JUNMA TYRE CORD COMPANY LIMITED

CIRCULAR DATED 27 APRIL 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ ITCAREFULLY.

If you are in any doubt in relation to this Circular or as to the action you should take, you should consult yourstockbroker, bank manager, solicitor, accountant, financial, tax or other professional adviser immediately.

If you have sold or transferred all your shares in the capital of Junma Tyre Cord Company Limited (“Company”),you should immediately forward this Circular together with the Notice of Extraordinary General Meeting and theaccompanying proxy form to the purchaser or transferee or to the bank, stockbroker or other agent through whomthe sale was effected for onward transmission to the purchaser or transferee.

This Circular has been prepared by the Company and its contents have been reviewed by the Company’s sponsor,PrimePartners Corporate Finance Pte. Ltd. (the “Sponsor”) for compliance with the Singapore Exchange SecuritiesTrading Limited (the “SGX-ST”) Listing Manual Section B: Rules of Catalist. The Sponsor has not verified thecontents of this Circular.

This Circular has not been examined or approved by the SGX-ST. The Sponsor and the SGX-ST assume noresponsibility for the contents of this Circular, including the accuracy, completeness or correctness of any of theinformation, statements or opinions made or reports contained in this Circular.

The contact person for the Sponsor is Mr. Thomas Lam, Associate Director, Continuing Sponsorship, at 16 CollyerQuay, #10-00 Income at Raffles, Singapore 049318, telephone (65) 6229 8088.

This Circular, the Exit Offer Letter and the Acceptance Form (all as defined herein) shall not be construed as, andmay not be used for the purpose of, and does not constitute a notice or proposal or advertisement or an offer orinvitation or solicitation in any jurisdiction or in any circumstance in which such a notice or proposal oradvertisement or an offer or invitation or solicitation is unlawful or not authorised, or to any person to whom it isunlawful to make such a notice or proposal or advertisement or an offer or invitation or solicitation.

JUNMA TYRE CORD COMPANY LIMITED(Incorporated in the People’s Republic of China)

CIRCULAR TO SHAREHOLDERS

in relation to

THE PROPOSED VOLUNTARY DELISTING OF JUNMA TYRE CORD COMPANY LIMITED

PURSUANT TO RULES 1307 AND 1308 OF THE CATALIST RULES

Independent Financial Adviser to the Independent Directors in respect of the Exit Offer

CANACCORD GENUITY SINGAPORE PTE. LTD.(Incorporated in the Republic of Singapore)

(Company Registration Number: 200713620D)

IMPORTANT DATES AND TIMES:

Last Date and Time for Lodgement of Proxy Form : 12 May 2015 at 11.00 a.m.

Date and Time of Extraordinary General Meeting : 13 May 2015 at 11.00 a.m. (or soon thereafter

immediately following the conclusion or adjournment

of the Annual General Meeting of the Company to be

held on 13 May 2015 at 10.00 a.m.)

Place of Extraordinary General Meeting : MR 309 Level 3

Suntec Singapore International Convention &

Exhibition Centre

1 Raffles Boulevard

Suntec City

Singapore 039593

FREQUENTLY ASKED QUESTIONS

Unless otherwise defined, all capitalised terms used herein shall bear the same meanings

ascribed to them in the Circular.

(A) HIGHLIGHTS OF THE DELISTING AND EXIT OFFER

Q1: Do I need to attend and vote at the EGM?

A1: The EGM of the Shareholders of the Company will be held on 13 May 2015 at 11.00 a.m. (or

soon thereafter immediately following the conclusion or adjournment of the Annual General

Meeting of the Company to be held on 13 May 2015 at 10.00 a.m. at MR 309 Level 3, Suntec

Singapore International Convention & Exhibition Centre, 1 Raffles Boulevard Suntec City

Singapore 039593 for the purpose of considering and obtaining Shareholders’ approval for

the Delisting of the Company.

A Shareholder entitled to attend and vote at the EGM is entitled to appoint one or more

proxies to attend and vote instead of him/her. A proxy needs not be a Shareholder of the

Company.

Q2: Are there any conditions attached to the Delisting and Exit Offer?

A2: The Delisting and Exit Offer would be conditional upon the Shareholders approval for the

Delisting and there being no rejection by the SGX-ST against the Delisting. Please refer to

Section 2.1 of the Circular for more details.

Q3: What is the Exit Offer Price? Will there be any other costs deducted from the Exit Offer Price?

A3: Under the Exit Offer, the Offeror is offering S$0.20 in cash for each Offer Share.

If you accept the Exit Offer, you will receive the S$0.20 in cash for each Offer Share you

tender in acceptance of the Exit Offer without incurring brokerage and other trading costs.

Q4: Do I have to sell all my Shares?

A4: You can accept the Exit Offer in respect of all or part of your Shares.

However, if you choose not to accept the Exit Offer, and the Delisting takes effect upon

Shareholders approval at the EGM, you may remain together with the Concert Parties as

Shareholders of the Company (with the Company becoming an unlisted company) following

the close of the Exit Offer.

Q5: Are there any conditions attached to the Delisting and Exit Offer?

A5: The Delisting and Exit Offer would be conditional upon the approval from SGX-ST and

fulfilment of the Catalist Rules. Please refer to Section 2.1 of the Circular for more details.

Q6: What are the choices available to the Shareholders?

A6: (a) Vote for the Delisting and accept the Exit Offer

If you choose to accept the Exit Offer and the Exit Offer becomes unconditional, you will

receive S$200 for every 1,000 Offer Shares tendered for acceptance under the Exit

Offer.

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The procedures for acceptance and settlement of the Exit Offer are set out in the

Appendix to the Exit Offer Letter.

Shareholders may choose to accept the Exit Offer in respect of all or part of their

holdings of Shares. Further, Shareholders may choose to accept the Exit Offer before

the EGM. However, such acceptances would be conditional and upon the Delisting

Conditions being satisfied, otherwise the conditions to the Exit Offer will not be fulfilled

and the Exit Offer will lapse.

(b) Vote for the Delisting and do not accept the Exit Offer

If the Delisting takes effect, you may remain together with the Concert Parties as

Shareholders of the Company (with the Company being an unlisted company) after the

completion of the Delisting.

(c) Vote against the Delisting and accept the Exit Offer

If you vote against the Delisting but the Delisting Resolution is approved by the other

Shareholders, you are still entitled to accept the Exit Offer.

If you choose to accept the Exit Offer, you will receive S$200.00 for every 1,000 Offer

Shares tendered for acceptance under the Exit Offer.

The procedures for acceptance and settlement of the Exit Offer are set out in the



holdings of Shares. Further, Shareholders may choose to accept the Exit Offer before

the EGM. However, such acceptances would be conditional upon the Delisting

Resolution Approval Conditions being satisfied, otherwise the conditions to the Exit

Offer will not be fulfilled and the Exit Offer will lapse.

(d) Vote against the Delisting and do not accept the Exit Offer

If you vote against the Delisting but the Delisting Resolution is approved by the other

Shareholders, you are still entitled to accept the Exit Offer.

If you choose not to accept the Exit Offer, you may remain together with the Concert

Parties as Shareholders of the Company (with the Company being an unlisted

company) after the completion of the Delisting.

(B) ACCEPTANCE PROCEDURES

Q1: How do I accept the Delisting?

A1: You can cast your votes in the upcoming EGM. Please follow the steps as follows:

1. Domestic Shareholders who intend to attend the EGM shall deliver their written reply to

the Company confirming their attendance at the EGM 20 days prior to the date of EGM,

failing which they will not be entitled to attend the EGM.

2. The instrument appointing a proxy or proxies must be under the hand of the appointor

or his attorney duly authorised in writing. Where the instrument appointing a proxy or

proxies is executed by a corporation, it must be executed either under its common seal

or under the hand of its Directors or its duly appointed attorney.

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3. The instrument appointing a proxy must be deposited at the office of the Company’s

Singapore Share Transfer Agent, M&C Services Private Limited at 112 Robinson Road

#05-01, Singapore 068902 not less than 24 hours before the time for holding the

Extraordinary General Meeting.

4. Please indicate in the ‘For’ if you accept the Delisting or ‘Against’ column if you do not

accept the Delisting.

Q2: How do I accept the Exit Offer?

A2: Please note that acceptances of the Exit Offer shall be irrevocable.

Please follow the steps as follows:

1. Locate the FAA. If you did not receive the FAA, please contact CDP during normal

business hours at 9 North Buona Vista Drive, #01-19, the Metropolis, Singapore

138588.

2. Complete the FAA in accordance with the Exit Offer Letter and the instructions printed

on the FAA. In particular, you must state in Part A of the FAA, the number of Offer

Shares in respect of which you wish to accept the Exit Offer. If you:

a. do not specify such number; or

b. specify a number which exceeds the number of Offer Shares standing to the credit

of the “Free Balance” of your Securities Account as at 5.00 p.m. on the date of

receipt of the FAA by CDP (“Date of Receipt”), provided always that the Date of

Receipt is on or before 5.30 p.m. on the Closing Date,

you shall be deemed to have accepted the Exit Offer in respect of all the Offer Shares

standing to the credit of the “Free Balance” of your Securities Account as at 5.00 p.m.

on the Date of Receipt (or 5.30 p.m. on the Closing Date if the FAA is received by CDP

on the Closing Date);

3. Sign the FAA in accordance with the Exit Offer Letter and the instructions printed on the

FAA; and

4. Deliver the completed and signed FAA:

a. by hand to Ultimative Ltd c/o The Central Depository (Pte) Limited at 9 North

Buona Vista Drive, #01-19/20, The Metropolis, Singapore 138588; or

b. by post, in the enclosed pre-addressed envelope at your own risk, to Ultimative

Ltd c/o The Central Depository (Pte) Limited at Robinson Road Post Office, P.O.

Box 1984, Singapore 903934,

in each case so as to arrive not later than 5.30 p.m. on the Closing Date, being 27

May 2015 or such later date(s) as may be announced from time to time by or on

behalf of the Offeror.

Overseas Shareholders should read Section 16 of this Circular.

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IMPORTANT NOTICE

The information in this section is a summary of the Circular and is qualified by, and should

be read in conjunction with, the full information contained in the rest of this Circular, which

should be read in its entirety.

Shareholders are advised to exercise caution when dealing in their Shares and refrain from

taking any action in relation to their Shares which may be prejudicial to their interests until

they or their advisers have considered the information and the recommendations of the

Independent Directors as well as the advice of the IFA as set out in the Circular.

Nothing in this section is intended to be, or shall be taken as, any advice, recommendation

or solicitation to the Shareholders or any other party.

The remainder of the page has been intentionally left blank

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CONTENTS

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

INDICATIVE TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

LETTER TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

2. THE DELISTING PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

3. THE EXIT OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

4. INFORMATION ON THE OFFEROR AND CONCERT PARTIES . . . . . . . . . . . . . . . . 21

5. INFORMATION ON THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

6. THE OFFEROR’S INTENTIONS FOR THE COMPANY AND ITS SUBSIDIARIES

AND RATIONALE FOR THE DELISTING PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . 22

7. FINANCIAL EVALUATION OF THE EXIT OFFER. . . . . . . . . . . . . . . . . . . . . . . . . . . 24

8. IMPLICATIONS OF COMPULSORY ACQUISITION DELISTING FOR

SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

9. CONFIRMATION OF FINANCIAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

10. NO COMPETING OFFER RECEIVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

11. INTEREST OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS . . . . . . . . . . . 27

12. EXEMPTION RELATING TO DIRECTORS’ RECOMMENDATIONS . . . . . . . . . . . . . 29

13. ADVICE OF INDEPENDENT FINANCIAL ADVISER TO THE INDEPENDENT

DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

14. OPINION FROM PRC COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

15. INDEPENDENT DIRECTORS’ RECOMMENDATION. . . . . . . . . . . . . . . . . . . . . . . . . 32

16. OVERSEAS SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

17. EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

18. ACTIONS TO BE TAKEN BY SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

19. DIRECTORS’ RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

20. CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

21. DOCUMENTS AVAILABLE FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

22. ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

5

APPENDIX 1

LETTER FROM IFA TO THE INDEPENDENT DIRECTORS IN RESPECT OF THE EXIT

OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

APPENDIX 2

JUNHE LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

APPENDIX 3

HEP LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

APPENDIX 4

VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

APPENDIX 5

ADDITIONAL INFORMATION ON THE OFFEROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

APPENDIX 6

ADDITIONAL INFORMATION ON THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

APPENDIX 7

RELEVANT EXCERPTS FROM THE ARTICLES OF ASSOCIATION OF THE

COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

APPENDIX 8

AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEARS

ENDED 31 DECEMBER 2012, 31 DECEMBER 2013 AND 31 DECEMBER 2014 . . . . . . 134

APPENDIX 9

ANNOUNCEMENT DATED 8 NOVEMBER 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276

NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . 282

EXTRAORDINARY GENERAL MEETING PROXY FORM

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DEFINITIONS

In this Circular, the following definitions apply throughout unless otherwise stated.

“Acceptance Form” : means FAA.

“Act” or “Companies Act” : means the Companies Act (Cap 50) of Singapore, as

amended, modified or supplemented from time to time.

“AGM” : means the annual general meeting of the Company to be held

on 13 May 2015 at 10.00 a.m.

“Articles of Association” : means the articles of association of the Company.

“Catalist Rules” : means the SGX-ST Listing Manual Section B: Rules of

Catalist.

“CDP” : means the Central Depository (Pte) Limited.

“Circular” : means this circular to Shareholders dated 27 April 2015

issued by the Company in relation to the proposed voluntary

delisting of the Company pursuant to Rules 1307 and 1308 of

the Catalist Rules.

“Closing Date” : means 5.30 p.m on 27 May 2015, or such later date(s) as may

be announced from time to time by or on behalf of the Offeror,

being the last day for the lodgement of acceptances of the Exit

Offer.

“Code” : means the Singapore Code on Take-overs and Mergers as

amended, supplemented or modified from time to time.

“Company” : means Junma Tyre Cord Company Limited.

“Controlling

Shareholder”

: means a person who:

(a) holds directly or indirectly fifteen per cent (15%) or more

of the total number of issued Shares (excluding treasury

shares) unless the SGX-ST determines that such a

person is not a controlling shareholder of the Company;

or

(b) in fact exercises control over the Company.

“Delisting” : means the proposed voluntary delisting of the Company from

the Catalist Board of the SGX-ST pursuant to Rules 1307 and

1308 of the Catalist Rules.

“Delisting Proposal” : means the proposal for the Delisting dated 9 March 2015 put

forth by the Offeror to the Board of Directors of the Company.

“Delisting Resolution” : means the resolution to be proposed at the EGM to approve

the Delisting.

7

“Delisting Conditions” : shall have the meaning ascribed to it in Section 2.1 of this

Circular.

“Directors” : means the directors of the Company (including the

Independent Directors) as at the date of this Circular.

“Domestic Shares” : Domestic shares of nominal value RMB1.00 each in the share

capital of the Company which were subscribed for or credited

as fully paid in RMB by investors in the PRC other than Hong

Kong, Macau and Taiwan.

“EGM” : means the extraordinary general meeting of the Company to

be held on 13 May 2015, notice of which is set out on page

282 of this Circular, and any adjournment thereof.

“Exit Offer” : means the cash offer by the Offeror, to purchase all the Offer

Shares, on the terms and subject to the conditions set out in

the Exit Offer Letter, in accordance with Section 139 of the

SFA and the Code.

“Exit Offer Letter” : means the letter dated 27 April 2015 issued by the Offeror,

and any other document which may be issued for and on

behalf of the Offeror, in respect of the Exit Offer, including the

FAA, which are despatched to Shareholders together with this

Circular.

“Exit Offer Price” : means S$0.20 in cash for each Offer Share.

“FA” : means Provenance Capital Pte. Ltd.

“FAA” : means the Form of Acceptance and Authorisation to be issued

to Shareholders who are Depositors.

“FY” : means the financial year of the Company ended or ending

31 December.

“Group” : means the Company and its subsidiaries.

“IFA” or “Canaccord

Genuity”

: Canaccord Genuity Singapore Pte. Ltd.

“IFA Letter” : means the letter from the IFA to the Independent Directors in

relation to the Exit Offer, as set out in Appendix 1 to this

Circular.

“Independent Directors” : means the Directors who are considered to be independent

for the purposes of making the recommendation(s) to

Shareholders in relation to the Delisting Proposal and the Exit

Offer, namely, Jen Shek Voon, Teng Cheong Kwee and Shan

Wenfeng.

8

“Interested Person” : as defined in the note on Rule 24.6 of the Code read with the

note on Rule 23.12 of the Code, is:

(a) a director, chief executive officer, or substantial

shareholder of the company;

(b) the immediate family of a director, the chief executive

officer, or a substantial shareholder (being an

individual)of the company;

(c) the trustees, acting in their capacity as such trustees, of

any trust of which a director, the chief executive officer,

or a substantial shareholder (being an individual) and his

immediate family is a beneficiary;

(d) any company in which a director, the chief executive

officer, or a substantial shareholder (being an individual)

together and his immediate family together (directly or

indirectly) have an interest of 30% of more;

(e) any company that is the subsidiary, holding company or

fellow subsidiary of the substantial shareholder (being a

company); or

(f) any company in which a substantial shareholder (being a

company) and any of the companies listed in (e) above

together (directly or indirectly) have an interest of 30% of

more.

“Joint Announcement” : means the joint announcement issued by the Company and

the Offeror on the Joint Announcement Date.

“Joint Announcement

Date”

: means 10 March 2015, being the date on which the Joint

Announcement was made.

“Junhe” : Jun He Law Offices, being the PRC legal counsels to the

Company.

“Latest Practicable Date” : means 20 April 2015, being the latest practicable date prior to

the printing of this Circular.

“Market Day” : means a day on which the SGX-ST is open for trading in

securities.

“Notice of EGM” : means the Notice of EGM as set out on page 282 of this

Circular.

“NAV” : means net asset value.

“NTA” : means net tangible asset.

“Offeror” : Ultimative Ltd.

9

“Offeror’s Concert

Parties”

: means parties acting in concert with the Offeror in relation to

the Exit Offer, namely, Yang Cong, Liu Zhenfeng, Yang

Peixing, Chen Zufu, Liu Yaoxiang and Zhangjiagang Buole

Investment Development Company Limited.

“Offer Shares” : means all the issued S Shares (excluding treasury shares)

other than those S Shares held, directly or indirectly, by the

Offeror and the Offeror’s Concert Parties.

“PRC” : People’s Republic of China.

“Register” : means the register of holders of the Shares, as maintained by

the Registrar.

“Relevant Directors” : Yang Peixing, Liu Yaoxiang, Liu Zhenfeng and Zhou Zhidan.

“Relevant Period” : means the period commencing 6 months prior to the Joint

Announcement Date and ending on the Latest Practicable

Date.

“SAIC” : means the State Administration for Industry and Commerce of

the PRC.

“Securities Account” : means a securities account maintained by a Depositor with

CDP but does not include a securities sub-account.

“SFA” or “Securities and

Futures Act”

: means the Securities and Futures Act (Cap 289) of Singapore,

as amended, modified or supplemented from time to time.

“SGXNET” : means the system network used by listed companies to send

information and announcements to SGX-ST or any other

system networks prescribed by SGX-ST.

“SGX-ST” : means Singapore Exchange Securities Trading Limited.

“Shareholders” : means registered holders of Shares, except that where the

registered holder is CDP, the term “Shareholders” shall, in

relation to such Shares, mean the persons named as

Depositors in the Depository Register and whose Securities

Accounts maintained with CDP are credited with Shares.

“Shares” : means Domestic Shares and/or S Shares (as the case may

be).

“S Shares” : Ordinary shares of nominal value RMB1.00 each in the share

capital of the Company which were subscribed for or credited

as fully paid in S$ by investors from other countries other than

the PRC (excluding Hong Kong, Macau and Taiwan).

“S Shareholder” : shall have the meaning ascribed to it in Section 14(e) of this

Circular.

“SIC” : means the Securities Industry Council of Singapore.

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“Sponsor” : means PrimePartners Corporate Finance Pte. Ltd.

“Substantial

Shareholder”

: means a person who holds directly or indirectly not less than

five per cent. (5%) of the total number of issued Shares

(excluding treasury shares).

“Valuation Report” : valuation report dated 20 April 2015 expressing the

independent opinion by Jones Lang LaSalle Corporate

Appraisal and Advisory Limited of the value in use of the

indicated cash-generating unit, equivalent to the fair value of

land use rights, building, machinery and equipment, motor

vehicles, other equipment and construction-in-progress in the

Company as at 31 December 2014.

Currencies, Units and Others

“RMB” : PRC Renminbi.

“S$” and “cents” : Singapore dollars and cents respectively, the lawful currency

of the Republic of Singapore.

“%” or “per cent.” : Per centum or percentage.

The terms “Depositor” and “Depository Register” shall have the meanings ascribed to them

respectively in Section 130A of the Act.

The term “treasury shares” shall have the meaning ascribed to it in Section 4 of the Act.

The terms “subsidiary” and “related corporation” shall have the meaning ascribed to it in

Sections 5 and 6 of the Act respectively.

The terms “acting in concert” and “associates” shall have the meanings ascribed to them in the

Code.

Words importing the singular shall, where applicable, include the plural and vice versa. Words

importing the masculine gender shall, where applicable, include the feminine and neuter genders

and vice versa. References to persons, where applicable, shall include corporations.

Any reference in this Circular to any enactment is a reference to that enactment as for the time

being amended or re-enacted. Any term defined under the Act or the Code or the Catalist Rules

(or any modification thereof) and used in this Circular shall, where applicable, have the same

meaning assigned to it under the Act or the Code or the Catalist Rules (or any modification

thereof), as the case may be, unless otherwise provided.

Any reference to a time of the day and date in this Circular shall be a reference to Singapore

time and date respectively, unless otherwise stated.

Any discrepancies in the tables included in this Circular between the listed amounts and

the totals thereof are due to rounding. Accordingly, figures shown as totals in certain tables

in this Circular may not be an arithmetic aggregation of the figures that precede them.

All statements other than statements of historical facts included in this Circular are or may

be forward-looking statements. Forward-looking statements include but are not limited to

those using words such as “seek”, “expect”, “anticipate”, “estimate”, “believe”, “intend”,

11

“project”, “plan”, “strategy”, “forecast” and similar expressions or future or conditional

verbs such as “if”, “will”, “would”, “shall”, “should”, “can”, “could”, “may” and “might”.

These statements reflect the Company’s or, as the case may be, the Offeror’s current

expectations, beliefs, hopes, intentions or strategies regarding the future and assumptions

in light of currently available information. Such forward-looking statements are not

guarantees of future performance or events and involve known and unknown risks and

uncertainties. Accordingly, actual results may differ materially from those described in

such forward-looking statements. Shareholders and investors should not place undue

reliance on such forward-looking statements, and neither the Company, the Offeror nor the

IFA guarantees the performance of such forward-looking statements or undertakes any

obligation to update publicly or revise any forward-looking statements, subject to

compliance with all applicable laws and regulations and/or rules of the SGX-ST and/or any

other regulatory or supervisory body or agency.

Capitalised terms used in the extracts of the Exit Offer Letter and not defined herein shall

bear the same meanings as attributed to them in the Exit Offer Letter.

12

INDICATIVE TIMETABLE

Date of Despatch of the Exit Offer

Letter and this Circular

: 27 April 2015

Last Date and time for lodgement

of proxy form for the EGM

: 12 May 2015 at 11.00 a.m.

Date and time of the EGM : 13 May 2015 at 11.00 a.m. (or soon thereafter

immediately following the conclusion or adjournment

of the AGM)

Expected Closing Date and time

of the Exit Offer

: 27 May 2015 at 5.30 p.m., or such date(s) as may be

announced by or on behalf of the Offeror, being the

last day and time for the acceptances of the Exit Offer

Expected date for the Delisting : Approximately 4 to 6 weeks after the Closing Date or

such other date and time as may be announced from

time to time by the Company

Expected date for the payment of

the Exit Offer Price, in respect of

valid acceptances of the Exit

Offer

: Within 10 days after (i) the Delisting Conditions have

been satisfied at the EGM (where valid Exit Offer

acceptances of the Exit Offer are tendered on or prior

to the date of the Delisting Conditions being satisfied

at the EGM), or (ii) the date of receipt of valid

acceptances of the Exit Offer (where such

acceptances are tendered after the Delisting

Conditions have been satisfied at the EGM but before

the close of the Exit Offer)

Shareholders should note that, save for the date of despatch of the Exit Offer Letter and

this Circular, the last date and time for lodgement of proxy forms for the EGM, the date and

time of the EGM, the above timetable is indicative only and may be subject to change. For

events listed above which are described as “expected”, please refer to future

announcement(s) by or on behalf of the Company and/or the Offeror via SGXNET for the

exact dates and times of such events.

Note:

The instrument appointing a proxy must be deposited at the office of the Company’s Singapore Share Transfer Agent, M&C

Services Private Limited at 112 Robinson Road #05-01, Singapore 068902 not less than 24 hours before the time for

holding the Extraordinary General Meeting. Completion and return of a proxy form will not preclude a Shareholder from

attending and voting in person at the EGM in place of his proxy.

PLEASE NOTE THAT THE EXIT OFFER IS CONDITIONAL ON THE DELISTING CONDITIONS

BEING SATISFIED BUT WILL NOT BE CONDITIONAL UPON A MINIMUM NUMBER OF

ACCEPTANCES BEING RECEIVED. PLEASE ALSO NOTE THAT VOTING IN FAVOUR OF THE

DELlSTlNG RESOLUTION AT THE EGM DOES NOT AUTOMATICALLY MEAN THAT YOU

HAVE ACCEPTED THE EXlT OFFER. PLEASE REFER TO THE APPENDIX TO THE EXIT

OFFER LETTER WHICH SETS OUT PROCEDURES FOR ACCEPTANCE OF THE EXIT OFFER

IF YOU WISH TO ACCEPT THE EXIT OFFER.

13

LETTER TO SHAREHOLDERS


Board of Directors: Registered office:

Yang Peixing (Executive Chairman) Junma Building,

Nonglu Road, Chenghang,

Yangshe Town, Zhangjiagang City,

Jiangsu Province, PRC

Liu Yaoxiang (Executive Director)

Liu Zhenfeng (Executive Director)

Zhou Zhidan (Executive Director)

Jen Shek Voon (Non-Executive and

Lead Independent Director)

Teng Cheong Kwee (Non-Executive and Independent

Director)

Shan Wenfeng (Non-Executive and Independent

Director)

27 April 2015

To: The Shareholders of Junma Tyre Cord Company Limited

Dear Sir/Madam

PROPOSED VOLUNTARY DELISTING OF JUNMA TYRE CORD COMPANY LIMITED

PURSUANT TO RULES 1307 AND 1308 OF THE CATALIST RULES

1. INTRODUCTION

On 10 March 2015, the Company and the Offeror jointly announced that the Offeror had

presented the Delisting Proposal to the Company to seek the Delisting of the Company from

the Catalist Board of the SGX-ST pursuant to Rules 1307 and 1308 of the Catalist Rules.

A copy of the Joint Announcement is available on the website of the SGX-ST at

http://www.sgx.com.

Under the terms of the Delisting Proposal, the Offeror will make the Exit Offer to purchase

all the Offer Shares at the Exit Offer Price.

The Directors, having considered the Delisting Proposal, have resolved to convene the

EGM to seek the approval of Shareholders for the Delisting and have made an application

to the SGX-ST for the Delisting on 30 March 2015.

The purpose of this Circular is to provide Shareholders with information relating to the

Delisting Proposal and the Exit Offer, and to seek Shareholders’ approval at the EGM for the

Delisting Resolution, notice of which is set out on page 282 of this Circular.

2. THE DELISTING PROPOSAL

2.1 Terms Of The Delisting Proposal

Under the terms of the Delisting Proposal, the Delisting and the Exit Offer will be conditional

on:

(a) the SGX-ST agreeing to the application by the Company to delist from the SGX-ST;

(b) the Company convening an extraordinary general meeting to obtain approval from

Shareholders for the Delisting;

14

(c) the Delisting Resolution being approved by a majority of at least 75% of the total

number of issued Shares excluding treasury shares held by the Shareholders present

and voting, on a poll, either in person or by proxy at the EGM (the Directors and

controlling Shareholders need not abstain from voting on the Delisting Resolution);

and

(d) the Delisting Resolution not being voted against by 10% or more of the total number

of issued Shares excluding treasury shares held by the Shareholders present and

voting, on a poll, either in person or by proxy at the EGM,

(collectively, the “Delisting Conditions”).

If the Delisting Conditions are satisfied, the Closing Date of the Exit Offer is 5.30 p.m. on

27 May 2015 or such later date(s) as may be announced from time to time by or on behalf

of the Offeror.

If the Delisting Conditions are not satisfied, the Exit Offer will lapse and all

acceptances of the Exit Offer will be returned.

2.2 Requirements Under The Catalist Rules

2.2.1 Under Rule 1307 of the Catalist Rules, the SGX-ST may agree to an application by the

Company for the Delisting if:

(a) the Company convenes a general meeting to obtain the approval of its Shareholders

for the Delisting;

(b) the Delisting Resolution is approved by a majority of at least 75% of the total number

of Shares excluding treasury shares held by Shareholders present and voting, on a

poll, either in person or by proxy at the EGM (the Directors and controlling

Shareholders need not abstain from voting on the Delisting Resolution); and

(c) the Delisting Resolution is not voted against by 10% or more of the total number of

Shares excluding treasury shares held by Shareholders present and voting, on a poll,

either in person or by proxy at the EGM.

Shareholders should note that under Rule 1307 of the Catalist Rules, all Shareholders

(including the Offeror and parties acting in concert with the Offeror who hold Shares)

are entitled to vote on the Delisting Resolution.

2.2.2 In addition, Rule 1308 of the Catalist Rules requires that if the Company is seeking to delist

from the Catalist Board of SGX-ST:

(a) a reasonable exit alternative, which should normally be in cash, should be offered to

Shareholders and holders of any other classes of listed securities to be delisted; and

(b) the Company should normally appoint an independent financial adviser to advise on

the Exit Offer.

An application for the Delisting was made to SGX-ST by the Company through the Sponsor

on 30 March 2015. The SGX-ST has in its letter dated 6 April 2015 advised that it has no

objection to the Delisting, subject to compliance with Rules 1307 and 1308 of the Catalist

Rules and Shareholders’ approval being obtained at the EGM. The SGX-ST’s in-principle

approval is not an indication of the merits of the Delisting.

15

2.3 Code Requirements

Information relating to the application made by the Offeror to the SIC to seek clarification

regarding the extent to which the provisions of the Code applied to the Exit Offer and the

SIC’s ruling on the Offeror’s application has been extracted from paragraph 9 of the Exit

Offer Letter and reproduced below, and all terms and expressions used in the section below

shall bear the same meanings as attributed to them in the Exit Offer Letter unless otherwise

stated.

“An application was made by the Offeror to the Securities Industry Council (“SIC”) to seek

clarification regarding the extent to which the provisions of the Code applied to the Exit

Offer. The SIC ruled on 15 December 2014, inter alia, that:

(a) the Exit Offer is exempted from compliance with the following provisions of the Code:

(i) Rule 20.1 on keeping the Exit Offer open for 14 days after it is revised;

(ii) Rule 22 on the offer timetable;

(iii) Rule 28 on acceptances; and

(iv) Rule 29 on the right of acceptors to withdraw their acceptances;

(b) subject to the following conditions:

(i) disclosure in the Circular of the consolidated NTA per Share of the group

comprising the Company, its subsidiaries and associated companies based on

the latest published accounts prior to the date of the Circular;

(ii) disclosure in the Circular of particulars of all known material changes as of the

latest practicable date set out in the Circular which may affect the consolidated

NTA per Share referred to in paragraph (b)(i) above or a statement that there are

no such known material changes; and

(iii) the Exit Offer remaining open for at least:

(A) 21 days after the date of the despatch of the Exit Offer Letter if the Exit Offer

Letter is despatched after Shareholders’ approval for the Delisting has been

obtained, or

(B) 14 days after the date of the announcement of Shareholders’ approval of the

Delisting if the Exit Offer Letter is despatched on the same date as the

Delisting Circular;

(c) the following Directors: LZF, YPX, LYX and Zhou Zhidan (collectively, “Relevant

Directors”) are exempted from the requirement under Rule 24.1 of the Code to make

a recommendation to the Shareholders on the Exit Offer as each of the Relevant

Directors, faces irreconcilable conflict of interests in doing so. Nevertheless, the

Relevant Directors must still assume responsibility for the accuracy of the facts stated

and opinions expressed in documents or advertisements issued by, or on behalf of, the

Company to the Shareholders in connection with the Exit Offer.

Mr Jen Shek Voon, Mr Teng Cheong Kwee and Mr Shan Wenfeng, being the remaining

Directors, will be considered independent for the purposes of providing a

recommendation on the Exit Offer to the Shareholders.”

16

2.4 Acceptance Procedures – You Can Accept The Exit Offer Anytime During The Period

Commencing From The Date Of Despatch Of The Exit Offer Letter And Ending At 5.30

p.m. On The Closing Date.

If you decide to accept the Exit Offer, you should complete, sign and return the Acceptance

Form in accordance with the provisions and instructions stated in the Exit Offer Letter and

the Acceptance Form. Additional information on the procedures for acceptance and

settlement of the Exit Offer is set out in the Appendix to the Exit Offer Letter.

Acceptance of the Exit Offer does not mean that you have voted in favour of the Delisting

Resolution. To vote in favour of the Delisting Resolution, you may wish to attend the EGM,

or if you are unable to attend in person, you may wish to appoint a proxy to attend and vote

on your behalf in accordance with Section 18.1 of this Circular.

Shareholders should also note that if the Delisting Conditions are not satisfied at the EGM,

the condition to the Exit Offer will not be fulfilled. In such event, those Offer Shares in

respect of which acceptances have been received shall be transferred to the “Free Balance”

of the relevant Shareholder’s Securities Account in accordance with the terms set out in the

Acceptance Form.

If you decide not to accept the Exit Offer, you do not need to take any action. In the event

that the Delisting Conditions are satisfied at the EGM and the Company is delisted from the

Catalist Board of the SGX-ST, you will continue to hold unquoted Shares of the Company

(as an unlisted company). If you hold Shares that are deposited with CDP, a share

certificate representing your delisted Shares that are deposited with CDP will be sent, by

ordinary post and at your own risk, to your mailing address as it appears in the records of

CDP, after the Company has been delisted from the Catalist Board of the SGX-ST. The

implications of the Delisting for Shareholders are set out in Section 8 of this Circular.

3. THE EXIT OFFER

3.1 Information relating to the Exit Offer has been extracted from paragraph 2 of the Exit Offer

Letter and reproduced below, and all terms and expressions used in the extract below shall

bear the same meanings as attributed to them in the Exit Offer Letter unless otherwise

stated.

2.1 “Consideration

The offer price for each Offer Share will be S$0.20 in cash (“Exit Offer Price”).

THE OFFEROR DOES NOT INTEND TO REVISE THE EXIT OFFER PRICE UNDER

ANY CIRCUMSTANCES.

The Exit Offer Price shall be applicable to any number of Offer Shares that are

tendered in acceptance of the Exit Offer.


holdings of the Offer Shares.

Each Shareholder who accepts the Exit Offer will receive S$200.00 for every 1,000

Offer Shares tendered for acceptance under the Exit Offer.

17

2.2 No Encumbrances

The Offer Shares will be acquired fully paid and free from all liens, equities,

mortgages, debentures, pledges, title retention, security interests, options, charges,

encumbrances, rights of pre-emption and other third party rights and interests of any

nature whatsoever (“Encumbrances”), and together with all rights, benefits and

entitlements attached thereto as at the Joint Announcement Date and thereafter

attaching thereto (including the right to receive and retain all dividends, rights, other

distributions or returns of capital (“Distributions”), if any, which may be declared, paid

or made by the Company on or after the Joint Announcement Date). If any Distribution

is declared, made or paid by the Company on or after the Joint Announcement Date,

the Offeror reserves the right to reduce the Exit Offer Price by the amount of such

Distribution.

2.3 Conditions to Delisting and Exit Offer

The Delisting and the Exit Offer are conditional on, inter alia:

(a) the SGX-ST agreeing to the application by the Company to delist from the

Catalist Board of the SGX-ST;

(b) the resolution to approve the Delisting (“Delisting Resolution”) being approved

by a majority of at least 75% of the total number of Shares held by the

Shareholders present and voting, on a poll, either in person or by proxy at the

EGM; and

(c) the Delisting Resolution not being voted against by 10% or more of the total

number of Shares held by the Shareholders present and voting, on a poll, either

in person or by proxy at the EGM;

(d) (Collectively, “Delisting Resolution Approval Conditions”).

Under Rule 1307(2) of the Catalist Rules, all Shareholders including the Offeror and

Concert Parties who hold Shares, and the Directors who hold Shares are entitled to

vote on the Delisting Resolution.

The SGX-ST has advised in its letter dated 6 April 2015 that it has no objection to the

Delisting, subject to the compliance of Rules 1307 and 1308 of the Catalist Rules, and

Shareholders’ approval being obtained at the EGM. However, this is not to be taken as

an indication of the merits of the Delisting.

2.4 Concert Parties

As at the Latest Practical Date, the Offeror does not own or have any control over any

Shares. The Concert Parties of the Offeror are as follows:

(a) Yang Cong (being a director and sole shareholder of the Offeror) (“YC”);

(b) Liu Zhenfeng (being a director of the Offeror) (“LZF”);

(c) Yang Peixing who is the father of YC (“YPX”);

(d) Chen Zufu who is the brother-in-law of YPX and uncle of YC (“CZF”);

(e) Liu Yaoxiang who is the cousin of YPX and uncle of YC (“LYX”); and

18

(f) Zhangjiagang Buole Investment Development Company Limited (“Buole”), an

investment holding company with 20.75% of its shareholding interests owned by

the following individuals:

(i) Yang Peiying who is the sister of YPX and the aunt of YC;

(ii) Yang Jianxing who is the brother of YPX and the uncle of YC;

(iii) Wang Minghan who is the brother-in-law of YPX and the uncle of YC;

(iv) Liu Zhenxiang who is the cousin of YPX and the uncle of YC;

(v) Liu Fengxiang who is the cousin of YPX and the uncle of YC; and

(vi) Qian Liquan who is the brother-in-law of YPX and the uncle of YC,

(collectively, “Buole Individuals” and each a “Buole Individual”)

As at the Latest Practicable Date, the Concert Parties collectively own all the

55,000,000 Domestic Shares and 2,524,400 S Shares. The shareholdings of the

Concert Parties in the Company are as follows:

Name of

Shareholder

No. of Shares held Percentage

shareholding in

the Company

(%)

No. of

Domestic

Shares

No. of

S Shares

Total no.

of Shares

YC – 629,400 629,400 0.86

LZF 4,500,000 – 4,500,000 6.13

YPX 13,500,000 1,895,000 15,395,000 20.97

CZF 4,375,000 – 4,375,000 5.96

LYX 2,500,000 – 2,500,000 3.41

Buole 30,125,000 – 30,125,000 41.04

Total 55,000,000 2,524,400 57,524,400 78.37

The Exit Offer is being made to the remaining 15,875,600 S Shares, being the Offer

Shares.

As at the Latest Practicable Date, the shareholding interests of the Buole Individuals

in Buole are as follows:

Name of Buole Individual Percentage shareholding in Buole

(%)

Yang Peiying 7.47

Yang Jianxing 4.98

Wang Minghan 5.40

Liu Zhenxiang 1.24

Liu Fengxiang 0.83

Qian Liquan 0.83

Total 20.75

19

Each of the Concert Parties has irrevocably and unconditionally undertaken to the

Company that it/he will vote, and/or procure its/his representatives or proxy to vote in

favour of the Delisting Resolution at the EGM. Further details of the irrevocable

undertakings given by the Concert Parties are set out in paragraph 3 of this Exit Offer

Letter.

2.5 Acceptances


holdings of the Offer Shares. The Exit Offer will not be conditional upon a minimum

number of acceptances being received by the Offeror.

2.6 Warranty

Acceptance of the Exit Offer by a Shareholder will be deemed to constitute an

unconditional and irrevocable warranty by that Shareholder that each Offer Share in

respect of which the Exit Offer is accepted is sold by him as, or on behalf of, the

beneficial owner(s) thereof, fully paid and free from all Encumbrances, and together

with all rights, benefits and entitlements attached thereto as at the Joint

Announcement Date and thereafter attaching thereto (including the right to receive

and retain all Distributions (if any) announced, declared, paid or made by the

Company on or after the Joint Announcement Date.

2.7 Duration

The Exit Offer is open for acceptance from the date of despatch of this Exit Offer

Letter. Shareholders may choose to accept the Exit Offer before the EGM. However,

such acceptances would be conditional and if the Delisting Resolution Approval

Conditions are not satisfied, the conditions to the Exit Offer will not be fulfilled and the

Exit Offer will lapse, and both the Shareholders and the Offeror will cease to be bound

by any prior acceptances of the Exit Offer by any Shareholder.

At present, it is envisaged that the Exit Offer will close at 5.30 p.m. on 27 May 2015

or such later date(s) as may be announced from time to time by or on behalf of the

Offeror (“Closing Date”).

If the Delisting Resolution Approval Conditions are satisfied on or before the Closing

Date, the Exit Offer will be opened for acceptance by the Shareholders for a period of

at least 14 days after the date of the announcement of the satisfaction of the Delisting

Resolution Approval Conditions.

2.8 Procedures for acceptance

The Appendix of this Exit Offer Letter sets out the procedures for the acceptance of the

Exit Offer and additional information on the settlement of the consideration for the Exit

Offer.”

3.2 Exit Offer Documents

Subject to Section 16 of this Circular, the Exit Offer Letter and the Acceptance Form have

been despatched to Shareholders by ordinary post together with this Circular.

20

4. INFORMATION ON THE OFFEROR AND CONCERT PARTIES

Information on the Offeror and its concert parties have been extracted from paragraph 4 of

the Exit Offer Letter and reproduced below, and all terms and expressions used in the

extract below shall bear the same meanings as attributed to them in the Exit Offer Letter

unless otherwise stated. Additional information on the Offeror is set out in Appendix 5 to this

Circular.

“The Offeror is a special purpose vehicle incorporated in the British Virgin Islands on 3 June

2014 for the purposes of the Delisting and the Exit Offer. Its principal activity is that of an

investment holding company and its registered address is at 263 Main Street, Road Town,

Tortola, British Virgin Islands.

As at the Latest Practicable Date, the directors of the Offeror (“Offeror Directors”, each an

“Offeror Director”) are:

Name Designation Address

YC Director No. 39, Chenghang East Road,


Jiangsu Province 215617, PRC

LZF Director No. 20, East Ten Team, Li Ming Village,



As at the Latest Practicable Date, the Offeror has an issued and paid-up capital of US$1.00

comprising one (1) fully paid-up ordinary share of US$1.00. The sole shareholder of the

Offeror is YC.

Besides being an Offeror Director, LZF is also an Executive Director of the Company.

As the Offeror is incorporated in the British Virgin Islands, there is no requirement to

prepare audited financial statements, and accordingly, no audited financial statements of

the Offeror have been prepared. In addition, as the Offeror had only been incorporated on

3 June 2014 for the purposes of the Delisting and the Exit Offer, the Offeror would not have

had a full financial year as at the Latest Practicable Date.

Save as a result of the making and financing of the Exit Offer, as at the Latest Practicable

Date, there have been no known material changes in the financial position of the Offeror

subsequent to the date of its incorporation.

As mentioned in paragraph 2.4 of this Exit Offer Letter, the Offeror does not own or have

any control over any Shares as at the Latest Practicable Date. YC holds 629,400 S Shares,

representing approximately 0.86% of the total issued Shares. LZF holds 4,500,000

Domestic Shares, representing approximately 6.13% of the total issued Shares.

Save as disclosed in this Exit Offer Letter and the information disclosed in the

announcements released by the Company on the SGX-ST, as at the Latest Practicable

Date, there has not been, within the knowledge of the Offeror, any material change in the

financial position or prospects of the Company since 31 December 2013, being the date of

the last audited balance sheet of the Company laid before its Shareholders in a general

meeting on 8 May 2014. The Company had announced the unaudited financial results of the

Company and its subsidiaries (“Group”) for the financial year ended 31 December 2014

(“FY2014”) on 28 February 2015, and had despatched its annual report for FY2014

enclosing the audited financial statements of the Group for adoption by its Shareholders at

the annual general meeting to be held on 13 May 2015.”

21

5. INFORMATION ON THE COMPANY

The Company is a limited liability company incorporated in the People’s Republic of China

on 12 June 1998 and was converted to a joint stock limited company on 19 June 2000. It

had been listed on the Catalist Board of the SGX-ST since 25 November 2004. The Group

is principally engaged in the production and sale of Nylon 6 industrial yarn and Nylon 6

dipped tyre cords.

Additional information on the Company, including a summary of the Group’s financial

performance for FY2012 and FY2013 and FY2014 is set out in Appendix 8 to this Circular.

As at the Latest Practicable Date, the Company has not issued any instruments convertible

into, rights to subscribe for, nor options in respect of, securities which carry voting rights of

the Company.

6. THE OFFEROR’S INTENTIONS FOR THE COMPANY AND ITS SUBSIDIARIES AND

RATIONALE FOR THE DELISTING PROPOSAL

The Offeror’s intentions relating to the Company and its subsidiaries and rationale for the

Delisting Proposal have been extracted from paragraph 5 of the Exit Offer Letter and

reproduced below, and all terms and expressions used in the extract below shall bear the

same meanings as attributed to them in the Exit Offer Letter unless otherwise stated:

“The rationale for the Delisting and the Offeror’s intentions for the Company are asfollows:

5.1 Opportunity to Realise Investments with an Upfront Premium

The Exit Offer Price represents a premium over the historical market prices of the SShares prior to the Joint Announcement Date:

Description

S Share Price(1)

(S$)

Premium of

Exit Offer

Price over

S Share Price(2)

(%)

Last transacted price per S Share on the

SGX-ST on 4 March 2015, being the last

market day when trades were done on the

S Shares prior to the Joint Announcement

Date (“Reference Date”) 0.062 222.6

Volume weighted average price (“VWAP”)

for the one-month period prior to and

including 6 March 2015, being the latest

practicable date prior to the Joint

Announcement(3)(4) 0.076 164.4

VWAP for the three-month period prior to

and including 6 March 2015, being the

latest practicable date prior to the Joint

Announcement(3) 0.073 174.8

VWAP for the six-month period prior to




22

Description

S Share Price(1)

(S$)

Premium of

Exit Offer

Price over

S Share Price(2)

(%)

VWAP for the twelve-month period prior to




Notes:

(1) Source: Bloomberg L.P.;

(2) Computed based on the S Share prices which are rounded to the nearest three decimal places;

(3) The VWAP is calculated based on the daily VWAP turnover divided by VWAP volume of the S Shares

as extracted from Bloomberg L.P.. Off market transactions are excluded from the calculation; and

(4) The S Shares were halted from trading on 9 March and 10 March 2015.

There were no S Shares traded on 5 and 6 March 2015.

It is noted that the S Shares have not transacted at or above the Exit Offer Price in the

last twelve-month period prior to and including 6 March 2015. Through the Exit Offer,

accepting Shareholders will have an opportunity to realise their investments in the

Company for a cash consideration at a premium over the twelve-month historical

market prices of the S Shares up to and including the 6 March 2015.

5.2 Low Trading Liquidity

The trading volume of the S Shares on the Catalist Board of the SGX-ST has been low

as shown in the table below:

Period prior to and including 6 March 2015, being the

latest practicable date prior to the Joint Announcement

Average Daily

Trading Volume

of S Shares(1)

One month 4,350

Three months 2,221

Six months 2,206

Twelve months 4,118

Note:

(1) The average daily trading volume is computed based on the total trading volume of the S Shares on

the SGX-ST (excluding off market transactions) for the relevant periods immediately prior to and

including 6 March 2015, being the latest practicable date prior to the Joint Announcement, divided by

the number of market trading days on which the SGX-ST is open for trading during the relevant

periods (excluding market trading days with full day trading halts), as extracted from Bloomberg L.P..

The volume of the S Shares traded on the Reference Date was 17,800 S Shares.

The Exit Offer will provide an exit option for Shareholders who wish to realise their

entire investment in the S Shares but find it difficult to do so as a result of the low

trading liquidity of the S Shares.

23

5.3 Compliance Costs of Maintaining Listing

In maintaining the Company’s listing status, the Company incurs additional

compliance and associated costs. The Company will be able to gain cost-savings as

a non-listed entity by dispensing with costs associated with complying with SGX-ST

listing requirements and other regulatory requirements as well as human resources

that have to be committed for such compliance. The Delisting, if approved, will

eliminate the costs of compliance with the SGX-ST listing rules and regulations,

thereby allowing the Company to focus its resources on its business operations.

5.4 Unlikely to Access the Capital Markets

Since its listing on the Catalist Board of the SGX-ST in 2004, the Company has not

carried out any exercise to raise cash funding on the SGX-ST. The Company is

unlikely to require access to the Singapore capital markets to finance its operations in

the foreseeable future. Accordingly, it is not necessary for the Company to maintain a

listing on the SGX-ST.

5.5 Offeror’s Intention

Although the Offeror has no current intention of (a) making material changes to the

Group’s existing business, (b) re-deploying the Group’s fixed assets, or (c)

discontinuing the employment of the employees of the Group, other than in the

ordinary course of business, nonetheless, the Offeror retains the flexibility at any time

to consider options or opportunities which may present themselves, and which it

regards to be in the interests of the Offeror and/or the Company. Following the close

of the Exit Offer, the Offeror will conduct a comprehensive review of the operations,

management and financial position of the Group, and will evaluate various strategic

options following the privatisation of the Company.”

7. FINANCIAL EVALUATION OF THE EXIT OFFER

The financial aspects of the Exit Offer have been extracted from paragraph 14 of the Exit

Offer Letter and reproduced below, and all terms and expressions used in the extract below


stated:

14. “Closing Prices of the S Shares

The last transacted prices of the S Shares on the Catalist Board of the SGX-ST on (a)

17 April 2015, being the last market day when trades were done on the S Shares prior

to the Latest Practicable Date (there were no S Shares traded on the Latest

Practicable Date) was S$0.197 and (b) 4 March 2015, being the last market day when

trades were done on the S Shares prior to the Joint Announcement Date, was

S$0.062.

24

The last transacted prices of the S Shares on the Catalist Board of the SGX-ST on a

monthly basis from September 2014 to February 2015 (being the six calendar months

preceding the Joint Announcement Date), as reported by Bloomberg L.P., are set out

below:

Month

Last Transacted Price

(S$)

September 2014 0.072

October 2014 0.072

November 2014 0.072

December 2014 0.066

January 2015 0.070

February 2015 0.075

During the period between the start of the six months preceding the Joint

Announcement Date and the Latest Practicable Date, the highest and lowest closing

prices of the S Shares on the Catalist Board of the SGX-ST, as reported by Bloomberg

L.P., are as follows:”

Price

(S$) Date(s)

Highest closing price 0.230 30 March 2015

Lowest closing price 0.060 7 January 2015

8. IMPLICATIONS OF COMPULSORY ACQUISITION DELISTING FOR SHAREHOLDERS

8.1 Compulsory Acquisition Of Shares By The Offeror

Information relating to the compulsory acquisition of Shares by the Offeror and listing status

of the Company have been extracted from paragraph 6 of the Exit Offer Letter and


same meanings as attributed to them in the Exit Offer Letter unless otherwise stated:

6. “Compulsory Acquisition

The Company is incorporated in the PRC. Based on the opinion of Jun He Law Offices,

which was appointed by the Company to act as the PRC counsel to the Company

(“PRC Counsel”) in relation to the Delisting, there are no PRC laws or provisions of

the articles of association of the Company which explicitly (a) give the right to the

Shareholders holding S Shares who have not accepted the Exit Offer to require the

Offeror to acquire their S Shares on the same terms as those under the Exit Offer; or

(b) give the right to the Offeror to acquire all the S Shares from the Shareholders who

have not accepted the Exit Offer on the same terms as those under the Exit Offer.

Shareholders who hold S Shares and do not accept the Exit Offer in relation to the

Delisting may remain together with the Concert Parties as Shareholders of an unlisted

company after the completion of the Delisting.”

25

8.2 Implications Of Delisting For Shareholders

Following the Delisting, it is likely to be difficult for Shareholders who do not accept the Exit

Offer to sell their S Shares in the absence of a public market for the S Shares, as there is

no arrangement for such Shareholders to exit. Shareholders should note that shares of

unlisted companies are generally valued at a discount to the shares of comparable listed

companies due to the lack of marketability.

Shareholders should also note that, under the Code, except with the consent of the SIC,

neither the Offeror nor any person acting in concert with it may, within six (6) months of the

closure of the Exit Offer, make a second offer to, or acquire any Shares from, any

Shareholder on terms better than those made available under the Exit Offer.

If the Company is delisted from the Catalist Board of the SGX-ST, it will no longer be obliged

to comply with the listing requirements of the SGX-ST. Nonetheless, as an unlisted

sino-foreign joint venture company in the PRC, the Company will need to comply with the

PRC laws and the Articles of Association, and the interests of Shareholders who do not

accept the Exit Offer will be protected to the extent provided for by the PRC laws and the

Articles of Association. Junhe, the PRC counsel, has advised that PRC laws do not

differentiate the protection to shareholders holding Domestic Shares or S Shares after the

Delisting.

After the Delisting, each S Shareholder is not individually registered in his own name with

the SAIC or its local counterpart, the Administration for Industry and Commerce of Jiangsu

Province (“Local Counterpart”). All S Shareholders are collectively registered as S

Shareholders with the SAIC or its Local Counterpart and this registration status will not be

altered immediately after the completion of the Delisting. The S Shareholders who have not

tendered their S Shares for acceptance during the Delisting will continue to be entitled to

transfer their S Shares pursuant to the PRC laws subject to approval requirements currently

applicable on the transfer of Shares of the Company as an unlisted sino-foreign joint

venture company in the PRC. Junhe has advised that the transfer of Shares of the Company

after the Delisting are subject to the review and approval from the relevant PRC

governmental authorities, including but not limited to the Ministry of Commerce of the PRC

and SAIC, or their local counterparts, the Department of Commerce of Jiangsu Province

and the Administration for Industry and Commerce of Jiangsu Province respectively

(“Approval”) and such Approval for the transfer of Shares of the Company can be denied

if it is held to be contrary to PRC laws.

S Shareholders should note that under the current applicable PRC laws, transfer of

S Shares after the Delisting will require Approval.

If the Company is delisted from the Catalist Board of the SGX-ST, each Shareholder who

holds Shares that are deposited with the CDP and does not accept the Exit Offer will be

entitled to one share certificate representing his delisted Shares. According to the Articles

of Association, the share certificates shall be issued by the Company after the Delisting and

the names of the S Shareholders will be entered into the register of shareholders of the

Company. The registrar appointed by the Company will arrange to forward the share

certificates to such Shareholders for their safe-keeping, by ordinary post and at the

Shareholders’ own risk, to their respective mailing addresses as such addresses appear in

the records of CDP. If a Shareholder wishes to split his share certificate into other

denominations, he will be required to pay for each share certificate so required, the

prevailing rate for which is S$2.00 (excluding goods and services tax).

Shareholders who are in doubt of their position should seek independent

professional advice.

26

9. CONFIRMATION OF FINANCIAL RESOURCES

The confirmation of financial resources has been extracted from paragraph 8 of the Exit

Offer Letter and reproduced below, and all terms and expressions used in the extract below


stated:

“Provenance Capital, as the financial adviser to the Offeror in respect of the Exit Offer, has

confirmed that sufficient financial resources are available to the Offeror to satisfy in full all

acceptances of the Exit Offer for the 15,875,600 Offer Shares at the Exit Offer Price. For

the avoidance of doubt, the 15,875,600 Offer Shares does not include S Shares held by the

Offeror and its Concert Parties.”

10. NO COMPETING OFFER RECEIVED

As at the Latest Practicable Date, no competing offer has been received by the Company.

11. INTEREST OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

The interests of the Directors and Substantial Shareholders in the Shares as at the Latest

Practicable Date, based on the information in the register of Directors and Substantial

Shareholders as maintained by the Company, were as follows:

Direct Interest Deemed Interest

Directors

Number of

Domestic

Shares %

Number of

S Shares %

%

(Total)

Number of

Domestic

Shares %

Number of

S Shares %

%

(Total)

Yang Peixing 13,500,000 18.39 1,895,000 2.58 20.97 – – – – –

Liu Yaoxiang 2,500,000 3.41 – – 3.41 – – – – –

Liu Zhenfeng 4,500,000 6.13 – – 6.13 – – – – –

Zhou Zhidan – – – – – – – – – –

Jen Shek Voon – – 240,000 0.33 0.33 – – – – –

Teng Cheong Kwee – – – – – – – – – –

Shan Wenfeng – – – – – – – – – –

Substantial

Shareholders

Buole(1) 30,125,000 41.04 – – 41.04 – – – –

Chen Zufu 4,375,000 5.96 – – 5.96 – – – –

Note:

(1) Buole is an investment holding company. It is owned by 50 individuals as follows:

Name Relationship Interest in Buole*

Yang Peiying The Company’s sales and marketing manager, the legal

representative of Buole and the sister of Mr Yang Peixing,

the Company’s Executive Chairman

7.47%

Ji Jianchun Executive Officer 5.81%

Wang Xuefang Non-employee 5.40%

Yang Jianxing The Company’s employee and the brother of Mr Yang Peixing,

the Company’s Executive Chairman

4.98%

Mao Yuying Non-employee 4.57%

Jiang Yuda Non-employee 4.15%

Yang Renming A Supervisor of the Company 4.15%

27


He Jianming A Supervisor of the Company 4.15%

Zou Peidong The Company’s employee 3.32%

Lin Fang The Company’s employee 3.32%

Liu Linsheng Non-employee 3.32%

Shen Peiliang The Company’s employee 2.91%

Qi Jianxing The Company’s employee 2.08%

Wang Minghan the brother-in-law of Mr Yang Peixing, Ms Yang Peiying and

Mr Yang Jianxing

5.40%

Chen Renbao brother-in-law of Mr Chen Zufu 1.66%

Qian Zhengdong The Company’s employee 1.66%

Ji Jianqiu The Company’s employee and the brother of Mr Ji Jianchun,

the Company’s Executive Officer

1.66%

Xu Feng The Company’s employee 1.66%

Ji Jianying Non-employee 1.66%

Qian Jianshi Non-employee 1.66%

Qian Huifang Non-employee 1.66%

Zhou Zhidan The Company’s Executive Director and the nephew of

Mr Liu Yaoxiang, the Company’s Executive Director

1.66%

Shen Yafen Non-employee 1.66%

Qian Xinfen Non-employee 1.66%

Gao Degang Non-employee 1.24%

Shen Zhixian Non-employee 1.24%

Zhu Weiming Non-employee 1.24%

Xu Huichu The Company’s employee 1.24%

Chen Ganxing The Company’s employee 1.24%

Lin Zhengfang Non-employee 1.24%

Liu Zhenxiang Non-employee and the brother of Mr Liu Yaoxiang,

the Company’s Executive Director and Mr Liu Fengxiang

1.24%

Xia Xiufen The Company’s employee 1.24%

Xu Jian The Company’s employee 0.83%

Liu Fengxiang The brother of Mr Liu Yaoxiang, the Company’s Executive

Director and Mr Liu Zhenxiang

0.83%

Zhu Haidong Non-employee 0.83%

Dai Mingfen Non-employee 0.415%

Qin Zuru Non-employee 0.83%

Wei Chunlei The Company’s employee 0.83%

Zhang Fenggao Non-employee 0.83%

Wei Jianping The Company’s employee 0.83%

Qian Liquan The Company’s employee 0.83%

Yao Jinfei The Company’s employee 0.83%

Fu Hongbo The Company’s employee 0.83%

Ni Zhengdong Deceased 0.83%

Qi Jianli The Company’s employee 0.415%

Jiang Zhenglin The Company’s employee 0.415%

Jiang Weixiang The Company’s employee 0.415%

Sun Jiancai Non-employee 0.415%

Zhu Yongxiang Non-employee 0.415%

Xu Zhong Non-employee 0.415%

* Percentages do not add up to 100% due to rounding.

28

Save as disclosed above and save for their respective shareholdings in the Company, if

any, none of the other Directors and Controlling Shareholders of the Company has any

interest, direct or indirect, in the Proposed Disposal.

12. EXEMPTION RELATING TO DIRECTORS’ RECOMMENDATIONS

The SIC ruled on 15 December 2014 that the Relevant Directors are exempted from the

requirement to make a recommendation on the Exit Offer to the Shareholders as they face

irreconcilable conflicts of interests in doing so, being concert parties of the Offeror.

Nonetheless, the Relevant Directors must still assume responsibility for the accuracy of the

facts stated and opinions expressed in documents or advertisements issued by, or on behalf

of, the Company to the Shareholders in connection with the Exit Offer.

13. ADVICE OF INDEPENDENT FINANCIAL ADVISER TO THE INDEPENDENT DIRECTORS

13.1 IFA

Canaccord Genuity has been appointed as independent financial adviser to the

Independent Directors in respect of the Exit Offer. The letter from Canaccord Genuity

setting out its advice to the Independent Directors is set out in Appendix 1 to this Circular

(“IFA Letter”). Shareholders are advised to read and consider the IFA Letter in its entirety.

13.2 IFA’s Advice

Information relating to the advice of IFA to the Independent Directors and the key factors it

has taken into consideration have been extracted from paragraph 9 of the IFA Letter and


same meanings as attributed to them in the IFA Letter unless otherwise stated.

Shareholders are advised to read the following extract in conjunction with, and in the

context of the full text of the IFA Letter.

9. “Summary of Analysis and Recommendation to the Independent Directors

In arriving at our recommendation in respect of the Exit Offer, we have taken into

consideration, inter alia, the following factors summarised below. The factors set out

herein should be considered in the context of the entirety of this IFA Letter and the

Circular:–

(1) Historical financial performance and financial position of the Group;

(2) Market quotation and trading liquidity of the S Shares;

(3) Asset-based valuation of the Group;

(4) Comparison with the valuation statistics of selected companies broadly

comparable to the Group;

(5) Comparison with precedent transactions in Singapore;

(6) Dividend record of the Group; and

(7) Other considerations.

29

Based on our analysis, and after having considered carefully the information

available to us as at the Latest Practicable Date, we are of the opinion that the

financial terms of the Exit Offer Price are fair and reasonable.

Accordingly, we advise the Independent Directors to recommend the

Shareholders to ACCEPT the Exit Offer or sell their Shares in the open market if

they can obtain a price higher than the Exit Offer Price after deducting

transaction and related expenses. We wish to highlight that according to the Exit

Offer Letter, the Offeror does not intend to revise the exit offer price under any

circumstances.

Shareholders who are prepared to take a long-term view of their investment in the S

Shares and wish to retain their S Shares and not accept the Exit Offer should note the

following:

(i) If the Company is delisted from the Catalist Board, it will no longer be obliged to

comply with the listing requirements of the SGX-ST. The interests of S

Shareholders who do not accept the Exit Offer will be protected to the extent

provided for by the PRC laws and the Company’s articles of association. The

PRC Counsel has advised that PRC laws do not differentiate the protection to

Shareholders holding Domestic Shares or S Shares after the Delisting;

(ii) that the trading volume and market price of the S Shares as at the Latest

Practicable Date may not be sustainable at current levels after the close of the

Exit Offer;

(iii) As there will be no compulsory acquisition, S Shareholders who do not accept the

Exit Offer may only be able to dispose of their S Shares, subsequent to the close

of the Exit Offer, if they are able to find purchaser(s) for their S Shares and/or

through other means;

(iv) Shareholders should note that shares of unlisted companies are generally valued

at a discount to the shares of comparable listed companies due to the lack of

marketability;

(v) The PRC Counsel has advised that under the current applicable PRC laws,

transfer of Shares after the Delisting will require approval from the relevant PRC

governmental authorities and such approval for the transfer of Shares of the

Company can be denied if it is held to be contrary to PRC laws; and

(vi) The reporting auditor to the Group has issued a disclaimer of opinion in the

Independent Auditor’s Report.

In rendering the above advice, Canaccord Genuity has not had regard to the specific

investment objectives, financial situation, tax position or particular needs and

constraints of any individual Shareholder. As each Shareholder would have different

investment objectives and profiles, we would advise that any individual Shareholder

who may require specific advice in relation to PRC laws, his investment objectives or

portfolio should consult his stockbroker, bank manager, solicitor, accountant, tax

adviser or other professional advisers immediately.

Shareholders should note that the trading of the Shares are subject to, inter alia, the

performance and prospects of the Group, prevailing economic conditions, economic

outlook and stock market conditions and sentiments. Accordingly, the advice by

Canaccord Genuity on the Exit Offer does not and cannot take into account future

30

trading activities or patterns or price levels that may be established for the Shares

after the Latest Practicable Date since these are governed by factors beyond the ambit

of Canaccord Genuity’s review and also, such advice, if given, would not fall within

Canaccord Genuity’s term of reference in connection with the Exit Offer.

We have prepared this letter for the use of the Independent Directors in connection

with and for the purposes of their consideration of the Exit Offer, but any

recommendations made by the Independent Directors in respect of the Exit Offer shall

remain their sole responsibility.

This opinion is governed by, and construed in accordance with, the laws of Singapore,

and is strictly limited to the matters stated herein and does not apply by implication to

any other matter.”

14. OPINION FROM PRC COUNSEL

The Company’s PRC Counsel has advised, inter alia:

(a) that there are no PRC laws requiring the Company to obtain any consent or approval

or file any documents with any governmental authority within PRC for the Delisting;

(b) that based on the consultation by the Company and the PRC Counsel with the China

Securities Regulatory Commission (“CSRC”), no regulatory approval from CSRC is

required prior to the consummation of the Delisting; that no regulatory approval from

the China Securities Regulatory Commission is required prior to the consummation of

the Delisting;

(c) that based on the legal opinion issued by HEP (as defined below), that under PRC

laws, the Delisting will not impose any additional restrictions on the transfer or

ownership rights of any class of Shares of the Company;

(d) that in the event that the Offeror acquires such number of Offer Shares, which,

together with the Shares held by it, its related corporations and their respective

nominees, comprises 90.0% or more of the total issued Shares of the Company, there

are no PRC laws or provisions of the Articles of Association explicitly (a) giving the

right to the Shareholders holding S Shares who have not accepted the Exit Offer to

require the Offeror to acquire their S Shares on the same terms as those under the Exit

Offer; or (b) giving the right to the Offeror to acquire all the S Shares from the

Shareholders who have not accepted the Exit Offer on the same terms as those under

the Exit Offer;

(e) that each Shareholder of the S Shares in the Company (“S Shareholder”) is not

individually registered in his own name with the SAIC or its Local Counterpart. All S

Shareholders are collectively registered as S Shareholders in the SAIC and this

registration status will not be altered immediately after the completion of the Delisting;

and

(f) upon completion of the Delisting, the S Shareholders who have not tendered their S

Shares for acceptance during the Delisting will continue to be entitled to transfer their

S Shares pursuant to PRC laws subject to approval requirements currently applicable

on the transfer of Shares of the Company as an unlisted sino-foreign joint venture

company in the PRC.

31

To elaborate item (c) above, Harry Elias Partnership LLP (“HEP”) issued a legal opinion to

the Company opining that the Delisting will not impose any additional restrictions under the

laws of Singapore on the right to transfer or ownership rights of the Shareholders of the

Company, such opinion being restricted to matters of law and issues of legal rights. HEP

has not advised the Company on other aspects of the Delisting and is not involved in the

preparation of this Circular.

15. INDEPENDENT DIRECTORS’ RECOMMENDATION

The Independent Directors have reviewed the terms of the Delisting Proposal (including the

Exit Offer) and have carefully considered the advice of the IFA in its letter set out in

Appendix 1 to this Circular. The Independent Directors concur with the advice of the IFA

in respect of the Exit Offer. Accordingly, the Independent Directors recommend that

Shareholders VOTE IN FAVOUR of the Delisting Resolution.

In relation to the Exit Offer and in the event that the Delisting Resolution is passed, the

Independent Directors recommend that the Shareholders ACCEPT the Exit Offer.

Alternatively, Shareholders may wish to sell their Shares in the open market if they are able

to obtain a price higher than the Exit Offer Price (after deducting related expenses) or

choose not to accept the Exit Offer. Shareholders who wish to retain all or part of their

investment in the Shares are advised to take into consideration the general economic

outlook and the implications of holding Shares in an unlisted or delisted company as set out

in Section 8.2 of this Circular in the event that the Delisting Conditions are met.

In rendering the above opinion and giving the above recommendations, both the IFA

and the Independent Directors have not had regard to the general or specific

investment objectives, financial situation, tax status or position, risk profiles or

unique needs and constraints or other particular circumstances of any individual

Shareholder. As different Shareholders would have different investment objectives

and profiles, the Independent Directors recommend that any individual Shareholder

who may require specific advice in relation to his investment portfolio should consult

his stockbroker, bank manager, solicitor, accountant, tax adviser or other

professional adviser immediately. Accordingly, the Independent Directors advise that

the opinion and advice of the IFA should not be relied upon by any Shareholder as the

sole basis for deciding whether or not to accept the Exit Offer.

16. OVERSEAS SHAREHOLDERS

16.1 Overseas Shareholders

Information relating to overseas Shareholders have been extracted from paragraph 12 of

the Exit Offer Letter and reproduced below, and all terms and expressions used in the

extract below shall bear the same meanings as attributed to them in the Exit Offer Letter

unless otherwise stated:

12. “Overseas Shareholders

12.1 Overseas Shareholders

The availability of the Exit Offer to Shareholders whose addresses are outside

Singapore (each, an “Overseas Shareholder”), as shown in the records of the CDP

may be affected by the laws of the relevant overseas jurisdictions. Accordingly, all

Overseas Shareholders should inform themselves about, and observe any applicable

legal requirements in their own jurisdictions.

32

Where there are potential restrictions on sending this Exit Offer Letter, the Circular,

the FAA and any related documents (collectively the “Delisting Materials”) to any

overseas jurisdiction, the Offeror reserves the right not to send such documents to

the Overseas Shareholders in such overseas jurisdictions.

For the avoidance of doubt, the Exit Offer is made to all Shareholders holding the

Offer Shares, including those to whom this Exit Offer Letter and the FAA will not be,

or may not be, sent, provided that this Exit Offer Letter does not constitute an offer

or a solicitation to any person in any jurisdiction in which such offer or solicitation is

unlawful and the Exit Offer is not proposed in any jurisdiction in which the

introduction or implementation of the Exit Offer would not be in compliance with the

laws of such jurisdiction.

12.2 Copies of Delisting Materials

Shareholders (including the Overseas Shareholders) may obtain copies of the

Delisting Materials during normal business hours and up to the Closing Date from

CDP at 9 North Buona Vista Drive, #01-19/20, The Metropolis, Singapore 138588.

Alternatively, Shareholders (including the Overseas Shareholders) may write to the

Offeror c/o M & C Services Private Limited at 112 Robinson Road #05-01, Singapore

068902, to request for the Delisting Materials to be sent to an address in Singapore

by ordinary post at his own risk, up to 3 Market Days prior to the Closing Date.

12.3 Request for Delisting Materials

In requesting for the Delisting Materials, the Overseas Shareholder represents and

warrants to the Offeror that he is in full observance of the laws of the relevant

jurisdiction in that connection, and that he is in full compliance with all necessary

formalities or legal requirements.

Copies of the Delisting Materials are not being, and must not be, directly or indirectly,

mailed or otherwise forwarded, distributed or sent in or into or from any jurisdiction

where the making of or the acceptance of the Exit Offer would violate the laws of that

jurisdiction (“Restricted Jurisdiction”) and will not be capable of acceptance by any

such use, instrumentality or facility within any Restricted Jurisdiction and persons

receiving such documents (including custodians, nominees and trustees) must not

mail or otherwise forward, distribute or send them in or into or from any Restricted

Jurisdiction.

The Exit Offer (unless otherwise determined by the Offeror and permitted by

applicable law and regulations) will not be made, directly or indirectly, in or into, or

by use of mails of, or by any means or instrumentality (including, without limitation,

telephonically or electronically) of interstate or foreign commerce of, or any facility of

a national, state or other securities exchange of, any Restricted Jurisdiction and the

Exit Offer will not be capable of acceptance by any such use, means, instrumentality

or facilities.

12.4 Notification

The Offeror reserves the right to (a) reject any acceptance of the Exit Offer where it

believes or has reason to believe, that such acceptance may violate the applicable

laws of any jurisdiction; and (b) notify any matter, including the fact that the Exit Offer

has been made, to any or all Overseas Shareholders by announcement to the

SGX-ST and if necessary, by paid advertisement in a daily newspaper published and

33

circulated in Singapore, in which case such notice shall be deemed to have been

sufficiently given notwithstanding any failure by any Shareholder to receive or see

such announcement or advertisement, provided that such notification will not result

in any breach of any laws in the relevant jurisdictions.

12.5 Responsibility

It is the responsibility of any Overseas Shareholder who wishes to request for the

Delisting Materials and/or accept the Exit Offer to satisfy himself as to the full

observance of the laws of the relevant jurisdictions in that connection, including but

not limited to the obtaining of any governmental or other consent which may be

required, and full compliance with all necessary formalities or legal requirements and

the payment of any taxes, imposts, duties or other requisite payments due in such

jurisdiction. Any Overseas Shareholder who is in doubt about his position

should consult his own professional advisers in the relevant jurisdiction.”

16.2 Copies Of Circular

On account of potential restrictions on sending this Circular to any overseas jurisdiction the

Company reserves the right not to send this Circular to any overseas jurisdiction. Subject

to compliance with applicable laws, any affected overseas Shareholder may, nonetheless,

attend in person and obtain copies of this Circular during normal business hours and up to

the Closing Date, from the Company’s Singapore share transfer agent, M & C Services

Private Limited at 112 Robinson Road, #05-01 Singapore 068902. Alternatively, an

overseas Shareholder may, subject to compliance with applicable laws, write to the

Company at the above-stated address to request that a copy of this Circular be sent to an

address in Singapore by ordinary post at his own risk, at any time up to five (5) Market Days

prior to the Closing Date.

17. EXTRAORDINARY GENERAL MEETING

The EGM, notice of which is set out on page 282 of this Circular, will be held on 13 May

2015 at 11.00 a.m. (or soon thereafter immediately following the conclusion or adjournment

of the AGM of the Company to be held on 13 May 2015 at 10.00 a.m.) at MR 309 Level 3,

Suntec Singapore International Convention & Exhibition Centre, 1 Raffles Boulevard

Suntec City Singapore 039593 on Wednesday for the purpose of considering and, if thought

fit, passing, on a poll, with or without any modification, the resolution set out in the Notice

of EGM.

A Depositor shall not be regarded as a Shareholder entitled to attend the EGM and to speak

and vote thereat unless his name appears on the Depository Register, as certified by CDP,

at least 48 hours before the EGM in the case of S Shareholders. Domestic Shareholders

who intend to attend the EGM shall deliver their written reply to the Company confirming

their attendance at the EGM 20 days prior to the date of EGM, failing which they will not be

entitled to attend the EGM.

18. ACTIONS TO BE TAKEN BY SHAREHOLDERS

18.1 Voting at the EGM

Shareholders who are unable to attend the EGM and wish to appoint a proxy to attend and

vote on their behalf should sign and return the proxy form attached to the Notice of EGM

in accordance with the instructions printed thereon as soon as possible and in any event,

34

so as to reach the registered office of the Singapore Share Transfer Agent, M & C Services

Private Limited at 112 Robinson Road, #05-01 Singapore 068902, not later than 24 hours

before the time fixed for the EGM.

The completion and sending of the proxy form by a Shareholder will not preclude him from

attending and voting in person at the EGM in place of his proxy if he wishes to do so. A

Depositor shall not be regarded as a Shareholder entitled to attend the EGM and to speak

and vote thereat unless he is shown to have Shares entered against his name in the

Depository Register, as certified by the CDP, as at 48 hours before the EGM.

18.2 Exit Offer Letter And Acceptance Form

The Exit Offer Letter and the Acceptance Form have been despatched to Shareholders by

ordinary post together with this Circular. Shareholders may choose to accept the Exit

Offer before the EGM. However, such acceptance is conditional upon the Delisting

Conditions being satisfied.

Shareholders should note that if the Delisting Conditions are not satisfied at the

EGM, the Exit Offer will lapse and both the Shareholders and the Offeror will cease

to be bound by any prior acceptances of the Exit Offer by any Shareholder.

18.2.1 Accepting the Exit Offer: Subject to the Delisting Resolution being approved at

the EGM, to accept the Exit Offer, you should complete, sign and return the

relevant Acceptance Form in accordance with the provisions and instructions

stated in the Exit Offer Letter and the Acceptance Form. Additional information on

the procedures for acceptance and settlement of the Exit Offer is set out in the


18.2.2 No Acceptance: If you decide not to accept the Exit Offer, you do not need to take

any action. In the event that the Delisting Conditions are satisfied at the EGM and

the Company is delisted from the Catalist Board of the SGX-ST, you will continue

to hold unquoted Shares of the Company (as an unlisted company). The

implications of delisting of the Company for Shareholders and the rights of

compulsory acquisition are set out in Section 8 of this Circular.

18.2.3 Different Forms of Acceptance and No Acceptance

(a) Vote for the Delisting and accept the Exit Offer

If you choose to accept the Exit Offer and the Exit Offer becomes

unconditional, you will receive S$200 for every 1,000 Offer Shares tendered

for acceptance under the Exit Offer.

The procedures for acceptance and settlement of the Exit Offer are set out in

the Appendix to the Exit Offer Letter.

Shareholders may choose to accept the Exit Offer in respect of all or part of

their holdings of Offer Shares. Further, Shareholders may choose to accept

the Exit Offer before the EGM. However, such acceptances would be

conditional and if the Delisting Resolution Approval Conditions are not

satisfied, the conditions to the Exit Offer will not be fulfilled and the Exit Offer

will lapse.

35

(b) Vote for the Delisting and do not accept the Exit Offer

If the Delisting takes effect, you may remain together with the Concert Parties

as Shareholders of the Company (with the Company becoming an unlisted

company) after the completion of the Delisting.

(c) Vote against the Delisting and accept the Exit Offer

If you vote against the Delisting but the Delisting Resolution is approved by

the other Shareholders, you are still entitled to accept the Exit Offer.

If you choose to accept the Exit Offer and the Exit Offer becomes

unconditional, you will receive S$200.00 for every 1,000 Offer Shares

tendered for acceptance under the Exit Offer.

The procedures for acceptance and settlement of the Exit Offer are set out in

the Appendix to the Exit Offer Letter.

Shareholders may choose to accept the Exit Offer in respect of all or part of

their holdings of Offer Shares. Further, Shareholders may choose to accept

the Exit Offer before the EGM. However, such acceptances would be

conditional and if the Delisting Resolution Approval Conditions are not

satisfied, the conditions to the Exit Offer will not be fulfilled and the Exit Offer

will lapse.

(d) Vote against the Delisting and do not accept the Exit Offer

If you vote against the Delisting but the Delisting Resolution is approved by

the other Shareholders, you are still entitled to accept the Exit Offer.

If you choose not to accept the Exit Offer, you may remain together with the

Concert Parties as Shareholders of the Company (with the Company being

an unlisted company) after the completion of the Delisting.

19. DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors (including those who may have delegated detailed supervision of this

Circular) jointly and severally accept full responsibility for the accuracy of the information

given in this Circular and confirm after making all reasonable enquiries, that to the best of

their knowledge and belief, this Circular constitute full and true disclosure of all material

facts about the Delisting Proposal, the Company and its subsidiaries (other than those

relating to the Offeror, parties acting in concert with the Offeror, in Appendix 1 to this

Circular for which the IFA has taken responsibility, in Appendix 2 to this Circular for which

Junhe has taken responsibility, in Appendix 3 to this Circular for which HEP has taken

responsibility, in Appendix 4 to this Circular for which Jones Lang LaSalle Corporate

Appraisal and Advisory Limited has taken responsibility and in Appendix 8 to this Circular

for which Baker Tilly TFW LLP has taken responsibility) and the Directors have taken all

reasonable care to ensure that, to the best of their knowledge and belief, the facts stated

and opinions expressed in this Circular (other than those relating to the Offeror, parties

acting in concert with the Offeror, in Appendix 1 to this Circular for which the IFA has taken

responsibility, in Appendix 2 to this Circular for which Junhe has taken responsibility, in

Appendix 3 to this Circular for which HEP has taken responsibility, in Appendix 4 to this

Circular for which Jones Lang LaSalle Corporate Appraisal and Advisory Limited has taken

responsibility and in Appendix 8 to this Circular for which Baker Tilly TFW LLP has taken

36

responsibility) are fair and accurate in all material aspects and the Directors are not aware

of any material facts the omission of which would make any statement in this Circular

misleading in any material respect.

The recommendation of the Independent Directors to Shareholders set out in Section 15 of

this Circular is the sole responsibility of the Independent Directors.

Where any information in this Circular has been extracted from published or otherwise

publicly available sources, the Exit Offer Letter, Junhe Legal Opinion, HEP Legal Opinion,

Valuation Report or the IFA Letter or obtained from the Offeror, Junhe, HEP, Jones Lang

LaSalle Corporate Appraisal and Advisory Limited or the IFA, the sole responsibility of the

Directors has been to ensure that such information has been accurately and correctly

extracted from those sources and/or reproduced in this Circular in its proper form and

context.

20. CONSENTS

Canaccord Genuity (as independent financial adviser to the Independent Directors in

connection with the Exit Offer) has given and has not withdrawn its written consent to the

issue of this Circular with the inclusion of the IFA Letter and the references to its name in

the form and context in which they appear in this Circular.

Junhe has given and has not withdrawn its written consent to the issue of this Circular with

the inclusion of the PRC legal opinion issued by themselves in relation to the Delisting and

the references thereto in the form and context in which they appear in this Circular.

HEP has given and has not withdrawn its written consent to the issue of this Circular with

the inclusion of the HEP legal opinion issued by themselves in relation to the Delisting and

the references thereto in the form and context in which it appears in this Circular.

Jones Lang LaSalle Corporate Appraisal and Advisory Limited, named as independent

valuers to express an independent opinion of the value in use of the indicated cash-

generating unit, i.e. land use rights, property, plant and equipment as at 31 December 2014

has given and has not withdrawn its written consent to the inclusion of the Valuation Report

and the references thereto in the form and context in which it appears in this Circular.

21. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents may be inspected at the Company’s registered office at

Junma Building, Nonglu Road, Chenghang, Yangshe Town, Zhangjiagang City, Jiangsu

Province, PRC. during normal business hours from the date hereof up to and including the

date of the EGM:

(a) the Joint Announcement;

(b) the IFA Letter as set out in Appendix 1 of this Circular;

(c) the PRC legal opinion as set out in Appendix 2 of this Circular;

(d) the HEP legal opinion as set out in Appendix 3 of this Circular;

(e) the Valuation Report as set out in Appendix 4 of this Circular;

(f) the Articles of Association of the Company;

(g) the annual reports of the Company for FY2011, FY2012 and FY2013;

37

(h) the audited financial statements of the Group for FY2012, FY2013 and FY2014 as set

out in Appendix 8 of this Circular;

(i) the letters of consent referred to in Section 20 of this Circular; and

(j) the Delisting Proposal.

22. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices which form

part of this Circular.

Yours faithfully

For and on behalf of the Directors

Yang Peixing

Executive Chairman

Junma Tyre Cord Company Limited

38

APPENDIX 1

LETTER FROM IFA TO THE INDEPENDENT DIRECTORS

IN RESPECT OF THE EXIT OFFER

27 April 2015

To: The Directors of Junma Tyre Cord Company Limited who are deemed independent in respect

of the Exit Offer (as defined herein)

PROPOSED VOLUNTARY DELISTING OF JUNMA TYRE CORD COMPANY LIMITED (THE

“COMPANY”) PURSUANT TO RULES 1307 AND 1308 OF THE CATALIST RULES (AS

DEFINED HEREIN)

Unless otherwise defined or the context otherwise requires, all terms used in this IFA Letter shall

have the same meanings as defined in the circular dated 27 April 2015 (the “Circular”). For the

purpose of this IFA Letter, where applicable, the closing exchange rate of S$1:RMB4.5988 on

20 April 2015 (the “Latest Practicable Date”) is used. The above exchange rate was extracted

from Bloomberg L.P. and is provided solely for information.

1. INTRODUCTION

On 10 March 2015 (the “Joint Announcement Date”), the Company and Ultimative Ltd (the

“Offeror”) jointly announced that the Offeror had presented a delisting proposal (the

“Delisting Proposal”) to directors of the Company (the “Directors”) to seek the voluntary

delisting of the Company from the Catalist Board of the Singapore Exchange Securities

Trading Limited (the “SGX-ST”) (the “Catalist Board”) pursuant to Rules 1307 and 1308 of

the SGX-ST Listing Manual Section B: Rules of Catalist (the “Catalist Rules”) (the

“Delisting”). Under Rule 1308(1) of the Catalist Rules, if the Company is seeking to delist

from the SGX-ST, a reasonable exit alternative, which should normally be in cash, should

be offered to the shareholders of the Company (the “Shareholders”).

Under the terms of the Delisting Proposal, the Offeror will make a cash offer (the “Exit

Offer”) to purchase all the issued S Shares (excluding treasury shares) which are not held

by the parties acting in concert with it (the “Concert Parties”) (the “Offer Shares”) on the

terms and conditions set out in the Joint Announcement and the exit offer letter (the “Exit

Offer Letter”), in accordance with Section 139 of the Securities and Futures Act (Cap. 289)

of Singapore and the Singapore Code on Take-overs and Mergers (the “Code”), to be

issued by the Offeror to the Shareholders containing, inter alia, the terms of the Exit Offer

and the relevant acceptance forms.

The Directors, having considered the Delisting Proposal, have resolved to convene an

extraordinary general meeting of the Company (“EGM”) to seek the approval of

Shareholders for the Delisting and have made an application to the SGX-ST through the

Sponsor for the Delisting.

On 6 April 2015, the SGX-ST informed the Company that it has no objection to the Delisting,

subject to compliance with Rules 1307 and 1308 of the Catalist Rules and Shareholders’

approval being obtained at the EGM.

Canaccord Genuity Singapore Pte. Ltd. (“Canaccord Genuity”) has been appointed by the

Company as the independent financial adviser (the “IFA”) to advise the Directors who are

considered independent in respect of the Exit Offer for the purpose of making their

recommendation to Shareholders in respect of the Exit Offer. This letter (the “IFA Letter”)

39

is addressed to the Independent Directors (as defined below) and sets out, inter alia, our

evaluation and advice on the financial terms of the Exit Offer and our recommendation

thereon. This IFA Letter forms part of the Circular to be despatched to Shareholders.

For the purpose of the Exit Offer, the Securities Industry Council of Singapore (“SIC”) ruled

on 15 December 2014 that Mr Yang Peixing, Mr Liu Yaoxiang, Mr Liu Zhenfeng and Mr Zhou

Zhidan are exempted from the requirement to make a recommendation on the Exit Offer to

the Shareholders as they face irreconcilable conflicts of interests in doing so, being concert

parties of the Offeror. The remaining Directors, Mr Jen Shek Voon, Mr Teng Cheong Kwee

and Mr Shan Wenfeng, will be considered independent for the purpose of providing a

recommendation on the Exit Offer to the Shareholders (the “Independent Directors”).

2. TERMS OF REFERENCE

Canaccord Genuity has been appointed as IFA to the Independent Directors to provide an

assessment of the financial terms of the Exit Offer in order to advise the Independent

Directors in respect of their recommendation to Shareholders in relation to the Exit Offer,

in compliance with the provisions of the Code. We have confined our evaluation on the

bases set out therein to the financial terms of the Exit Offer.

Our terms of reference do not require us to evaluate or comment on the rationale, legal and

commercial risks and/or merits (if any) of the Exit Offer or on the future financial

performance or prospects of the Company and its subsidiaries (collectively known as the

“Group”) and we have not made such evaluations or comments. Such evaluations or

comments shall remain the sole responsibility of the Directors and the management of the

Group (the “Management”) although we may draw upon their views or make such

comments in respect thereof (to the extent deemed necessary or appropriate by us) in

arriving at our recommendations as set out in this IFA Letter.

We were also not requested, instructed or authorised to solicit, and we have not solicited,

any indications of interest from any third party with respect to any other proposals for

transactions similar to or in lieu of the Exit Offer. In this regard, we are not addressing the

relative merits of the Exit Offer as compared to any alternative transaction previously

considered by the Company or which otherwise may have been available to the Company

currently or in the future, and such comparison and consideration remains the responsibility

of the Directors.

In the course of our evaluation of the financial terms of the Exit Offer, we have held

discussions with the Directors, the Management and/or their professional advisers. We

have also examined publicly available information collated by us as well as information,

both written and verbal, provided to us by aforesaid parties, including information contained

in the Exit Offer Letter and the Circular. We have relied on, and assumed without

independent verification, the accuracy and completeness of such information, whether

written or verbal, and accordingly cannot and do not make any warranty or representation,

express or implied, in respect of, and do not accept any responsibility for the accuracy,

completeness or adequacy of, such information.

We have relied upon the assurances from the Directors and the Management (including

those who may have delegated supervision of the Circular), who have accepted full

responsibility for the accuracy and completeness of the information provided to us, that, to

the best of their knowledge and belief, they have taken reasonable care to ensure that the

facts stated and opinions expressed by them or the Company in the Circular in respect of

the Delisting, the Exit Offer and the Group is fair and accurate in all material aspects. The

Directors confirmed to us that, to the best of their knowledge and belief, there is no other

information or fact, the omission of which would cause any statement in the Circular in

40

respect of the Delisting, the Exit Offer and the Group to be inaccurate, incomplete or

misleading in any material respect. Whilst care has been exercised in reviewing the

information upon which we have relied, we have not independently verified such information

but nevertheless have made such enquiry and judgement as we have deemed necessary

and have found no reason to doubt the accuracy of the information.

We have been furnished with the independent valuation report on the value in use (“VIU”)

of the cash-generating unit (“CGU”) of the Group issued by Jones Lang LaSalle Corporate

Appraisal and Advisory Limited (the “Valuer”) dated 20 April 2015 (the “Valuation Report”).

We have not made an independent evaluation or appraisal of the assets and liabilities of the

Company or the Group, and we have not been furnished with any such evaluation or

appraisal except for the Valuation Report. In respect of the Valuation Report, we have

placed sole reliance thereon for the information and/or valuation contained therein. We are

not involved and assume no responsibility for the Valuation Report. We have not made any

independent verification of the matters or bases set out in the Valuation Report.

Our recommendations are based upon market, economic, industry and other conditions

prevailing as at the Latest Practicable Date, and information set out in the Exit Offer Letter,

the Circular or made available to us as at the Latest Practicable Date. Such conditions and

information may change significantly over a short period of time. We assume no

responsibility to update, revise or reaffirm our recommendations in light of any subsequent

developments after the Latest Practicable Date that may affect our recommendations

contained therein. Shareholders should further take note of any announcements relevant to

their consideration of the Exit Offer, which may be released after the Latest Practicable

Date.

In rendering our advice and providing our recommendation, we did not have regard to the

specific investment objectives, financial situation, tax position, risk profiles or unique needs

and constraints of any Shareholder. We recommend that any Shareholder who may require

specific advice in relation to his or their investment objective(s) or portfolio(s) should

consult his or their legal, financial, tax or other professional advisers immediately.

The Company has been advised by its own legal advisers in the preparation of the Circular

(other than this IFA Letter). We have had no role or involvement and have not provided any

advice (financial or otherwise) whatsoever in the preparation, review and verification of the

Circular (other than this IFA Letter) and our responsibility is as set out above in relation to

this IFA Letter. Accordingly, we take no responsibility for, and express no views, whether

expressed or implied, on the contents of the Exit Offer Letter or the Circular (other than this

IFA Letter).

Whilst a copy of this letter may be reproduced in the Circular, neither the Company, the

Directors nor any other persons may reproduce, disseminate or quote this letter (or any part

thereof) for any purposes at any time and in any manner without the prior written consent

of Canaccord Genuity.

We have prepared this IFA Letter for the use by the Independent Directors in connection

with their consideration of the Exit Offer and their advice and recommendation to the

Shareholders in respect thereof. The recommendations made to the Shareholders in

relation to the Exit Offer remain the responsibility of the Independent Directors.

Our recommendation in relation to the Exit Offer should be considered in the context

of the entirety of this IFA Letter and the Circular.

41

3. THE EXIT OFFER

3.1 Exit Offer

The Offeror is making the Exit Offer for all the 15,875,600 Offer Shares, representing

approximately 21.63% of the Shares. The offer price for each Offer Share will be S$0.20 in

cash (the “Exit Offer Price”). The Offeror does not intend to revise the Exit Offer Price

under any circumstances.

The Exit Offer Price shall be applicable to any number of Offer Shares that are tendered in

acceptance of the Exit Offer.

Shareholders may choose to accept the Exit Offer in respect of all or part of their holdings

of Offer Shares. Each Shareholder who accepts the Exit Offer will receive S$200 for every

1,000 Offer Shares tendered for acceptance under the Exit Offer.

The Offer Shares will be acquired fully paid and free from any all liens, equities, mortgages,

debentures, pledges, title retention, security interests, options, charges, encumbrances,

rights of pre-emption and other third party rights and interests of any nature whatsoever

(“Encumbrance”), and together with all rights, benefits and entitlements attached thereto

as at the Joint Announcement Date and thereafter attaching thereto (including the right to

receive and retain all dividends, rights, other distributions, or returns of capital

(“Distributions”), if any, which may be declared, paid or made by the Company on or after

the Joint Announcement Date).

If any Distribution is declared, made or paid by the Company on or after the Joint

Announcement Date, the Offeror reserves the right to reduce the Exit Offer Price by the

amount of such Distribution.

3.2 Conditions

The Delisting and the Exit Offer are conditional on, inter alia:–

(1) the SGX-ST agreeing to the application by the Company to delist from the Catalist

Board;

(2) the resolution to approve the Delisting (“Delisting Resolution”) being approved by a

majority of at least 75% of the total number of Shares excluding treasury shares held

by the Shareholders present and voting, on a poll, either in person or by proxy at the

EGM (the Directors and controlling Shareholders need not abstain from voting on the

Delisting Resolution); and

(3) the Delisting Resolution not being voted against by 10% or more of the total number

of Shares excluding treasury shares held by the Shareholders present and voting, on

a poll, either in person or by proxy at the EGM,

(collectively, “Delisting Conditions”).

If the Delisting Conditions are not satisfied, the Exit Offer will lapse and all acceptances of

the Exit Offer will be returned.


Company that (i) it/he will not transfer or otherwise dispose of any of its/his shareholdings

as at the date of irrevocable undertakings prior to and up to the Closing Date or the abortion

of the Delisting, whichever is applicable; and (ii) it/he will vote, and/or procure its/his

42

representatives or proxy to vote in favour of the Delisting Resolution at the EGM. Further

details of the irrevocable undertakings given by the Concert Parties are set out in

Paragraph 3.1 of the Circular.

3.3 Acceptances

Shareholders may choose to accept the Exit Offer in respect of all or part of their holdings

of Offer Shares. Shareholders may choose to accept the Exit Offer before the EGM.

However, such acceptances would be conditional and if the Delisting Conditions are not

satisfied, the conditions to the Exit Offer will not be fulfilled and the Exit Offer will lapse.

The Exit Offer will not be conditional upon a minimum number of acceptances being

received by the Offeror.

3.4 Warranty

Acceptance of the Exit Offer by a Shareholder will be deemed to constitute an unconditional

and irrevocable warranty by that Shareholder that each Offer Share in respect of which the

Exit Offer is accepted is sold by him as, or on behalf of, the beneficial owner(s) thereof, fully

paid and free from all Encumbrances, and together with all rights, benefits and entitlements

attached thereto as at the Joint Announcement Date and thereafter attaching thereto

(including the right to receive and retain all Distributions, if any, which may be announced,

declared, paid or made by the Company on or after the Joint Announcement Date).

3.5 Duration

If the Delisting Resolution is approved by Shareholders at the EGM, the Exit Offer will be

opened for acceptance by Shareholders for a period of at least 14 days after the date of the

announcement of the satisfaction of the Delisting Conditions. Accordingly, the Exit Offer will

close at 5.30 p.m. on 27 May 2015 or such later date(s) as may be announced from time

to time by or on behalf of the Offeror (“Closing Date”).

3.6 Irrevocable Undertakings





representatives or proxy to vote in favour of the Delisting Resolution at the EGM. As at the

date of irrevocable undertakings and the Latest Practicable Date, the Concert Parties

collectively hold 55,000,000 Domestic Shares and 2,524,400 S Shares aggregating

57,524,400 Shares, representing approximately 78.37% of the Shares.

Mr Jen Shek Voon, the lead independent director of the Company, has irrevocably and

unconditionally undertaken to the Company that (i) he will not transfer or otherwise dispose

of any of his shareholdings as at the date of irrevocable undertaking prior to and up to the

Closing Date or the abortion of the Delisting, whichever is applicable; (ii) he will vote, and/or

procure his representatives or proxy to vote in favour of the Delisting Resolution at the

EGM; and (iii) he will accept the Exit Offer. As at the date of irrevocable undertaking and the

Latest Practicable Date, Mr Jen Shek Voon holds 240,000 S Shares, representing

approximately 0.33% of all the Shares.

Save as disclosed in the Circular, as at the Latest Practicable Date, none of the Offeror nor

any party acting in concert with it has received any irrevocable undertaking from any party

to accept or reject the Exit Offer.

43

Save for the above irrevocable undertakings, the Offeror has no agreement, arrangement

or understanding with any other Shareholders having any connection with or dependence

upon the Exit Offer.

4. INFORMATION ON THE COMPANY

The Company was a limited liability company incorporated in the People’s Republic of

China on 12 June 1998 and was converted to a joint stock limited company on 19 July 2000.

It had been listed on the Catalist Board since 25 November 2004. The Group is principally

engaged in the production and sale of Nylon 6 industrial yarn and Nylon 6 dipped tyre cords.

As at the Latest Practicable Date, the issued share capital of the Company comprises

73,400,000 Shares of which 55,000,000 Shares (“Domestic Shares”) held by Shareholders

in the People’s Republic of China (“PRC”) and are not listed on the Catalist Board and

18,400,000 Shares are listed on the Catalist Board (“S Shares”). As at the Latest

Practicable Date, there are no Shares held in treasury.

As at the Latest Practicable Date, the Company has not issued any instruments convertible

into, rights to subscribe for, nor options in respect of, securities which carry voting rights of

the Company.

Additional information on the Company is set out in Paragraph 5 of and Appendix 6 to the

Circular.

5. INFORMATION ON THE OFFEROR AND CONCERT PARTIES

Please refer to Paragraph 4 of and Appendix 5 to the Circular for information on the Offeror

and the parties acting in concert with the Offeror.

6. THE OFFEROR’S INTENTIONS FOR THE COMPANY AND ITS SUBSIDIARIES AND

RATIONALE FOR THE DELISTING PROPOSAL

Please refer to Paragraph 6 of the Circular for the Offeror’s intentions relating to the

Company and its subsidiaries and rationale for the Delisting Proposal.

7. ASSESSMENT OF THE FINANCIAL TERMS OF THE EXIT OFFER

In assessing the financial terms of the Exit Offer, we have taken into account the following

factors which we consider to have a significant bearing on our assessment:–




(4) Comparison with the valuation statistics of selected companies broadly comparable to

the Group;


(6) Dividend track record of the Group; and


44

7.1 Historical Financial Performance and Financial Position of the Group

A summary of the financial results of the Group between FY2012 to FY2014 is set out

below:–

Review of Operating Results

(RMB’000) FY2012 FY2013 FY2014

(Audited) (Audited) (Audited)

Revenue 2,438,718 2,513,762 2,306,269

Gross profit 166,026 188,740 153,874

Loss from continuing operations, net of tax (55,795) (2,060) (20,665)

Loss from discontinued operation, net of tax (188,635) (106,418) –

Loss for the year (244,430) (108,478) (20,665)

Loss attributable to equity holders of the

Company (159,544) (26,796) (20,665)

Source: Company’s annual reports and announcements

Based on information set out in the Company’s annual reports, the Company’s results

announcements as well as from discussions with the Management, we note the following:–

(a) FY2013 vs FY2012

Revenue of the Group increased marginally by RMB75.0 million or 3.1% from FY2012

to FY2013. This was due mainly the increase in sales volume of both nylon tyre cord

fabrics and high modulus low shrinkage fabric, partially offset by the decrease in the

average selling price of both products. Gross profit increased by RMB22.7 million or

13.7% from FY2012 to FY2013 as a result of the increased sales volume.

The Group recorded a lower loss from continuing operations in FY2013 as compared

to FY2012, due mainly to increase in gross profit, decrease in finance costs due to

reduction in bank interest rates, decrease in doubtful debts, decrease in transportation

costs and decrease in processing fee, partially offset by decrease in processing

income.

The Group recorded a lower loss from discontinued operation, namely the steel tyre

cords business, in FY2013 as compared to FY2012. This was due mainly to the

increase in sales volume, partially offset by the decrease in the average selling price

of the steel tyre cords as a result of the decrease in average price of raw materials

(steel wire rods and steel wire cutting saws).

(b) FY2014 vs FY2013

Revenue of the Group decreased by RMB207.5 million or 8.3% from FY2013 to

FY2014. This was due mainly to lower sales volume and lower average selling price

of nylon tyre cord fabrics both in the domestic and export markets, despite higher sales

volume and marginally higher average selling price of high modulus low shrinkage

fabrics in FY2014. Gross profit decreased by RMB34.9 million or 18.5% from FY2013

to FY2014, mainly due to the reduction in gross profit of nylon tyre cord fabric sales.

45

The Group recorded a greater loss from continuing operations in FY2014 as compared

to FY2013 due mainly to decrease in gross profit, increase in bank borrowing interest

expense, increase in transportation costs, increase in employee salaries as well as

increase in allowance for trade doubtful debts due to slow repayment from debtors.

The increase in loss from continuing operations is partially offset by an increase in

interest income due to reimbursement of interest cost paid by the Company on loans

borrowed by it which were on-lent to STC and a decrease in cost of processing.

The discontinued operation had been disposed of by the end of FY2013.

Review of Financial Position

(RMB’000) FY2013 FY2014

(Audited) (Audited)

Non-current assets

Property, plant and equipment 222,939 227,639

Lease prepayments 15,984 15,571

Total non-current assets 238,923 243,210

Current assets

Inventories 275,854 275,722

Trade and other receivables 1,517,774 792,452

Due from a related party 908,427 836,437

Cash and cash equivalents 748,594 712,429

Total current assets 3,450,649 2,617,040

Current liabilities

Trade and other payables 1,222,368 906,139

Borrowings 2,376,607 1,884,180

Total liabilities 3,598,975 2,790,319

Equity

Share capital and share premium 179,340 179,340

Other reserves 58,847 58,846

Accumulated losses (147,590) (168,255)

Total equity 90,597 69,931

Working capital (148,326) (173,279)

Gearing(1) (times) 26.2 26.9


Note:–

(1) Based on total borrowings divided by shareholders’ equity.

46



(a) Non-current assets increased by RMB4.3 million or 1.8% from RMB238.9 million as at

31 December 2013 to RMB243.2 million as at 31 December 2014. This was mainly due

to the addition of equipment for the manufacture of high modulus low shrinkage

fabrics.

(b) Current assets decreased by RM833.6 million or 24.2% from RMB3,450.6 million as at

31 December 2013 to RMB2,617.0 million as at 31 December 2014. This was mainly

due to the decrease in (i) trade and other receivables of RMB725.3 million as a result

of lower sales leading to lower utilisation of bank bills as collaterals for bank loans, (ii)

amount due from a related party of RMB72.0 million due to repayment by

Zhangjiagang Junma Steel Tyre Cord Company Limited (the “STC”), and (iii) cash and

cash equivalents of RMB36.2 million. Please refer to Appendices 8 and 9 to the

Circular and Paragraph 8.5 of this IFA Letter for information on the bank borrowings

and guarantees linked to STC.

(c) Current liabilities decreased by RMB808.7 million or 22.5% from RMB3,599.0 million

as at 31 December 2013 to RMB2,790.3 million as at 31 December 2014. This was

mainly due to the decrease in (i) borrowings of RMB492.4 million due to lower

utilisation of bank bills as collaterals for bank loans and (ii) trade and other payables

of RMB316.2 million as a result of lesser purchases.

(d) Total equity decreased by RMB20.7 million from RMB90.6 million as at 31 December

2013 to RMB69.9 million as at 31 December 2014 due to the losses incurred in

FY2014.

(e) The Group had negative working capital positions of RMB148.3 million and RMB173.3

million as at 31 December 2013 and 31 December 2014, respectively.

(f) the Group’s gearing as at 31 December 2013 and 31 December 2014 were 26.2 times

and 26.9 times respectively.

(g) We note that the borrowings include (i) bank borrowings of RMB1,550.5 million

(including RMB632.3 million loans by the Company guaranteed by STC, for and on

behalf of STC for use by STC) guaranteed by the related parties and/or third parties

and (ii) bank borrowings of RMB333.7 million are secured by certain buildings,

machinery and equipment, land use rights, bills receivables and/or bank deposits. It

was disclosed in Note 15 to the audited financial statements of the Group for FY2014

that a total amount of the Group and the Company’s bank borrowings of approximately

RMB406 million (“Outstanding Loans”) are subject to financial covenants as at 31

December 2014. These Outstanding Loans are presented as part of the current

liabilities as at 31 December 2014. The Company is, however, in breach of certain

financial covenants as at 31 December 2014, and the bank is thus contractually

entitled to request for immediate repayment of the Outstanding Loans. Subsequent to

the balance sheet date, the Management obtained a written representation from the

bank of its intention to renew the relevant borrowings as and when they fall due in year

2015. As at the Latest Practicable Date, the Management has confirmed that the bank

has not requested for early repayment of the Outstanding Loans. Furthermore, we

note from the Company’s announcement dated 20 April 2015 that the Board of

Directors, based on current information made available to them by the Management,

is of the view that the ability of the Group and the Company to continue as going

concern will depend on the abilities of the Group and the Company to generate profit

and positive cash flows from operations, and obtain additional bank borrowings and

other funding for its working capital requirements in the next 12 months.

47

Review of Cash Flow Statement

(RMB’000)

As at

31 December

2013

As at

31 December

2014

(Audited) (Audited)

Net cash flows (used in)/generated from operating

activities (186,301) 339,221

Net cash flows (used in)/generated from investing

activities (457,326) 102,873

Net cash flows generated from/(used in) financing

activities 731,796 (619,521)

Net increase/(decrease) in cash and cash equivalents 88,169 (177,427)

Cash and cash equivalents at the beginning of the year 117,802 205,971

Cash and cash equivalents at the end of the year 205,971 28,544




(a) Net cash generated from operating activities amounted to RMB339.2 million in

FY2014, compared to net cash used in operating activities of RMB186.3 million in

FY2013, due mainly to reduction in trade and other receivables, partially offset by

decrease in trade and other payables.

(b) Net cash generated from investing activities amounted to RMB102.9 million in

FY2014, compared to net cash used in investing activities of RMB457.3 million in

FY2013. This was largely attributable to the one-time loss on disposal of STC in

FY2013, repayment from STC in FY2014, the increase in interest received in FY2014

and the decrease in purchase of property, plant and equipment in FY2014.

(c) Net cash used in financing activities amounted to RMB619.5 million in FY2014 as

compared to net cash generated from financing activities of RMB731.8 million in

FY2013. This was mainly due to repayments of bank loans and lower proceeds from

bank loans in FY2014.

(d) The Group’s cash and cash equivalents decreased from RMB206.0 million as at 31

December 2013 to RMB28.5 million as at 31 December 2014.

The ability of the Group to continue generating positive operating cash flow going forward

would affect its ability to meet its short-term obligations as and when they fall due and its

ability to continue as a going concern.

We wish to highlight that the reporting auditor to the Group has issued a disclaimer of

opinion in the independent auditor’s report dated 20 April 2015 (“Independent Auditor’s

Report”). The basis for its disclaimer of opinion is related to (i) its inability to obtain

sufficient appropriate audit evidence to conclude as to the appropriateness of the use of the

going concern assumptions in the preparation of the financial statements; and (ii) its

inability to obtain sufficient information and explanation to enable it to conclude whether any

impairment allowance in respect of the amount due from a related party is necessary.

Please refer to Appendix 8 to the Circular for further details.

48

Outlook of the Group

We would like to draw the attention of Shareholders to paragraph 10 of the Company’s

results announcement for FY2014 where the Company made commentaries on its general

business outlook, which we have reproduced in italics below:

“The decrease in the domestic demand of tyres led to the decrease in production by the

Company’s tyre manufacturing customers in China, which consequentially led to the

reduction in demand of the Company’s products. Export demand has also decreased in the

light of prevailing global economic conditions and the economic environment in China. The

Company sees the business environment remaining challenging, and will continue to be

impacted by prevailing market environment in China, the restrictive policies imposed by

certain countries relating to the export of tyres to those markets, as well as macroeconomic

conditions globally, and in particular fiscal and monetary policies in China.”

7.2 Market Quotation and Trading Liquidity of the S Shares

7.2.1 Share performance and trading liquidity

The share price and trading volume chart for the S Shares for the period since 11 March

2014, being one year prior to the Joint Announcement Date, and up to the Latest

Practicable Date is set out below:–

Share Price and Trading Volume from 11 March 2014 and up to the Latest Practicable Date

0.0

50.0

100.0

150.0

200.0

250.0

300.0

0.00

0.05

0.10

0.15

0.20

0.25

Mar-

14

Apr-

14

May-

14

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct -

14

Nov-

14

Dec-1

4

Jan-1

5

Fe

b-1

5

Mar-

15

Apr-

15

Volu

me (

'000)

Equity Volume Last Traded Price

Pri

ce

(S$

)

Exit Offer Price Joint Announcement Date

Source: Bloomberg L.P.

49

The selected corporate announcements of the Group since 11 March 2014 till the Latest

Practicable Date were as follows:–

12 May 2014 The Company announced its unaudited first quarter financial

statement for the three months ended 31 March 2014

14 August 2014 The Company announced its unaudited second quarter financial

statement for the six months ended 30 June 2014

7 November 2014 The Company announced update on debts and obligations

between the Company and STC pursuant to the disposal of the

Company’s entire 55% shareholdings in STC

13 November 2014 The Company released a corrigendum announcement in relation

to announcement dated 7 November 2014

13 November 2014 The Company announced its unaudited third quarter financial

statements for the nine months ended 30 September 2014

4 February 2015 The Company announced profit warning for fourth quarter and

full year financial statements for the year ended 31 December

2014

28 February 2015 The Company announced its unaudited full year financial

statements for the year ended 31 December 2014

6 March 2015 The Company requested for trading halt

10 March 2015 The Company and the Offeror jointly announced the Delisting.

After the release of the Joint Announcement, the Company

requested for lifting of trading halt

7 April 2015 The Company announced the receipt of no objection letter from

the SGX-ST in respect of the Delisting

20 April 2015 The Company announced that the independent auditor has

issued its independent auditor’s report with a disclaimer of

opinion in respect of the audited financial statements of the

Group and the Company for FY2014

Trading statistics of the S Shares from 11 March 2014 and up to the Latest Practicable Date

The trading statistics of the S Shares from 11 March 2014 and up to the Latest Practicable

Date are set out below:–

Reference Period

Highest

Daily

Closing

Price

(S$)

Lowest

Daily

Closing

Price

(S$)

VWAP(1)

(S$)

Premium

of Exit

Offer Price

over VWAP

(%)

Number of

Traded

Days(2)

Average

Daily

Trading

Volume(3)

Average Daily

Trading

Volume as a

percentage of

Free Float(4)

(%)

Periods prior and up to the Joint Announcement Date

Last 12 months 0.112 0.051 0.068 195.1 40 4,134 0.03

Last 6 months 0.085 0.060 0.075 167.7 21 2,209 0.01

Last 3 months 0.084 0.060 0.073 174.7 10 2,263 0.01

Last 1 month 0.084 0.062 0.076 162.3 3 4,371 0.03

4 March 2015 (last traded

day prior to the Joint

Announcement Date) 0.062(6) 0.062(6) 0.062(5) 222.6 1 17,800 0.11

50

Reference Period

Highest

Daily

Closing

Price

(S$)

Lowest

Daily

Closing

Price

(S$)

VWAP(1)

(S$)

Premium

of Exit

Offer Price

over VWAP

(%)

Number of

Traded

Days(2)

Average

Daily

Trading

Volume(3)

Average Daily

Trading

Volume as a

percentage of

Free Float(4)

(%)

Periods after the Joint Announcement Date

11 March 2015 (first

traded day immediately

after the Joint

Announcement Date) 0.196(6) 0.166(6) 0.196(5) 2.0 1 145,000 0.93

After the Joint

Announcement Date and

up to the Latest

Practicable Date 0.230 0.196 0.196 2.1 13 38,314 0.25

Latest Practicable Date(7) 0.197(6) 0.197(6) 0.197(5) 1.5 1 36,000 0.23

Source: Bloomberg L.P.

Notes:–

(1) The volume-weighted average price (“VWAP”) is calculated based on the turnover divided by volume of the

S Shares for the respective periods as extracted from Bloomberg L.P..

(2) Traded days refer to the number of days on which the S Shares were traded on the SGX-ST during the

period.

(3) Average traded volume of the shares is computed based on the total volume of S Shares traded during the

relevant periods, divided by the number of market trading days on which the SGX-ST is open for trading

during the relevant periods (excluding market trading day with full day trading halt), as extracted from

Bloomberg L.P..

(4) Free float refers to the shares other than those directly and deemed held by the directors, chief executive

officer, substantial shareholders or controlling shareholders and their respective associates of the company.

For the purpose of computing the average daily trading volume as a percentage of free float for the various

periods, we have used the free float of 21.3% of total issued Shares (based on information obtained from

the Company’s Annual Report 2014, statistics of shareholding as at 19 March 2015) (“Free Float”). The Free

Float excludes non-traded Domestic Shares.

(5) Based on last traded price of the S Shares.

(6) Based on the daily highest and lowest traded prices of the S Shares.

(7) This refers to the S Shares traded on 17 April 2015, being the last market day on which the S Shares were

traded up to the Latest Practicable Date. There were no trades done on the Latest Practicable Date.

We note the following with regard to the Share prices:–

(a) Over the 12-month period prior and up to the Joint Announcement Date, the S Shares

had closed between a low of S$0.051 and a high of S$0.112 and had not traded at or

above the Exit Offer Price;

(b) The Exit Offer Price represents premia of approximately 195.1%, 167.7%, 174.7% and

162.3% to the VWAP for the 12-month, 6-month, 3-month and 1-month periods prior

and up to the Joint Announcement Date, respectively;

(c) The Exit Offer Price represents a premium of approximately 222.6% to the last traded

price for the last market day on which the S Shares were traded prior to the Joint

Announcement Date;

(d) The Exit Offer Price represents a premium of approximately 2.0% to the last traded

price for the market day immediately after the Joint Announcement Date;

51

(e) The Exit Offer Price represents a premium of approximately 2.1% to the VWAP for the

period after the Joint Announcement Date and up to 17 April 2015, being the last

market day on which the S Shares were traded up to the Latest Practicable Date; and

(f) The Exit Offer Price represents a premium of approximately 1.5% to the last traded

price on 17 April 2015, being the last market day on which the S Shares were traded

prior to the Latest Practicable Date. There were no trades done on the Latest

Practicable Date.

Based on the observations from (a) to (f) above, the current traded price appears to be

supported by the Exit Offer Price.

We note the following with regard to the trading liquidity of the Shares:–

(a) The average daily trading volume of the S Shares for the 12-month, 6-month, 3-month

and 1-month periods prior to the Joint Announcement Date represents 0.03%, 0.01%,

0.01% and 0.03% of the Free Float respectively;

(b) During the 12-month period prior to the Joint Announcement Date, the S Shares were

traded on 40 days out of 251 market days (or 15.9% of the total number of market

days);

(c) The trading volume of the S Shares on the last market day on which the S Shares were

traded prior to the Joint Announcement Date represents 0.11% of the Free Float;

(d) The trading volume of the S Shares on the market day immediately after the Joint

Announcement Date represents 0.93% of the Free Float;

(e) The average daily trading volume of the S Shares for the period after the Joint

Announcement Date and up to 17 April 2015, being the last market day on which the

S Shares were traded up to the Latest Practicable Date, represents 0.25% of the Free

Float; and

(f) The trading volume of the S Shares on 17 April 2015, being the last market day on

which the S Shares were traded prior to the Latest Practicable Date, represents 0.23%

of the Free Float. There were no trades done on the Latest Practicable Date.

The higher average trading volume post Joint Announcement Date appeared to be

supported by the Exit Offer.

Shareholders should note that the past trading performance of the S Shares is no

assurance of its future trading performance.

There is no assurance that the S Share price will remain at prevailing level as at the

Latest Practicable Date or that the higher trading liquidity of the S Shares will remain

if the Exit Offer lapses or does not become unconditional. We further wish to

highlight that our analysis of historical share price performance is not indicative of

future price levels, which will be governed by factors beyond the scope of our review.

52

7.3 Asset-based valuation of the Group

The asset-based valuation approach provides an estimate of the value of a company

assuming the hypothetical sale of all its assets over a reasonable period of time, and is

meaningful in so far as it shows the extent to which the value of each share is backed by

assets. This method would be more relevant for asset-based companies which do not carry

on any business operations of a commercial nature. This method is also particularly

appropriate when applied in circumstances where (i) an entity carries on a business which

incurs losses or generates insufficient return on the assets employed, (ii) the entity’s

business is to cease operations, and/or (iii) the entity intends to convert the uses of all or

most of its assets.

In this regard, we noted that the Offeror has no current intention of (i) making material

changes to the Group’s existing business, (ii) re-deploying the Group’s the fixed assets or

(iii) discontinuing the employment of the employees of the Group, other than in the ordinary

course of the business. Nonetheless, the Offeror retains the flexibility at any time to

consider options or opportunities which may present themselves, and which it regards to be

in the interests of the Offeror and/or the Company. Following the close of the Exit Offer, the

Offeror will conduct a comprehensive review of the operations, management and financial

position of the Group, and will evaluate various strategic options following the privatisation

of the Company.

We also wish to highlight that while the asset base of the Group can be a basis for valuation,

such a valuation does not necessarily imply a realisable value as the market value of the

assets and liabilities may vary depending on prevailing market and economic conditions.

7.3.1 Net Tangible Value (“NTA”) and Re-valued Net Tangible Value (“RNTA”) of the Group

Based on the Group’s audited financial statements as at 31 December 2014, the net asset

value (“NAV”) of the Group stood at RMB69.9 million (or equivalent to S$15.2 million), or

RMB0.95 per Share (or equivalent to S$0.21 per Share). The Group did not have any

intangible assets as at 31 December 2014. As such, the NTA for the Group is the same as

the NAV.

The Company had, on 26 November 2014, commissioned the Valuer to conduct an

independent valuation of the VIU of the CGU of the Group. A copy of the Valuation Report

is set out in Appendix 4 to the Circular.

Based on the Valuation Report, VIU is defined as “the present value of the future cash flows

expected to be derived from an asset or CGU”. The CGU being valued comprises land use

rights, property, plant and equipment. We note from the Valuation Report that the Valuer

had, in arriving at the assessed VIU, determined that the most appropriate approach of

valuing the CGU of the Group is the income approach through the use of the discounted

cash flow method. The Valuer is of the opinion that the market approach and cost approach

are inappropriate, as (a) they had not identified any current market transactions which are

comparable to be used as an indication of value of the CGU; and (b) the cost approach does

not directly incorporate information about the economic benefits contributed by the CGU.

Based on the income approach, the Valuer has assessed the VIU of the CGU of the Group

to be RMB245,543,000 million as at 31 December 2014.

53

For illustrative purposes only, the table below sets out the computation of the Group’s RNTA

as at 31 December 2014, taking into account the revaluation surplus of land use rights,

property, plant and equipment in the Valuation Report as compared to its net book value as

at 31 December 2014:–

As at 31 December 2014

(RMB’000)

Audited NTA as at 31 December 2014 69,931

Add: Net revaluation surplus on CGU 2,333

RNTA of the Group 72,264

Based on the Group’s audited financial statements as at 31 December 2014 after

adjustment for the Valuation, the RNTA of the Group stood at approximately RMB72.3

million (or equivalent to approximately S$15.7 million), or RMB0.98 per Share (or

equivalent to S$0.21 per Share).

We note that the Exit Offer Price represents a discount of approximately 3.5% to the NTA

per share and 6.6% to the RNTA per share, or a price-to-NTA ratio (“P/NTA”) of 0.97 times

and a price-to-RNAV ratio (“P/RNTA”) of 0.93 times, as at 31 December 2014.

Notwithstanding that the Exit Offer Price is at a discount to RNTA at 0.93 times, we wish to

highlight that the Group is in a negative working capital position of RMB173.3 million and

net borrowing position of approximately RMB1.2 billion as at 31 December 2014. A total of

RMB683.9 million in bank deposits (or 96.0% of total cash and cash equivalent), bills

receivables of the Group amounting to RMB11.5 million, certain buildings, machinery and

equipment and land use rights have been pledged as securities for bank borrowings as at

31 December 2014. As a result, the Group may not be able to easily find buyers for or be

able to dispose of the property (including land use rights), plant and equipment at the value

assessed by the Valuer.

The computation set out in this section is for illustrative purposes only and does not imply

that the assets can be disposed off at the value indicated above nor does it imply that after

payment of all liabilities and obligations, the amount indicated for the RNTA per Share is

realisable or distributable to the Shareholders as it is dependent on, amongst others,

availability of potential buyers for the assets, the prevailing regulations, market and

economic conditions.

The Directors and the Management have confirmed to us that to the best of their knowledge

and belief:–

(a) save for the appraised value of the CGU by the Valuer as stated in its Valuation Report

and the disclaimer of opinion in the Independent Auditor’s Report, they are not aware

of any factors or circumstances that would result in a material

impairment/enhancement of assets, which is likely to lead to a material

reduction/increase of the NAV and NTA of the Group as at the Latest Practicable Date;

(b) as at the Latest Practicable Date, there is no litigation, claim or proceeding pending or

threatened against the Company or any of its subsidiaries or of any fact likely to give

rise to any proceeding which might materially and adversely affect the financial

position of the Company and its subsidiaries taken as a whole;

54

(c) (i) there are no material acquisitions and disposals of assets by the Group between

31 December 2014 and the Latest Practicable Date, and (ii) there are no other

impending material disposals of the Group’s assets, which are likely to lead to a

material reduction/increase of the NAV and NTA of the Group as at the Latest

Practicable Date and/or a conversion of use of the Group’s assets or material change

in the nature of the Group’s business; and

(d) as at the Latest Practicable Date, there are no intangible assets which ought to be

disclosed in the statement of financial position of the Group in accordance with the

International Financial Reporting Standards and which have not been so disclosed

and where such intangible assets would have had a material impact on the overall

financial position of the Group; and

(e) other than that already provided for or disclosed in the Group’s audited financial

statements as at 31 December 2014, including but not limited to the guarantee

provided by the Company to lending banks for the STC loan amounting to RMB850.0

million, there are no contingent liabilities or material events which are likely to have a

material impact on the NAV and NTA of the Group as at the Latest Practicable Date.

Please refer to Appendices 8 and 9 to the Circular and Paragraph 8.5 of this IFA Letter

for information on the bank borrowings and guarantees linked to STC.

In relation to the bank borrowings and guarantees linked to STC, the Directors and the

Management have confirmed to us that to the best of their knowledge and belief, STC is

able to and has continued to service its loan obligations in relation to (i) the loan amounting

to RMB632.3 million as at 31 December 2014 that the Company has borrowed for use by

STC; and (ii) the STC loan amounting to RMB850.0 million as at 31 December 2014 that the

Company has provided a guarantee to the lending bank in favour of STC.

7.4 Comparison with the valuation statistics of selected companies broadly comparable

to the Group

For the purpose of assessing the financial terms of the Exit Offer Price, we have referred

to the current valuation statistics of selected listed companies on several stock exchanges,

which business operations and product types we consider to be broadly comparable to the

Group (“Comparable Companies”). In the opinion of the Management, there are no

Comparable Companies listed on the SGX-ST. The Comparable Companies are broad

proxies to the Group’s business and is intended to serve only as an illustrative guide.

A brief description of the Comparable Companies is as follows:–

Companies Exchange Key Activities

Century Enka Ltd.

(“Century Enka”)

National Stock

Exchange of

India

Century Enka manufactures synthetic

filament yarn, fibres and fabrics. The

company’s products include nylon tyre cord

fabric. It also manufactures plastics,

polymer resins, polyamide (Nylon-6) and

methanol.

PT Indo Kordsa Tbk

(“PT Indo Kordsa”)

Indonesia Stock

Exchange

PT Indo Kordsa manufactures nylon, rayon

and polyester tyre cords.

55

Companies Exchange Key Activities

PT Polychem

Indonesia Tbk

(“PT Polychem”)

Indonesia Stock

Exchange

PT Polychem manufactures nylon cords,

polyester chips, polyester filaments,

engineering plastics and resins, ethylene

glycol, polyester staple fibers, and

petrochemicals. It also weaves, knits, and

manufactures textiles. Its products are

marketed both domestically and

internationally.

Shenma Industry

Co., Ltd. (“Shenma”)

Shanghai Stock

Exchange

Shenma manufactures and markets cord

fabrics, nylon rubber-impregnated fabrics,

nylon industrial fibers, and other related

products. Shenma’s products are mainly

used in tire manufacturing industry.

Zhejiang Hailide New

Material Co., Ltd

(“Zhejiang Hailide”)

Shenzhen

Stock Exchange

Zhejiang Hailide manufactures, processes

and markets cord fabrics, industrial fabrics

and chemical fiber.

Source: Bloomberg L.P., annual reports and announcements of the respective Comparable Companies

We wish to highlight that the list of Comparable Companies is not exhaustive and we

recognise that there is no particular listed company that may be directly comparable

to the Group in terms of, inter alia, market capitalisation, composition of business

activities, scale of operations, clientele base, composition of business activities,

asset base, geographical spread, track record, operating and financing leverage, risk

profile, liquidity, quality of earnings, accounting policies, future prospects and other

relevant criteria. As such, any comparison made is necessarily limited and merely

serves as an illustrative guide.

We have had discussions with the Management about the suitability and reasonableness of

the selected Comparable Companies acting as a basis for comparison with the Group.

Relevant information has been extracted from Bloomberg L.P., publicly available annual

reports and/or public announcements of the selected Comparable Companies. We make no

representations or warranties, expressed or implied, as to the accuracy or completeness of

such information. The selected accounting policies of Comparable Companies with respect

to the values for which the assets or the revenue and cost are recorded may differ from

those of the Group.

Therefore, Independent Directors should note that any comparison made with respect to the

Comparable Companies merely serves as an illustration and that any conclusions drawn

from any comparisons herein may not necessarily reflect the market valuation of the Group.

In addition, we wish to highlight that we have not found companies listed on SGX-ST that

are principally engaged in similar business activities as that of the Group. Hence, we have

considered public listed companies in other stock exchanges and there may be significant

differences between the valuations that investors may accord to companies listed on the

SGX-ST vis-à-vis other stock exchanges. Such cross border valuation statistics are subject

to differing macroeconomic variables and hence may not be directly comparable to the

Group. As such, any comparison made with regard to the valuation measures of the

Comparable Companies is necessarily limited and merely serves as an illustrative guide.

56

For the purpose of our evaluation and for illustration, we have used the following valuation

measures in our analysis:–

Valuation Measure Description

Historical Price-to-Earnings

(“PER”)

Historical PER ratio or earnings multiple is the ratio of a

company’s market capitalisation divided by the last 12

months’ historical consolidated net profit attributable to

shareholders.

The historical PER ratio is an earnings-based valuation

methodology and is calculated based on the net earnings

attributable to shareholders after interest, taxation,

depreciation and amortisation expenses.

The historical PER ratio illustrates the ratio of the market

capitalisation of an entity in relation to the historical net

profit attributable to its shareholders.

As such, it is affected by the capital structure of a

company, its tax position, as well as its accounting

policies relating to the depreciation and intangible

assets.

P/NTA NTA refers to consolidated net tangible assets, which is

the total assets of a company less total liabilities and

intangibles. The NTA of a company provides an estimate

of its value assuming a hypothetical sale of all its

tangible assets and repayment of its liabilities and

obligations, with the balance being available for

distribution to its shareholders.

P/NTA refers to the ratio of a company’s share price in

relation to its NTA per share. The P/NTA ratio represents

an asset-based relative valuation which takes into

consideration the book value of NTA backing of a

company.

P/NTA is an asset-based valuation methodology and this

approach is meaningful to the extent that it measures the

value of each share that is attached to the net tangible

assets of the company.

We have used the historical NTA for the companies

based on their latest publicly available financial

statements for the purpose of our comparison.

57

Valuation Measure Description

LTM EV/EBITDA EV refers to enterprise value which is the sum of acompany’s market capitalisation, preferred equity,minority interests, short-term and long-term debts(inclusive of finance leases), less cash and cashequivalents.

EBITDA refers to the last 12 months’ historicalconsolidated earnings before interests, taxes,depreciation and amortisation.

The LTM EV/EBITDA ratio illustrates the ratio of themarket value of an entity’s business in relation to itshistorical pre-tax operating cash flow performance. TheLTM EV/EBITDA ratio is an earnings-based valuationmethodology. The difference between LTM EV/EBITDAand the PER ratio (described above) is that it does nottake into account the capital structure of company aswell as its interest, taxation, depreciation andamortisation charges.

We have used the 12-month trailing (“LTM”) EBITDA ofthe companies based on their latest publicly availablefinancial statements for the purpose of our comparison.

The valuation measures of the Comparable Companies set out below are based on their

respective last transacted share prices as at the Latest Practicable Date:–

Name

Latest

Financial

Period

Reported

Market

Capitalisation(1)

(S$’000)

Historical

PER

(X)

P/NTA

(X)

LTM

EV/EBITDA

(X)

Century Enka 31-Mar-14 81,365 6.05 0.54 3.83

PT Indo Kordsa 30-Sep-14 320,381 49.23 1.53 9.96

PT Polychem 31-Dec-14 51,552 N.M.(2)(3) 0.13 14.92

Shenma 30-Sep-14 1,052,662 246.06 2.17 21.14

Zhejiang Hailide 31-Dec-14 1,263,081 40.46 3.10 17.33

High 246.06 3.10 21.14

Low 6.05 0.13 3.83

Mean 31.92(4) 1.49 13.44

Median 44.85 1.53 14.92

The Company

(Implied by Exit

Offer Price)

31-Dec-14 14,460 N.M.(2)(3) 0.97

(based on

NTA of the

Company)

0.93

(based on

RNTA of the

Company)

15.24

Source: Bloomberg L.P., annual reports and/or announcements of the Comparable Companies

58

Notes:–

(1) Based on the last traded price of the shares on the Latest Practicable Date, converted to S$ based on the

exchange rates extracted from Bloomberg L.P. on 20 April 2015.

(2) Historical PER ratios for the Company and PT Polychem are not meaningful as they were in loss making

positions based on earnings in FY2014.

(3) N.M. denotes not meaningful.

(4) This excludes the historical PER of Shenma, which is considered an outlier.

Comparison of historical PER ratios

Based on FY2014 earnings of the Group, the computed historical PER ratio is negative as

the Group recorded a net loss of RMB20.7 million. As such, comparison with the

Comparable Companies in this regard is not meaningful.

Comparison of P/NTA and P/RNTA ratios

We note that the P/NTA ratio and the P/RNTA ratio of the Company implied by the Exit Offer

Price of 0.97 times and 0.93 times, respectively, are within the range of the P/NTA ratios of

the Comparable Companies but are lower than the mean and median P/NTA ratios of the

Comparable Companies.

Comparison of LTM EV/EBITDA ratios

We note that the LTM EV/EBITDA ratio of the Company implied by the Exit Offer Price of

15.24 times is above the mean and median LTM EV/EBITDA ratios of the Comparable

Companies and is within the range of the LTM EV/EBITDA ratios of the Comparable

Companies.

We note that the Comparable Companies are listed on foreign exchanges and have larger

market capitalisations as compared to the Company.

7.5 Comparison with precedent transactions in Singapore

For the purpose of providing an illustrative guide as to whether the financial terms of the

Exit Offer are attractive relative to other similar transactions, we have compared the

financial terms of the Exit Offer with selected, completed privatisation and delisting offers

of companies listed on the SGX-ST that were announced in the 2-year period preceding the

Joint Announcement Date (both dates inclusive) (“Precedent Transactions”).

We wish to highlight that the premium that an offeror pays in any particular takeover

depends on various factors such as the potential synergy that the offeror can gain by

acquiring the target, the presence of competing bids for the target, prevailing market

conditions and sentiments, attractiveness and profile of the target’s business and assets,

size of consideration and exiting and desired level of control in the target. The comparison

below is made without taking into consideration the underlying liquidity of the shares and

the performance of the shares of the relevant companies below. Further, the list of target

companies involved in the Precedent Transactions set out in the analysis below may not be

directly comparable with the Company in terms of size of operations, market capitalisation,

business activities, asset base, geographical spread, track record, accounting policy,

financial performance, operating and financial leverage, future prospects and other relevant

criteria. Hence, the comparison of the Exit Offer with the Precedent Transactions set out

below is for illustration purpose only and is by no means exhaustive. Conclusion drawn from

the comparisons made may not reflect any perceived market valuation of the Company.

59

A summary of the relevant financial terms of the Precedent Transactions is set out below:–

Premium/(Discount) of offer priceover/(to)

CompanyAnnouncedDate Type

Lasttransacted

price(%)

1-monthVWAP

(%)

3-monthVWAP

(%)

6-monthVWAP

(%)P/NTA

(Times)

Pan Pacific HotelGroup Limited 10-May-13 VD 9.0 8.2 6.1 8.1 1

Tsit Wing InternationalHoldings Limited 11-Jun-13 MGO 36.7 36.7 36.2 30.9 1.1

Guthrie GTS Limited 21-Jun-13 VGO 21.4 21.9 19.7 20.2 0.8

Food JunctionHoldings Limited 24-Jun-13 VGO 40.1 37.8 37.1 33.5 1.4

Armstrong IndustrialCorporation Limited 5-Jul-13 VD 5.9 14.0 17.0 21.1 2.0

Viz Branz Limited 5-Jul-13 MGO 15.0 17.9 17.4 17.4 2.4

Berger InternationalLimited 21-Aug-13 VGO 78.6 67.8 86.6 95.3 1.7

Superior MultiPackaging Limited 6-Sep-13 VD – 0.5 10.8 12.8 1.0

Sound Global Ltd 10-Sep-13 VD 22.8 18.9 22.6 18.9 1.5

Internet TechnologyGroup Limited 25-Sep-13 VD 35.3 9.0 5.7 0.4 0.9

ConsciencefoodHoldings Limited 28-Sep-13 VD 23.5 23.3 18.0 13.2 0.9

Devotion EnergyGroup Limited 7-Oct-13 VD 23.4 24.2 25.0 34.8 0.8

Superbowl HoldingsLimited 7-Oct-13 VGO 15.4 34.9 41.0 45.0 0.6

Medi-Flex Limited 11-Oct-13 VD 15.4 21.0 27.1 30.4 3.2

People’s FoodHoldings Limited 19-Oct-13 VD 2.6 4.2 10.0 (6.4) 1.2

Kreuz HoldingsLimited 5-Nov-13 SOA 4.6 6.9 6.4 10.9 1.8

China Energy Limited 11-Nov-13 VD (14.8) (13.0) (20.6) (23.6) 4.9

WBL Corporation Ltd 19-Nov-13 VD 27.5 26.2 24.3 27.7 1.4

Malacca Trust Limited 23-Dec-13 VD 15.4 15.4 15.4 14.9 2.1

Singapore LandLimited 24-Feb-14 VGO 11.2 16.9 13.9 11.0 0.7

Chemoil EnergyLimited 25-Feb-14 VD 29.0 31.1 32.5 31.1 1.1

Asia PowerCorporation Limited 24-Mar-14 VD – 1.2 1.4 9.7 0.6

China XLX FertiliserLtd. 31-Mar-14 VD 23.1 28.9 24.8 22.2 0.8

Capitamalls AsiaLimited 14-Apr-14 VGO 23.0 27.0 25.5 20.5 0.8

ASJ Holdings Limited 7-May-14 VGO 18.2 43.7 55.4 62.0 0.7

Goodpack Limited 27-May-14 SOA 23.2 30.8 31.3 34.3 3.1

Fischer Tech Ltd 10-Sep-14 MGO 2.6 1.5 6.8 8.6 0.6

Lee Kim Tah Holdings 25-Sep-14 VGO 6.4 11.8 12.3 13.5 0.9

Perennial China RetailTrust 27-Oct-14 VGO 29.6 34.0 33.0 32.1 0.9

60

Premium/(Discount) of offer priceover/(to)

CompanyAnnouncedDate Type

Lasttransacted

price(%)

1-monthVWAP

(%)

3-monthVWAP

(%)

6-monthVWAP

(%)P/NTA

(Times)

Forterra Trust 4-Nov-14 MGO 32.4 51.1 49.7 39.8 0.6

ECS Holdings Limited 14-Nov-14 VGO 11.5 9.0 11.5 9.3 0.7

Eunetworks GroupLimited(1) 17-Nov-14

MGOand VD 32.6 58.4 69.2 101.2 2.1

UE E&C Ltd 19-Dec-14 VGO (2.3) 2.7 5.0 (2.9) 1.2

Popular HoldingsLimited 14-Jan-15 VGO 39.1 39.7 37.3 32.2 1.2

High 78.6 67.8 86.6 101.2 4.9

Low (14.8) (13.0) (20.6) (23.6) 0.6

Mean 19.3 22.5 24.0 24.4 1.3(2)

Median 19.8 21.5 21.2 20.4 1.1

The Company 10-Mar-15 VD 222.6 162.3 174.7 167.7 0.97(based onNTA of the

Company)

0.93(based on

RNTA of theCompany)

Sources: SGX-ST announcements and circulars to shareholders in relation to the respective PrecedentTransactions

Notes:–

(1) Mandatory unconditional cash offer for Eunetworks Group Limited closed on 13 February 2015 andproposed voluntary delisting of Eunetworks Group Limited completed on 20 March 2015.

(2) This excludes the P/NTA of China Energy Limited, which is considered an outlier.

Based on the above, we note the following:–

(a) The premium of 222.6% implied by the Exit Offer Price against the last transacted

price of the S Shares prior to the Joint Announcement Date is above the high, mean

and median premiums of the Precedent Transactions;

(b) The premium of 162.3% implied by the Exit Offer Price against the 1-month VWAP of

the S Shares prior to the Joint Announcement Date is above the high, mean and

median premiums of the Precedent Transactions;

(c) The premium of 174.7% implied by the Exit Offer Price against the 3-month VWAP of



(d) The premium of 167.7% implied by the Exit Offer Price against the 6-month VWAP of



(e) The P/NTA ratio and the P/RNTA ratio implied by the Exit Offer Price of 0.97 times and

0.93 times, respectively, are (i) within the range; but (ii) lower than the mean and

median P/NTA ratios of the Precedent Transactions.

61

7.6 Dividend Track Record of the Group

We wish to highlight that the Company has only paid a dividend in 2010 and has not paid

any other dividend since its listing in 2004. We also note that the Group has accumulated

losses amounting to RMB168.3 million as at 31 December 2014. We also wish to highlight

that under the PRC Company Law and the articles of association of the Company, net profit

after taxation can be distributed as dividends only after allowance has been made for: (i)

making up cumulative prior years’ losses, if any; (ii) allocation of 10% of after-tax profit, as

determined in accordance with the PRC accounting rules and regulations, to the Company’s

statutory surplus reserve until the fund aggregates to 50% of the Company’s registered

capital; and (iii) allocation to discretionary surplus reserve, if approved by the Shareholders.

As disclosed in the notes to the audited financial statements of the Group for the financial

year ended 31 December 2014, the Company did not have any distributable reserve as at

31 December 2014.

8. OTHER CONSIDERATIONS

8.1 Certainty of Delisting





representatives or proxy to vote in favour of the Delisting Resolution at the EGM. As at the

Latest Practicable Date, the Concert Parties collectively hold an aggregate of 57,524,400

Shares, representing approximately 78.37% of the total Shares of the Company. One of the

conditions for the delisting resolution to be passed at the EGM requiring the delisting

resolution to be approved by at least 75% of the total number of issued Shares (excluding

treasury shares) held by Shareholders present and voting, on a poll, either in person or by

proxy at the EGM is likely to be met as a result of the irrevocable undertakings given by the

Concert Parties.


unconditionally undertaken to the Company that (i) he will not transfer or otherwise dispose

of any of his shareholdings as at the date of irrevocable undertaking prior to and up to the

Closing Date or the abortion of the Delisting, whichever is applicable; (ii) he will vote, and/or

procure his representatives or proxy to vote in favour of the Delisting Resolution at the

EGM; and (iii) he will accept the Exit Offer. As at the Latest Practicable Date, Mr Jen Shek

Voon holds 240,000 S Shares, representing approximately 0.33% of all the Shares.

Unless the Delisting Resolution is voted against by 10% or more of the total number

of issued Shares (excluding treasury shares) held by Shareholders present and

voting, on a poll, either in person or by proxy at the EGM, the Delisting Resolution is

assured of being passed at the EGM. Shareholders should also note that the Exit

Offer will not be conditional upon a minimum number of acceptances being received.

Should the Delisting Resolution be approved by Shareholders at the EGM,

Shareholders who have chosen not to accept the Exit Offer in respect of all or part of

their holdings of Offer Shares would continue to remain as Shareholders of the

Company holding unquoted S Shares upon the completion of the proposed voluntary

delisting.

Save as disclosed in the Circular, as at the Latest Practicable Date, none of the Offeror nor

any party acting in concert with it has received any irrevocable undertaking from any party

to accept or reject the Exit Offer.

62

8.2 No compulsory acquisition

The Company is incorporated in the PRC. Based on the opinion of Junhe Law Office, which

was appointed by the Company to act as the PRC counsel to the Company (“PRC

Counsel”) in relation to the Delisting, there are no PRC laws or provisions of the articles of

association of the Company which explicitly (a) give the right to the Shareholders holding

S Shares who have not accepted the Exit Offer to require the Offeror to acquire their S

Shares on the same terms as those under the Exit Offer; or (b) give the right to the Offeror

to acquire all the S Shares from the Shareholders who have not accepted the Exit Offer on

the same terms as those under the Exit Offer. Please refer to Paragraph 14 of the Circular

for further information on the legal opinion issued by the PRC counsel to the Company.

8.3 Implications of Delisting for Shareholders

Upon the Delisting Resolution being passed at the EGM and following the close of the Exit

Offer, the Company will be delisted from the Catalist Board and become an unlisted

sino-foreign joint venture company in the PRC.

Following the Delisting, it is likely to be difficult for Shareholders who do not accept the Exit

Offer to sell their S Shares in the absence of a public market for the S Shares, as there is

no arrangement for such Shareholders to exit. Shareholders should note that shares of

unlisted companies are generally valued at a discount to the shares of comparable listed

companies due to the lack of marketability.





If the Company is delisted from the Catalist Board, it will no longer be obliged to comply with

the listing requirements of the SGX-ST. Nonetheless, as an unlisted sino-foreign joint

venture company in the PRC, the Company will need to comply with the PRC laws and

its articles of association, and the interests of Shareholders who do not accept the

Exit Offer will be protected to the extent provided for by the PRC laws and the

Company’s articles of association. The PRC Counsel has advised that PRC laws do

not differentiate the protection to Shareholders holding Domestic Shares or S Shares

after the Delisting.

After the Delisting, each S Shareholder is not individually registered in his own name with

the State Administration for Industry and Commerce of the PRC (“SAIC”) or its local

counterpart, Administration for Industry and Commerce of Jiangsu Province (“Local

Counterpart”). All S Shareholders are collectively registered as S Shareholders with the

SAIC or its Local Counterpart and this registration status will not be altered immediately

after the completion of the Delisting. The S Shareholders who have not tendered their S

Shares for acceptance during the Delisting will continue to be entitled to transfer their S

Shares pursuant to the PRC laws subject to approval requirements currently applicable on

the transfer of Shares of the Company as an unlisted sino-foreign joint venture company in

the PRC. The PRC Counsel has advised that the transfer of Shares of the Company

after the Delisting are subject to the review and approval from the relevant PRC

governmental authorities, including but not limited to Ministry of Commerce of the

PRC and SAIC or their local counterparts, namely Department of Commerce of

Jiangsu Province and Administration for Industry and Commerce of Jiangsu

Province respectively (“Approval”) and such Approval for the transfer of Shares of

the Company can be denied if it is held to be contrary to PRC laws.

63

S Shareholders should note that under the current applicable PRC laws, transfer of

S Shares after the Delisting will require Approval.

Shareholders who are in doubt of their position should seek independent

professional advice.

8.4 No alternative offer

There is no publicly available evidence of any alternative offer for the Shares or the

Company from any third party. The Directors have confirmed that, as at the Latest

Practicable Date, apart from the Exit Offer proposed by the Offeror, no competing offer or

an enhancement or revision of the Exit Offer has been received.

The possibility of any alternate take-over would be remote given that the Concert Parties

who collectively own 78.73% of the total number of issued Shares as at the Latest

Practicable Date have given irrevocable undertakings that (i) it/he will not transfer or

otherwise dispose of any of its/his shareholdings as at the date of irrevocable undertakings

prior to and up to the Closing Date or the abortion of the Delisting, whichever is applicable;

and (ii) it/he will vote, and/or procure its/his representatives or proxy to vote in favour of the

Delisting Resolution at the EGM.





8.5 Risks relating to bank borrowings and guarantees linked to STC

As disclosed in the circular to shareholders of the Company dated 9 December 2013 in

relation to the disposal of the Company’s 55% shareholdings in STC (the “Disposal”), each

of the Company and STC had taken up loans from financial institutions which had been

secured by corporate guarantees and certain assets of the Company and STC and for use

by the other party respectively. The Disposal was completed on 26 December 2013

(“Completion Date”). These financial arrangements are necessary to facilitate the Disposal

as the repayment of the STC Loans or the discharge of the STC Guarantee and the Junma

Guarantee cannot be fulfilled immediately after the Disposal.

The details of the loans and corporate guarantees linked to STC are set out below:–

(a) The Company had taken loans amounting to RMB829 million (the “Loans”) as at 8

November 2013 for and on behalf of STC for use by STC for its working capital

purposes. The Loans are guaranteed by STC. STC has agreed to repay the Loans

within one (1) year from the date of the agreement for the Disposal (the “Agreement”).

Pending repayment, STC shall reimburse the Company for all interest paid on the

Loans within seven (7) days of such payment of interest by the Company.

(b) STC had taken loans amounting to RMB1,140 million (the “STC Loans”) as at 8

November 2013 which are guaranteed by the Company (“STC Guarantee”). The

Company consents that it shall continue to guarantee the STC Loans for a maximum

period of one (1) year from the date of the Agreement, during which period, STC

warrants and undertakes that it shall procure the discharge of the STC Guarantee.

64

(c) The Company had taken loans amounting to RMB521 million (the “Junma Loans”) as

at 8 November 2013 which are guaranteed by STC (“Junma Guarantee”). STC

consents that it shall continue to guarantee the Junma Loans for a maximum period of

one (1) year from the date of the Agreement, during which period, the Company

warrants and undertakes that it shall procure the discharge of the Junma Guarantee.

The Agreement, which expired on 7 November 2014, has been renewed via a supplemental

agreement dated 7 November 2014. The said supplemental agreement extends the

commitments under the terms and conditions of the Agreement but does not specify the

date of the repayment of the Loans or the discharge of the STC Guarantee.

As at 31 December 2014, the Company’s exposure to the risks relating to bank borrowings

and guarantees linked to STC is summarised below:–

(RMB million)

As at

31 December

2014

Loans by the Company guaranteed by STC, for and on behalf of

STC for use by STC 632

STC Loans by STC guaranteed by the Company 850

Junma Loan by the Company guaranteed by STC –

Source: Company’s announcement

As at 31 December 2014 up to the Latest Practicable Date, the Company has not:–

(a) undertaken any additional loans guaranteed by STC, for and on behalf of STC for use

by STC; and

(b) guaranteed any additional loans made by STC.

The Directors and the Management have confirmed that there have not been any material

movement to the abovementioned outstanding loan amounts since 31 December 2014 up

to the Latest Practicable Date.

It was disclosed in the Independent Auditor’s Report that as STC had been persistently

making losses, it has recorded a deficit in its shareholders’ equity of approximately RMB206

million based on its management accounts as at 31 December 2014. There is significant

uncertainty as to whether the lenders of STC may recall/cancel/discontinue their bank

facilities to STC and call upon the corporate guarantees provided by the Company.

In the event that the financial arrangements cannot be settled or discharged as

agreed under the terms of the Agreement, the operations and financial condition of

the Company will be adversely affected.

8.6 The Offeror’s Intentions for the Group

As set out in Paragraph 6 of the Circular, the Offeror has no current intention of (i) making

material changes to the Group’s existing business, (ii) re-deploying the Group’s the fixed

assets or (iii) discontinuing the employment of the employees of the Group, other than in the

ordinary course of the business. Nonetheless, the Offeror retains the flexibility at any time

to consider options or opportunities which may present themselves, and which it regards to

be in the interests of the Offeror and/or the Company. Following the close of the Exit Offer,

65

the Offeror will conduct a comprehensive review of the operations, management and

financial position of the Group, and will evaluate various strategic options following the

privatisation of the Company.

8.7 Intentions of Directors

As set out in Appendix 6 to the Circular, Mr Jen Shek Voon, the Lead Independent Director,

has irrevocably and unconditionally undertaken to the Company that (i) he will not transfer

or otherwise dispose of any of his shareholdings as at the date of irrevocable undertaking

prior to and up to the Closing Date or the abortion of the Delisting, whichever is applicable;

(ii) he will vote, and/or procure his representatives or proxy to vote in favour of the Delisting

Resolution at the EGM; and (iii) he will accept the Exit Offer. As at the date of irrevocable

undertakings and Latest Practicable Date, Mr Jen Shek Voon holds 240,000 S Shares,

representing approximately 0.33% of all the Shares.

8.8 No transaction costs in connection with the disposal of S Shares

If the Delisting Resolution is approved by Shareholders at the EGM, Shareholders who

validly accept the Exit Offer will receive the entire proceeds in cash within 10 days after the

close of the Exit Offer as the Exit Offer will not be conditional upon a minimum number of

acceptances being received by the Offeror. The Exit Offer represents an opportunity for

Shareholders to dispose of their Shares for cash without any transaction costs as opposed

to the sale of Shares in the open market which will incur expenses such as brokerage

commission and transaction costs.

9. SUMMARY OF ANALYSIS AND RECOMMENDATION TO THE INDEPENDENT

DIRECTORS

In arriving at our recommendation in respect of the Exit Offer, we have taken into

consideration, inter alia, the following factors summarised below. The factors set out herein

should be considered in the context of the entirety of this IFA Letter and the Circular:–




(4) Comparison with the valuation statistics of selected companies broadly comparable to

the Group;


(6) Dividend record of the Group; and


Based on our analysis, and after having considered carefully the information

available to us as at the Latest Practicable Date, we are of the opinion that the

financial terms of the Exit Offer Price are fair and reasonable.

66

Accordingly, we advise the Independent Directors to recommend the Shareholders to

ACCEPT the Exit Offer or sell their Shares in the open market if they can obtain a

price higher than the Exit Offer Price after deducting transaction and related

expenses. We wish to highlight that according to the Exit Offer Letter, the Offeror

does not intend to revise the exit offer price under any circumstances.

Shareholders who are prepared to take a long-term view of their investment in the S Shares

and wish to retain their S Shares and not accept the Exit Offer should note the following:–

(i) If the Company is delisted from the Catalist Board, it will no longer be obliged to

comply with the listing requirements of the SGX-ST. The interests of S Shareholders

who do not accept the Exit Offer will be protected to the extent provided for by the PRC

laws and the Company’s articles of association. The PRC Counsel, has advised that

PRC laws do not differentiate the protection to Shareholders holding Domestic Shares

or S Shares after the Delisting;

(ii) that the trading volume and market price of the S Shares as at the Latest Practicable

Date may not be sustainable at current levels after the close of the Exit Offer;

(iii) As there will be no compulsory acquisition, S Shareholders who do not accept the Exit

Offer may only be able to dispose of their S Shares, subsequent to the close of the Exit

Offer, if they are able to find purchaser(s) for their S Shares and/or through other

means;

(iv) Shareholders should note that shares of unlisted companies are generally valued at a

discount to the shares of comparable listed companies due to the lack of marketability;

(v) The PRC Counsel has advised that under the current applicable PRC laws, transfer of

Shares after the Delisting will require approval from the relevant PRC governmental

authorities and such approval for the transfer of Shares of the Company can be denied

if it is held to be contrary to PRC laws; and

(vi) The reporting auditor to the Group has issued a disclaimer of opinion in the

Independent Auditor’s Report.

In rendering the above advice, Canaccord Genuity has not had regard to the specific

investment objectives, financial situation, tax position or particular needs and constraints of

any individual Shareholder. As each Shareholder would have different investment

objectives and profiles, we would advise that any individual Shareholder who may require

specific advice in relation to PRC laws, his investment objectives or portfolio should consult

his stockbroker, bank manager, solicitor, accountant, tax adviser or other professional

advisers immediately.

Shareholders should note that the trading of the Shares are subject to, inter alia, the

performance and prospects of the Group, prevailing economic conditions, economic outlook

and stock market conditions and sentiments. Accordingly, the advice by Canaccord Genuity

on the Exit Offer does not and cannot take into account future trading activities or patterns

or price levels that may be established for the Shares after the Latest Practicable Date

since these are governed by factors beyond the ambit of Canaccord Genuity’s review and

also, such advice, if given, would not fall within Canaccord Genuity’s term of reference in

connection with the Exit Offer.

67

We have prepared this letter for the use of the Independent Directors in connection with and

for the purposes of their consideration of the Exit Offer, but any recommendations made by

the Independent Directors in respect of the Exit Offer shall remain their sole responsibility.

This opinion is governed by, and construed in accordance with, the laws of Singapore, and

is strictly limited to the matters stated herein and does not apply by implication to any other

matter.

Yours faithfully

For and on behalf of Canaccord Genuity Singapore Pte. Ltd.

ALEX TAN

CHIEF EXECUTIVE OFFICER

KAREN SOH

MANAGING DIRECTOR

68

APPENDIX 2

JUNHE LEGAL OPINION

69

APPENDIX 3

HEP LEGAL OPINION

74

AP

PE

ND

IX 4

VA

LUA

TIO

N R

EP

OR

T

77

APPENDIX 5

ADDITIONAL INFORMATION ON THE OFFEROR

The following information on the Offeror is extracted from Paragraph 4 of the Exit Offer Letter.

Unless otherwise defined, all terms and expressions used in this Appendix 5 shall have the same

meanings as those in the Exit Offer Letter.

REGISTERED OFFICE

The registered office of the Offeror is 263 Main Street, Road Town, Tortola, British Virgin Islands.

OFFEROR DIRECTORS

The names, addresses and designations of the Offeror Directors as at the Latest Practicable Date

are set out below:

Name Address Designation

Yang Cong No. 39, Chenghang East Road,



Director

Liu Zhenfeng No. 20, East Ten Team, Li Ming Village,



Director

PRINCIPAL ACTIVITIES AND SHARE CAPITAL

The Offeror, Ultimative Ltd, is a special purpose vehicle incorporated in the British Virgin Islands

for the purposes of the Delisting and the Exit Offer. Its principal activity is that of an investment

holding company. Yang Cong is the sole shareholder of the Offeror.

As at the Latest Practicable Date, the Offeror has an issued and paid-up capital of US$1.00

comprising one (1) fully paid-up ordinary share of US$1.00.

As at the Latest Practicable Date, the Offeror does not own or have any control over any Shares.

SUMMARY OF FINANCIAL INFORMATION

As the Offeror is incorporated in the British Virgin Islands, there is no requirement to prepare

audited financial statements, and accordingly, no audited financial statements of the Offeror have

been prepared. In addition, as the Offeror had only been incorporated on 3 June 2014 for the

purposes of the Delisting and the Exit Offer, the Offeror would not have had a full financial year

as at the Latest Practicable Date.

100

APPENDIX 6

ADDITIONAL INFORMATION ON THE COMPANY

GENERAL INFORMATION

The Company was a limited liability company incorporated in the PRC on 12 June 1998 and was

converted to a joint stock limited company on 19 July 2000. It had been listed on the Catalist Board

of the SGX-ST since 25 November 2004. The Group is principally engaged in the production and

sale of Nylon 6 industrial yarn and Nylon 6 dipped tyre cords.

As at the Latest Practicable Date, the issued share capital of the Company comprises 73,400,000

Shares consisting of 55,000,000 Domestic Shares held by Shareholders in the PRC and not listed

on the Catalist Board of the SGX-ST and 18,400,000 S Shares listed on the Catalist Board of the

SGX-ST. There are no Shares held in treasury.

DIRECTORS OF THE COMPANY

The names, addresses and designations of the Directors as at the Latest Practicable Date are set

out below:

Name Address Designation

Yang Peixing Nanyuan Small District, Chenghang

Yangshe Town, Zhangjiagang

Jiangsu Province

Executive Chairman

Liu Yaoxiang Group 10, Liming Village

Yangshe Town

Zhangjiagang

Jiangsu Province

Executive Director

Liu Zhenfeng Liming Village

Donglai Town

Zhangjiagang

Jiangsu Province

Executive Director

Zhou Zhidan Room 10-407

Yunpan New Village

Zhangjiagang

Jiangsu Province

Executive Director

Jen Shek Voon 29 Swettenham Road

Singapore 248115

Lead Independent

Director

Teng Cheong Kwee 16B Margoliouth Road #06-03

Singapore 258542

Independent Director

Shan Wenfeng Room 405 7#, No. 12

Zhongheqiao, Baixia district

Nanjing City

Jiangsu Province

Independent Director

REGISTERED OFFICE

The registered office of the Company is at Junma Building, Nonglu Road, Chenghang, Yangshe

Town, Zhangjiagang City, Jiangsu Province, PRC.

101

MATERIAL CHANGES IN FINANCIAL POSITION

Save as disclosed in publicly available information on the Company (including but not limited to

announcements released by the Company in respect of its financial results), as at the Latest

Practicable Date, there have been no known material changes in the financial position of the

Company since 31 December 2014, being the date to which the Company’s last published audited

accounts were made up.

DISCLAIMER OF OPINION

As announced by the Company on 20 April 2015, Baker Tilly TFW LLP, the Company’s external

auditors, has issued its Independent Auditor’s Report dated 20 April 2015 with a disclaimer of

opinion in respect of the audited financial statements of the Group and of the Company for the

financial year ended 31 December 2014 (“Independent Auditor’s Report”).

A total amount of the Group and the Company’s bank borrowings of approximately RMB406 million

are subject to financial covenant clauses as at 31 December 2014 (“Outstanding Loans”).

However, the Company breached these financial covenants as at 31 December 2014

(“Breaches”). Due to such Breaches, the bank is contractually entitled to request for immediate

repayment of the Outstanding Loans. However, the management of the Company had obtained a

written representation from the bank of its intention to renew the Outstanding Loans as and when

they fall due in year 2015. As of 20 April 2015, the bank had not requested for early repayment

of the Outstanding Loans.

A copy of the Independent Auditor’s Report and the relevant Notes 2(a), 9, 15, and 28, to the

audited financial statements are annexed Appendix 8 of this Circular.

DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTEREST

The interests of the Directors and Substantial Shareholders in the Shares as at the Latest

Practicable Date, based on the information in the Register of Directors and Substantial

Shareholders as maintained by the Company, were as follows:

Direct Interest Deemed Interest

Directors

Number ofDomestic

Shares %Number ofS Shares %

%(Total)

Number ofDomestic

Shares %Number ofS Shares %

%(Total)

Yang Peixing 13,500,000 18.39 1,895,000 2.58 20.97 – – – – –

Liu Yaoxiang 2,500,000 3.41 – – 3.41 – – – – –

Liu Zhenfeng 4,500,000 6.13 – – 6.13 – – – – –

Zhou Zhidan – – – – – – – – – –

Jen Shek Voon – – 240,000 0.33 0.33 – – – – –

Teng CheongKwee – – – – – – – – – –

Shan Wenfeng – – – – – – – – – –

SubstantialShareholders

Buole(1) 30,125,000 41.04 – – 41.04 – – – –

Chen Zufu 4,375,000 5.96 – – 5.96 – – – –

102

Note:

(1) Buole is an investment holding company. It is owned by 50 individuals as follows:


Yang Peiying The Company’s sales and marketing manager, the legalrepresentative of Buole and the sister of Mr Yang Peixing,the Company’s Executive Chairman

7.47%

Ji Jianchun Executive Officer 5.81%

Wang Xuefang Non-employee 5.40%

Yang Jianxing The Company’s employee and the brother of Mr Yang Peixing,the Company’s Executive Chairman

4.98%

Mao Yuying Non-employee 4.57%

Jiang Yuda Non-employee 4.15%

Yang Renming A Supervisor of the Company 4.15%

He Jianming A Supervisor of the Company 4.15%

Zou Peidong The Company’s employee 3.32%

Lin Fang The Company’s employee 3.32%

Liu Linsheng Non-employee 3.32%

Shen Peiliang The Company’s employee 2.91%

Qi Jianxing The Company’s employee 2.08%

Wang Minghan the brother-in-law of Mr Yang Peixing, Ms Yang Peiying andMr Yang Jianxing

5.40%

Chen Renbao brother-in-law of Mr Chen Zufu 1.66%

Qian Zhengdong The Company’s employee 1.66%

Ji Jianqiu The Company’s employee and the brother of Mr Ji Jianchun,the Company’s Executive Officer

1.66%

Xu Feng The Company’s employee 1.66%

Ji Jianying Non-employee 1.66%

Qian Jianshi Non-employee 1.66%

Qian Huifang Non-employee 1.66%

Zhou Zhidan The Company’s Executive Director and the nephew ofMr Liu Yaoxiang, the Company’s Executive Director

1.66%

Shen Yafen Non-employee 1.66%

Qian Xinfen Non-employee 1.66%

Gao Degang Non-employee 1.24%

Shen Zhixian Non-employee 1.24%

Zhu Weiming Non-employee 1.24%

Xu Huichu The Company’s employee 1.24%

Chen Ganxing The Company’s employee 1.24%

Lin Zhengfang Non-employee 1.24%

Liu Zhenxiang Non-employee and the brother of Mr Liu Yaoxiang, theCompany’s Executive Director and Mr Liu Fengxiang

1.24%

Xia Xiufen The Company’s employee 1.24%

Xu Jian The Company’s employee 0.83%

Liu Fengxiang The brother of Mr Liu Yaoxiang, the Company’s ExecutiveDirector and Mr Liu Zhenxiang

0.83%

Zhu Haidong Non-employee 0.83%

Dai Mingfen Non-employee 0.415%

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Qin Zuru Non-employee 0.83%

Wei Chunlei The Company’s employee 0.83%

Zhang Fenggao Non-employee 0.83%

Wei Jianping The Company’s employee 0.83%

Qian Liquan The Company’s employee 0.83%

Yao Jinfei The Company’s employee 0.83%

Fu Hongbo The Company’s employee 0.83%

Ni Zhengdong Deceased 0.83%

Qi Jianli The Company’s employee 0.415%

Jiang Zhenglin The Company’s employee 0.415%

Jiang Weixiang The Company’s employee 0.415%

Sun Jiancai Non-employee 0.415%

Zhu Yongxiang Non-employee 0.415%

Xu Zhong Non-employee 0.415%

* Percentages do not add up to 100% due to rounding.

DISCLOSURE OF INTERESTS OF THE COMPANY AND THE DIRECTORS

Shareholdings and Dealings

(a) The Company does not have any direct or deemed interest in the equity share capital,

securities convertible into equity share capital or rights to subscribe for or options (including

traded option) in respect of equity share capital of the Offeror (collectively, “Offeror

Securities”) as at the Latest Practicable Date.

(b) The Company has not dealt for value in any Offeror Securities during the Relevant Period.

(c) As at the Latest Practicable Date, none of the Directors has any direct or deemed interests

in the Offeror Securities.

(d) None of the Directors has dealt for value in the Offeror Securities in the Relevant Period.

(e) Save as disclosed in this Circular, none of the Directors has dealt for value in the Shares or

convertible securities of the Company during the Relevant Period.

Directors’ Intentions in relation to the Exit Offer

Each of the Offeror’s Concert Parties has irrevocably and unconditionally undertaken to the

Company that (i) it/he will not transfer or otherwise dispose of any of its/his shareholdings as at

the date of irrevocable undertakings prior to and up to the Closing Date or the abortion of the

Delisting, whichever is applicable; and (ii) it/he will vote, and/or procure its/his representatives or

proxy to vote in favour of the Delisting Resolution at the EGM. As at the date of irrevocable

undertakings and Latest Practicable Date, the Concert Parties collectively hold an aggregate of

57,524,400 Shares, representing approximately 78.37% of all the Shares.


unconditionally undertaken to the Company that (i) he will not transfer or otherwise dispose of any

of his shareholdings as at the date of irrevocable undertaking prior to and up to the Closing Date

or the abortion of the Delisting, whichever is applicable; and (ii) he will vote, and/or procure his

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representatives or proxy to vote in favour of the Delisting Resolution at the EGM (iii) he will accept

the Exit Offer. As at the date of irrevocable undertakings and Latest Practicable Date, Mr Jen Shek

Voon holds 240,000 S Shares, representing approximately 0.33% of all the Shares.

Save as disclosed in this Circular, as at the Latest Practicable Date, none of the Offeror nor any

party acting in concert with it has received any irrevocable undertaking from any party to accept

or reject the Exit Offer.

Directors’ Service Contracts

There (i) are no service contracts between any Director or proposed director with the Company or

any of its subsidiaries with more than 12 months to run, which the employing company cannot,

within the next 12 months, terminate without payment of compensation; and (ii) were no service

contracts entered into or amended between any of the Directors of proposed director and the

Company or any of its subsidiaries during the period between the start of the six months

immediately preceding the Joint Announcement Date and the Latest Practicable Date.

Arrangements Affecting Directors

(a) There are no payments or other benefits which will be made or given to any Director or any

director of any corporation, which is by virtue of Section 6 of the Act, deemed to be related

to the Company, as compensation for loss of office or otherwise in connection with the Exit

Offer.

(b) Save as disclosed in this Circular, there are no agreements or arrangements made between

any Director and any other person in connection with or conditional upon the outcome of the

Exit Offer.

(c) Save as disclosed in this Circular, none of the Directors has any material personal interest,

whether direct or indirect, in any material contract entered into by the Offeror.

DISCLOSURE OF INTERESTS OF THE INDEPENDENT FINANCIAL ADVISER

Interests of IFA in Shares and Voting Rights in the Company

The IFA, does not own or control any Shares as at the Latest Practicable Date.

Dealings in Shares by IFA

The IFA has not dealt for value in the Shares between the date of its appointment on 12 March

2015 and the Latest Practicable Date.

MATERIAL CONTRACTS WITH INTERESTED PERSONS

Save as disclosed below, there are no material contracts (not being contracts entered into during

the ordinary course of business carried on by the Company) entered into by the Company or any

of its subsidiaries with Interested Persons, within the 3 years preceding the Joint Announcement

Date.

A sale and purchase agreement (the “SPA”) dated 8 November 2013 was entered into between the

Company as vendor, and Zhangjiagang Junma Polyester Manufacturing Co., Ltd as purchaser

(“Purchaser”) for the sale of the entire 55% shareholdings (the “55% Shareholdings”) in the

registered share capital of Zhangjiagang Junma Steel Tyre Cord Company Limited (the “STC”) at

a consideration of RMB110.83 million.

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Mr Yang Cong, the son of Mr Yang Peixing, the Executive Chairman and a substantial shareholder

of the Company, holds 50% interest in the Purchaser. As such, the Purchaser is an associate of

Mr Yang Peixing and the transaction was deemed to be an interested person transaction. The said

transaction approved by the shareholders in the EGM held on 24 December 2013 was completed

on 26 December 2013.

For more details, please refer to the announcement on SGXNet dated 8 November 2013 which is

attached as Appendix 9 of this Circular.

MATERIAL LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged in

any arbitration proceedings, either as plaintiff or defendant and the Directors have no knowledge

of any proceedings pending or threatened against the Company or its subsidiaries or of any fact

likely to give to any proceedings which might materially and/or adversely affect the financial

position or business of the Company or subsidiaries taken as a whole.

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APPENDIX 7

RELEVANT EXCERPTS FROM THE ARTICLES OF

ASSOCIATION OF THE COMPANY

This Appendix provides a translation of certain provisions of our Articles of Association. The

attention of investors is drawn to Article 208 of the Articles of Association which states that in the

event of any inconsistency between the Chinese version of the Articles of Association and any

translations thereof, the Chinese version shall prevail.

Chapter 3 Shares and Registered Capital

Article 16

The Company may, at any time, issue ordinary shares; the Company may, in accordance with

requirements and subject to approval by the company examination and approval department

authorised by the State Council, issue other classes of shares.

Article 17

Shares issued by the Company shall have a par value. Each share shall have a par value of

Renminbi 1.00.

The Renminbi referred to in the preceding paragraph is the legal currency of the PRC.

Article 18

Subject to the approval of the securities regulatory authority of the State Council, the Company

may issue shares to both domestic investors and foreign investors.

Foreign investors referred to in the preceding paragraph mean those investors of foreign countries

and regions of Hong Kong, Macau and Taiwan who subscribe for shares issued by the Company;

domestic investors referred to in the preceding paragraph mean those investors within the territory

of China (excluding investors of the regions referred to in the preceding sentence) who subscribe

for the shares issued by the Company.

Article 19

Shares issued by the Company to domestic investors for subscription in Renminbi are referred to

as “Domestic Shares”. Shares issued by the Company to foreign investors for subscription in

foreign currencies are referred to as “Foreign Shares”. Domestic Shares which are listed within

the territory are called herein “Domestic Listed Shares”. Foreign Shares which are listed overseas

are called herein “Foreign Listed Shares”.

The holders of Domestic Shares and Foreign Listed Shares shall be ordinary shareholders having

the same rights and obligations except otherwise provided in these articles.

The foreign currencies referred to in the preceding paragraph mean the legal currencies (apart

from Renminbi) of other countries or regions which are recognized by the foreign currency control

authority of the PRC and can be used to pay the Company for the share price.

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Article 20

Foreign Listed Shares issued by the Company are known as “S” Shares, which may, subject to the

approval of the securities regulatory authority of the PRC, be listed on Singapore Exchange

Securities Trading Limited (“SGX-ST”) Dealing and Automated Quotation System

(“SGX-Sesdaq”). The par value is shown in Renminbi and the shares are purchased and traded

in Singapore dollar (the “S$”).

Article 21

At the time the Company was established, the Company issued a total of 367,000,000 ordinary

shares, of which (a) 275,000,000 Domestic Shares had been issued and fully subscribed for by

the promoters of the Company (namely, Zhangjiagang Buole Investment Development Company

Limited, Mr. Yang Peixing, Mr. Liu Zhenfeng, Mr. Chen Zufu, and Mr. Liu Yaoxiang who subscribed

for 150,625,000 shares, 67,500,000 shares (including shares acquired after the establishment of

the Company), 22,500,000 shares, 21,875,000 shares and 12,500,000 shares respectively); and

(b) 92,000,000 Foreign Listed Shares had been issued for subscription by foreign investors.

Pursuant to a share consolidation exercise approved by Shareholders at an extraordinary general

meeting of the Company held on 12 May 2011, the existing 367,000,000 ordinary shares of

RMB0.20 each on the capital of the Company consolidated to 73,400,000 ordinary shares of

RMB1.00 each, of which 55,000,000 Domestic Shares are held by the promoters of the Company

(namely Zhangjiagang Buole Investment Development Company Limited, Mr. Yang Peixing, Mr.

Liu Zhenfeng, Mr. Chen Zufu, and Mr. Liu Yaoxiang who hold 30,125,000 shares, 13,500,000

shares, 4,500,000 shares, 4,375,000 shares and 2,500,000 shares respectively); and 18,400,000

Foreign Listed Shares are held by the holders of Foreign Listed Shares, representing 74.9% and

25.1%, respectively.

On completion of the initial issue of “S” Shares, the registered capital of the Company is

RMB73,400,000.

The registered capital of the Company is RMB73,400,000.

Article 22

After the plan for issuing Foreign Listed Shares or issuing Domestic Shares has been approved

by the State Council department-in-charge of securities, the Board of Directors may arrange for

implementation of such plan by means of separate issues of Foreign Listed Shares and Domestic

Shares.

The Company’s plan for separate issues of Foreign Listed Shares and Domestic Shares in

accordance with the preceding paragraph may be implemented within 15 months of the approval

thereof by the State Council department-in-charge of securities respectively.

Article 23

Where the Company issues Foreign Listed Shares and Domestic Shares separately within the

total number of shares specified in this issue plan, every such issue shall be fully subscribed for

in one issue. Where special circumstances render it impossible for every such issue to be fully

subscribed for at one time, the shares may be issued in several stages, subject to the approval

of the State Council department-in-charge of securities.

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Article 24

The Company may increase its capital according to the Company’s business and development

requirements in accordance with the relevant provision of these articles. The Company may

increase its capital by way of:–

(1) an offer of shares to non-specific investors; or

(2) placement of new shares to existing shareholders; or

(3) bonus issue to existing shareholders; or

(4) any other method permitted by laws and administrative regulations.

The Company’s increase of capital by issuing new shares shall, after being approved in

accordance with the provisions of these articles, be conducted in accordance with the procedures

stipulated by the relevant laws and administrative regulations of the PRC. The Company must

register the increase of capital with the registration authority of the Company as well as make a

public announcement.

Unless otherwise provided by a shareholders’ Meeting or the listing regulations of the SGX-ST, all

new Foreign Shares shall, before issue, be offered to such persons who hold Foreign Shares as

at the date of the offer and whom are entitled to receive notices from the Company of General

Meetings, in proportion, as far as the circumstances admit, to the amount of the existing Foreign

Shares to which they are entitled. The offer shall be made by notice in writing specifying the

number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed

to be declined, and after the expiration of that time, or on the receipt of a notice from the person

to whom the offer is made that he declines to accept the shares offered, the Directors may dispose

of those shares in such manner as they think most beneficial to the Company.

The Directors may likewise so dispose of any new shares which (by reason of the ratio which the

new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the

opinion of the Directors, be conveniently offered under this article.

Article 25

Subject to the terms and conditions of any application for shares, the Directors shall allot the “S”

Shares applied for within ten market days of the closing date (or such other period as may be

approved by any stock exchange upon which the shares in the Company may be listed) of any

such application. For the purposes of this Article 25, the term “market day” shall mean a day on

which the SGX-ST is open for trading in securities. The Directors may, at any time after the

allotment of any Foreign Share but before any person has been entered in the register of

shareholders as the holder or (as the case may be) before that share is entered against the name

of a Depositor in the Depository Register, recognise a renunciation thereof by the allottee in favour

of some other person and may accord to any allottee of a share a right to effect such renunciation

upon and subject to such terms and conditions as the Directors may think fit to impose.

Article 26

Unless otherwise provided by law and administrative regulations, the shares issued by the

Company can be transferred free of any lien.

The Company’s lien on shares and dividends from time to time declared in respect of such shares

shall be restricted to unpaid calls and instalments upon the specific shares in respect of which

such moneys are due and unpaid, and to such amounts as the company may be called upon by

109

law to pay in respect of the shares of the member or deceased member. If any shares are forfeited

and sold, any residue after the satisfaction of the unpaid calls and accrued interest and expenses,

shall be paid to the person whose shares have been forfeited or his executors, administrators or

assignees or as he directs.

Article 27

Once the shares of the Company are transferred, the name of the transferee shall be entered in

the register of shareholders and the transferee shall become a holder of such shares.

Capital paid on shares in advance of calls, shall not, whilst carrying interest, confer a right to

participate in profits.

Article 28

The issue or transfer of Foreign Listed Shares listed on the Official List of the SGX-Sesdaq shall

be registered on the register of shareholders of Foreign Listed Shares kept in Singapore pursuant

to Article 48 of these articles.

Article 29

Holders of Foreign Listed Shares listed on the Official List of the SGX-Sesdaq may transfer all or

part of their shares using the transfer documents approved by the SGX-ST or the Board of

Directors. The transfer documents shall be signed by the transferor and transferee or by way of

a facsimile signature; or the transfer of shares shall be effective upon being entered electronically

into the depository registration system by the Depository Agent.

Article 30

The Company shall ensure that its share certificates for Foreign Listed Shares shall state the

following terms, and to instruct and procure that its Depository Register shall refuse to register any

person as having subscribed, purchased or transferred the shares of the company, unless and

until such persons present to such Depository Register a sample of a share certificate and a duly

signed transfer document approved by the Board of Directors relating to the shares containing the

following terms or terms of similar meanings:–

(1) the purchaser expressly consents to the shareholders of the Company and to the Company;

and the Company expressly consents to the shareholders to abide by and comply with the

Company Law and other relevant laws, administrative regulations and these articles;

(2) the purchaser expressly consents to the Company, its shareholders, Directors, Supervisors

and Management Personnel, and the Company, on behalf of itself and its Directors,

Supervisors and Management Personnel, expressly consents to the shareholders to

undertake arbitration in accordance with these articles for all disputes and claims arising out

of these articles, or disputes and claims arising out of any rights or obligations contained or

stipulated in the Company Law and other relevant laws and administrative regulations, and

the undertaking of arbitration shall be deemed as authorising the arbitration tribunal to hold

a public hearing and to announce the results of the arbitration and such arbitration ruling

shall be final;

(3) the purchaser and the Company and its shareholders expressly consent that the shares of

the Company may be freely transferred;

110

(4) the purchaser shall authorise the Company to enter into an agreement with the Directors and

Management Personnel of the Company on its behalf, and the Directors and Management

Personnel shall warrant to bear responsibility towards the shareholders in compliance with

the stipulations of these articles.

Article 31

With regards to the termination of rights to deliver a dividend slip by post, if the dividend slip is not

cashed, such rights may only be exercised after the dividend slip has not been cashed for two

times consecutively. Also, such right may be exercised in the event that the dividend slip is

returned and has not been delivered to the receiver.

The Company shall be entitled to take back, without consideration, such shares of shareholders

who could not be contacted, and sell the same to any other persons, in the event of the following:–

(1) the Company had declared a minimum of 3 dividends on such shares within a period of

twelve (12) years and the dividends were unclaimed within such period; and

(2) after the expiry of such twelve (12) year period, the Company has published an

announcement in the newspaper to express its intention to sell the shares and a notice has

been given to the SGX-ST.

Chapter 4 Reduction of Capital and Repurchase of Shares

Article 32

The Company may reduce its registered capital in accordance with these articles.

Article 33

When the Company wishes to reduce its capital, it must prepare a balance sheet and an inventory

of the Company’s assets.

The Company must, within 10 days from the date of the passing of a resolution to reduce the

registered capital, notify the creditors and shall make a public announcement in the newspapers

not less than 3 times within 30 days from the date of the passing of such resolution. A creditor has

the right to make a claim, within 30 days of the notice, or for those who have not received a written

notice, within 90 days of the first public announcement in the newspaper, for payment of debts

owed to it or the provision of a corresponding guarantee for such debts.

The Company’s reduced registered capital shall not be less than the minimum statutory

requirement.

Article 34

The Company may repurchase the issued shares from this market in accordance with the

procedures set out in these articles, and after submission to the relevant state department-in-

charge under the following circumstances:–

(1) cancellation of shares for the purpose of reducing the Company’s share capital;

(2) merger with other companies holding shares in the Company; and

(3) any other circumstances permissible by laws or administrative regulations.

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Article 35

Subject to approval of the relevant state department-in-charge, the Company may repurchase

shares by:–

(1) making an offer to all the shareholders to repurchase their shares in proportion to their

shareholding;

(2) repurchasing in the open market on a stock exchange; and

(3) repurchasing under an off-market agreement outside a stock exchange.

Article 36

Where the Company has the power to purchase for redemption a redeemable share:–

(1) purchases not made through the market or by tender shall be limited to a maximum price;

and

(2) purchases by tender shall be made available to all shareholders alike.

Article 37

The Company may repurchase its shares under an off-market agreement subject to the prior

approval of shareholders in General Meeting obtained in accordance with these articles. The

Company may cancel or alter the terms of the off-market agreement or waive any of its rights

thereunder subject to the prior approval of shareholders in General Meeting obtained in

accordance with these articles.

The off-market agreement referred to above includes, without limitation, agreements to undertake

to re-purchase shares and agreements in respect of the option/right to re-purchase shares.

The Company shall not assign contracts for the re-purchasing of its shares or any rights

thereunder.

Article 38

Share repurchased in accordance with law by the Company shall be cancelled within the time limit

prescribed by the laws and/or administrative regulations and the Company shall apply to the

original company registration authority to register the reduction in registered capital.

The registered capital of the Company shall be reduced by such amount representing the

aggregate nominal value of the shares cancelled.

Article 39

Except where the Company is in the process of liquidation, in the exercise to repurchase its issued

shares the Company shall comply with the following:–

(1) Where the shares are to be repurchased at a price equal to the aggregate nominal value the

net book value of distributable profits and/or the proceeds from the issue of shares to raise

funds for the repurchase of shares shall be used to pay for the said repurchase;

112

(2) Where the shares are to be repurchased at a price above the aggregate nominal value, the

net book value of distributable profits and/or the proceeds from the issue of shares to raise

funds for the repurchase of shares shall be used to pay for the said aggregate nominal value

and the premium shall be paid for as follows:–

(i) where the shares to be repurchased have been issued at par from the net book value

of the distributable profits; and

(ii) where the shares to be repurchased have been issued at a premium, from the book

balance of the distributable profits and/or the proceeds from the issue of new shares to

raise funds for the repurchase of shares, provided that the proceeds from the issue of

shares to raise funds for the repurchase of shares shall not exceed (a) the aggregate

value of the share premium in respect of the shares to be repurchased obtained at the

time of the issuance of such shares; or (b) the amount representing the Company’s

capital reserve account at the time of the repurchase (including the share premium in

respect of issue of new shares);

(3) The following expenses shall be paid out of the distributable profits:–

(i) obtaining the option to repurchase;

(ii) amending the agreement for the repurchase of shares; and

(iii) (terminating the obligations in the agreement for the repurchase of shares;

(4) Upon the cancellation of any shares, the registered capital of the Company shall be reduced

by such amount representing the aggregate nominal value thereof and an entry on the

amount drawn from the distributable profits to pay for that part of the nominal value of the

shares to be repurchased, shall be made in the Company’s capital reserve account.

Chapter 6 Share Certificates and Share Register

Article 43

The Company’s shares shall be in registered form.

The following items shall be stated on the share certificates of the Company:–

(1) the name of the Company;

(2) the registration date of incorporation of the Company;

(3) the class of the share certificate, the par value and the number of shares represented by the

share certificate;

(4) the serial number of the share certificate;

(5) any other matters required by the Company Law and the Special Regulations; and

(6) any other items required by the stock exchange on which the Company’s shares are listed.

In the case of the “S” Shares, every shareholder (other than a Depositor) shall be entitled to

receive a reasonable number of share certificates in proportion to its shareholding subject to the

payment of a fee not exceeding S$2.00 (if payable).

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Article 44

Each share certificate shall be signed by the Chairman of the Board of Directors. If the stock

exchange listing the Company’s shares requests that the other senior management personnel

shall sign the share certificates, a share certificate shall also be signed by those senior

management personnel as requested. A share certificate shall be valid upon the affixation of the

Company Seal with the prior authority of the Board of Directors. Each of the signatures of the

Chairman of the Board of Directors and the aforesaid senior management staff may be produced

in the form of an impression.

Article 45

In relation to the “S” Shares, subject to the payment of all or any part of the stamp duty payable

(if any) on each share certificate prior to the delivery thereof which the Directors in their absolute

discretion may require, every person whose name is entered as a shareholder in the register of

shareholders in respect of any “S” Shares shall be entitled to receive within ten market days of the

closing date of any application for “S” Shares (or such other period as may be approved by any

stock exchange upon which the “S” Shares of the Company may be listed) or within fifteen market

days after the date of lodgement of a registrable transfer (or such other period as may be

approved by any stock exchange upon which the “S” Shares of the Company may be listed) one

certificate for all his “S” Shares or several certificates in reasonable denominations each for a part

of the “S” Shares so allotted or transferred. Where such a shareholder transfers part only of the

“S” Shares comprised in a certificate or where such a shareholder requires the Company to cancel

any certificate or certificates and issue new certificates for the purpose of subdividing his holding

in a different manner, the old certificate or certificates shall be cancelled and a new certificate or

certificates for the balance of such “S” Shares issued in lieu thereof and such shareholder shall

pay all or any part of the stamp duty payable (if any) on each share certificate prior to the delivery

thereof which the Directors may require and a maximum fee of S$2.00 for each new certificate or

such other fee as the Directors in their absolute discretion may from time to time determine having

regard to any limitation thereof as may be prescribed by any stock exchange upon which the “S”

Shares of the Company may be listed. The term “market day” shall have the meaning ascribed to

it in Article 25.

Article 46

(i) In relation to the “S” Shares, any two or more certificates representing the “S” Shares held

by any person whose name is entered in the register of shareholders may at his request be

cancelled and a single new certificate for such shares issued in lieu without charge.

(ii) If any person whose name is entered in the register of shareholders shall surrender for

cancellation a share certificate representing “S” Shares held by him and request the

Company to issue in lieu two or more share certificates representing such shares in such

proportions as he may specify, the Directors may, if they think fit, comply with such request.

Such person shall (unless such fee is waived by the Directors) pay a maximum fee of S$2.00

for each share certificate issued in lieu of a share certificate surrendered for cancellation or

such other fee as the Directors may from time to time determine having regard to any

limitation thereof as may be prescribed by any stock exchange upon which the “S” Shares of

the Company may be listed.

(iii) In the case of “S” Shares registered jointly in the names of several persons, any such request

may be made by any one of the registered joint holders.

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Article 47

The Company shall establish a register of shareholders containing the following particulars:–

(1) The name (or title), address (or domicile) and occupation (or nature of business) of each

shareholder;

(2) The class and number of shares held by each shareholder;

(3) The amount paid or payable for the shares held by each shareholder;

(4) The share certificate number;

(5) The date on which each shareholder is registered as a shareholder; and

(6) The date on which each shareholder ceases to be a shareholder.

The register of shareholders shall be sufficient evidence of each shareholder’s interest in the

Company unless there is evidence to the contrary.

Article 48

The Company may, pursuant to the understanding and agreement of the State Council

department-in-charge of securities and an overseas securities regulatory organisation keep a

register of holders of Foreign Listed Shares outside the PRC in the country where the shares of

the Company are listed and to entrust the administration thereof to an agent outside the PRC. The

original register of holders of Foreign Listed Shares listed on the Official List of the SGX-Sesdaq

shall be kept in Singapore and the administration thereof shall be entrusted to an agent in

Singapore.

The Company shall keep a duplicate of the register of holders of Foreign Listed Shares in its

domicile. The appointed agent outside the PRC shall at all times ensure that the particulars in the

register of holders of Foreign Listed Shares kept by it are consistent with the particulars set out

in the duplicate thereof.

If there is any inconsistency between the particulars in the register of holders of Foreign Listed

Shares kept by the appointed agent and the duplicate thereof, the former shall prevail.

The Register of Foreign Substantial Shareholders (as defined in Article 49(2)(i)) shall be kept

outside the PRC in the country where the shares of the Company are listed and the Register of

Domestic Substantial Shares (as defined in Article 49(2)(ii)) shall be kept in its domicile. The

Register of Foreign Substantial Shareholders and the Register of Domestic Substantial

Shareholders shall be open for inspection by a shareholder of the Company without charge and

by any other person on payment for each inspection of a sum of S$2.00 or such lesser sum as the

Company requires. The Company shall forthwith notify the stock exchange on which the “S”

Shares of the Company may be listed of any notice received under Articles 61(3), (4) and (5). The

Company shall keep a duplicate of the Register of Foreign Substantial Shareholders in its

domicile. The appointed agent outside the PRC shall at all times ensure that the particulars in the

Register of Foreign Substantial Shareholders kept by it are consistent with the particulars set out

in the duplicate thereof. If there is any inconsistency between the particulars in the Register of

Foreign Substantial Shareholders kept by the appointed agent and the duplicate thereof, the

former shall prevail.

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Article 49

(1) The Company shall maintain a complete register of shareholders.

The register of shareholders shall include:–

(i) The register of shareholders kept at its domicile, excluding the register of shareholders

referred to in sections (2) and (3) of this article;

(ii) The register of holders of the Foreign Listed Shares listed outside the PRC deposited

at the place where the Foreign Listed Shares are listed; and

(iii) Such register of shareholders deposited in such place as the Directors may designate

for the purpose of listing the shares of the Company.

(2) The Company shall also maintain a complete registrar of Substantial Shareholders (as

defined in Article 62(2).)

(i) The register of holders of Foreign Shares who are Substantial Shareholders (as defined

in Article 62(2)) (the “Register of Foreign Substantial Shareholders”) should include:–

(a) In alphabetical order, the names of persons who are holders of Foreign Shares

from whom it has received a notice under Article 61(3)(i); and

(b) Against each name so entered, where it receives a notice under Articles 61(3), (4)

and (5), the information given in that notice;

(ii) The register of holders of Domestic Shares who are Substantial Shareholders (as

defined in Article 62(2)), (the “Register of Domestic Substantial Shareholders”) in which

it shall forthwith enter:–

(a) In alphabetical order, the names of persons who are holders of Domestic Shares

from whom it has received a notice under Article 61(3)(i); and

(b) Against each name so entered, where it receives a notice under Articles 61(3), (4)

and (5), the information given in that notice.

Article 50

There shall be no overlap between the various parts of the register of shareholders. Where a

transfer of a share is registered in one part of the register of shareholders, while the holder of that

share remains registered as the holder in that part of the register of shareholders, no entry of the

transfer shall be made in another part of the register of shareholders.

Any alteration or amendment of any part of a register of shareholders shall be made in accordance

with the laws of the country where that register is maintained.

Article 51

All fully paid-up Foreign Listed Shares listed on the Official List of the SGX-Sesdaq can be freely

transferred in accordance with these articles; provided however that, unless the following

conditions are satisfied, the Board of Directors may, without giving any reason, refuse to recognize

any instrument of transfer:–

(1) A fee (for each instrument of transfer) not exceeding S$2.00 or such lower fee stipulated by

the Board of Directors of the Company, (in accordance with the listing rules of the SGX-ST

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from time to time), has been paid to the Company for the registration of any transfer

instrument or any other documents which are related to or will affect the ownership of or the

change of the ownership of the shares;

(2) The instrument of transfer only involves Foreign Listed Shares listed on the Official List of the

SGX-Sesdaq;

(3) The stamp duty chargeable on the instrument of transfer has been paid;

(4) The relevant share certificates, and (upon the reasonable request of the Board of Directors)

any evidence in relation to the right of the transferor to transfer the shares have been

submitted;

(5) Except with respect to a deceased shareholder’s executor, trustee or manager, if it is

intended to transfer the shares to such joint owners, the maximum number of joint owners

shall not exceed 3 persons; and

(6) The Company does not have any lien on the relevant shares.

If the Company refuses to register a transfer of shares, the Company shall, within 2 months

following the date of the formal application for the transfer, provide the transferor and the

transferee with a written notice.

Article 52

(1) No change in the particulars of the register of shareholders shall be made during the period

of 30 days prior to the date of a General Meeting or within 5 days prior to the cut-off day for

dividends distribution decided by the Company.

In relation to “S” Shareholders, an “S” Shareholder shall be entitled to attend any General

Meeting or class meeting if his name appears on the register of shareholders or the

Depository Register (as the case may be) forty-eight (48) hours before the said meeting and

to speak and vote thereat.

(2) The Company or the Directors may, subject to the requirements of the stock exchange on

which the shares of the Company may be listed, fix any date as the record date for

determining the shareholders entitled to receive any dividend, distribution, allotment or

issue.

No changes resulting from the transfer of shares may be made to the register of “S”

shareholders within 3 days prior to the cut-off day for dividends distribution decided by the

Company.

Article 53

Save as may otherwise be provided in these articles, for the purposes of convening General

Meetings of shareholders, distributing dividends, liquidating the Company or dealing with such

other matters requiring the confirmation of shareholding, the Board of Directors shall determine a

date to verify shareholding in the Company. The shareholders whose names appear in the register

of shareholders as at the Shareholders’ Verification Date shall be deemed to be the Company’s

shareholders.

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Article 54

Any person that challenges the register of shareholders and requires to have his name entered in

or removed from the register of shareholders, may apply to make such amendment in the register

of shareholders in a court having jurisdiction to do so.

Article 55

Any person whose name appears on, or wishing to have his name entered in the register of

shareholders may if the share certificate held by it (i.e. the original share certificate) is lost, apply

to the Company for the issue of a replacement share certificate in replacement of the lost share

certificate.

A holder of Domestic Shares if the share certificate held by it is lost, may apply for the issue of

a replacement share certificate in replacement of the lost share certificate in accordance with

Article 150 of the Company Law.

A holder of Foreign Listed Shares may if the share certificate held by it is lost, apply for the issue

of a replacement share certificate in replacement of the lost share certificate in accordance with

the laws of the country where the relevant register of holders of Foreign Listed Shares is

deposited, the rules of the stock exchange on which that share is listed and any other relevant

regulations.

In relation to the “S” Shares, subject to provisions of law, if any share certificates representing the

“S” Shares shall be defaced, worn-out, destroyed, lost or stolen, it may be renewed on such

evidence being produced and a letter of indemnity (if required) being given by the shareholder,

transferee, person entitled, purchaser, member firm or member company of any stock exchange

upon which the Company is listed or on behalf of its or their client or clients as the Directors of

the Company shall require and in any case on payment of such sum not exceeding S$2.00 as the

Directors may from time to time require together with the amount of the proper duty with which

such share certificate is chargeable under any law for the time being in force relating to stamps

(old shares shall be returned in the case where they are defaced or damaged). In the case of

destruction, loss or theft, a shareholder or person entitled to whom such renewed certificate is

given shall also bear the loss and pay to the Company all expenses incidental to the investigations

by the Company of the evidence of such destruction or loss.

Article 56

After the Company has issued a replacement share certificate in accordance with these articles,

it shall not delete from the register of shareholders the name of a bona fide purchaser who

acquires the share as evidenced by the replacement share certificate or any subsequent person

registered as the holder of that share (provided that he is a bona fide purchaser).

Article 57

The Company shall not be obliged to compensate any person who has suffered loss arising from

any cancellation of an Original Share Certificate or the issuance of a replacement share certificate

unless there can be shown that there is fraud on the part of the Company.

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Chapter 7 Rights and Obligations of Shareholders

Article 58

A shareholder of the Company is a person who lawfully holds shares in the Company and whose

name (title) is entered in the register of shareholders.

In relation to the persons named as Depositors in the Depository Register, such persons shall, for

such period as any book-entry securities of the Company are entered against their names in the

Depository Register, be deemed to be:–

(1) shareholders of the Company in respect of the amount of book-entry securities (relating to

stocks and shares issued by the Company) entered against their respective names in the

Depository Register; or

(2) holders of the amount of the Company’s book-entry securities (relating to bonds or any

derivatives instruments) entered against their names in the Depository Register.

The Depository shall be deemed not to be a shareholder of the Company.

A shareholder shall enjoy the rights and obligations in accordance with the number and class of

shares held by it. Persons holding the same class of shares shall enjoy the same rights and

undertake the same obligations.

If the shareholder is a corporation with legal person status, its legal representative or such other

person as may be duly authorised shall be entitled to exercise the same powers on behalf of such

corporation as the corporation may exercise.

If the shareholder is a recognised depository or its nominee, its representative or agent shall be

entitled to exercise the same powers on behalf of such recognised depository company or

nominee.

In the case of joint shareholders, if one shareholder is declared dead, the other shareholders shall

have the right to own those shares, but the Board of Directors shall have the right to request for

the death certificate in order to revise the register of shareholders. For any joint shareholders, only

the shareholder whose name appears first in the register of shareholders or (as the case may be)

the Depository Registry shall be entitled to receive share certificates and the Company’s notices,

to attend and exercise the right to vote at the shareholders’ general meeting and notices sent to

such shareholder shall be deemed to be sent to all the related joint shareholders.

The Company shall not be entitled to seize or otherwise prejudice any of the rights attached to any

shares by reason only that the person or persons who are interested directly or indirectly in the

Company have failed to disclose such interest.

In the case of the “S” Shares, every registered shareholder shall be entitled to receive share

certificates in reasonable denominations for his holding and where a charge is made for

certificates, such charge shall not exceed S$2.00.

Article 59

A holder of ordinary shares (the “Ordinary Shareholder”) shall be entitled to:–

(1) receive dividends or other distribution in proportion to the number of shares held by it;

(2) attend and vote at General Meetings either in person or by proxy;

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(3) supervise and control the Company’s activities in respect of business operations and to

make recommendations or raise queries relating thereto;

(4) transfer shares in accordance with laws, administrative regulations and these articles;

(5) obtain information as provided under these articles, including:–

(i) (upon the payment of a fee to cover costs) a copy of these articles;

(ii) (upon payment of a reasonable fee), inspect and make copies of:–

(a) all parts of the register of shareholders;

(b) information on the Directors, Supervisors, General Manager, Deputy General

Manager and other senior management staff, including:–

1. past and present names and aliases;

2. principal address (domicile);

3. nationality;

4. profession and other part time employment; and

5. personal identification document and number;

(c) Company’s share capital;

(d) the report on the total face value, quantity, the lowest and highest price on every

repurchase of shares (in respect of each class) by the Company, and the expenses

incurred by the Company in connection therewith since the last financial year; and

(e) the minutes of General Meetings;

(6) participate in the distribution of the residual assets according to their shareholding in the

dissolution or winding-up of the Company; and

(7) such other rights as may be conferred by laws, administrative regulations and these articles.

Article 60

An Ordinary Shareholder shall undertake the following obligations:–

(1) comply with these articles;

(2) make payment on the shares subscribed in the prescribed amount and manner; and

(3) perform such other obligations as may be prescribed by laws, administrative regulations and

these articles.

Shareholders shall not bear any liability for further contribution to share capital other than the

conditions agreed by the subscriber of the relevant shares on subscription.

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Article 61

(1) In addition to the obligations imposed by laws, administrative regulations or listing rules of

the stock exchange(s) on which the shares of the Company are listed, a controlling

shareholder (as defined in Article 62) in exercising its rights as a shareholder shall not cast

his votes on the following matters in a manner prejudicial to the interests of all or any of the

shareholders:–

(i) release any Director or Supervisor from the obligation to act in good faith and in the best

interests of the Company;

(ii) approve any Director’s or Supervisor’s wrongful appropriation of the Company’s assets

in any manner (whether for its own benefit or a third party’s benefit) including (but not

limited to) any opportunity that is favourable to the Company; and

(iii) approve any Director’s or Supervisor’s wrongful appropriation of other shareholder’s

rights (whether for its own benefit or a third party’s benefit) including (but not limited to)

any distribution rights, voting rights (except for a reorganisation of the Company on

terms approved by the shareholders in General Meeting in accordance with these

articles).

(2) The obligation to comply with Articles 61(3), (4) and (5) extends to all natural persons,

whether resident in Singapore or not and whether citizens of Singapore or not, and to all legal

persons and companies, bodies corporate, whether incorporated or carrying on business in

Singapore or not.

(3) (i) A person who is a Substantial Shareholder (as defined in Article 62(2)) in the Company

shall give notice in writing to the Company stating his name and address and all his

interests (including unless the interest or interests cannot be related to a particular

share or shares the name of the person who is registered as the holder) in the voting

shares in the Company and of the circumstances by reason of which he has that

interest. In relation to a holder of “S” Shares who is a Substantial Shareholder, such

notice shall disclose full particulars of the voting shares in the Company in which he has

an interest or interests and full particulars of each such interest.

(ii) The notice shall be given within two days after becoming a Substantial Shareholder.

(iii) The notice shall be so given notwithstanding that the person has ceased to be a

Substantial Shareholder.

(4) (i) Where there is a change in the interest or interests of a Substantial Shareholder in the

Company in voting shares in the Company, he shall give notice in writing to the

Company stating his name and particulars of the change, including the date of the

change and the circumstances by reason of which that change has occurred.

(ii) The aforesaid notice shall be given within two days after the date of the change in the

interest(s).

(iii) For the purposes of Article 61(4)(i), where a Substantial Shareholder in the Company

acquires or disposes of voting shares in the Company there shall be deemed to be a

change in the interest or interests of the Substantial Shareholder in the voting shares

in the Company.

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(5) (i) A person who ceases to be a Substantial Shareholder in the Company shall give notice

in writing to the Company stating his name and the date on which he ceased to be a

Substantial Shareholder and particulars of the circumstances by reason of which he

ceased to be a Substantial Shareholder.

(ii) The notice shall be given within two days after the person ceased to be a Substantial

Shareholder.

(6) The circumstances required to be stated in the notice under Articles 61(3), (4) and (5) are the

circumstances by reason of which:–

(i) a person has an interest in voting shares; or

(ii) a change has occurred in an interest in voting shares; or

(iii) a person has ceased to be a Substantial Shareholder in a company, respectively.

Article 62

(1) “Controlling shareholder” referred to in these articles is defined as a person who:–

(i) either alone or acting in concert with other persons, is able to elect more than half of the

Board of Directors; or

(ii) either alone or acting in concert with other persons, is able to exercise 30% or more of

the voting rights or control 30% or more of the voting rights of the Company; or

(iii) either alone or acting in concert with other persons, holds 30% or more of the shares

issued by the Company; or

(iv) either alone or acting in concert with other persons, controls the Company in any other

manner.

(2) For the purposes of Articles 61(3), (4) and (5), a person has a substantial shareholding in the

Company if he has an interest or interests in the voting shares in the Company and the

nominal amount of that share, or the aggregate of the nominal amounts of those shares, is

not less than 5% of the aggregate of the nominal amount of all the voting shares in the

Company and a person who has a substantial shareholding in the Company is a “Substantial

Shareholder” in the Company.

Chapter 8 Shareholder’s General Meetings

Article 63

A General Meeting is an organ vested with the highest authority in the Company and its functions

and powers shall be exercised in accordance with law.

Article 64

A General Meeting shall exercise the following functions and powers:–

(1) deciding on the Company’s business direction and investment plans;

(2) deciding on the election, replacement and remuneration of the Directors;

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(3) deciding on the election, replacement and remuneration of the Supervisors representing the

shareholders;

(4) examining and approving the reports of the Board of Directors;

(5) examining and approving the reports of the Supervisory Committee;

(6) examining and approving the Company’s annual budget and financial accounting plans for

each financial year;

(7) examining and approving the Company’s profits distribution plan and the plans for making

good losses;

(8) passing resolutions on the increase or reduction of the Company’s registered capital;

(9) passing resolutions involving, inter alia, the merger, division, dissolution and winding up of

the Company;

(10) passing resolutions on the issue of bonds by the Company;

(11) passing resolutions on the appointment, termination or discontinuance of auditors;

(12) amending these articles;

(13) examining proposals made by shareholders holding 5% or more of the voting shares of the

Company; and

(14) other matters as may be required by laws, administrative regulations and these articles to be

passed by shareholders in General Meeting.

Article 65

The Company shall not, without the prior approval of shareholders in a General Meeting, enter into

any contract with any person (other than Directors, Supervisors, General Manager, Deputy

General Manager or other senior management staff) to delegate the management of all or a

material part of the business of the Company.

Article 66

General Meetings comprise Annual General Meetings or Extraordinary General Meetings. General

Meetings are convened by the Board of Directors who shall determine the time and venue of the

meeting. An Annual General Meeting shall be convened once a year and within a period not later

than 6 months from the date of the last financial year or such other period as may be required by

the SGX-ST.

The Board of Directors shall, within 2 months from the occurrence of any of the following events,

convene an Extraordinary General Meeting:–

(1) the number of Directors is fewer than that required by the Company Law or less than

two-third of the requisite number required under these articles;

(2) the losses of the Company that have not been made up equals to one-third of its aggregate

share capital;

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(3) shareholders holding 10% or more of the voting shares issued by the Company make a

requisition in writing to convene an Extraordinary General Meeting;

(4) the Board of Directors is of the opinion that it is necessary or as requisitioned by the

Supervisory Committee;

(5) requested by the Company’s accountants in accordance with Article 180 thereof; and

(6) requested by at least two independent directors.

Article 67

When the Company convenes a shareholders’ general meeting, written notice of the meeting shall

be given 45 days prior to the date of the meeting to notify all shareholders registered in the register

of shareholders of the matters to be considered, the date, time and place of the meeting. A

shareholder who intends to attend the meeting shall deliver his written reply to the Company

confirming his attendance at the meeting 20 days prior to the date of the meeting.

In relation to “S” Shareholders, an “S” Shareholder shall be entitled to attend any General Meeting

or class meeting if his name appears on the register of shareholders or the Depository Register

(as the case may be) forty-eight (48) hours before the said meeting and to speak and vote thereat

and shall not be required to submit any written reply to the Company confirming attendance

thereof.

In calculating the number of days of notice given, the date of the meeting and the date on which

such notice is given, being the date when the Company or the appointed shares registration

department posts the related notice, shall not be taken into account.

Article 68

When the Company convenes a shareholders’ annual general meeting, shareholders holding 5%

or more of the total voting shares of the Company shall have the right to propose new motions in

writing provided that such motions are given to the Company at least 90 days prior to the date of

the annual general meeting, and the Company shall place those matters in the proposed motions

within the scope of the functions and powers of the shareholders’ general meeting on the agenda.

Article 69

Based on the written replies received 20 days prior to a shareholders’ General Meeting, the

Company shall calculate the number of voting shares represented by the shareholders intending

to attend the meeting. A General Meeting can only be held if such number of shareholders

representing more than half of the voting shares of the Company intend to attend that General

Meeting. If the abovesaid requirements are not satisfied, the Company shall, within 5 days

therefrom, by way of public announcement, notify the shareholders of the agenda, date and place

of the General Meeting. Upon such public announcement, the Company may convene the General

Meeting.

No resolution shall be passed at an Extraordinary General Meeting on matters not contained in the

notice convening the Extraordinary General Meeting.

Article 70

Every notice of a General Meeting shall comply with the following requirements:–

(1) be in writing;

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(2) specify the venue, date and time of the General Meeting;

(3) specify the agenda of the General Meeting;

(4) contain such information and explanation as to enable a shareholder to make an informed

decision in respect of the agenda. This principle shall apply to the following matters

including, but not limited to, a proposed merger, repurchase of shares, variation of share

capital or other reorganisation. The information to be provided shall include the specific

conditions and contracts (if any) relating to such transactions and the explanations relating

to the reasons and effects thereof;

(5) if any of the Directors, Supervisors, General Manager, Deputy General Manager or other

senior management staff is interested in any of the resolutions to be passed at a General

Meeting disclose the nature and extent of such interests; and if by reason of its capacity as

a shareholder of the Company, such Director, Supervisor, General Manager, Deputy General

Manager or other senior management staff’s interest in any of the resolutions to be passed

at that General Meeting is different from holders of shares of the same class, disclose

information relating to such difference;

(6) contain the full text of the Special Resolutions to be passed at that General Meeting;

(7) appear with reasonable prominence, a statement as to the right of the shareholder to appoint

one or more proxies to attend and vote instead of the shareholder and that a proxy need not

also be a shareholder; and

(8) contain a statement as to the place and date for the deposit of the instrument of proxy for the

purposes of that General Meeting.

Article 71

All notices of General Meetings shall be sent to the shareholders registered in the register of

shareholders on the entitlement date (regardless of whether such a shareholder shall have a right

to vote at a General Meeting) to their addresses either by courier or by prepaid mail addressed

to such shareholder at his address appearing in the register of shareholders. Holders of Domestic

Shares may be notified by public announcement as well.

Public announcement as aforesaid of the General Meeting shall be made in one or more

newspapers designated by the State Council department-in-charge of securities not less than 45

days to 50 days prior to the General Meeting. All holders of Domestic Shares shall be deemed to

have notice of the General Meeting upon publication of the public announcement in the

designated newspaper(s).

The Company shall give notice of the general meeting which shall reach the holders of Foreign

Shares whose registered address is in Singapore, in time to allow them to exercise their rights or

act in accordance with the terms of notice.

Article 72

If, as a result of an inadvertent omission, notice was not given to a person entitled to receive notice

of a General Meeting or such person did not receive notice of a General Meeting, the non-receipt

thereof shall not invalidate the proceedings of that General Meeting and the resolutions passed

thereat.

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Article 73

Shareholders having the right to attend and vote at General Meetings may appoint one or more

persons (who need not also be shareholders) to act as their proxies to attend and vote on their

behalf.

A proxy appointed to attend and vote instead of a shareholder shall have the right to:–

(1) speak at that General Meeting;

(2) demand or join in demanding a poll; and

(3) vote on a poll or a show of hands except that if a shareholder has appointed more than one

proxy, such proxies may only exercise their voting rights by poll.

Provided that if the shareholder is a Depositor, the Company shall be entitled and bound:–

(i) to reject any instrument of proxy lodged if the Depositor is not shown to have any shares

entered against his name in the Depository Register as at forty-eight hours before the time

of the relevant General Meeting as certified by the Depository to the Company; and

(ii) to accept as the maximum number of votes which in aggregate the proxy or proxies

appointed by the Depositor is or are able to cast on a poll a number which is the number of

shares entered against the name of that Depositor in the Depository Register as at forty-eight

hours before the time of the relevant General Meeting as certified by the Depository to the

Company, whether that number is greater or smaller than the number specified in any

instrument of proxy executed by or on behalf of that Depositor.

Article 74

The appointment of a proxy shall be made by an instrument in writing signed by the appointor or

his attorney (appointed in writing) and where the shareholder is a legal person, given under its

common seal or signed on its behalf by its Directors or by its officially appointed attorney, the

instrument shall specify the total number of shares represented by the proxy, Where a number of

proxies have been appointed, the instrument shall specify the proportion of votes as to be

represented by each proxy.

Article 75

An instrument appointing a proxy must be left at such place as may be specified for in the notice

convening the General Meeting (if any) or the domicile of the Company not less than 24 hours

before the time appointed for the holding of the meeting or voting proceedings to commence at

that General Meeting. Where an instrument appointing a proxy is signed on behalf of the appointor

by an attorney, the letter or power of attorney shall be notarised. The notarised letter or power of

attorney together with the proxy form shall be deposited at the domicile of the Company or such

place as is specified for in the notice convening the meeting.

Where a shareholder is a legal person, its legal representative, or such other person authorised

by a resolution of its Board of Directors or other decision-making body, shall act as its corporate

representative in attending General Meetings.

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Article 76

A proxy form issued by the Directors to shareholders for the appointment of a proxy shall be in

such form as would provide a shareholder with an option of instructing its proxy to vote for or

against each and every resolution in the agenda and to give separate instructions for each and

every resolution in the agenda. A proxy form must also state that if a shareholder fails to instruct

its proxy, its proxy may vote in the General Meeting in such manner at it may think fit.

Article 77

A vote cast by the proxy shall not be invalidated by the previous death or incapacity of the principal

or by the revocation of the appointment of the proxy or of the authority under which the

appointment was made, or the relevant shares had been transferred prior to voting provided that

no intimation in writing of such death, incapacity, revocation or transfer shall have been received

by the Company before the commencement of the General Meeting.

Article 78

A proxy who attends a shareholders’ general meeting on behalf of an individual shareholder shall

present the power of attorney and his identification document. If a shareholder who is a legal

person appoints its representative to attend the meeting, the representative shall present his own

identification document and a certificate of legal representation or an original or notarially certified

photocopy of the resolutions of the Board of Directors or other governing body of the shareholder

authorizing such representative.

Article 79

The resolutions passed at a General Meeting comprise Ordinary Resolutions and Special

Resolutions.

A resolution shall be an Ordinary Resolution when it has been passed by a majority of more than

one-half of the voting rights of such shareholders as, being present at a General Meeting and

entitled to do so, vote in person, or by proxy, at a General Meeting.

A resolution shall be a Special Resolution when it has been passed by a majority of more than

two-thirds of the voting rights of such shareholders as, being present at a General Meeting and

entitled to do so, vote in person, or by proxy, at a General Meeting.

Article 80

A shareholder (including proxy), when voting at a shareholders’ general meeting, shall exercise

voting rights in accordance with the number of shares carrying the right to vote and each share

shall have one vote.

In the case of a vote, every shareholder (including proxies) shall be entitled to one vote for every

share he holds or represents. For the purposes of determining the number of votes which a

shareholder, being an “S” Shareholder (whether a Depositor or otherwise), or his proxy may cast

at any General Meeting on a poll, the reference to shares held or represented shall, in relation to

shares of that “S” Shareholder or Depositor, be the number of shares entered against his name

in the register of shareholders or the Depository Register (as the case may be) as at forty-eight

hours before the time of the relevant General Meeting and in the case of the Depository Register,

as certified by the Depository to the Company.

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In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person

or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this

purpose, seniority shall be determined by the order in which the names stand in the register of

shareholders or (as the case may be) the Depository Register in respect of the share.

Article 81

At any General Meeting, a resolution put to the vote of the meeting shall be decided on a show

of hands unless a poll is (before or after the declaration of the result of the show of hands)

demanded by:–

(1) the Chairman of the meeting;

(2) not less than 2 shareholders present in person or by proxy and entitled to vote; or

(3) one or several shareholders present in person or by proxy and representing 10% or more of

the total voting rights of the shares having the right to vote at the meeting.

Unless a poll is required, a declaration by the Chairman of the meeting in accordance with the

results of a show of hands that a resolution has been carried by a show of hands, and an entry

to that effect in the minute book, shall be conclusive evidence of that fact without proof of the

number or proportion of the votes recorded for or against such resolution.

A demand for a poll may be withdrawn by the person demanding the poll.

Article 82

If a poll is requested to decide on the election of the Chairman of a meeting or cancel the meeting,

the poll shall forthwith be conducted. On any other questions on which a poll is requested, the

Chairman of the meeting may conduct the poll at such time as he may think fit and the demand

for a poll shall not prevent the continuance of the meeting for the transaction of any business other

than the question on which the poll has been demanded. The result of the poll shall be deemed

to be the resolution of the meeting at which the poll was demanded.

Article 83

On a poll, a shareholder (including proxies) entitled to two or more votes need not cast all their

votes in the same way.

Article 84

In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the

meeting shall be entitled to a casting vote.

Article 85

An Ordinary Resolution is required to be passed by the Company in General Meeting in relation

to the following:–

(1) the working reports prepared by the Board of Directors and the Supervisory Committee;

(2) the profit distribution plan and the plans for making good losses prepared by the Board of

Directors;

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(3) the termination of the appointment and the amount and manner of remuneration of the

members of Board of Directors and the Supervisory Committee;

(4) the Company’s annual budget, final accounting reports, balance sheet, profit and loss

statement and other financial statements; and

(5) such other matters as are not required by laws, administrative regulations or these articles

to be passed by Special Resolution.

Article 86

A Special Resolution is required to be passed by the Company in General Meeting in relation to

the following:–

(1) the increase or reduction of share capital and the issue of shares of any class, warrants or

other similar securities;

(2) the issue of bonds;

(3) the division, merger, dissolution or winding up of the Company;

(4) the amendment of these articles; and

(5) such other matter as may be resolved by the Company in General Meeting by Ordinary

Resolution to have a material effect on the Company and require adoption by way of a

Special Resolution.

Article 87

The following procedures apply to a shareholder(s) requisitioning an Extraordinary General

Meeting or any class meeting:–

(1) two or more shareholders may by an instrument or instruments in writing holding not less

than 10% of the shares carrying the right to vote at the meeting so requisitioned, request that

the Board of Directors convene an Extraordinary General Meeting or class meeting (as the

case may be) and the notice shall contain the agenda of that meeting and the Board of

Directors upon receiving the said notice and in accordance with Article 66, shall promptly

convene the Extraordinary General Meeting or class meeting (as the case may be). The

shareholding referred to above shall be calculated as of the date of the instrument in writing;

and

(2) if the Board of Directors fails to issue a notice convening the Extraordinary General Meeting

or class meeting (as the case may be) within 30 days of the receipt of instrument in writing,

the shareholders who made the requisition may convene the meeting within 4 months from

the date of the Board of Directors’ receipt of the instrument in writing and the shareholders

shall, as far as possible, follow such procedures for convening a shareholders’ meeting as

if such shareholders’ meeting had been convened by the Board of Directors.

If, as a result of the failure by the Board of Directors to convene the meeting, a shareholder

convenes the meeting, the Company shall bear all reasonable expenses incurred which amount

shall be deducted from the amounts owed by the Company to such Directors who failed to

convene the Extraordinary General Meeting.

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Article 88

The Chairman of the Board shall convene and chair the General Meetings of the Company. If the

Chairman of the Board shall be unable to attend the General Meeting, the vice-Chairman of the

Board shall convene and chair the General Meeting. Where both the Chairman and the

vice-Chairman are unable to attend the General Meeting, the Board of Directors may appoint a

director to convene and chair the General Meeting. In the absence of any prior appointment of

Chairman of the General Meeting, the shareholders present at the meeting may elect a person to

be the Chairman of the meeting. If for any reason whatsoever, the shareholders are unable to elect

a Chairman, the meeting shall be chaired by the shareholder (or its proxy) present at the meeting

holding the largest number of shares with voting rights.

Article 89

The Chairman of the meeting shall determine whether a resolution at the meeting has been duly

passed and the decision shall be final and conclusive. The Chairman of the meeting shall declare

the decision which shall be recorded in the minutes of the meeting.

Article 90

If the Chairman of the meeting has any doubt as to the outcome of any resolution, he may request

for a recount of the number of votes cast for and against the resolution. If the Chairman decides

not to recount the number of votes cast for and against the resolution, any shareholder or proxy

having any doubt as to the outcome of any resolution may, upon the Chairman’s declaration

thereof, forthwith request for a recount of the number of votes cast for and against the resolution.

The Chairman of the meeting shall forthwith comply.

Article 91

If counting of votes is held at a General Meeting, the result of the counting shall be recorded in

the minutes of the meeting.

Minutes of each meeting and the resolutions passed thereat should be recorded and signed by all

the Directors present at the meeting. The minutes of meetings and the attendance records signed

by the shareholders attending the meetings and the instruments of proxy shall be kept at the

Company’s registered office.

Article 92

A shareholder may without charge inspect the duplicate of the minutes of a meeting during office

hours of the Company. A shareholder may request for a copy of the minutes of a meeting and the

Company shall make the copy available to the shareholder within 7 days of the receipt of a

reasonable fee.

Chapter 9 Special Procedures for Voting by a Class of Shareholders

Article 93

Shareholders who hold different classes of shares, shall be shareholders of different classes. The

holders of Domestic Shares and the holders of Foreign Listed Shares shall be deemed to be

shareholders of different classes.

A holder of a different class of shares shall enjoy such rights and undertake such obligations as

may be prescribed under the laws, administrative regulations and these articles.

130

Article 94

The Company may, subject to the consent of the shareholders in General Meeting passing a

Special Resolution and the sanction of a resolution passed at a separate meeting of the holders

of the shares of that class in such proceedings and manner as prescribed in Articles 96 to 100,

vary or abrogate the rights attached to any class of shares.

Article 95

The following shall be deemed to be a variation or abrogation of the rights attached to the shares

of a class:–

(1) any increase or decrease in the number of shares in such class of shares or an increase or

decrease in the number of shares belonging to different classes which enjoy equal or more

voting rights, distribution rights or other special rights attaching to such class;

(2) any conversion of such class of shares in whole or in part into another class or conversion

of the shares in another class in whole or in part into such class of shares or the creation of

any right to effect such conversion;

(3) any abrogation or diminution of the right to payment of dividend, whether cumulative or

otherwise attaching to such class;

(4) any abrogation or diminution of the right to preferential payment of dividend or to participate

in the preferential distribution of assets in the event of the winding-up of the Company

attaching to such class;

(5) any increase, abrogation or diminution of the right to effect conversion, exercise option,

voting right, right of transfer, preferential rights to subscribe for placement shares and the

right to subscribe for securities issued by the Company attaching to such class;

(6) any abrogation or diminution of the right to payment by the Company in a designated

currency attaching to such class;

(7) any creation of another class of shares having the same or greater voting rights, distribution

rights or special rights as the holders of such class of shares;

(8) any restriction or increase in restrictions on the transferability or ownership of shares in such

class;

(9) any grant of option to subscribe for shares in such class or another class or the right to

convert shares;

(10) any increase in the rights and special rights of the shares in another class;

(11) any proposed reorganisation of the Company resulting in holders of shares in different

classes assuming liabilities in different proportions; and

(12) any alteration or abrogation of the provision of these articles.

131

Article 96

Holders of a class of shares shall, if their rights are affected by reason of Articles 95(2) to (8), (11)

to (12), be entitled to vote at a meeting of that class, regardless of whether such holders have the

right to vote in a General Meeting, except that interested shareholders shall not have the right to

vote at meetings of shareholders of that classes.

For the purposes of the preceding paragraph, the term “interested shareholders” shall have the

following meanings:–

(1) if the Company has made an offer to all the shareholders to repurchase shares in the

Company under Article 35 in the proportion of their respective shareholdings or the Company

has repurchased its shares through open transactions on a securities exchange, the

controlling shareholders as defined in Article 62 shall be “interested shareholders”;

(2) if the Company enters into an off-market agreement to repurchase its shares under Article

35, the shareholder related to such agreement shall be an “interested shareholder”; and

(3) if that shareholder shall bear proportionately less liabilities than other holders of shares in the

same class or enjoy different rights from other holders of shares in that class, pursuant to a

reorganisation of the Company, such shareholder shall be an “interested shareholder”.

Article 97

A majority comprising shareholders representing more than two-thirds of the voting rights of the

shareholders of a particular class present and voting in accordance with Article 96 is required to

pass any resolution in a meeting of that class.

Article 98

The Company shall give notice to all the registered holders of the shares of a particular class not

less than 45 days prior to any meeting of the holders of shares of that class. The notice shall

specify the agenda, date and venue of the meeting. Holders of the shares of that class intending

to attend the meeting shall notify the Company in writing not less than 20 days prior to the

meeting.

In relation to “S” Shareholders, an “S” Shareholder shall be entitled to attend any General Meeting

or class meeting if his name appears on the register of shareholders or the Depository Register

(as the case may be) forty-eight (48) hours before the said meeting and to speak and vote thereat

and shall not be required to submit any written reply to the Company confirming attendance

thereof.

All notices of such meeting shall be sent to “S” shareholders (regardless of whether such a

shareholder shall have a right to vote at such meeting) to their addresses in accordance with

Chapter 23. Holders of Domestic Shares may be notified by public announcement as well.

Public announcement as aforesaid of such meeting shall be made in one or more newspapers

designated by the State Council department-in-charge of securities not less than 45 days prior to

such meeting. All holders of Domestic Shares shall deemed to have notice of such meeting upon

publication of the public announcement in the designated newspaper(s).

A meeting of holders of shares in a class can only be held provided that more than one-half of the

holders of shares in that class having the right to vote intend to attend the meeting or are present

at that meeting. Otherwise the Company shall, within 5 days from the relevant date therefrom,

132

re-issue the notice by making a public announcement of the agenda, date and venue of the next

meeting. Once the notice has been issued by way of public announcement, the Company shall

convene the meeting of the shareholders of that class.

A quorum for a separate class meeting (other than an adjourned meeting) to consider a variation

of the rights of any class of shares shall be the holders of at least one-third of the issued shares

of the class.

Article 99

Only holders of shares in a class having the right to vote are entitled to receive notice of any

meeting of holders of that class.

Proceedings at any meeting of holders of shares in a class shall mutatis mutandis follow the same

proceedings at any General Meeting and the provisions in these articles on the proceedings at any

General Meeting shall mutatis mutandis apply to any meeting of holders of shares in a class.

Article 100

The special voting procedures of holders of shares in a class shall not apply in the following

event:–

(1) where, pursuant to the approval of the shareholders in General Meeting by way of a Special

Resolution, the Company makes an offer of Domestic Shares or Foreign Listed Shares once

every 12 months whether such offer is made separately or concurrently and the proposed

issue of Domestic Shares or Foreign Listed Shares does not exceed 20% of the issued

shares of that class at that time; or

(2) any proposed issue of Domestic Shares and Foreign Listed Shares at the time of the

formation of the Company-which was completed within 15 months from the date of the

approval given by the State Council department-in-charge of securities.

133

APPENDIX 8

AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR

THE FINANCIAL YEARS ENDED 31 DECEMBER 2012,

31 DECEMBER 2013 AND 31 DECEMBER 2014

134

135

AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

JUNMA TYRE CORD COMPANY LIMITED (Incorporated in the People’s Republic of China)

AND ITS SUBSIDIARIES

FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED

31 DECEMBER 2012 CONTENTS Directors’ Report 1 Statement by Directors 3 Independent Auditor’s Report 4 Balance Sheets 5 Consolidated Statement of Comprehensive 6 Income Consolidated Statement of Changes in Equity 7 Consolidated Statement of Cash Flows 8 Notes to the Financial Statements 9

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1

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES DIRECTORS’ REPORT The directors are pleased to present their report to the members together with the audited consolidated financial statements of the Group for the financial year ended 31 December 2012 and the balance sheet of the Company as at 31 December 2012.

Directors

The directors in office at the date of this report are: Yang Peixing (Executive chairman) Liu Yaoxiang (Executive director) Liu Zhenfeng (Executive director) Zhou Zhidan (Executive director) Shan Wenfeng (Independent director) Jen Shek Voon (Independent director) Teng Cheong Kwee (Independent director) Arrangement to enable directors to acquire benefits Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Directors’ interest in shares or debentures Ordinary shares of RMB1.00 each Holdings at Holdings Holdings at beginning at end 21 January of the year of the year 2013 Junma Tyre Cord Company Limited Yang Peixing 14,961,000 15,170,000 15,170,000 Liu Yaoxiang 2,500,000 2,500,000 2,500,000 Liu Zhenfeng 4,500,000 4,500,000 4,500,000 Jen Shek Voon 240,000 240,000 240,000 The Company’s Executive Director, Mr Zhou Zhidan, holds 1.66% of the shareholdings in Zhangjiagang Buole Investment Development Company (“Buole”), a substantial shareholder of the Company. Buole holds 30,125,000 (41%) domestic shares in the Company. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning of the financial year, or at the end of the financial year. Directors’ contractual benefits Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member or with a company in which he has substantial financial interest except as disclosed in the financial statements.

137

2

Junma Tyre Cord Company Limited And Its Subsidiaries Share options

No option to take up unissued shares of the Company or its subsidiaries was granted during the

financial year.

There were no shares issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries whether granted before or during the financial year. There were no unissued shares of the Company or its subsidiaries under option at the end of the financial year. Independent auditor The independent auditor, Baker Tilly TFW LLP, has expressed its willingness to accept re-appointment. On behalf of the directors Yang Peixing Director

Zhou Zhidan Director

17 April 2013

138

3

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENT BY DIRECTORS In the opinion of the directors, (a) the consolidated financial statements of the Group and the balance sheet of the Company and

notes to these financial statements as set out on pages 5 to 44 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Company at 31 December 2012 and of the results, changes in equity and cash flows of the Group for the financial year then ended in accordance with International Financial Reporting Standards; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be

able to pay its debts as and when they fall due. On behalf of the directors Yang Peixing Director


17 April 2013

139

4

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JUNMA TYRE CORD COMPANY LIMITED (Incorporated in the People’s Republic of China) Report on the Financial Statements We have audited the accompanying financial statements of Junma Tyre Cord Company Limited (“the Company”) and its subsidiaries (“the Group”) as set out on pages 5 to 44, which comprise the balance sheets of the Group and the Company as at 31 December 2012 and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s 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. Opinion In our opinion, the balance sheet of the Company and the consolidated financial statements of the Group are properly drawn up in accordance with International Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2012, and the results, changes in equity and cash flows of the Group for the financial year ended on that date. Baker Tilly TFW LLP Public Accountants and Certified Public Accountants Singapore 17 April 2013

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5

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS At 31 December 2012 Group Company 2012 2011 2012 2011 Note RMB’000 RMB’000 RMB’000 RMB’000 ASSETS Non-current assets Property, plant and equipment 4 1,319,197 1,122,360 195,290 222,760 Lease prepayments 5 215,649 208,664 16,397 16,811 Investments in subsidiaries 6 – – 155,567 295,000

Total non-current assets 1,534,846 1,331,024 367,254 534,571

Current assets Inventories 7 550,133 515,883 252,365 271,019 Trade and other receivables 8 1,602,831 1,638,257 1,708,295 1,466,890 Cash and cash equivalents 9 760,400 384,725 703,622 334,427

Total current assets 2,913,364 2,538,865 2,664,282 2,072,336

Total assets 4,448,210 3,869,889 3,031,536 2,606,907

EQUITY AND LIABILITIES Equity Share capital and share premium 10 179,340 179,340 179,340 179,340 Other reserves 11 58,803 58,808 58,762 58,762 Retained earnings 12 (120,794) 38,750 (116,144) 77,854

Equity attributable to equity holders of the Company

117,349

276,898

121,958

315,956

Non-controlling interests 110,918 195,804 – –

Total equity 228,267 472,702 121,958 315,956

LIABILITIES Non-current liabilities Borrowings 13 410,000 290,000 – – Deferred tax liabilities 16 6,054 6,636 – –

Total non-current liabilities 416,054 296,636 – –

Current liabilities Trade and other payables 14 1,514,587 837,742 1,073,473 580,560 Borrowings 13 2,289,106 2,261,406 1,836,105 1,709,165 Derivative financial instruments 15 196 177 – – Tax payable – 1,226 – 1,226

Total current liabilities 3,803,889 3,100,551 2,909,578 2,290,951

Total liabilities 4,219,943 3,397,187 2,909,578 2,290,951

Total equity and liabilities 4,448,210 3,869,889 3,031,536 2,606,907

The accompanying notes form an integral part of these financial statements.

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6

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the financial year ended 31 December 2012 2012 2011 Note RMB’000 RMB’000 Revenue 3,052,820 2,928,413Cost of sales 17 (2,939,591) (2,883,272)

Gross profit 113,229 45,141

Other income 18 98,475 115,409Distribution and selling expenses (112,470) (87,323) Administrative expenses (120,101) (99,099) Other operating expenses (39,322) (35,381) Finance costs 19 (185,918) (136,956)

Loss before tax 20 (246,107) (198,209)

Tax credit/(expense) 22 1,677 (16,185)

Loss for the year (244,430) (214,394)

Other comprehensive (loss)/income Currency translation differences arising on consolidation (5) 46

Total comprehensive loss for the year (244,435) (214,348)

Loss attributable to: Equity holders of the Company (159,544) (169,277) Non-controlling interests (84,886) (45,117)

(244,430) (214,394)

Total comprehensive loss attributable to: Equity holders of the Company (159,549) (169,231) Non-controlling interests (84,886) (45,117)

(244,435) (214,348)

Loss per share attributable to equity holders of the Company (expressed in Renminbi per share)

23

- Basic (2.17) (2.31)

- Diluted (2.17) (2.31)


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7

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the financial year ended 31 December 2012

Attributable to equity holders of the Company Share Non- capital and Other Retained controlling Total share premium reserves earnings Total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2012

179,340

58,808

38,750

276,898 195,804

472,702

Loss for the year – – (159,544) (159,544) (84,886) (244,430) Other comprehensive loss

Currency translation differences arising on consolidation

–

(5)

–

(5)

–

(5)

Total comprehensive loss for the year

–

(5)

(159,544)

(159,549) (84,886)

(244,435)

Balance at 31 December 2012

179,340

58,803

(120,794)

117,349 110,918

228,267


179,340

58,762

208,027

446,129 150,921

597,050

Loss for the year – – (169,277) (169,277) (45,117) (214,394) Other comprehensive income


–

46

–

46

–

46


–

46

(169,277)

(169,231) (45,117)

(214,348)

Proceeds from issuance of shares to non-controlling interests

–

–

–

–

90,000

90,000


179,340

58,808

38,750

276,898 195,804

472,702


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8

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the financial year ended 31 December 2012 2012 2011 Note RMB’000 RMB’000 Cash flows from operating activities Loss before tax (246,107) (198,209)

Adjustments for: Amortisation of lease prepayment 4,634 2,492 Depreciation of property, plant and equipment 157,084 114,741 Interest expense 172,119 122,498 Interest income (11,978) (6,946) Loss on disposals of property, plant and equipment (49) – Net fair value loss/(gain) on derivative financial instruments 19 (541) Write down of inventories 10,073 22,005

Operating cash flow before working capital changes 85,795 56,040

Changes in working capital Inventories (44,323) (91,407) Trade and other receivables 35,426 (506,692) Pledged bank deposits (339,854) 14,640 Trade and other payables 676,840 (18,411)

Cash generated from/(used in) operations 413,884 (545,830) Income tax paid (131) (22,994)

Net cash generated from/(used in) operating activities 413,753 (568,824)

Cash flows from investing activities Purchases of property, plant and equipment (344,811) (355,350) Proceeds from disposals of property, plant and equipment 60 – Increase in lease prepayment (11,619) – Decrease of fixed deposits with original maturity of more than 3 months

– 18,150

Interest received 11,978 6,946

Net cash used in investing activities (344,392) (330,254)

Cash flows from financing activities Proceeds from borrowings 4,588,232 3,861,961 Repayments of borrowings (4,440,532) (2,879,877) Proceeds from issuance of shares to non-controlling interests – 90,000 Interest paid (181,240) (139,406)

Net cash (used in)/generated from financing activities (33,540) 932,678

Net increase in cash and cash equivalents 35,821 33,600 Cash and cash equivalents at beginning of the year 81,981 48,381

Cash and cash equivalents at end of the year 9 117,802 81,981


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9

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2012 These notes from an integral part of and should be read in conjuction with the accompanying financial statements. 1. General information

Junma Tyre Cord Company Limited (the “Company”) is incorporated in the People’s Republic of China (the “PRC”) as a joint-stock company with limited liability and is publicly traded on the Catalist of Singapore Exchange Securities Trading Limited. Its registered office is at 80 Hedong Road, Chenghang, Yangshe Town, Zhangjiagang City, Jiangsu Province, the PRC.

The principal activities of the Company are the manufacturing and trading of chemical fibre and materials. The principal activities of its subsidiaries are set out in Note 6(a).

The consolidated financial statements relate to the Company and its subsidiaries (referred to as the “Group”).

2. Summary of significant accounting policies (a) Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below.

The financial statements are presented in Renminbi (“RMB”) and all values in the tables are rounded to the nearest thousand (RMB’000) as indicated.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the financial year. Although these estimates and assumptions are based on management’s best knowledge of current events and actions and historical experiences and various other factors that are believed to be reasonable under the circumstances, actual results may ultimately differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both the current and future periods.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

The carrying amounts of cash and cash equivalents, trade and other current receivables and payables and provisions approximate their respective fair values due to the relatively short-term maturity of these financial instruments.

In the current financial year, the Group has adopted all the new and revised IFRS and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) that are relevant to its operations and effective for the current financial year. The adoption of these new/revised IFRS and IFRIC did not have any material effect on the financial results or position of the Group and the Company.

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10

Junma Tyre Cord Company Limited And Its Subsidiaries

2. Summary of significant accounting policies (cont’d)

(a) Basis of preparation (cont’d)

New standards, amendments to standards and interpretations that have been issued at the reporting date but are not yet effective for the financial year ended 31 December 2012 have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Group and the Company.

(b) Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the Board of Directors. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has control over another entity. In the Company’s balance sheet, investments in subsidiaries are accounted for at cost less accumulated impairment losses. On disposal of the investments, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.

(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances. Intragroup balances and transactions, including income, expenses and dividends, are eliminated in full. Profits and losses resulting from intragroup transactions that are recognised in assets, such as inventory and property, plant and equipment, are eliminated in full. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are recognised as expenses as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Any excess of the fair value of the consideration transferred in the business combination, the amount of any non-controlling interest in the acquiree (if any) and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the fair value of the net identifiable assets acquired is recorded as goodwill. Goodwill is accounted for in accordance with the accounting policy for goodwill stated in Note 2(d) to the financial statements. In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the date of acquisition.

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2. Summary of significant accounting policies (cont’d) (c) Basis of consolidation (cont’d)

Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the equity holder of the Company. They are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and balance sheet. Total comprehensive income is attributed to the non-controlling interests based on their respective interests in a subsidiary, even if the subsidiary incurred losses and the losses allocated exceed the non-controlling interests in the subsidiary’s equity.

For non-controlling interest that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in the event of liquidation the Group elects on an acquisition-by-acquisition basis whether to measure them at fair value or at the non-controlling interests’ proportionate share of the acquiree’s net identifiable assets, at the acquisition date. All other non-controlling interests are measured at acquisition date fair value or, when applicable, on the basis specified in another standard.

In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (i.e. transactions with owners in their capacity as owners).

When a change in the Company’s ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to accumulated profits if required by a specific IFRS.

(d) Goodwill

Goodwill is initially measured at cost and is subsequently measured at cost less any accumulated impairment losses.

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

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Junma Tyre Cord Company Limited And Its Subsidiaries 2. Summary of significant accounting policies (cont’d) (e) Property, plant and equipment

Property, plant and equipment are initially recognised at cost less accumulated depreciation and any impairment in value. Construction-in-progress represents plant and machinery under construction or pending installation.

The cost of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.

On disposal of a property, plant and equipment, the difference between the net disposal proceeds and its carrying amount is taken to profit or loss.

Depreciation

Construction-in-progress is not depreciated until such time when the assets are completed and ready for their intended use.

Depreciation is calculated on a straight-line basis to write off the cost of property, plant and equipment over their expected useful lives. The estimated useful lives are as follows:

Buildings 9 to 30 years Machinery and equipment 5 to 10 years Motor vehicles 4 to 10 years Other equipment 3 to 10 years

The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise.

Fully depreciated assets are retained in the financial statements until they are no longer in use.

Properties in the course of construction for production, or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss until construction or development is completed. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policies. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

(f) Lease prepayment

Leases of land under which the lessor has not transferred all the risks and benefits of ownership are classified as operating leases. Lease prepayment for land use rights is stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the profit or loss on a straight-line basis over the term of the respective leases.

(g) Impairment of non-financial assets excluding goodwill

At each balance sheet date, the Group assesses the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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Junma Tyre Cord Company Limited And Its Subsidiaries 2. Summary of significant accounting policies (cont’d) (g) Impairment of non-financial assets excluding goodwill (cont’d)

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss recognised in other comprehensive income up to the amount of any previous revaluation.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

(h) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production overheads based on normal operating capacity but exclude borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses.

(i) Financial assets (i) Classification

The Group classifies its financial assets according to the nature of the assets and the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. The Group’s only financial assets are loans and receivables.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except those maturing later than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are presented as “trade and other receivables” (excluding advanced payments, prepayments and deposits) and “cash and cash equivalents” on the balance sheet.

(ii) Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date - the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the net sale proceeds and its carrying amount is recognised in profit or loss. Any amount in the fair value reserve relating to that asset is also transferred to profit or loss.

Trade receivables that are factored out to banks and other financial institutions with recourse to the Group are not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the financial institutions is recorded as borrowings.

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Junma Tyre Cord Company Limited And Its Subsidiaries 2. Summary of significant accounting policies (cont’d) (i) Financial assets (cont’d) (iii) Initial measurement

Loans and receivables are initially recognised at fair value plus transaction costs.

(iv) Subsequent measurement Loans and receivables are carried at amortised cost using the effective interest method. Interest income on financial assets are recognised separately in profit or loss. (v) Impairment

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired.


Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivable is impaired.

The carrying amount of these assets is reduced through the use of an impairment allowance account, and the amount of the loss is recognised in profit or loss. The allowance amount is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised the same line item in profit or loss.

If in subsequent periods, the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversed date.

(j) Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and deposits with financial institutions which are subject to an insignificant risk of change in value. Pledged deposits with financial institutions and deposits with financial institutions with maturity exceeding three months are excluded from cash and cash equivalents.

(k) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity. Current tax is the expected tax payable or recoverable on the taxable income for the current year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or recoverable in respect of previous years. Deferred income tax is provided using the liability method, on all temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except where the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination, and at the time of the transaction, affects neither the accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

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Junma Tyre Cord Company Limited And Its Subsidiaries 2. Summary of significant accounting policies (cont’d) (k) Income tax (cont’d)

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on currently enacted or substantively enacted tax rates at the reporting date.

Deferred income tax are charged or credited to equity if the tax relates to items that are credited or charged, in the same or a different period, directly to equity.

(l) Financial liabilities

Financial liabilities include trade and other payables (excluding advanced payments from customers), derivative financial liabilities and bank borrowings. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instruments.

Financial liabilities are initially recognised at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transaction costs.

Subsequent to initial recognition, derivatives are measure at fair value. Other financial liabilities (except for the financial guarantees) are measured at amortised cost using effective interest method.

For financial liabilities other than derivatives, gain and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in profit or loss. Net gain or losses on derivative include exchange differences. A financial liability is derecognised when the obligation under the liability is extinguished.

(m) Financial guarantees

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.

Financial guarantee contracts are initially recognised at their fair values plus transaction costs. Financial guarantees are classified as financial liabilities.

Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the expected amount payable to the holder. Financial guarantees contracts are amortised in profit or loss over the period of the guarantee.

(n) Derivative financial instruments

Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

(i) Derivatives designated as hedging instrument

Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in profit or loss. The Group’s policy with respect to hedging the foreign currency risk of a firm commitment is to designate it as a cash flow hedge. The fair value changes on the effective portion of the currency forwards designated as cash flow hedges are recognised in the hedging reserve and transferred to either the cost of a hedged non-monetary asset upon acquisition or profit or loss when the hedged forecast transactions are recognised.

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Junma Tyre Cord Company Limited And Its Subsidiaries 2. Summary of significant accounting policies (cont’d) (n) Derivative financial instruments (cont’d) (i) Derivatives designated as hedging instrument (cont’d)

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, for forecast transactions, any cumulative gain or loss on the hedging instrument recognised in other comprehensive income is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to profit or loss for the period.

(ii) Derivatives that are not designated or do not quality for hedge accounting

Changes in fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in profit or loss as they arise.

(o) Provisions for other liabilities

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past event, and it is probable that an outflow of economic resources will be required to settle that obligation and the amount can be estimated reliably. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

(p) Employee benefits

Defined contribution benefits are post-employment benefit plans under which the Group pays fixed contributions into defined contribution plans organised by the government for its eligible employees, and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. The Group’s contribution to defined contribution benefits are recognised in the financial year to which they relate.

(q) Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services net of value added tax, rebates and discounts, and after eliminating sales within the Group. Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the entity, and the amount of revenue and the related cost can be reliably measured.

(i) Sales of goods

Revenue from sale of goods is recognised when a group entity has delivered products to the customer and significant risks and rewards of ownership of the goods have been passed to the customer.

(ii) Interest income

Interest income is recognised on a time proportion basis using the effective interest method.

(r) Borrowing costs

Borrowing costs, which comprise interest and other costs incurred in connection with the borrowing of funds, are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period they occur.

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2. Summary of significant accounting policies (cont’d) (s) Operating leases

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to profit or loss on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period expires, any payment required to be made to the lessor by way of penalty is recognised as an expenses in the period in which the termination takes place.

(t) Foreign currencies (i) Functional and presentation currency

Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements of the Group and the Company are presented in Renminbi, which is the Company’s functional currency.

(ii) Transactions and balances Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Currency translation gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except for currency translation differences on net investment in foreign operations and borrowings and other currency instruments qualifying as net investment hedges for foreign operations, which are included in the currency translation reserve within equity in the consolidated financial statements. The currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined.

(iii) Transaction of Group entities’ financial statements

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the Group’s presentation currency are translated into the presentation currency as follows:

(i) Assets and liabilities are translated at the closing rates at the date of the balance sheet;

(ii) Income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and

(iii) All resulting exchange differences are recognised in the currency translation reserve within equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign currency translation reserve.

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Junma Tyre Cord Company Limited And Its Subsidiaries 2. Summary of significant accounting policies (cont’d) (t) Foreign currencies (cont’d) (iii) Transaction of Group entities’ financial statements

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. On disposal of a foreign group entity, the cumulative amount of the currency translation reserve relating to that particular foreign entity is reclassified from equity and recognised in profit or loss when the gain or loss on disposal is recognised.

(u) Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incurs expenses, including revenues and expenses that relate to transactions with other components of the Group. Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s chief operating decision maker for making decisions about allocating resources and assessing performance of the operating segments.

(v) Dividend Interim dividends are recorded during the financial year in which they are declared payable.

Final dividends are recorded in the Group’s financial statements in the period in which they are approved by the Company’s shareholders.

(w) Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to profit or loss over the expected useful life of the relevant asset by equal annual instalments.

When the grant relates to an expense item, it is recognised in profit or loss over the period necessary to match them on a systematic basis to the costs that it is intended to compensate.

3. Significant accounting judgements and estimates

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

(i) Impairment allowance for trade and other receivables

Management has reviewed the Group’s and the Company’s trade and other receivables at year end to determine whether there is objective evidence that the Group and the Company will not be able to collect all amounts due according to the original terms of the receivables. As at 31 December 2012, management believes that the allowances for impairment for trade and other receivables of RMB58,322,000 (2011: RMB34,724,000) for the Group and of RMB39,118,000 (2011: RMB29,314,000) for Company are adequate. The carrying amounts of the Group’s and the Company’s trade and other receivables are disclosed in Note 8.

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3. Significant accounting judgements and estimates (cont’d) Key sources of estimation uncertainty (cont’d) (ii) Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these assets to be between 3 and 30 years. The carrying amounts of the Group’s and the Company’s property, plant and equipment as at 31 December 2012 were RMB1,319,197,000 (2011: RMB1,122,360,000) and RMB195,290,000 (2011: RMB222,760,000) respectively. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

(iii) Impairment of non-financial assets

The Group and the Company assess whether there are any indicators of impairment for all non-financial assets at each reporting date. Fair value less costs to sell calculation is based on observable market prices or market valuations less incremental costs for disposing asset. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

The Group determined that the losses incurred by the steel yarn and chemical fibre business segments, regarded as separate cash-generating units, during the financial year as an indication that the carrying amount of the segment property, plant and equipment may not be recoverable.

In this respect, an external independent valuer was engaged to calculate the recoverable amounts. The recoverable amounts of the cash-generating units have been determined based on fair value less costs to sell. As the recoverable amounts as at 31 December 2012 determined by the independent valuer were higher than the carrying amounts of the respective segment property, plant and equipment, no impairment allowance is considered necessary. As at 31 December 2012, the carrying amounts of the property, plant and equipment in the steel yarn and the chemical fire business segments were RMB1,097,943,000 (2011: RMB871,933,000) and RMB221,254,000 (2011: RMB250,427,000) respectively.

(iv) Net realisable value of inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value of inventories is the estimated selling price in the ordinary course of the business, based on market prices at the balance sheet date and less estimated selling expenses. The amount of inventories written down is disclosed in Note 17. The carrying amounts of the Group’s and the Company’s inventories as at 31 December 2012 were RMB550,133,000 (2011: RMB515,883,000) and RMB252,365,000 (2011: RMB271,019,000) respectively.

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4. Property, plant and equipment Group Machinery Construction- and Motor Other in- Building equipment vehicles equipment progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2011 Cost 221,667 1,102,980 5,033 7,622 215,796 1,553,098 Accumulated depreciation (69,870) (611,224) (3,296) (3,865) – (688,255)

Net carrying value 151,797 491,756 1,737 3,757 215,796 864,843

Year ended 31 December 2011 Opening net carrying value

151,797

491,756 1,737

3,757

215,796

864,843

Additions 550 12,688 1,459 2,693 354,868 372,258 Transfer 81,397 351,739 – 1,449 (434,585) – Depreciation charge (Note 20)

(11,979)

(100,780) (599)

(1,383)

–

(114,741)

Closing net carrying value 221,765 755,403 2,597 6,516 136,079 1,122,360

At 31 December 2011 Cost 303,614 1,422,468 6,492 11,764 136,079 1,880,417 Accumulated depreciation (81,849) (667,065) (3,895) (5,248) – (758,057)

Net carrying value 221,765 755,403 2,597 6,516 136,079 1,122,360


221,765

755,403 2,597

6,516

136,079

1,122,360

Additions 6,468 48,260 223 1,324 306,157 362,432 Transfer – 89,609 – – (89,609) – Subsidy income – – – – (8,500) (8,500) Disposals – – (11) – – (11) Depreciation charge (Note 20)

(15,961)

(138,390) (623)

(2,110)

–

(157,084)

212,272 754,882 2,186 5,730 344,127 1,319,197



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4. Property, plant and equipment (cont’d) Company Machinery Construction- and Motor Other in- Building equipment vehicles equipment progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2011 Cost 90,481 523,184 4,942 3,274 2,200 624,081 Accumulated depreciation (46,343) (379,205) (2,997) (2,206) – (430,751)



44,138

143,979 1,945

1,068 2,200

193,330

Additions – 4,845 1,314 2,188 65,178 73,525 Transfer – 47,092 – 124 (47,216) – Disposals – (2,013) – – – (2,013) Depreciation charge (4,890) (35,916) (543) (733) – (42,082)

Closing net carrying value 39,248 157,987 2,716 2,647 20,162 222,760

At 31 December 2011 Cost 90,481 528,169 6,256 5,586 20,162 650,654 Accumulated depreciation (51,233) (370,182) (3,540) (2,939) – (427,894)



39,248

157,987 2,716

2,647 20,162

222,760

Additions 2,420 15,914 88 322 535 19,279 Transfer – 20,697 – – (20,697) – Disposals – – (11) – – (11) Depreciation charge (4,717) (40,353) (555) (1,113) – (46,738)

36,951 154,245 2,238 1,856 – 195,290

At 31 December 2012 Cost 92,901 564,780 6,064 5,908 – 669,653 Accumulated depreciation (55,950) (410,535) (3,826) (4,052) – (474,363)

Net carrying value 36,951 154,245 2,238 1,856 – 195,290

Depreciation charge of the Group of RMB152,661,000 (2011: RMB110,175,000) has been charged to cost of sales, and RMB4,423,000 (2011: RMB4,566,000) to administrative expenses. Certain buildings, machinery and equipment of the Group and the Company with net carrying value of RMB185,020,000 (2011: RMB192,980,000) have been pledged as securities for bank borrowings (Note 13(b)). The Group’s property, plant and equipment include borrowing costs arising from bank loans borrowed specifically for the purpose of the construction of a plant. During the financial year, the borrowing costs capitalised as cost of construction-in-progress of the Group amounted to RMB9,121,000 (2011: RMB16,908,000). The rates used to determine the amount of borrowing costs eligible for capitalisation range from 6.46% to 6.9% (2011: 5.985% to 6.9%) per annum which are the interest rates of the specific borrowings.

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Junma Tyre Cord Company Limited And Its Subsidiaries 5. Leases prepayments Group Company RMB’000 RMB’000

At 1 January 2011 Cost 222,939 20,669 Accumulated amortisation (11,783) (3,445)

Net carrying value 211,156 17,224

Year ended 31 December 2011 Opening net carrying value 211,156 17,224 Amortisation charge (Note 20) (2,492) (413)

Closing net carrying value 208,664 16,811

At 31 December 2011 Cost 222,939 20,669 Accumulated amortisation (14,275) (3,858)


Year ended 31 December 2012 Opening net carrying value 208,664 16,811 Additions 11,619 – Amortisation charge (Note 20) (4,634) (414)




Lease prepayments represent payments made for land use rights of ten (2011: eight) pieces of land situated in the PRC on which the buildings of the Company and the Group are erected. The leases run for an initial period of 50 years with expiry dates on 31 August 2052, 9 September 2052, 19 April 2054, 16 June 2057, 29 November 2059, 29 November 2059, 12 January 2060, 9 March 2060, 31 March 2061 and 20 July 2061 respectively. None of the leases include contingent rentals.

Certain land use rights of the Group and Company with net carrying values of RMB111,958,000 (2011: RMB121,267,000) and RMB16,397,000 (2011: RMB16,811,000) respectively has been pledged as securities for banking borrowings (Note 13(b)).

The amortisation charge is recognised in administrative expenses.

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Junma Tyre Cord Company Limited And Its Subsidiaries 6. Investments in subsidiaries Company 2012 2011 RMB’000 RMB’000

Unquoted equity investments, at cost Balance at beginning of year 295,000 185,000Capital injection (c) – 110,000Less: Impairment loss (b) (139,433) –

Balance at end of year 155,567 295,000

Representing: Unquoted equity investments, at cost 350,000 350,000Less: accumulated impairment losses (194,433) (55,000)

155,567 295,000

(a) Details of the Group’s subsidiaries are set out below:

Country Equity interest of 2012 2011 Name of subsidiary Principal activities incorporation % % Subsidiary held by Company Zhangjiagang Junma Steel Tyre Cord Company Ltd * (“STC”)

Manufacture and sale of steel yarn and materials

PRC

55

55

Suqian Junma Tyre Cord Company Ltd * (“SQJTC”)

Manufacture and sale of chemical fibre and materials

PRC

100

100 Junma Tyre Cord (Hong Kong) Company Ltd * (“JTCHK”)

Dealing in foreign exchange derivatives

Hong Kong

100

100

* The financial statements for the year ended 31 December 2012 were audited by Baker Tilly TFW LLP for the sole purpose of preparing the consolidated financial statements.

(b) During the financial year, the Company carried out a review of the recoverable amount of its

investment in STC because of the losses incurred. The recoverable amount of the investment was determined on the basis of its estimated fair value less costs to sell. As a result of the review, an impairment loss of $139,433,000 was recognised in profit or loss for the financial year ended 31 December 2012.

(c) In 2011, STC increased its registered capital from RMB400 million to RMB600 million with

capital injection of RMB200 million of which the Company injected RMB110 million. The Company’s shareholding in STC upon completion of this capital injection remains at 55%.

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7. Inventories Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Raw materials 184,797 166,166 81,616 54,888 Work-in-progress 129,012 104,988 51,094 43,164 Finished goods 236,324 244,729 119,655 172,967

550,133 515,883 252,365 271,019

Cost of inventories recognised as an expense and included in cost of sales amounts to RMB2,939,591,000 (2011: RMB2,883,272,000) during the financial year. Included in this amount is write-down of inventories of RMB10,073,000 (2011: RMB22,005,000).

8. Trade and other receivables Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables - subsidiaries – – 29,551 46,217 - third parties 874,575 843,718 575,553 590,142 Less: allowance for impairment (third parties) (46,351) (29,588)

(28,068)

(24,800)

828,224 814,130 577,036 611,559

Advanced payments to suppliers,prepayments and other deposits 120,525 147,767

15,242

70,014

Other receivables - subsidiaries – – 465,241 125,931 - advances to directors 79 42 79 42 - third parties 17,891 22,727 14,144 16,886 Less: allowance for impairment (third parties) (11,971) (5,136)

(11,050)

(4,514)

126,524 165,400 483,656 208,359

Bill receivables - trade 648,083 658,727 647,603 646,972

1,602,831 1,638,257 1,708,295 1,466,890

There is concentration of credit risk with respect to trade receivables as the Group and the Company have several large customers in a single industry located in the PRC. The details of the Group’s and the Company’s credit risk exposures are disclosed in Note 25(b)(iii).

Bill receivables of the Group and the Company totalling RMB427,733,000 (2011: RMB384,982,000) have been pledged to banks for bank borrowings (Notes 13(b)).

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9. Cash and cash equivalents Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Cash at bank and on hand 117,802 81,981 107,186 77,264 Short-term bank deposits 642,598 302,744 596,436 257,163

760,400 384,725 703,622 334,427

Certain bank deposits have been pledged as securities as follow: Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Securities for:

Bills facilities (Note 14) 242,188 80,965 220,288 49,900 Letters of credit facilities 254,221 177,239 229,959 162,723 Borrowings (Note 13) 145,589 43,940 145,589 43,940

641,998 302,144 595,836 256,563

For the purpose of the consolidated statement of cash flows, the consolidated cash and cash equivalents comprise the following:

Group 2012 2011 RMB’000 RMB’000

Cash and cash equivalents (as above) 760,400 384,725 Less: - Pledged bank deposits (641,998) (302,144)

- Fixed deposits with original maturity of more than 3 months (600) (600)

Cash and cash equivalents for purpose of consolidated statement of cash flows 117,802

81,981

10. Share capital and share premium Group and Company No. of ordinary shares Amount Total share capital and Domestic S Share Share share share share capital premium premium ‘000 ‘000 RMB’000 RMB’000 RMB’000

2012 Balance at beginning and end of the year

55,000

18,400

73,400

105,940

179,340

2011 Balance at beginning of the year

275,000

92,000

73,400

105,940

179,340

Shares consolidation (220,000) (73,600) – – –

Balance at end of the year 55,000 18,400 73,400 105,940 179,340

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10. Share capital and share premium (cont’d)

In 2011, the Company consolidated every five (5) existing issued ordinary shares of RMB0.20 each in the capital of the Company into one (1) ordinary share of RMB1.00 each in the capital of the Company.

At the balance sheet date, the total registered number of domestic shares and S shares were 55,000,000 (2011: 55,000,000) and 18,400,000 (2011: 18,400,000) respectively, both with par value of RMB1.00 per share (2011: RMB1.00 per share). All issued shares are fully paid.

All domestic shares and S shares rank pari passu in all material respects.

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions.

11. Other reserves Group Statutory Discretionary Currency Total surplus surplus translation other reserve reserve reserve reserves RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2011 48,652 10,110 – 58,762 Other comprehensive income Currency translation differences arising on consolidation –

–

46

46

Balance at 31 December 2011 48,652 10,110 46 58,808 Other comprehensive loss Currency translation differences arising on consolidation –

–

(5)

(5)

Balance at 31 December 2012 48,652 10,110 41 58,803

Company Statutory Discretionary Total surplus surplus other reserve reserve reserves RMB’000 RMB’000 RMB’000

2012 Balance at 1 January 2012 and 31 December 2012 48,652 10,110 58,762 2011 Balance at 1 January 2011 and 31 December 2011 48,652 10,110 58,762

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11. Other reserves (cont’d)

(a) Statutory surplus reserve

According to the Articles of Association of the Company and its subsidiaries incorporated in the PRC, the Company and its PRC subsidiaries are required to transfer 10% of net profit, as determined in accordance with the PRC accounting rules and regulations, to statutory surplus reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of dividend to shareholders.

Statutory surplus reserve can be used to make good previous years’ losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is not less than 25% of the registered capital. This statutory surplus reserve is not distributable in the form of cash dividend.

(b) Discretionary surplus reserve

Pursuant to the Articles of Association of the Company and its subsidiaries incorporated in the PRC, the Company and its PRC subsidiaries can transfer a portion of net profit, as determined in accordance with the PRC accounting rules and regulations, to the discretionary surplus reserve. The transfer to this reserve must be made before distribution of dividend to shareholders. The utilisation of this reserve should be proposed by the board of directors and approved by the shareholders.

(c) Currency translation reserve

Currency translation reserve represents exchange differences arising from the translation of the financial statements of foreign subsidiary whose functional currency is different from that of the Group’s presentation currency.

12. Retained earnings and dividend

According to the Articles of Association of the Company, the net profit of the Company for the purpose of profit distribution to shareholders is deemed to be the lesser of (i) the net profit determined in accordance with PRC accounting rules and regulations; and (ii) the net profit determined in accordance with IFRS.

Under the PRC Company Law and the Company’s Articles of Association, net profit after taxation can be distributed as dividends after allowance has been made for:

(i) making up cumulative prior years’ losses, if any;

(ii) allocation of 10% of after-tax profit, as determined in accordance with the PRC accounting rules and regulations, to the Company’s statutory surplus reserve until the fund aggregates to 50% of the Company’s registered capital; and

(iii) allocation to discretionary surplus reserve, if approved by the shareholders.

The distributable reserve of the Company as at 31 December 2012 amounted to RMB nil (2011: RMB114,281,000).

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13. Borrowings Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Non-current Guaranteed bank borrowings (a) 220,000 250,000 – –Secured bank borrowings (b) 190,000 40,000 – – 410,000 290,000 – – Current Guaranteed bank borrowings (a) 1,179,745 1,549,258 786,744 1,016,180Secured bank borrowings (b) 995,382 602,058 935,382 582,895Unsecured bank borrowings 113,979 110,090 113,979 110,090 2,289,106 2,261,406 1,836,105 1,709,165 Total borrowings 2,699,106 2,551,406 1,836,105 1,709,165

The details of the bank borrowings’ guarantees and securities are as follows:

(a) These bank borrowings are guaranteed by a subsidiary, the Company (Note 28), a related party and/or third parties.

(b) These bank borrowings are secured by certain buildings, machinery and equipment (Note 4),

land use rights (Note 5), bill receivables (Note 8), and/or bank deposits (Note 9). 14. Trade and other payables Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 399,290 503,077 211,788 358,890 Bill payables 1,015,837 250,000 805,282 158,000 Advanced payments from customers 21,343 30,977 21,015 29,065 Accrued staff costs 17,138 13,999 6,730 6,827 Other payables and accruals 60,979 39,689 28,658 27,778 1,514,587 837,742 1,073,473 580,560 As at 31 December 2012, the bill payables of the Group and the Company are secured by certain bank deposits (Note 9).

Bill payables are non-interest bearing and have maturity period of between 90 to 180 days (2011: 90 to 180 days).

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15. Derivative financial instruments Group 2012 2011 Contract/ Contract/ Notional Fair value Notional Fair value Amount Assets Liabilities Amount Assets Liabilities RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Non-hedging instruments - Forward foreign exchange contracts

45,456

–

(196) 9,677

–

(177)

At 31 December 2012, the Group’s outstanding non-deliverable forward foreign exchange contracts are valued at the forward rates applicable to the remaining period to maturity of the contracts, and their fair values are estimated to be approximately RMB196,000 (2011: RMB177,000).

16. Deferred tax liabilities Group 2012 2011 RMB’000 RMB’000

Deferred tax liabilities (6,054) (6,636)

The movements in deferred tax account are as follows: Accounting Fair value depreciation in adjustments excess of tax on acquisition depreciation Provisions of subsidiary Total Group RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2011 8,295 8,184 (7,023) 9,456 Credited/(charged) to profit or loss (Note 22)

(8,295)

(8,184)

387

(16,092)

At 31 December 2011 – – (6,636) (6,636) Charged to profit or loss (Note 22) – – 582 582

At 31 December 2012 – – (6,054) (6,054)

Deferred income tax assets are recognised for accounting depreciation in excess of tax depreciation, provisions and for tax loss carry-forwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable. As at balance sheet date, the Group did not recognise deferred income tax assets of RMB126,001,000 (2011: RMB72,273,000) in respect of losses amounting to RMB393,286,000 (2011: RMB194,116,000) that can be carried forward up to five years from the year of loss against future taxable income; and accounting depreciation in excess of tax depreciation amounting to RMB42,224,000 (2011: RMB37,040,000) and provisions amounting to RMB68,395,000 (2011: RMB57,935,000). During the financial year, unrecognised tax loss amounted to RMB28,390,000 (2011: RMB25,241,000) has expired.

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Junma Tyre Cord Company Limited And Its Subsidiaries 17. Cost of sales

During the financial year, a write down of inventories amounting to RMB10,073,000 (2011: RMB22,005,000) was recognised as an expense in cost of sales.

18. Other income

Group 2012 2011 RMB’000 RMB’000

Sales of scrap materials 51,462 61,386 Processing fees 26,659 25,739 Sales of raw materials 2,428 1,670 Interest income 11,978 6,946 Foreign currency exchange gains – 15,597 Subsidy and grant income 2,615 1,617 Others 3,333 2,454 98,475 115,409

19. Finance costs Group 2012 2011 RMB’000 RMB’000

Interest on borrowings 162,745 123,268 Interest on discounting of bill receivables 18,495 16,138 Other borrowing costs 13,780 14,999 Net fair value loss/(gain) on derivative financial instruments (Note 15)

19

(541)

195,039 153,864

Less: Interest expense capitalised in property, plant and equipment (Note 4)

(9,121)

(16,908)

185,918 136,956

20. Loss before tax Group 2012 2011 RMB’000 RMB’000

Loss before tax is arrived at after charging/(crediting):

Audit fees paid/payable to auditors of the Company 885 885 Fees for non-audit services paid/payable to auditors of the Company – – Amortisation of lease prepayments (Note 5) 4,634 2,492 Allowance for doubtful debts written back – (1,014) Allowance for doubtful trade and other receivables 23,598 4,209 Bad debts written back (1,413) – Depreciation of property, plant and equipment (Note 4) 157,084 114,741 Foreign currency exchange loss 8,131 – Loss on disposals of property, plant and equipment 49 – Staff costs (Note 21) 168,628 128,547

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21. Staff costs Group 2012 2011 RMB’000 RMB’000

Wages and salaries 152,273 116,235 Contribution to defined contribution benefits 13,025 9,802 Staff welfare and other benefits 3,330 2,510

168,628 128,547

22. Income tax (credit)/expense Tax (credit)/expense attributable to loss is made up of: Group 2012 2011 RMB’000 RMB’000

(Over)/underprovision of income tax in previous financial years (1,095) 93 Deferred tax (Note 16) (582) 16,092

(1,677) 16,185

The income tax (credit)/expense on the results of the financial year differs from the amount of income tax determined by applying the PRC standard rate of income tax due to the following factors:

Loss before income tax (246,107) (198,209)

Tax calculated at a tax rate of 25% (61,527) (49,552) Expenses not deductible for tax purposes 910 2,275 Effect of tax incentives (808) (878) Deferred tax assets not recognised 60,843 64,247 (Over)/underprovision of income tax in previous financial years (1,095) 93

(1,677) 16,185

23. Loss per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company of RMB159,544,000 (2011: RMB169,277,000) by the weighted average number of shares outstanding during the year of 73,400,000 (2011: 73,400,000).

There were no dilutive potential ordinary shares in the Group in existence for either year.

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24. Significant related party transactions

In addition to information disclosed elsewhere in the financial statements, the following transactions took place between the Group and related parties who are not members of the Group during the financial year on terms agreed by the parties concerned:

a) Purchase of power and steam Group 2012 2011

RMB’000 RMB’000

Zhangjiagang Junma Polyester Company Limited Power Factory (“ZJPPCL Power Factory”)

Purchase of power and steam 309,252 314,592

Certain directors and shareholders of ZJPPCL Power Factory were spouses/relatives of certain directors of the Company.

(b) Key management personnel compensation

Key management personnel compensation is as follows: Group 2012 2011 RMB’000 RMB’000

Directors’ remuneration and fees 1,555 1,482 Salaries of other key management personnel 600 600 Contributions to defined contribution benefits 93 97 2,248 2,179

Included in the above is total compensation to directors of the Company amounting to RMB1,601,000 (2011: RMB1,534,000).

(c) Year-end balances arising from purchases of services Group 2012 2011 RMB’000 RMB’000

ZJPPCL Power Factory Trade payables 12,952 13,963

(d) Bank guarantees by ZJPPCL Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Bank loans 430,000 480,000 200,000 410,000

(e) Bank guarantees by subsidiary

As at 31 December 2012, certain bank loans of the Company totaling RMB546,945,000 (2011: RMB404,770,000) were guaranteed by Zhangjiagang Junma Steel Tyre Cord Company Ltd (“STC”), a subsidiary of the Company.

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25. Financial instruments (a) Categories of financial instruments The following table sets out the financial instruments as at the balance sheet date: Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Financial assets Loans and receivables (including cash and cash equivalents)

2,248,420

1,876,133

2,401,477

1,731,599 Financial liabilities At amortised cost 4,192,340 3,358,171 2,888,563 2,260,660 Derivative financial instruments

196

177

–

–

(b) Financial risk management

The Group and the Company are exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include foreign currency risk, interest rate risk, credit risk and liquidity risk. The Group’s overall risk management strategy seeks to minimise adverse effects from these financial risks on Group’s financial performance. The Group uses derivatives such as non-deliverable forward foreign exchange contracts to hedge certain financial risk exposures.

Risk management is carried out by the Finance Department under policies approved by the Board of Directors. The Finance Department identifies and evaluates financial risks in close co-operation with the Group’s operating units. The Board of Directors provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and liquidity risk.

(i) Foreign currency risk

The Group and the Company have currency exposures arising from transactions, assets and liabilities that are denominated in currencies other than the respective functional currencies of entities in the Group. The foreign currencies in which the Group’s and the Company’s currency risk arises are mainly United States Dollars (“USD”) and Euro. The Group used non-deliverable forward foreign exchange contracts to hedge approximately 39% (2011: 5%) of its trade and other payables in USD at the balance sheet date (Note 15).

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34


25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (i) Foreign currency risk (cont’d)

At balance sheet date, the Group and the Company have the following financial assets and financial liabilities denominated in foreign currencies based on information provided to key management:

Group USD Euro Total RMB’000 RMB’000 RMB’000

2012 Financial assets Cash and cash equivalents 43,826 849 44,675 Trade and other receivables 215,068 – 215,068 Financial liabilities Trade and other payables (115,381) – (115,381) Borrowings (416,545) (60,650) (477,195) Net financial liabilities denominated in foreign currencies

(273,032)

(59,801)

(332,833)

Less: forward foreign exchange contracts 45,455 – 45,455 Net exposures to foreign currencies (227,577) (59,801) (287,378)


(312,980)

(16,299)

(329,279)


Company USD Euro Total RMB’000 RMB’000 RMB’000

2012 Financial assets Cash and cash equivalents 41,786 849 42,635 Trade and other receivables 209,024 – 209,024 Financial liabilities Trade payables (115,385) – (115,385) Borrowings (416,545) (60,650) (477,195) Net financial liabilities denominated in foreign currencies, representing net exposures to foreign currencies

(281,120)

(59,801)

(340,921)

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25. Financial instruments (cont’d) (b) Financial risk management (cont’d) Company USD Euro Total RMB’000 RMB’000 RMB’000


(305,826)

(8,136)

(313,962)

The following table demonstrates the sensitivity to a reasonably possible change in the USD exchange rates against the respective functional currencies of the Group’s entities, with all other variables held constant, of the Group’s and the Company’s loss after tax:

Group Increase/(decrease) in loss after tax 2012 2011 RMB’000 RMB’000

USD/RMB - strengthened 5% (2011: 5%) 8,534 11,373 - weakened 5% (2011: 5%) (8,534) (11,373) Euro/RMB - strengthened 5% (2011: 5%) 2,243 611 - weakened 5% (2011: 5%) (2,243) (611)

Company Increase/(decrease) in loss after tax 2012 2011 RMB’000 RMB’000

USD/RMB - strengthened 5% (2011: 5%) 10,542 11,468 - weakened 5% (2011: 5%) (10,542) (11,468) Euro/RMB - strengthened 5% (2011: 5%) 2,243 305 - weakened 5% (2011: 5%) (2,243) (305)

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25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (ii) Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates.

The Group’s and the Company’s exposures to interest rate risk arises primarily from their bank borrowings. Borrowings at variable rates expose the Group and the Company to cash flow interest rate risk (ie. the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates). Borrowings at fixed rates expose the Group and the Company to fair value interest rate risk (ie. the risk that the value of a financial instrument will fluctuate due to changes in market rates). The Group’s and the Company’s policy is to manage interest cost using a mix of fixed and floating rate debts. The Group and the Company do not utilise derivatives to mitigate its interest rate risk.

The Group and the Company have no significant interest-bearing assets, except for bank deposits. The impacts of interest rate fluctuations on the bank deposits are not significant to the Group’s and the Company’s income.

Sensitivity analysis for interest rate risk

The sensitivity analysis below have been determined based on the exposure to interest rates for borrowings at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of borrowings that have floating rates.

The Group’s and the Company’s borrowings at variable rates on which effective hedges have not been entered into, are denominated mainly in RMB and USD. If the interest rates increase/decrease by 50 (2011: 50) basis points with all other variables including tax rate being held constant, the effects arising from loss net of tax are as follows:

Increase/(decrease) in loss after tax 2012 2011 RMB’000 RMB’000

Group Interest rate - Increase by 50 basis points 12,070 9,537 - Decrease by 50 basis points (12,070) (9,537) Company Interest rate - Increase by 50 basis points 8,217 6,205 - Decrease by 50 basis points (8,217) (6,205)

(iii) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company. For trade receivables, the Group and the Company adopt the policy of dealing only with customers of appropriate credit history and obtaining sufficient security where appropriate to mitigate credit risk. For other financial assets, the Group and the Company adopt the policy of dealing only with high credit quality counterparties.

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25. Financial instruments (cont’d)

(b) Financial risk management (cont’d) (iii) Credit risk

The Group’s and the Company’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group and the Company trades only with recognised and creditworthy third parties. For customers who wish to trade on credit terms, the Group and the Company will take into account the quantity of the customer order, background and creditworthiness of the customer, level of risk involved, payment history of the customer and relationship with the customer. In addition, receivable balances are monitored on an ongoing basis. At the balance sheet date, the Group and the Company had no significant concentrations of credit risk except for trade receivables from 2 debtors (2011: 3 debtors) that individually represented 7% - 16% (2011: 7% - 14%) of trade receivables as follows:

Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

108,980 107,414 90,622 88,957

91,144 84,901 41,386 42,028 –* 71,120 –* 55,634

200,124 263,435 132,008 186,619

* Balances at balance sheet date were less than 10% of the trade receivables of the

Group and the Company respectively.

As the Group and the Company do not hold any collateral, the maximum exposure to credit risk is the carrying amount of each financial instruments presented on the balance sheets and the amount of RMB593,000,000 (2011: RMB430,037,000) relating to corporate guarantees given by the Company to banks for the subsidiaries’ bank borrowings.

The credit risk for trade receivables based on the information provided to key management is as follows:


By geographical areas People’s Republic of China 652,786 648,830 401,598 446,259 Other countries 175,438 165,300 175,438 165,300 828,224 814,130 577,036 611,559 By types of customers Non-related parties - Multi national companies 177,732 165,300 177,732 165,300 - Other companies 650,492 648,830 369,753 400,042 Subsidiaries – – 29,551 46,217 828,224 814,130 577,036 611,559

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25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (iii) Credit risk (cont’d) Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group and the Company. Cash and cash equivalents that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.

Financial assets that are past due and/or impaired

There is no other class of financial assets that is past due and/or impaired except for trade and other receivables.

The age analysis of trade receivables past due but not impaired is as follows: Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Past due 0 to 3 months 135,255 108,070 80,235 73,028 Past due 3 to 6 months 63,021 69,898 38,796 57,625 Past due over 6 months 13,299 64,286 11,143 54,056 211,575 242,254 130,174 184,709

The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment are as follows:


Gross amount 46,351 29,588 28,068 24,800 Less: Allowance for impairment

(46,351)

(29,588) (28,068)

(24,800)

– – – – At 1 January 29,588 29,439 24,800 24,938 Allowance made 16,763 791 3,268 332 Allowance written back – (642) – (470) At 31 December 46,351 29,588 28,068 24,800

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(b) Financial risk management (cont’d)

(iii) Credit risk (cont’d)

The carrying amount of other receivables individually determined to be impaired and the movement in the related allowance for impairment are as follows:



(11,971) (5,136)

(11,050)

(4,514)

– – – – At 1 January 5,136 2,090 4,514 2,090 Allowance made 6,835 3,418 6,536 2,796 Allowance written back – (372) – (372) At 31 December 11,971 5,136 11,050 4,514

Trade and other receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in significant financial difficulties or have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

(iv) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

The Group and the Company manage the liquidity risk by maintaining sufficient cash and cash equivalents, and adequate credit facilities to enable them to meet their normal operating commitments and to mitigate the effects of fluctuation in cash flows.

With regard to its short-term bank borrowings outstanding at 31 December 2012, the Group’s and the Company’s principal bankers have confirmed their intention to renew the relevant borrowings as they fall due during 2013. The directors believe that the Group and Company will have sufficient cash resources to satisfy future working capital and other financing requirements.

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25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (iv) Liquidity risk (cont’d)

The table below summarises the maturity profile of the Group’s and the Company’s non-derivative financial liabilities at the balance sheet date based on contractual undiscounted repayment obligations:

Between Less than 1 and 5 1 year years RMB’000 RMB’000

Group At 31 December 2012 Trade and other payables 1,493,244 – Borrowings 2,338,817 488,651 3,832,061 488,651 At 31 December 2011 Trade and other payables 806,765 – Borrowings 2,298,627 329,214 3,105,392 329,214 Company At 31 December 2012 Trade and other payables 1,052,458 – Borrowings 1,869,900 – Financial guarantee 593,000 – 3,515,358 – At 31 December 2011 Trade and other payables 551,495 – Borrowings 1,713,031 – Financial guarantee 430,037 – 2,694,563 –

The Group’s derivative financial instruments comprised of net-settled currency forwards with contractual maturity term of less than one year from the balance sheet date. The contract/nominal value of the currency forwards as at the balance sheet date is disclosed in Note 15.

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41


25. Financial instruments (cont’d) (c) Fair value of financial instruments that are carried at fair value

The following table presents the level of fair value hierarchy for each class of financial instruments of the Group measured at fair value on the balance sheet at 31 December 2012.

Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000

Group 2012 Liabilities Non-hedging derivatives – 196 – 196 2011 Liabilities Non-hedging derivatives – 177 – 177

The fair value hierarchy levels are defined as follows:

a) Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; b) Level 2 - inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly or indirectly (ie derived from prices); and c) Level 3 - input for the asset or liability are not based on observable market date

(unobservable inputs).

Determination of fair value

The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date and these instruments are included in Level 2.

(d) Fair value of financial instruments by classes that are not carried at fair value and whose

carrying amounts are reasonable approximation of fair value

The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the balance sheet date.

26. Segment information Primary reporting format – business segments The Group is organised into two main business units as follows: (i) Chemical fibre: manufacture and sale of chemical fibre and materials; and (ii) Steel yarn: manufacture and sale of steel yarn and materials.

Management monitors the operating results of its business units separately for making decisions about allocation of resources and assessment of performances of each segment.

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26. Segment information (cont’d) The segment information provided to management for the reportable segments are as follows: Chemical Fibre Steel Yarn Group 2012 2011 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Segment revenue sales to external customers

2,438,718

2,419,203

614,102

509,210

3,052,820

2,928,413

Segment profit/(loss) 77,299 4,376 (137,488) (65,629) (60,189) (61,253) Finance costs (185,918) (136,956) Tax credit/(expense) 1,677 (16,185)

Loss for the year (244,430) (214,394)

Depreciation and amortisation for the year

49,761

43,371

111,957

75,958

161,718

119,329 Write down of inventories

–

13,598

10,073

8,407

10,073

22,005

Segment assets 1,863,991 1,961,787 1,941,621 1,605,358 3,805,612 3,567,145 Unallocated assets 642,598 302,744

Total assets 4,448,210 3,869,889

Segment liabilities 1,090,059 599,967 424,724 237,952 1,514,783 837,919 Unallocated liabilities

2,705,160

2,559,268

4,219,943 3,397,187

Capital expenditure incurred during the year

20,185

99,394

324,626

255,956

344,811

355,350 Additions to lease prepayments for the year

–

–

11,619

–

11,619

–

Segment results

Performance of each segment is evaluated based on segment profit or loss which is measured differently from the net profit or loss before tax in the consolidated financial statements. Finance costs and income taxes are not allocated to segments as Group financing and income taxes are managed on a group basis.

Segment assets

The amounts provided to the Management with respect to total assets are measured in a manner consistent with that of the financial statements. Management monitors the assets attributable to each segment for the purposes of monitoring segment performance and for allocating resources between segments. All assets are allocated to reportable segments other than deferred tax assets and fixed deposits which are classified as unallocated assets.

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43

Junma Tyre Cord Company Limited And Its Subsidiaries 26. Segment information (cont’d) Segment liabilities

The amounts provided to Management with respect to total liabilities are measured in a manner consistent with that of the financial statements. All liabilities are allocated to the reportable segments based on the operations of the segments other than deferred tax liabilities, tax payable and borrowings. These liabilities are classified as unallocated liabilities.

Geographical information

The headquarters and manufacturing operations of the Group’s two business segments are located in the PRC. The segment assets, liabilities, capital expenditure and lease prepayments are located in the PRC. The Group sells to customers located in different geographical locations as follow:

2012 2011 RMB’000 RMB’000

The PRC 1,629,146 1,776,700 India 554,753 377,902 Other countries (principally Thailand, Turkey and Indonesia)

868,921

773,811

3,052,820 2,928,413

Information about major customers

During the financial year, there was no revenue from transaction with any customer which amounted to 10% or more of the Group’s revenue.

27. Capital Management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, obtain new borrowings or sell assets to reduce borrowings.

As disclosed in Note 11, the Group is required to contribute to and maintain a statutory surplus reserve under the PRC accounting rules and regulations.

The Group manages capital by monitoring the level of net debts and capital. Net debts include trade and other payables, borrowings less cash and cash equivalents. Capital includes equity attributable to the owners of the Company less the above-mentioned restricted statutory surplus reserve fund. The Group’s overall strategy remains unchanged from 2011.

2012 2011 RMB’000 RMB’000

Trade and other payables 1,514,587 837,742 Borrowings 2,699,106 2,551,406 Less: Cash and cash equivalents (760,400) (384,725) Net debts 3,453,293 3,004,423 Equity attributable to the equity holders of the Company 117,348 276,898 Less: Statutory surplus reserve (Note 11) (48,652) (48,652) Total capital 68,696 228,246

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44


28. Contingent liabilities (unsecured) Details and estimates of maximum amounts of contingent liabilities are as follows: Guarantees

The Company has provided corporate guarantees to banks for borrowings of RMB593,000,000 (2011: RMB430,037,000) taken by its subsidiary. The directors have assessed the fair value of these financial guarantees to have no material financial impact on the results for the financial year.

29. Capital commitment Capital commitments contracted for but not provided for in the financial statements:


Purchase of property, plant and equipment

42,062

168,142

–

–

30. Authorisation of financial statements

These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of Junma Tyre Cord Company Limited on 17 April 2013.

180





31 DECEMBER 2013 CONTENTS Directors’ Report 1 Statement by Directors 3 Independent Auditor’s Report 4 Balance Sheets 5 Consolidated Statement of Comprehensive 6 Income Consolidated Statement of Changes in Equity 7 Consolidated Statement of Cash Flows 8 Notes to the Financial Statements 9

181

1


Directors

The directors in office at the date of this report are: Yang Peixing (Executive chairman) Liu Yaoxiang (Executive director) Liu Zhenfeng (Executive director) Zhou Zhidan (Executive director) Shan Wenfeng (Independent director) Jen Shek Voon (Independent director) Teng Cheong Kwee (Independent director) Arrangement to enable directors to acquire benefits Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Directors’ interest in shares or debentures Ordinary shares of RMB1.00 each Holdings at Holdings Holdings at beginning at end 21 January of the year of the year 2014 Junma Tyre Cord Company Limited Yang Peixing 14,961,000 15,170,000 15,170,000 Liu Yaoxiang 2,500,000 2,500,000 2,500,000 Liu Zhenfeng 4,500,000 4,500,000 4,500,000 Jen Shek Voon 240,000 240,000 240,000 The Company’s Executive Director, Mr Zhou Zhidan, holds 1.66% of the shareholdings in Zhangjiagang Buole Investment Development Company Limited (“Buole”), a substantial shareholder of the Company. Buole holds 30,125,000 (41%) domestic shares in the Company. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning of the financial year, or at the end of the financial year. Directors’ contractual benefits Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member or with a company in which he has substantial financial interest except as disclosed in the financial statements.

182

2


Share options


financial year.



11 April 2014

183

3


notes to these financial statements as set out on pages 5 to 47 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2013 and of the results, changes in equity and cash flows of the Group for the financial year then ended in accordance with International Financial Reporting Standards; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be

able to pay its debts as and when they fall due. On behalf of the directors Yang Peixing Director


11 April 2014

184

4

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JUNMA TYRE CORD COMPANY LIMITED (Incorporated in the People’s Republic of China) Report on the Financial Statements We have audited the accompanying financial statements of Junma Tyre Cord Company Limited (“the Company”) and its subsidiaries (“the Group”) as set out on pages 5 to 47, which comprise the balance sheets of the Group and the Company as at 31 December 2013 and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s 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. Opinion In our opinion, the balance sheet of the Company and the consolidated financial statements of the Group are properly drawn up in accordance with International Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2013, and the results, changes in equity and cash flows of the Group for the financial year ended on that date. Baker Tilly TFW LLP Public Accountants and Chartered Accountants Singapore 11 April 2014

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5

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS At 31 December 2013 Group Company 2013 2012 2013 2012 Note RMB’000 RMB’000 RMB’000 RMB’000 ASSETS Non-current assets Property, plant and equipment 4 222,939 1,319,197 198,566 195,290 Lease prepayments 5 15,984 215,649 15,984 16,397 Investments in subsidiaries 6 – – 12,515 155,567

Total non-current assets 238,923 1,534,846 227,065 367,254

Current assets Inventories 7 275,854 550,133 238,749 252,365 Trade and other receivables 8 1,517,774 1,602,831 1,542,838 1,708,295 Due from a related party 9 908,427 – 908,427 – Cash and cash equivalents 10 748,594 760,400 743,703 703,622


Total assets 3,689,572 4,448,210 3,660,782 3,031,536

EQUITY AND LIABILITIES Equity Share capital and share premium 11 179,340 179,340 179,340 179,340 Other reserves 12 58,847 58,803 58,762 58,762 Retained earnings 13 (147,590) (120,794) (146,523) (116,144)


90,597

117,349

91,579

121,958

Non-controlling interests – 110,918 – –

Total equity 90,597 228,267 91,579 121,958

LIABILITIES Non-current liabilities Borrowings 14 – 410,000 – – Deferred tax liabilities 15 – 6,054 – –

Total non-current liabilities – 416,054 – –

Current liabilities Trade and other payables 16 1,222,368 1,514,587 1,192,596 1,073,473 Borrowings 14 2,376,607 2,289,106 2,376,607 1,836,105 Derivative financial instruments 17 – 196 – –

Total current liabilities 3,598,975 3,803,889 3,569,203 2,909,578




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6

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the financial year ended 31 December 2013 2013 2012 Note RMB’000 RMB’000 (Restated) Continuing operations Revenue 2,513,762 2,438,718 Cost of sales 18 (2,325,022) (2,272,692)

Gross profit 188,740 166,026

Other income 19 76,348 83,629 Distribution and selling expenses (81,785) (85,124) Administrative expenses (53,989) (58,032) Other operating expenses (15,756) (29,200) Finance costs 20 (115,594) (134,189)

Loss before tax 21 (2,036) (56,890)

Tax (expense)/credit 23 (24) 1,095

Loss from continuing operations (2,060) (55,795)

Discontinued operation Loss from discontinued operation, net of tax 24 (106,418) (188,635)

Loss for the year (108,478) (244,430)

Other comprehensive income/(loss) Item that is or may be reclassified subsequently to profit or loss:

Currency translation differences arising on consolidation 44 (5)


Loss attributable to: Equity holders of the Company (26,796) (159,544) Non-controlling interests (81,682) (84,886)

(108,478) (244,430)

Total comprehensive loss attributable to: Equity holders of the Company (26,752) (159,549) Non-controlling interests (81,682) (84,886)

(108,434) (244,435)

Loss per share from continuing operations attributable to equity holders of the Company (RMB per share) 25

Basic (0.03) (0.76)

Diluted (0.03) (0.76)

Loss per share attributable to equity holders of the Company (RMB per share) 25

Basic (0.37) (2.17)

Diluted (0.37) (2.17)


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7


Attributable to equity holders of the Company Share Non- capital and Other Retained controlling Total share premium reserves earnings Total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


179,340

58,803

(120,794)

117,349

110,918 228,267



–

44

–

44

–

44


–

44

(26,796)

(26,752)

(81,682) (108,434)

Disposal of a subsidiary – – – – (29,236) (29,236) Balance at 31 December 2013

179,340

58,847

(147,590)

90,597

– 90,597


179,340

58,808

38,750

276,898

195,804 472,702

Loss for the year – – (159,544) (159,544) (84,886) (244,430) Other comprehensive loss


–

(5)

–

(5)

–

(5)


–

(5)

(159,544)

(159,549)

(84,886) (244,435)


179,340

58,803

(120,794)

117,349

110,918 228,267


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8

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the financial year ended 31 December 2013 2013 2012 Note RMB’000 RMB’000 Cash flows from operating activities Loss before tax from continuing operations (2,036) (56,890) Loss before tax from discontinued operation (107,000) (189,217)

(109,036) (246,107)

Adjustments for: Amortisation of lease prepayment 4,781 4,634 Depreciation of property, plant and equipment 165,231 157,084 Interest expense 157,299 172,119 Interest income (19,381) (11,978) Gain on disposals of property, plant and equipment (8) (49) Net fair value loss on derivative financial instruments – 19 Gain on disposal of subsidiary (75,096) – Write down of inventories 7,662 10,073


Changes in working capital Inventories 32,636 (44,323) Trade and other receivables (1,641,058) 35,426 Pledged and long-term bank deposits 99,975 (339,854) Trade and other payables 1,190,718 676,840

Cash (used in)/generated from operations (186,277) 413,884 Income tax paid (24) (131)

Net cash (used in)/from operating activities (186,301) 413,753

Cash flows from investing activities Purchases of property, plant and equipment (427,849) (344,811) Proceeds from disposals of property, plant and equipment 560 60 Increase in lease prepayment – (11,619) Disposal of subsidiary, net cash outflow 6(c) (49,418) – Interest received 19,381 11,978

Net cash used in investing activities (457,326) (344,392)

Cash flows from financing activities Proceeds from borrowings 5,722,422 4,588,232 Repayments of borrowings (4,831,520) (4,440,532) Interest paid (159,106) (181,240)

Net cash from/(used in) financing activities 731,796 (33,540)

Net increase in cash and cash equivalents 88,169 35,821 Cash and cash equivalents at beginning of the year 117,802 81,981



189

9

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2013 These notes from an integral part of and should be read in conjunction with the accompanying financial statements. 1. General information

Junma Tyre Cord Company Limited (the “Company”) is incorporated in the People’s Republic of China (the “PRC”) as a joint-stock company with limited liability and is publicly traded on the Catalist of Singapore Exchange Securities Trading Limited. Its registered office is at 80 Hedong Road, Chenghang, Yangshe Town, Zhangjiagang City, Jiangsu Province, the People’s Republic of China (“PRC”).

The principal activities of the Company are the manufacturing and trading of chemical fibre and materials. The principal activities of its subsidiaries are disclosed in Note 6(a).

The consolidated financial statements relate to the Company and its subsidiaries (the “Group”).

2. Summary of significant accounting policies (a) Basis of preparation





The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

The carrying amounts of cash and cash equivalents, trade and other current receivables and payables approximate their respective fair values due to the relatively short-term maturity of these financial instruments.

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10



(a) Basis of preparation (cont’d)

In the current financial year, the Group has adopted all the new and revised IFRS and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) that are relevant to its operations and effective for the current financial year. The adoption of these new/revised IFRS and IFRIC did not have any material effect on the financial results or position of the Group and the Company, except as disclosed below:

(i) Amendment to IAS 1 Presentation of Items of Other Comprehensive Income

The Group adopted the amendment to IAS 1 on 1 January 2013. The amendment is applicable for annual periods beginning on or after 1 July 2012. With the adoption, the Group has separately presented items of other comprehensive income that would be reclassified to profit or loss in the future from those that would not be reclassified in the consolidated statement of comprehensive income. Comparative information has also been re-presented accordingly. The adoption of amendment to IAS 1 has no impact on the Group’s financial position and total comprehensive income.

(ii) IFRS 13 Fair Value Measurement

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it provides a consistent definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs. In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively on 1 January 2013. The adoption of IFRS 13 has no significant impact on the financial statements of the Group and the Company.

(iii) IFRS 10 Consolidated Financial Statements and Revised IAS 27 Separate

Financial Statements IFRS 10 establishes a single control model that applies to all entities including special

purpose entities. The changes introduced by IFRS 10 require management to exercise significant judgement to determine which entities are controlled, and therefore are required to be consolidated by the Group, compared with the requirements that were in IAS 27. Therefore, IFRS 10 may change which entities are consolidated within a group. The Revised IAS 27 was amended to address accounting for subsidiaries, jointly controlled entities and associates in separate financial statement. The adoptions of IFRS 10 and Revised IAS 27 have no significant impact on the financial statements of the Group and the Company.

New standards, amendments to standards and interpretations that have been issued at the balance sheet date but are not yet effective for the financial year ended 31 December 2013 have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Group and the Company.

(b) Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has control over another entity.

191

11


2. Summary of significant accounting policies (cont’d) (b) Subsidiaries (cont’d)

In the Company’s balance sheet, investments in subsidiaries are accounted for at cost less accumulated impairment losses. On disposal of the investment, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.

(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances.

Intragroup balances and transactions, including income, expenses and dividends, are eliminated in full. Profits and losses resulting from intragroup transactions that are recognised in assets, such as inventory and property, plant and equipment, are eliminated in full.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are recognised as expenses as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

Any excess of the fair value of the consideration transferred in the business combination, the amount of any non-controlling interest in the acquiree (if any) and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the fair value of the net identifiable assets acquired is recorded as goodwill. Goodwill is accounted for in accordance with the accounting policy for goodwill stated in Note 2(d) to the financial statements. In instances where the latter amount exceeds the former and the measurement of all amounts has been reviewed, the excess is recognised as gain on bargain purchase in profit or loss on the date of acquisition.

Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and balance sheet. Total comprehensive income is attributed to the non-controlling interests based on their respective interests in a subsidiary, even if this results in the non-controlling interests having a deficit balance.

For non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in the event of liquidation, the Group elects on an acquisition-by-acquisition basis whether to measure them at fair value, or at the non-controlling interests’ proportionate share of the acquiree’s net identifiable assets, at the acquisition date. All other non-controlling interests are measured at acquisition-date fair value or, when applicable, on the basis specified in another standard.

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12


2. Summary of significant accounting policies (cont’d) (c) Basis of consolidation (cont’d)



When a change in the Company’s ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings if required by a specific IFRS.

(d) Goodwill

Goodwill is initially measured at cost and is subsequently measured at cost less any accumulated impairment losses.

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

(e) Property, plant and equipment





Depreciation


193

13


2. Summary of significant accounting policies (cont’d) (e) Property, plant and equipment (cont’d)

Depreciation (cont’d)

Depreciation is calculated on a straight-line basis to write off the cost of property, plant and equipment over their expected useful lives. The estimated useful lives are as follows:


The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise.

Fully depreciated assets are retained in the financial statements until they are no longer in use.

Properties in the course of construction for production, or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss until construction or development is completed. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policies. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

(f) Lease prepayment

Leases of land under which the lessor has not transferred all the risks and benefits of ownership are classified as operating leases. Lease prepayment for land use rights is stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the profit or loss on a straight-line basis over the term of the respective leases.

(g) Impairment of non-financial assets excluding goodwill

At each balance sheet date, the Group assesses the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is recognised in other comprehensive income up to the amount of any previous revaluation.

194

14


2. Summary of significant accounting policies (cont’d) (g) Impairment of non-financial assets excluding goodwill (cont’d)

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

(h) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production overheads based on normal operating capacity but exclude borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses.

(i) Financial assets (i) Classification

The Group classifies its financial assets according to the nature of the assets and the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. The Group’s only financial assets are loans and receivables.


Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except those maturing later than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are presented as “trade and other receivables” (excluding advanced payments, prepayments and deposits) and “cash and cash equivalents” on the balance sheet.

(ii) Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date - the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

On disposal of a financial asset, the difference between the net sale proceeds and its carrying amount is recognised in profit or loss. Any amount in the fair value reserve relating to that asset is also transferred to profit or loss.

Trade receivables that are factored out to banks and other financial institutions with recourse to the Group are not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the financial institutions is recorded as borrowings.

(iii) Initial measurement Loans and receivables are initially recognised at fair value plus transaction costs.

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15


2. Summary of significant accounting policies (cont’d) (i) Financial assets (cont’d) (iv) Subsequent measurement

Loans and receivables are carried at amortised cost using the effective interest method, less impairment.

Interest income on financial assets are recognised separately in profit or loss. (v) Impairment

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired.


Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivable is impaired.

The carrying amount of these assets is reduced through the use of an impairment allowance account, and the amount of the loss is recognised in profit or loss. The allowance amount is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised the same line item in profit or loss.

If in subsequent periods, the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversed date.

(j) Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and deposits with financial institutions which are subject to an insignificant risk of change in value. Pledged deposits with financial institutions and deposits with financial institutions with maturity exceeding three months are excluded from cash and cash equivalents.

(k) Income taxes

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable or recoverable on the taxable income for the current year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable or recoverable in respect of previous years. Deferred income tax is provided using the liability method, on all temporary differences at the balance sheet date arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except where the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination, and at the time of the transaction, affects neither the accounting nor taxable profit or loss.

196

16


2. Summary of significant accounting policies (cont’d) (k) Income taxes (cont’d)

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on currently enacted or substantively enacted tax rates at the balance sheet date. Deferred income tax are charged or credited to equity if the tax relates to items that are credited or charged, in the same or a different period, directly to equity.

(l) Financial liabilities Financial liabilities include trade and other payables (excluding advanced payments from customers), derivative financial liabilities and bank borrowings. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instruments. Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transaction costs. Subsequent to initial recognition, derivatives are measured at fair value. Other financial liabilities (except for the financial guarantees) are measured at amortised cost using effective interest method. For financial liabilities other than derivatives, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in profit or loss. Net gains or losses on derivatives include exchange differences. A financial liability is derecognised when the obligation under the liability is extinguished.





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17


2. Summary of significant accounting policies (cont’d) (n) Derivative financial instruments

Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent balance sheet dates. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

(i) Derivatives designated as hedging instrument

Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in profit or loss. The Group’s policy with respect to hedging the foreign currency risk of a firm commitment is to designate it as a cash flow hedge. The fair value changes on the effective portion of the currency forwards designated as cash flow hedges are recognised in the hedging reserve and transferred to either the cost of a hedged non-monetary asset upon acquisition or profit or loss when the hedged forecast transactions are recognised. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, for forecast transactions, any cumulative gain or loss on the hedging instrument recognised in other comprehensive income is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to profit or loss for the period.

(ii) Derivatives that are not designated or do not quality for hedge accounting

Changes in fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in profit or loss as they arise.

(o) Provisions for other liabilities

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past event, and it is probable that an outflow of economic resources will be required to settle that obligation and the amount can be estimated reliably. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the balance sheet date. Where the effect of the time value of money is material, the amount of the provision shall be discounted to present value using a pre-tax discount rate that reflects the current market assessment of the time value of money and risks specific to the obligation.

When discounting is used, the increase in the provision due to passage of time is recognised as a finance cost in profit or loss.

(p) Employee benefits

Defined contribution benefits are post-employment benefit plans under which the Group pays fixed contributions into defined contribution plans organised by the government for its eligible employees, and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. The Group’s contribution to defined contribution benefits are recognised as an expense in the period in which the related service is performed.

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18

Junma Tyre Cord Company Limited And Its Subsidiaries 2. Summary of significant accounting policies (cont’d) (q) Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services, net of value added tax, rebates and discounts, and after eliminating sales within the Group. Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the entity, and the amount of revenue and the related cost can be reliably measured.

(i) Sale of goods

Revenue from sale of goods is recognised when a Group entity has delivered the products to the customer and significant risks and rewards of ownership of the goods have been passed to the customer.

(ii) Interest income

Interest income is recognised on a time proportion basis using the effective interest method.

(r) Borrowing costs

Borrowing costs, which comprise interest and other costs incurred in connection with the borrowing of funds, are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are recognised in the profit or loss using the effective interest method.

(s) Operating leases

Leases where a significant portion of the risks and rewards incidental to ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to profit or loss on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period expires, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which the termination takes place.

(t) Foreign currencies (i) Functional and presentation currency


(ii) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Currency translation gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except for currency translation differences on net investment in foreign operations and borrowings and other currency instruments qualifying as net investment hedges for foreign operations, which are included in the currency translation reserve within equity in the consolidated financial statements. The currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

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19


2. Summary of significant accounting policies (cont’d) (t) Foreign currencies (cont’d) (ii) Transactions and balances (cont’d)

Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined.



(i) Assets and liabilities are translated at the closing rates at the date of the balance

sheet; (ii) Income and expenses are translated at average exchange rates (unless the average

is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and


On consolidation, exchange differences arising from the translation of the net investment in foreign operations (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. On disposal of a foreign group entity, the cumulative amount of the currency translation reserve relating to that particular foreign entity is reclassified from equity and recognised in profit or loss when the gain or loss on disposal is recognised.

(u) Segment reporting


(v) Government grants



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20


2. Summary of significant accounting policies (cont’d) (w) Discontinued operations

A component of the Group is classified as a ‘discontinued operation’ when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations. In profit or loss of the current reporting period, and of the comparative period of the previous year, all income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in profit or loss.

3. Significant accounting judgements and estimates

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the balance sheet date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

(i) Impairment allowance for trade and other receivables

Management has reviewed the Group’s and the Company’s trade and other receivables at year end to determine whether there is objective evidence that the Group and the Company will not be able to collect all amounts due according to the original terms of the receivables. As at 31 December 2013, management believes that the allowances for impairment for trade and other receivables of RMB34,143,000 (2012: RMB58,322,000) for the Group and of RMB34,143,000 (2012: RMB39,118,000) for the Company are adequate. The carrying amounts of the Group’s and the Company’s trade and other receivables are disclosed in Note 8.

(ii) Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these assets to be between 3 and 30 years. The carrying amounts of the Group’s and the Company’s property, plant and equipment as at 31 December 2013 were RMB222,939,000 (2012: RMB1,319,197,000) and RMB198,566,000 (2012: RMB195,290,000) respectively. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

(iii) Net realisable value of inventories


201

21


4. Property, plant and equipment Group Machinery Construction- and Motor Other in- Building equipment vehicles equipment progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2012 Cost 303,614 1,422,468 6,492 11,764 136,079 1,880,417 Accumulated depreciation (81,849) (667,065) (3,895) (5,248) – (758,057)


Year ended 31 December 2012 Opening net carryingvalue 221,765

755,403 2,597

6,516

136,079 1,122,360

Additions 6,468 48,260 223 1,324 306,157 362,432 Transfer – 89,609 – – (89,609) – Subsidy income – – – – (8,500) (8,500) Disposals – – (11) – – (11) Depreciation charge (15,961) (138,390) (623) (2,110) – (157,084)

Closing net carrying value 212,272 754,882 2,186 5,730 344,127 1,319,197



Year ended 31 December 2013 Opening net carrying value 212,272

754,882 2,186

5,730

344,127 1,319,197

Additions 4,144 40,194 252 3,352 381,518 429,460 Transfer 10,000 10,178 – – (20,178) – Disposals – (552) – – – (552) Depreciation charge (16,089) (146,259) (337) (2,546) – (165,231) Disposal of a subsidiary (177,624) (516,942) (55) (3,058) (662,256) (1,359,935)

32,703 141,501 2,046 3,478 43,211 222,939



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22


4. Property, plant and equipment (cont’d) Company Machinery Construction- and Motor Other in- Building equipment vehicles equipment progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2012 Cost 90,481 528,169 6,256 5,586 20,162 650,654 Accumulated depreciation (51,233) (370,182) (3,540) (2,939) – (427,894)


Year ended 31 December 2012 Opening net carryingvalue

39,248

157,987

2,716

2,647

20,162

222,760

Additions 2,420 15,914 88 322 535 19,279 Transfer – 20,697 – – (20,697) – Disposals – – (11) – – (11) Depreciation charge (4,717) (40,353) (555) (1,113) – (46,738)

Closing net carrying value 36,951 154,245 2,238 1,856 – 195,290

At 31 December 2012 Cost 92,901 564,780 6,064 5,908 – 669,653 Accumulated depreciation (55,950) (410,535) (3,826) (4,052) – (474,363)



36,951

154,245

2,238

1,856

–

195,290

Additions – 3,549 252 2,380 42,865 49,046 Disposals – (552) – – – (552) Depreciation charge (4,800) (38,441) (557) (1,420) – (45,218)

32,151 118,801 1,933 2,816 42,865 198,566



Depreciation charge of the Group of RMB160,997,000 (2012: RMB152,661,000) has been charged to cost of sales, and RMB4,234,000 (2012: RMB4,423,000) to administrative expenses. Certain buildings, machinery and equipment of the Group and the Company with net carrying value of RMB146,978,000 (2012: RMB185,020,000) have been pledged as securities for bank borrowings (Note 14(b)).

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23


4. Property, plant and equipment (cont’d)

The Group’s property, plant and equipment include borrowing costs arising from bank loans borrowed specifically for the purpose of the construction of a plant. During the financial year, the borrowing costs capitalised as cost of construction-in-progress of the Group amounted to RMB1,611,000 (2012: RMB9,121,000). The rates used to determine the amount of borrowing costs eligible for capitalisation range from 6.46% to 6.57% (2012: 6.46% to 6.9%) per annum which are the interest rates of the specific borrowings.

5. Lease prepayments Group Company RMB’000 RMB’000



Year ended 31 December 2012 Opening net carrying value 208,664 16,811 Additions 11,619 – Amortisation charge (4,634) (414)




Year ended 31 December 2013 Opening net carrying value 215,649 16,397 Disposal of a subsidiary (194,884) – Amortisation charge (4,781) (413)




Lease prepayments represent payments made for land use rights of two (2012: ten) pieces of land situated in the PRC on which the buildings of the Company and the Group are erected. The leases run for an initial period of 50 years with expiry dates on 31 August 2052 and 9 September 2052 (2012: 31 August 2052, 9 September 2052, 19 April 2054, 16 June 2057, 29 November 2059, 29 November 2059, 12 January 2060, 9 March 2060, 31 March 2061 and 20 July 2061) respectively. None of the leases include contingent rentals.

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5. Lease prepayments (cont’d)

The land use rights of the Group and Company with net carrying values of RMB15,984,000 (2012: RMB111,958,000) and RMB15,984,000 (2012: RMB16,397,000) respectively have been pledged as securities for banking borrowings (Note 14(b)).

The amortisation charge is recognised in administrative expenses. 6. Investments in subsidiaries Company 2013 2012 RMB’000 RMB’000

Unquoted equity investments, at cost Balance at beginning of year 155,567 295,000 Impairment loss (b) (7,485) (139,433) Disposal of a subsidiary (c) (135,567) –

Balance at end of year 12,515 155,567

Representing: Unquoted equity investments, at cost 20,000 350,000 Less: accumulated impairment losses (7,485) (194,433)

12,515 155,567

(a) Details of the Company’s subsidiaries are set out below:

Country Equity interest of 2013 2012 Name of subsidiary Principal activities incorporation % % Zhangjiagang Junma Steel Tyre Cord Company Ltd * (“STC”)

Manufacture and sale of steel yarn and materials

PRC

–

55

Suqian Junma Tyre Cord Company Ltd * (“SQJTC”)


PRC

100

100 Junma Tyre Cord (Hong Kong) Company Ltd * (“JTCHK”)

Dealing in foreign exchange derivatives

Hong Kong

100

100

* The financial statements for the year ended 31 December 2013 were audited by Baker Tilly TFW LLP for the sole purpose of preparing the consolidated financial statements.

(b) During the financial year, the Company carried out a review of the recoverable amount of

its investment in SQJTC because of the losses incurred. The recoverable amount of the investment was determined on the basis of its estimated fair value less costs to sell. As a result of the review, an impairment loss of RMB7,485,000 was recognised in profit or loss for the financial year ended 31 December 2013.

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25


6. Investments in subsidiaries (cont’d) c) Disposal of a subsidiary

On 26 December 2013, the Company completed the disposal of its entire 55% shareholding interest in a subsidiary, STC to a related party, Zhangjiagang Junma Polyester Manufacturing Co., Ltd (“ZJPMCL”) for consideration of RMB110.83 million. Effect of the disposal of subsidiary on the consolidated statement of cash flows are: RMB’000 Cash and cash equivalents 160,248 Inventories 233,981 Receivables 817,687 Lease prepayments 194,884 Property, plant and equipment 1,359,935 Total assets 2,766,735 Borrowings (1,213,400) Payables (1,482,893) Deferred tax liabilities (5,472) Total liabilities (2,701,765) Net assets disposed 64,970 Non-controlling interests (29,236) Gain on disposal of subsidiary 75,096 Net cash received from disposal of subsidiary 110,830 Less: Cash and cash equivalents in subsidiary disposed (160,248) Net cash outflow on disposal of a subsidiary (49,418)



275,854 550,133 238,749 252,365

During the financial year, raw materials and changes in finished goods and work in progress included cost of sales amounted to RMB1,892,369,000 (2012: RMB2,033,640,000).

Included in cost of sales is inventories written off of RMB508,000 (2012: Nil).

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26



Trade receivables - subsidiaries – – 9,380 23,482 - third parties 652,478 874,575 648,085 575,553 Less: allowance for impairment (third parties) (28,959)

(46,351)

(28,959) (28,068)

623,519 828,224 628,506 570,967

Advanced payments to suppliers, prepayments and other deposits 14,517

120,525

14,050 15,242

Other receivables - subsidiaries – – 21,840 471,309 - advances to directors 260 79 260 79 - third parties 14,810 17,891 14,674 14,144 Less: allowance for impairment (third parties) (5,184)

(11,971)

(5,184) (11,050)

24,403 126,524 45,640 489,724

Bills receivables - trade 869,852 648,083 868,692 647,604

1,517,774 1,602,831 1,542,838 1,708,295


Bills receivables of the Group and the Company totalling RMB800,415,000 (2012: RMB427,733,000) have been pledged to banks for bank borrowings (Note 14(b)).

9. Due from a related party

The related party refers to STC, a former subsidiary of the Company. At the balance sheet date, STC is controlled by ZJPMCL, a related party of the Company. The amount is non-trade in nature, repayable on demand and secured by property, plant and equipment of STC with net carrying amount of RMB928 million (2012: Nil). At the balance sheet date, the amount bears interest rates ranging from 5.6% to 6.6% (2012: Nil) per annum based on the interest rates charged by the banks on borrowings.

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27



Cash at bank and on hand 205,971 117,802 201,080 107,186 Short-term bank deposits 542,623 642,598 542,623 596,436

748,594 760,400 743,703 703,622

Certain bank deposits have been pledged as securities as follow: Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000

Securities for:

Bills facilities (Note 16) 213,225 242,188 213,225 220,288Letters of credit facilities 242,062 254,221 242,062 229,959Borrowings (Note 14) 87,336 145,589 87,336 145,589

542,623 641,998 542,623 595,836


Group 2013 2012 RMB’000 RMB’000

Cash and cash equivalents (as above) 748,594 760,400Less: - Pledged bank deposits (542,623) (641,998)

- Fixed deposits with original maturity of more than 3 months – (600)

Cash and cash equivalents for purpose of consolidated statement ofcash flows 205,971 117,802



55,000

18,400

73,400 105,940 179,340


55,000

18,400

73,400 105,940 179,340

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28

Junma Tyre Cord Company Limited And Its Subsidiaries 11. Share capital and share premium (cont’d)





Balance at 1 January 2012 48,652 10,110 46 58,808 Other comprehensive loss Currency translation differences arising on consolidation

–

– (5) (5)

Balance at 31 December 2012 48,652 10,110 41 58,803 Other comprehensive income Currency translation differences arising on consolidation

–

– 44 44



2013 Balance at 1 January 2013 and 31 December 2013 48,652 10,110 58,762 2012 Balance at 1 January 2012 and 31 December 2012 48,652 10,110 58,762


According to the Articles of Association of the Company and its subsidiaries incorporated in the PRC, the Company and its PRC subsidiaries are required to transfer 10% of net profit, as determined in accordance with the PRC accounting rules and regulations, to statutory surplus reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of dividend to shareholders.

Statutory surplus reserve can be used to make good previous years’ losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is not less than 25% of the registered capital. This statutory surplus reserve is not distributable in the form of cash dividend.

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29


12. Other reserves (cont’d) (b) Discretionary surplus reserve




13. Retained earnings and dividend






The distributable reserve of the Company as at 31 December 2013 amounted to RMB Nil (2012: RMB Nil).


Non-current Guaranteed bank borrowings (a) – 220,000 – – Secured bank borrowings (b) – 190,000 – –

– 410,000 – –

Current Guaranteed bank borrowings (a) 949,209 1,179,745 949,209 786,744 Secured bank borrowings (b) 1,311,898 995,382 1,311,898 935,382 Unsecured bank borrowings 115,500 113,979 115,500 113,979

2,376,607 2,289,106 2,376,607 1,836,105

Total borrowings 2,376,607 2,699,106 2,376,607 1,836,105

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30


14. Borrowings (cont’d) The details of the bank borrowings’ guarantees and securities are as follows:

(a) These bank borrowings are guaranteed by the related parties and/or third parties (2012: the Company, a subsidiary, a related party and/or third parties).

(b) These bank borrowings are secured by certain buildings, machinery and equipment (Note

4), land use rights (Note 5), bills receivables (Note 8), and/or bank deposits (Note 10). 15. Deferred tax liabilities Group 2013 2012 RMB’000 RMB’000

Deferred tax liabilities – (6,054)

The movements in deferred tax account are as follows: Fair value adjustments on acquisition of subsidiary Total Group RMB’000 RMB’000

At 1 January 2012 (6,636) (6,636) Charged to profit or loss (Note 23) 582 582 At 31 December 2012 (6,054) (6,054) Charged to profit or loss (Note 23) 582 582 Disposal of subsidiary 5,472 5,472 At 31 December 2013 – –

Deferred income tax assets are recognised for accounting depreciation in excess of tax depreciation, provisions and for tax loss carry-forwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable. As at balance sheet date, the Group did not recognise deferred income tax assets of RMB58,106,000 (2012: RMB126,001,000) in respect of tax losses amounting to RMB167,997,000 (2012: RMB393,286,000) that can be carried forward up to five years from the year of loss against future taxable income; and accounting depreciation in excess of tax depreciation amounting to RMB29,777,000 (2012: RMB42,224,000) and provisions amounting to RMB34,650,000 (2012: RMB68,395,000). During the financial year, unrecognised tax loss amounted to RMB Nil (2012: RMB28,390,000) has expired.

16. Trade and other payables Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 342,909 399,290 325,893 211,788Bills payables 794,256 1,015,837 794,256 805,282Advanced payments from customers 40,420 21,343 39,948 21,015Accrued staff costs 13,488 17,138 10,956 6,730Other payables and accruals 31,295 60,979 21,543 28,658 1,222,368 1,514,587 1,192,596 1,073,473

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31

Junma Tyre Cord Company Limited And Its Subsidiaries 16. Trade and other payables (cont’d)

The bills payables of the Group and the Company are secured by certain bank deposits (Note 10).

Bills payables are non-interest bearing and have maturity period of between 90 to 365 days (2012: 90 to 180 days).

17. Derivative financial instruments Group 2013 2012 Contract/ Contract/ Notional Fair value Notional Fair value Amount Assets Liabilities Amount Assets Liabilities RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Non-hedging instruments

- Forward foreign exchange contracts

– – – 45,456

–

(196)

At 31 December 2013, the Group’s outstanding non-deliverable forward foreign exchange contracts are valued at the forward rates applicable to the remaining period to maturity of the contracts, and their fair values are estimated to be approximately RMB Nil (2012: RMB196,000).

18. Cost of sales

During the financial year, a write down of inventories amounting to RMB508,000 (2012: Nil) was recognised as an expense in cost of sales.

19. Other income

Group 2013 2012 RMB’000 RMB’000 (Restated)

Sales of scrap materials 34,115 39,183 Processing fees 16,154 26,659 Sales of raw materials 2,854 2,190 Interest income 18,021 10,710 Foreign currency exchange gains 987 – Subsidy and grant income 1,410 2,615 Others 2,807 2,272 76,348 83,629

20. Finance costs


Interest on borrowings 94,960 104,624 Interest on discounting of bill receivables 12,677 16,670 Other borrowing costs 7,957 12,876 Net fair value loss on derivative financial instruments (Note 17) – 19 115,594 134,189

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32


21. Loss before tax

Group 2013 2012 RMB’000 RMB’000 (Restated) Loss before tax from continuing operations is arrived at after charging/(crediting):

Audit fees paid/payable to auditors of the Company 905 885 Other fees paid/payable to other auditors 189 – Fees for non-audit services paid/payable to auditors of the Company

–

–

Amortisation of lease prepayments (Note 5) 413 413 Allowance for doubtful trade and other receivables 3,262 9,804 Allowance for doubtful debts written back (2,060) – Depreciation of property, plant and equipment 48,396 49,348 Foreign currency exchange (gain)/loss (987) 8,034 Gain on disposals of property, plant and equipment (8) (49) Staff costs (Note 22) 91,978 81,461 Bad debts written back (1,310) (1,413)

22. Staff costs


Wages and salaries 82,259 72,795 Contribution to defined contribution benefits 7,961 6,319 Other benefits 1,758 2,347

91,978 81,461

23. Income tax (credit)/expense Tax (credit)/expense attributable to loss is made up of: Group 2013 2012 RMB’000 RMB’000

From continuing operations Under/(over) provision of income tax in previous financial years

24

(1,095)

From discontinued operation Deferred tax (Note 15) (582) (582) (558) (1,677)

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33

Junma Tyre Cord Company Limited And Its Subsidiaries 23. Income tax (credit)/expense (cont’d)

The income tax (credit)/expense on the results of the financial year differs from the amount of income tax determined by applying the PRC standard rate of income tax due to the following factors:

Group 2013 2012 RMB’000 RMB’000

Loss before income tax from: - Continuing operations (2,036) (56,890) - Discontinued operation (107,000) (189,217) (109,036) (246,107) Tax calculated at a tax rate of 25% (27,259) (61,527) Expenses not deductible for tax purposes 1,125 910 Income not subject to tax (18,774) – Effect of tax incentives (6,814) (808) Deferred tax assets not recognised 51,144 60,843 Under/(over) provision of income tax in previous financial years

24

(1,095)

Others (4) – (558) (1,677)

24. Discontinued operation

Following the approval of the Company’s shareholders on 24 December 2013 to dispose STC (which previously contributed to the steel yarn segment) and the completion of the disposal on 26 December 2013, the results from STC is presented separately on the statement of comprehensive income as “discontinued operation”. Previous period’s results have also been re-presented for discontinued operation. An analysis of the results of discontinued operation, and the gain recognised on the disposal of STC is as follows:

Group 2013 2012 RMB’000 RMB’000

Revenue 837,549 614,102 Expenses (1,019,645) (803,319) Loss before tax from discontinued operation (182,096) (189,217) Tax 582 582 Loss after tax from discontinued operation (181,514) (188,635) Pre-tax gain recognised on disposal 75,096 – Tax – – After tax gain recognised on disposal 75,096 – Loss from discontinued operation (106,418) (188,635) Loss from discontinued operation attributable to: Equity holders of the Company (24,736) (103,749) Non-controlling interests (81,682) (84,886) (106,418) (188,635)

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34


24. Discontinued operation (cont’d) Group 2013 2012

Loss per share from discontinued operation attributable to equity holders of the Company (RMB per share) (Note 25)

Basic (0.34) (1.41) Diluted (0.34) (1.41)

The impact of the discontinued operation on the cash flows of the Group are as follows: Group 2013 2012 RMB’000 RMB’000

Operating cash flows 163,019 378,274 Investing cash flows (375,856) (337,513) Financing cash flows 299,127 (39,187) 86,290 1,574

25. Loss per share Weighted average number of shares

The calculation of basic and diluted loss per share is based on the weighted average number of shares outstanding during the year of 73,400,000 (2012: 73,400,000) shares. There were no dilutive potential ordinary shares in the Group in existence for either year. From continuing and discontinued operations The calculation of the basic and diluted loss per share attributable to the equity holders of the Company is based on the loss for the year attributable to equity holders of the Company of RMB26,796,000 (2012: RMB159,544,000).

From continuing operations Earnings figures are calculated as follows: Group 2013 2012 RMB’000 RMB’000

Loss for the year attributable to equity holders of the Company (26,796) (159,544) Less: loss for the year from discontinued operation attributable to equity holders of the Company

(24,736)

(103,749)

Loss for the purposes of basic and diluted loss per share from continuing operations

(2,060)

(55,795)

From discontinued operation

Basic and diluted loss per share for the discontinued operation is based on the loss for the year from the discontinued operation attributable to equity holders of the Company of RMB24,736,000 (2012: RMB103,749,000).

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35


26. Significant related party transactions


(a) Purchase of power and steam and disposal of a subsidiary Group 2013 2012

RMB’000 RMB’000

Zhangjiagang Junma Polyester Manufacturing Co., Ltd (“ZJPMCL”) Purchase of power and steam 214,615 309,252 Disposal of a subsidiary 110,830 –

Certain directors and shareholders of ZJPMCL are close members of the family of certain directors of the Company.

(b) Year-end balance Group 2013 2012

RMB’000 RMB’000 ZJPMCL Trade payables – 12,952

(c) Key management personnel compensation

Key management personnel compensation is as follows: Group 2013 2012

RMB’000 RMB’000



(d) Corporate guarantees Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000

Bank loans of the Group and the Company

- guaranteed by ZJPMCL 564,188 430,000 564,188 200,000- guaranteed by STC 533,445 – 533,445 546,945 Bank loans of STC guaranteed by the Company

862,000

–

862,000

593,000

216

36

Junma Tyre Cord Company Limited And Its Subsidiaries 27. Financial instruments (a) Categories of financial instruments The following table sets out the financial instruments as at the balance sheet date: Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000


3,160,018

2,248,420

3,180,658

2,401,477 Financial liabilities At amortised cost 3,558,555 4,192,340 3,529,255 2,888,563 Derivative financial instruments

–

196

–

–


The Group and the Company are exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include foreign currency risk, interest rate risk, credit risk and liquidity risk. The Group’s overall risk management strategy seeks to minimise adverse effects from these financial risks on the Group’s financial performance. The Group uses derivatives such as non-deliverable forward foreign exchange contracts to hedge certain financial risk exposures.


(i) Foreign currency risk

The Group and the Company have currency exposures arising from transactions, assets and liabilities that are denominated in currencies other than the respective functional currencies of entities in the Group. The foreign currencies in which the Group’s and the Company’s currency risk arises are mainly United States Dollars (“USD”) and Euro. The Group used non-deliverable forward foreign exchange contracts to hedge approximately Nil (2012: 39%) of its trade and other payables in USD at the balance sheet date (Note 17). At balance sheet date, the Group and the Company have the following financial assets and financial liabilities denominated in foreign currencies based on information provided to key management:

Group USD Euro Total 2013 RMB’000 RMB’000 RMB’000

Financial assets Cash and cash equivalents 14,507 118 14,625 Trade and other receivables 229,913 – 229,913 Financial liabilities Trade and other payables (122,210) – (122,210) Borrowings (602,346) (30,832) (633,178) Net financial liabilities denominated in foreign currencies, representing net exposures to foreign currencies

(480,136)

(30,714)

(510,850)

217

37


27. Financial instruments (cont’d) (b) Financial risk management (cont’d) (i) Foreign currency risk (cont’d) Group USD Euro Total RMB’000 RMB’000 RMB’000


(273,032)

(59,801)

(332,833)


Company USD Euro Total RMB’000 RMB’000 RMB’000


(485,261)

(30,714)

(515,975)


(281,120)

(59,801)

(340,921)

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38


27. Financial instruments (cont’d) (b) Financial risk management (cont’d) (i) Foreign currency risk (cont’d)

The following table demonstrates the sensitivity to a reasonably possible change in the USD and EURO exchange rates against the respective functional currencies of the Group’s entities, with all other variables held constant, of the Group’s and the Company’s loss after tax:


USD/RMB - strengthened 5% (2012: 5%) 18,005 8,534 - weakened 5% (2012: 5%) (18,005) (8,534) Euro/RMB - strengthened 5% (2012: 5%) 1,152 2,243 - weakened 5% (2012: 5%) (1,152) (2,243)

Company Increase/(decrease) in loss after tax 2013 2012 RMB’000 RMB’000

USD/RMB - strengthened 5% (2012: 5%) 18,197 10,542 - weakened 5% (2012: 5%) (18,197) (10,542) Euro/RMB - strengthened 5% (2012: 5%) 1,152 2,243 - weakened 5% (2012: 5%) (1,152) (2,243)

(ii) Interest rate risk


The Group’s and the Company’s exposures to interest rate risk arises primarily from their bank borrowings. Borrowings at variable rates expose the Group and the Company to cash flow interest rate risk (ie. the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates). Borrowings at fixed rates expose the Group and the Company to fair value interest rate risk (ie. the risk that the value of a financial instrument will fluctuate due to changes in market rates). The Group’s and the Company’s policy is to manage interest cost using a mix of fixed and floating rate debts. The Group and the Company do not utilise derivatives to mitigate its interest rate risk.

The Group and the Company have no significant interest-bearing assets, except for bank deposits. The impacts of interest rate fluctuations on the bank deposits are not significant to the Group’s and the Company’s income.

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39


27. Financial instruments (cont’d) (b) Financial risk management (cont’d) (ii) Interest rate risk (cont’d) Sensitivity analysis for interest rate risk

The sensitivity analysis below have been determined based on the exposure to interest rates for borrowings at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of borrowings that have floating rates.

The Group’s and the Company’s borrowings at variable rates on which effective hedges have not been entered into, are denominated mainly in RMB and USD. If the interest rates increase/decrease by 50 (2012: 50) basis points with all other variables including tax rate being held constant, the effects arising from loss net of tax are as follows:

Increase/(decrease) in loss after tax 2013 2012

Group RMB’000 RMB’000 Interest rate - Increase by 50 basis points 11,891 12,070 - Decrease by 50 basis points (11,891) (12,070) Company Interest rate - Increase by 50 basis points 11,891 8,217 - Decrease by 50 basis points (11,891) (8,217)

(iii) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company. For trade receivables, the Group and the Company adopt the policy of dealing only with customers of appropriate credit history and obtaining sufficient security where appropriate to mitigate credit risk. For other financial assets, the Group and the Company adopt the policy of dealing only with high credit quality counterparties. The Group’s and the Company’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group and the Company trades only with recognised and creditworthy third parties. For customers who wish to trade on credit terms, the Group and the Company will take into account the quantity of the customer order, background and creditworthiness of the customer, level of risk involved, payment history of the customer and relationship with the customer. In addition, receivable balances are monitored on an ongoing basis.

220

40



(b) Financial risk management (cont’d) (iii) Credit risk (cont’d)

At the balance sheet date, the Group and the Company had no significant concentrations of credit risk except for trade receivables from 1 debtor (2012: 2 debtors) that individually represented 13% (2012: 7% - 16%) of trade receivables as follows:


82,666 108,980 82,666 90,622

–* 91,144 –* 41,386 82,666 200,124 82,666 132,008

* Balances at balance sheet date were less than 10% of the trade receivables of the


As the Group and the Company do not hold any collateral, the maximum exposure to credit risk is the carrying amount of each financial instruments presented on the balance sheets and the amount of RMB862,000,000 relating to corporate guarantees given by the Company to banks for a related party’s bank borrowings (2012: RMB593,000,000 for a subsidiary’s bank borrowings).



By geographical areas People’s Republic of China 428,444 652,786 433,431 395,529 Other countries 195,075 175,438 195,075 175,438 623,519 828,224 628,506 570,967 By types of customers Non-related parties - Multi national companies 195,075 177,732 195,075 177,732 - Other companies 428,444 650,492 424,051 369,753 Subsidiaries – – 9,380 29,551 623,519 828,224 628,506 577,036

Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group and the Company. Cash and cash equivalents that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.

221

41


27. Financial instruments (cont’d) (b) Financial risk management (cont’d) (iii) Credit risk (cont’d) Financial assets that are past due and/or impaired







(28,959)

(46,351) (28,959) (28,068)

11,282 – 11,282 – At 1 January 46,351 29,588 28,068 24,800 Allowance made 13,443 16,763 891 3,268 Disposal of subsidiary (30,835) – – – At 31 December 28,959 46,351 28,959 28,068

222

42


27. Financial instruments (cont’d) (b) Financial risk management (cont’d) (iii) Credit risk (cont’d)




(5,184) (11,971)

(5,184)

(11,050)

1,799 – 1,799 – At 1 January 11,971 5,136 11,050 4,514 Allowance made 2,371 6,835 2,371 6,536 Allowance written off (6,177) – (6,177) – Allowance written back (2,238) – (2,060) – Disposal of subsidiary (743) – – – At 31 December 5,184 11,971 5,184 11,050


(iv) Liquidity risk



With regard to its short-term bank borrowings outstanding at 31 December 2013, the Group’s and the Company’s principal bankers have confirmed their intention to renew the relevant borrowings as they fall due during 2014. The directors believe that the Group and Company will have sufficient cash resources to satisfy future working capital and other financing requirements.

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43




Between Less than 1 and 5 1 year years RMB’000 RMB’000

Group At 31 December 2013 Trade and other payables 1,181,948 – Borrowings 2,412,026 – Financial guarantee 862,000 – 4,455,974 – At 31 December 2012 Trade and other payables 1,493,244 – Borrowings 2,338,817 488,651 3,832,061 488,651 Company At 31 December 2013 Trade and other payables 1,152,648 – Borrowings 2,412,026 – Financial guarantee 862,000 – 4,426,674 – At 31 December 2012 Trade and other payables 1,052,458 – Borrowings 1,869,900 – Financial guarantee 593,000 – 3,515,358 –

The Group’s derivative financial instruments comprised of net-settled currency forwards with contractual maturity term of less than one year from the balance sheet date. The contract/nominal value of the currency forwards as at the balance sheet date is disclosed in Note 17.

224

44


27. Financial instruments (cont’d) (c) Fair value of financial instruments that are carried at fair value

The following table presents the level of fair value hierarchy for each class of financial instruments of the Group measured at fair value on the balance sheet at 31 December 2013.

Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000

Group 2013 Liabilities Non-hedging derivatives – – – – 2012 Liabilities Non-hedging derivatives – 196 – 196

The fair value hierarchy levels are defined as follows: a) Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

b) Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (ie derived from prices); and

c) Level 3 - input for the asset or liability are not based on observable market date (unobservable inputs).

Determination of fair value

The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date and these instruments are included in Level 2.

(d) Fair value of financial instruments by classes that are not carried at fair value and

whose carrying amounts are reasonable approximation of fair value


28. Segment information Primary reporting format – business segments The Group is organised into two main business units as follows: (i) Chemical fibre: manufacture and sale of chemical fibre and materials; and (ii) Steel yarn: manufacture and sale of steel yarn and materials.

Management monitors the operating results of its business units separately for making decisions about allocation of resources and assessment of performances of each segment.

225

45


28. Segment information (cont’d)

The segment information provided to management for the reportable segments are as follows:

Continuing operations Discontinued operation Chemical Fibre Steel Yarn Group 2013 2012 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Segment revenue Revenue from external customers

2,513,762

2,438,718

837,548

614,102

3,351,310 3,052,820

Segment profit/(loss) 113,558 77,299 (131,502) (137,488) (17,944) (60,189) Pre-tax gain recognised on disposal

–

–

75,096

–

75,096 –

Finance costs (166,188) (185,918) Income tax expense 558 1,677 Loss for the year (108,478) (244,430) Depreciation and amortisation for the year

48,809

49,761

121,203

111,957

170,012

161,718

Write down of inventories

508

–

7,155

10,073

7,663 10,073

Segment assets 2,238,521 1,863,990 – 1,941,622 2,238,521 3,805,612 Unallocated assets 1,451,051 642,598 Total assets 3,689,572 4,448,210 Segment liabilities 1,222,368 1,090,059 – 424,724 1,222,368 1,514,783 Unallocated liabilities 2,376,607 2,705,160 Total liabilities 3,598,975 4,219,943 Capital expenditure incurred during the year

50,635

20,185

377,214

324,626

427,849

344,811

Additions to lease prepayments for the year

–

–

–

11,619

–

11,619

Segment results Performance of each segment is evaluated based on segment profit or loss which is measured differently from the net profit or loss before tax in the consolidated financial statements. Finance costs and income taxes are not allocated to segments as Group financing and income taxes are managed on a group basis.

226

46


28. Segment information (cont’d) Segment assets

The amounts provided to the Management with respect to total assets are measured in a manner consistent with that of the financial statements. Management monitors the assets attributable to each segment for the purposes of monitoring segment performance and for allocating resources between segments. All assets are allocated to reportable segments other than fixed deposits which are classified as unallocated assets.

Segment liabilities

The amounts provided to Management with respect to total liabilities are measured in a manner consistent with that of the financial statements. All liabilities are allocated to the reportable segments based on the operations of the segments other than amount due from a related party, tax payable and borrowings. These liabilities are classified as unallocated liabilities.


The headquarters and manufacturing operations of the Group’s two business segments are located in the PRC. The segment assets, liabilities, capital expenditure and lease prepayments are located in the PRC. The Group sells to customers located in different geographical locations as follow:

Continuing Discontinued operations operation 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000

Revenue from external customers The PRC 1,155,619 1,016,654 835,919 612,492India 497,816 553,873 1,337 880Other countries (principally Indonesia, Thailand and Egypt) (2012: principally Thailand, Turkey and Indonesia)

860,327

868,191

292

730 2,513,762 2,438,718 837,548 614,102



29. Capital management



227

47


29. Capital management (cont’d)


2013 2012 RMB’000 RMB’000

Trade and other payables 1,222,368 1,514,587Borrowings 2,376,607 2,699,106Less: Cash and cash equivalents (748,594) (760,400) Net debts 2,850,381 3,453,293 Equity attributable to the equity holders of the Company 90,597 117,349Less: Statutory surplus reserve (Note 12) (48,652) (48,652) Total capital 41,945 68,697


The Group and the Company have provided corporate guarantees to banks for borrowings of RMB862,000,000 taken by its related party, STC (2012: borrowings of RMB593,000,000 taken by subsidiary and guaranteed by the Company). The directors have assessed the fair value of these financial guarantees to have no material financial impact on the results for the financial year.

31. Capital commitment Capital commitments contracted for but not provided for in the financial statements:


Purchase of property, plant and equipment

–

42,062

– –



228





31 DECEMBER 2014 CONTENTS Directors’ Report 1 Statement by Directors 3 Independent Auditor’s Report 4 Balance Sheets 6 Consolidated Statement of Profit or Loss and Other Comprehensive Income 7 Consolidated Statement of Changes in Equity 8 Consolidated Statement of Cash Flows 9 Notes to the Financial Statements 10

229

1


Directors

The directors in office at the date of this report are: Yang Peixing (Executive chairman) Liu Yaoxiang (Executive director) Liu Zhenfeng (Executive director) Zhou Zhidan (Executive director) Jen Shek Voon (Independent director) Teng Cheong Kwee (Independent director) Shan Wenfeng (Independent director) Arrangement to enable directors to acquire benefits Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Directors’ interest in shares or debentures Ordinary shares of RMB1.00 each Holdings at Holdings Holdings at beginning at end 21 January of the year of the year 2015 Junma Tyre Cord Company Limited Yang Peixing 15,170,000 15,395,000 15,395,000 Liu Yaoxiang 2,500,000 2,500,000 2,500,000 Liu Zhenfeng 4,500,000 4,500,000 4,500,000 Jen Shek Voon 240,000 240,000 240,000 The Company’s Executive Director, Mr Zhou Zhidan, holds 1.66% of the shareholdings in Zhangjiagang Buole Investment Development Company Limited (“Buole”), a substantial shareholder of the Company. Buole holds 30,125,000 (41%) domestic shares in the Company. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning of the financial year, or at the end of the financial year. Directors’ contractual benefits Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member or with a company in which he has substantial financial interest except as disclosed in the financial statements.

230

2


Share options


financial year.



20 April 2015

231

3


notes to these financial statements as set out on pages 6 to 47 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2014 and of the results, changes in equity and cash flows of the Group for the financial year then ended in accordance with International Financial Reporting Standards; and

(b) at the date of this statement, after considering the matters as described in Note 2(a) to the

financial statements, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the directors Yang Peixing Director


20 April 2015

232

4

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JUNMA TYRE CORD COMPANY LIMITED (Incorporated in the People’s Republic of China) Report on the Financial Statements We were engaged to audit the accompanying financial statements of Junma Tyre Cord Company Limited (“the Company”) and its subsidiaries (“the Group”) as set out on pages 6 to 47, which comprise the balance sheets of the Group and the Company as at 31 December 2014 and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (“IFRS”), and for such internal control as the management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on conducting our audit in accordance with International Standards on Auditing. Because of the matters described in the Basis for Disclaimer of Opinion paragraphs, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Basis for Disclaimer of Opinion 1. Going concern assumptions As disclosed in the Note 2(a) to the financial statements, the Group incurred a loss of

RMB20,665,000 for the year ended 31 December 2014 and, as of that date, the Group’s and the Company’s current liabilities exceeded the current assets by RMB173,279,000 and RMB154,829,000 respectively.

As further disclosed in Note 15 to the financial statements, the Company breached certain

financial covenants of a bank as at 31 December 2014. However, the bank has not enforced their rights for immediate repayments.

In addition, as disclosed in Note 28 to the financial statements, the Group and the Company have

provided corporate guarantees to banks for borrowings of RMB849,818,000 taken by a related party, Zhangjiagang Junma Steel Tyre Cord Co. Ltd (“STC”), which is a former subsidiary of the Company. As STC had been persistently making losses, it has recorded a deficit in its shareholders’ equity of approximately RMB206 million based on its management accounts as at 31 December 2014. There is significant uncertainty as to whether the lenders may recall/cancel/discontinue their bank facilities to STC and call upon the corporate guarantees provided by the Company.

These conditions indicate the existence of a material uncertainty which may cast significant doubt

about the Group’s and the Company’s ability to continue as going concerns.

The directors of the Company believe that the going concern basis of preparation of financial statements is appropriate, having considered that the Group’s and the Company’s principal bankers, including the above-mentioned bank whose financial covenants have been breached, have confirmed their intention to renew the short-term bank borrowings as and when they fall due in year 2015.

The ability of the Group and the Company to continue as going concerns also depend on the abilities of the Group and the Company to generate profit and positive cash flows from operations, and obtain additional bank borrowings and other fundings for its working capital requirements in the next twelve months.

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5

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JUNMA TYRE CORD COMPANY LIMITED (cont’d) (Incorporated in the People’s Republic of China) Report on the Financial Statements (cont’d) Basis for Disclaimer of Opinion (cont’d) 1. Going concern assumptions (cont’d) The ability of the Group and the Company to remain as going concerns are therefore dependent

on the above assumptions, which are premised on future events and market conditions, the outcome of which is inherently uncertain.

The financial statements have been prepared on the assumptions that the Group and the Company

will continue as going concerns. If the Group and the Company are unable to continue in operational existence for the foreseeable future, and the Group and the Company may be unable to discharge their liabilities in the normal course of business, adjustments may have to be made to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts at which they are currently recorded in the balance sheets. In addition, the Group and the Company may have to provide for further liabilities that might arise, and to reclassify non-current assets as current assets. No such adjustments have been made to these financial statements.

We were unable to obtain sufficient appropriate audit evidence to conclude as to the

appropriateness of the use of the going concern assumptions in the preparation of these financial statements. As a result, we were unable to determine whether any adjustments might have been found necessary in respect of the Group’s financial statements for the financial year ended 31 December 2014 and the Company’s balance sheet as at 31 December 2014.

2. Amount due from a related party As disclosed in Note 9 to the financial statements, the amount due from a related party, STC at 31

December 2014 was RMB836,437,000. Based on its management accounts, STC has recorded a net loss of approximately RMB271 million for the financial year ended 31 December 2014 and, as of that date, it has a deficit in its shareholders’ equity of approximately RMB206 million. Accordingly, there is a significant uncertainty as to whether the full amount due from STC is recoverable.

We were unable to obtain sufficient information and explanation to enable us to conclude whether

any impairment allowance is necessary. As a result, we were unable to determine whether any adjustments might have been found necessary in respect of the Group’s financial statements for the financial year ended 31 December 2014 and the Company’s balance sheet as at 31 December 2014.

Disclaimer of Opinion Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements. Baker Tilly TFW LLP Public Accountants and Chartered Accountants Singapore 20 April 2015

234

6

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS At 31 December 2014 Group Company 2014 2013 2014 2013 Note RMB’000 RMB’000 RMB’000 RMB’000 ASSETS Non-current assets Property, plant and equipment 4 227,639 222,939 206,226 198,566 Lease prepayments 5 15,571 15,984 15,571 15,984 Investments in subsidiaries 6 – – – 12,515

Total non-current assets 243,210 238,923 221,797 227,065

Current assets Inventories 7 275,722 275,854 260,427 238,749 Trade and other receivables 8 792,452 1,517,774 821,644 1,542,838 Due from a related party 9 836,437 908,427 836,437 908,427 Cash and cash equivalents 10 712,429 748,594 704,902 743,703


Total assets 2,860,250 3,689,572 2,845,207 3,660,782

EQUITY AND LIABILITIES Equity Share capital and share premium 11 179,340 179,340 179,340 179,340 Other reserves 12 58,846 58,847 58,762 58,762 Accumulated losses 13 (168,255) (147,590) (171,134) (146,523)


69,931

90,597

66,968

91,579

Current liabilities Trade and other payables 14 906,139 1,222,368 894,059 1,192,596 Borrowings 15 1,884,180 2,376,607 1,884,180 2,376,607




235

7

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the financial year ended 31 December 2014 2014 2013 Note RMB’000 RMB’000 Continuing operations Revenue 2,306,269 2,513,762 Cost of sales 16 (2,152,395) (2,325,022)

Gross profit 153,874 188,740

Other income 17 111,891 76,348 Distribution and selling expenses (85,369) (81,785) Administrative expenses (56,237) (53,989) Other operating expenses (10,166) (15,756) Finance costs 18 (134,658) (115,594)

Loss before tax 19 (20,665) (2,036)

Tax expense 21 – (24)

Loss from continuing operations (20,665) (2,060)

Discontinued operation Loss from discontinued operation, net of tax 22 – (106,418)

Loss for the year (20,665) (108,478)

Other comprehensive (loss)/income Item that is or may be reclassified subsequently to profit or loss:

Currency translation differences arising on consolidation (1) 44


Loss attributable to: Equity holders of the Company (20,665) (26,796) Non-controlling interests – (81,682)

(20,665) (108,478)

Total comprehensive loss attributable to: Equity holders of the Company (20,666) (26,752) Non-controlling interests – (81,682)

(20,666) (108,434)

Loss per share from continuing operations attributable to equity holders of the Company (RMB per share)

23

Basic (0.28) (0.03)

Diluted (0.28) (0.03)

Loss per share attributable to equity holders of the Company (RMB per share)

23

Basic (0.28) (0.37)

Diluted (0.28) (0.37)


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8


Attributable to equity holders of the Company Share Non- capital and Other Accumulated controlling Total share premium reserves losses Total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


179,340

58,847

(147,590)

90,597

– 90,597

Loss for the year – – (20,665) (20,665) – (20,665) Other comprehensive loss


–

(1)

–

(1)

–

(1)


–

(1)

(20,665)

(20,666)

– (20,666)


179,340

58,846

(168,255)

69,931

– 69,931


179,340

58,803

(120,794)

117,349

110,918 228,267



–

44

–

44

–

44

Total comprehensive income/(loss) for the year

–

44

(26,796)

(26,752)

(81,682) (108,434)

Disposal of a subsidiary – – – – (29,236) (29,236) Balance at 31 December 2013

179,340

58,847

(147,590)

90,597

– 90,597


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9

JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the financial year ended 31 December 2014 2014 2013 Note RMB’000 RMB’000 Cash flows from operating activities Loss before tax from continuing operations (20,665) (2,036) Loss before tax from discontinued operation – (107,000)

(20,665) (109,036)

Adjustments for: Amortisation of lease prepayments 413 4,781 Depreciation of property, plant and equipment 43,592 165,231 Interest expense 127,094 157,299 Interest income (17,528) (19,381) Interest income from a related party, STC (51,574) – Gain on disposals of property, plant and equipment – (8) Gain on disposal a of subsidiary – (75,096) Write down of inventories 3,396 7,662


Changes in working capital Inventories (3,264) 32,636 Trade and other receivables 725,322 (1,641,058) Pledged and long-term bank deposits (141,261) 99,975 Trade and other payables (326,304) 1,190,718

Cash generated from/(used in) operations 339,221 (186,277) Income tax paid – (24)

Net cash generated from/(used in) operating activities 339,221 (186,301)

Cash flows from investing activities Purchases of property, plant and equipment 4 (38,219) (427,849) Proceeds from disposals of property, plant and equipment – 560 Disposal of a subsidiary, net cash outflow 6(c) – (49,418) Repayment from a related party, STC 71,990 – Interest received 69,102 19,381

Net cash generated from/(used in) investing activities 102,873 (457,326)

Cash flows from financing activities Proceeds from borrowings 3,491,005 5,722,422 Repayments of borrowings (3,983,432) (4,831,520) Interest paid (127,094) (159,106)

Net cash (used in)/generated from financing activities (619,521) 731,796

Net (decrease)/increase in cash and cash equivalents (177,427) 88,169 Cash and cash equivalents at beginning of the year 205,971 117,802



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JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2014 These notes from an integral part of and should be read in conjunction with the accompanying financial statements. 1. General information

Junma Tyre Cord Company Limited (the “Company”) is incorporated in the People’s Republic of China (the “PRC”) as a joint-stock company with limited liability and is publicly traded on the Catalist of Singapore Exchange Securities Trading Limited. Its registered office is at 80 Hedong Road, Chenghang, Yangshe Town, Zhangjiagang City, Jiangsu Province, the People’s Republic of China (“PRC”).

The principal activities of the Company are the manufacturing and trading of chemical fibre and materials. The principal activities of its subsidiaries are disclosed in Note 6(a).

2. Summary of significant accounting policies (a) Going concern assumptions

The Group incurred a loss of RMB20,665,000 for the year ended 31 December 2014. The Group’s and the Company’s current liabilities exceeded the current assets by RMB173,279,000 and RMB154,829,000, respectively as at 31 December 2014.

As disclosed in Note 15, the Group and the Company breached certain financial covenants of a bank as at 31 December 2014. However, the bank has not enforced their rights for immediate repayments.

In addition, as disclosed in Note 28, the Group and the Company have provided corporate guarantees to banks for borrowings of RMB849,818,000 taken by a related party, Zhangjiagang Junma Steel Tyre Cord Co. Ltd (“STC”), which is a former subsidiary of the Company. As STC had been persistently making losses, it has recorded a deficit in its shareholders’ equity of approximately RMB206 million as at 31 December 2014. There is significant uncertainty as to whether the lenders may recall/cancel/discontinue their bank facilities to STC and call upon the corporate guarantees provided by the Group and the Company.

These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s and the Company’s ability to continue as going concerns.

The directors of the Company believe that the going concern basis of preparation of financial statements is appropriate, having considered that the Group’s and the Company’s principal bankers, including the above-mentioned bank whose financial covenants have been breached, have confirmed their intention to renew the short-term bank borrowings as and when they fall due in year 2015.

The ability of the Group and the Company to continue as going concerns also depend on the abilities of the Group and the Company to generate profit and positive cash flows from operations, and obtain additional bank borrowings and other fundings for its working capital requirements in the next twelve months.

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2. Summary of significant accounting policies (cont’d) (a) Going concern assumptions (cont’d)

The ability of the Group and the Company to remain as going concerns are therefore dependent on the above assumptions, which are premised on future events and market conditions, the outcome of which is inherently uncertain.

The financial statements have been prepared on the assumptions that the Group and the Company will continue as going concerns. If the Group and the Company are unable to continue in operational existence for the foreseeable future, and the Group and the Company may be unable to discharge their liabilities in the normal course of business, adjustments may have to be made to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts at which they are currently recorded in the balance sheets. In addition, the Group and the Company may have to provide for further liabilities that might arise, and to reclassify non-current assets as current assets. No such adjustments have been made to these financial statements.

(b) Basis of preparation





The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

The carrying amounts of cash and cash equivalents, trade and other current receivables and payables approximate their respective fair values due to the relatively short-term maturity of these financial instruments. In the current financial year, the Group has adopted all the new and revised IFRS and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) that are relevant to its operations and effective for the current financial year. The adoption of these new/revised IFRS and IFRIC did not have any material effect on the financial results or position of the Group and the Company.

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(b) Basis of preparation (cont’d)

New standards, amendments to standards and interpretations that have been issued at the balance sheet date but are not yet effective for the financial year ended 31 December 2014 have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Group and the Company except as disclosed below: (i) IFRS 9 Financial Instruments

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.

IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 9.

(ii) IFRS 15 Revenue from contracts with customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 15.

(c) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when the Group is exposed to, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In the Company’s balance sheet, investments in subsidiaries are accounted for at cost less accumulated impairment losses. On disposal of the investment, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.

(d) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances.

Intragroup balances and transactions, including income, expenses and dividends, are eliminated in full. Profits and losses resulting from intragroup transactions that are recognised in assets, such as inventory and property, plant and equipment, are eliminated in full.

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(d) Basis of consolidation (cont’d)

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are recognised as expenses as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

Any excess of the fair value of the consideration transferred in the business combination, the amount of any non-controlling interest in the acquiree (if any) and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the fair value of the net identifiable assets acquired is recorded as goodwill. In instances where the latter amount exceeds the former and the measurement of all amounts has been reviewed, the excess is recognised as gain on bargain purchase in profit or loss on the date of acquisition.

Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and balance sheet. Total comprehensive income is attributed to the non-controlling interests based on their respective interests in a subsidiary, even if this results in the non-controlling interests having a deficit balance.

For non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in the event of liquidation, the Group elects on an acquisition-by-acquisition basis whether to measure them at fair value, or at the non-controlling interests’ proportionate share of the acquiree’s net identifiable assets, at the acquisition date. All other non-controlling interests are measured at acquisition-date fair value or, when applicable, on the basis specified in another standard.



When a change in the Company’s ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings if required by a specific IFRS.

Any retained equity interest in the previous subsidiary is remeasured at fair value at the date

that control is lost. The difference between the carrying amounts of the retained interest at the date control is lost, and its fair value is recognised in profit or loss.

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2. Summary of significant accounting policies (cont’d) (e) Property, plant and equipment





Depreciation


Depreciation is calculated on a straight-line basis to write off the cost of property, plant and

equipment over their expected useful lives. The estimated useful lives are as follows:


The residual values, estimated useful lives and depreciation method of property, plant and

equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise.

Fully depreciated assets are retained in the financial statements until they are no longer in

use. Properties in the course of construction for production, or administrative purposes, or for

purposes not yet determined, are carried at cost, less any recognised impairment loss until construction or development is completed. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policies. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

(f) Lease prepayment Leases of land under which the lessor has not transferred all the risks and benefits of

ownership are classified as operating leases. Lease prepayment for land use rights is stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the profit or loss on a straight-line basis over the term of the respective leases.

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2. Summary of significant accounting policies (cont’d) (g) Impairment of non-financial assets At each balance sheet date, the Group assesses the carrying amounts of its non-financial

assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing

value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its

carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is recognised in other comprehensive income up to the amount of any previous revaluation.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-

generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

(h) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using

the weighted average cost method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production overheads based on normal operating capacity but exclude borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses.

(i) Financial assets

(i) Classification

The Group classifies its financial assets according to the nature of the assets and the

purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. The Group’s only financial assets are loans and receivables.


Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. They are included in current assets, except those maturing later than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are presented as “trade and other receivables” (excluding advanced payments, prepayments and non-refundable deposits) and “cash and cash equivalents” on the balance sheets.

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(i) Financial assets (cont’d) (ii) Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date - the date on

which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

On disposal of a financial asset, the difference between the net sale proceeds and its

carrying amount is recognised in profit or loss. Any amount in the fair value reserve relating to that asset is also transferred to profit or loss.

Trade receivables that are factored out to banks and other financial institutions with

recourse to the Group are not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the financial institutions is recorded as borrowings.

(iii) Initial measurement Loans and receivables are initially recognised at fair value plus transaction costs. (iv) Subsequent measurement Loans and receivables are carried at amortised cost using the effective interest method,

less impairment. Interest income on financial assets are recognised separately in profit or loss. (v) Impairment The Group assesses at each balance sheet date whether there is objective evidence that a

financial asset or a group of financial assets is impaired. Loans and receivables Significant financial difficulties of the debtor, probability that the debtor will enter

bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivable is impaired.

The carrying amount of these assets is reduced through the use of an impairment

allowance account, and the amount of the loss is recognised in profit or loss. The allowance amount is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised the same line item in profit or loss.

If in subsequent periods, the impairment loss decreases, and the decrease can be related

objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversed date.

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Junma Tyre Cord Company Limited And Its Subsidiaries 2. Summary of significant accounting policies (cont’d)

(j) Cash and cash equivalents For the purpose of presentation in the consolidated statement of cash flows, cash and cash

equivalents comprise cash on hand and deposits with financial institutions which are subject to an insignificant risk of change in value. Pledged deposits with financial institutions and deposits with financial institutions with maturity exceeding three months are excluded from cash and cash equivalents.

(k) Income taxes Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is

recognised in profit or loss except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable or recoverable on the taxable income for the current

year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable or recoverable in respect of previous years.

Deferred income tax is provided using the liability method, on all temporary differences at the

balance sheet date arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except where the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination, and at the time of the transaction, affects neither the accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on currently enacted or substantively enacted tax rates at the balance sheet date. Deferred income tax are charged or credited to equity if the tax relates to items that are credited or charged, in the same or a different period, directly to equity.

(l) Financial liabilities

Financial liabilities include trade and other payables (excluding advanced payments from customers) and borrowings. Financial liabilities are recognised on the balance sheets when, and only when, the Group becomes a party to the contractual provisions of the financial instruments. Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transaction costs.

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(l) Financial liabilities (cont’d)

Subsequent to initial recognition, derivatives are measured at fair value. Other financial liabilities (except for the financial guarantees) are measured at amortised cost using effective interest method. For financial liabilities other than derivatives, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in profit or loss. Net gains or losses on derivatives include exchange differences. A financial liability is derecognised when the obligation under the liability is extinguished.





(n) Provisions for other liabilities

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past event, and it is probable that an outflow of economic resources will be required to settle that obligation and the amount can be estimated reliably. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the balance sheet date. Where the effect of the time value of money is material, the amount of the provision shall be discounted to present value using a pre-tax discount rate that reflects the current market assessment of the time value of money and risks specific to the obligation.

When discounting is used, the increase in the provision due to passage of time is recognised as a finance cost in profit or loss.

(o) Employee benefits Defined contribution benefits are post-employment benefit plans under which the Group

pays fixed contributions into defined contribution plans organised by the government for its eligible employees, and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. The Group’s contribution to defined contribution benefits are recognised as an expense in the period in which the related service is performed.

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(p) Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of

goods and rendering of services, net of value added tax, rebates and discounts, and after eliminating sales within the Group. Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the entity, and the amount of revenue and the related cost can be reliably measured.

(i) Sale of goods

Revenue from sale of goods is recognised when a Group entity has delivered the

products to the customer and significant risks and rewards of ownership of the goods have been passed to the customer.

(ii) Interest income Interest income is recognised on a time proportion basis using the effective interest

method.

(q) Borrowing costs Borrowing costs, which comprise interest and other costs incurred in connection with the

borrowing of funds, are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are recognised in the profit or loss using the effective interest method.

(r) Operating leases Leases where a significant portion of the risks and rewards incidental to ownership are

retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to profit or loss on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period expires, any payment required

to be made to the lessor by way of penalty is recognised as an expense in the period in which the termination takes place.

(s) Foreign currencies

(i) Functional and presentation currency


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(s) Foreign currencies (cont’d)

(ii) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are

translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Currency translation gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except for currency translation differences on net investment in foreign operations and borrowings and other currency instruments qualifying as net investment hedges for foreign operations, which are included in the currency translation reserve within equity in the consolidated financial statements. The currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

Non-monetary items measured at fair values in foreign currencies are translated using

the exchange rates at the date when the fair values are determined.



(i) Assets and liabilities are translated at the closing rates at the date of the balance

sheet; (ii) Income and expenses are translated at average exchange rates (unless the average is

not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and


On consolidation, exchange differences arising from the translation of the net investment in foreign operations (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign currency translation reserve. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. On disposal of a foreign group entity, the cumulative amount of the currency translation reserve relating to that particular foreign entity is reclassified from equity and recognised in profit or loss when the gain or loss on disposal is recognised.

(t) Segment reporting


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2. Summary of significant accounting policies (cont’d) (u) Government grants



(v) Discontinued operations

A component of the Group is classified as a ‘discontinued operation’ when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations.

In profit or loss of the current reporting period, and of the comparative period of the previous year, all income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in profit or loss.

3. Significant accounting judgments and estimates

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the balance sheet date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

(i) Amount due from a related party

Management assesses the recoverability of the Group’s and the Company’s amount due from a related party at the end of each reporting period. As at 31 December 2014, the Group assessed that there is no significant doubt in its ability to collect the outstanding debt, and accordingly, no allowance for impairment was made on this balance. In assessing the recoverability, management considers certain expectations and assumptions regarding the ability of the related party to make payments as well as the market conditions. These assumptions are inherently uncertain. In the event that such expectations and assumptions are different from the current estimation, such difference will impact the carrying value of amount due from a related party and the allowance for impairment expenses in the period in which such estimate has been changed. As at 31 December 2014, the carrying amount of the amount due from a related party of the Group and the Company was RMB836,437,000 (2013: RMB908,427,000).

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3. Significant accounting judgments and estimates (cont’d) Key sources of estimation uncertainty (cont’d) (ii) Impairment allowance for trade and other receivables

Management reviews the Group’s and the Company’s trade and other receivables at each reporting date to determine whether there is objective evidence that the Group and the Company will not be able to collect all amounts due according to the original terms of the receivables. As at 31 December 2014, management believes that the allowances for impairment for trade and other receivables of RMB43,837,000 (2013: RMB34,143,000) for the Group and for the Company are adequate. The carrying amounts of the Group’s and the Company’s trade and other receivables are disclosed in Note 8.

(iii) Impairment of non-financial assets

Management assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Fair value less costs to sell calculation is based on observable market prices or market valuations less incremental costs for disposing asset. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

The Group determined that the loss incurred during the financial year as an indication that the carrying amount of the property, plant and equipment may not be recoverable.

In this respect, an external independent valuer was engaged to estimate the recoverable amounts. The recoverable amount of the cash-generating unit has been determined based on fair value less costs to sell. As the recoverable amount as at 31 December 2014 determined by the independent valuer was higher than the carrying amount of the property, plant and equipment, no impairment allowance is considered necessary. As at 31 December 2014, the carrying amounts of the property, plant and equipment of the Group and the Company are disclosed in Note 4.

(iv) Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these assets to be between 3 and 30 years. The carrying amounts of the Group’s and the Company’s property, plant and equipment are disclosed in Note 4. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

(v) Net realisable value of inventories


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4. Property, plant and equipment

Machinery Construction- and Motor Other in- Buildings equipment vehicles equipment progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Group At 1 January 2013 Cost 310,082 1,560,337 6,435 13,088 344,127 2,234,069 Accumulated depreciation

(97,810)

(805,455)

(4,249)

(7,358)

–

(914,872)



212,272

754,882

2,186

5,730

344,127

1,319,197

Additions 4,144 40,194 252 3,352 381,518 429,460 Transfer 10,000 10,178 – – (20,178) – Disposals – (552) – – – (552) Depreciation charge (16,089) (146,259) (337) (2,546) – (165,231) Disposal of a subsidiary (177,624) (516,942) (55) (3,058) (662,256) (1,359,935)

32,703 141,501 2,046 3,478 43,211 222,939

At 31 December 2013 Cost 106,915 590,394 6,451 9,180 43,211 756,151 Accumulated depreciation

(74,212)

(448,893)

(4,405)

(5,702)

–

(533,212)



32,703

141,501

2,046

3,478

43,211

222,939

Additions 12 173 187 1,542 46,378 48,292 Transfer – 77,844 – 231 (78,075) – Depreciation charge (4,660) (36,990) (469) (1,473) – (43,592)

28,055 182,528 1,764 3,778 11,514 227,639

At 31 December 2014 Cost 106,927 668,411 6,638 10,953 11,514 804,443 Accumulated depreciation

(78,872)

(485,883)

(4,874)

(7,175)

–

(576,804)


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4. Property, plant and equipment (cont’d) Machinery Construction- and Motor Other in- Buildings equipment vehicles equipment progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Company At 1 January 2013 Cost 92,901 564,780 6,064 5,908 – 669,653 Accumulated depreciation (55,950) (410,535) (3,826) (4,052) – (474,363)



36,951

154,245

2,238

1,856

–

195,290

Additions – 3,549 252 2,380 42,865 49,046 Disposals – (552) – – – (552) Depreciation charge (4,800) (38,441) (557) (1,420) – (45,218)

32,151 118,801 1,933 2,816 42,865 198,566




32,151

118,801

1,933

2,816

42,865

198,566

Additions 12 173 187 1,542 46,148 48,062 Transfer – 77,844 – – (77,844) – Depreciation charge (4,628) (33,960) (455) (1,359) – (40,402)

27,535 162,858 1,665 2,999 11,169 206,226



Certain buildings, machinery and equipment of the Group and the Company with net carrying value of RMB120,422,000 (2013: RMB146,978,000) have been pledged as securities for bank borrowings (Note 15(b)). The Group’s property, plant and equipment included borrowing costs arising from bank loans borrowed specifically for the purpose of the construction of a plant. During the previous financial year, the borrowing costs capitalised as cost of construction-in-progress of the Group amounted to RMB1,611,000. The rates used to determine the amount of borrowing costs eligible for capitalisation were at 6.46% to 6.57% per annum, which were the interest rates of the specific borrowings in the previous financial year.

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5. Lease prepayments Group Company RMB’000 RMB’000



Year ended 31 December 2013 Opening net carrying value 215,649 16,397 Disposal of a subsidiary (194,884) – Amortisation charge (4,781) (413)




Year ended 31 December 2014 Opening net carrying value 15,984 15,984 Amortisation charge (Note 19) (413) (413)




Lease prepayments represent payments made for land use rights of two (2013: two) pieces of land situated in the PRC on which the buildings of the Company and the Group are erected. The leases run for an initial period of 50 years with expiry dates on 31 August 2052 and 9 September 2052 respectively. None of the leases include contingent rentals.

The land use rights of the Group and Company with net carrying values of RMB15,571,000 (2013: RMB15,984,000) have been pledged as securities for banking borrowings (Note 15(b)).

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6. Investments in subsidiaries Company 2014 2013 RMB’000 RMB’000

Unquoted equity investments, at cost Balance at beginning of year 12,515 155,567 Impairment loss (b) (12,515) (7,485) Disposal of a subsidiary (c) – (135,567)

Balance at end of year – 12,515

Representing: Unquoted equity investments, at cost 20,000 20,000 Less: accumulated impairment losses (20,000) (7,485)

– 12,515

(a) Details of the Company’s subsidiaries are set out below:

Group’s

Country effective equity

interest held of 2014 2013Name of subsidiaries Principal activities incorporation % %Held by the Company Suqian Junma Tyre Cord Company Limited* (“SQJTC”)


PRC 100 100

Junma Tyre Cord (Hong Kong) Co., Limited* (“JTCHK”)

General trading Hong Kong S.A.R.

100 100

* The financial statements for the year ended 31 December 2014 were audited by Baker

Tilly TFW LLP for the sole purpose of preparing the consolidated financial statements. (b) During the financial year, the Company carried out a review of the recoverable amount of

its investment in SQJTC because of the losses incurred. As a result of the review, the management determined that the full amount of the cost of investment is impaired. Consequently, additional impairment loss of RMB12,515,000 (2013: RMB7,485,000) was recognised in profit or loss for the financial year ended 31 December 2014.

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6. Investments in subsidiaries (cont’d) (c) Disposal of a subsidiary

During the previous financial year, the Company completed the disposal of its entire 55% shareholding interest in a subsidiary, Zhangjiagang Junma Steel Tyre Lord Company Ltd (“STC”) to a related party, Zhangjiagang Junma Polyester Manufacturing Co., Ltd (“ZJPMCL”) for consideration of RMB110.83 million. Effects of the disposal of a subsidiary on the consolidated statement of cash flows were: RMB’000 Cash and cash equivalents 160,248 Inventories 233,981 Receivables 817,687 Lease prepayments 194,884 Property, plant and equipment 1,359,935 Total assets 2,766,735 Borrowings (1,213,400) Payables (1,482,893) Deferred tax liabilities (5,472) Total liabilities (2,701,765) Net assets disposed 64,970 Non-controlling interests (29,236) Gain on disposal of a subsidiary 75,096 Net cash received from disposal of subsidiary 110,830 Less: Cash and cash equivalents in subsidiary disposed (160,248) Net cash outflow on disposal of a subsidiary (49,418)



275,722 275,854 260,427 238,749

During the financial year, raw materials used and changes in finished goods and work in progress included as cost of sales amounted to RMB1,903,877,000 (2013: RMB1,943,793,000).

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Trade receivables - subsidiaries – – 109,650 9,380 - third parties 724,156 652,478 619,880 648,085 Less: allowance for impairment (third parties) (39,225)

(28,959)

(39,225) (28,959)

684,931 623,519 690,305 628,506

Advanced payments to suppliers, prepayments and other deposits 23,359

14,517

23,179 14,050

Advanced payments to directors 84 260 84 260 Other receivables - subsidiaries – – 24,201 21,840 - third parties 17,028 14,810 16,825 14,674 Less: allowance for impairment (third parties) (4,612)

(5,184)

(4,612) (5,184)

35,859 24,403 59,677 45,640

Bills receivables - trade 71,662 869,852 71,662 868,692

792,452 1,517,774 821,644 1,542,838


Bills receivables of the Group and the Company totalling RMB11,461,000 (2013: RMB800,415,000) have been pledged to banks for bank borrowings (Note 15(b)).

Transfers of financial assets At 31 December 2014, the Group and the Company endorsed certain bills receivables in the PRC

(the “Derecognised Bills”), with a carrying amount in aggregate of RMB507,230,000 (2013: RMB732,011,000) to certain of its suppliers in order to settle the trade payables due to such suppliers. The Derecognised Bills have a maturity period of one to six months at the balance sheet date. In accordance with the laws in the PRC, the holders of the Derecognised Bills have a right of recourse against the Group and the Company if the PRC banks default. In the opinion of the directors, the Group and the Company have transferred substantially all risks and rewards relating to the Derecognised Bills. Accordingly, the Group and the Company have derecognised the full carrying amounts of the Derecognised Bills and the associated trade payables. The maximum exposure to loss from the continuing involvement in the Derecognised Bills and the undiscounted cash flows to repurchase these Derecognised Bills equal to their carrying amounts. In the opinion of the directors, the fair values of the Group and the Company’s continuing involvement in the Derecognised Bills are not significant.

9. Due from a related party

The related party refers to STC, a former subsidiary of the Company. At the balance sheet date, STC is controlled by ZJPMCL, a related party of the Company. The amount of RMB836,437,000 (2013: RMB 908,427,000) due from STC is non-trade in nature, unsecured and repayable on demand. At the balance sheet date, the amount bears interest rate at 6% (2013: 5.6% to 6.6%) per annum based on the average of interest rates charged by the banks on borrowings.

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Cash at bank and on hand 28,544 205,971 21,017 201,080Short-term bank deposits 683,885 542,623 683,885 542,623

712,429 748,594 704,902 743,703

Certain bank deposits have been pledged as securities as follow: Group and Company 2014 2013 RMB’000 RMB’000

Securities for:

Bills facilities (Note 14) 178,457 213,225Letters of credit facilities 446,293 242,062Borrowings (Note 15) 59,135 87,336

683,885 542,623


Group 2014 2013 RMB’000 RMB’000

Cash and cash equivalents (as above) 712,429 748,594Less: Pledged bank deposits (683,885) (542,623)

Cash and cash equivalents for purpose of consolidated statement of cash flows 28,544 205,971

Cash and cash equivalents of RMB712,182,000 (2013: RMB748,348,000) are held in the People’s Republic of China and are subject to local exchange control regulations. These regulations place restrictions on the amount of currency being exported from the country, other than through dividends.


2014 and 2013 Balance at beginning and end of the year

55,000

18,400

73,400 105,940 179,340

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11. Share capital and share premium (cont’d)





Balance at 1 January 2013 48,652 10,110 41 58,803 Other comprehensive income Currency translation differences arising on consolidation

–

– 44 44

Balance at 31 December 2013 48,652 10,110 85 58,847 Other comprehensive loss Currency translation differences arising on consolidation

–

– (1) (1)



2014 and 2013 Balance at beginning and end of the year 48,652 10,110 58,762


According to the Articles of Association of the Company and its subsidiaries incorporated in the PRC, the Company and its PRC subsidiaries are required to transfer 10% of net profit, as determined in accordance with the PRC accounting rules and regulations, to statutory surplus reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of dividend to shareholders. Statutory surplus reserve can be used to make good previous years’ losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is not less than 25% of the registered capital. This statutory surplus reserve is not distributable in the form of cash dividend.

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12. Other reserves (cont’d) (b) Discretionary surplus reserve




13. Accumulated losses and dividend






The distributable reserve of the Company as at 31 December 2014 amounted to RMB Nil (2013: RMB Nil).

14. Trade and other payables Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables - subsidiary – – 12,250 –- third party 167,928 342,909 159,541 325,893 167,928 342,909 171,791 325,893Bills payables 657,811 794,256 657,811 794,256Advanced payments from customers 21,701 40,420 21,701 39,948Accrued staff costs 16,275 13,488 15,349 10,956Other payables and accruals 42,424 31,295 27,407 21,543 906,139 1,222,368 894,059 1,192,596

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14. Trade and other payables (cont’d)

The bills payables are non-interest bearing, have maturity period of between 90 and 365 days (2013: 90 and 365 days) and are secured by certain bank deposits (Note 10). As at 31 December 2014, included in other payables and accruals of the Group and the Company is an accrual of RMB10,073,000 (2013: Nil) for the additions of plant under construction-in-progress.


Current Guaranteed bank borrowings* 1,550,457 949,209 1,550,457 949,209 Secured bank borrowings# 333,723 1,311,898 333,723 1,311,898 Unsecured bank borrowings – 115,500 – 115,500

1,884,180 2,376,607 1,884,180 2,376,607

The details of the bank borrowings’ guarantees and securities are as follows:

* These bank borrowings are guaranteed by the related parties and/or third parties.

# These bank borrowings are secured by certain buildings, machinery and equipment (Note 4), land use rights (Note 5), bills receivables (Note 8), and/or bank deposits (Note 10).

Breaches of loan covenants A total amount of the Group and the Company’s bank borrowings of approximately RMB406 million are subject to financial covenant clauses as at 31 December 2014. Pursuant to these loan agreements, the Company is required to meet certain financial ratios. However, the Company breached these financial covenants as at 31 December 2014. Due to this breach of the financial covenant clauses, the bank is contractually entitled to request for immediate repayment of these outstanding loans. These outstanding loans are presented as part of the current liabilities as at 31 December 2014. Subsequent to the balance sheet date, the management has obtained a written representation from the bank of its intention to renew the relevant borrowings as and when they fall due in year 2015. As of the date when these financial statements were approved by the Board of Directors for issue, the bank had not requested for early repayment of these outstanding loans.

16. Cost of sales

During the financial year, a write down of inventories amounting to RMB3,396,000 (2013: RMB508,000) was recognised as an expense in cost of sales.

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17. Other income

Group 2014 2013 RMB’000 RMB’000

Sales of scrap materials 28,219 34,115 Processing fees 5,485 16,154 Sales of raw materials 3,177 2,854 Interest income 17,528 18,021 Interest income from a related party, STC 51,574 – Foreign currency exchange gain – 987 Subsidy and grant income 621 1,410 Others 5,287 2,807 111,891 76,348

18. Finance costs

Group 2014 2013 RMB’000 RMB’000

Interest on borrowings 114,421 94,960 Interest on discounting of bills receivables 12,673 12,677 Other borrowing costs 7,564 7,957 134,658 115,594

19. Loss before tax

Group 2014 2013 RMB’000 RMB’000 Loss before tax from continuing operations is arrived at after charging/(crediting):

Audit fees paid/payable to auditors of the Company 885 905 Other fees paid/payable to other auditors – 189 Amortisation of lease prepayments (Note 5) 413 413 Allowance for doubtful trade and other receivables 16,695 3,262 Allowance for doubtful trade and other receivables written back (7,001) (2,060) Depreciation of property, plant and equipment (Note 4) 43,592 48,396 Foreign currency exchange loss/(gain) 1,267 (987) Gain on disposals of property, plant and equipment – (8) Staff costs (Note 20) 90,913 91,978 Bad debts written back (4,400) (1,310)

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34


20. Staff costs

Group 2014 2013 RMB’000 RMB’000

Wages and salaries 80,124 82,259 Contribution to defined contribution benefits 8,709 7,961 Other benefits 2,080 1,758 90,913 91,978

21. Income tax expense Tax expense attributable to loss is made up of: Group 2014 2013 RMB’000 RMB’000

From continuing operations Under provision of income tax in prior years – 24 From discontinued operation Deferred tax – (582)

– (558)

The income tax expense on the results of the financial year differs from the amount of income tax determined by applying the PRC standard rate of income tax due to the following factors:

Group 2014 2013 RMB’000 RMB’000

Loss before income tax from: - Continuing operations (20,665) (2,036) - Discontinued operation – (107,000) (20,665) (109,036) Tax calculated at a tax rate of 25% (5,166) (27,259) Expenses not deductible for tax purposes 429 1,125 Income not subject to tax – (18,774) Effect of tax incentives (632) (6,814) Deferred tax assets not recognised 5,242 51,144 Under provision of income tax in prior years – 24 Others 127 (4) – (558)

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35


21. Income tax expense (cont’d)

At the balance sheet date, the Group did not recognise deferred income tax assets of RMB69,532,000 (2013: RMB64,290,000) in respect of tax losses amounting to RMB202,042,000 (2013: RMB192,734,000) that can be carried forward up to five years from the year of loss against future taxable income; and accounting depreciation in excess of tax depreciation amounting to RMB31,820,000 (2013: RMB29,777,000) and provisions amounting to RMB44,266,000 (2013: RMB34,650,000).

22. Discontinued operation

Following the approval of the Company’s shareholders on 24 December 2013 to dispose STC (which previously contributed to the steel yarn segment) and the completion of the disposal on 26 December 2013, the results from STC was presented separately on the statement of profit or loss and other comprehensive income as “discontinued operation” during the previous financial year. An analysis of the results of discontinued operation, and the gain recognised on the disposal of STC is as follows:

Group 2013 RMB’000

Revenue 837,548 Expenses (1,019,644) Loss before tax from discontinued operation (182,096) Tax expense (Note 21) 582 Loss after tax from discontinued operation (181,514) Pre-tax gain recognised on disposal 75,096 Tax expense – After tax gain recognised on disposal 75,096 Loss from discontinued operation (106,418) Loss from discontinued operation attributable to: Equity holders of the Company (24,736) Non-controlling interests (81,682) (106,418)

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36


22. Discontinued operation (cont’d) Group 2013 RMB’000

Loss per share from discontinued operation attributable to equity holders of the Company (RMB per share) (Note 23)

Basic (0.34) Diluted (0.34)

The impact of the discontinued operation on the cash flows of the Group for the previous financial year were as follows:

RMB’000

Operating cash flows 163,019 Investing cash flows (375,856) Financing cash flows 299,127 86,290

23. Loss per share Weighted average number of shares

The calculation of basic and diluted loss per share is based on the weighted average number of shares outstanding during the year of 73,400,000 (2013: 73,400,000) shares. There were no dilutive potential ordinary shares in the Group in existence for either year.

From continuing operations Earnings figures are calculated as follows: Group 2014 2013 RMB’000 RMB’000

Loss for the year attributable to equity holders of the Company (20,065) (26,796) Less: loss for the year from discontinued operation attributable to equity holders of the Company

–

(24,736)

Loss for the purposes of basic and diluted loss per share from continuing operations

(20,065)

(2,060)

From continuing and discontinued operations The calculation of the basic and diluted loss per share attributable to the equity holders of the Company is based on the loss for the year attributable to equity holders of the Company of RMB20,665,000 (2013: RMB26,796,000).

From discontinued operation

Basic and diluted loss per share for the discontinued operation is based on the loss for the previous year from the discontinued operation attributable to equity holders of the Company of RMB24,736,000.

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Junma Tyre Cord Company Limited And Its Subsidiaries 24. Significant related party transactions


(a) Transactions during the year Group 2014 2013

RMB’000 RMB’000 Zhangjiagang Junma Polyester Manufacturing Co., Ltd (“ZJPMCL”)

Purchase of power, gas and steam 246,795 214,615 Disposal of a subsidiary – 110,830

STC (subsidiary of ZJPMCL) Interest income 51,574 – Purchase of raw materials 137 – Purchase of power and gas 4,284 –

Certain directors and shareholders of ZJPMCL are close members of the family of certain directors of the Company.

(b) Year-end balance Group 2014 2013

RMB’000 RMB’000 STC Other receivables 836,437 908,427

(c) Key management personnel compensation Key management personnel compensation is as follows: Group 2014 2013

RMB’000 RMB’000



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38

Junma Tyre Cord Company Limited And Its Subsidiaries 24. Significant related party transactions (cont’d) (d) Corporate guarantees Group and Company 2014 2013 RMB’000 RMB’000

Bank loans of the Group and the Company

- guaranteed by ZJPMCL 539,949 564,188- guaranteed by STC 632,304 533,445 Bank loans of STC guaranteed by the Company

849,818

862,000

25. Financial instruments (a) Categories of financial instruments The following table sets out the financial instruments as at the balance sheet date: Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000


2,320,842

3,160,018

2,342,687

3,180,658 Financial liabilities At amortised cost 2,768,618 3,558,555 2,756,538 3,529,255


The Group and the Company are exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include foreign currency risk, interest rate risk, credit risk and liquidity risk. The Group’s overall risk management strategy seeks to minimise adverse effects from these financial risks on the Group’s financial performance. The Group uses derivatives such as forward foreign exchange contracts to hedge certain financial risk exposures but the Group does not hold derivative financial instruments for trading purpose.


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39

Junma Tyre Cord Company Limited And Its Subsidiaries 25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (i) Foreign currency risk

The Group and the Company have currency exposures arising from transactions, assets and liabilities that are denominated in currencies other than the respective functional currencies of entities in the Group. The foreign currencies in which the Group’s and the Company’s currency risk arises are mainly United States Dollar (“USD”) and Euro. At the balance sheet date, the Group and the Company have the following financial assets and financial liabilities denominated in foreign currencies based on information provided to key management:

Group USD Euro Total 2014 RMB’000 RMB’000 RMB’000

Financial assets Cash and cash equivalents 164,130 902 165,032 Trade and other receivables 72,625 – 72,625 Financial liabilities Trade and other payables (39,297) – (39,297) Borrowings (628,071) (6,710) (634,781) Net financial liabilities denominated in foreign currencies, representing net exposures to foreign currencies (430,613) (5,808) (436,421) 2013 Financial assets Cash and cash equivalents 14,507 118 14,625 Trade and other receivables 229,913 – 229,913 Financial liabilities Trade and other payables (122,210) – (122,210) Borrowings (602,346) (30,832) (633,178) Net financial liabilities denominated in foreign currencies, representing net exposures to foreign currencies (480,136) (30,714) (510,850)

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40


25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (i) Foreign currency risk (cont’d) Company USD Euro Total RMB’000 RMB’000 RMB’000

2014 Financial assets Cash and cash equivalents 164,130 902 165,032 Trade and other receivables 182,276 – 182,276 Financial liabilities Trade payables (39,297) – (39,297) Borrowings (628,071) (6,710) (634,781) Net financial liabilities denominated in foreign currencies, representing net exposures to foreign currencies (320,962) (5,808) (326,770) 2013 Financial assets Cash and cash equivalents 13,575 118 13,693 Trade and other receivables 225,720 – 225,720 Financial liabilities Trade payables (122,210) – (122,210) Borrowings (602,346) (30,832) (633,178) Net financial liabilities denominated in foreign currencies, representing net exposures to foreign currencies (485,261) (30,714) (515,975)

The following table demonstrates the sensitivity to a reasonably possible change in the USD and Euro exchange rates against the respective functional currencies of the Group’s entities, with all other variables held constant, of the Group’s and the Company’s loss after tax:


USD/RMB - strengthened 5% (2013: 5%) 16,148 18,005 - weakened 5% (2013: 5%) (16,148) (18,005) Euro/RMB - strengthened 5% (2013: 5%) 218 1,152 - weakened 5% (2013: 5%) (218) (1,152)

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Junma Tyre Cord Company Limited And Its Subsidiaries 25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (i) Foreign currency risk (cont’d) Company Increase/(decrease) in loss after tax 2014 2013 RMB’000 RMB’000

USD/RMB - strengthened 5% (2013: 5%) 12,036 18,030 - weakened 5% (2013: 5%) (12,036) (18,030) Euro/RMB - strengthened 5% (2013: 5%) 218 1,152 - weakened 5% (2013: 5%) (218) (1,152)

(ii) Interest rate risk


The Group’s and the Company’s exposures to interest rate risk arises primarily from their bank borrowings and interest-bearing loans to a related party. Borrowings and interest-bearing loans to a related party at variable rates expose the Group and the Company to cash flow interest rate risk (ie. the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates). Borrowings at fixed rates expose the Group and the Company to fair value interest rate risk (ie. the risk that the value of a financial instrument will fluctuate due to changes in market rates). The Group’s and the Company’s policy is to manage interest cost using a mix of fixed and floating rate debts. At the balance sheet date, approximately 66% (2013: 54%) of the Group’s borrowings are at fixed rates of interest. The Group’s and Company’s loans at floating rates given to its related party form a natural hedge for its floating rate bank loans. The Group and the Company do not utilise derivatives to mitigate its interest rate risk.

Sensitivity analysis for interest rate risk

The sensitivity analysis below have been determined based on the exposure to interest rates for borrowings and interest-bearing loans to a related party at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of borrowings that have floating rates.

The Group’s and the Company’s borrowings at variable rates on which effective hedges have not been entered into, are denominated mainly in RMB and USD. At the balance sheet date, if the interest rates increase/decrease by 50 (2013: 50) basis point with all other variable held constant, the Group’s loss after tax would have been higher/lower by RMB2,380,000 (2013: RMB4,071,000).

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25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (iii) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company. For trade receivables, the Group and the Company adopt the policy of dealing only with customers of appropriate credit history and obtaining sufficient security where appropriate to mitigate credit risk. For other financial assets, the Group and the Company adopt the policy of dealing only with high credit quality counterparties. The Group’s and the Company’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group and the Company trades only with recognised and creditworthy third parties. For customers who wish to trade on credit terms, the Group and the Company will take into account the quantity of the customer order, background and creditworthiness of the customer, level of risk involved, payment history of the customer and relationship with the customer. In addition, receivable balances are monitored on an ongoing basis.

At the balance sheet date, the Group and the Company had no significant concentrations of credit risk except for the amount due from a related party and the trade receivables from 1 debtor (2013: 1 debtor) that individually represented 19% (2013: 13%) of trade receivables as follows:


–* 82,666 –* 82,666

130,391 –* 130,391 –* 130,391 82,666 130,391 82,666

* Balance at balance sheet date were less than 10% of the trade receivables of the


As the Group and the Company do not hold any collateral, the maximum exposure to credit risk is the carrying amount of each financial instruments presented on the balance sheets and the amount of RMB849,818,000 (2013: RMB862,000,000) relating to corporate guarantees given by the Company to banks for a related party’s bank borrowings.



By geographical areas People’s Republic of China 549,747 428,444 635,277 433,431 Other countries 135,184 195,075 55,028 195,075 684,931 623,519 690,305 628,506 By types of customers Non-related parties - Multi-national companies 184,509 195,075 104,353 195,075 - Other companies 500,422 428,444 476,302 424,051 Subsidiaries – – 109,650 9,380 684,931 623,519 690,305 628,506

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Junma Tyre Cord Company Limited And Its Subsidiaries 25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (iii) Credit risk (cont’d) Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group and the Company. Cash and cash equivalents that are neither past due nor impaired are placed with or entered into with reputable financial institutions which have no history of default.

Financial assets that are past due and/or impaired







(39,225)

(28,959) (39,225) (28,959)

30,116 11,282 30,116 11,282 At 1 January 28,959 46,351 28,959 28,068 Allowance made 14,905 13,443 14,905 891 Allowance written back (4,639) – (4,639) – Disposal of subsidiary – (30,835) – – At 31 December 39,225 28,959 39,225 28,959

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44


25. Financial instruments (cont’d) (b) Financial risk management (cont’d) (iii) Credit risk (cont’d)




(4,612) (5,184)

(4,612)

(5,184)

262 1,799 262 1,799 At 1 January 5,184 11,971 5,184 11,050 Allowance made 1,790 2,371 1,790 2,371 Allowance written off – (6,177) – (6,177) Allowance written back (2,362) (2,238) (2,362) (2,060) Disposal of subsidiary – (743) – – At 31 December 4,612 5,184 4,612 5,184


(iv) Liquidity risk



With regard to its short-term bank borrowings outstanding at 31 December 2014, the Group’s and the Company’s principal bankers have confirmed their intention to renew the relevant borrowings as and when they fall due in year 2015. The directors believe that the Group and Company will have sufficient cash resources to satisfy future working capital and other financing requirements.

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Less than 1 year RMB’000

Group At 31 December 2014 Trade and other payables 884,438 Borrowings 1,915,444 Financial guarantee 849,818 3,649,700 At 31 December 2013 Trade and other payables 1,181,948 Borrowings 2,412,026 Financial guarantee 862,000 4,455,974 Company At 31 December 2014 Trade and other payables 872,358 Borrowings 1,915,444 Financial guarantee 849,818 3,637,620 At 31 December 2013 Trade and other payables 1,152,648 Borrowings 2,412,026 Financial guarantee 862,000 4,426,674

(c) Fair value of financial instruments by classes that are not carried at fair value and

whose carrying amounts are reasonable approximation of fair value


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46


26. Segment information

No information by business segments is presented as the principal operation of the Group relates mainly to the manufacture and sales of chemical fibre and materials.


The headquarter and manufacturing operations of the Group are located in the PRC. The assets, liabilities, capital expenditure and lease prepayments are located in the PRC. The Group sells to customers located in different geographical locations as follow:

Continuing Discontinued operations operation 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000

Revenue from external customers The PRC 1,156,037 1,155,619 – 835,919India 380,099 497,816 – 1,337Other countries (principally Indonesia, Thailand and Vietnam) (2013: principally Indonesia, Thailand and Egypt)

770,133

860,327

–

292 2,306,269 2,513,762 – 837,548



27. Capital management



Except as disclosed in Note 15, the Group and the Company are in compliance with all externally imposed capital requirements for the financial years ended 31 December 2014 and 31 December 2013.


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47


27. Capital management (cont’d) Group 2014 2013 RMB’000 RMB’000

Trade and other payables 906,139 1,222,368Borrowings 1,884,180 2,376,607Less: Cash and cash equivalents (712,429) (748,594) Net debts 2,077,890 2,850,381 Equity attributable to the equity holders of the Company 69,931 90,597Less: Statutory surplus reserve (Note 12) (48,652) (48,652) Total capital 21,279 41,945


The Group and the Company have provided corporate guarantees to banks for borrowings of RMB849,818,000 (2013: RMB862,000,000) taken by its related party, STC. The directors have assessed the fair value of these financial guarantees to have no material financial impact on the results for the financial year.

29. Capital commitment Capital commitments contracted for but not provided for in the financial statements: Group and Company 2014 2013 RMB’000 RMB’000

Purchase of property, plant and equipment 4,317 –

30. Events after balance sheet date

On 10 March 2015, the Company announced that it is proposing a voluntary delisting of the Company from the Catalist Board of the Singapore Exchange Securities Trading Limited. In connection with the proposed voluntary delisting, the Company and Ultimative Ltd (“Offeror”) jointly announced that the Offeror has presented to the directors of the Company a formal proposal to make a cash offer to purchase all the shares in the capital of the Company which are not held by individuals and non-individuals who are acting in concert with the Offeror, on the terms and conditions as set out in the joint announcement and the exit offer letter to be issued by the Offeror to the shareholders. An Extraordinary General Meeting of the Company will be convened to seek the approval of the shareholders.



APPENDIX 9

ANNOUNCEMENT DATED 8 NOVEMBER 2013

JUNMA TYRE CORD COMPANY LIMITED

(Incorporated in the People’s Republic of China)

PROPOSED DISPOSAL OF THE COMPANY’S ENTIRE 55% SHAREHOLDINGS IN ZHANGJIAGANG JUNMA STEEL TYRE CORD COMPANY LIMITED

1. INTRODUCTION The Board of Directors of Junma Tyre Cord Company Limited ( (the “Company”) wishes to announce that the Company has on 8 November 2013 entered into a sale and purchase agreement (the “Agreement”) with Mr Yang Peixing and Zhangjiagang Junma Polyester Manufacturing Co., Ltd ( ) (the “Purchaser”) for the proposed disposal (the “Proposed Disposal”) of its entire 55% shareholdings (the “55 %Shareholdings”) in the registered share capital of Zhangjiagang Junma Steel Tyre Cord Company Limited (the “STC”). As each of the relative figure(s) computed under Rules 1006(a),(b) and (c) of the Listing Manual of the SGX-ST, Section B: Rules of Catalist (the “Listing Manual”) of the SGX-ST exceeds 50%, the Proposed Disposal is considered a major transaction under Chapter 10 of the Listing Manual. Please see paragraph 8 below for further details on the computation of the relative figures under Rule 1006 of the Listing Manual. Accordingly, the Proposed Disposal is subject to the approval of the shareholders of the Company (the “Shareholders”) at an extraordinary general meeting (the “EGM”) of the Shareholders to be convened. The Proposed Disposal also constitutes as an “Interested Person Transaction” as defined under Chapter 9 of the Listing Manual and will be subject to Shareholders’ Approval. Please see paragraph 9 below for further details on the Proposed Disposal as an Interested Person Transaction. A circular will be dispatched to the Shareholders in due course. 2. PARTICULARS OF THE PARTIES (a) Information on the Company and STC The Company was incorporated in the People’s Republic of China (the “PRC”) and listed on the Singapore Exchange Securities Trading Limited (the “SGX-ST”) in November 2004. The Company is the leading Nylon 6 dipped tyre cord manufacturer in PRC. It is principally engaged in the production and sale of Nylon 6 industrial yarn and Nylon 6 dipped tyre cords. In July 2003, the Company incorporated STC to carry out the business of production and sale of steel tyre cords, which is the tyre reinforcement material adopted for the production of radial ply tires. (b) Information on the Purchaser The Purchaser is a private limited liability company incorporated in the PRC. As at the date of the Agreement and this announcement, Mr Yang Cong, the son of Mr Yang Peixing, the Executive Chairman and a Controlling Shareholder of the Company, holds 50% shareholding of the registered share capital of the Purchaser. The remaining 50% is held by four unrelated third parties. Accordingly, the Purchaser, being an associate of Mr Yang Peixing, is considered as an “Interested Person” as defined under Chapter 9 of the Listing Manual. 3. CONSIDERATION FOR THE PROPOSED DISPOSAL The consideration for the sale and purchase of the 55% Shareholdings shall be the sum of RMB110.83 million (“Consideration”). The Consideration stands at a premium of 68.5% over the proportionate net asset value of STC as at 30 September 2013. The Consideration was based on the market valuation of the 55% Shareholdings of approximately RMB110.83 million based on the independent valuation report on the 55% Shareholdings issued by Jiangsu Yinxin Assets and Real Estate Appraisal Co., Ltd. ( ) (the “Valuer”) dated 22 October 2013 (the “Valuation Report”). The Company has appointed the Valuer as the independent professional valuer to conduct a market valuation of the 55% Shareholdings using an asset-based approach as at 30 June 2013.

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In arriving at the Consideration, the Board of Directors had also considered the financial condition of STC and the prevailing business environment and material conditions as at the date of the Agreement. While there has been an increase in revenue of the STC in FY2012, the gross profit margins of STC dropped from -4.85 % in FY2011 to -6.96% in FY2012. Based on the current operating conditions with stiff competition and cost pressures, the Directors are of the view that the profit margins of STC are likely to continue to trend lower and its losses to continue.

The Consideration shall be wholly satisfied in cash and payable by the Purchaser within two (2) months of the Completion Date (as defined below). 4. SALIENT TERMS OF THE AGREEMENT

Conditions Precedent The Agreement’s taking effect is conditional upon the fulfilment of, inter alia, the receipt by the Company of the approval of the Shareholders in general meeting and the board approval of the Purchaser.

Completion Date Completion of the Proposed Disposal will be on the date of the written confirmation by the Industry and Commerce Bureau of the change in shareholdings ownership (the “Completion Date”).

Right of First Refusal

The Purchaser warrants that in the event that the Purchaser intends to transfer the 55% Shareholdings or any part thereof to a third party, it shall grant the Company a first right of refusal to purchase the 55% Shareholdings or any part thereof as the case may be on the same terms and conditions offered to the third party. Conflicts of Interest Mr Yang Peixing warrants and undertakes that he will not perform an executive function in STC after the Proposed Disposal and will not be involved in the operations and management of STC. Debts and Obligations (a) The Company had taken loans amounting to RMB829 million (the “Loans”) as at 8 November

2013 for and on behalf of STC for use by STC for its working capital purposes. The Loans are guaranteed by STC. The parties to the Agreement agree that the Loans will be repaid by STC within one (1) year from the date of the Agreement. Pending repayment, STC shall reimburse the Company for all interest paid on the Loans within seven (7) days of such payment of interest by the Company.

(b) STC had taken loans amounting to RMB1.14 billion (the “STC Loans”) as at 8 November 2013

which are guaranteed by the Company (“STC Guarantee”). The Company consents that it shall continue to guarantee the STC Loans for a maximum period of one (1) year from the date of the Agreement, during which period, STC warrants and undertakes that it shall procure the discharge of the STC Guarantee.

(c) The Company had taken loans amounting to RMB521 million (the “Junma Loans”) as at 8

November 2013 which are guaranteed by STC (“Junma Guarantee”). STC consents that it shall continue to guarantee the Junma Loans for a maximum period of one (1) year from the date of the Agreement, during which period, the Company warrants and undertakes that it shall procure the discharge of the Junma Guarantee.

(d) The Board is of the opinion that the arrangements as described in paragraphs (a), (b) and (c) above is necessary to facilitate the Proposed Disposal as the management of the Company has represented that the repayment of the STC Loans or the discharge of the STC Guarantee cannot be fulfilled immediately after the Proposed Disposal.

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The Shareholders should note that by approving the Proposed Disposal, they are also approving the Financing Arrangements until they are discontinued within a maximum period of one (1) year.

5. RATIONALE OF THE PROPOSED DISPOSAL Due to the unfavourable industry conditions, STC had incurred losses for the last two (2) financial years ended 31 December 2012 (“FY2012”) and for the nine (9) months ended 30 September 2013 (“3Q2013”). The Group is of the view that additional capital expenditure would have to be incurred by the Group in order to expand and strengthen the business of STC and to overcome the pressure of competition in the steel tyre cord business. In addition, as the global economic outlook continues to be uncertain, business sentiments will remain weak, and demand from the key customers of STC will continue to be impacted adversely. Accordingly, the future prospects of the Group’s steel tyre cord business is increasingly uncertain. As such, it is the Board’s view that the STC should be disposed off. With the Proposed Disposal, the Company will substantially reduce its liabilities, and have more working capital to fund its operations. The Group will continue to focus on and strengthen its core Nylon 6 business as well as expand into other businesses and undertake new investment opportunities that may arise in the future, which may result in higher value to the Shareholders.

The Company is of the view that, given the prevailing unfavourable industry conditions, it is difficult to sell the business to unrelated third parties and that potential purchasers are likely to ask for a huge discount. As the Company has invested a lot of time and money in developing and expanding the steel cord business and Mr Yang Peixing would want the business to succeed, the parties have decided to transfer the 55% Shareholdings to the Purchaser, an Associate of Mr Yang Peixing. 6. LOSS ON THE PROPOSED DISPOSAL AND USE OF PROCEEDS

Based on the latest announced audited financial statements of the Group for FY2012, the net book value of STC is approximately RMB135.57 million, based on the Company’s cost of investment in the STC. The deficit of the proportionate net asset value of the 55% Shareholdings over the proceeds from the Proposed Disposal is approximately RMB24.74 million. Based on the latest announced unaudited consolidated financial statement of the Group for 3Q2013, the Group is expected to record a net profit on disposal of approximately RMB45.07 million from the Proposed Disposal. This net profit on disposal will be recorded in financial year ended 31 December 2013. For illustrative purposes only, had the Proposed Disposal been recorded in FY2012, the losses of the Group attributable to equity holders of the Company would have been increased from RMB (159.55) million to RMB (201.50) million. The Company intends to use the proceeds of the Proposed Disposal for the working capital of the Group. Pending the deployment of the unutilised proceeds for the purposes mentioned above, such proceeds may be deposited with banks and/or financial institutions, invested in short-term money markets and/or marketable securities, or used for any other purposes on a short-term basis, as the Directors may deem appropriate in the interests of the Group. 7. FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL For illustrative purposes only, the pro forma financial effects of the Proposed Disposal on the net tangible asset (the “Company’s NTA”) per share of the Company (the “Share”) and the earnings per Share (the “EPS”) based on the latest announced audited consolidated financial statements of the Group for the financial year ended 31 December 2012 (“FY2012”) are set out below. The financial effects of the Proposed Disposal are purely for illustrative purposes only and do not reflect the future actual financial position of the Group after completion of the Proposed Disposal.

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(a) Effect on Company’s NTA per Share

For illustrative purposes only, had the Proposed Disposal taken place on 31 December 2012 and based on the audited consolidated financial statements of the Company as at 31 December 2012, the Proposed Disposal would have had the following impact on the Company’s NTA for FY2012: FY2012

Before the Proposed Disposal

After the Proposed Disposal

NTA (RMB’000)

12,618 76,215

Number of Shares (‘000)

73,400 73,400

NTA per share (RMB’000)

0.17 1.04

(b) Effect on EPS For illustrative purposes only, had the Proposed Disposal taken place on 1 January 2012 and based on the audited consolidated financial statements of the Company as at 31 December 2012, the Proposed Disposal would have had the following impact on the Company’s EPS for FY2012: FY2012

Before the Proposed Disposal

After the Proposed Disposal

Earnings/(Losses) attributable to equity holders of the Company (RMB’000)

(159,544) (201,497)*

Number of Shares (‘000)

73,400 73,400

EPS per share (RMB)

(2.17) (2.75)

*The loss attributable to equity holders of the Company include loss on disposal of TSC of RMB128.49 million assuming the Proposed Disposal had taken place on 1 January 2012. If the Proposed Disposal had taken place on 30 September 2013, there would be a gain on disposal of RMB45.07 million. 8. REQUIREMENTS UNDER CHAPTER 10 OF THE LISTING MANUAL Chapter 10 of the Listing Manual governs the continuing listing obligations of the listed company in respect of acquisition and realisation of assets, including securities and business undertakings. If any of the relative figures as computed on the basis set out of Rule 1006 of the Listing Manual for a disposal exceeds 50%, such transaction is classified as a major transaction. The relative figures computed on the bases set out in Rule 1006 of the Listing Manual based on the latest announced unaudited consolidated financial results of the company for the financial period ended 30 September 2013 (announced on 8 November 2013) are as follows: Rule 1006(a) Net asset(1) value of the 55% Shareholdings to be

disposed of, compared with the Group’s net asset value (RMB 65,759/RMB119,407)

55.07%

Rule 1006(b) Net profits(2) attributable to the 55% Shareholdings acquired or disposed of, compared with the Group’s net profits (RMB -70,048/RMB -109,299)

64.09%

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Rule 1006(c) Aggregate value of the consideration of

RMB110.83 million, compared with the Company’s market capitalization of S$4.90 million(3), based on the total number of issued shares excluding treasury shares (based on the weighted average price of the Company’s shares on the SGX-ST of S$0.0668(4) on 24 October 2013 being the last Market Day preceding the Agreement on which trades are done. RMB11083 / (73400 X 0.0668 X 4.8983)

453%

Rule 1006(d) Number of equity securities issued by the Company as consideration for an acquisition, compared with the number of equity securities previously in issue

Not applicable.

Notes: (1) Under Rule 1002(3)(a) of the Listing Manual, “net assets” means total assets less total liabilities. (2) Under Rule 1002(3)(b) of the Listing Manual, “net profits” means profit or loss before income tax, minority interests and

extraordinary items. (3) Under Rule 1002(5) of the Listing Manual, the market capitalisation of the Company is determined by multiplying the

number of shares in issue by the weighted average price of such shares transacted on 24 October 2013 being the last Market Day preceding the Agreement on which trades are done.

(4) Based on an exchange rate of S$ 1.00 to RMB 4.8983 as at 7 November 2013. As each of the relative figures calculated under Rules 1006(a), 1006(b) and 1006(c) is more than 50%, the Proposed Disposal is considered a major transaction under Chapter 10 of the Listing Manual, and is therefore subject to Shareholders’ approval at the EGM to be convened. 9. THE PROPOSED DISPOSAL AS AN INTERESTED PERSON TRANSACTION The Company is an “Entity at Risk” while the Purchaser is an “Interested Person” as defined under Chapter 9 of the Listing Manual in view that the Purchaser is an associate of Mr Yang Peixing, the Executive Chairman and a substantial shareholder of the Company. The Purchaser is considered as an associate of Mr Yang Peixing because Mr Yang Peixing’s son, Mr Yang Cong, holds more than 30% interest in the Purchaser. Hence, the Proposal Disposal constitutes as an Interested Person Transaction pursuant to Chapter 9 of the Listing Manual. Furthermore, as the aggregate value of the Consideration represents approximately 878% of the Group’s latest audited consolidated NTA of RMB12.62 million as at 31 December 2012, the approval of the Shareholders by way of ordinary resolution is required in order for the Company to effect the Proposed Disposal. Save as disclosed above, there are no other interested person transactions entered into by the Company for the current financial year ending 31 December 2013 up to the date of this announcement. Mr Yang Peixing and his associates will abstain from voting its shareholdings (either in person or in proxy) in respect of the ordinary resolution relating to the Proposed Disposal at the EGM. 10. OPINION OF THE AUDIT COMMITTEE

The Audit Committee of the Company will form their view as to whether the Proposed Disposal is on normal commercial terms and is not prejudicial to the interests of the Company and its minority Shareholders after considering independent financial advisor’s opinion referred to in paragraph 14 below. The Audit Committee’s view on the Proposed Disposal will be set out in the circular to be dispatched to the Shareholders in due course.

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11. INTEREST OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

Save for Mr Yang Peixing who is interested in the Proposed Disposal which is an Interested Person Transaction, none of the other Directors and substantial shareholders of the Company has any interest, direct or indirect, in the Proposed Disposal. 12. DIRECTORS’ SERVICE CONTRACTS There are no directors proposed to be appointed by the Company in connection with the Proposed Disposal. Accordingly, there is no service contract entered into by the Company. 13. INDEPENDENT FINANCIAL ADVISER

The Company will appoint an Independent Financial Adviser in respect of the Proposed Disposal in accordance to the Listing Manual. 14. EXTRAORDINARY GENERAL MEETING AND CIRCULAR

A circular setting out information on, inter alia, the Proposed Disposal, together with a notice of EGM and the opinion of the Independent Financial Adviser, will be dispatched by the Company to the Shareholders in due course. In the meantime, Shareholders are advised to refrain from taking any action in relation to their Shares in the Company, which may be prejudicial to their interests until they or their advisers have considered the information and recommendations to be set out in the circular. 15. DOCUMENTS AVAILABLE FOR INSPECTION A copy of the Agreement and the Valuation Report will be made available for inspection during normal business hours at the registered office of the Company at 80 Hedong Road Chenghang Road East, Yangshe Town, Zhangjiaqang City, Jiangsu Province, the People’s Republic of China, for a period of three (3) months from the date of this announcement. 16. CAUTIONARY STATEMENT

The Directors of the Company would like to advise the Shareholders that, although the Agreement has been entered into, completion is subject to conditions precedent being fulfilled and there is no assurance that completion will take place. Accordingly, Shareholders are advised to exercise caution before making any decision in respect of their dealings in the Company’s Shares. Shareholders who are in any doubt about this announcement should consult their legal, financial, tax or other professional adviser. BY ORDER OF THE BOARD

Mr Yang Peixing Executive Chairman 8 November 2013 This announcement has been prepared by the Company and reviewed by the Company’s Sponsor, CNP Compliance Pte. Ltd. (“Sponsor”), for compliance with the Singapore Exchange Securities Trading Limited (“SGX-ST”) Listing Manual Section B: Rules of Catalist. The Sponsor has not verified the contents of this announcement including the accuracy or completeness of any of the information disclosed or the correctness of any of the statements or opinions made or reports contained in this announcement. This announcement has not been examined or approved by the SGX-ST. The Sponsor and the SGX-ST assume no responsibility for the contents of this announcement including the correctness of any of the statements or opinions made or reports contained in this announcement. The contact person for the Sponsor is Mr Lance Tan at 36 Carpenter Street, Singapore 059915, telephone: (65) 6323 8383; email: [email protected]

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NOTICE OF EXTRAORDINARY GENERAL MEETING


NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of the shareholders of Junma

Tyre Cord Company Limited (the “Company”) will be held on 13 May 2015 at 11.00 a.m. (“EGM”)

(or soon thereafter immediately following the conclusion or adjournment of the Annual General

Meeting of the Company to be held on 13 May 2015 at 10.00 a.m.) at MR 309 Level 3, Suntec

Singapore International Convention & Exhibition Centre, 1 Raffles Boulevard Suntec City

Singapore 039593 on Wednesday) for the purpose of considering and, if thought fit, passing with

or without any modifications, the following Resolution 1 (on a poll to be taken) to be passed as an

ordinary resolution:

Ordinary Resolution 1: Approval for the Voluntary Delisting of the Company

RESOLVED THAT:

THAT:

a. the voluntary delisting of the Company from the Catalist Board of the Singapore Exchange

Securities Trading Limited (“SGX-ST”) under Rules 1307 and 1308 of the Catalist Rules

(“Delisting Proposal”), in connection with the cash offer to be made to S Shareholders of the

Company by Ultimative Ltd (“Offeror”) to purchase all issued S Shares other than those S

Shares held directly or indirectly by the Offeror and its concert parties on the terms and

subject to the conditions set out in the Exit Offer Letter and in accordance with Section 139

of the Securities Futures Act, Cap. 289 and the Singapore Code on Take-overs and Mergers

be and is hereby approved; and

b. the directors of the Company and each of them be authorised and empowered to complete

and to do all such acts and things as they may consider necessary or expedient to give effect

to the Delisting Proposal and/or this Resolution as they or he shall deem fit in the interests

of the Company.

BY ORDER OF THE BOARD

Mr Yang Peixing

Executive Chairman

27 March 2015

Notes:

1. Domestic Shareholders who intend to attend the Extraordinary General Meeting shall deliver their written reply tothe Company confirming their attendance at the Extraordinary General Meeting 20 days prior to the date ofExtraordinary General Meeting, failing which they will not be entitled to attend the Extraordinary General Meeting.

2. “S” Shareholders are entitled to attend the Extraordinary General Meeting if their names appear on the Register ofShareholders or the Depository Register 48 hours before the EGM.

3. A Shareholder entitled to attend and vote at the Extraordinary General Meeting is entitled to appoint one or moreproxies to attend and vote instead of him. A proxy need not be a Shareholder of the Company.

4. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorisedin writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executedeither under its common seal or under the hand of its Directors or its duly appointed attorney.

5. The instrument appointing a proxy must be deposited at the office of the Company’s Singapore Share TransferAgent, M&C Services Private Limited at 112 Robinson Road #05-01, Singapore 068902 not less than 24 hoursbefore the time for holding the Extraordinary General Meeting.

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Personal Data Privacy: By attending the EGM and/or any adjournment thereof or submitting an

instrument appointing a proxy(ies) and/or representative(s) to attend, speak and vote at the EGM

and/or any adjournment thereof, a Shareholder of the Company (i) consents to the collection, use

and disclosure of the Shareholder’s personal data by the Company (or its agents) for the purpose

of the processing and administration by the Company (or its agents) of proxies and

representatives appointed for the EGM (including any adjournment thereof) and the preparation

and compilation of the attendance lists, minutes and other documents relating to the EGM

(including any adjournment thereof), and in order for the Company (or its agents) to comply with

any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”), (ii)

warrants that where the Shareholder discloses the personal data of the Shareholder’s proxy(ies)

and/or representative(s) to the Company (or its agents), the Shareholder has obtained the prior

consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by the

Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the

Purposes, and (iii) agrees that the Shareholder will indemnify the Company in respect of any

penalties, liabilities, claims, demands, losses and damages as a result of the Shareholder’s

breach of warranty.

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EXTRAORDINARY GENERAL MEETINGPROXY FORM

I/We, NRIC/Passport No.

of

being a Shareholder/Shareholders of Junma Tyre Cord Company Limited (the “Company”),

hereby appoint:

Name NRIC/Passport No. Proportion of shareholdings

No. of Shares (%)

Address

and/or (delete as appropriate)

Name NRIC/Passport No. Proportion of shareholdings

No. of Shares (%)

Address

or failing the person or either both of the persons referred to above, the Chairman of meeting as

my/our proxy/proxies to vote for me/us and on my/our behalf at the Extraordinary General Meeting

(“EGM”) of the Company to be held on 13 May 2015 at 11.00 a.m. (or soon thereafter immediately

following the conclusion or adjournment of the Annual General Meeting of the Company to be held

on 13 May 2015 at 10.00 a.m.) at MR 309 Level 3, Suntec Singapore International Convention &

Exhibition Centre, 1 Raffles Boulevard Suntec City Singapore 039593 and at any adjournment

thereof. I/We direct my/our proxy/proxies to vote for or against the Resolution proposed at the

EGM as indicated hereunder. In the absence of specific directions, the proxy/proxies will vote or

abstain as he/they may think fit, as he/they will on any other matters arising at the EGM.

The Resolution put to the vote of the EGM shall be decided by way of poll. Please indicate the

number of votes as appropriate.

Ordinary Resolution

Number of Votes

FOR

Number of Votes

AGAINST

1. Approval for the Voluntary Delisting of the

Company

Dated this day of 2015

Total number of Shares in:

Number of

Shares Held:

(a) CDP Register

(b) Register of Shareholders

Signature(s) of Shareholders/Corporation’s Common Seal

-----------------------------------------------------------------------------------------------------------------------------------------------

"

IMPORTANT

NOTES:

a. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository

Register (as defined in Section 130A of the Companies Act (Cap. 50) of Singapore, you should insert that number

of shares. If you have shares registered in your name in the Register of Shareholders of the Company, you should

insert that number of Shares. If you have shares against your name in the Depository Register and shares registered

in your name in the Register of Shareholders, you should insert the aggregate number of shares entered against

your name in the Depository Register and registered in your name in the Register of Shareholders. If no number is

inserted, this instrument of proxy will be deemed to relate to all the shares held by you.

b. A Shareholder entitled to attend and vote at the Extraordinary General Meeting is entitled to appoint one or more

proxies to attend and vote on his behalf.

c. The instrument appointing a proxy or proxies must be deposited at the office of the Company’s Share Transfer

Agent, M&C Services Private Limited at 112 Robinson Road #05-01, Singapore 068902 not less than twenty-four

(24) hours before the time appointed for the Extraordinary General Meeting.

d. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of

attorney shall be notarised. The notarised letter or power of attorney together with the proxy from shall be deposited

at the office of the Company’s Singapore Share Transfer Agent, M&C Services Private Limited at 112 Robinson Road

#05-01, Singapore 068902.

e. Where a number of proxies have been appointed, the instrument shall specify the proportion of votes as to be

represented by each proxy. Where a shareholder appoints more than one proxy, the appointments shall be invalid

unless he specifies the proportion of his holding to be represented by each proxy.

f. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised

in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed

either under its common seal or under the hand of its Directors or its duly appointed attorney.

g. Where a Shareholder is a legal person, its legal representative, or such other person authorised by a resolution of

its Board of Directors or other decision making body, shall act as its corporate representative in attending the

Extraordinary General Meeting.

h. A proxy need not be a shareholder of the Company.

i. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly

completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the

appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the

Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the

Shareholder, being the appointor, is not shown to have shares entered against his name in the Depository Register

as at forty eight (48) hours before the time appointed for holding the Extraordinary General Meeting, as certified by

the Central Depository (Pte) Limited to the Company.

Personal Data Privacy: By attending the EGM and/or any adjournment thereof or submitting an

instrument appointing a proxy(ies) and/or representative(s) to attend, speak and vote at the EGM

and/or any adjournment thereof, a Shareholder of the Company (i) consents to the collection, use

and disclosure of the Shareholder’s personal data by the Company (or its agents) for the purpose

of the processing and administration by the Company (or its agents) of proxies and

representatives appointed for the EGM (including any adjournment thereof) and the preparation

and compilation of the attendance lists, minutes and other documents relating to the EGM

(including any adjournment thereof), and in order for the Company (or its agents) to comply with

any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”), (ii)

warrants that where the Shareholder discloses the personal data of the Shareholder’s proxy(ies)

and/or representative(s) to the Company (or its agents), the Shareholder has obtained the prior

consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by the

Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the

Purposes, and (iii) agrees that the Shareholder will indemnify the Company in respect of any

penalties, liabilities, claims, demands, losses and damages as a result of the Shareholder’s

breach of warranty.

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TOPPAN VITE PTE. LTD. SCR1504027

JUNMA TYRE CORD COMPANY LIMITED

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Transcript of JUNMA TYRE CORD COMPANY LIMITED