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
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 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
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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.
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“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.
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“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.
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“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”,
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“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.
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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
JUNMA TYRE CORD COMPANY LIMITED(Incorporated in the People’s Republic of China)
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.
Shareholders may choose to accept the Exit Offer in respect of all or part of their
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
Shareholders may choose to accept the Exit Offer in respect of all or part of their
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,
Yangshe Town, Zhangjiagang City,
Jiangsu Province 215617, PRC
LZF Director No. 20, East Ten Team, Li Ming Village,
Yangshe Town, Zhangjiagang City,
Jiangsu Province 215617, PRC
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
and including 6 March 2015, being the
latest practicable date prior to the Joint
Announcement(3) 0.075 167.8
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
and including 6 March 2015, being the
latest practicable date prior to the Joint
Announcement(3) 0.068 195.1
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
shall bear the same meanings as attributed to them in the Exit Offer Letter unless otherwise
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
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:
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
shall bear the same meanings as attributed to them in the Exit Offer Letter unless otherwise
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
Name Relationship Interest in Buole*
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
reproduced below, and all terms and expressions used in the extract below shall bear the
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
Appendix to the Exit Offer Letter.
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.
Each of the 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
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
Each of the 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 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:–
(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 track record of the Group; and
(7) Other considerations.
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
Source: Company’s annual reports and announcements
Note:–
(1) Based on total borrowings divided by shareholders’ equity.
46
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) 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
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) 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
the S Shares prior to the Joint Announcement Date is above the high, mean and
median premiums of the Precedent Transactions;
(d) The premium of 167.7% implied by the Exit Offer Price against the 6-month VWAP of
the S Shares prior to the Joint Announcement Date is above the high, mean and
median premiums of the Precedent Transactions;
(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.
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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
Each of the 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
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.
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 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.
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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.
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, 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.
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.
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:–
(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.
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.
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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
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APPENDIX 2
JUNHE LEGAL OPINION
69
70
71
72
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APPENDIX 3
HEP LEGAL OPINION
74
75
76
AP
PE
ND
IX 4
VA
LUA
TIO
N R
EP
OR
T
77
78
79
80
81
82
83
84
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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,
Yangshe Town, Zhangjiagang City,
Jiangsu Province 215617, PRC
Director
Liu Zhenfeng No. 20, East Ten Team, Li Ming Village,
Yangshe Town, Zhangjiagang City,
Jiangsu Province 215617, PRC
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.
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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.
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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 – – – –
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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 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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Name Relationship Interest in Buole*
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.
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; 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
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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;
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(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;
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(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.
127
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;
128
(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
136
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
Zhou Zhidan 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
140
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)
The accompanying notes form an integral part of these financial statements.
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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
Balance at 1 January 2011
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
Currency translation differences arising on consolidation
–
46
–
46
–
46
Total comprehensive loss for the year
–
46
(169,277)
(169,231) (45,117)
(214,348)
Proceeds from issuance of shares to non-controlling interests
–
–
–
–
90,000
90,000
Balance at 31 December 2011
179,340
58,808
38,750
276,898 195,804
472,702
The accompanying notes form an integral part of these financial statements.
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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
The accompanying notes form an integral part of these financial statements.
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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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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.
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.
(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
Year ended 31 December 2012 Opening net carrying value
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
At 31 December 2012 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)
Net carrying value 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)
Net carrying value 44,138 143,979 1,945 1,068 2,200 193,330
Year ended 31 December 2011 Opening net carrying value
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)
Net carrying value 39,248 157,987 2,716 2,647 20,162 222,760
Year ended 31 December 2012 Opening net carrying value
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)
Net carrying value 208,664 16,811
Year ended 31 December 2012 Opening net carrying value 208,664 16,811 Additions 11,619 – Amortisation charge (Note 20) (4,634) (414)
Closing net carrying value 215,649 16,397
At 31 December 2012 Cost 236,654 20,669 Accumulated amortisation (21,005) (4,272)
Net carrying value 215,649 16,397
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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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)
2011 Financial assets Cash and cash equivalents 32,927 954 33,881 Trade and other receivables 117,771 – 117,771 Financial liabilities Trade and other payables (192,228) – (192,228) Borrowings (271,450) (17,253) (288,703) Net financial liabilities denominated in foreign currencies
(312,980)
(16,299)
(329,279)
Less: forward foreign exchange contracts 9,677 – 9,677 Net exposures to foreign currencies (303,303) (16,299) (319,602)
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
2011 Financial assets Cash and cash equivalents 32,895 954 33,849 Trade and other receivables 117,771 – 117,771 Financial liabilities Trade payables (190,082) – (190,082) Borrowings (266,410) (9,090) (275,500) Net financial liabilities denominated in foreign currencies, representing net exposures to foreign currencies
(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:
Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000
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:
Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000
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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25. Financial instruments (cont’d)
(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:
Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000
Gross amount 11,971 5,136 11,050 4,514 Less: Allowance for impairment
(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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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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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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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:
Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000
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.
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AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013
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 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
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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 2013 and the balance sheet of the Company as at 31 December 2013.
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.
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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
11 April 2014
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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 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
Zhou Zhidan Director
11 April 2014
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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 current assets 3,450,649 2,913,364 3,433,717 2,664,282
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)
Equity attributable to equity holders of the Company
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
Total liabilities 3,598,975 4,219,943 3,569,203 2,909,578
Total equity and liabilities 3,689,572 4,448,210 3,660,782 3,031,536
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 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)
Total comprehensive loss for the year (108,434) (244,435)
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)
The accompanying notes form an integral part of these financial statements.
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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 2013
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 2013
179,340
58,803
(120,794)
117,349
110,918 228,267
Loss for the year – – (26,796) (26,796) (81,682) (108,478) Other comprehensive income
Currency translation differences arising on consolidation
–
44
–
44
–
44
Total comprehensive 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
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
The accompanying notes form an integral part of these financial statements.
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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
Operating cash flow before working capital changes 131,452 85,795
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
Cash and cash equivalents at end of the year 10 205,971 117,802
The accompanying notes form an integral part of these financial statements.
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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 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 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 approximate their respective fair values due to the relatively short-term maturity of these financial instruments.
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2. Summary of significant accounting policies (cont’d)
(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.
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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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2. Summary of significant accounting policies (cont’d) (c) Basis of consolidation (cont’d)
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 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
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.
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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:
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.
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.
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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
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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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.
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.
(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.
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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.
(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.
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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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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
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.
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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.
(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.
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) 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.
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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
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 18. The carrying amounts of the Group’s and the Company’s inventories as at 31 December 2013 were RMB275,854,000 (2012: RMB550,133,000) and RMB238,749,000 (2012: RMB252,365,000) 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 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)
Net carrying value 221,765 755,403 2,597 6,516 136,079 1,122,360
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
At 31 December 2012 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)
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
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)
Net carrying value 32,703 141,501 2,046 3,478 43,211 222,939
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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 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)
Net carrying value 39,248 157,987 2,716 2,647 20,162 222,760
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)
Net carrying value 36,951 154,245 2,238 1,856 – 195,290
Year ended 31 December 2013 Opening net carrying value
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
At 31 December 2013 Cost 92,901 560,731 6,316 8,288 42,865 711,101 Accumulated depreciation (60,750) (441,930) (4,383) (5,472) – (512,535)
Net carrying value 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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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
At 1 January 2012 Cost 225,035 20,669 Accumulated amortisation (16,371) (3,858)
Net carrying value 208,664 16,811
Year ended 31 December 2012 Opening net carrying value 208,664 16,811 Additions 11,619 – Amortisation charge (4,634) (414)
Closing net carrying value 215,649 16,397
At 31 December 2012 Cost 236,654 20,669 Accumulated amortisation (21,005) (4,272)
Net carrying value 215,649 16,397
Year ended 31 December 2013 Opening net carrying value 215,649 16,397 Disposal of a subsidiary (194,884) – Amortisation charge (4,781) (413)
Closing net carrying value 15,984 15,984
At 31 December 2013 Cost 20,669 20,669 Accumulated amortisation (4,685) (4,685)
Net carrying value 15,984 15,984
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”)
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 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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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)
7. Inventories Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
Raw materials 97,300 184,797 95,133 81,616 Work-in-progress 71,808 129,012 57,131 51,094 Finished goods 106,746 236,324 86,485 119,655
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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8. Trade and other receivables Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
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
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 27(b)(iii).
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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10. Cash and cash equivalents Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
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
For the purpose of the consolidated statement of cash flows, the consolidated cash and cash equivalents comprise the following:
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
11. 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
2013 Balance at beginning and end of the year
55,000
18,400
73,400 105,940 179,340
2012 Balance at beginning and end of the year
55,000
18,400
73,400 105,940 179,340
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Junma Tyre Cord Company Limited And Its Subsidiaries 11. Share capital and share premium (cont’d)
At the balance sheet date, the total registered number of domestic shares and S shares were 55,000,000 (2012: 55,000,000) and 18,400,000 (2012: 18,400,000) respectively, both with par value of RMB1.00 per share (2012: 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.
12. 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 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
Balance at 31 December 2013 48,652 10,110 85 58,847
Company Statutory Discretionary Total surplus surplus other reserve reserve reserves RMB’000 RMB’000 RMB’000
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
(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.
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12. Other reserves (cont’d) (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.
13. 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 2013 amounted to RMB Nil (2012: RMB Nil).
14. Borrowings Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
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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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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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
Group 2013 2012 RMB’000 RMB’000 (Restated)
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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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
Group 2013 2012 RMB’000 RMB’000 (Restated)
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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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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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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26. 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 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
Directors’ remuneration and fees 1,540 1,555 Salaries of other key management personnel 600 600 Contributions to defined contribution benefits 99 93 2,239 2,248
Included in the above is total compensation to directors of the Company amounting to RMB1,588,000 (2012: RMB1,601,000).
(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
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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
Financial assets Loans and receivables (including cash and cash equivalents)
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
–
–
(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 the 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 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)
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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
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)
Company USD Euro Total RMB’000 RMB’000 RMB’000
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)
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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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:
Group Increase/(decrease) in loss after tax 2013 2012 RMB’000 RMB’000
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
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.
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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.
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27. Financial instruments (cont’d)
(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:
Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
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
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 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).
The credit risk for trade receivables based on the information provided to key management is as follows:
Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
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.
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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
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 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
Past due 0 to 3 months 62,785 135,255 62,785 80,235 Past due 3 to 6 months 83,305 63,021 83,105 38,796 Past due over 6 months 2,508 13,299 3,550 11,143 148,598 211,575 149,440 130,174
The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment are as follows:
Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
Gross amount 40,241 46,351 40,241 28,068 Less: Allowance for impairment
(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
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27. Financial instruments (cont’d) (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:
Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
Gross amount 6,983 11,971 6,983 11,050 Less: Allowance for impairment
(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
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 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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27. 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 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.
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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
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.
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.
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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.
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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.
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:
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
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.
29. 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 12, the Group is required to contribute to and maintain a statutory surplus reserve under the PRC accounting rules and regulations.
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29. Capital management (cont’d)
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 2012.
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
30. Contingent liabilities (unsecured) Details and estimates of maximum amounts of contingent liabilities are as follows: Guarantees
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:
Group Company 2013 2012 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000
Purchase of property, plant and equipment
–
42,062
– –
32. 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 11 April 2014.
228
AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014
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 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
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 2014 and the balance sheet of the Company as at 31 December 2014.
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.
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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
20 April 2015
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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 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
Zhou Zhidan Director
20 April 2015
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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
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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 current assets 2,617,040 3,450,649 2,623,410 3,433,717
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)
Equity attributable to equity holders of the Company
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
Total liabilities 2,790,319 3,598,975 2,778,239 3,569,203
Total equity and liabilities 2,860,250 3,689,572 2,845,207 3,660,782
The accompanying notes form an integral part of these financial statements.
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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
Total comprehensive loss for the year (20,666) (108,434)
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)
The accompanying notes form an integral part of these financial statements.
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8
JUNMA TYRE CORD COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the financial year ended 31 December 2014
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
Balance at 1 January 2014
179,340
58,847
(147,590)
90,597
– 90,597
Loss for the year – – (20,665) (20,665) – (20,665) Other comprehensive loss
Currency translation differences arising on consolidation
–
(1)
–
(1)
–
(1)
Total comprehensive loss for the year
–
(1)
(20,665)
(20,666)
– (20,666)
Balance at 31 December 2014
179,340
58,846
(168,255)
69,931
– 69,931
Balance at 1 January 2013
179,340
58,803
(120,794)
117,349
110,918 228,267
Loss for the year – – (26,796) (26,796) (81,682) (108,478) Other comprehensive income
Currency translation differences arising on consolidation
–
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
The accompanying notes form an integral part of these financial statements.
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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
Operating cash flow before working capital changes 84,728 131,452
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
Cash and cash equivalents at end of the year 10 28,544 205,971
The accompanying notes form an integral part of these financial statements.
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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 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 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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2. Summary of significant accounting policies (cont’d)
(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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2. Summary of significant accounting policies (cont’d)
(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.
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 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
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.
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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
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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2. Summary of significant accounting policies (cont’d)
(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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(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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2. Summary of significant accounting policies (cont’d)
(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.
(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) 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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2. Summary of significant accounting policies (cont’d)
(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
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.
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2. Summary of significant accounting policies (cont’d)
(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.
(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. 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
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.
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2. Summary of significant accounting policies (cont’d) (u) 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.
(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
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 16. The carrying amounts of the Group’s and the Company’s inventories as at 31 December 2014 were RMB275,722,000 (2013: RMB275,854,000) and RMB260,427,000 (2013: RMB238,749,000) respectively.
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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)
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
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)
Net carrying value 32,703 141,501 2,046 3,478 43,211 222,939
Year ended 31 December 2014 Opening net carrying value
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)
Net carrying value 28,055 182,528 1,764 3,778 11,514 227,639
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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)
Net carrying value 36,951 154,245 2,238 1,856 – 195,290
Year ended 31 December 2013 Opening net carrying value
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
At 31 December 2013 Cost 92,901 560,731 6,316 8,288 42,865 711,101 Accumulated depreciation (60,750) (441,930) (4,383) (5,472) – (512,535)
Net carrying value 32,151 118,801 1,933 2,816 42,865 198,566
Year ended 31 December 2014 Opening net carrying value
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
At 31 December 2014 Cost 92,913 638,748 6,503 9,830 11,169 759,163 Accumulated depreciation (65,378) (475,890) (4,838) (6,831) – (552,937)
Net carrying value 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
At 1 January 2013 Cost 236,654 20,669 Accumulated amortisation (21,005) (4,272)
Net carrying value 215,649 16,397
Year ended 31 December 2013 Opening net carrying value 215,649 16,397 Disposal of a subsidiary (194,884) – Amortisation charge (4,781) (413)
Closing net carrying value 15,984 15,984
At 31 December 2013 Cost 20,669 20,669 Accumulated amortisation (4,685) (4,685)
Net carrying value 15,984 15,984
Year ended 31 December 2014 Opening net carrying value 15,984 15,984 Amortisation charge (Note 19) (413) (413)
Closing net carrying value 15,571 15,571
At 31 December 2014 Cost 20,669 20,669 Accumulated amortisation (5,098) (5,098)
Net carrying value 15,571 15,571
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”)
Manufacture and sale of chemical fibre and materials
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)
7. Inventories Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000
Raw materials 58,784 97,300 57,323 95,133 Work-in-progress 50,951 71,808 46,819 57,131 Finished goods 165,987 106,746 156,285 86,485
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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8. Trade and other receivables Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000
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
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).
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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10. Cash and cash equivalents Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000
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
For the purpose of the consolidated statement of cash flows, the consolidated cash and cash equivalents comprise the following:
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.
11. 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
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)
At the balance sheet date, the total registered number of domestic shares and S shares were 55,000,000 (2013: 55,000,000) and 18,400,000 (2013: 18,400,000) respectively, both with par value of RMB1.00 per share (2013: 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.
12. 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 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)
Balance at 31 December 2014 48,652 10,110 84 58,846
Company Statutory Discretionary Total surplus surplus other reserve reserve reserves RMB’000 RMB’000 RMB’000
2014 and 2013 Balance at beginning and end of the year 48,652 10,110 58,762
(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.
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12. Other reserves (cont’d) (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.
13. Accumulated losses 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 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.
15. Borrowings Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000
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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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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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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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
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) 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
Directors’ remuneration and fees 1,529 1,540 Salaries of other key management personnel 900 600 Contributions to defined contribution benefits 91 99 2,520 2,239
Included in the above is total compensation to directors of the Company amounting to RMB1,564,000 (2013: RMB1,588,000).
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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
Financial assets Loans and receivables (including cash and cash equivalents)
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
(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 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.
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.
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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
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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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:
Group Increase/(decrease) in loss after tax 2014 2013 RMB’000 RMB’000
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
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 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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Junma Tyre Cord Company Limited And Its Subsidiaries
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:
Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000
–* 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
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 RMB849,818,000 (2013: RMB862,000,000) relating to corporate guarantees given by the Company to banks for a related party’s bank borrowings.
The credit risk for trade receivables based on the information provided to key management is as follows:
Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000
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
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 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000
Past due 0 to 3 months 109,697 62,785 105,722 62,785 Past due 3 to 6 months 35,963 83,305 37,575 83,105 Past due over 6 months 14,496 2,508 14,496 3,550 160,156 148,598 157,793 149,440
The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment are as follows:
Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000
Gross amount 69,341 40,241 69,341 40,241 Less: Allowance for impairment
(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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Junma Tyre Cord Company Limited And Its Subsidiaries
25. Financial instruments (cont’d) (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:
Group Company 2014 2013 2014 2013 RMB’000 RMB’000 RMB’000 RMB’000
Gross amount 4,874 6,983 4,874 6,983 Less: Allowance for impairment
(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
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 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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Junma Tyre Cord Company Limited And Its Subsidiaries
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:
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
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.
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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.
Geographical information
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
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 12, the Group is required to contribute to and maintain a statutory surplus reserve under the PRC accounting rules and regulations.
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.
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 2013.
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Junma Tyre Cord Company Limited And Its Subsidiaries
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
28. Contingent liabilities (unsecured) Details and estimates of maximum amounts of contingent liabilities are as follows: Guarantees
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.
31. 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 20 April 2014.
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
JUNMA TYRE CORD COMPANY LIMITED(Incorporated in the People’s Republic of China)
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.
282
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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JUNMA TYRE CORD COMPANY LIMITED(Incorporated in the People’s Republic of China)
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
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