Fruit and Juice Limited
中 新 果 业 有 限 公司
XUZHOU ZHONGXIN FRUIT & JUICE COMPANY LIMITED (Formerly known as New Lakeside Fruit Juice (Xuzhou) Co., Ltd) DongCe, YuGong Road, Feng Xian Xuzhou City, Jiangsu Province, Postal Code: 221700 People’s Republic of China
ZHONGXIN FRUIT AND JUICE LIMITED
ZHONGXIN FRUIT AND JUICE LIMITED (Formerly known as New Lakeside Holdings Limited) 25 International Business Park, #02-53 German Centre Singapore 609916
YUNCHENG ZHONGXIN FRUIT & JUICE COMPANY LIMITED (Formerly known as New Lakeside Fruit Juice (Yuncheng) Co., Ltd) Sunji Town, Linyi Xian, Yuncheng, Shanxi Province. Postal Code: 044100 People’s Republic of China
LINYI SDIC ZHONGLU FRUIT JUICE CO., LTD. (Formerly known as Shanxi Linyi Lakeside Fruit Juice Co., Ltd) YanJiaZhuang (GongMao District), Linyi Xian Yuncheng, Shanxi Province. Postal Code: 044104 People’s Republic of China
ANNUAL REPORT 2013
Associated company
Reforming & Investing for the Future ANNUAL REPORT 2013
CORPORATE PROFILE Zhongxin Fruit and Juice Limited, formerly known as New Lakeside Holdings Limited, is a subsidiary of the world’s leading producer of fruit and vegetable juice concentrates and beverages, SDIC Zhonglu Fruit Juice Co., Ltd. The Group’s primary business is the production of concentrated apple juice mainly for export to multinational F&B corporations in the United States, European Union, South Africa, Canada, Japan and Australia. The concentrated apple juice produced is used as an ingredient in packet juice drinks, soft drinks, cider, yoghurt and candies. Currently, the Group operates two wholly-owned subsidiaries - Yuncheng Zhongxin Fruit & Juice Company Limited, Xuzhou Zhongxin Fruit & Juice Company Limited and one 50%-owned associated company - Linyi SDIC Zhonglu Fruit Juice Co. Ltd.
CORPORATE INFORMATION BOARD OF DIRECTORS
SECRETARY
The Group’s subsidiary in Xuzhou city, Jiangsu province is equipped with an apple processing capacity of 60 tons per hour and concentrated apple juice production capacity of approximately 15,000 to 23,000 tons of concentrated apple juice per year, while the subsidiary in Yuncheng city, Shanxi province and the associated company in Linyi county, Yuncheng city, Shanxi province each has an apple processing capacity of 40 tons per hour and concentrated apple juice production capacity of approximately 10,000 to 15,000 tons per year.
ZHANG JIAN Chairman and Executive Director
LOH MEI LING
NGIAM ZEE MOEY Independent Director
REGISTERED OFFICE
In the aspect of research and development, the Group aligns with the “National R&D Center for Apple Processing” of the “Ministry of Agriculture of the People’s Republic of China” for new product development.
THAM POH WENG Independent Director
Leveraging on the resources and network of the Group’s parent company, SDIC Zhonglu Fruit Juice, the Group aims to strengthen its foothold in the concentrated fruit juice industry and broaden its product varieties to include other value-added products such as vegetable juice, fruit vinegar and fruit wine. Besides this, the Group will also develop new use of residues from its fruit juice production to produce by-products like animal feed, extract pectin and dietary fiber. It will also seek to extend its business arms into the health and beauty food sector in the future.
CHOW WEN KWAN, MARCUS Independent Director QUAN YUHONG Non-Executive Director AUDIT COMMITTEE
The Group was listed on the SGX-ST Catalist in 2004.
This document 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 document 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 document. This document has not been examined or approved by the SGX-ST. The Sponsor and the SGX-ST assume no responsibility for the contents of this document including the correctness of any of the statements or opinions made or reports contained in this document. The contact person for the Sponsor is Mr Thomas Lam at 36 Carpenter Street, Singapore 059915, telephone: (65) 6323 8383; email:
[email protected].
NGIAM ZEE MOEY Chairman THAM POH WENG QUAN YUHONG CHOW WEN KWAN, MARCUS NOMINATING COMMITTEE CHOW WEN KWAN, MARCUS Chairman
CONTENTS 01 Group Structure / Location of Facilities 02 Chairman’s Message 04 Board of Directors & Key Management 06 Business Overview 08 Corporate Governance 19 Financial Contents 62 Statistics Of Shareholdings 64 Notice of Annual General Meeting 67 Addendum To Shareholders Proxy Form
25 International Business Park, #02-53 German Centre Singapore 609916 Tel: 6557 2308 SHARE REGISTRARS Boardroom Corporate & Advisory Services Pte Ltd 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623 AUDITORS RT LLP (formerly known as LTC LLP) Chartered Accountants 1 Raffles Place #17-02 One Raffles Place Singapore 048616 Partner-in-charge: Tsang Siu For Thomas (Since FY 2009)
NGIAM ZEE MOEY
PRINCIPAL BANKERS
THAM POH WENG
Industrial and Commercial Bank of China Limited
QUAN YUHONG
Singapore Branch 6 Raffles Quay #12-01 Singapore 048580
REMUNERATION COMMITTEE THAM POH WENG Chairman NGIAM ZEE MOEY QUAN YUHONG CHOW WEN KWAN, MARCUS
COMPANY REGISTRATION NO. 200208395H
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
GROUP STRUCTURE ZHONGXIN FRUIT AND JUICE LIMITED (Formerly known as New Lakeside Holdings Limited)
YUNCHENG ZHONGXIN FRUIT & JUICE COMPANY LIMITED Formerly known as New Lakeside Fruit Juice (Yuncheng) Co., Ltd
XUZHOU ZHONGXIN FRUIT & JUICE COMPANY LIMITED Formerly known as New Lakeside Fruit Juice (Xuzhou) Co., Ltd
100%
100% 40%
LINYI SDIC ZHONGLU FRUIT JUICE CO., LTD. Formerly known as Shanxi Linyi Lakeside Fruit Juice Co., Ltd
10%
LOCATION OF FACILITIES
SHANXI LINYI SDIC ZHONGLU FRUIT JUICE CO., LTD.
XUZHOU ZHONGXIN FRUIT & JUICE COMPANY LIMITED JIANGSU
YUNCHENG ZHONGXIN FRUIT & JUICE COMPANY LIMITED
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ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
CHAIRMAN’S MESSAGE DEAR VALUED SHAREHOLDERS,
FINANCIAL SCORECARD FOR FY2013
FY2013 marks an exceptionally significant year for Zhongxin Fruit and Juice Limited (“the Group”) as we made remarkable changes over the period. We have returned to the path of profitability to achieve a net profit of RMB 15.9 million for FY2013 as compared to a loss of RMB 20.8 million for FY2012.
The Group has recorded revenue of RMB 139.9 million and net profit of RMB 15.9 million for FY2013. In line with the resumption of sales of our Group, our distribution expenses surged from RMB 78,000 in FY2012 to RMB 5.1 million in FY2013 primarily because of more expenses incurred for freight and transportation charges and storage fees.
The key developments and results we have attained during the year showcase our sincerity and confidence to strive for higher growth and performance in the concentrated fruit juice sector. As we conclude an extraordinarily eventful year, I am pleased and honored to present you our annual report for the financial year ended 30 June 2013 (“FY2013”).
Our other income increased 158.6% year-on-year (“yoy”) to RMB 12.8 million largely due to the write-back of part of the impairment losses previously made on the Group’s joint investment in Linyi SDIC Zhonglu Fruit Juice Co., Ltd, recovery of balance of dividend receivable from this Linyi plant, gain from restructuring of debts and foreign currency exchange.
REFORMING AND INVESTING OVER THE PAST YEAR Now known as Zhongxin Fruit and Juice Limited, and previously as New Lakeside Holdings Limited, we resumed trading of the Group’s shares on the SGX-ST Catalist on 5 March 2013. With the corporate restructuring led by our parent company SDIC Zhonglu Fruit Juice Co., Ltd., one of the world’s leading fruit juice producers, we went back to a positive net asset position of RMB 54.6 million as at 30 June 2013 as compared to a net liability position of RMB 78.1 million as at 30 June 2012. Under the leadership of the new management team, the Group reversed two years of losses to be back in the black. For the past fiscal year, we have reformed our business strategies and streamlined our production with the resumption of our two plants namely Yuncheng Zhongxin Fruit & Juice Company Limited in Yuncheng city, Shanxi province and Xuzhou Zhongxin Fruit & Juice Company Limited in Xuzhou city, Jiangsu province. Leveraging on the resources and network of our parent company, we are able to gain access to the major markets of fruit juice consumption of SDIC Zhonglu, which include the United States, Japan, Germany, Russia and Australia. Throughout our restructuring, we have geared up our efforts to revitalize our corporate culture and management style. Consequently, we witnessed a rebound in our profitability and improved our corporate governance. Our swift turnaround has allowed us to gain higher credibility amongst our creditors and suppliers and rebuild clients’ confidence in us. Continuing to invest and cultivate in areas where our previous management lacked the expertise in is vital for us to extend our potential growth in the concentrated fruit juice industry.
The Group saw a 40.1% decrease in finance costs to RMB 2.2 million mainly due to lesser interest expenses paid to creditors. Our earnings per share for FY2013 increased from negative RMB 5.21 cents to RMB 1.91 cents. SCALING UP PRODUCTION CAPACITY AND REINFORCING POTENTIAL GROWTH Recently on 6 September this year, we have entered into a contract manufacturing agreement with three production plants in Shaanxi province to gain access to apple producing regions in that area. This opens a new window of opportunity for the Group to explore the potential of apple producing areas in Shaanxi province without capital investment. We shall consider replicating this business model to other apple producing areas in China in order to procure a higher volume of fresh and quality supply of apples. This will allow the Group to increase its competitiveness and scale up its production capacity. We shall look into further streamlining our production to improve our gross profit margins and capacity utilization rate for our three existing plants namely, Yuncheng Zhongxin Fruit & Juice, Xuzhou Zhongxin Fruit & Juice and Linyi SDIC Zhonglu Fruit Juice. As China continues to implement policies to favor agricultural activities in rural areas, the Group remains optimistic on the growth opportunities available to expand its reach via developing or acquiring new plants in quality apple-producing regions in these areas. In view of the high barriers to entry, such as gaining the approval to produce concentrated apple juice and obtaining licenses to operate new apple juice production lines, coupled with limited supplies of fresh apples worldwide,
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we believe we are well-equipped with the resources and equipment to tap on the increased demand for concentrated apple juice.
market of China’s concentrated apple juice, we hope to grow in tandem with the progress of this industry.
Looking ahead, we aim to broaden our product varieties to include vegetable juice, fruit vinegar and fruit wine. We may also develop use of residues from our production to produce by-products such as animal feed, extract pectin and dietary fiber. We will also consider producing other value-added health and beauty food to expand our business segments in the long run.
Along with the increased affluence and higher awareness of the benefits of apple juice globally, demand for the concentrated apple juice market continues to grow. Export of China’s concentrated apple juice maintains its upward trend partly because of the lower cost of producing apple juice concentrate in China and this allows Chinese suppliers of apple juice concentrate to compete better as compared to others. These trends augur well for the Group and we are upbeat on our prospects and developments on strengthening our foothold in China’s export market of concentrated apple juice.
SET TO CAPTURE CHINA’S RESILIENT EXPORT MARKET FOR CONCENTRATED APPLE JUICE As we focus our energies on our core business of producing concentrated apple juice in China, we foresee higher demand in the export market for concentrated apple juice. China is the world’s largest supplier of concentrated apple juice and the main source of apple juice supply in the United States, European Union and Japan. We currently produce our concentrated apple juice mainly for export to countries such as the United States, European Union, South Africa, Canada, Japan and Australia, through our parent company. From January to June this year, the export volume of China’s concentrated apple juice grew 47.4% yoy to surpass the 200,000 ton level to hit 229,000 tons. Over the same period, the export value of China’s concentrated apple juice increased 51.7% yoy to reach US$137.0 million and the price of China’s concentrated apple juice went up by 1.2% yoy to US$598 per ton. It is also estimated that China’s concentrated apple juice market would have the potential to achieve 57.0% of the world’s total export of concentrated apple juice. Based on the robust performance of the first half of the export
ACKNOWLEDGEMENT & APPRECIATION On behalf of the board of directors, management and staff of Zhongxin Fruit and Juice, I would like to express my heartfelt gratitude to all our stakeholders for their support and trust in our Company’s development in the concentrated fruit juice sector. We remain strongly committed to uphold high standards in food and production safety and strive to conduct our operations in an environmentally and socially responsible way. Moving forward, we hope you will continue to join us in our journey to advance the Group to the next level of development. We shall work towards enhancing our performance in the concentrated fruit juice market and maximizing our investors’ benefits. Zhang Jian Chairman & Executive Director 2013
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ANNUAL REPORT 2013
BOARD OF DIRECTORS & KEY MANAGEMENT ZHANG JIAN
NGIAM ZEE MOEY
Chairman and Executive Director
Independent Director
Mr Zhang was appointed as Chairman of the Board and a Non-Executive Director on 19 October 2012. He has been redesignated as an Executive Director with effect from 28 March 2013. He is in charge of the business development of the Company.
Mr. Ngiam joined the Board on 26 October 2005. He is presently the joint company secretary of AEI Corp Ltd. Between 1987 to March 2005, he was the group financial controller of Lauw & Sons group of companies in Singapore and Australia, a diversified group dealing in real estate development, investment holdings and leisure activities. Mr Ngiam was the accounting manager of Primary Industries Enterprise, a government linked company in primary products trading and farming activities from 1983 to 1987. From 1980 to 1983, he was a tax officer with corporate branch of the Inland Revenue Department. Mr Ngiam graduated from Nanyang University with Bachelor Degree in Commerce (Accountancy) in 1980. He is a non-practising fellow and member of Institute of Singapore Chartered Accounts as well as a fellow of Association of Chartered Certified Accountants UK.
He graduated from the Economics And Trade Institute in Beijing with a Bachelor of Industrial Science degree and has several years of group business management experience. He was appointed as Deputy General Manager of SDIC Zhonglu Fruit Juice Co., Ltd from 2001 to 2009 and as General Manager of Guangdong Zhongneng Alcohol Co. Ltd from 2009 to 2012. He is currently the General Manager of SDIC Zhonglu Fruit Juice Co., Ltd.
THAM POH WENG Independent Director Mr Tham Poh Weng joined the Board on 23 June 2006. He is currently lecturing and providing management consulting services on a part-time basis. He was previously the Chief Operating Officer (“COO”) of a hedge fund manager in Singapore, in charge of operations, compliance, risk management and corporate governance. Before that, he spent more than 12 years as a Venture Capitalist. He has invested in more than 30 regional projects in industries ranging from semi-conductors, medical technology, biotechnology, engineering services, food and beverages, materials technology, petrochemicals and Infocomm Technology, and many have been listed throughout the region. Mr Tham has also significant experience in several large MultiNational Corporations and local Small and Medium Enterprises, in areas such as general administration, marketing, financial management and operations management. Mr Tham graduated from the National University of Singapore with a Bachelor’s Degree (Honours) in Pharmacy, and from the University of Washington with an MBA Degree, majoring in Finance and Accounting.
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CHOW WEN KWAN MARCUS
HOU LEI
Independent Director
General Manager
Mr Chow Wen Kwan Marcus was appointed as an Independent Director of our Company and concurrently as the Chairman of the Nominating Committee and member of the Audit and Remuneration Committee on 27 February 2013. He graduated with a LLB (Hons) from the National University of Singapore in 1998 and obtained his LLM from the University of Virginia School of Law, USA in 1999. He also holds a certificate in Governance as Leadership from the Harvard Kennedy School of Government. He previously practised with several international law firms in New York, Hong Kong and Singapore. Mr Chow is currently a Partner in the Corporate and Commercial Groups of the ATMD Bird & Bird LLP office in Singapore. He is also an Independent Director of Ley Choon Group Holdings Limited, listed on SGX Mainboard. He is a member of the Law Society of Singapore and Singapore Academy of Law and is an Attorney of Law, New York, USA.
Mr Hou was appointed as General Manager of the Company on 26 October 2012. Mr Hou is responsible for the overall operations of the Group.
QUAN YUHONG Non-Executive Director Ms Quan was appointed as a non-executive Director and member of the Audit, Remuneration and Nominating Committees on 19 October 2012. She holds a Masters Degree in Economics and was a Senior Accountant and Senior Economist. Ms Quan has also worked as Finance Manager in Beijing Logistic Economics and Technology Development Co. Ltd from 2001 to 2004, and as an Audit Manager and Office (Board of Directors) Manager in SDlC Zhonglu Fruit Juice Co., Ltd. from 2004 to 2010. Currently, she is the Chief Financial Officer of SDIC Zhonglu Fruit Juice Co., Ltd.
He is an engineer and has many years of experience in managing fruit juice production. He was appointed as General Manager of Shanxi SDIC Zhonglu Fruit Juice Co., Ltd from 2008 to 2012 and is currently the General Manager of Yuncheng Zhongxin Fruit & Juice Company Limited.
LIU ZHENZHE Deputy General Manager (Finance) Mr Liu was appointed as Deputy General Manager (Finance) of the Company on 26 October 2012. He is responsible for the overall financial operations of the Group. In addition to Mr Liu’s accounting background, he was also the Finance Manager of Shanxi SDIC Zhonglu Fruit Juice Co., Ltd from 2005 to 2006 and the Finance Manager of Linyi SDIC Zhonglu Fruit Juice Co., Ltd. from 2006 to 2012.
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ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
BUSINESS OVERVIEW With the strong support from our parent company SDIC Zhonglu Fruit Juice and the new management team, the Group managed to reverse two years of losses by achieving revenue of RMB 139.9 million and a net profit of RMB 15.9 million for FY2013. Gross profit was recorded at RMB 22.4 million with gross profit margin of 16.0%. For FY2013, the Group produced 15,300 metric tonne (“MT”) of concentrated apple juice and 262 MT of concentrated pear juice. The Group continued to focus on its primary business of producing concentrated fruit juice with the resumption of its two plants namely, Yuncheng Zhongxin Fruit & Juice in Yuncheng city, Shanxi province and Xuzhou Zhongxin Fruit & Juice in Xuzhou city, Jiangsu province. Other income surged 158.6% yoy to RMB 12.8 million for FY2013 mainly due to the write-back of part of the impairment losses previously made on the Group’s joint venture investment in Linyi SDIC Zhonglu Fruit Juice Co., Ltd. (“Linyi”) which amounted to RMB 3.1 million, recovery of RMB 2.0 million of balance of dividend receivable from Linyi, gain of RMB 2.6 million from the restructuring of debts and foreign currency exchange gain of RMB 0.8 million. In line with the resumption of sales, distribution expenses rose from RMB 78,000 for FY2012 to RMB 5.1 million for FY2013 primarily due to more expenses incurred for freight and transportation charges and storage fee. Administrative expenses fell by 33.6% yoy to RMB 11.7 million for FY2013 largely due to deferred expenditure of RMB 1.7 million as compared to RMB 5.8 million for FY2012 and legal and professional fees of RMB 2.2 million for FY2013 as compared to RMB 6.2 million for FY2012. Other expenses decreased 92.9% yoy to RMB 0.3 million for FY2013 mainly due to rental costs of RMB 3.8 million incurred in FY2012 which was no longer incurred in FY2013. Finance costs fell by 40.1% yoy to RMB 2.2 million for FY2013 largely due to lesser interest expenses paid to creditors.
CASH FLOW MANAGEMENT The Group generated an operating cash flow before working capital changes of RMB 15.9 million for FY2013 as compared to a negative operating cash of RMB 6.1 million for FY2012. Net cash generated from financing activities for the year amounted to RMB 39.2 million which was mainly attributable to the capital injection of RMB 47.0 million from SDIC Zhonglu Fruit Juice and this was partially offset by the net repayment of bank borrowings of RMB 5.7 million and interest payment of RMB 2.2 million. A net cash of RMB 3.2 million was
ANNUAL REPORT 2013
Our financial position had strengthened significantly for FY2013, to achieve a positive net assets position of RMB 54.6 million as at 30 June 2013 as compared to a net liability position of RMB 78.1 million as at 30 June 2012.
ZHONGXIN FRUIT AND JUICE LIMITED
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used in investing activities such as the purchase of plant and equipment for the year. As a result, cash and cash equivalents increased by more than ten-fold from RMB 0.3 million as at 30 June 2012 to RMB 2.9 million as at 30 June 2013.
FINANCIAL POSITION The Group’s financial position had strengthened significantly for FY2013. The capital injection from SDIC Zhonglu Fruit Juice and the conversion of debts into shares enabled the Group to achieve a positive net assets position of RMB 54.6 million as at 30 June 2013 as compared to a net liability position of RMB 78.1 million as at 30 June 2012. For the period under review, the Group’s non-current assets decreased by RMB 4.1 million to RMB 92.8 million as at 30 June 2013. Current assets increased by RMB 30.5 million to RMB 35.0 million as at 30 June 2013 primarily due to increase in cash balances, increase in other receivables and increase in inventories in order to meet the higher demand for the Group’s produce. Current liabilities fell by RMB 106.3 million to RMB 73.3 million as at 30 June 2013 largely due to a RMB 40.4 million decrease in trade and other payables from RMB 83.7 million as at 30 June 2012 to RMB 43.3 million as at 30 June 2013.
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ANNUAL REPORT 2013
CORPORATE GOVERNANCE REPORT The Board of directors (the “Board”) of Zhongxin Fruit and Juice Limited (the “Company” and together with its subsidiaries, the “Group”) recognizes the importance of corporate governance and good business practices within the Group to ensure greater transparency and to protect the interests of its shareholders. As required by the Singapore Exchange Securities Trading Limited (“SGX-ST”) Listing Manual Section B: Rules of Catalist (“Catalist Rules”), the following report describes the Company’s corporate governance practices with specific reference to the principles and guidelines set out in the Code of Corporate Governance 2005 (the “Code”), where it is applicable and practical to the Company. The Board is aware that the Monetary Authority of Singapore has issued a revised Code of Corporate Governance (“Revised Code”) on 2 May 2012, which takes effect in respect of Annual Reports relating to financial years commencing from 1 November 2012. The Company is reviewing and will take steps to adopt the new changes of the Revised Code so as to strengthen its corporate governance practice and foster corporate disclosure. The Company was placed under judicial management since 2 November 2010 (i.e. under interim judicial management on 2 November 2010 and subsequently under judicial management on 16 May 2011). The Company was discharged from the judicial management order on 20 December 2012 and was subsequently lifted from trading suspension by the SGX-ST on 5 March 2013. Principle 1: The Board’s Conduct of Affairs Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board. The key roles of the Board are to protect and enhance long term shareholders value and returns, set the Group’s corporate strategies and directions, oversee management of the Group’s business affairs, financial performance and key operational initiatives, and implementations of risk management policies and practices. Each individual Director is obliged to act in good faith and exercise independent judgement in the best interests of shareholders of the Company at all times. To assist the Board in the discharge of its function, the Board is assisted by its Board Committees which comprise of Audit, Nominating and Remuneration Committees. Matters which are delegated to Board Committees for more detailed appraisals are reported to and monitored by the Board. The Board conducts regular scheduled meetings and one Board and Board Committees’ meeting was held in the financial year ended 30 June 2013 (“FY2013”) following the lifting from trading suspension by the SGX-ST on 5 March 2013. Board meetings are conducted in Singapore and attendance by Directors is regular. Ad-hoc meetings are convened as and when circumstances required. The Company’s Articles of Association (the “Articles”) allow a board meeting to be conducted by way of tele-conference or other electronic communication facilities through which all persons participating in the meeting can communicate with each other simultaneously and instantly. There were no Board or Board Committees’ meetings held from 1 July 2012 to 20 December 2012 as the Company was under judicial management then.
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CORPORATE GOVERNANCE REPORT The attendance of the Directors at meetings of the Board and Board committees, as well as the frequency of such meetings held after the lifting of the judicial management order on 20 December 2012 and during FY2013, is as follows:
Board of Directors
Nominating Committee
Audit Committee
Remuneration Committee
Number of meetings Held
Attended
Held
Attended
Held
Attended
Held
Attended
Zhang Jian*
1
1
1
1
1
1
0
0
Quan Yuhong
1
1
1
1
1
1
0
0
Ngiam Zee Moey
1
1
1
1
1
1
0
0
Tham Poh Weng
1
1
1
1
1
1
0
0
–
–
–
–
–
–
–
–
Name
Chow Wen Kwan
#1
Note * Mr Zhang Jian was present at Board Committees’ meeting by invitation #1 – Mr Chow Wen Kwan was appointed as Director on 27 February 2013
The following persons have resigned as Directors of the Company on 19 October 2012, following the restructuring exercise of the Company during the judicial management period:Mr Go Twan Heng – Executive Director Madam Ho Kam Har – Non-Executive and Non-Independent Director Mr Pang Jiaqing – Executive Director Mr Zhou Licheng – Executive Director Principle 2: Board Composition and Balance There should be a strong and independent element on the Board, which is able to exercise objective judgment on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making. As at the date of this Annual Report, the Board comprises one Executive Director, one Non-Executive Director and three Independent Directors, with the Independent Directors making up of more than half of the Board. Each Director possesses the appropriate core competencies, quality and diversity of experience to enable them to lead and contribute to the development of the Group’s strategies and the performance of its business. The Board members as of the date of this report are: Mr Zhang Jian – Executive Director and Chairman of the Board (appointed on 19 October 2012)* Ms Quan Yuhong – Non-Executive Director (appointed on 19 October 2012) Mr Ngiam Zee Moey – Independent Director (appointed since 26 October 2005) Mr Tham Poh Weng – Independent Director (appointed since 23 June 2006) Mr Chow Wen Kwan – Independent Director (appointed on 27 February 2013) *
Mr Zhang Jian was re-designated from Non-Executive Director to Executive Director with effect from 28 March 2013
Mr Zhang Jian and Ms Quan Yuhong are the representatives from SDIC Zhonglu Fruit Juice Co., Ltd, the major shareholder holding 53.11% interest in the capital of Company.
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CORPORATE GOVERNANCE REPORT Principle 3: Chairman and Chief Executive Officer There should be a clear division of responsibilities at the top of the company – the working of the Board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power. The role of Chairman is assumed by Mr Zhang Jian, an Executive Director of the Company. Currently, the Company has no Chief Executive Officer and is in the process of searching for a suitable candidate to fill the position. The Company has in the interim period prior to the appointment of a suitable Chief Executive Officer, appointed its General Manager, Mr Hou Lei, to oversee the overall operations of the Group. Mr Zhang Jian and Mr Hou Lei are not related to each other. Principles 4: Board Membership There should be a formal and transparent process for the appointment of new directors to the Board. The Nominating Committee’s primary roles are to create a formal and transparent process for the appointments and re-nominations of members of the Board and to assess the effectiveness of the Board as a whole and the contribution of individual Directors to the effectiveness of the Board as well as to affirm annually the independence of the Directors. As at the date of this Annual Report, the members of the Nominating Committee (“NC”) comprise the following Directors, the majority of whom, including the Chairman, are independent. In addition, the Chairman is not directly or indirectly associated with the substantial shareholders of the Company. Chow Wen Kwan – Independent Director and Chairman Tham Poh Weng – Independent Director and Member Ngiam Zee Moey – Independent Director and Member Quan Yuhong – Non-Executive Director and Member For new appointments to the Board, the NC will consider the Company’s current board size and its composition and decide if the candidate’s background, expertise and knowledge will complement the skills and competencies of the existing Directors on the Board. The candidate must be a person of integrity and must be able to commit sufficient time and attention to the affairs of the Company, especially if he is serving on multiple boards. If a vacancy arises under any circumstances, or where it is considered that the Board would benefit from the services of a new Director, the NC, in consultation with the Board, will determine the selection criteria and select the appropriate candidates for the position. The NC is charged with the responsibility of re-nomination of Directors having regard to the Director’s contribution and performance (eg attendance, preparedness, participation and candour) including, if applicable, independency. Each member of the NC will abstain from voting on any resolutions in respect of the assessment of his performance or re-nomination as a Director. Pursuant to the provision of the Company’s Articles of Association, one-third of the Directors shall retire from office at every Annual General Meeting (“AGM”) and a retiring Director shall be eligible for re-election at the said AGM. All Directors shall retire from office at least once every three years. A newly appointed Director shall also submit himself for retirement at the AGM immediately after his appointment and shall be eligible for re-election at the said AGM. Annually, the NC is required to determine the “independence” status of the Directors with reference to the guideline set out in the Code. The NC has assessed and is satisfied that there are no relationships which would deem any of the Independent Directors not to be independent.
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ZHONGXIN FRUIT AND JUICE LIMITED
11
CORPORATE GOVERNANCE REPORT The NC had recommended to the Board the re-appointment of the following Directors at forthcoming AGM:Mr Zhang Jian (retiring pursuant to Article 107) Ms Quan Yuhong (retiring pursuant to Article 107) Mr Chow Wen Kwan a Director retiring pursuant to Article 117 will not be seeking for re-election at forthcoming AGM. Principle 5: Board Performance There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board. The Board and the NC strive to ensure that Directors on the Board possess the experience, knowledge and skills critical to the Group’s business so as to enable the Board to make sound and well-considered decisions. The NC had implemented a process for evaluating the effectiveness of the Board as a whole and the contribution by each individual Director to the effectiveness of the Board and set objective performance criteria for such evaluation. Each member of the NC abstains from voting on any resolutions in respect of the assessment of his performance or re-nomination as a Director. Evaluations of individual Director aim to assess whether that individual continues to contribute effectively and demonstrate commitment to the role (including commitment of time for board and committee meetings, and any other duties). Principle 6: Access to information In order to fulfill their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis. In order to ensure that the Board is able to fulfill its responsibilities, the Management is required to provide complete, adequate and timely information to the Board prior to Board meetings and any other information as deem necessary on Board affairs and issues that require Board’s decision. In exercising their duties, the Directors have separate and independent access to Senior Management and the Company Secretary (who advises the Board and ensures that board procedures are followed and that applicable laws and regulations are complied with). Additionally, should the Board consider it necessary and expedient, the Board is authorized to independently appoint legal and other professional advisors to directly advise them on specific issues which may be of concern to the Board. Principle 7: Procedures for Developing Remuneration Policies There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration. As at the date of this Annual Report, the Remuneration Committee (“RC”) comprises the following members, the majority of whom, including the Chairman, are independent: Tham Poh Weng – Independent Director and Chairman Ngiam Zee Moey – Independent Director and Member Chow Wen Kwan – Independent Director and Member Quan Yuhong – Non-Executive Director and Member
12
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
CORPORATE GOVERNANCE REPORT The RC shall perform the following functions: l
recommend to the Board a framework of remuneration for the Directors and key Executive or Senior Management, and determine specific remuneration packages for each Executive Director, with the recommendations of the RC submitted for endorsement by the entire Board. All aspects of remuneration, including but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind shall be covered by the RC; and
l
perform an annual review of the remuneration of employees related to the Directors and Substantial Shareholders to ensure that their remuneration packages are in line with the staff remuneration guidelines and commensurate with their respective job scopes and level of responsibilities. They will also review and approve any bonuses, pay increases and/or promotions for these employees.
If necessary, the RC would seek expert advice inside and/or outside the Company on remuneration of all Directors. Each member of the RC will abstain from voting on any resolutions in respect of his remuneration package or that of employees related to him. Principle 8: Level and Mix of Remuneration The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance. The Company adopts a remuneration policy for employees comprising a fixed component and a variable component. The fixed component is in the form of a base salary. The variable component is in the form of a variable bonus that is linked to the performance of the Company and the individual. The Non-Executive Directors are paid Directors’ fees, in accordance with their contribution, taking into account factors such as effort, time spent, responsibilities of the Directors and the need to pay competitive fees to attract, motivate and retain such Directors. Directors’ fees are recommended by the Board for approval by the shareholders at the Company’s AGM. Principle 9: Disclosure on Remuneration Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance. A breakdown of the level and mix of remuneration paid/payable to each Director in remuneration bands of S$250,000 for FY2013 are as follows:Fees
Salary
Bonus
Other Benefits
Total
%
%
%
%
%
Ngiam Zee Moey
100
–
–
–
100
Tham Poh Weng
100
–
–
–
100
Chow Wen Kwan*
100
–
–
–
100
Zhang Jian#
–
0
0
0
0
Quan Yuhong#
–
0
0
0
0
Remuneration bands Below S$250,000
Note *
Mr Chow Wen Kwan was appointed on 27 February 2013
#
Mr Zhang Jian and Ms Quan Yuhong have decided not to receive remuneration during FY 2013
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
13
CORPORATE GOVERNANCE REPORT Remuneration of Key Employees The remuneration paid to the top five key executives (who are not Directors of the Company) of the Group set out in bands of $250,000 for the FY2013 are as follows. The names of the executives are not disclosed, for industry competitive reasons:Name of Key Executive and Remuneration band ($)
Base/Fixed Salary (%)
Variable or Bonuses (%)
Benefits in Kind (%)
Total (%)
Executive No. 1
35
64
1
100
Executive No. 2
35
64
1
100
Executive No. 3
45
53
2
100
Executive No. 4
45
53
2
100
Executive No. 5
45
53
2
100
Below S$250,000
There is no employee of the Group who is immediate family member of any Director whose remuneration exceeds S$150,000 during the financial year ended 30 June 2013. Principle 10: Accountability The Board should present a balanced and understandable assessment of the company’s performance, position and prospects. The Board is responsible for providing a balanced and understandable assessment of the Company’s performance, position and prospects. Financial reports and other price sensitive information are disseminated to shareholders through announcements via SGXNET to SGX-ST and press releases. The Group makes announcement of its financial results in accordance with the requirements of the Catalist Rules. Management provides the Board with management accounts and keep the Board informed of, on a balanced and understandable basis, the Group’s performance, position and prospects and enable the Board to discharge of its duties efficiently. Principle 11: Audit Committee The Board should establish an audit committee with written terms of reference which clearly set out its authority and duties. As at the date of this Annual Report, the Audit Committee (“AC”) comprises the following members, all of whom are Non-Executive Directors and majority of whom, including the Chairman, are independent: Ngiam Zee Moey – Independent Director and Chairman Tham Poh Weng – Independent Director and Member Chow Wen Kwan – Independent Director and Member Quan Yuhong – Non-Executive Director and Member A majority of the AC members have accounting and related financial management expertise and experience.
14
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
CORPORATE GOVERNANCE REPORT The AC has explicit authority to investigate any matter within its terms of reference, full access to and cooperation of the Management, full discretion to invite any persons including a Director or an employee of the Group to attend its meeting, and reasonable resources to enable it to discharge its functions properly. The AC assists the Board in discharging its responsibility to safeguard the assets of the Company, maintain adequate accounting records, and develop and maintain effective systems of internal control, with the overall objective of ensuring that the Management creates and maintains an effective control environment in the Group. The AC will provide a channel of communication between the Board, the Management and the independent auditor on matters relating to audit. The AC has been entrusted with the following functions: l
Review with the external and internal auditors their audit plan, evaluation of the internal control, audit report and any other matters that the external auditors wish to discuss;
l
Review of audit matters, their scope and results and cost effectiveness;
l
Review with the internal and external auditors the scope and the results of internal audit procedures and their evaluation of the overall internal control system;
l
Review the financial statements before submission to the Board for approval, focusing in particular on changes in accounting policies and practices, major risk areas, significant adjustments resulting from audit compliance with accounting standards and compliance with the Catalist Rules and other relevant statutory or regulatory requirements;
l
Conduct investigation into any matter within the AC’s scope of responsibility and review of any significant findings of investigations with full access to Management and discretion to invite any Director or others to attend its meetings;
l
Assess the independence and objectivity of the external auditors;
l
Recommend to the Board on the appointment or re-appointment of external auditors;
l
Review and recommend to the Board on the appointment, replacement and reassignment of the internal auditors;
l
Review the assistance given by the Company’s officers to the external and internal auditors; and
l
Review interested person transactions (if any) falling within the scope of Chapter 9 of the Catalist Rules;
The AC has been granted full authority and access to the Company’s external and internal auditors and finance and accounts department without the presence of executive management and Senior Management members. The AC has authority to investigate any matter within its terms of reference, full discretion to invite any Director or executive officer to attend its meetings and reasonable resources to enable it to discharge its functions properly. Further to the release of the Company from the judicial management order and the resumption of trading of the Company’s shares, the AC has met with the external and internal auditors, for the FY2013 without the presence of Management. The AC constantly bears in mind the need to maintain a balance between the independence and objectivity of the external auditors and the work carried out by the external auditors based on value for money consideration. During the financial year under review, the aggregate amount of fees paid to the external auditors for the audit and non-audit services amounted to S$ 85,000 and S$ 2,600 respectively.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
15
CORPORATE GOVERNANCE REPORT The AC reviews the independence and objectivity of external auditors annually. During the financial year under review, the AC has reviewed the independence of RT LLP (formerly known as LTC LLP) including the volume of all non-audit services provided to the Group, and is satisfied that the nature and extent of such services will not prejudge the independence and objectivity of the external auditors. The AC has recommended and the Board has approved the re-appointment of RT LLP as external auditors of the Company at the forthcoming AGM. The Group has appointed different auditors for its overseas subsidiaries and associated company. The Board and the AC have reviewed the appointment of different auditors for its subsidiaries and associated company and were satisfied that the appointment of different auditors would not compromise the standard and effectiveness of the audit of the Group. The AC is satisfied that the Company has complied with Rule 712 and 715 of the Catalist Rules. The Company has adopted a whistle blowing policy which provides well-defined and accessible channels in the Group through which employees may raise concerns about improper conduct within the Group. The AC will review arrangements by which staff of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The AC’s objectives are to ensure that arrangements are in place for the independent investigation of such matters and for appropriate follow-up action. Principle 12: Internal Controls The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets. The AC will review, at least annually, the reports submitted by the external and internal auditors relating to the effectiveness of the Group’s significant internal controls, including financial, operational and compliance controls, risk management, and risks of fraud and irregularities. Any material non-compliance and recommendation for improvement are reported to the AC. A copy of the report is also issued to the relevant department for its follow-up action. The timely and proper implementation of all required corrective, preventive or improvement measures are closely monitored. The AC will also review the effectiveness of the actions taken by the Management on the recommendations made by the external and internal auditors in this respect. Based on the internal controls established by and maintained by the Management, the work performed by internal and external auditors and reviews performed by Management and various Board Committees and the Board, the Board, with the concurrence of the AC, is of the opinion that the Group’s internal controls, addressing the financial, operational and compliance risks, were adequate as at 30 June 2013. The system of internal controls and risk management established by the Group provides reasonable, but not absolute, assurance that the Group will not be adversely affected by any event that can be reasonably foreseen as it strives to achieve its business objectives. The Group is also consistently improving its internal controls and to adopt the recommendations which were highlighted by the internal and external auditors to further enhance the Group’s internal controls. Principle 13: Internal Audit The company should establish an internal audit function that is independent of the activities it audits. The Group has outsourced its internal audit function to JF Virtus Pte Ltd, a qualified professional firm which meets the standards set by internationally recognised professional bodies including the International Professional Practices Framework issued by the Institute of Internal Auditors.
16
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
CORPORATE GOVERNANCE REPORT The main objective of the internal audit function is to assist the Group in evaluating and assessing the effectiveness of internal controls and consequently to highlight the areas where control weaknesses exist, if any, and thus improvements could be made. The internal auditor function is independent and it reports directly to the AC on audit matters and to the Board on administrative matters. The internal auditor assists the Board in monitoring and managing risks and internal controls of the Group. The AC also reviews and approves the internal auditor’s plan for each financial year to ensure that the scope of the plan is adequate and covers the review of the significant internal controls of the Group, including financial, operational and compliance controls. The internal auditor will report their audit findings and recommendation to the AC. The Management together with the Board will review all audit reports and findings from internal auditors and external auditors during the AC meetings. The AC had reviewed the adequacy of the internal audit function and is satisfied that the team is adequately resourced and has appropriate standing within the Company. Principles 14 and 15: Communication with Shareholders Principle 14: Companies should engage in regular, effective and fair communication with shareholders. Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company. The Board believes in regular, timely and effective communication with shareholders. Shareholders are kept informed of all important developments concerning the Group through timely dissemination of information via SGXNET announcements, press releases, annual reports and various other announcements made whenever necessary. Shareholders are encouraged to attend the AGM to ensure a high level of accountability and to stay informed of the Company’s strategy and goals. Annual Report is sent to all our shareholders of the Company. The Board welcomes questions from shareholders who will have an opportunity to raise issues either informally or formally before or at the AGM. The Chairman of the AC, RC and NC are normally present at the AGM to answer those questions relating to the work of these committees. Dealings in Securities The Company has adopted an internal code on dealings in securities. The Company, as well as Directors, Senior Management and employees (collectively the “Officers”) of the Group who have access to price-sensitive, financial or confidential information are not permitted to deal in the Company’s securities during the periods commencing one month before the announcement of the Group’s half year and full year results and ending on the date of announcement of such result, or when they are in possession of unpublished price-sensitive information on the Group. In addition, the Officers of the Company are advised not to deal in the Company’s securities for a short term considerations and are expected to observe the insider trading laws at all times even when dealing in securities within the permitted trading periods.
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
17
CORPORATE GOVERNANCE REPORT Interested Person Transactions In compliance with Rule 920 of the Catalist Rules the value of Interested Person Transactions conducted during FY2013 by the Group were as follow:Name of interested person
SDIC Zhonglu
Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than SGD100,000 and excluding transactions conducted under shareholders’ mandate pursuant to Rule 920)
Aggregate value of all interested person transactions conducted under shareholders’ mandate pursuant to Rule 920 (excluding transactions less than SGD100,000)
(RMB’000)
(RMB’000)
Issue of 462,598,425 shares on 31 October 2012 pursuant to the Scheme approved at the Extraordinary General Meeting on 21 September 2012.
(a)
47,000
Entrusted loan granted by SDIC Zhonglu Fruit Juice Co Limited (“SDIC Zhonglu”) to a subsidiary of the Company through a related party. The transaction was conducted pursuant to the shareholders’ mandate for I nterested Person Transactions approved on 18 January 2013. 30,000
(b)
Sales by the Group to SDIC Zhonglu and its group of companies. The transaction was conducted pursuant to the shareholders’ mandate for I nterested Person Transactions approved on 18 January 2013. 138,288
(c)
Interest paid by a subsidiary of the Company with respect to the entrusted loan granted by SDIC Zhonglu. 920
(d)
Sales by Linyi SDIC Zhonglu Fruit Juice Co. Ltd (“Linyi”) to SDIC Zhonglu and its group of companies. 113,836*
(e)
Interest paid by Linyi to SDIC Zhonglu for loans and advances received from SDIC Zhonglu. 1,090*
Go Twan Heng, Go Wei Ho and Ho Kam Har
Conversion of debts to 159,352,296 shares on 31 October 2012 as per the Scheme approved at the EGM on 21 September 2012. 57,703
* - Based on the effective equity interest of the Group in Linyi of 50%.
–
18
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
CORPORATE GOVERNANCE REPORT Material Contracts Save as disclosed above, there were no material contracts entered into by the Group involving the interest of any Director or controlling shareholder of the Company. Risk Management and Processes The Company does not have a risk management committee. The Company has engaged the professional services of JF Virtus Pte Ltd in addressing the Group’s system of internal controls and corporate governance issues which included the assessing of financial, operational and compliance risks. Sponsorship Fees The Continuing Sponsor of the Company is CNP Compliance Pte. Ltd. In compliance with Rule 1204(20) of the Catalist Rules, there was no non-sponsor fee paid to the Sponsor by the Company for FY2013. Use of Proceeds on shares allotment The Company had raised S$9,251,968.50 (“Proceeds”) from the issuance of 462,598,425 new ordinary shares which the transaction was completed in October 2012. The Proceeds was intended for repayment to the Scheme Creditors with the balance amount to be utilized for working capital of the Group and payment of professional fees and other outgoings, pursuant to the Circular to Shareholders dated 6 September 2012. As at the date of this Annual Report, the use of the Proceeds is as follows: S$ Balance Proceeds as at 28 December 2012 -
2,281,729.89
Amount utilized:Professional fees paid pursuant to the Scheme during Judical Management
1,200,009.63
Outgoing expenses (directors’ fees, printing fees, admin salary and other professional fees)
785,288.59
Balance as at 30 August 2013
296,431.67
The use of the Proceeds is in accordance with the stated use as described in the Circular to Shareholders dated 6 September 2012.
FINANCIAL CONTENTS 20 Directors’ Report 22 Statement By Directors 23 Independent Auditor’s Report 24 Consolidated Statement of Comprehensive Income 25 Statements Of Financial Position 26 Consolidated Statement Of Changes in Equity 27 Consolidated Statement Of Cash Flows 28 Notes To The Financial Statements
20
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
DIRECTORS’ REPORT For the financial year ended 30 June 2013
The directors present their report to the members together with the audited financial statements of Zhongxin Fruit and Juice Limited (the “Company”) and its subsidiaries (the “Group”) for the financial year ended 30 June 2013, and the statements of financial position of the Company as at 30 June 2013. During the financial year, on 25 February 2013, the Company changed its name from New Lakeside Holdings Limited to Zhongxin Fruit and Juice Limited. Directors The directors of the Company in office at the date of this report are: Zhang Jian (appointed on 19 October 2012) Quan Yuhong (appointed on 19 October 2012) Ngiam Zee Moey Tham Poh Weng Chow Wen Kwan (appointed on 27 February 2013) Arrangements to enable directors to acquire shares and debentures Neither at the end nor at any time during the financial year was the Company a party to any arrangement whose object was 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’ interests in shares or debentures None of the directors who held office at the end of the financial year, had according to the register of directors’ shareholdings required to be kept under Section 164 of the Singapore Companies Act (the “Act”), held an interest in shares of the Company and related corporations (other than wholly-owned subsidiaries). 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 the director is a member or with a company in which the director has a substantial financial interest, except as disclosed in the accompanying financial statements and in this report, and except that certain directors have employment relationships with the Company and have received remuneration in those capacities. Share options There were no options granted during the financial year to subscribe for unissued shares of the Company or its subsidiaries. There were no shares of the Company or any corporation in the Group issued during the financial year by virtue of any exercise of option to take up unissued shares. There were no unissued shares of the Company or its subsidiaries under option at the end of the financial year. As at 30 June 2013, the Company does not have any employee share option scheme.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
21
DIRECTORS’ REPORT For the financial year ended 30 June 2013
Audit committee The Audit Committee performed the functions specified in the Singapore Companies Act. The functions performed are detailed in the Report on Corporate Governance. Independent Auditor The independent auditor, RT LLP (formerly known as LTC LLP), has expressed its willingness to accept re-appointment.
On behalf of the directors
Quan Yuhong Director
Ngiam Zee Moey Director Singapore, 2 October 2013
22
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
STATEMENT BY DIRECTORS For the financial year ended 30 June 2013
We, Quan Yuhong and Ngiam Zee Moey, being two of the directors of Zhongxin Fruit and Juice Limited, do hereby state that, in the opinion of the directors, (a)
the statement of financial position of the Company and the consolidated financial statements of the Group as set out on pages 24 to 61 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 30 June 2013 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended on that date; 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
Quan Yuhong Director
Ngiam Zee Moey Director Singapore, 2 October 2013
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
23
INDEPENDENT AUDITOR’S REPORT To the Members of Zhongxin Fruit and Juice Limited For the financial year ended 30 June 2013 Report on the Financial Statements We have audited the accompanying financial statements of Zhongxin Fruit and Juice Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the statements of financial position of the Group and of the Company as at 30 June 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 the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. 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 Singapore 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 that we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2013, and the results, changes in equity and cash flows of the Group for the financial year ended on that date. Report on Other Legal and Regulatory Requirements In our opinion, the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.
RT LLP Public Accountants and Chartered Accountants Singapore, 2 October 2013
24
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the financial year ended 30 June 2013
Group Note
Revenue
2013
2012
RMB’000
RMB’000
4
139,911
–
Cost of sales
(117,532)
–
Gross profit
22,379
–
12,818
4,956
Other income: Other operating income
5
Expenses: Distribution expenses Administrative expenses Finance costs
7
Other expenses
(5,087)
(78)
(11,679)
(17,582)
(2,168)
(3,622)
(315)
(4,438)
Profit/(Loss) before income tax
8
15,948
(20,764)
Income tax expense
9
–
–
Profit/(Loss) for the financial year
15,948
(20,764)
Profit/(Loss) for the financial year
15,948
(20,764)
–
–
15,948
(20,764)
Other comprehensive income for the financial year, net of tax Total comprehensive income/(loss) for the financial year attributable to owners of the parent Earnings/(Loss) per share for earnings/(loss) attributable to owners of parent (cents) - Basic
10
1.91
(5.21)
- Diluted
10
1.91
(5.21)
The accompanying notes form an integral part of these financial statements.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
25
STATEMENTS OF FINANCIAL POSITION As at 30 June 2013
Group Note
Company
2013
2012
2013
2012
RMB’000
RMB’000
RMB’000
RMB’000
3,110 – 81,186 8,466
– – 88,491 8,452
– 48,223 – –
– 48,223 – –
92,762
96,943
48,223
48,223
2,932 3,229 – 2,871 26,025
281 710 – 1,727 1,814
1,843 2,000 78,927 – –
264 259 57,627 – –
35,057
4,532
82,770
58,150
127,819
101,475
130,993
106,373
252,093 22,000 791 (220,329)
135,401 22,000 791 (236,277)
252,093 – – (127,090)
135,401 – – (125,431)
54,555
(78,085)
125,003
9,970
23 24 25 26
34,136 9,128 30,000 –
83,650 – 35,656 30,807
5,990 – – –
36,149 – – 30,807
27
–
29,447
–
29,447
73,264
179,560
5,990
96,403
127,819
101,475
130,993
106,373
ASSETS Non-current Assets Investment in joint venture Investment in subsidiaries Property, plant and equipment Land use rights and intangible assets
Current Assets Cash and bank balances Other receivables Receivable from subsidiaries Receivable from related parties Inventories
11 12 13 14
15 16 17 18 19
Total Assets EQUITY AND LIABILITIES Equity attributable to owners of parent Share capital Contributed surplus Legal and other reserves Accumulated losses
20 21 22
Equity attributable to owners of parent Current Liabilities Trade and other payables Payable to related parties Borrowings Amount due to an ex-director Amount due to a shareholder and its related party Total Liabilities Total Equity and Liabilities
The accompanying notes form an integral part of these financial statements.
26
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the financial year ended 30 June 2013
Share Capital
Contributed Surplus
Legal and Other Reserves
Accumulated Losses
Total
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
135,401
22,000
791
(215,513)
(57,321)
–
–
–
(20,764)
(20,764)
135,401
22,000
791
(236,277)
(78,085)
–
–
–
15,948
15,948
Issuance of new shares
47,000
–
–
–
47,000
Conversion of debts to shares
69,692
–
–
–
69,692
252,093
22,000
791
(220,329)
54,555
Balance at 1 July 2011 Total comprehensive loss for the financial year Balance at 30 June 2012 Total comprehensive income for the financial year
Balance at 30 June 2013
The accompanying notes form an integral part of these financial statements.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
27
CONSOLIDATED STATEMENT OF CASH FLOWS For the financial year ended 30 June 2013
Group Note
2013
2012
RMB’000
RMB’000
15,948
(20,764)
205 5,199 151 – (2,000) (3,110) (2,613) 2,168 (33)
187 10,529 148 193 – – – 3,622 –
Operating profit/( loss) before working capital changes Inventories Trade and other receivables Trade and other payables
15,915 (19,264) (1,663) (28,335)
(6,085) 256 (1,360) 10,323
Net cash (used in)/generated from operating activities
(33,347)
3,134
Cash Flows From Investing Activities Interest received Purchase of property, plant and equipment Purchase of land use rights and intangible assets
33 (2,992) (219)
– (91) (57)
Net cash used in investing activities
(3,178)
(148)
Cash Flows From Financing Activities Proceeds from issuance of new shares Proceeds from borrowings Repayment of borrowings Interest paid
47,000 30,000 (35,656) (2,168)
– – (284) (3,622)
Net cash generated from/(used in) financing activities
39,176
(3,906)
2,651 281
(920) 1,201
2,932
281
Cash Flows From Operating Activities Profit/(Loss) before income tax Adjustments for: Amortisation of land use rights and intangible assets Depreciation of property, plant and equipment Property, plant and equipment written off Provision for stock impairment Write-back of impairment of dividend receivable Write-back of impairment of investment Income from restructuring of debts Interest expense Interest income
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the financial year Cash and cash equivalents at end of the financial year
15
The accompanying notes form an integral part of these financial statements.
28
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1.
Corporate information Zhongxin Fruit and Juice Limited (Co. Reg. No. 200208395H) is a limited liability company incorporated and domiciled in Singapore and is listed on the Catalist of the Singapore Exchange Securities Trading Limited. The immediate and ultimate holding company is SDIC Zhonglu Fruit Juice Co., Ltd (“SDIC Zhonglu”). The financial statements cover the Company (referred to as “parent”) and the subsidiaries. With effect from 25 February 2013, the name of the Company was changed from New Lakeside Holdings Limited to Zhongxin Fruit and Juice Limited. The registered office of the Company and its principal place of business are located at 25 International Business Park #02-53, German Centre, Singapore 609916. The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are shown in Note 12 to the financial statements. Following the execution of the Implementation Agreement between the Company and its controlling shareholders on 6 December 2011, a proposed scheme of arrangement (the “Scheme”) between the Company and certain creditors of the Company and the Implementation Agreement were duly approved by the requisite majority of the creditors and shareholders of the Company at their meeting held on 19 September 2012 and 21 September 2012, respectively. The Scheme was sanctioned by the Court on 24 September 2012 and became effective upon lodgement with the Accounting and Corporate Regulatory Authority of Singapore on 27 September 2012. The holding company, SDIC Zhonglu, injected a cash sum of RMB 47 million into the Company in exchange for 462,598,425 ordinary shares in the Company, of which approximately RMB 14 million was used to pay the scheme creditors as part settlement of their claims. The Company also issued and allotted new ordinary shares to the scheme creditors to settle their remaining liabilities. The Scheme was completed on 31 October 2012 and terminated on 13 December 2012. The Company was subsequently discharged from judicial management order on 20 December 2012. The statement of financial position of the Company and consolidated financial statements of the Group for the financial year ended 30 June 2013 were authorised for issue in accordance with a resolution of the directors on the date of the Statement by Directors.
2.
Significant accounting policies
2.1
Basis of preparation These financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”) and the related Interpretations to FRS (“INT FRS”) as issued by the Singapore Accounting Standards Council and the Companies Act, Chapter 50. The financial statements are prepared on a going concern basis under the historical cost convention except for the accounting policies disclosed below. The financial statements are presented in Chinese Renminbi and all values in the tables are rounded to the nearest thousand (RMB’000). The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group’s accounting policies. It also requires the use of certain accounting estimates and assumptions. 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.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
29
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.2
Adoption of new and revised standards In the current financial year, the Group has adopted all the new and revised FRSs and INT FRS that are relevant to its operations and effective for annual periods beginning on or after 1 July 2012. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Group’s and Company’s accounting policies and has no material effect on the amounts reported for the current or prior years.
2.3
Standards issued but not yet effective The Group has adopted the following standards and interpretations that have been issued but not yet effective: Effective for annual periods beginning on or after
FRS No
Title
FRS 19
Employee Benefits (Revised)
1 January 2013
FRS 113
Fair Value Measurement
1 January 2013
FRS 107
Amendments to 107 Disclosures – Offsetting Financial Assets and Financial Liabilities
1 January 2013
Improvements to FRSs 2012 - Amendment to FRS 1 Presentation of Financial Statements
1 January 2013
- Amendment to FRS 16 Property, Plant and Equipment
1 January 2013
- Amendment to FRS 32 Financial Instruments: Presentation
1 January 2013
FRS 27
Separate Financial Statements (Revised)
1 January 2014
FRS 28
Investments in Associates and Joint Ventures (Revised)
1 January 2014
FRS 110
Consolidated Financial Statements
1 January 2014
FRS 111
Joint Arrangements
1 January 2014
FRS 112
Disclosure of Interests in Other Entities
1 January 2014
FRS 32
Amendments to FRS 32 Offsetting Financial Assets and Financial Liabilities
1 January 2014
Except for FRS 112, the Directors expect that the adoption of the other standards and interpretations above will have no material impact on the financial statements in the period of initial application. The nature of the impending changes in accounting policy on adoption of the FRS 112 is described below: FRS 112 Disclosure of Interests in Other Entities FRS 112 Disclosure of Interests in Other Entities is effective for financial periods beginning on or after 1 January 2014. FRS 112 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. FRS 112 requires an entity to disclose information that helps users of its financial statements to evaluate the nature and risks associated with its interests in other entities and the effects of those interests on its financial statements. As this is a disclosure standard, it will have no impact to the financial position and financial performance of the Group when implemented in 2014.
30
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.4
Revenue recognition Sales comprise the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Group’s activities. Sales are presented, net of value-added tax, rebates and discounts, and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, when it is probable that the collectability of the related receivables is reasonably assured and when the specific criteria for each of the Group’s activities are met as follows: (i)
Sale of goods Sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer which generally coincides with delivery and acceptance of the goods sold.
(ii)
Interest income Interest income is recognised on a time proportion basis (taking into account the effective yield on the asset) unless collectability is in doubt.
(iii)
Dividend income Dividend income is recognised when the right to receive payment is established.
2.5
Government grants Government grants are recognised as other income at their fair value when there is reasonable assurance that the grants will be received and all the attaching conditions will be complied with.
2.6
Group accounting (i)
Subsidiaries Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of any minority interest. Please refer to the paragraph “Intangible assets Goodwill” for the accounting policy on goodwill on acquisition of subsidiaries. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which that control ceases.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
31
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.6
Group accounting (Cont’d) (i)
Subsidiaries (Cont’d) In preparing the consolidated financial statements, intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Minority interest is that part of the net results of operations and of net assets of a subsidiary attributable to interests which are not owned directly or indirectly by the Group. They are measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the date of acquisition by the Group and the minorities’ share of changes in equity since the date of acquisition, except when the minorities’ share of losses in a subsidiary exceeds its interests in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minorities are attributed to the equity holders of the Company, unless the minorities have a binding obligation to, and are able to, make good the losses. When that subsidiary subsequently reports profits, the profits applicable to the minority interests are attributed to the equity holders of the Company until the minorities’ share of losses previously absorbed by the equity holders of the Company are fully recovered. Please refer to the paragraph “Investments in subsidiaries and associated companies” for the accounting policy on investments in subsidiaries in the separate financial statements of the Company.
(ii)
Transactions with minority interests The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recognised in the profit or loss. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the Group’s incremental share of the carrying value of identifiable net assets of the subsidiary.
(iii)
Joint venture The Group’s joint venture is entity over which the Group has contractual arrangements to jointly share the control over the economic activity of the entity with one or more parties. The Group’s interest in joint venture is accounted for in the consolidated financial statement using the equity method of accounting less impairment losses. In applying the equity method of accounting, the Group’s share of its joint venture companies’ post-acquisition profits or losses are recognised in the profit or loss and its share of post-acquisition movements in reserves is recognised in equity directly. These post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, including any other unsecured non-current receivables, the Group does not recognise further losses, unless it has obligations or has made payments on behalf of the joint venture. Unrealised gains on transactions between the Group and its joint venture are eliminated to the extent of the Group’s interest in the joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of joint venture have been changed where necessary to ensure consistency with the accounting policies adopted by the Group. Dilution gains and losses arising from investments in joint venture are recognised in the profit or loss. Please refer to the paragraph “Investment in subsidiaries and joint venture” for the accounting policy on investments in joint venture in the separate financial statements of the Company.
32
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.7
Property, plant and equipment (i)
Measurement (a)
Property, plant and equipment Property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses.
(b)
Components of costs The cost of an item 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. The cost of dismantlement, removal or restoration is also recognised as part of the cost of property, plant and equipment if the obligation for the dismantlement, removal or restoration is incurred as a consequence of either acquiring the asset or using the asset.
(ii)
Depreciation Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows: Useful lives Buildings Plant and machinery Furniture, fittings and office equipment Motor vehicles
15 – 30 years 10 years 3 – 15 years 4 – 10 years
The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at the end of each reporting period. The effects of any revision are recognised in the profit or loss when the changes arise. Fully depreciated property, plant and equipment still in use are retained in the financial statements. (iii)
Subsequent expenditure Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in the profit or loss when incurred.
(iv)
Disposal On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in the profit or loss.
2.8
Land use rights Land use rights are stated at cost less accumulated amortisation and any impairment losses. Land use rights are amortised on a straight line basis over the remaining years of rights allocated to use the land of 50 years. The amortisation period and amortisation method are reviewed at each financial year-end.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
33
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.9
Intangible assets (i)
Goodwill on acquisitions Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiaries and associated companies at the date of acquisition. Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated impairment losses. Goodwill on associated companies is included in the carrying amount of the investments. Gains and losses on the disposal of subsidiaries and associated companies include the carrying amount of goodwill relating to the entity sold, except for goodwill arising from acquisitions prior to 1 January 2001. Such goodwill was adjusted against retained earnings in the year of acquisition and not recognised in the profit or loss on disposal.
(ii)
Trademarks Trademarks acquired are initially recognised at cost and are subsequently carried at cost less accumulated amortisation and accumulated impairment losses.
2.10
Investments in subsidiaries and joint venture Investments in subsidiaries and joint venture are carried at cost less accumulated impairment losses in the Company’s statement of financial position. On disposal of investments in subsidiaries and joint venture, the difference between disposal proceeds and the carrying amounts of the investments are recognised in the profit or loss.
2.11
Impairment of non-financial assets (i)
Goodwill Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired. Goodwill included in the carrying amount of an investment in an associated company is tested for impairment as part of the investment, rather than separately. For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating-units (“CGU”) expected to benefit from synergies arising from the business combination. An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount of the CGU. The recoverable amount of a CGU is the higher of the CGU’s fair value less cost to sell and value-in-use. The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognised in the profit or loss and is not reversed in a subsequent period.
34
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.11
Impairment of non-financial assets (Cont’d) (ii)
Property, plant and equipment Land use rights Investments in subsidiaries and joint venture Property, plant and equipment, land use rights and investments in subsidiaries and joint venture are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the CGU to which the asset belongs. If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. The difference between the carrying amount and recoverable amount is recognised as an impairment loss in the profit or loss, unless the asset is carried at revalued amount, in which case, such impairment loss is treated as a revaluation decrease. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years.
2.12
Financial assets (i)
Classification The Group classifies its financial assets in the following category: loans and receivables. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. The designation of financial assets at fair value through profit or loss is irrevocable. 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 presented as current assets, except for those maturing later than 12 months after the end of the reporting period which are presented as non-current assets. Loans and receivables are presented as “trade and other receivables” and “cash and cash equivalents” on the statements of financial position.
(ii)
Recognition and derecognition Regular way 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 carrying amount and the sale proceeds is recognised in the profit or loss. Any amount in the fair value reserve relating to that asset is transferred to the profit or loss.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
35
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.12
Financial assets (Cont’d) (ii)
Recognition and derecognition (Cont’d) 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 Financial assets are initially recognised at fair value plus transaction costs.
(iv)
Subsequent measurement Loans and receivables and financial assets are subsequently carried at amortised cost using the effective interest method.
(v)
Impairment The Group assesses at each statements of financial position date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists. Loans and receivables Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired. The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the 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 against the same line item in the profit or loss. The allowance for impairment loss account is reduced through the income statement in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost, had no impairment been recognised in prior periods.
2.13
Cash and cash equivalents Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash on hand and in banks and short-term deposits which are held to maturity are carried at cost. For the purposes of presentation in the consolidated cash flow statement, cash and cash equivalents include cash on hand, deposits with financial institutions which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are presented as current borrowings on the statements of financial position.
36
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.14
Corporate guarantees The Company has issued corporate guarantees to banks for borrowings of its subsidiaries in prior years. These guarantees are corporate guarantee as they require the Company to reimburse the banks if the subsidiaries and joint venture fail to make principal or interest payments when due in accordance with the terms of their borrowings. Corporate guarantee are initially recognised at their fair values plus transaction costs in the Company’s statement of financial position. Corporate guarantee are subsequently amortised to the profit or loss over the period of the subsidiaries’ borrowings, unless it is probable that the Company will reimburse the bank for an amount higher than the unamortised amount. In this case, the corporate guarantee shall be carried at the expected amount payable to the bank in the Company’s statement of financial position.
2.15
Borrowings Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit or loss over the period of the borrowings using the effective interest method.
2.16
Financial liabilities Financial liabilities include trade payables, other payables, amounts owing to subsidiaries, hire purchase liabilities, and borrowings. Financial liabilities are recognised on the statements of financial position when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are initially recognised at fair value of consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the profit or loss when the liabilities are derecognised as well as through the amortisation process. The liabilities are derecognised when the obligation under the liability is discharged or cancelled or expired.
2.17
Fair value estimation of financial assets and liabilities The fair values of financial instruments traded in active markets (such as exchange traded and over-the counter securities and derivatives) are based on quoted market prices at the end of the reporting period. The quoted market prices used for financial assets are the current bid prices; the appropriate quoted market prices for financial liabilities are the current asking prices. The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation techniques, such as discounted cash flow analyses, are also used to determine the fair values of the financial instruments. The fair values of currency forwards are determined using actively quoted forward exchange rates. The fair values of interest rate swaps are calculated as the present value of the estimated future cash flows discounted at actively quoted interest rates. The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
37
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.18
Leases When the Group is the lessee: The Group leases property, plant and equipment under operating leases. Lessee – Operating leases Leases of property and equipment where substantially all risks and rewards incidental to ownership are retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in the profit or loss on a straight-line basis over the period of the lease. Contingent rents are recognised as an expense in the profit or loss when incurred.
2.19
Inventories Inventories are carried at the lower of cost and net realisable value. Except for the cost of fruit juice concentrate which are determined on a first–in first–out basis, inventories are determined on a weighted average basis. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Costs of conversion include direct labour, other direct costs and related production overheads which are allocated based on normal capacity of the production facilities. Normal capacity is the production expected to be achieved on average over a number of periods or season under normal circumstances. A write down on cost is made for where the cost is not recoverable or if their selling prices have declined. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Semi-finished goods are fruit juice concentrate produced that have not been packaged.
2.20
Income taxes Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when 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 affects neither accounting nor taxable profit or loss at the time of the transaction. A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, joint venture and associated companies, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.
38
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.20
Income taxes (Cont’d) Deferred income tax is measured: (i)
at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period; and
(ii)
based on the tax consequence that will follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amounts of its assets and liabilities.
Current and deferred income taxes are recognised as income or expense in the profit or loss, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition. 2.21
Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past events, it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Other provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax discount rate that reflects the current market assessment of the time value of money and the risk specific to the obligation. The increase in the provision due to the passage of time is recognised in the profit or loss as finance expense. Changes in the estimated timing or amount of the expenditure of discount rate are recognised in the profit or loss when the changes arise.
2.22
Employee compensation The Group’s contributions are recognised as employee compensation expense when they are due, unless they can be capitalised as an asset. (i)
Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid.
(ii)
Employee leaves entitlement Employee entitlements to annual leave are recognised when they accrue to employees. An accrual is made for the estimated liability for leave as a result of services rendered by employees up to the end of the reporting period.
2.23
Foreign currency transactions and translation (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 (“functional currency”). The financial statements are presented in Chinese Renminbi, which is the Company’s functional currency.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
39
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.23
Foreign currency transactions and translation (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 at the dates of the transactions. Currency translation differences from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the end of the reporting period are recognised in the profit or loss, unless they arise from borrowings in foreign currencies, other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations. Those currency translation differences are recognised in the currency translation reserve in the consolidated financial statements and transferred to the profit or loss as part of the gain or loss 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.
2.24
Segment reporting A business segment is a distinguishable component of the Group engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. Segment information is presented in respect of the Group’s business and geographical segments. The primary format, which is business segments, is based on the Group’s management and internal reporting structure. For management purposes, there is no breakdown by business segments in the financial year as the Group’s operations and sales were predominantly related to fruit juice concentrate, subsequent to the resume of productions following completion of the restructuring exercise. Segment capital expenditure is the total costs incurred during the year to acquire segment assets that are expected to be used for more than one year. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise goodwill on consolidation, interestearning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses. Inter-segment transfers, segment revenue and expense include transfers between business segments. Inter-segment sales are charged at prevailing market prices. These transfers are eliminated on consolidation.
2.25
Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account. When an entity within the Group purchases the Company’s ordinary shares (“treasury share”), the consideration paid including any directly attributable incremental cost is presented as a component within equity attributable to the Company’s equity holders, until they are cancelled, sold or reissued. When treasury shares are subsequently cancelled, the cost of treasury shares are deducted against the share capital account if the shares are purchased out of capital of the Company, or against the retained earnings of the Company if the shares are purchased out of earnings of the Company.
40
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
2.
Summary of significant accounting policies (Cont’d)
2.25
Share capital (Cont’d) When treasury shares are subsequently sold or reissued pursuant to the employee share option scheme, the cost of treasury shares is reversed from the treasury share account and the realised gain or loss on sale or reissue, net of any directly attributable incremental transaction costs and related income tax, is recognised in the capital reserve of the Company.
2.26
Dividends to Company’s shareholders Dividends to the Company’s shareholders are recognised when the dividends are approved for payment.
2.27
Legal and Other Reserve In accordance with the relevant laws and regulations of the People’s Republic of China (“the PRC”), the subsidiaries of the Company established in the PRC is required to transfer 10% of its profit after income tax prepared in accordance with the accounting regulations in the PRC to the statutory reserve until the reserve balance reaches 50% of the respective registered capital. Such reserve may be used to reduce any losses incurred or for capitalisation as paid-up capital.
3.
Critical Accounting Estimates, Assumptions and Judgements Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (i)
Revenue recognition In making its judgement, management considered the detailed criteria for the recognition of revenue from the sale of goods set out in FRS 18, Revenue and, in particular, whether the Group had transferred to the buyer the significant risks and rewards of ownership of the goods.
(ii)
Impairment and collectability of other receivables The Group follows the guidance of FRS 39 to determine when other receivables are impaired. This determination requires certain level of judgement. The Group first assesses whether objective evidence of impairment exists for individually significant debtors and collectively for debtors which are not individually significant. The Group evaluates, among other factors, financial status of the debtor, and change in the collection status and changes in industry conditions that affect the debtors. Trade and other receivables that are collectively evaluated for impairment are based on historical loss experience for receivables with similar credit risk characteristics. The methodology and assumption used for estimating potential impairment loss are reviewed regularly to reduce the differences between loss estimates and actual loss experience. The carrying amount of the other receivables at the end of the reporting period as disclosed in Note 16 to the financial statements for the Group and Company are RMB 3,229,000 (2012: RMB 710,000) and RMB 2,000,000 (2012: RMB 259,000) respectively.
(iii)
Useful lives of property, plant and equipment The estimates for the useful lives and related depreciation charges for property, plant and equipment is based on commercial and production factors which could change significantly as a result of technical innovations and competitor actions in response to severe market conditions. The depreciation charge is increased where useful lives are less than previously estimated lives, or the carrying amounts written off or written down for technically obsolete or non-strategic assets that have been abandoned or sold.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
41
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
3.
Critical Accounting Estimates, Assumptions and Judgements (Cont’d) (iv)
Impairment of property, plant and equipment An assessment is made at the end of each reporting period whether there is any indication that the asset may be impaired. If any such indication exits, an estimate is made of the recoverable amount of the asset. The recoverable amounts of cash-generating-units have been determined based on value-in-use calculations. These calculations require the use of estimates. If the revised estimated gross margin is lower than that used in the calculations there would be a need to provide for impairment.
(v)
Allowances for slow moving inventories The management carries out an inventory review on a product-by-product basis at the end of each reporting period and makes allowance for slow moving inventory items. The management estimates the net realisable value for such inventories based primarily on the latest invoice prices and current market conditions. The carrying amount of the inventories at the end of the reporting period as disclosed in Note 19 to the financial statements of the Group is RMB 26,025,000 (2012: RMB 1,814,000)
(vi)
Income tax The Group has exposure to income taxes in People’s Republic of China (“PRC”) jurisdictions. Significant judgement is involved in determining the Group’s provision for income taxes. There are certain transactions and computations for which the ultimate tax determining is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred provision in the financial year in which such determination is made. The carrying amount of income tax liabilities and deferred income tax assets and deferred income tax liabilities at the end of the reporting period are disclosed in Note 9 to the financial statements.
4.
Revenue Revenue of the Group represents the invoiced value of the goods sold to customers, net of sales discount and returns. It represents mainly sales of fruit juice concentrate to related parties as disclosed in Note 31 as well as sales of fruit pomace to non related parties which are not substantial.
5.
Other operating income Group
Foreign currency exchange gain Income from debt restructuring Government grants/incentives Interest income Other income Rental income Write-back of impairment of dividend receivable Write-back of impairment of investment
2013
2012
RMB’000
RMB’000
816 2,613 25 33 1,929 2,292 2,000 3,110
49 – – – 526 4,381 – –
12,818
4,956
42
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
6.
Staff costs Group
Wages and salaries Employers’ contribution to defined contribution plans including Central Provident Fund
2013
2012
RMB’000
RMB’000
3,735
1,138
397
26
4,132
1,164
Key management’s (directors and key executive officers) remuneration includes salary, bonus, commission and other emoluments computed based on the cost incurred by the Group and the Company and where the Group and the Company did not incur any costs, the value of the benefit is included. The directors’ and key management’s remuneration (included as part of staff cost above) are as follows: Group
Wages and salaries Directors’ fees
2013
2012
RMB’000
RMB’000
1,387 363
– 329
1,750
329
Included in the above is total compensation to directors of the Company amounting to RMB 363,000 (2012: RMB 329,000). The key management personnel remunerations are determined by the remuneration committee having regard to the performance of individuals and market trends. 7.
Finance costs Group
Interest on borrowings: - with respect to the entrusted loan granted by the holding company - bank borrowings Others
2013
2012
RMB’000
RMB’000
920 1,230 18
– 3,222 400
2,168
3,622
ANNUAL REPORT 2013
43
ZHONGXIN FRUIT AND JUICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
8.
Profit/(Loss) before income tax Group 2013
2012
RMB’000
RMB’000
205 435 150 363 5,199 151 –
187 – – 329 10,529 148 193
This was arrived at after charging: Amortisation of land use rights (Note 14) Audit fees to the independent auditors of the Company Audit fees to the other independent auditors Directors’ fee Depreciation of property, plant and equipment (Note 13) Property, plant and equipment written off Provision for stock impairment 9.
Income Tax Expense Pursuant to Section 149 of Finance Bill (2008), a special incentive was granted by the Tax Authorities of People’s Republic of China (“PRC”) to the companies engaging in preliminary processing of farm products. Pursuant to this special incentive, the profit of the subsidiaries would be fully exempted from PRC corporate income tax for the financial year 2012 and 2013. Certain province in the PRC will require the application of tax exemption in year 2012 and 2013. No provision for current taxation was made in the current financial year as the Company has sufficient unutilised tax losses in the subsidiaries to offset against the subsidiaries’ taxable income. A reconciliation between tax expenses and the product of the accounting loss multiplied by the applicable corporate tax rate for the years ended 30 June 2013 and 30 June 2012 is as follows: Group 2013
2012
RMB’000
RMB’000
Profit/(Loss) before income tax
15,948
(20,764)
Tax calculated at tax rate of 17% Effect of different tax rate in other country Income not subject to tax Expenses not deductible Utilisation of business losses Deferred tax benefit not recognised
2,711 1,160 (4,457) 783 (197) –
(3,530) (964) (800) – – 5,294
–
–
At the end of financial reporting date, the Company has unabsorbed tax losses amounting to approximately RMB 12,501,000 (2012: RMB 13,658,000). The availability of these unabsorbed tax losses for carried forward to offset against the Company’s future taxable income is subject to compliance with certain provisions of the Singapore Income Tax Act. Deferred tax benefits have not been recognised in respect of the tax losses due to uncertainty of realisation.
44
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
10.
Earnings/(Loss) per share Basic and diluted earnings/(loss) per share is calculated by dividing the net profit/(loss) for the financial year attributable to owners of the parent, by the weighted average number of ordinary shares. The basic earnings per share ratio is based on the weighted average number of ordinary shares outstanding during each reporting year. There were no potential dilutive shares for financial years 2013 and 2012. Group 2013 Net earnings/(loss) for the year (RMB ‘000) Weighted average number of ordinary shares for the purpose of basic earnings per share Basic earnings/(loss) per share (RMB per share)
11.
2012
15,948
(20,764)
835,999,852
398,880,000
1.91 cents
(5.21 cents)
Investment in Joint Venture Group
Company
2013
2012
2013
2012
RMB’000
RMB’000
RMB’000
RMB’000
28,336 – (25,226)
28,336 – (28,336)
23,336 (23,336) –
23,336 (23,336) –
3,110
–
–
–
Balance at beginning of the financial year Write-back of impairment of investment
(28,336) 3,110
(28,336) –
Balance at end of the financial year
(25,226)
(28,336)
Unquoted share at costs Less : Allowance for impairment Share of loss
Movement in share of loss:
The details of the joint venture as at 30 June 2013 were as follows:
Name of Joint Venture
Linyi SDIC Zhonglu Fruit Juice Co. Ltd (formerly known as Shanxi Linyi Lakeside Fruit Juice Co., Ltd) (“Linyi”) *
Principal Activities
Production of fruit juice concentrate and apple pomace animal feed.
Country of incorporation/ place of business
The People’s Republic of China
Equity holding 2013 %
2012 %
50
50
The statutory financial statements of the joint venture for compliance of the laws of the People’s Republic of China is audited by Baker Tilly China Certified Public Accountants; and RT LLP for equity method of accounting purposes.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
45
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
11.
Investment in Joint Venture (Cont’d) The following amounts represent the Group’s 50% share of the assets and liabilities and income and expenses of the joint venture which are included in the statement of financial position of the Group and consolidated statement of comprehensive income using the equity method of accounting. Group 2013
2012
RMB’000
RMB’000
16,469 20,502
16,061 23,365
36,971
39,426
(33,861)
(39,296)
3,110
130
117,713 (104,068)
56,576 (53,368)
13,645 33 (10,699)
3,208 3 (6,496)
Profit/(Loss) before taxation Income tax expense
2,979 –
(3,285) –
Profit/(Loss) after taxation
2,979
(3,285)
Operating cash inflows
1,492
631
Investing cash outflows
(913)
–
Financing cash outflows
(685)
(387)
Assets - Current assets - Non-current assets Liabilities - Current liabilities Net assets Revenue Cost of sales Gross profit Other income Expenses
The Group has not recognised its share of profit of a joint venture amounting to RMB 2,979,000 (Share of losses in 2012: RMB 3,285,000) because the Group’s cumulative share of losses exceed its interest in that entity and the Group has no obligation in respect of those losses. The cumulative unrecognised losses amounted to approximately RMB 48,947,000 at the end of the reporting period.
46
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
12.
Investment in Subsidiaries Company 2013
2012
RMB’000
RMB’000
Unquoted equity shares, at cost Add: Foreign exchange Less: Impairment in value of investment
65,627 21 (17,425)
65,627 21 (17,425)
Shares, at cost
48,223
48,223
17,425
17,425
Movement in impairment in value of investment is as follows: Balance at beginning and end of the financial year The details of the subsidiaries as at 30 June 2013 are as follows:
Name of Subsidiaries
Principal Activities
Country of incorporation /place of business
Percentage of equity held
Cost of investments
2013 %
2012 %
2013 RMB’000
2012 RMB’000
Xuzhou Zhongxin Fruit and Juice Company Limited (formerly known as New Lakeside Fruit Juice (Xuzhou) Co., Ltd) (“Xuzhou”)
Production of fruit juice concentrate
The People’s Republic of China
100
100
46,154
46,154
Yuncheng Zhongxin Fruit and Juice Company Limited (formerly known as New Lakeside Fruit Juice (Yuncheng) Co., Ltd) (“Yuncheng”)
Production of fruit juice concentrate
The People’s Republic of China
100
100
19,473
19,473
65,627
65,627
All subsidiaries were incorporated in the People’s Republic of China (“the PRC”). The statutory financial statements of the subsidiaries for compliance of the laws of the PRC are audited by Baker Tilly China Certified Public Accountants; and RT LLP for consolidation purpose.
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
47
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
13.
Property, plant and equipment (a)
Group
Buildings
Plant & machinery
Furniture, fittings & office equipment
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
57,063 372 –
89,271 2,553 (1,980)
1,181 67 (33)
1,303 – –
148,818 2,992 (2,013)
57,435
89,844
1,215
1,303
149,797
12,147 1,661 –
46,137 8,453 (1,832)
908 (6) (30)
1,135 38 –
60,327 10,146 (1,862)
13,808
52,758
872
1,173
68,611
43,627
37,086
343
130
81,186
56,979 84 –
89,659 5 (393)
1,195 2 (16)
1,303 – –
149,136 91 (409)
57,063
89,271
1,181
1,303
148,818
10,121 2,026 –
38,119 8,268 (250)
805 114 (11)
1,014 121 –
50,059 10,529 (261)
12,147
46,137
908
1,135
60,327
44,916
43,134
273
168
88,491
Motor vehicles
Total
2013 Cost: As at 1 July 2012 Additions Written off As at 30 June 2013 Accumulated depreciation: As at 1 July 2012 Charge to profit and loss Written off As at 30 June 2013 Net book value As at 30 June 2013 2012 Cost: As at 1 July 2011 Additions Written off As at 30 June 2012 Accumulated depreciation: As at 1 July 2011 Charge to profit and loss Written off As at 30 June 2012 Net book value As at 30 June 2012
48
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
13.
Property, plant and equipment (Cont’d) (b)
Company Furniture, fittings & office equipment RMB’000 2013 Cost: As at 1 July 2012 and 30 June 2013
143
Accumulated depreciation: As at 1 July 2012 and 30 June 2013
143
Net book value: As at 30 June 2013
–
2012 Cost: As at 1 July 2011 and 30 June 2012
143
Accumulated depreciation: As at 1 July 2011 Charge to profit and loss
140 3
As at 30 June 2012 Net book value: As at 30 June 2012
143 –
Certain plant & machinery with carrying value amounting to RMB 54,373,000 in the previous financial year has been pledged as security for the Group’s borrowings, as disclosed in Note 25. Included in the depreciation charges of the Group for the financial year was an amount of RMB 4,947,000 (2012: Nil) which were absorbed into inventories’ costing.
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
49
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
14.
Land use rights and intangible assets Group 2013
2012
RMB’000
RMB’000
9,360 219
9,303 57
9,579
9,360
908 205
721 187
1,113
908
Net book value: At end of financial year
8,466
8,452
Comprising of: Land use rights Intangible assets
8,452 14
8,452 –
8,466
8,452
Cost: At beginning of financial year Additions At end of financial year Accumulated amortisation: At beginning of financial year Charge to profit and loss At end of financial year
The entire land use rights of the Group were pledged as security for the Group’s borrowings in the previous financial year, as disclosed in Note 25. The details of the land use rights as at 30 June 2013 are as follows:
Tenure
Total land area (Square Metres)
Eastern Part of Fengyu Road, Fengxian, Xuzhou, Jiangsu Province, PRC
From 25 May 2004 to 23 May 2054
152,040
Southern Part of Sanzhao Road, Sunji Town, Linyixian, Yuncheng, Shanxi Province, PRC
From 4 March 2010 to 31 July 2059
64,724
Address of land plot
15.
Cash and bank balances Group
Cash and bank deposits
Company
2013
2012
2013
2012
RMB’000
RMB’000
RMB’000
RMB’000
2,932
281
1,843
264
50
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
16.
Other receivables Group 2012
2013
2012
RMB’000
RMB’000
RMB’000
RMB’000
Other receivables: - Non-related parties Less: Provision for doubtful debts:
271
271
–
–
As at 1 July 2012/2011 Additions
(120) –
(120) –
– –
– –
As at 30 June
(120)
(120)
–
–
151 592 486 2,000 –
151 259 300 2,000 (2,000)
– – – 2,000 –
– 259 – 2,000 (2,000)
3,229
710
2,000
259
Net other receivables Deposits Prepayments Dividend receivable Less: Impairment of dividend receivable
17.
Company
2013
Receivable from subsidiaries Amount receivable from subsidiaries in the previous financial year was non-trade, unsecured, interest-free and was repayable on demand.
18.
Receivable from related parties Amount receivable from related parties were non-trade, unsecured, interest-free and were repayable on demand.
19.
Inventories Group 2013
2012
RMB’000
RMB’000
2,392 16,384 7,442
1,993 – 14
Raw materials Semi finished goods Finished goods Less: Allowance for slow moving inventories: As at 1 July 2012/2011 Additions
(193) –
– (193)
As at 30 June
(193)
(193)
26,025
1,814
The cost of inventories recognised as an expense and included in “Cost of sales” amounted to approximately RMB 118,170,000 (2012: Nil). Depreciation of approximately RMB 4,947,000 (2012: Nil) were absorbed into inventories’ costing.
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
51
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
20.
Share capital Group and Company 2013 No of shares Issued and fully paid: Ordinary shares At beginning of financial year Issuance of new shares for cash Conversion of debts into new shares At end of financial year
2012 RMB’000
No of shares
RMB’000
398,880,000 462,598,425 193,980,776
135,401 47,000 69,692
398,880,000 – –
135,401 – –
1,055,459,201
252,093
398,880,000
135,401
All issued shares are fully paid. The Company has one class of ordinary shares, which carry one vote per share without restriction. The holders of the ordinary shares are entitled to receive dividends as and when declared by the Company. The ordinary shares have no par value. Following the execution of the Implementation Agreement between the Company and its controlling shareholders on 6 December 2011, a Scheme of Arrangement (“Scheme”) between the Company and certain creditors and the Implementation Agreement were duly approved by the requisite majority of the creditors and shareholders of the Company at their meeting held on 19 September 2012 and 21 September 2012, respectively. The issue of new shares for cash and the conversion of debts into new conversion shares were part of the principal terms pursuant to the Implementation Agreement to carry out the allotment and issue of shares to SDIC Zhonglu as well as the implementation of the Scheme; administered under the Judicial Management. The Scheme was completed on 31 October 2012 and was terminated on 13 December 2012. The Company was subsequently discharged from Judicial Management on 20 December 2012. 21.
Contributed Surplus The contributed surplus relates to the amount of money that the Group earns from sources other than its profits.
22.
Legal and other reserves In accordance with the relevant laws and regulations of the People’s Republic of China (“PRC”), the subsidiaries of the Company established in the PRC is required to transfer 10% of its profit after income tax prepared in accordance with the accounting regulations in the PRC to the statutory reserve until the reserve balance reaches 50% of the respective registered capital. Such reserve may be used to reduce any losses incurred or for capitalisation as paid-up capital.
52
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
23.
Trade and other payables Group
Trade payables: - Non-related parties Other payables: - Non-related parties* Accrued salaries, bonus and directors’ remunerations Accruals and provisions Advances received**
Company
2013
2012
2013
2012
RMB’000
RMB’000
RMB’000
RMB’000
7,211
29,375
–
16,090
23,358
37,493
1,156
9,964
2,613 942 12
1,937 9,623 5,222
485 4,349 –
1,367 8,728 –
34,136
83,650
5,990
36,149
*The Group Xuzhou had a dispute with Xi’an Jingfa Economics & Trade Industrial Co., Ltd (“Xi’an Jingfa”) under a juice processing/ manufacturing agreement, pursuant to which Xuzhou agreed to produce fruit juice for Xi’an Jingfa. Xi’an Jingfa claimed that it had overpaid Xuzhou, and it commenced legal proceedings against Xuzhou in the PRC for a claim of approximately RMB 5.2 million with interest. On 12 October 2010, the PRC Xi’an Weiyang District People’s Court (西安市未央区人民法院) issued a judgment against Xuzhou ordering Xuzhou to pay Xi’an Jingfa a sum of RMB 5,429,000. On 15 May 2012, the Company, Xuzhou and Xi’an Jingfa entered into a settlement agreement, in which Xuzhou shall repay a sum of approximately RMB 6,281,000 (inclusive of the court processing fees and accrued interest as at 21 January 2012) to Xi’an Jingfa via instalments and, if Xuzhou is unable to settle its liabilities to Xi’an Jingfa, Xi’an Jingfa may instruct Xuzhou to transfer such liabilities to the Company and the Company shall settle such liabilities in accordance to the terms of the Scheme. Such balance was included in trade payables as at 30 June 2012. The balance outstanding owing by Xuzhou to Xi’an Jingfa as at 30 June 2013 amounted to approximately RMB 4,345,000, which were included in other payables as at 30 June 2013. *The Company The Company owed Xi’an Jingfa a sum of RMB 11,999,000 under a judgment of the PRC Xi’an Intermediate Court (西安市 中级人民法院) made on 25 October 2011. The Company and Xi’an Jingfa entered into a settlement agreement to settle the aforesaid judgment debt of approximately RMB 12,509,000 (including the court processing fees of RMB 98,000 and the accrued interest as at 1 November 2010). The claim amount has since been settled in full on 31 October 2012 via the Scheme. ** Advances received from customers are unsecured, interest-free and repayable on demand.
24.
Payable to Related Parties Amount payable to related parties are non-trade, unsecured, interest-free and are repayable on demand.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
53
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
25.
Borrowings Group
Current: Entrusted loan – Unsecured Short-term loans – Secured
2013
2012
RMB ’000
RMB ’000
30,000 –
– 35,656
30,000
35,656
The exposure of the borrowings of the Group and of the Company to interest rate changes and the contractual reporting dates at the end of the reporting period are as follows: Group 2013
2012
RMB ’000
RMB ’000
30,000
35,656
Within 1 year (a)
Securities granted Entrusted loan The entrusted loan as at 30 June 2013 was granted by SDIC Zhonglu to a subsidiary of the Company, through a related party. Short-term loans The short-term loans as at 30 June 2012 were secured by certain buildings, plant & machinery and land use rights of the Group, as disclosed in Note 13 and Note 14.
(b)
Interest rates The interest rates charged on borrowings based on market rate are as follows: Group
Entrusted loan - unsecured Short-term loans - secured (c)
2013
2012
RMB’000
RMB’000
6% per annum –
– 5.84% to 7.62% per annum
Fair values The carrying amounts of borrowings approximate their fair values.
54
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
26.
Amount due to an ex-director The amount due to an ex-director (see Note 1) in the previous financial year amounted to RMB 30,807,000 of which RMB 26,897,000 were carried at an interest rate of 7% to 7.5% per annum, and both of these unsecured loan were due for repayment upon the respective maturity date (6 months from the remittance date). The interest charged has been waived since 2 November 2010 in accordance with the Scheme of Arrangement dated 11 September 2012. On 31 October 2012, the Company has settled the amount due to the ex-director in full via the Scheme, by repaying the ex-director an amount equivalent to 17% of the outstanding amounts owed to him and allotting/issuing new ordinary shares of the Company based on the remaining 83% of the outstanding amounts.
27.
Amount due to a shareholder and its related party The amount due to a shareholder (see Note related to loans from the shareholder and a unsecured with interest rate of 7% per annum charged has been waived since 2 November 11 September 2012.
2) and its related party in the previous financial year were party related to an ex-director and a substantial shareholder, and were due for repayment since December 2009. The interest 2010 in accordance with the Scheme of Arrangement dated
On 31 October 2012, the Company settled the amount due to the shareholder and its related party in full via the Scheme, by repaying the shareholder and its related party an amount equivalent to 17% of the outstanding amounts owed to them and allotting/issuing new ordinary shares of the Company based on the remaining 83% of the outstanding amounts. 28.
Commitments Operating lease commitments – Where the Group is a lessee Group
Future minimum lease payments: - not later than 1 year - between 1 to 5 years - later than 5 years
29.
2013
2012
RMB’000
RMB’000
– – –
28 112 224
–
364
Capital Commitments Estimated amounts committed at the end of the reporting year for future capital expenditure but not recognised in the financial statements are as follows: Group
Purchase of machineries
2013
2012
RMB’000
RMB’000
1,216
–
Notes: 1.
The director, who was also the major shareholder, has resigned as a director of the Company on 19 October 2012 following the restructuring exercise of the Company.
2.
The shareholder was appointed as a non-executive director of the Company on 23 July 2010, has subsequently resigned on 19 October 2012 following the restructuring exercise of the Company.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
55
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
30.
Segment information (a)
Business segment There is no breakdown by business segments as the Group’s operations and sales in the financial year were predominantly related to fruit juice concentrate, subsequent to the resume of productions following completion of the restructuring exercise.
(b)
Geographical information There is no breakdown by geographical markets as the Group’s operations and customers were all based in the PRC. Revenues of approximately RMB 117,373,000 (2012: Nil) were derived from a related party customer. These revenues were attributable to the sale of fruit juice concentrate.
(c)
Revenue from major products Revenues from external customers were derived from the sale of fruit juice concentrate.
31.
Related Party Transactions In addition to the transactions detailed elsewhere in the financial statements, the Group had the following transactions with related parties during the financial year: Group
Sales to: - SDIC Zhonglu - Shandong Luling Fruit Juice Co., Ltd. (“Shandong Luling”)^ - Liaoning SDIC Zhonglu Fruit Juice Co., Ltd.^ Interest paid with respect to the entrusted loan provided by SDIC Zhonglu Purchase of consumable from: - Linyi Warehousing, packaging and other expenses paid to: - Linyi - Qingdao SDIC Zhonglu Fruit Juice Co., Ltd. (“Qingdao SDIC”)^ Sales by Linyi to: - SDIC Zhonglu - Qingdao SDIC - Shandong Luling Interest paid by Linyi to SDIC Zhonglu for loans and advances received from SDIC Zhonglu ^ These companies are subsidiaries of SDIC Zhonglu, which has common shareholder with the Company. *
Based on the effective equity interest of the Group in Linyi of 50%.
2013
2012
RMB’000
RMB’000
117,373 17,027 3,888
– – –
920
–
97
–
43 199
– –
113,163* 2* 671*
– – –
1,090*
–
56
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
32.
Financial risk management Financial risk factors The Group’s activities expose it to a variety of financial risks. The Group’s overall business strategies, tolerance of risk and general risk management philosophy are determined by directors in accordance with prevailing economic and operating conditions. It is the Group’s policy not to trade in derivative contracts. Interest rate risk Interest rate risk is the risk that changes in interest rates will have an adverse financial effect on the Group and the Company’s financial conditions and/or results. The primary source of the Group and the Company’s interest rate risk is its borrowings from financial institutions in Singapore and PRC. The Group and the Company’s policy are to manage its interest cost using a combination of fixed and variable interest rate borrowings, where applicable. The Company has adequate credit facilities to ensure necessary liquidity as provided from the statements of financial position of the Group. The Group and the Company have cash balances placed with reputable banks. The Group and the Company manage its interest rate risks on its interest income by placing the cash balances in varying maturities and interest rate terms. The Group’s and the Company’s interest bearing financial assets and liabilities are mainly bank and cash balances, borrowings, amount due to an ex-director, and amount due to a shareholder and its related company (all variable) as set out in the table below:
Interest bearing
Group Noninterest bearing
Interest bearing
Company Noninterest Bearing
Total
Total
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
–
2,932
2,932
–
1,843
1,843
30,000
–
30,000
–
–
–
–
281
281
–
264
264
35,656 30,807
– –
35,656 30,807
– 30,807
– –
– 30,807
29,447
–
29,447
29,447
–
29,447
95,910
–
95,910
60,254
–
60,254
2013 Assets Cash and cash equivalents Liabilities Borrowings 2012 Assets Cash and cash equivalents Liabilities Borrowings Amount due to an ex-director Amount due to a shareholder and its related company
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
57
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
32.
Financial risk management (Cont’d) Interest rate risk (Cont’d) The Group’s and the Company’s borrowings at variable rates on which effective hedges have not been entered into are denominated mainly in Renminbi (“RMB”) and Singapore Dollar (“SGD”). If the interest rates increase/ decrease by 2% with all other variables including tax rate being held constant, the Group’s and the Company’s net profit/loss will be lower/higher by RMB 600,000 (2012: RMB 1,918,000) and RMB Nil (2012: RMB 1,205,000) respectively as a result of higher/lower interest expense on these borrowings. Liquidity risk The Group’s and the Company’s ability to fund their existing and prospective debt requirements is managed by maintaining the availability of adequate committed funding lines from high quality lenders. Cash and cash equivalents are placed with credit worthy financial institutions. The Group’s and the Company’s non-derivative financial liabilities are less than 1 year based on the remaining period from the end of the reporting period to the contractual maturity date. As at 30 June 2013, the Group’s current liabilities exceeded its current assets by RMB 38,207,000. The ability of the Group to meet its financial obligations is dependent on the continuing support from its bankers and its holding company, and the Group generating sufficient positive cash flows from the operations. Currency risk Currency risk arises from a change in foreign currency exchange rate, which is expected to have an adverse effect on the Group and the Company in the current reporting period and in future years. The Group’s and the Company’s main currency risk arises from foreign currency denominated sales and purchases, and operating expenses. This risk is mitigated to a certain extent by the natural hedge between sales receipts and purchases, and operating expenses disbursements. Entities within the Group maintain their books in their respective functional currencies. Profits and net assets of overseas entities are translated into RMB, the Group’s reporting currency for consolidation purposes. Fluctuations in the exchange rate between the respective functional currencies and RMB will have an impact on the Group and the Company. The Group and the Company also maintain foreign currency bank accounts for operating purposes.
58
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
32.
Financial risk management (Cont’d) Currency risk (Cont’d) The Group’s and the Company’s exposures to currency risk are as follows:
Group
Renminbi RMB’000
Singapore Dollar RMB’000
1,089 2,743 2,871
1,843 – –
2,932 2,743 2,871
6,703
1,843
8,546
30,000 34,136 9,128
– – –
30,000 34,136 9,128
73,264
–
73,264
(66,561)
1,843
(64,718)
66,561
–
66,561
–
1,843
1,843
– 451 1,727
281 259 –
281 710 1,727
2,178
540
2,718
35,656 60,010 – –
– 23,640 30,807 29,447
35,656 83,650 30,807 29,447
95,666
83,894
179,560
(93,488)
(83,354)
(176,842)
93,488
–
93,488
–
(83,354)
(83,354)
Total RMB’000
2013 Assets Cash and cash equivalents Other receivables Receivables for related parties Liabilities Borrowings Trade and other payables Payable to related parties
Net financial (liabilities)/assets Less: Net financial liabilities denominated in the respective entities’ functional currency Currency exposure 2012 Assets Cash and cash equivalents Other receivables Receivables for related parties Liabilities Borrowings Trade and other payables Amount due to an ex-director Amount due to a shareholder and its related party
Net financial liabilities Less: Net financial liabilities denominated in the respective entities’ functional currency Currency exposure
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
59
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
32.
Financial risk management (Cont’d) Currency risk (Cont’d)
Company
Renminbi RMB’000
Singapore Dollar RMB’000
Total RMB’000
– 2,000 78,927
1,843 – –
1,843 2,000 78,927
80,927
1,843
82,770
5,990
–
5,990
74,937
1,843
76,780
(74,937)
–
(74,937)
–
1,843
1,843
– – 57,627
264 259 –
264 259 57,627
57,627
523
58,150
12,509 – –
23,640 30,807 29,447
36,149 30,807 29,447
12,509
83,894
96,403
45,118
(83,371)
(38,253)
(45,118)
–
(45,118)
–
(83,371)
(83,371)
2013 Assets Cash and cash equivalents Trade and other receivables Receivables from subsidiaries Liabilities Trade and other payables Net financial assets Less: Net financial assets denominated in the respective entities’ functional currency Currency exposure 2012 Assets Cash and cash equivalents Other receivables Receivables from subsidiaries Liabilities Trade and other payables Amount due to an ex-director Amount due to a shareholder and its related party
Net financial assets/(liabilities) Less: Net financial assets denominated in the respective entities’ functional currency Currency exposure
60
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
32.
Financial risk management (Cont’d) Currency risk (Cont’d) If the SGD change against the RMB by 3% (2012: 2%) with all other variables including tax rate being held constant, the effects arising from the net financial assets/liabilities position will be as follows: Profit/(Loss) Group
SGD against RMB - strengthened - weakened
Company
2013
2012
2013
2012
RMB’000
RMB’000
RMB’000
RMB’000
55 (55)
(1,677) 1,677
55 (55)
(1,667) 1,667
Credit risk Credit risk is the risk that companies and other parties will be unable to meet their obligations to the group resulting in financial loss to the Group and the Company. The Group and the Company manage such risks by dealing with a diversity of credit-worthy counterparties to mitigate any significant concentration of credit risk. Credit policy includes assessing and evaluation of existing and new customers’ credit reliability and monitoring of receivable collections. The Group places its cash and cash equivalents with creditworthy institutions. As at 30 June 2013, there was no significant credit risk. The maximum exposure to credit risk in the event that the counterparties fail to perform the obligations as at the end of the financial year in relation to each class of financial assets is the carrying amount of these assets in the statements of financial position. The credit risk for trade receivables based on the information provided to key management is as follows: (i)
Financial assets that are neither past due nor impaired Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially companies with a good collection track record with the Group and the Company.
(ii)
Financial assets that are past due and/or impaired There is no other class of financial assets that is past due and/or impaired.
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
61
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
32.
Financial risk management (Cont’d) Capital risk The Company’s objectives when managing capital are: l
to safeguard the Company’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and
l
to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Company sets the amount of capital in proportion to risk. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. Given the cyclical nature of the Group’s operations, the Group’s gearing ratio varies substantially over the course of a financial year, peaking at around November each year at the middle of the apple harvest season before settling down around April the following year. Management monitors capital based on an analysis of gearing ratio. The amount of interest bearing loans the Group takes up depends on various factors, of which the two most important are: (i) the prices of apples which is the Group’s main raw material; and (ii) the quantity of apple juice concentrate the Group decides to produce taking into account the market conditions, trends and market demand for apple juice concentrate. To operate within these internally set parameters, the Group may issue new shares or enter into other nonrecourse financing arrangements such as entering into joint production arrangements with third parties. There has been no change in the Group’s capital management practices during the financial year under review. The gearing ratio is calculated as net debt divided by total capital. Net debt is calculated as total debt (as shown in the statements of financial position) less cash and cash equivalents. Total capital is equity plus net debts. The gearing ratios at 30 June 2013 and 30 June 2012 were as follows: Group
Company
2013
2012
2013
2012
RMB’000
RMB’000
RMB’000
RMB’000
Total debt Less: Cash and cash equivalents
73,264 (2,932)
179,560 (281)
5,990 (1,843)
96,403 (264)
Net debt Total equity
70,332 54,555
179,279 (78,085)
4,147 125,003
96,139 9,970
Total capital
124,887
101,194
129,150
106,109
56%
177%
3%
91%
Gearing ratio
The Company does not have any externally imposed capital requirement. However, both the Group’s operating companies, namely Xuzhou and Yuncheng are registered in and under the laws of the PRC. Both these subsidiaries are required by the PRC’s Law on Foreign Enterprises to contribute to and maintain a non-distributable statutory reserve fund whose utilization is subject to the approval of the relevant PRC authorities. As at the date of this report, the Group is in compliance with the aforesaid externally imposed capital requirement.
62
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
STATISTICS OF SHAREHOLDINGS As at 17 September 2013
Issued and fully paid-up shares excluding treasury shares
:
1,055,459,201
Treasury shares
:
Nil
Class of shares
:
Ordinary shares
Voting rights
:
One vote per share
SUBSTANTIAL SHAREHOLDERS (as recorded in the Register of Substantial Shareholders as at 17 September 2013) Name
Direct Interest No. of shares %
SDIC Zhonglu Fruit Juice Co., Ltd State Development and Investment Corporation Go Twan Heng Ho Kam Har
(1)
(2)
(3)
New Lakeside Investment Ltd
(4)
GKH International Ltd (5) Go Wei Ho (6)
Deemed Interest No. of shares %
560,598,425
53.11
–
–
–
–
560,598,425
53.11
103,796,399
9.83
202,558,897
19.20
136,328,897
12.92
170,026,399
16.11
66,230,000
6.27
–
–
–
–
66,230,000
6.27
22,279,000
2.11
66,230,000
6.27
Notes: (1)
State Development and Investment Corporation is deemed to be interested in the 560,598,425 shares held by SDIC Zhonglu Fruit Juice Co., Ltd
(2)
Go Twan Heng is deemed to be interested in the 66,230,000 shares held by New Lakeside Investment Ltd and 136,328,897 shares held by his spouse, Ho Kam Har
(3)
Ho Kam Har is deemed to be interested in the 66,230,000 shares held by New Lakeside Investment Ltd and 103,796,399 shares held by her spouse, Go Twan Heng
(4)
The 66,230,000 shares were held by CIMB Securities (Singapore) Pte Ltd as nominee of New Lakeside Investment Ltd.
(5)
GKH International Ltd is deemed to be interested in the 66,230,000 shares held by New Lakeside Investment Ltd.
(6)
Go Wei Ho is deemed to be interested in the 66,230,000 shares held by New Lakeside Investment Ltd. There are 1,050,000 shares belonging to Go Wei Ho registered in the name of New Lakeside Investment Ltd.
SHAREHOLDINGS HELD IN THE HANDS OF PUBLIC Based on information available to the Company as at 17 September 2013, approximately 15.68% of the issued ordinary shares of the Company is held by the public and therefore, Rule 723 of the SGX-ST Listing Manual (Section B: Rules of Catalist) is complied with.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
63
STATISTICS OF SHAREHOLDINGS As at 17 September 2013
DISTRIBUTION OF SHAREHOLDINGS
SIZE OF SHAREHOLDINGS 1 – 999
NO. OF SHAREHOLDERS
%
NO. OF SHARES
%
1
0.10
214
1,000 – 10,000
502
49.75
2,648,197
0.25
10,001 – 1,000,000
487
48.27
43,866,668
4.16
19
1.88
1,008,944,122
95.59
1,009
100.00
1,055,459,201
100.00
NO. OF SHARES
%
1,000,001 AND ABOVE TOTAL
0.00
TWENTY LARGEST SHAREHOLDERS NAME 1.
SDIC ZHONGLU FRUIT JUICE CO., LTD
560,598,425
53.11
2.
HO KAM HAR
136,328,897
12.92
3.
GO TWAN HENG
103,796,399
9.83
4.
CIMB SECURITIES (SINGAPORE) PTE LTD
68,090,000
6.45
5.
CHINA ORIGIN INVESTMENT LTD
32,900,000
3.12
6.
SHANXI BODING INDUSTRY & TRADE CO., LTD
29,000,000
2.75
7.
XI’AN KINGFAR ENTERPRISE LTD
28,672,401
2.72
8.
GO WEI HO
22,279,000
2.11
9.
LUM WENG YU
5,915,000
0.56
10.
LAKESIDE EMPLOYEE HOLDINGS LIMITED
4,500,000
0.43
11.
KOH WAN LEE
4,030,000
0.38
12.
GOH GEOK KHIM
2,400,000
0.23
13.
CITIBANK NOMINEES SINGAPORE PTE LTD
2,237,000
0.21
14.
NG NGEE HUNG
2,000,000
0.19
15.
DBS VICKERS SECURITIES (SINGAPORE) PTE LTD
1,590,000
0.15
16.
OCBC SECURITIES PRIVATE LTD
1,364,000
0.13
17.
LOW WENG KEONG
1,200,000
0.11
18.
YEO LAY SUAN ANGELA
1,025,000
0.10
19.
LIM HOO PING @ HO PENG
1,018,000
0.10
20.
CHOW WING WAH
1,000,000
0.09
1,009,944,122
95.69
TOTAL
64
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at 8 Wilkie Road #03-08, Wilkie Edge, Singapore 228095, on 30 October 2013, Wednesday at 10.00 a.m. to transact the following business: ORDINARY BUSINESS 1.
To receive and adopt the Audited Financial Statements for the financial year ended 30 June 2013 together with the Reports of the Directors and Auditors thereon.
Resolution 1
2.
To approve payment to the Independent Directors of Directors’ fees of S$46,795 for the financial year ended 30 June 2013. (2012: S$66,000).
Resolution 2
3.
To re-elect Mr Zhang Jian who is retiring pursuant to Article 107 of the Company’s Articles of Association.
Resolution 3
Mr Zhang Jian shall, upon re-election as Director of the Company, remain as the Chairman of the Board. 4.
To re-elect Ms Quan Yuhong who is retiring pursuant to Article 107 of the Company’s Articles of Association.
Resolution 4
Ms Quan Yuhong shall, upon re-election as Director of the Company, remain as a member of the Audit, Nominating and Remuneration Committees. 5.
To note the retirement of Mr Chow Wen Kwan, a Director retiring by rotation pursuant to the Article 117 of the Company’s Articles of Association, who has decided not to seek re-election. Mr Chow Wen Kwan will retire as a Director of the Company at the conclusion of the Annual General Meeting. He will concurrently cease to be the Chairman of the Nominating Committee and a member of the Audit Committee and Remuneration Committee. The appointment of his replacement for each Committee will be announced in due course.
6.
To re-elect Messrs RT LLP (formerly known as LTC LLP) as the Auditors of the Company and to authorise the Directors to fix their remuneration.
7.
To transact any other ordinary business which may be properly transacted at an Annual General Meeting.
Resolution 5
SPECIAL BUSINESS To consider and, if thought fit, approve the following Ordinary Resolution, with or without modifications: 8.
Authority to allot and issue shares “That pursuant to Section 161 of the Companies Act, Cap. 50, and subject to Rule 806 of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) Listing Manual Section B: Rules of Catalist (“Catalist Rules”), approval be and is hereby given to the Directors of the Company to issue: (a)
shares in the capital of the Company (whether by way of bonus, rights or otherwise) or;
(b)
convertible securities; or
Resolution 6
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
65
NOTICE OF ANNUAL GENERAL MEETING (c)
additional convertible securities arising from adjustments made to the number of convertible securities previously issued in the event of rights, bonus or capitalism issues; or
(d)
shares arising from the conversion of convertible securities in (b) and (c) above,
at any time and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided that :-
9.
(i)
the aggregate number of shares and convertible securities that may be issued shall not be more than 100% of the total number of issued shares excluding treasury shares or such other limit as may be prescribed by the SGX-ST as at the date the general mandate is passed;
(ii)
the aggregate number of shares and convertible securities to be issued other than a pro-rata basis to existing shareholders shall not be more than 50% of the total number of issued shares excluding treasury shares or such other limit as may be prescribed by the SGX-ST as at the date the general meeting is passed;
(iii)
for the purpose of determining the aggregate number of shares that may be issued under subparagraphs (i) and (ii) above, the percentage of the total number of issued shares excluding treasury shares is based on the total number of issued shares excluding treasury shares at the date of the general mandate is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or employee share options in issue as at the date the general mandate is passed and any subsequent bonus issue, consolidation or subdivision of the Company’s shares; and
(iv)
unless earlier revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.” [See Explanatory Note (i)]
Proposed Renewal of the Shareholders’ Mandate for Interested Person Transactions Resolution 7
“That:(a)
approval be and is hereby given, for the purposes of Chapter 9 of the Catalist Rules, for the Company, its subsidiaries and associated companies that are entities at risk (as that term is used in Chapter 9 of the Catalist Rules) or any of them, to enter into any of the transactions falling within the types of the interested person transactions as set out in the Addendum accompanying the Annual Report 2013, with SDIC Interested Persons (as defined in the Addendum) , provided that such transactions are made on commercial terms and in accordance with the review procedures for such interested person transactions;
(b)
the approval given in sub-paragraph (a) above (the “IPT Mandate”) shall unless revoked or varied by the Company in general meeting continue in force until the next Annual General Meeting of the Company;
66
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
NOTICE OF ANNUAL GENERAL MEETING (c)
the Audit Committee of the Company be and is hereby authorised to take such action as it deems proper in respect of procedures and/or to modify or implement such procedures as may be necessary to take into consideration any amendments to Chapter 9 of the Listing Manual which may be prescribed by the SGX-ST from time to time; and
(d)
the Directors of the Company and any of them be and are hereby authorised to complete and do all such acts and things (including approving, amending, modifying, supplementing and executing and delivering such documents and affixing common seal of the Company to any such documents if necessary), as they or any of them may in their absolute discretion deem expedient, desirable or necessary or in the interest of the Company to give effect to the transactions contemplated and/or authorised by the IPT Mandate and/or this resolution.” [See Explanatory Note (ii)]
By Order of the Board
Loh Mei Ling Company Secretary Singapore 14 October 2013
Explanatory Notes: (i)
The Ordinary Resolution 6 above, is to authorise the Directors of the Company from the date of the above Meeting until the next Annual General Meeting to issue shares up to an amount not exceeding in aggregate 100% of the total number of issued shares excluding treasury shares of which the total number of shares issued other than on a pro-rata basis to existing shareholders shall not exceed 50% of the total number of issued shares excluding treasury shares for such purposes as they consider would be in the interests of the Company. Rule 806(3) of the Catalist Rules currently provides for the percentage of the total number of issued shares excluding treasury shares to be calculated on the basis of the total number of issued shares at the time that the resolution is passed (taking into account the conversion or exercise of any convertible securities and the exercise of employee share options on the issue at the time that the resolution is passed, which were issued pursuant to previous shareholder approval), adjusted for any subsequent bonus issue, consolidation or subdivision of shares. This authority will, unless revoked or varied at a general meeting, expire at the next Annual General Meeting of the Company.
(ii)
Detailed information relating to the Ordinary Resolution 7 is set out in the Addendum accompanying the Annual Report 2013.
Notes: 1.
A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint not more than 2 proxies to attend and vote on his behalf. A proxy need not be a member of the Company.
2.
The instrument appointing a proxy or proxies, together with the power of attorney or other authority (if any) under which it is signed, or notarially certified copy thereof, must be deposited at the registered office of the Company at 25 International Business Park, #02-53 German Centre, Singapore 609916 not less than 48 hours before the time set for the Annual General Meeting.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
67
ADDENDUM DATED 14 OCTOBER 2013 If you are in any doubt as to the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. This Addendum is circulated to the shareholders of Zhongxin Fruit and Juice Limited (the “Company”) together with the Company’s Annual Report. Its purpose is to provide the shareholders the relevant information relating to, and seek the shareholders’ approval for, the renewal of the general mandate for interested person transactions (“IPT Mandate”) to be tabled at the Annual General Meeting to be held at 8 Wilkie Road #03-08, Wilkie Edge, Singapore 228095 on 30 October 2013 at 10.00 a.m. The Notice of Annual General Meeting and a Proxy Form are enclosed with the Annual Report. This Addendum 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 document 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 document. This document has not been examined or approved by the SGX-ST. The Sponsor and the SGX-ST assume no responsibility for the contents of this document including the correctness of any of the statements or opinions made or reports contained in this document. The contact person for the Sponsor is Mr Thomas Lam at 36 Carpenter Street, Singapore 059915, telephone: (65) 6323 8383; email:
[email protected].
ZHONGXIN FRUIT AND JUICE LIMITED (Incorporated in the Republic of Singapore on 27 September 2002) (Company Registration Number: 200208395H)
ADDENDUM IN RELATION TO THE PROPOSED RENEWAL OF IPT MANDATE
68
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED (Incorporated in the Republic of Singapore) (Company Registration Number: 200208395H)
Board of Directors: Zhang Jian Ngiam Zee Moey Tham Poh Weng Chow Wen Kwan Quan Yuhong To:
(Chairman and Executive Director) (Independent Director) (Independent Director) (Independent Director) (Non-Executive Director)
Registered Office: 25 International Business Park, #02-53 German Centre, Singapore 609916
The Shareholders of ZHONGXIN FRUIT AND JUICE LIMITED
Dear Sir/Madam, ADDENDUM RELATING TO THE PROPOSED RENEWAL OF IPT MANDATE 1.
INTRODUCTION The Directors wish to seek approval of shareholders (“Shareholders”) of Zhongxin Fruit and Juice Limited (the “Company”, together with its subsidiaries, the “Group”) at the forthcoming annual general meeting (“AGM”) to be held on 30 October 2013 at 8 Wilkie Road #03-08, Wilkie Edge, Singapore 228095 at 10.00 a.m. for the Proposed Renewal of IPT Mandate (as defined below). The purpose of this Addendum to the annual report of the Company for the current financial year (the “Annual Report”) is to provide Shareholders with relevant information pertaining to the aforesaid proposal to be tabled as a special matter at the AGM and to seek Shareholders’ approval for the resolution relating to the same. The Notice of the AGM is set out on pages 64 and 66 of the Annual Report.
2.
PROPOSED RENEWAL OF IPT MANDATE
2.1
Background The Company anticipates that (a) the Company; (b) subsidiaries of the Company that is not listed on the SGX-ST or an approved exchange; and (c) an associated company of the Company that is not listed on the SGX-ST or an approved exchange, provided that the listed group, or the listed group and its interested person(s), has control over the associated company (“EAR Group”) would, in the ordinary course of business, enter into transactions with persons which are considered ‘Interested Persons’ as defined in Chapter 9 of the Catalist Rules. It is likely that such transactions will occur with some degree of frequency and could arise at any time and from time to time. Chapter 9 of the Catalist Rules permits a listed company to seek a general mandate from its shareholders for recurrent transactions of a revenue or trading nature or those necessary for its day-to-day operations such as the purchase and sale of supplies and materials (but not in respect of the purchase or sale of assets, undertakings or businesses) that may be carried out with the Interested Persons. Shareholders had approved a general mandate (“IPT Mandate”) at the extraordinary general meeting of the Company held on 21 September 2012 to enable the EAR Group to enter into transactions (“SDIC Interested Person Transactions”) with SDIC Zhonglu Fruit Juice Co., Ltd. (“SDIC Zhonglu”) and its associates (SDIC Zhonglu together with its associates, the “SDIC Interested Persons”), provided that such SDIC Interested Person Transactions are carried out on normal commercial terms and in accordance with the review procedures set out in the circular dispatched to Shareholders.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
69
The IPT Mandate was renewed by Shareholders at the annual general meeting held by the Company on 18 January 2013 (“Previous AGM”) and was expressed to take effect until the forthcoming AGM of the Company. Accordingly, the Directors propose to seek the approval of Shareholders for the renewal of the IPT Mandate (“Proposed Renewal of IPT Mandate”) at the forthcoming AGM of the Company. The renewed mandate (“Renewed IPT Mandate”) will take effect and continue in force until the conclusion of the next annual general meeting of the Company. The scope of the Renewed IPT Mandate, the SDIC Interested Persons, details of the SDIC Interested Person Transactions, approval and review procedures for the SDIC Interested Person Transactions and the general administrative procedure for SDIC Interested Person Transactions, remain unchanged from the last renewal of the IPT Mandate at the Previous AGM and are as set out in Appendix A of this Addendum. 2.2
Rationale for the Proposed Renewal of IPT General Mandate and benefits to Shareholders The Group’s requirement for working capital during the apple production season is critical as apple production is seasonal in nature. The Group needs sufficient working capital to purchase apples from suppliers to produce apple juice concentrate and related products for the forthcoming and future apple pressing seasons. Following the lifting of the judicial management order, the Group continues to face difficulties in obtaining external funding for the Group’s operations and it takes time for the Group to regain the confidence of financial institutions. To assist the Group in tiding over these challenging times, the SDIC Interested Persons are prepared to provide financial support for the Group’s operations. The loan arrangements which form part of the SDIC Interested Person Transactions will provide the working capital funds that are required for the Group’s operations. The Company believes that by renewing the IPT Mandate will enable the EAR Group to tap on the financial support from the SDIC Interested Persons as and when the need arises. As apple production is seasonal and apples are perishable, it is unlikely that a supplier will be willing to set aside certain stock while waiting for confirmation on funding. If the Company is constantly required to seek Shareholders’ approval for the financing transactions with the SDIC Interested Persons, the Company will have to expend substantial administrative time and resources as well as incur additional expenses associated therewith. The Group will also risk losing its suppliers if it does not have sufficient working capital. The Group has appointed SDIC Zhonglu as a non-exclusive distributor under the IPT Mandate, and the Group shall continue to rely on the sales network of SDIC Zhonglu, its subsidiaries and associated corporations as the Group currently does not have the resources to establish a sizeable sale and distribution team. Furthermore, the Group will need time to regain confidence of the purchasers of its products. The Audit Committee is of the view that the appointment of SDIC Zhonglu as a non-exclusive distributor should be renewed for another year. The Renewed IPT Mandate and the renewal thereof on an annual basis is intended to facilitate the SDIC Interested Person Transactions which are likely to be transacted with some frequency from time to time with the SDIC Interested Persons, provided that they are carried out on normal commercial terms and are not prejudicial to the interests of the Company and its minority Shareholders.
70
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
As (i) the loans from the SDIC Interested Persons and the sale of the products of the EAR Group to the SDIC Interested Persons are recurring and mostly short term in nature and (ii) the interest payable on the loan(s) to be extended by the SDIC Interested Persons and the transaction value of the sale of the products of the EAR Group to the SDIC Interested Persons may exceed 5% of the Group’s latest audited net tangible assets value(NTA) for the current financial year, the Company is proposing to table the resolution in respect to the renewal of the IPT Mandate for approval by Shareholders at the AGM. 2.3
Disclosures The Company will announce the aggregate value of transactions conducted with the SDIC Interested Persons pursuant to the IPT Mandate and Renewed IPT Mandate for each financial period on which the Company is required to report on pursuant to the Catalist Rules. Disclosure will also be made in the annual report of the Company of the aggregate value of the SDIC Interested Person Transactions conducted pursuant to the IPT Mandate and the Renewed IPT Mandate during the current financial year, and in the annual reports for the subsequent financial years during which the renewal is in force, in accordance with the Catalist Rules.
3.
INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS The interests of the Directors and Substantial Shareholders in the Company as at 17 September 2013, as recorded in the Company’s Register of Directors’ Shareholdings and the Register of Substantial Shareholders, were as follows: As at the Last Practicable Date Number of Shares Direct Interest
Deemed Interest
Total Interest
% of total issued Shares
Directors Zhang Jian Ngiam Zee Moey Tham Poh Weng Chow Wen Kwan Quan Yuhong
– 355,714 355,714 – –
– – – – –
– 355,714 355,714 – –
– 0.03 0.03 – –
560,598,425
–
560,598,425
53.11
– 103,796,399 136,328,897 66,230,000 – 22,279,000
560,598,425 202,558,897 170,026,399 – 66,230,000 66,230,000
560,598,425 306,355,296 306,355,296 66,230,000 66,230,000 88,509,000
53.11 29.03 29.03 6.27 6.27 8.38
Substantial Shareholders (other than Directors) SDIC Zhonglu Fruit Juice Co., Ltd. State Development and Investment Corporation(1) Go Twan Heng(2) Ho Kam Har(3) New Lakeside Investment Ltd(4) GKH International Ltd(5) Go Wei Ho(6) Notes: (1)
State Development and Investment Corporation is deemed to be interested in the 560,598,425 shares held by SDIC Zhonglu Fruit Juice Co., Ltd.
ANNUAL REPORT 2013
4.
ZHONGXIN FRUIT AND JUICE LIMITED
71
(2)
Go Twan Heng is deemed to be interested in the 66,230,000 shares held by New Lakeside Investment Ltd and 136,328,897 shares held by his spouse, Ho Kam Har.
(3)
Ho Kam Har is deemed to be interested in the 66,230,000 shares held by New Lakeside Investment Ltd and 103,796,399 shares held by her spouse, Go Twan Heng.
(4)
The 66,230,000 shares were held by CIMB Securities (Singapore) Pte Ltd as nominee of New Lakeside Investment Ltd.
(5)
GKH International Ltd is deemed to be interested in the 66,230,000 shares held by New Lakeside Investment Ltd.
(6)
Go Wei Ho is deemed to be interested in the 66,230,000 shares held by New Lakeside Investment Ltd. There are 1,050,000 shares belonging to Go Wei Ho registered in the name of New Lakeside Investment Ltd.
AUDIT COMMITTEE’S STATEMENT The Audit Committee of the Company (other than Ms. Quan Yuhong) has reviewed the terms of the Renewed IPT Mandate and is satisfied that the review procedures proposed by the Company as set out in Appendix A to this Addendum are sufficient to ensure that the SDIC Interested Person Transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders. Ms. Quan Yuhong is nominated by SDIC Zhonglu, and hence, shall abstain from expressing any views and making any recommendation on the Proposed Renewal of IPT Mandate.
5.
DIRECTORS’ RECOMMENDATION Having reviewed and considered the rationale for and benefits of the Proposed Renewal of IPT Mandate and the views of the Audit Committee, the Directors (excluding Mr. Zhang Jian and Ms. Quan Yuhong) are of the opinion that the Proposed Renewal of IPT Mandate is beneficial to, and in the interests of the Company. Accordingly, the Directors (excluding Mr. Zhang Jian and Ms. Quan Yu Hong) recommend that Shareholders vote in favour of the Ordinary Resolution 7 relating to the Proposed Renewal of IPT Mandate as set out in the Notice of AGM. The Directors (excluding Mr. Zhang Jian and Ms. Quan Yu Hong) are of the opinion that the Renewed IPT Mandate is not prejudicial to the interests of the Company and are satisfied that the review procedures set out in Appendix A to this Addendum are sufficient to ensure that the SDIC Interested Person Transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders. Mr. Zhang Jian and Ms. Quan Yuhong are nominated by SDIC Zhonglu and hence, shall abstain from expressing any views and making any recommendation of the Proposed Renewal of IPT Mandate.
6.
ANNUAL GENERAL MEETING The AGM, notice of which is set out in the Annual Report, will be held at 8 Wilkie Road #03-08, Wilkie Edge, Singapore 228095 on 30 October 2013 at 10.00 a.m. for the purpose of considering and if, thought fit, passing, with or without modification, the resolution relating to the Proposed Renewal of the IPT Mandate at the AGM.
72 7.
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
DIRECTORS’ RESPONSIBILITY STATEMENT The Directors collectively and individually accept full responsibility for the accuracy of the information given in this Addendum and confirm after making all reasonable enquiries that, to the best of their knowledge and belief, this Addendum constitutes full and true disclosure of all material facts about the Proposed Renewal of IPT Mandate, the Company and its subsidiaries, and the Directors are not aware of any facts the omission of which would make any statement in this Addendum misleading. Where information in this Addendum has been extracted from published or otherwise publicly available sources or obtained from a named source, 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 Addendum in its proper form and context.
8.
ABSTENTION FROM VOTING SDIC Zhonglu and its associates will abstain from voting on the Ordinary Resolution 7 relating to the Proposed Renewal of IPT Mandate as set out in the Notice of AGM. Mr. Zhang Jian and Ms. Quan Yuhong will also not accept nominations to act as proxy, corporate representative or attorney to vote in respect of Ordinary Resolution 7 unless the Shareholder appointing him or her indicates clearly how votes are to be cast in respect of Ordinary Resolution 7.
9.
DOCUMENTS AVAILABLE FOR INSPECTION The Memorandum of Association and Articles of Association of the Company may be inspected by Shareholders at 25 International Business Park #02-53 German Centre Singapore 609916 during normal business hours from the date hereof up to the date of the AGM.
Yours faithfully, For and on behalf of Zhongxin Fruit and Juice Limited
Ngiam Zee Moey Independent Director
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
73
APPENDIX A
Scope of the IPT Mandate The IPT Mandate will cover the following transactions: (a)
(b)
the recurring entrusted loans made on behalf of the SDIC Interested Persons to the EAR Group, which include (i)
the lending of working capital by the SDIC Interested Persons to the EAR Group;
(ii)
the provision of guarantees, indemnities or security by the SDIC Interested Persons in favour of the EAR Group’s creditors, in respect of borrowings which are incurred by the EAR Group; and
(iii)
the provision of guarantees, indemnities or security by the EAR Group in favour of the SDIC Interested Persons to secure the entrusted loans; and
the sale of the products of the EAR Group to the SDIC Interested Persons and the appointment of SDIC Interested Persons as distributor(s) of the EAR Group.
The IPT Mandate does not cover any transaction between the EAR Group and the SDIC Interested Persons that is below S$100,000 in value, as the threshold and aggregation requirements of Chapter 9 of the Catalist Rules do not apply to such transactions. The Interested Person SDIC Zhonglu is a Controlling Shareholder of the Company and it is considered an interested person of the Company under Chapter 9 of the Catalist Rules. Accordingly, any transaction between SDIC Zhonglu (or any of its associates) and any member of the EAR Group shall constitute an interested person transaction. As at 17 September 2013, SDIC Zhonglu owns 560,598,425 Shares representing 53.11% of the total issued Shares. Details of the Proposed SDIC Interested Person Transactions The Proposed Recurring Entrusted Loans Made on behalf of the SDIC Interested Persons to the EAR Group It is proposed that SDIC Zhonglu or any SDIC Interested Person shall procure a licenced bank in the People’s Republic of China (“PRC”) to grant loans to any member of the EAR Group (the “Borrower”). Such loans are likely to be (i) secured by collateral provided by a SDIC Interested Person or (ii) guaranteed by a SDIC Interested Person. Interest paid by the Borrower to the relevant bank under such a loan will be paid by the relevant bank to the relevant SDIC Interested Person. Effectively, the Borrower will be paying interest to the relevant SDIC Interested Person. Under the laws of the PRC, a corporation is not permitted to directly grant loans to other corporations. An entrusted loan arrangement will allow the SDIC Interested Persons to indirectly grant loans to the EAR Group, in compliance with the laws of the PRC. The proposed entrusted loans will be made through a licenced bank in the PRC and such loans will be used to finance the working capital requirements and operations of the EAR Group. The key terms of such loans include, inter alia, the following: (a)
the interest rate shall be agreed between the Borrower and the SDIC Interested Person making the loan and such interest shall accrue to the relevant SDIC Interested Person. Any interest premium over the prevailing benchmark lending interest rate formulated by the People’s Bank of China or the cost of funds (if the SDIC Interested Person has to obtain financing to provide the entrusted loans) shall not be more than 10% of the prevailing benchmark lending interest rate formulated by the People’s Bank of China or 10% over the cost of funds, whichever is applicable;
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ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
(b)
each loan shall be repayable within a period to be agreed between the Borrower, the SDIC Interested Person making the loan and the intermediary bank;
(c)
the SDIC Interested Person making the loan may require the loan to be secured by collateral from the EAR Group, for example, by way of a charge, fixed or floating, over the assets of the EAR Group. The intermediary bank may also require additional collateral from the EAR Group. The exact terms for such arrangement will be agreed between the borrower, the SDIC Interested Person making the loan and the intermediary bank; and
(d)
if the EAR Group is unable to make full or part repayment of the loan by the due date, SDIC Zhonglu may request that payment of any outstanding sums be settled by way of the Company’s issuance of new Shares to SDIC Zhonglu or its nominee on terms to be agreed, subject to the prior approval of the Board and/or Shareholders as well as the compliance with the Catalist Rules and the applicable laws and regulations.
The Proposed Sale of the Products of the EAR Group to SDIC Interested Persons and The Proposed Appointment of SDIC Interested Persons as Distributor(s) of the EAR Group The Company proposes to (i) sell products of the EAR Group to SDIC Interested Persons and (ii) appoint SDIC Interested Persons as the EAR Group’s distributor(s) in the PRC for the sale of apple juice concentrate produced by the EAR Group. The distributorship arrangement will enable the EAR Group to tap on the sales network of SDIC Zhonglu to increase the sales of the EAR Group. The key terms of the distributorship arrangement include, inter alia, the following: (a)
the appointment of SDIC Interested Persons as the EAR Group’s distributor(s) in the PRC on a nonexclusive basis;
(b)
the selling price of the apple juice concentrate produced by the EAR Group and distributed to the customers by SDIC Interested Persons shall be based on market price to be agreed between the customers and the EAR Group;
(c)
SDIC Zhonglu shall be entitled to a commission of US$10 per tonne of apple juice concentrate sold, which shall be set-off against the sum received by the EAR Group for the sale of the apple juice concentrate to SDIC Interested Persons; and
(d)
the sum received by the EAR Group for the sale of the apple juice concentrate to SDIC Interested Persons may be used towards the payment of the loans granted by the SDIC Interested Persons to the EAR Group.
If the apple juice concentrate produced by the EAR Group is sold to SDIC Interested Persons without an end customer, the terms of sale, insofar as practical, will be similar to the general terms that SDIC Interested Persons are selling to their customers, save for those stipulated in the preceding paragraph above. The price will be derived from the average price (nett of any commission) of recent sales with similar quality and batch size by SDIC Interested Persons to their customers. In arriving at the commission of US$10 per tonne, the Company took into account the expected costs to the EAR Group to set up its own sales and marketing team, as well as associated marketing costs. The commission of US$10 per tonne will be subject to review by the Audit Committee.
ANNUAL REPORT 2013
ZHONGXIN FRUIT AND JUICE LIMITED
75
Approval and Review Procedures for the SDIC Interested Person Transactions Review Procedures The Audit Committee shall review the SDIC Interested Person Transactions and their terms every half-year to ensure that the terms are not prejudicial to the interests of the Company and its minority Shareholders. The Audit Committee will adopt such procedures and consider such evidence as it deems appropriate for such review, and shall where appropriate consider if it is feasible for the EAR Group to (i) obtain loans from noninterested parties on terms acceptable to the EAR Group or (ii) set-up its own sale and distribution team. Approval Limits for Entrusted Loans In addition to the review procedures, the Group shall supplement its internal review system by establishing the following approval limits for the entrusted loans. The Chief Executive Officer and the Chief Financial Officer of the Company are authorised jointly to review and approve any entrusted loans between the EAR Group and the SDIC Interested Persons if the aggregate amount of the outstanding entrusted loans between the EAR Group and the SDIC Interested Persons does not exceed RMB50,000,000. Only the principal amount of the entrusted loans will be aggregated for this purpose to facilitate easy calculation. The Chief Executive Officer and the Chief Financial Officer of the Company may jointly request the Audit Committee to review and increase the approval limit, and the Audit Committee may increase the approval limit provided that each increase shall not exceed RMB50,000,000. In reviewing the approval limit, the Audit Committee may require the management of the Company to provide to the Audit Committee all information it deems necessary for it to undertake such a review. Having considered the working capital requirements of the Group, the Directors in consultation with the Audit Committee are of the opinion that the above approval process reflects a risk control level that is acceptable to the Company. Approval Limits under the Distribution Arrangement In addition to the review procedures, the Group shall supplement its internal review system by establishing approval threshold limits to its sale or distribution transactions under the distribution arrangement with any SDIC Interested Person as follows: (a)
a Category 1 transaction i.e. where the value of the transaction is below or equal to RMB10,000,000, does not require the prior review and approval of the Audit Committee but it shall be reviewed and approved jointly by the Chief Executive Officer and the Chief Financial Officer of the Company before such transaction is entered into. The Category 1 transactions will be reviewed every half year by the Audit Committee; and
(b)
a Category 2 transaction i.e. where the value of the transaction is more than RMB10,000,000, must be reviewed and approved by the Audit Committee before such transaction is entered into.
The threshold of RMB10,000,000 is selected to strike a balance between commercial efficiency and the requirement of oversight by the Audit Committee. Having considered the current market prices, the prevailing market conditions and the expected sale volume, the Directors in consultation with the Audit Committee are of the opinion that the threshold limit of RMB10,000,000 reflects a risk control level that is acceptable to the Company.
76
ZHONGXIN FRUIT AND JUICE LIMITED
ANNUAL REPORT 2013
On top of the above mentioned, the approval limit of the aggregate amount of the sale to SDIC Interested Persons without an end customer within a financial year by the Chief Executive Officer and the Chief Financial Officer of the Company shall not exceed RMB30,000,000. The Chief Executive Officer and the Chief Financial Officer of the Company may jointly request the Audit Committee to review and increase the approval limit, and the Audit Committee may increase the approval limit provided that each increase shall not exceed RMB30,000,000. In reviewing the approval limit, the Audit Committee may require the management of the Company to provide to the Audit Committee all information it deems necessary for it to undertake such a review. In the event that a member of the Audit Committee (where applicable) is interested or related to any SDIC Interested Person in any ttransactions, he will abstain from reviewing that particular transaction. Review and/or approval of that transaction will accordingly be undertaken by the remaining members of the Audit Committee. Further, in the event that any of the Chief Executive Officer and Chief Financial Officer of the Company is interested in any SDIC Interested Person Transactions or related to any SDIC Interested Person, he will abstain from reviewing and approving the SDIC Interested Person Transactions. Review and/or approval of that transaction will be undertaken by a general manager or other executive officer of equivalent authority selected by the Audit Committee (and who shall not be interested in the transaction) instead. General Administrative Procedures for the SDIC Interested Person Transactions The Company will also implement the following administrative procedures in respect of the SDIC Interested Person Transactions: (a)
A register will be maintained by the Company to record all SDIC Interested Person Transactions that are entered into pursuant to the Proposed IPT Mandate. The internal audit plan shall incorporate a biannual review of all SDIC Interested Person Transactions entered into pursuant to the Proposed IPT Mandate to ensure compliance with the established procedures under the Proposed IPT Mandate.
(b)
The internal auditors of the Company will review the established guidelines and procedures for the SDIC Interested Person Transactions annually. The results of such reviews will be submitted to the Audit Committee.
(c)
If the Audit Committee comes to the view that the guidelines and procedures as stated above are not sufficient to ensure that the SDIC Interested Person Transactions will be on normal commercial terms and will not be prejudicial to the interests of the Company and the minority Shareholders, the Company will obtain a fresh mandate from the Shareholders based on new guidelines and procedures for the SDIC Interested Person Transactions.
PROXY FORM ZHONGXIN FRUIT AND JUICE LIMITED (formerly known as New Lakeside Holdings Limited) (Company Registration Number 200208395H)
I/We
(Name)
of
(Address),
being a member/members of Zhongxin Fruit and Juice Limited (the “Company”), hereby appoint: Name
Address
NRIC/ Passport No.
Proportion of Shareholdings No. of Shares
%
and/or (Please delete as appropriate) Name
Address
NRIC/ Passport No.
Proportion of Shareholdings No. of Shares
%
or failing the person, or either or both of the persons, referred to above, the Chairman of the General Meeting, as my/our proxy/ proxies to attend and vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at 8 Wilkie Road #03-08, Wilkie Edge, Singapore 228095 on Wednesday 30 October 2013 at 10.00 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the Meeting as hereunder indicated. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll. No.
Ordinary Resolutions
For
ORDINARY BUSINESS 1
To receive and adopt the Financial Statements for the financial year ended 30 June 2013 together with the Directors’ Report and the Auditors’ Report thereon
2
To approve the Directors’ fees for the financial year ended 30 June 2013
3
To re-elect Mr Zhang Jian as Director
4
To re-elect Ms Quan Yuhong as Director
5
To re-elect RT LLP (formerly known as LTC LLP) as the Auditors of the Company and authorise the Directors to fix their remuneration
SPECIAL BUSINESS 6
Authority to allot and issue shares
7
Proposed renewal of the shareholders’ mandate for Interested Person Transactions
Dated this
day of
2013 Total number of shares held in: (a) CDP Register (b) Register of Members
Signature(s) of member(s) or Common Seal IMPORTANT: PLEASE READ NOTES OVERLEAF
Against
Notes: 1.
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, Chapter 50), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, 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 Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.
2.
A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote in his stead.
3.
Where a member appoints two proxies, he shall specify the percentage of his shares to be represented by each proxy and if no percentage is specified, the first named proxy shall be deemed to represent 100 per cent of his shareholding and the second named proxy shall he deemed to be an alternate to the first named.
4.
A proxy need not be a member of the Company.
5.
The instrument appointing a proxy or proxies together with the letter of power of attorney, if any under which it is signed or a duly certified copy thereof, must be deposited at the registered office of the Company at 25 International Business Park, #02-53 German Centre Singapore 609916 at least 48 hours before the time appointed for the Annual General Meeting.
6.
A corporation which is a member may authorise by resolution of its directors or other governing body such a person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with Section 179 of the Companies Act, Chapter 50.
7.
Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be for or against the Resolutions as set out in the Notice of Annual General Meeting. 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 matter arising at the Annual General Meeting.
8.
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.
9.
In the case of a member whose shares are entered against his name in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.
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