rate has no significant effect on the fair value of the investment; after almost all of the initial principal amount of the investment is recovered by periodic payments under the contract or early repayment , selling the remaining portion or reclassifying; sale or reclassification is due to the independent issue the company cannot control or are not expected to recur.
C、Accounts receivables
Principle: accounts receivables formed by companies selling goods or providing services, recognize the initial amount according to the buyer's contract or agreement.
The methods of measurement for financial tools: The Company adopts amortized costs for subsequent measurement according to actual interest rate method.
When disposing or recovering, the difference of acquiring amount and book value of accounts receivables is recognized as current profits and losses.
D、Available-for-sale
Principle: the financial assets not classified as financial assets or liabilities measured with fair value and their changes calculated into the current profits and losses, held-to-maturity investment, loans and receivables.
The methods of measurement for financial tools: fair value and the relevant transaction expenses are recognized as the initial amount when acquiring (deducting declared but unpaid cash dividends or to pay interest on the bonds but not yet received)
During the holding period, interest or cash dividends are recognized as investment income, fair value's changes are directly calculated into capital reserve (other capital reserves) at the balance sheet date.
When such financial assets are disposed in the future, the difference between book value and acquiring amount are recognized as investment income, meanwhile, accumulated amounts from fair value change with corresponding disposing part are transferred out to investment income.
⑵ Conversion of financial assets
① Recognition of financial assets conversion: Recognition of the financial assets are terminated when the Company converts out nearly all related risks and rewards, or the company neither converts nor keeps all related risks and rewards but loses control.
② Measure of financial assets conversion
A: For financial assets that totally conversed: If it meets the requirements of termination recognition, then the difference of the two items below is calculated into current profits and 67 Chengde Dalu Co., Ltd. Annual Report 2011 losses.
Book value of the conversed financial assets.
Relevant receivables together with accumulated amounts from fair value change that entered into equity before.
B、For financial assets that partially conversed: If it meets the requirements of termination recognition, then book value of the conversed financial assets are allocated between the terminated recognition parts and the rest in light with fair value of their own respectively, and the difference of the two amounts below are calculated into current profits and losses.
Book value of the terminated recognition parts
Relevant receivables of the terminated recognition parts together with accumulated amounts from fair value change that correspond to the terminated recognition parts.
C、The conversed financial assets that do not meet the requirements of termination recognition are continue recognized as financial assets. The relevant receivables are recognized as financial liabilities.
D、For using continuing involvement approach to converse financial assets, the company recognizes a financial asset toward the extent of the conversion, simultaneously recognize a financial liability.
⑶ Termination recognition of financial liabilities
When all or partial current obligations of the financial liability terminated, the company terminates confirming all or partial of the financial liability.
⑷ Confirmation of fair value of financial assets and liabilities
①If it exists the active market about financial assets and liabilities, then using the quotation in active market to determine the fair value.
② If it does not have active market, the company use value estimation to confirm the fair value.
⑸ Devalue test methods of financial assets (exclude accounts receivables)
At the balance sheet date, the company checks book value of financial assets excluding accounts receivables. Impairment provision is made if impersonality evidence obtained to verify the impairment of the assets.
① For held-to-maturity investment, impairment provision is calculated in the difference between book value and current value of projected future cash flow. The details follow the impairment losses method of accounts receivables.
③For available for sale financial assets: Impairment provision is made if impersonality evidence obtained to verify the fair value of this kind financial assets decrease substantially, and predict this decreased trend is not temporary. The accumulated losses resulted from fair value decrease that entered into equity before are also confirmed as impairment loss. These accumulated losses are equal to the amount that acquisition cost of the financial assets minus principal repayment, amortization, and the current fair value and the impairment loss that entered into profit or loss before.
The available for sale liability tools that has been confirmed the impairment loss, the fair value
68 Chengde Dalu Co., Ltd. Annual Report 2011 has increased in the subsequent accounting period, and this is objectively related to the matters of impairment losses, the impairment losses are entered into current profits and losses. When the value of available for sale equity tools has increased, their impairment losses are entered into equity not profits and losses.
The impersonality evidence that verify the financial assets devalued are the matters that actually occur after the initial confirmation of the financial assets, and affect the projected future cash flow, and these effects are reliably measured.
10、Account receivable ⑴ Account receivable which are individually significant in amount and individually assessed for impairment：
The recognizing method for It is defined as account receivable which individually account receivable which are significant in amount with large amount over RMB individually significant in amount: 1,000,000 single. The accrue method of provisions The client identifies single amount of accounts receivable for individual significance that is individually significant in amount. If evidence shows its repayment and its present value of expected future cash flow is lower than the carry amount, provisions for bad debt are recognized.
⑵ Accounts receivable belong to recognition of impairment allowances in combination：
The Company recognizes the credit risk based on the accounts‘ age and accrual the provision for bad debt by aging analysis to those individual accounts without large amount but with major risk after integrated into credit risk combination
Aging analysis：
Percentage of accounts Percentage of other Aging receivable provision for receivables provision for bad accounts (%) bad accounts (%) Within 1 year 5.00 5.00 1-2 year 20.00 20.00 2-3 years 50.00 20.00 Over 3 years 100.00 100.00
⑶ Accounts receivable belong to individual insignificant but individually assessed for impairment：：
The reason for individually The company conducts impairment test to receivables that is assessed for impairment insignificant in amount individually but with the following characteristics: receivables that involving dispute or legal case, arbitration with the other party; obvious indicators show that it is probable that the debtor is unable to fulfill the repayment obligation. Method for recognition of Standalone impairment test is carried out for this kind of impairment allowances receivables. If any objective evidence indicate that the receivables impaired, impairment losses are recognized based on the difference between the carrying amount and the present value of estimated future cash flows. Bad debt provision is recognized accordingly.
69 Chengde Dalu Co., Ltd. Annual Report 2011
11. Inventory ⑴ Classification of inventory
Inventories mainly include raw materials, auxiliary materials, repair parts, low-value and consumable products, goods in stock, goods in process, finished goods, development cost, and products to be developed and so on. Development costs include land cost, construction cost and other cost which cost in the construction of real estate development projects. Products to be developed are land purchased and prepared for real estate development projects.
⑵ Costing method of delivering of inventory Costing method used for inventory usage and shipment is the weighted average costing at the end of the month.
The actual costs of real estate development products include land leasing fees, infrastructure facilities expenses, and expenditures on construction and installation works, borrowing costs before the completion of the development projects and other related costs. When inventories are sold, determine the actual cost by the individual valuation method. ⑶ Determination of net realizable value of inventories and method of recognizing impairment provision.
Provision for inventories are accrued and adjusted according to the lower of cost and net realizable value after checking thoroughly at the end of the year.
The net realizable value of finished goods and inventories hold for sell such as hold for sell materials estimated selling price less estimated selling costs and related taxes in the ordinary course of business.
The net realizable value of the processing material is the estimated selling price in the ordinary course of business less the estimated costs before finished and the estimated selling expenses and the taxes necessary to make the sale.
To the inventories holding for selling contract and service contract, its net realizable value should be measured according the contract price. If the holding quantity is over the contract needed, the surplus are measured based on selling price instead of contract. If no selling contract, the net realizable value of inventories are measured based on selling price and hold for sell materials are measured based on market value.
Provision for inventories are accrued and adjusted according to the lower of cost and net realizable value after checking thoroughly at the end of the year. Usually provisions for inventories are accrued individually. But to those huge quantity and low price items, provisions are accrued for types of stock. And if it is hard to discriminate with other inventories, provisions are accrued for whole to those with the same purpose and series.
If the influence resulted in provision for impairment disappeared, the write-down amounts are reversed and profit recognized accordingly.
⑷ The inventory system Perpetual inventory system is applied to inventories.
⑸ The amortization method of low cost consumables and packing materials Low cost consumables and Packing materials are amortized on one-off basis.
12. Long-term equity investment ⑴ Determination of investment cost ① For the merger of enterprises under the same control
Pooling of interest method is applied to the merger of enterprises under the same control.
70 Chengde Dalu Co., Ltd. Annual Report 2011 If the consideration of the merging enterprise is that it makes payment in cash, transfers non-cash assets or bears its debts, it, on the date of merger, regards the share of the book value of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party are offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings are adjusted.
The initial cost of a long-term equity investment obtained by making payment in cash is the purchase cost actually paid. The initial cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses.
If its subsidiary company adjusted the book value in accordance with the evaluation value of assets and liabilities at the time by restructuring, the initial costs of the long-term equity investment formed in the merger of an enterprise regard the share of the net assets as the initial costs and the differences between costs and payments are adjusted accordingly.
② For the long-term investment acquired by merger of enterprises not under the same control
Purchase method is applied to determine the costs of the merger of enterprises not under the same control. The merging enterprise regards the costs of the merger as the initial costs of the long-term equity investment. The costs for business combination include the fair values on the acquisition date of cash or noncash assets, issued or assumed debts, issued equity securities, as well as the summation directly related expenses incurred during business combination, but exclude agent‘s expenses of audit, legal service and valuation consulting, etc. and other related management expenses incurred as acquirer for business combination.
If the merging enterprise under different control is through number of transactions step by step, its accounting treatment will distinguish individual financial statements and consolidated financial statements.
③ Besides the long-term equity investments formed by the merger of enterprises
④ The initial costs of a long-term equity investment obtained by making payment in cash are the purchase costs which are actually paid.
The initial costs of a long-term equity investment obtained on the basis of issuing equity securities are the fair value of the equity securities issued;
The initial costs of a long-term equity investment of an investor are the value stipulated in the investment contract or agreement except the unfair value stipulated in the contract or agreement;
If the fair values of both the assets received and surrendered can be reliably measured, the fair value of the assets surrendered are the basis for the determination of the costs of the assets received, unless there is any exact evidence showing that the fair value of the assets received are more reliable. Where a non-monetary assets transaction is not satisfies the above conditions at the same time, the fair value of the assets and relevant payable taxes are regarded as the transaction costs.
The initial costs of a long-term equity investment obtained by recombination of liabilities are ascertained in accordance with fair value.
⑵ Subsequent measurement and recognition of gains or losses
Cost method is used for measurement of long-term equity investment if there is no common control with or significant influence to the invested entity, and there is no quotation in an active market and the fair value cannot be measured reliable. Equity method is used for measurement of long-term equity investment if there is common control with or significant influence to the invested entity. 71 Chengde Dalu Co., Ltd. Annual Report 2011
Long-term equity investments that are measured using equity method:
① If the initial investment cost of a long-term equity investment, which is measured using quity method, is greater than the portion of fair value of the identifiable net assets of the invested entity attributable to the Company, the initial investment cost of the long-term equity investment is not adjusted. Otherwise, the difference is charged to current profit or loss, and the cost of long-term equity investment is adjusted accordingly.
② Under equity method measurement, current period investment gain or losses are the net profits or losses, which are realized by the invested entity in the same year, that attributable to the Company. The portion of net profit or loss that attributable to the Company is determined based on the fair value of the identifiable assets of the invested entity and after adjusting invested entity‘s net profit according to the accounting policies and accounting period of the Company. For unrealized gain or losses from internal transactions between the Company and its associated enterprises and joint invested enterprises, the part attributable to the Company, calculated based on percentage of shareholding, is offset(unrealized gain or losses that are impairment are excluded) and, on this basis, the investment gain or losses are calculated.
③ The invested entity‘s net loss attributable to the company reduces the carrying amount of long-term equity investment and other long-term equities that in nature of net investment to the invested entity to the extent of zero. If the Company undertakes obligations of the invested entity‘s extra losses, provision is to be recognized according to liabilities estimated, and charge to investment loss in current period. Net profit of the invested entity that is realized in subsequent period, the Company offset the unrealized losses using the profit attributable to the Company. After all losses are offset, resume recognizing gains attributable to the Company.
④ The investing enterprise, in the light of the profits or cash dividends declared to distribute by the invested entity, calculate the proportion it obtain, and reduce the book value of the long-term equity investment correspondingly.
⑤ Where any change is made to the owner's equity other than the net profits and losses of the invested entity, the book value of the long-term equity investment is adjusted and included in the owner's equity.
If the investing enterprise is still the Company‘s subsidiary after shareholding percentage reduced, quity method is still used and other profits and losses that are recorded in other comprehensive income are transferred into current profits and losses.
⑶ Base of joint control over or significant influences on the invested entity ① The judgment basis of joint control
The term "joint control" refers to the control over an economic activity in accordance with the contracts and agreements, which does not exist unless the investing parties of the economic activity with one an assent on sharing the control power over the relevant important financial and operating decisions. Joint control is recognized in accordance with the following provisions:
A Either of joint venture could control the joint enterprise alone B The business activities related to both of the joint venture agreement C All parties of the joint venture may appoint one of the parties to manage daily activities of the joint venture. But it should exercise management power under the extent of financial and business policies unanimously agreed by all parties.
② The judgment basis of significant influences
The term "significant influences" refers to the power to participate in making decisions on the financial and operating policies of an enterprise. Significant influences are recognized in accordance with the following provisions:
72 Chengde Dalu Co., Ltd. Annual Report 2011 A There are represents in the investee's board or similar rights organization B Having the right to make policy, including the dividend distribution and other policy C There are important transactions with the invested enterprise, which can affect the business decisions of the investee D Dispatching the management to the investee E Providing essential technologies
⑷ The impairment testing method and accrue method of provision ① The company, on the day of balance sheet, makes estimation on the recoverable amount about the long-term equity investment of subsidiaries, joint ventures and associates and impairment provision of long-term equity investment is recognized according to the method mentioned at II、 33.
② If the investment enterprise has not joint control or significant influence over the invested entity or fair value of the long-term equity investment cannot reliably measured, impairment provisions are recognized according to the method mentioned at II、9(5).
13. Fixed assets and accumulated depreciation
⑴ Recognition principles of fixed assets Fixed assets are defined as the tangible assets which are held for the purpose of producing goods, providing services, lease or for operation & management and with useful life of more than. The term "fixed assets" refers to the tangible assets that simultaneously possess the features as follows:
① The economic benefits pertinent to the fixed assets are likely to flow into the enterprise.
② The cost of the fixed assets can be measured reliably
⑵ Depreciation method of various fixed assets Fixed asset is depreciated on straight-line basis over its estimated useful life from the next month after it reached estimated useful condition(fixed assets that have been fully depreciated but are still in use and the land that is separately measured are excluded). The useful lives, estimated residual ratios and annual depreciation rates for each category of fixed assets are as follows without considering impairment:
Categories Depreciation age Salvage value Annual (year) rate % depreciation rate % Houses and buildings 25.00 3.80 5.00
Papermaking equipment 20.00 4.50 10.00
Other machinery equipment 7.00-15.00 6.33-13.57 5.00
Transportation vehicles 5.00-10.00 9.50-19.00 5.00
Office equipment 5.00-10.00 9.50-19.00 5.00
⑶ Impairment test and impairment provision recognition for fixed assets Impairment test and impairment provision recognition for fixed assets please refer to Note II、23. ―Impairment provision of non-current non-financial asset‖.
⑷ Other remarks ①The Company revises at the end of year, the useful life, estimated salvage value, and depreciation policies of the fixed assets. If any change happened, it is treated as changes in accounting estimations.
73 Chengde Dalu Co., Ltd. Annual Report 2011 ②Subsequent repair expenditures in relation to fixed asset are recognized in the cost of the fixed assets .Subsequent repair expenses other than these are accounted into current income account when occurred.
③ Subsequent decoration expenses which are recognized in the cost of the fixed assets arel depreciated using the straight-line method individually choose between two shorter period of their remaining useful lives and the period between two decorations.
14. Construction-in-process ⑴ Method of accounting for construction-in-process
Cost of construction in process is determined at actual project expenditure and accounting according to project classification.
⑵ Time point to transfer to fixed asset
Construction in progress is transferred to fixed assets when the assets are ready for their intended use. But if the construction in progress are ready for their intended use while the final accounts have not finished, they are also transferred to fixed assets using estimated value according to construction budget、construction cost、or actual cost for projects and depreciation begins from the following month. After the final accounts have been finished then estimated value of construction in process is adjusted accordingly, but not depreciation.
⑶ .The impairment of construction in progress
For impairment test and impairment provision recognition for construction in progress please refer to II、23 ―Impairment of non-current non-financial asset‖.
15. Borrowing costs ⑴ Recognition for capitalization
The term "assets eligible for capitalization" refers to the fixed assets, investment real estates, inventories and other assets which the acquisition, construction or production activities which are necessary to prepare these assets for its intended use or sale need quite a long time.
The borrowing costs include interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. Where the borrowing costs incurred to an enterprise can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it is capitalized and recorded into the costs of relevant assets. Other borrowing costs are recognized as expenses on the basis of the actual amount incurred, and are recorded into the current profits and losses.
The borrowing costs are not capitalized unless they simultaneously meet the following requirements:
①The asset disbursements have already incurred, which include the cash, transferred non-cash assets or interest bearing debts paid for the acquisition and construction or production activities for preparing assets eligible for capitalization; ②The borrowing costs has already incurred; ③The acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started.
⑵ Period of capitalization
For the ancillary expense incurred to a specifically borrowed loan, those incurred before a qualified asset under acquisition, construction or production is ready for the intended use or sale are capitalized at the incurred amount when they are incurred, and are recorded into the costs of 74 Chengde Dalu Co., Ltd. Annual Report 2011 the asset eligible for capitalization; those incurred after a qualified asset under acquisition and construction or production is ready for the intended use or sale are recognized as expenses on the basis of the incurred amount when they are incurred, and are recorded into the profits and losses of the current period. Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs are suspended. When the qualified asset under acquisition and construction or production is ready for the intended use or sale, capitalization of borrowing costs are ceased.
⑶ Method of the amount of the capitalization of borrowing costs
The Company calculates the amount of the capitalized borrowing costs on a quarterly basis.
As for specifically borrowed loans for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests are determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment
Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the enterprise calculates and determines the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate is calculated and determined in light of the weighted average interest rate of the general borrowing.
Where there is any discount or premium, the amounts of discounts or premiums that are amortized during each accounting period are determined by the real interest rate method, and an adjustment is made to the amount of interests in each period.
During the period of capitalization, the exchange balance on foreign currency borrowings are capitalized, and are recorded into the cost of assets eligible for capitalization.
16. Intangible assets ⑴ Initial measurement of intangible assets
The intangible assets are initially measured at actual cost
If price of intangible assets is beyond the normal conditions of payment credit, essentially it is financing. The cost of the intangible assets is the present value of the purchase price.
Intangible assets acquired from the debtor restructuring, the Company uses fair value of intangible assets as the basis of the book value, and the difference between the book value of the restructuring of debt with the fair value of intangible assets are calculated into current profit or loss. If exchange of non-monetary assets has commercial substance of assets or under the premise that the fair value of the assets received or surrendered can be measured reliably. The Company uses the fair value of the assets surrendered as the book value of the assets received unless there is conclusive evidence that the fair value of assets received is more reliable. If it doesn't meet the prerequisite for the exchange of non-monetary assets, the Company uses the book value and related tax of the surrendered assets as the cost of assets received, not calculated into profits and losses.
⑵ Subsequent measurement of intangible assets
① Service life of intangible assets
The company analysis service life of intangible assets when obtained. For intangible asset with a finite useful life the company analysis its service life. If the service life time is unexpected, it is defined as indefinite useful life intangible assets.
75 Chengde Dalu Co., Ltd. Annual Report 2011 ② Amortization of intangible assets
For intangible assets with a limited service life, the Company amortizes in the straight-line method within the expected service life since the month it acquired. For those intangible assets with indefinite useful life are not amortized and the Company performs the impairment test at the end of report term.
At end of report term, revising is performed on the useful life of intangible assets with limited useful life and the methods of amortizing, adjustment are made when necessary.
③ Impairment of intangible assets
For Impairment of intangible assets please refer to Note II、23 ―Impairment of non-current non-financial asset‖.
17. Long-term prepaid expenses Long-term amortizable expenses are those already occurred and amortizable to the current term and successive terms for over one year. Long-term amortizable expenses are evenly amortized to the benefit period. For those long-term amortizable expenses that cannot bring benefit in the future accounting period its amortized cost are deducted as expenses during the current period.
18. Estimated debts ⑴ Provisions are recognized when the Company has a present obligation which needs reliably estimated outflow to settle as a result of past transactions or events such as pending litigation, product quality warranties, onerous contracts.
⑵ At the balance sheet date, a provision is initially measured at the best estimate of the expenditure required to settle the related present obligation, taking the risks, uncertainties and time value of money that related to the contingencies into consideration. Where the effect of the time value of money is material, the best estimate is determined by discounting the related future cash flow.
19. Revenue ⑴ Revenue from sale of goods
Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods are transferred to the buyer; the transfer of control and ownership of the goods sold which normally takes place upon delivery of goods; And the amount of revenue and cost related to the goods can be measured reliably.
Revenue from sale of real estate is recognized when the normal transfer procedures have finished and the house has delivered to the owner for use.
⑵ Revenue from providing service
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction are recognized using the percentage of completion method on balance sheet date. The Company ascertains the total revenue from the providing of labor services in accordance with the received or to-be-received price of the party that receives the labor services as stipulated in the contract or agreement, unless the received or to-be-received price as stipulated in the contract or agreement is unfair. When the outcome of a transaction involving the rendering of services cannot be estimated reliably, the best estimate is conducted in accordance with the following situations, respectively.
① If the cost of labor services incurred is expected to be compensated, the revenue from the providing of labor services are recognized in accordance with the amount of the cost of labor services incurred, and the cost of labor services is carried forward at the same amount; 76 Chengde Dalu Co., Ltd. Annual Report 2011
② If the cost of labor services incurred is not expected to compensate, the cost incurred are included in the current profits and losses, and no revenue from the providing of labor services may be recognized.
⑶ Revenue from transferring usage rights
Revenue from transferring usage rights of assets is recognized when the relevant economic benefits are likely to flow into the Company and the amount of revenues can be measured reliably.
① The interest income is calculated based on the tenure of the company‘s monetary funds used by others and the actual interest rates used;
② The amounts of royalty revenue are measured and confirmed in accordance with the period and method of charging as stipulated in the relevant contract or agreement.
20 Government Subsidies Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income.
⑴ Measurement and recognition of government subsidies
If a government subsidy is in a form of monetary asset; it is measured in the light of the received or receivable amount.
If a government subsidy is in a form of non-monetary asset, it is measured at its fair value. If the fair value cannot be obtained in a reliable way, it is measured at its nominal amount.
⑵ Accounting for government subsidies
A government grant related to asset is recognized as deferred income, and evenly amortized and charged to profit or loss over its useful life.
If a government grant is at its nominated amount it is charged to current profit or loss directly.
If a government grant related to income is used to compensate related expenses and losses in subsequent periods, it is recognized as deferred income. If it is use to compensate related expenses and losses that are already incurred, it is charged to current profit or loss directly.
21、Deferred tax assets and liabilities Deferred tax assets and deferred tax liabilities are confirmed respectively according to the deductible temporary difference and taxable temporary difference.
⑴ An enterprise recognizes the deferred income tax liabilities arising from a deductible temporary difference to the extent of the amount of the taxable income which it is most likely to obtain and which can be deducted from the deductible temporary difference. However, the deferred income tax assets, which are arising from the initial recognition of assets or liabilities during a transaction which is simultaneously featured by the following, are not recognized:
If it is not a transaction of corporate merger, accounting profits or taxable amount of incomes is not affected when the transaction occurs (or can deduct the losses), the temporary difference generating in this transaction will not generate deferred income taxes. The temporary difference caused by the initial confirmation of goodwill will not generate relevant deferred income taxes.
⑵ Except for the deferred income tax liabilities arising from the following transactions, the enterprise recognizes the deferred income tax liabilities arising from all taxable temporary differences:
77 Chengde Dalu Co., Ltd. Annual Report 2011
① The initial recognition of business reputation； ②The initial recognition of assets or liabilities arising from the following transactions which are simultaneously featured by the following：The transaction is not business combination，and at the time of transaction, the accounting profits will not be affected, nor will the taxable amount be affected.
The taxable temporary differences related to the investments of subsidiary companies when the investing enterprise can control the time of the reverse of temporary differences and the temporary differences are unlikely to be reversed in the excepted future.
The deferred income tax assets and deferred income tax liabilities are measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled.
⑶ The impairment of the deferred income tax assets
The carrying amount of deferred income tax assets is reexamined on balance sheet day. If it is unlikely to obtain sufficient taxable income taxes to offset the benefit of the deferred income tax assets, the carrying amount of the deferred income tax assets is written down, and the reduced amount is recorded into the income tax expenses of the current period. When it is probable to obtain sufficient taxable income taxes, such write down amount is subsequently reversed.
22、Operational leasing Rental payments from operational rental property are recognized as current losses at straight basis in the rental period, containing rent-free period. Initial direct expenses are accounted into current income account at occurring .If the lessor bears the lease related expenses which should be bear by the lessee (the Company), the lease related expenses are deducted from the total rental rate and rental payments after the lease related expenses are recognized as current losses on a straight-line basis over the lease term.
Lease receipts under an operating lease are recognized in the current profit on a straight-line basis over the lease term. Significant initial direct costs are capitalized when they are incurred and are recognized in profits or losses over the lease term on the basis on which the lease income is recognized. Insignificant initial direct costs are charged to the current profits or losses directly. If the lessor (the Company) bears the lease related expenses which should be bore by the lessee, the lease related expenses are deducted from the total rental receipts .Lease receipts after the lease related expenses are recognized as current profits on a straight-line basis over the lease term.
23、Impairment of non-current non-financial assets The Company assesses, on balance sheet date, whether there are indicators for impairment to fixed assets, construction in process, intangible assets with finite useful life investment property measured at cost, and long-term equity investment to subsidiaries, joint ventured companies and associated companies.
⑴ If there are any indictors of impairment, recoverable amount is estimated and impairment test is conducted. Impairment tests are conducted each year to goodwill, intangible assets that with indefinite useful life and intangible assets that have not reached its useful condition despite whether there is indicators of impairment.
If the recoverable amount of an asset is less than its carrying amount in the impairment test, provision for impairment is made for the difference and recognized as an impairment loss.
⑵ The recoverable amount of an asset is the higher of its fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. The present value of expected future cash flows of an asset are determined by estimating the future cash flows to be derived from continuing use of the asset and from its ultimate disposal and applying the appropriate discount rate to those future cash
78 Chengde Dalu Co., Ltd. Annual Report 2011 flows. Provision for impairment is made and recognized on an individual basis. If it is not possible to estimate the recoverable amount of the individual asset, the Company determines the recoverable amount of the asset group to which the asset belongs.
⑶ An asset is the minimum group of assets which can generate cash flows independently. If the recoverable amount of an asset group is less than its carrying amount in the impairment test, provision for impairment is made for the difference and recognized as an impairment loss.
⑷ When conducting impairment test on goodwill, which is presented separately in balance sheet, the carrying amount of goodwill will be allocated to asset group or combination of asset group which are expected to enjoy benefit from the synergy effect in a business combination. If the test results indicate that the recoverable amount of the asset group or combination of asset group, which consist goodwill allocated, is lower than its carrying amount, impairment loss is recognized accordingly. The impairment loss reduces the carrying amount of goodwill that allocated to the asset group or combination of asset group. If the goodwill is insufficient to deduct, then offsetting other assets within the asset group or combination of asset group based on the weight of the carrying amount of assets other than goodwill in the asset group or combination of group.
⑸ Once an impairment loss is recognized, it is not reversed in subsequent periods.
24、Employee wages In the accounting period in which an employee has rendered service to the Company, the Company recognizes the employee benefits payable as a liability. Expenditures paid by the Company for the social security system set up the government, such as basic pension insurance, medical insurance, housing funds and others, are recognized in the costs of related assets or the current profit or loss. For those with more than one year's maturity will be record by present value if the difference is big between the book value and present value
25、Changes of Main Accounting Policies, Accounting Estimates There are no major changes in accounting policies and accounting estimates this year.
26、Correction to errors of the previous period There are no major changes in correction to errors of the previous period this year
Ⅲ. Tax 1. Main tax types and rates imposed on the Company Item of taxation Tax base Tax rate % Value-added tax payable 17 Value added tax Fixed assets sales income Half of 4% Taxable turnover Business tax 5 Urban maintenance and Total turnover tax 5 construction tax Taxable income； Enterprise income tax Taxable Income approved by tax 25 official
2、Notes The enterprise income tax of Chengde Rongyida Real Estate Development Co., Ltd., subsidiary of the Company is on the basis of verification collection which is 15% of its taxable income. Ⅳ.CONSOLIDATED FINANCIAL STATEMENTS 1、 Subsidiaries ⑴ Subsidiaries that are established by setup or investment Year-end actual Name of Types of Place of Business Registered Capital Business Scope investment Subsidiary Subsidiary Registration Nature amount
79 Chengde Dalu Co., Ltd. Annual Report 2011 Year-end actual Name of Types of Place of Business Registered Capital Business Scope investment Subsidiary Subsidiary Registration Nature amount Produces and Chengde Xingye Chengde sales series of Wholly Paper 250,000,000.00 75,000,000.00 Paper Industry Co., City, Hebei super bond -owned producing (USD) (USD) Ltd. Province paper and kraft carton Gold Axe British Wholly 1 Investment and 1 Investment Group Virgin Export -owned (USD) exportation (USD) Limited Islands Chengde Hebei Xiaban Textile Wholly Clothes 4,000,000.00 Produces and 4,000,000.00 City, Hebei Co., Ltd. -owned producing (USD) sales of clothes (USD) Province Produces and Chengde Chengde Dixian Wholly Clothes 24,000,000.00 sale of clothes 24,000,000.00 City, Hebei Fashion Co., Ltd. -owned producing (USD) and synthetic (USD) Province fibers Recycling and Chengde Huaxin Chengde Waste Wholly 1000000.00 sale of waste 900,000.00 Waste Paper City, Hebei paper -owned (RMB) paper and paper (RMB) Collection Co., Ltd. Province recycling products (Continued) The amount of Balance of the net Share Voting In the scope of Minority minority shareholders‘ Name of actual investment -holding right Consolidation shareholders' equity after minority Subsidiary in proportion proportion (Yes/No) equity shareholders‘ gains subsidiaries (%) (%) and losses Chengde Xingye Paper Industry Co., 75.00 75.00 Yes 2,220,146.03 Ltd. Gold Axe Investment 100.00 100.00 Yes Group Limited Hebei Xiaban City 100.00 No Textile Co., Ltd. Chengde Dixian 100.00 No Fashion Co., Ltd. Chengde Huaxin Waste Paper 67.50 90.00 Yes 6.74 Collection Co., Ltd. Notes： ① Hebei Xiaban City Textile Co., Ltd. has been declared bankrupt according to the paper civil determination of Cheng Min Po Zi (2008) No.12-1 issued by Chengde intermediate people's court in Hebei province on 2nd Aug 2009.
② Chengde Dixian Fashion Co., Ltd. has been declared bankrupt according to the paper civil determination of Cheng Min Po Zi (2008) No. 11-1 issued by Chengde intermediate people's court in Hebei province on 8th Feb 2009.
③ Chengde Xingye Papermaking Co., Ltd., a joint venture that invested by the Company and (Hong Kong) Century Win International Holding Co., Ltd. in 2001, the registered capital is USD 250,000,000.00, and the paid-in capital is USD 100,000,000.00 by the end of the report period. 40% of the paid-in capital came from shareholders‘ contribution, in which 7.5 billion USD (75%) from the Company and 2.5 billion (25%) from Zhan Xi international Co, ltd, HK. According to the article of
Affected by the smuggling case of the major shareholder WANG SHU XIAN and senior executives, Chengde Xingye Paper Industrial Co., Ltd had been stopped operating since Dec. 2006, so that the company suffered very hard operational losses. The Chengde intermediate people's court in Hebei province
80 Chengde Dalu Co., Ltd. Annual Report 2011 acknowledged the receipt of the bankruptcy request from the said company on 11th Mar 2009 via the court ruling of（2008）Cheng Min Po Zi No.13 and the mediation request was approved by the Court via （2008） Min Po Zi No. 13-2 on 11th Mar 2009. On 10th May 2009, the Chengde intermediate people's court in Hebei province ended the mediation program by acknowledging the agreement between the creditors and Chende paper manufacturing co, Ltd which was signed on 8th May 2009 via （2008）Min Po Zi No. 13-3. According to the ruling of Hebei senior People's Court (2009) Ji Xing Er Zhong Zi 44 of 23 April 2009, Chengde Xingye Papermaking Co., Ltd was adjudicated a deceptive foreign- invested enterprise which was established by the original shareholder of the Company Wangsuxian in the name of Century Win International Holding Co., Ltd.
④ Chengde Industrial and Commercial Bureau withdraw the license of Chengde Huaxin waste paper collection Co., Ltd on 28 April 2009 due to not submitting the annual inspection material of 2007 according to the ChengGongShang (2009) No.75 Document.
⑵ Subsidiary from merger under different control Place of Types of Nature of Registered year-end actual Name of holding registratio Business scope subsidiary business capital investment amount n Real estate Chengde Rongyida development, Real Estate Wholly- Chengdu, Real estate 10,000,000.00 producing、 1 development Co., owned Hebei development (RMB) importing 、 (RMB) Ltd. exporting clothes and lease service (Continued) The amount of Balance of the Share Voting Financial minority Minority net actual -holding right statements shareholders‘ equity Name of holding shareholders' investment in proportion proportion consolidated offsetting minority equity subsidiaries (%) (%) or not shareholders‘ gains and losses Chengde Rongyida realestate development 100.00 100.00 Yes Co., Ltd.
2、 Explanation to changes in scope of consolidation. There is no change in scope of consolidation in the report period.
Ⅴ.NOTES TO SIGNIFICANT ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS 1. Cash and bank balances Closing balance Beginning balance
Item Amount in Amount in Exchange Amount in Exchange Amount in foreign foreign rate RMB rate RMB currency currency 103,766.34 61,415.17 Cash on hand: 103,766.34 61,415.17 RMB
Bank deposit: 468,956.88 9,661,593.08
RMB 431,984.61 9,622,371.45
USD 5,258.26 6.3009 33,131.77 5,314.53 6.6227 35,196.54
EUR 105.82 8.1625 863.76 105.82 8.8065 931.90
HKD 2,862.32 0.8107 2,320.48 2,862.32 0.8509 2,435.63
81 Chengde Dalu Co., Ltd. Annual Report 2011 Closing balance Beginning balance
Item Amount in Amount in Exchange Amount in Exchange Amount in foreign foreign rate RMB rate RMB currency currency JPY 8,092.00 0.0811 656.26 8,092.00 0.08126 657.56 4,944,969.07 Other monetary funds 4,944,969.07 RMB 5,517,692.29 9,723,008.25 Total
Notes to cash and bank balances: Other monetary funds are mainly credit card deposits.
2 Other receivables ⑴ Other receivables disclosed on types： Closing balance
Types Book value Bad debt provision Amount Rate in total Amount Rate in total (%) (%) Receivables that are individually significant in amount and provided for bad 74,832,730.76 95.93 44,196,901.26 59.06 debt separately Receivables provided for bad debt by 3,171,902.31 4.07 175,589.56 5.54 portfolio Receivables that are individually insignificant in amount but provided for - bad debt separately Total 78,004,633.07 100.00 44,372,490.82 56.88 (Continued) Beginning balance Book value Bad debt provision Types Amount Rate in total Amount Rate in total (%) (%) Receivables that are individually significant in amount and provided for bad 71,950,477.96 96.13 44,210,063.38 61.45 debt separately Receivables provided for bad debt by 2,895,696.15 3.87 150,809.21 5.21 portfolio Receivables that are individually insignificant in amount but provided for bad debt separately Total 74,846,174.11 100.00 44,360,872.59 59.27
Receivables that are individually significant in amount and provided for bad debt separately： Name of debtors Book balance Bad debt Rate Reason
Receivables due from administrator 30,635,829.50 ends operations for many years and Chengde dahua paper Co., LTD 44,196,901.26 44,196,901.26 100.00 receivables are expected to lost Total 74,832,730.76 44,196,901.26 100.00 --
For receivables that are individually significant in amount and provided for bad debt separately, receivable RMB 30,349,934.30 due from administrator of the company‘s subsidiary failed to make bad debt provision. The reason is that the dealings between the company and its subsidiaries under bankruptcy and restructuring with administrators still have not yet been settled. By the end of the current reporting period,
82 Chengde Dalu Co., Ltd. Annual Report 2011 the amount of receivables due from the administrators is smaller than that of payables due to the administrators, and the company expects to receive the full amount.
Receivables presented by account aging: Closing balance Beginning balance Duration of the Book value Bad debt Book value Bad debt accounts Amount Rate in total provision Amount Rate in total provision Less than one year 3,136,168.36 98.87 156,808.41 2,861,649.00 98.82 143,082.45 1-2 years 2,049.00 0.06 409.80 30,989.40 1.07 6,197.88 2-3 years 30,627.20 0.97 15,313.60 3,057.75 0.11 1,528.88 Over 3 years 3,057.75 0.10 3,057.75 Total 3,171,902.31 100.00 175,589.56 2,895,696.15 100.00 150,809.21
⑵ During the reporting period, there are no other accounts receivables due from any shareholders held over 5% (inclusive) voting shares of the Company.
⑶ Top five of other accounts receivable
Percentage of Relationship with Order number Amount Amount Aging total other accounts the Company receivable (%)
1 Affiliated party 44,196,901.26 Over 3 years 56.66
2 Non-affiliated 16,191,074.30 Less than 3 year 20.76
3 Non-affiliated 11,749,260.00 2-3 years 15.06
4 Non-affiliated 2,600,000.00 within 1 year 3.33
5 Non-affiliated 2,409,600.00 within 1 year 3.09 Total 77,146,835.56 98.90
⑷ Other receivables of related parties Percentage in the total Relationship with Entity name Amount amount of other accounts the Company receivable (%) Chengde Dahua paper Co., LTD joint venture 44,196,901.26 56.66 Suning Banhe Fiber Co., Ltd. joint venture 15,361.00 0.02 Total 44,212,262.26 56.68
3、 Prepayments ⑴ Prepayments presented by aging Closing balance Beginning balance Amount Aging Amount Rate in total (%) Amount Rate in total (%)
Within one year 974,464.00 4.63 1-2 years
2-3 years
Over 3 years 20,084,632.25 95.37 20,084,632.25 100.00
Total 21,059,096.25 100.00 20,084,632.25 100.00 ⑵ Top five prepayment accounts
83 Chengde Dalu Co., Ltd. Annual Report 2011 Relationship Name of the entity with the Amount Aging Reason for unsettlement company Purchasing the Land right (Land use Xiaban City financial bureau non-affiliated 20,084,632.25 over3 years Certificate has not been transferred and registered) Chengde YongWang construction Advances on non-affiliated 437,654.87 within 1 year and installation Co., LTD construction Chengde LiChen construction and Advances on non-affiliated 192,271.64 within 1 year installation Co., LTD construction Advances on All teams of DaLu QianYuan non-affiliated 167,985.59 within 1 year construction Chengde XingChen construction Advances on non-affiliated 112,951.90 within 1 year and installation Co., LTD construction
Total 20,995,496.25
⑶ During the reporting period, there are prepayments due from any shareholders held over 5% (inclusive) voting shares of the Company.
4 Inventories ⑴ Inventory Classification Closing balance Beginning balance Item Provision Provision Net-book Book balance for Net-book value Book balance for value inventories inventories Development cost 28,730,807.42 28,730,807.42 6,774,088.56 6,774,088.56 Products to be 10,967,992.85 10,967,992.85 10,967,992.85 10,967,992.85 developed Total 39,698,800.27 39,698,800.27 17,742,081.41 17,742,081.41
5 Other current assets Item Closing balance Beginning balance
Debt purchased 1,093,527.39 1,093,527.39 Total 1,093,527.39 1,093,527.39
6 Investment to the associates Share Voting Code of Name of the Enterprise Registration Corporate Business Registered holding shares in organization company type place representative sectors capital in investee investee invested (%) (%) Suning Banhe limited SuNing, Mr Wang Clothing 29,000,000.00 Fiber Textile Co., 20.00 20.00 Hebei Zheng Song production (USD) Ltd liability
Chengde Dahua limited ChengDe, Mr Shi Bai Paper 6,364,000,000.00 Paper Industry 45.00 45.00 76033882-1 Hebei Nian production (JPY) Co., Ltd. liability
（Continued） total operating Closing total Closing total Closing total net total net income for Name of the company invested revenues for the assets debts assets the year year Suning Banhe Fiber Textile
Co., Ltd Chengde Dahua Paper Industry 266,969,909.27 624,579.62 266,345,329.65 Co., Ltd.
84 Chengde Dalu Co., Ltd. Annual Report 2011
Note to the investment to the associates： Full provision has been made for long-term investment to Suning Banhe Fiber Textile Co., Ltd. in year 2006 for Suning Banhe Fiber Textile has stopped operation for several years due to the key involved in the crime. The Company did not obtain the 2011 financial statements of Suning Banhe Fiber Co., Ltd.
Chengde Dahua Paper Industry Co., Ltd. (―Dahua Paper‖) was invested by the Company and Japan paper industry Co., Ltd. (―Japan Paper‖) with original registered capital of USD 500million. After equity transferring and capital increasing, Dahua Paper has registered capital of JPY 6,364.00million，including JPY 2,864.00million from Chengde Xingye paper producing Co., Ltd. and JPY 3,500.00million from Japan new century Co., Ltd. However, the above new capital is unverified and the procedure on changes of shareholder hasn‘t been finished. Chengde Industrial and Commercial Bureau withdrew the license of Dahua Paper Industry Co., Ltd on 28 April 2009 according to the ChengGongShang (2009) No.75 Document, which due to not submitting the annual inspection material of 2007.
7 Long-term equity investment Account Company Initial investment Beginning ing Increase Decrease Closing balance invested cost balance method Suning Banhe Cost 46,980,000.00 46,980,000.00 46,980,000.00 Textile Co., Ltd method Chengde Dahua Cost 206,215,729.65 206,215,729.65 206,215,729.65 Paper Co., Ltd. method Hebei Xiaban Cost 441,303,759.82 441,303,759.82 441,303,759.82 Textile Co.,Ltd method Chengde Dixian Cost 200,051,551.11 200,051,551.11 200,051,551.11 Fashion Co.,Ltd method Total 894,551,040.58 894,551,040.58 (Continued) Explanation of Provision Cash Rate of Rate of difference between Impairment recognize Company invested dividend share (%) vote (%) rate of share and provision d this this year rate of vote year Suning Banhe Textile 20.00 20.00 46,980,000.00 Co., Ltd Chengde Dahua Paper 45.00 45.00 204,000,000.00 Co., Ltd. Hebei Xiaban Bankrupt but within 100.00 441,303,759.82 Textile Co.,Ltd liquidation Chengde Dixian Bankrupt but within 75.00 200,051,551.11 Fashion Co.,Ltd liquidation Total 892,335,310.93 8. Fixed assets Item Beginning balance Increase Decrease Closing balance ： 1. Total original cost 122,328,400.59 384,208.41 - 122,712,609.00 Incl: property and buildings 111,296,195.05 - - 111,296,195.05 Machinery equipment - - - - Electronic devices 208,934.29 73,698.00 - 282,632.29
Transport vehicles 10,823,271.25 310,510.41 - 11,133,781.66 -- Increase Accrual -- --
85 Chengde Dalu Co., Ltd. Annual Report 2011
Item Beginning balance Increase Decrease Closing balance ： 2,945,531.39 27,259,039.48 2.Accumulated depreciation 24,313,508.09 Incl: property and buildings 15,623,357.96 2,889,855.49 18,513,213.45 Machinery equipment - - - Electronic devices 63,148.41 7,461.45 70,609.86
Transport vehicles 8,627,001.72 48,214.45 8,675,216.17 3. Total carrying amount -- -- 98,014,892.50 95,453,569.52 Incl: property and buildings -- -- 95,672,837.09 92,782,981.60 Machinery equipment ------Electronic devices -- -- 145,785.88 212,022.43 -- -- Transport vehicles 2,196,269.53 2,458,565.49 4. Total impairment provision 35,361,563.01 -- -- 35,361,563.01
Incl: property and buildings -- -- 33,129,463.59 33,129,463.59 Machinery equipment ------Electronic devices -- -- 114,746.04 114,746.04 -- -- Transport vehicles 2,117,353.38 2,117,353.38 5. Total book value -- -- 62,653,329.49 60,092,006.51 Incl: Property and buildings -- -- 62,543,373.50 59,653,518.01 Machinery equipment ------Electronic devices -- -- 31,039.84 97,276.39 -- -- Transport vehicles 78,916.15 341,212.11 The depreciation accrued is RMB 2,945,531.39 for the current period.
⑵ Information of fixed assets that are temporarily idle Item Initial cost of Accumulated Impairment Book value Note fixed asset depreciation provision Property and Idle housing 104,658,552.92 18,008,752.66 33,129,463.59 53,520,336.67 buildings
Electronic devices 170,613.50 55,867.46 114,746.04 Transport 10,802,089.94 8,622,977.27 2,117,353.38 61,759.29 vehicles
Total 115,631,256.36 26,687,597.39 35,361,563.01 53,582,095.96
⑶ Fixed assets with application of certificate for property right still in process The reason for not receiving Predicted date for receiving the Item Book value the certificate certificate
86 Chengde Dalu Co., Ltd. Annual Report 2011
Buildings and Procedures for release of mortgage 32,032,352.03 Unknown plants assets have not been finished
Buildings and 27,621,165.98 Historical reasons Unknown plants
⑷ Notes： Fixed assets had been transferred to Chengde Rongyida Real Estate Development Co., Ltd in 2009 during the bankruptcy reorganization. But due to release of pledge is still under progress so that the property transfer cannot be done. Till now, information for the court has been issued by Hebei Chengde intermediate people's court to Chengde housing construction Bureau to ask for the assistance of execute property certificate ChengXian Fang ZI No.000104, 000196, 000110, 000109, 000198, 000108 and 000195 to complete the property transfer.
Our company has rented out those temporarily idle houses, venues and received the rental fee of RMB 515,150.00. Due to no calculation on the square meter of the rental areas, it is hard to get the rental cost, considering the amount is relatively small, our company decided to transfer those part of amount from fix assets to investment on real estate
9. Construction in progress ⑴ Information of construction in progress Closing balance Opening balance Name of project Carrying Impairment Book Carrying Impairment Book amount provision value amount provision value Papermaking 242,855,959.62 238,027,341.62 4,828,618.00 242,855,959.62 238,027,341.62 4,828,618.00 project Thermal power 16,752,062.42 14,858,862.42 1,893,200.00 16,752,062.42 14,858,862.42 1,893,200.00 stations Total 259,608,022.04 252,886,204.04 6,721,818.00 259,608,022.04 252,886,204.04 6,721,818.00 ⑵ Impairment provision for construction in progress
Name of project Beginning balance Increase Decrease Closing balance Accruing reason Papermaking 238,027,341.62 238,027,341.62 Stop construction for many years project Thermal power 14,858,862.42 14,858,862.42 Stop construction for many years stations Total 252,886,204.04 252,886,204.04
10 Intangible assets Item Beginning balance Increase Decrease Closing balance 31,075,075.63 31,075,075.63 1. Total original costs Chengde state-owned land use certificate（2000）NO. 8,718,530.30 8,718,530.30 169
87 Chengde Dalu Co., Ltd. Annual Report 2011
Item Beginning balance Increase Decrease Closing balance Chengde state-owned land use certificate（2000）NO. 912,279.36 912,279.36 410 Chengde state-owned land use certificate（2000）NO. 8,702,035.52 8,702,035.52 133 Chengde state-owned land use certificate（2000）NO. 2,782,907.20 2,782,907.20 152 Chengde state-owned land use certificate（2000）NO. 9,959,323.25 9,959,323.25 151 2.Accumulated amortization 6,251,294.90 621,501.48 - 6,872,796.38 Chengde state-owned land use certificate（2000）NO. 1,753,884.79 174,370.56 1,928,255.35 169 Chengde state-owned land use certificate（2000）NO. 183,521.00 18,245.64 201,766.64 410 Chengde state-owned land use certificate（2000）NO. 1,750,566.60 174,040.68 1,924,607.28 133 Chengde state-owned land use certificate（2000）NO. 559,830.47 55,658.16 615,488.63 152 Chengde state-owned land use certificate（2000）NO. 2,003,492.04 199,186.44 2,202,678.48 151
3.Book balance of intangible asset 24,823,780.73 24,202,279.25 Chengde state-owned land use certificate（2000）NO. 6,964,645.51 6,790,274.95 169 Chengde state-owned land use certificate（2000）NO. 728,758.36 710,512.72 410 Chengde state-owned land use certificate（2000）NO. 6,951,468.92 6,777,428.24 133 Chengde state-owned land use certificate（2000）NO. 2,223,076.73 2,167,418.57 152 Chengde state-owned land use certificate（2000）NO. 7,955,831.21 7,756,644.77 151 4.Impairment provision 5.Carry amount of intangible 24,823,780.73 24,202,279.25 Chengde state-owned land use certificate（2000）NO. 6,964,645.51 6,790,274.95 169 Chengde state-owned land use certificate（2000）NO. 728,758.36 710,512.72 410 Chengde state-owned land use certificate（2000）NO. 6,951,468.92 6,777,428.24 133 Chengde state-owned land use certificate（2000）NO. 2,223,076.73 2,167,418.57 152 The amortization for the current period is RMB 621,501.48.
11．The Long -term deferred expenses Item Beginning balance Increase Decrease Closing balance Office decoration expenses 356,640.00 356,640.00
Total 356,640.00 356,640.00
12. Provision for impairment of assets
88 Chengde Dalu Co., Ltd. Annual Report 2011
Decrease Beginning Item Increase Closing balance balance Written Reversed off 1. Bad debt provision 44,360,872.59 11,618.23 44,372,490.82 2. Provision for the long-term 892,335,310.93 892,335,310.93 equity 3.Impairment provision for 35,361,563.01 35,361,563.01 fixed assets 4.Impairment provision for 252,886,204.04 252,886,204.04 construction in progress Total 1,224,943,950.57 11,618.23 1,224,955,568.80
13、Other non-current assets Item Closing balance Opening balance
Buildings and plants 779,288.19 779,288.19
Land- use right 23,653,650.76 23,653,650.76 Total 24,432,938.95 24,432,938.95 Notes： ⑴ Other non-current assets came from the auction assets of the Company which was purchased by Chengde Rongyida Real Estate Development Co., Ltd before it being the subsidiary of the Company. The Company recorded it into inventory as the amount of RMB 1,375,138.71 and fixed asset as the amount of 34,726,549.74 according the using purpose.
⑵ On 13th Aug 2010, the Company has signed an agreement of
⑶ Instruction on the land-use right
① The land stated in the article of ChengdeXian Guo Yong Zi（2000） No.174 has been used for establishing dwelling house and dormitories. Although these houses were built on the name of our company, but the expenses were not counted in the financial accountings. ② The subsidiary of our company, Chengde Rongyida Real Estate Development Co., Ltd got the captioned land through auction and signed a given agreement with Chengde Xingcheng Construction and Installation Co., Ltd on 20th April 2009 to give the land to it. And the Chengde Xingcheng Construction and Installation Co., Ltd will work with the local government to solve the issue of property right for staff buildings. The Company has yet completed the operation of property transfer.
① Agreements of land exchange, buying & selling have been signed between our company and Chengde tractor factory and Chengde Bright chemical factory on Mar 2001 and April 2004 respectively to use part of the buildings to exchange the using right for 4 lands which was around 53.80unit, the operation for user change has yet been completed, but already been put as the pledge to Chende financial bureau for borrowing CNY 18 million. The Company will record these 4 lands into the statement. On 26th Sep 2010, according to the memo between the Chende local government and the Company that the Chende local financial bureau will give back the land certification to the Company and provide assistance on the property transferring after the debts have been cleared.
⑷ The property certifications for land- use right and buildings and plants under other non-current assets have not yet been completed.
14. Short-term loans ⑴ Types of short-term loans:
89 Chengde Dalu Co., Ltd. Annual Report 2011 Item Closing balance Beginning balance
Credit loan 422,261.91 422,261.91
Total 422,261.91 422,261.91
⑵ Notes： The Company borrowed several loan from Chengde County Treasure Bureau which was exceeded the time limit for many years. The original principal is the amount of 21,113,095.50, the loan now need to be refunded is the amount of 422,261.91 according to the confirmed ratio of proportion of liquidity of 2%
15. Accounts payable ⑴ Information of accounts payables Item Closing balance Beginning balance
Within 1 year 100.00
Over 1 year 231,075.82 231,075.82 Total 231,175.82 231,075.82 ⑵ During the report period, there are no payables to any shareholder or related party with 5% (inclusive) of total voting shares of the Company.
16. Advances from customers ⑴ Information of advances from customers Item Closing balance Beginning balance
30,028,613.02 Within 1 year Total 30,028,613.02
⑵ During the report period, there is no received deposit from any shareholder with 5% (inclusive) of total voting shares of the Company.
17. Employee remuneration payable Item Opening balance Increase Decrease Closing balance 1.Wages,bonuses,allowances,subsidies 298,000.00 915,178.62 835,378.62 377,800.00 2. Employee Welfare 3,030.00 3,030.00 - 3.Social insurances 231,185.60 231,185.60 Incl.: 1.medical insurance 30,816.00 30,816.00 2. annuity fee 200,369.60 200,369.60 4 Union funds and worker education . 3,954.00 2,544.00 1,410.00 funds 5.Others 6,097,486.60 6,097,486.60
Total 6,395,486.60 1,153,348.22 840,952.62 6,707,882.20
18. Taxes payable Item Closing balance Beginning balance
Value added tax 151,107.41 -64,474.83
Business tax -206,904.56 4,133,293.90
Enterprise income tax 54,549,500.97 56,842,147.94 90 Chengde Dalu Co., Ltd. Annual Report 2011
Land appreciation tax payable -513,431.23
Individual income tax 21,704.90 12,176.28
Housing property tax 2,982,346.66 1,913,935.91
Land use tax 12,492,077.71 8,753,776.49
Others 111,824.53 479,716.14 Total 69,588,226.39 72,070,571.83
19．Other payables ⑴ Information of other payables Item Closing balance Opening balance
within 1 year 17,743,067.41 30,019,732.85
1~2 years 15,286,349.31 96,799,893.77
2~3 years 81,858,728.62 516,549.00
over 3 years 1,684,355.79 1,180,478.79
Total 116,572,501.13 128,516,654.41
⑵ During the reporting period there is no other payable to any shareholder with 5% (inclusive) of total voting shares of the Company.
⑶ Other payables in significant amount and with account aging over 1 year: Name of the company Closing balance Reason for not being paid
The manager of Chende Dixian fashions 26,410,000.00 undue company Limited The manager of Chende Banhe chemical fiber 19,750,000.00 undue fabric simulation company Limited Shanghai mineral energy electric Limited 12,000,000.00 undue The manager of Hebei Xiaban Knitting 8,760,000.00 undue clothing Limited Zhang Xiao Ming 6,500,000.00 undue Financial centralized paying center of 6,000,000.00 Accounts Payable Chengde Li Yan 6,349,083.21 undue
Chen Li Ping 5,000,000.00 undue
Total 90,769,083.21
⑷ Other payables in significant amount Credito Closing balance Nature or Content
Qianzhenglin 6,498,914.58 undue Contract of transfer waste Weiquanda 6,000,000.00 equipment that have not yet been performed Zhouhaihong 1,846,311.11 undue
Total 14,345,225.69
20 Long-term loans ⑴ Classification of long-term loans
91 Chengde Dalu Co., Ltd. Annual Report 2011 Item Closing balance Beginning balance
Credit loan 6,801,600.00 6,398,000.00 Total 6,801,600.00 6,398,000.00
Notes： On 28 Dec. 2005, Chengde Finance Bureau granted the treasury lending money of the Project of paper producing , water saving and resource utilization comprehensively for the Dexing Paper Industrial Co., Ltd as the amount of RMB 5million according to the document (Ji Cai Jian (2005) No. 258). Dexing did not refund the interest every year due to the operating difficulties. By the end of 31st Dec 2010, the amount of accrued interest is RMB1, 398,000.00, and RMB6, 398,000.00 with principal.
⑵ Top five of long-term loans Closing balance Beginning balance Loans Loans Interest Amount of Amount of Loan company Currency Amount of Amount of starting date ending date rate（%） original original RMB RMB currency currency Chengde Financial 2005.12.28. 2020.12.28. RMB 2.55-4.44 6,801,600.00 6,398,000.00 Bureau Total 6,801,600.00 6,398,000.00
21 Special payables Opening Increase Decrease Closing balance Note Item balance Project of paper producing , water saving and resource utilization 7,500,000.00 7,500,000.00 JCJ[2005] No. 280 comprehensively Resource utilization comprehensively demonstration project of waste paper 3,000,000.00 3,000,000.00 JCJ[2004] No. 134 recycling industry chain Chengde Financial 98,000.03 98,000.03
Bureau Total 10,598,000.03 10,598,000.03
22 Share capital
Increase and decrease（+ 、–） Opening Issued Reserve Closing balance balance Bonus stock transferred Others Sub-total share newly share Restricted shares 244,800,000.00 244,800,000.00 Non-restricted 461,520,000.00 461,520,000.00 shares Total of shares 706,320,000.00 706,320,000.00
23 Capital reserve Item Opening balance Increase Decrease Closing balance
Capital /stock premium 391,996,587.96 391,996,587.96
Other capital surplus 58,768,855.14 58,768,855.14 Total 450,765,443.10 450,765,443.10
24 Surplus reserve Item Beginning balance Increase Decrease Closing balance
92 Chengde Dalu Co., Ltd. Annual Report 2011 Statutory surplus reserve 76,791,550.17 76,791,550.17
Total 76,791,550.17 76,791,550.17
25 Undistributed profits Percentage for Amount of the current Amount of the prior Item drawing or period period distribution Undistributed profit at the end of prior year -1,261,402,234.30 -1,230,421,633.22 before adjustments Adjustments to undistributed profit at the -32,685,529.13 beginning of year Undistributed profit at the beginning of a -1,261,402,234.30 -1,263,107,162.35 year after adjustment Plus: Net profit attributable to the owner of 3,643,202.46 1,704,928.05 the parent company this year Less: statutory surplus reserve drawn 10.00%
Drawing discretionary surplus reserve
Drawing commonly risk provisions
Payable dividends of common shares Transfer to common stock equity dividends -1,257,759,031.84 -1,261,402,234.30
Undistributed profit at the end of this year -1,261,402,234.30 -1,230,421,633.22
26 Sales revenues and operation cost ⑴ Sales revenues Item Current period Preceding period Revenue from main businesses
Revenue from other businesses 515,150.00 516,778.00 Total revenue 515,150.00 516,778.00 ⑵ Operation cost Item Current period Preceding period
Cost for main businesses
Cost for other businesses
Total operation cost
⑶ Notes: Revenue from other businesses are mainly rental income form idle factory buildings and yards.
27 Business taxes and surcharges Item Percentage 2011 2010 5% Business tax 25,757.50 558,075.40 Urban maintenance and 5% 2,220.73 47,153.74 construction tax Educational surcharge 3% 1,332.44 28,292.24
Local educational surcharge 2% 888.39 11,361.50
Total 30,199.06 644,882.88
28 Administration expenses 93 Chengde Dalu Co., Ltd. Annual Report 2011
Item Current period Preceding period Staff wages and salaries 1,153,348.22 470,600.00
Taxes 4,943,221.00 5,394,348.00 Depreciation expenses 2,945,531.39 3,353,187.57 Intermediary organs 1,472,000.00 1,671,000.00 Amortization of intangible assets 621,501.48 621,501.48 Business entertainment 257,155.76 69,374.70 Travel expenses 275,518.01 86,932.20
Office expenses 149,697.60 40,095.50
Electricity bills 165,567.31 151,713.41
Others 118,538.85 4,004.43
Total 12,102,079.62 11,862,757.29
29 Financial expenses Item Current period Preceding period 3,379,247.16 4,751,146.67 Interest expense 15,193.82 10,152.81 Less: Interest income 2,732.43 7,921.27 Gain or loss in foreign exchange 112,210.50 Bank charges 8,825.79 3,735.50 Service charge 3,487,822.06 4,752,650.63 Total
30 Loss on impairment of assets Item Current period Preceding period
Bad debt loss 11,618.23 160,208.41
Impairment provision for construction in progress 6,161,982.00
Total 11,618.23 6,322,190.41
31 Non-operating income ⑴ Non-operating income Item Current period Preceding period Total profits from disposal of non-current assets 10,644,730.00 Governmental subsidies 17,900,000.00 19,125,000.00 Others 951,504.06 333,312.80 Total 18,851,504.06 30,103,042.80 Details of government subsidies: Item Current period Preceding period Note Reward fund for handling the fixed assets ChengdeCounty involved in crime of Xinye paper industry Co., 19,125,000.00 People Government Ltd minute of the meeting 94 Chengde Dalu Co., Ltd. Annual Report 2011 (2010) No.44 Note of the people's Social security subsidies 17,900,000.00 government of Chengde Total 17,900,000.00 19,125,000.00
32 Non-operating expenses ⑴ Non-operating expenses Item Current period Preceding period Liquidated damages 150,000.00
557,050.00 Late fee of the taxes payable 280,253.70 52,397.77 Others 987,303.70 52,397.77 Total
33 Income taxes Item Current period Preceding period
19,318.12 4,082,172.06 Tax calculated for the current period Total 19,318.12 4,082,172.06
34 The calculating method of Basic earnings per share and diluted earnings per share ⑴ Basic EPSs and diluted EPSs are presented as follows:
Item Current period Preceding period Net profits and losses attributable to P1 3,643,202.46 1,704,928.05 common shareholders Non-recurring profits and losses attributable F 17,663,824.34 24,857,718.42 to common shareholders Net profits attributable to ordinary shareholders after deducting non-recurring P2=P1-F -14,020,621.88 -23,152,790.37 profits and losses Influence of dilutive matters to net profits and losses attributable to common P3 shareholders Influence of dilutive matters to net profits and losses attributable to common P4 shareholders after deducting non-recurring profits and losses The number of shares at the period-begin S0 706,320,000.00 706,320,000.00 Increased shares due to transferring of capital reserve or dividends distribution S1 during the reporting period Increased shares due to issuance of new shares or debt-to-equity swap during the Si reporting period Number of months from the next month when shares increased to the end of the Mi reporting period Stock decreased for share repurchase during Sj the reporting period Number of months from the next month when share decreased to the end of the Mj reporting period Amount of share compressing during the Sk reporting period Number of months during the reporting M0 12 12 period The weighted average amount of ordinary S=S0+S1+Si*Mi/M0- 706,320,000.00 706,320,000.00 shares out Sj*Mj/M0-Sk 95 Chengde Dalu Co., Ltd. Annual Report 2011
Item Current period Preceding period Plus: The increased weighted number of the common stock after the conversion of the X1 diluted potential ordinary shares Calculate weighted average amount of X2=S+X1 ordinary shares for diluted EPS Incl: Increased weighted number of the common stock after convert of the convertible bonds Increased weighted number of the common stock after the commitment of warrants/stock option Increased weighted number of the common stock after the commitment of the buyback Basic earnings per share Y1=P1/S 0.0052 0.0024 Basic earnings per share after deduction of Y2=P2/S -0.0199 -0.0328 the non-recurring losses and gains Diluted earnings per share Y3=（P1＋P3）/X2 0.0052 0.0024 Diluted earnings per share after deduction Y4=（P2＋P4）/X2 -0.0199 -0.0328 of the non-recurring losses and gains
35. Notes to cash flow statements ⑴ Other cash received related to operating activities Item Current period Preceding period
Receivables and payables received 6,910,348.15 25,429,987.68 Subsidy income 17,900,000.00 19,500,000.00 Revenue of renting and selling of discarded goods 970,161.00 850,090.80 Others 15,193.82 10,152.81 Total 25,795,702.97 45,790,231.29
⑵ Other cash paid related to operating activities Item Current period Preceding period Administrative expenses 1,402,200.65 1,496,929.63
Receivables and payables paid 23,657,486.44 71,950,817.58
Non-operating expenses 725,830.82 Others 121,036.29 56,133.27 Total 25,906,554.20 73,503,880.48
⑶ Other cash received related to investing activities Item Current period Preceding period
Loan from non-affiliated parties 14,800,000.00 50,000,000.00 Total 14,800,000.00 50,000,000.00 ⑷ Other cash paid related to financing activities Item Current period Preceding period
Payment of loans to non-related parties 17,445,727.12 65,410,000.00 Total 17,445,727.12 65,410,000.00 96 Chengde Dalu Co., Ltd. Annual Report 2011
36、Supplemental information of cash flow statement ⑴ Supplemental information Supplemental information Preceding period Current period 1. Reconciliation from net profit to operating cash flows
Net profit 2,728,313.27 2,902,769.76 Add: Impairment provision for assets 11,618.23 6,322,190.41 Depreciation of fixed assets, consumption & depreciation of oil and gas 2,945,531.39 3,353,187.57 assets, depreciation of productive biological assets Amortization for intangible assets 621,501.48 621,501.48 Amortization for long-term prepayments
Loss on disposal of fixed assets, intangible assets and others long-term -10,644,730.00 assets(―-― represents gains) Loss on retirement of fixed assets (―-― represents gains)
Loss from fair value change(―-― represents gains) Finance cost(―-― represents gains) 3,381,979.59 4,759,067.94 Loss on investment(―-― represents gains)
Decrease of deferred tax assets(―-― represents increase)
Liability increase of deferred tax(―-― represents decrease)
Decrease of inventories(―-― represents increase) -21,956,718.86 -6,445,982.81 Decrease of operating receivable accounts (―-― represents increase) 11,232,368.68 -29,181,595.57 Increase of operating payable accounts (―-― represents decrease) 503,014.66 -3,960,229.79
Others Net cash flow from operating activities -532,391.56 -32,273,821.01 2. Significant investing and financing activities for noncash items:
Conversion of debt into capital
Convertible bonds payable in one year
Fixed assets financed by finance leases
3. Net increase (decrease) for cash and cash equivalents
Closing balance for cash 5,517,692.29 9,723,008.25 Decrease: opening balance for cash 9,723,008.25 58,256.11 Increase: closing balance for cash equivalents
Decrease: Opening balance for cash equivalents
Net increase (decrease) in cash and cash equivalents -4,205,315.96 9,664,752.14 ⑵ There are no changes in acquisition or disposition of subsidiaries and other business units in the reporting period.
⑶ Cash and cash equivalents Opening balance Item Closing balance
1.cash 5,517,692.29 9,723,008.25
97 Chengde Dalu Co., Ltd. Annual Report 2011
Including：Cash on hand 103,766.34 61,415.17
Bank deposit available for immediate payment 468,956.88 9,661,593.08
Other monetary cash in bank available to pay 4,944,969.07
2.Cash equivalent
Including：Bond investment due within three months
3.Net cash and cash equivalent at the end of the year 5,517,692.29 9,723,008.25 ⑷ Relationship of cash and cash equivalents Cash and cash equivalents of cash flow statement This report period Previous period
Net cash and cash equivalent at the end of the year 5,517,692.29 9,723,008.25
minus：Restricted bank deposit
plus：Bond investment due within three months
Net cash and cash equivalent at the end of the year 5,517,692.29 9,723,008.25
minus：Net cash and cash equivalent at the beginning of the year 9,723,008.25 58,256.11
net increase or decrease of cash and cash equivalent -4,205,315.96 9,664,752.14
Ⅵ. RELATED PARTIES AND RELATED PARTY TRANSACTIONS 1、 Information of the parent company
There is no parent company directly controlled of the company. The related parties which being relationship of control is the controlled shareholder Chenrong which hold 29.49% shareholdings of the Company.
2、 Information of the subsidiaries Name of Types of Types of Type of Registered place Legal Person subsidiaries subsidiaries company business Chengde Rongyida Wholly Limited Chengde country Real Estate Real Estate Chenrong owned liability Hebei province development development Chengde Xingye Limited Chengde country Paper Holding Wangshuxian Paper Industry liability Hebei province producing Gold Axe Wholly Limited British Virgin Investment Group Export owned liability Island Limited Hebei Xiaban City Wholly Limited Chengde country Wangshuxian Clothing Textile owned liability Hebei province producing Chengde Dixian Wholly Limited Chengde country Wangshuxian Clothes fashion owned liability Hebei province producing Chengde Huaxin Limited Chengde country Waste paper waste paper Holding Xusulian liability Hebei province recycling collection （ Continued） Rate of share Rate of vote Name of subsidiaries Registered capital Organization code (% ) (%) Chengde Rongyida Real (RMB)10,000,000.00 100.00 100.00 68434235-0 estate development Chengde Xingye (USD)250,000,000.00 75.00 75.00 60125211-5 paper industry Gold Axe Investment (USD)1 100.00 100.00 group limited (USD)4,000,000.00 Hebei Xiaban City textile 100.00 60126026-2
(USD)24,000,000.00 Chengde Dixian fashion 100.00 60126040-6
98 Chengde Dalu Co., Ltd. Annual Report 2011 Chengde Huaxin waste (RMB)1,000,000.00 67.50 90.00 74544580-5 paper collection
3 Information of associates and joint ventures Rate Rate Name of Types of Registered Legal of of Organization invested Type of business Registered capital company place Person share vote code entities (% ) (%) Suning Limited Suning,He Wang Clothing 29,000,000.00 Banhe fiber 20.00 20.00 liability bei zhengsong production (USD) Co., LTD Chengde Limited Chengde, Paper 6,364,000,000.00 dahua paper Shibainian 45.00 45.00 76033882-1 liability Hebei production (JPY) Co., LTD
(Continued)
Name of invested entities Total Assets Total liabilities Total net assets Gross revenue Net profits
Suning Banhe fiber Co.,
LTD Chengde dahua paper 266,969,909.27 624,579.62 266,345,329.65 Co., LTD
4 Amounts receivable and payable from related parties ⑴ Receivables from related parties Closing balance Opening balance Item Related parties provision for provision for book balance book balance bad debt bad debt Other receivables Chengde Dahua Paper Co., 44,196,901.26 44,196,901.26 44,196,901.26 44,196,901.26 Ltd. Other receivables Suning Banhe Fiber Co., 15,361.00 7,065.80 15,361.00 2,764.85 Ltd. ⑵ Payables from related parties
Item Related parties Closing balance Opening balance Other payables Chenrong 481,980.00
Ⅶ. CONTINGENCIES 1 Creditor's rights disputes between the company and Wangsuxian
On April 26, 2011 the Company received a notice of respondence to action from the Intermediate People's Court of Chengde city,Hebei Province. Wangsuxian, the Company's former largest shareholder, sued the Company to court about creditor's rights disputes. Wangsuxian claimed that she has repaid bank debts of 84371544.00 Yuan for the Company using the money from the court auction of the 208,324,800 shares of the Company that she hold. So she demands that the left equity assets should be sold after paying off the bankruptcy reorganization plan and the money got from that should be used to pay off debts.
By April 22, 2012 the case is still pending and no substantive progress has been made.
2. The company sued Xuxue for reputation infringement
On December 22, 2011, Beijing West District People's Court accepted the case of the company sued Xuxue for reputation infringement. According to the order issued by Beijing West District People's Court on March 22, 2012 ,that although Xuxue has reported to the China Securities Regulatory Commission, the CSRC has not yet processed and identified, so whether Xuxue‘s behavior is reputation infringement or not should be identified after carefully research by the CSRC and the suit has been dismissed.
99 Chengde Dalu Co., Ltd. Annual Report 2011 3. Lirui sued the Company for infringement
On December14, 2010, Chengde Rongyida real estate development Co., LTD, subsidiary of the Company, entrusted Chengde Fengyuan auction shop to auction its paper making equipment and the equipment was bought by Lirui. On May 23, 2011, Lirui sued to Chengde city intermediate people's court because of the economic losses caused by Chengde Rongyida real estate development Co., LTD which prevented him from dismantling the equipment and committed a tortious act and appealed economic loss compensation of 10 million Yuan. On November7,2011, Lirui withdrawed his litigation application. On 15 December 2011, Chengde Rongyida real estate development Co., LTD received a notice of respondence to action from Chengde city intermediate people's court, Lirui sued to the court because of the same reason mentioned above and appealed economic loss compensation of 15 million Yuan. On April 20, 2012, Chengde city intermediate people's court opened a court session to hear this case. While the lawyer hired by the Company thinks that Lirui‘s claim was not necessary true because the insufficiency of the evidence he provided. By April 22, 2012, there are no trial results of the case.
Ⅷ. COMMITMENT Contracts signed but not recognized in the financial Closing balance Opening balance statements 112,500,000 112,500,000 External investment commitment (USD) (USD)
Chengde Xingye Papermaking Co., Ltd. has the registered capital of USD 250,000,000.00, within which USD 187500000.00 (75%) committed by the Company. According to the article of
Except the matter stated above，there is no other major commitments need to be disclosed.
Ⅸ. EVENTS AFTER THE BALANCE SHEET DATE
1.Mr Chenrong as the company's largest shareholder signed a share transfer agreement on April 6, 2012 with Mr Wangdong, which says that Mr Chenrong shall transfer all his 208,324,800 shares of the company((accounting for 29.49% of the total shares of the company) to Mr Wangdong.
2. As stated in Notes VII、3, Lirui sued the Company together with its subsidiary company Chengde Rongyida Real Estate Development Co., Ltd for infringement and appealed economic compensation of 15 million Yuan. The court heard the case on April 20, 2012, but by April 22, 2012 there are no trial results. On April 20, 2012, the Company had released public announcement of significant litigation on Shenzhen Stock Exchange.
By the day the board of directors approved the report there is no other event after the balance sheet date which needs to be disclosed except for the event mentioned above.
Ⅺ . NOTES TO THE MATERIAL EVENTS OF PARENT COMPANY FINANCIAL STATEMENTS
1、 Other receivables ⑴ Other receivables disclosed by types： Closing balance
Item Book value Bad debt provision Amount Rate in total Amount Rate in total (%) (%) OR with individual significant amount and individual accrual for 100 Chengde Dalu Co., Ltd. Annual Report 2011 bad debt provision
OR with accrual for bad debt 371,672.85 100.00 21,283.33 5.73 provision in combination OR with no individual significant amount but requires accrual for bad debt provision Total 371,672.85 100.00 21,283.33 5.73 (Continued) Opening balance Book balance Bad debt provision Item Amount Rate in total Amount Rate in total (%) (%) OR with individual significant amount and individual accrual for bad debt provision OR with accrual for bad debt 299,338.55 100.00 20,991.33 7.01 provision in combination OR with no individual significant amount but requires accrual for bad debt provision Total 299,338.55 100.00 20,991.33 7.01 In the combination, OR with accrual for bad debt provision using aging analysis method:：
Closing balance Opening balance Duration of the Book balance Book balance Bad debt Bad debt accounts Amount Rate in total Amount Rate in provision provision (%) total (%) Less than one year 72,696.50 20.00 2,502.18 265,291.40 88.63 13,264.57 1-2 years 265,291.40 71.00 409.80 30,989.40 10.35 6,197.88 2-3 years 30,627.20 8.00 15,313.60 3,057.75 1.02 1,528.88 Over 3 years 3,057.75 1.00 3,057.75 Total 371,672.85 100.00 21,283.33 299,338.55 100.00 20,991.33
⑵ There is no such amount belongs to shareholders who hold 5% or more than 5% voting rights.
⑶ Receivables due from related parties The proportion of other Relation with the Name Amount receivables company (%) Suning Banhe fiber Co., LTD joint venture 15,361.00 4.13
2、 Long-term equity investment ⑴ Classification of the long-term equity investment Accounting Initial Beginning Increa Company invested Decrease Closing balance method investment cost balance se Chengde Rongyida real estate Cost method 53,114,299.73 53,114,299.73 53,114,299.73 development Co., Ltd Chengde Xingye Cost method 622,500,000.00 622,500,000.00 622,500,000.00 paper Co., Ltd Gold Axe Investment Group Cost method 8,300,000.00 8,300,000.00 8,300,000.00 Limited Hebei Province Xiaban City Fabric Cost method 431,604,203.41 431,604,203.41 431,604,203.41 Co., Ltd. Chengde Dixian Cost method 149,408,230.11 149,408,230.11 149,408,230.11 fashion Co., Ltd
101 Chengde Dalu Co., Ltd. Annual Report 2011 Accounting Initial Beginning Increa Company invested Decrease Closing balance method investment cost balance se Suning Banhe Fiber Equity 46,980,000.00 46,980,000.00 46,980,000.00 Co., Ltd. method Total 1,311,906,733.25 1,311,906,733.25
(Continued) Explanation of The difference impairment The cash Rate of Rate of Impairment Company invested between rate of provision bonus for share (%) vote (%) provision share and rate of accrued for the period vote the period Chengde Rongyida real estate 100.00 100.00 development Co., Ltd Chengde Xingye 75.00 75.00 616,688,419.47 paper Co., Ltd Gold Axe Investment Group 100.00 100.00 8,300,000.00 Limited Hebei Province Xiaban 100.00 Bankrupt 431,604,203.41 City Fabric Co., Ltd. Chengde Dixian 75.00 Bankrupt 149,408,230.11 fashion Co., Ltd Suning Banhe Fiber 20.00 20.00 46,980,000.00 Co., Ltd. Total 1,252,980,852.99
3 Supplemental information of cash flow statement ⑴ Supplemental information of cash flow statement Supplemental information Current period Preceding period 1. Adjustments to reconcile net income to net cash provided by operating
activities: Net profit 15,434,798.67 -2,196,914.18 Add: Impairment provision for assets 292.00 17,228.41 Depreciation of fixed assets, consumption & depreciation of fuel and gas,
depreciation of production materials Amortization for intangible assets
Amortization for long-term prepayment
Loss on disposal of fixed assets, intangible assets and others long-term
assets Loss upon rejection of fixed assets
Loss on variance of fair value
Finance cost 225.97 7,065.54 Loss on investment
Decrease of deferred tax assets
Liability increase of deferred tax
Decrease of inventories
Decrease of operating receivable account items -72,334.30 24,118,593.58 Increase of operating payable account items -15,395,934.27 -21,918,610.55
102 Chengde Dalu Co., Ltd. Annual Report 2011
Supplemental information Current period Preceding period Others
Net cash flow from operating activities -32,951.93 27,362.80 2. Significant investing and financing activities for non cash items:
Liabilities capitalized
Convertible bonds payable mature in one year
Financing leased fixed assets
3. Net increase (decrease) for cash and cash equivalents
Ending balance for cash 4,019.80 37,197.70 Decrease: beginning balance for cash 37,197.70 16,900.44 Increase: ending balance for cash equivalents
Decrease: beginning balance for cash equivalents
Net increase (decrease) in cash and cash equivalents -33,177.90 20,297.26
⑵ There are no major changes in acquisition or disposition of subsidiaries and other business units in the reporting period.
⑶ Cash and cash equivalents Opening balance Item Closing balance 4,019.80 37,197.70 1.cash 27,362.80 Including：Cash on hand 4,019.80 9,834.90 Bank deposit available for immediate payment
Other monetary cash in bank available to pay
2.Cash equivalent
Including：Bond investment due within three months 4,019.80 37,197.70 3.Net cash and cash equivalent at the end of the year Cash and cash equivalents both of the parent company and the company group which are with limited use are not contained in the above cash and cash equivalents
⑷ Relationship of cash and cash equivalents Cash and cash equivalents of cash flow statement This report period Previous period
Net cash and cash equivalent at the end of the year 4,019.80 37,197.705
minus：Restricted bank deposit
plus：Bond investment due within three months
Net cash and cash equivalent at the end of the year 4,019.80 37,197.70
minus：Net cash and cash equivalent at the beginning of the year 37,197.70 16,900.44
103 Chengde Dalu Co., Ltd. Annual Report 2011
Net increase or decrease of cash and cash equivalent -33,177.90 20,297.26
Ⅻ.SUPPLEMENT INFORMATION 1. Non-operating losses and profits Item This report period Previous period 10,644,730.00 Losses/gains on disposal of non-current assets
Government subsidies included in the current profits and losses (government subsidies which are closely related to 17,900,000.00 19,125,000.00 the Company‘s business and received at national statutory standard and amount are excluded) Other non- operating losses and profits other than the -35,799.64 280,915.03 above Total amount of non-operating losses and profits 17,864,200.36 30,050,645.03 Decrease: effect of income tax on non- operating losses 411,676.61 and profits Total net amount of non-operating losses and profits 17,864,200.36 29,638,968.42 Decrease: Total amount of non-operating losses and 200,376.02 4,781,250.00 profits attributable to minority shareholders（After tax） Total amount of non-operating losses and profits 17,663,824.34 24,857,718.42 attributable to common stockholder
2. Return on net assets and earnings per share ⑴ Return on net assets Profit of the report period Current period Preceding period
Net profits attributable to common stockholders Net profits attributable to common stockholders after
deducting non-recurring profits or losses Note : The data are not suitable for calculating the assets attributable, since the opening and closing net assets are negative .
Calculation Procedures
Item Current period Preceding period Net profits and losses attributable to common P1 3,643,202.46 1,704,928.05 shareholders of the company Non-recurring profits and losses attributable to F 17,663,824.34 24,857,718.42 common shareholders Net profit attributable to the Company's ordinary shareholders after deducting non-recurring profits P2=P1-F -14,020,621.88 -23,152,790.37 and losses Opening net assets attributable to the E0 -27,525,241.03 -29,230,169.08 Company's ordinary shareholders Increased net assets due to issuance of new shares Ei or debt-to-equity swap during the reporting period Number of months from the next month to the end Mi of the reporting period for increase of shares
Net assets attributable to the company's ordinary shareholders decreased by cash Ej dividends and stock repurchase during reporting period Number of months from the next month to the end Mj of the reporting period for decrease of shares Change in net assets caused by other issues Ek Number of months from the next month to the end Mk of the reporting period for change in net assets 104 Chengde Dalu Co., Ltd. Annual Report 2011
Item Current period Preceding period caused by other issues
Months of the reporting period M0 12 12 The closing net profit attributable to common E1 -23,882,038.57 -27,525,241.03 shareholders of the company E2=E0+P1/2+ Weighted average net assets attributable to common Ei*Mi/M0-Ej -25,703,639.80 -28,377,705.06 shareholders of the company *Mj/M0+Ek* Mk/M0 Weighted average yield of net assets attributable to Y1=P1/E2 common shareholders of the company Weighted average yield of net assets attributable to common shareholders of the company after Y2=P2/E2 deducting non-recurring profits and losses
⑵ Basic earnings per share
Profits of the current Basic earnings per share Diluted earnings per share period Current period Preceding period Current period Preceding period Net profits attributable to common shareholders of the 0.0052 0.0024 0.0052 0.0024 company Net profits attributable to common shareholders of the company after deducting -0.0199 -0.0328 -0.0199 -0.0328 non-recurring profits and losses
3. The explanation of abnormal circumstance and reasons of items in major accounting report ⑴ The ending balance of cash and cash equivalents decreased by RMB 4,205,315.96 and 43.25% less than the opening balance mainly because of payment of loans and accounts payable this period.
⑵ The ending balance of inventory increased by RMB 21,956,718.86 and 123.76% compare with opening balance. Mainly because Chengde Rongyida Real Estate Development Co., Ltd., subsidiary of the Company, paid the land-transferring and other fees for the real estate development project of Dalu Qianyuan.
⑶ The ending balance of deposit received increased by RMB 30,028,613.02. Mainly because of the pre-sale of the real estate development project of Dalu Qianyuan mentioned above.
⑷ The ending balance of other account payable decreased by RMB 11,944,153.28 and 9.29% less than the opening balance mainly because of payment of loans and accounts payable this period.
⑸ Business Taxes and surcharges: The specified number of 2011 decreased by RMB 614,683.82 and 95.32% less than that of 2010, the taxes relevant to resettlement income contribute a lot.
⑹ Financial expense: The specified number of 2011 decreased by RMB 1,264,828.57 and 26.61% less than that of 2010 .Mainly because of the loan repayment which caused the financial expense decreased a lot.
105 Chengde Dalu Co., Ltd. Annual Report 2011 ⑺ Assets depreciation lose: The specified number of 2011 decreased by RMB 6,310,572.18 and 99.82%less than that of 2010 .According to assessment report of 2010 construction in process should made a lot of impairment losses in order to reflect the real value of enterprise assets correctly.
⑻ Non-operating revenue: The specified number of 2011 decreased by RMB 6,310,572.18 and 99.82%less than that of 2010 mainly because the company had paid a lot of tax fine for delaying payment in 2011.
⑼ Non-operating expenditure: The specified number of 2011 decreased by RMB 934,905.93 and 1,784.25% less than that of 2010 mainly because that there was much resettlement income in 2010.
⑽ Income tax expenses: The specified number of 2011 decreased by RMB 4,062,853.94 and 99.53% less than that of 2010 .Mainly because the revenue of Chengde Rongyida Real Estate Development Co., Ltd., subsidiary of the Company has decreased a lot compared to that of 2010, and there's a corresponding drop of income tax expenses.
XIII .Approval for issuance of financial statements
These financial statements have been approved by the resolution of the 26th meeting , the forth Board of D irectors , on April 22, 2012 .
Chengde Dalu Co., Ltd April 22, 2012
106 Chengde Dalu Co., Ltd. Annual Report 2011
Section XII. Documents for Reference I. Accounting statements carrying with confirmation and seals of Legal Representative of the Company, Person in Charge of the Financial Affairs and Person in Charge of Accounting Institution II. Original of Auditors‘ Report carrying with the seal of Certified Public Accountants as well as personal signatures and seals of certified public accountants. III. Originals of all documents and manuscripts of Public Notices of the Company publicly disclosed on Securities Times and Hong Kong Commercial Daily.
The Company will provide timely the above documents for reference provided that China Securities Regulatory Commission or Stock Exchange demands or shareholders requires according to the regulations and Articles of Association.
The Board of Directors of Chengde Dalu Co., Ltd. 22 April 2012
107