67052d china flexible ar2012 cov v06 - cnflexpack.com profile china flexible packaging holdings...

www.cnflexpack.com

ANNUAL REPORT 2012

689 Xiguan Road, Jieyang City, Guangdong, 522000 PRCwww.cnflexpack.com

Designed & Produced by HeterMedia Services Limited

ExtendingSustainable Future

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China Flexible Packaging Holdings Lim

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nnual Report 2012

CommitmentSteadfast

Contents

To be the preferred supplier of quality plastic packaging materials, offering quality products and services to meet the needs of customers.

To meet customers’ plastic packaging material needs with innovative products and value creation, strengthened by technology, market insights and expertise.

Mission & Vision

Corporate Profile 03

Chairman’s Statement 04

Operations Review 10

Major Products 15

Financial Highlights 16

Corporate Structure 17

Board of Directors 18

Key Management 20

Corporate Information 21

Financial Contents 22

Statistics of Shareholdings 75

Notice of Annual General Meeting 77

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Corporate Profile

China Flexible Packaging Holdings Limited (“China Flexpack”) is a leading manufacturer of Biaxially Oriented Polypropylene (“BOPP”) film and synthetic paper in the People’s Republic of China (“PRC”).

Based in Jieyang City, Guangdong Province, China Flexpack produces a wide variety of BOPP film including high shrinkage film such as labeling film and tobacco film, and low shrinkage film such as pearlised film, matt film and plain films for printing, lamination and coating. We also produce synthetic paper, which is a new packaging material with attributes of paper and plastic, commonly used in commercial packaging, printing, food, medical and cosmeceutical industries.

Our major customers are mainly from industries which require various kinds of plastic packaging materials such as food processing, tobacco and other light industries involving labeling, printing and gift wrapping.

Our current operating production lines have a total production capacity of 64,750 tonnes per annum. The production lines have the capabilities to manufacture high and low Shrinkage BOPP film, synthetic paper and five-layer high barrier film (“5-layer BOPP film”) – a higher value BOPP film product which has high humidity-resistance, high capability to preserve freshness and high transparency, suitable for use in the vacuum packing of meat products which will prolong shelf life.

China Flexpack was listed on the Mainboard of The Singapore Exchange Securities Trading Limited in February 2004.

JIEYANG CITYChina Flexpack’s manufacturing facilities are located in Jieyang City, Guangdong Province (广東省), China. Our production lines have the capacity to manufacture up to 64,750 tonnes of BOPP film annually.

Solid FoundationonBased

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Annual Report 2012 China Flexible Packaging Holdings Limited 0�

Corporate Profile

China Flexible Packaging Holdings Limited (“China Flexpack”) is a leading manufacturer of Biaxially Oriented Polypropylene (“BOPP”) film and synthetic paper in the People’s Republic of China (“PRC”).

Based in Jieyang City, Guangdong Province, China Flexpack produces a wide variety of BOPP film including high shrinkage film such as labeling film and tobacco film, and low shrinkage film such as pearlised film, matt film and plain films for printing, lamination and coating. We also produce synthetic paper, which is a new packaging material with attributes of paper and plastic, commonly used in commercial packaging, printing, food, medical and cosmeceutical industries.

Our major customers are mainly from industries which require various kinds of plastic packaging materials such as food processing, tobacco and other light industries involving labeling, printing and gift wrapping.

Our current operating production lines have a total production capacity of 64,750 tonnes per annum. The production lines have the capabilities to manufacture high and low Shrinkage BOPP film, synthetic paper and five-layer high barrier film (“5-layer BOPP film”) – a higher value BOPP film product which has high humidity-resistance, high capability to preserve freshness and high transparency, suitable for use in the vacuum packing of meat products which will prolong shelf life.

China Flexpack was listed on the Mainboard of The Singapore Exchange Securities Trading Limited in February 2004.

JIEYANG CITYChina Flexpack’s manufacturing facilities are located in Jieyang City, Guangdong Province (广東省), China. Our production lines have the capacity to manufacture up to 64,750 tonnes of BOPP film annually.

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Chairman’s Statement

Dear Shareholders,

On behalf of China Flexible Packaging Holdings Limited, I hereby present the results for the financial year of 2012.

Year in ReviewWith the slowing China economy and issues with our production lines, the last fiscal year has proven to be exceptionally challenging.

The China economy’s growth is slowing more quickly than initially hoped. The latest data of 2012 from the National Bureau of Statistics showed that China’s GDP grew by the slowest rate of 7.4% in the third quarter since early 2009, making a deceleration from an 8.1% and 7.6% in the previous two quarters in 2012, and putting the economy on course for its slowest expansion. Uncertainties in economy have shaken consumer confidence and thus posed adverse impact in local consumer spending. Together with the indication of global economic depression, market sentiment and business confidence in China slump further.

Internally, the Group suffered from production line deficiency. Two of the Group’s production lines broke down during the reporting period, causing temporary suspension of production. Overseas vendors have been called in for emergency repair works and replacement of the damage parts, incurring a significant repair cost in the reporting year.

“To our valued shareholders, we present to you the annual report for the financial year ended 31 October 2012 (“FY2012”). ”

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Although repaired and replaced with new components, the two production lines have not resumed full production performance and they produced a significant amount of sub-standard products which were sold at a much lower selling price. The senior management took immediate measures to shorten the time for run-in process and to reduce the amount of sub-standard finished products.

The production issues affected the quality of some of our products and unfortunately resulted in disputes with a few customers. Consequentially, we recognised an allowance for impairment on these customer’s receivables. The management will continue to monitor the progress of the collection of those doubtful receivables.

Local demand from the tobacco, food processing and consumable goods industries has weakened since early 2012. Yet market competition has been fierce with new industry players’ participations, which are often equipped with more advanced production facilities. Against this backdrop, the Group adjusted its product mix to cater for the changing market condition. Average selling prices are lowered due to lesser high margin products sold during the year under review owing to the changing market demand as well as supply. Therefore, it resulted in an overall decline in business.

The Group’s performance is prone to the volatility of oil price with Polypropylene, one of the Group’s major raw materials, being a by-product of petroleum. While the international

crude oil price began to consolidate, the open market price slid by 20% since its high price in March 2012. However, the Group’s raw material prices remain steadily high, mainly due to the control over the oil product prices and supplies in the PRC by a few local petroleum suppliers. During the reporting period, the continuous inflation in China further pressured the already high operating costs.

Owing to substantial loss reported in the second quarter ended 30 April 2012, and in view of the changing market demand and recurrence of deteriorating performance of production lines, in accordance with the requirements of the International Accounting Standards No. 36 – Impairment of Assets, the Board consequently conducted a comprehensive review of the carrying value of its non-current assets. The comprehensive review included appointing an independent professional valuer to assess the assets value of the Group’s production facilities. After careful assessment, the Board considered it necessary to make a substantial write-down of the book value of the non-current assets as of the year ended 31 October 2012. The decision has brought a significant impact in the financials for the reporting year.

Another measure taken as a result of the review was the revision of the Group’s accounting estimate for depreciating production facilities by changing their useful life from 15 years to 10 years based on the revised estimate of the useful life of our machinery. The change in this accounting estimate has been applied prospectively from the start of the 4th quarter of


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the financial year 2012 and it caused a reduction in the book value of the non-current assets as well as an increase in the depreciation expenses for the current reporting year.

Factoring in the aforementioned incidences, the Group recorded a gross loss of RMB46.3 million and net loss attributed to shareholders of RMB550.0 million in the reporting year, compared with the gross profit of RMB100.7 million and net profit attributed to shareholders of RMB6.8 million in the last financial year.

To conclude, the management has identified the major factors which continue to affect the Group’s performance in near term, including: (i) changing market demand; (ii) fluctuation of the raw material cost; (iii) intense competition from new entrants, and; (iv) production issues. In response, the Group has instituted a more stringent control on operating costs as an immediate measure to mitigate the above impacts. The Group will also continue to adjust its product mix to address the changing market condition in order to maintain our revenue. In addition, the management will continue to monitor the progress of the improvement of our production issues closely. Should the issues persist, the Group would consider engaging overseas machinery suppliers for further rectification works.

Even with the credit crunch in the PRC, we see no significant financial uncertainties ahead. The Group continues to maintain a healthy balance sheet with no borrowings as at 31 October 2012.

Pursuant to the Revised Code of Corporate Governance and Listing rules announced earlier in the reporting year, the Group is taking measures to strengthen its already transparent corporate governance. As an additional measure, the Board has engaged an independent professional firm to develop an Enterprise Risk Management Framework for the Group during FY2012 that helped the Board to gain higher assurance in the adequacy and effectiveness of the risk management framework and process in place. The Board will keep working closely with the audit committee, external professionals and

regulators to stringently administer the best practice and code of conduct to the executives, as well as maintaining an effective and standardized system of risk management and internal controls to safeguard our shareholders’ interests.

Looking Forward2012 is a year full of challenges for the plastic packaging industry. Business confidence and demand continue to slide across the already slowing China economy, severely affecting the Group’s downstream customers who are in consumer goods based sector. They experienced setbacks in both local and overseas orders in FY2012 and hence adversely affecting the Group as their upstream supplier of packaging materials.

Moreover, there are signs that the adverse economic situation and uncertainties in both global and local economy will further extend into 2013 which are expected to hinder the future development of the industry. Globally, the developed economies are still struggling to get back on their feet. As an industry closely in phase with economic cycles, the plastic packaging industry would be losing its driving force of growth under the global economic slowdown. Locally, the industry is confronted with increasing costs and withering internal demand. While the quickly diminishing global market has quenched the source of income for local plastic manufacturers and their downstream players, on the other hand the local demand has yet to catch up, this put the industry facing a dilemma creating difficulty to the industry development looking ahead.

The local plastic packaging market is facing a highly fragmented future with numerous new industry players. There are not only some new players entered with more advanced production facilities, but also a trend of upstream and downstream businesses expanding into packaging sector. This creates further pressure on the packaging industry. Some new entrants have no regards for quality so that they can lower their selling price to capture market share. This causes a very competitive market and a challenging situation.




As a manufacturer with almost 20 years of relevant industry experience, China Flexible firmly believes that “quality, customer service and experience” are the unique qualities that would make us to remain competitive, survive in and overcome current difficult time.

AcknowledgementOn behalf of the Board of Directors and Management, I would like to take this opportunity to extend my heartfelt gratitude and thanks to the retiring directors, Messrs Ong Tiew Siam and Yeung Koon Sang Alias David Yeung (who have already served as Independent Directors for a cumulative term of 9 years) for their invaluable contributions during their tenures as Independent Directors of the Company. They have decided to retire at the forthcoming annual general meeting of the Company to be held on 28 February 2013 and we will nominate suitable candidates for their replacements.

In closing, I would like to express my utmost appreciation to our business partners, customers and shareholders for their invaluable support through the years. We look forward to your continued support as we strive to bring China Flexible to greater heights and conquering new grounds. Furthermore, I would like to pay tribute to our employees and to thank them for their commitment and unceasing hard work throughout the year.

Mr Zeng HanmingChairman and CEO


LimitstheStretchingUnique Production Facilities for Your Film Development



Investing our Future

High process efficiency• Excellent mechanical and optical properties• Good convertibility and printability• High yield• Excellent sealing properties• Good barrier properties

Food contact approved• Environmentally friendly• Wide range of applications• Low density• Good recyclability• Excellent packaging efficiency• High aesthetic value


10

Operations Review

Financial ReviewThe Group’s Consolidated Statement of Comprehensive Income

The Group’s revenue decreased by 24.8% or RMB214.5 million from RMB864.8 million for the year ended 31 October 2011 (“FY2011”) to RMB650.3 million for the year ended 31 October 2012 (“FY2012”). The decrease was mainly attributed to the decline in revenue in all segments affected by the Group’s production lines issues during the year under review. These issues resulted in: (i) increased sub-standard products sold at lower selling prices, and; (ii) the suspension of production in production lines for 1.5 months in the 2nd quarter of the financial year 2012.

In addition, the decrease was also contributed by the lower market demand of high profit margin segments, which affected mainly high shrinkage films and synthetic paper segments. Their sales were encumbered by the weakening demand in tobacco, food processing and consumable goods industries since early 2012 influenced by the keener competition and slowing China economy.

During FY2012, cost of sales decreased from RMB764.1 million in FY2011 to RMB696.6 million in FY2012, representing a decrease of 8.8% or RMB67.5 million. The gross loss was due to: (i) the significant increase in sub-standard products in the second half of FY2012. The said products were sold at a lower selling price, putting a burden on the margins in all segments; (ii) lower production yield as a result of the longer run-in period after the repair work in April 2012, and; (iii) keener competition.

The above factors have resulted in a gross loss of RMB46.3 million in FY2012 with a gross loss margin of 7.1%, compared with a gross profit of RMB100.7 million in FY2011 with a gross profit margin of 11.7%.

Other revenue of RMB2.4 million in FY2012 (FY2011: RMB2.6 million) mainly comprised of: (i) sales of scrap materials of RMB1.6 million (FY2011: RMB2.0 million), and; (ii) interest income arising from bank deposits of RMB0.8 million (FY2011: RMB0.5 million).

Selling and distribution costs decreased by 13.5% over the year to RMB35.4 million in FY2012 (FY2011: RMB41.0 million). It was mainly due to the drop in freight charges, sales commission and other related expenses and was in tandem with the lower revenue recorded.

Administrative expenses recorded a decrease of 0.1% over the last reporting period to RMB30.5 million (FY2011: RMB30.6 million).

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Annual Report 2012 China Flexible Packaging Holdings Limited 11

Operations Review

Other operating expenses increased from RMB18.4 million in FY2011 to RMB439.0 million in FY2012. It was attributed to:

(i) Impairmentlossonnon-currentassetsofRMB355.5million

Owing to substantial loss reported in the second quarter ended 30 April 2012, and according to the requirements of the International Accounting Standards No. 36 – Impairment of Assets (“IAS 36”), the Board commissioned an independent valuer accordingly to conduct a review of the recoverable value of the Group’s assets. IAS 36 requires an entity to assess whether there is any indication that an asset may be impaired at the end of each reporting period. The substantial loss reported in the second quarter is an indicator of impairment under IAS 36.

Based on the result of the independent valuer’s report using the financial data for the year ended 31 October 2012, there was a shortfall of approximately RMB355.5 million to the carrying value of the Group’s non-current assets. In accordance with the aforesaid IAS 36, the Board is required to recognise an impairment loss of the shortfall in the Group’s financial statements for the current financial year. The shortfall was mainly due to the following factors; (i) changing market demand in all segments; (ii) keen competition from existing local players and new market entrants, and; (iii) unexpected deterioration of operating performance due to recurrence of breakdowns of machines.

The amount of the impairment loss was allocated pro rata to the non-current assets of our two PRC operating subsidiaries in the Group on the basis of the carrying amount of each non-current asset in the operating subsidiaries as at 31 October 2012.

(ii) Loss on the disposal of non-current assets ofRMB43.5million

It represented a loss on disposal of non-current assets in connection with certain items of the Group’s production facilities which were found to be damaged and worn-out in FY2012. They were all sold to a local metal recycling company which is an independent third party.

(iii) AllowanceforimpairmentondoubtfulaccountsreceivableofRMB13.6million

The Group had disputes with some customers over the quality of some of our products. Based on management’s assessment and slower subsequent settlement from these customers, their long outstanding receivables might not be able to be recovered in full as a result of the dispute. Therefore an allowance for impairment on the accounts receivable with these customers was made, after taking into consideration both the subsequent collection and assessment of the recoverability of their receivables.

(iv) RepairandmaintenancecostsofRMB11.8million

During the 2nd quarter of FY2012, two of the Group’s production lines were shut down (“shutdown”) for 1.5 months due to the breakdown of some major parts. The corresponding repair works included repair and replacement of damaged spare units by our overseas suppliers. The repair and maintenance costs for the whole repair works expensed off in the income statement as one-off expenses was RMB11.8 million, compared with RMB9.5 million in FY2011.

In conjunction with the repair works, the Group identified damaged parts which were later disposed of, resulting in a net loss as mentioned above. The Group also incurred RMB28.4 million additions on the replaced parts, as stated in the review of non-current assets in “The Group’s Consolidated Statements of Financial Position” section.


12

Operations Review

The comparative figures have been reclassified to conform with the current year’s presentation to better reflect the nature of the transactions. Repair and maintenance costs of approximately RMB9.5 million for the last corresponding FY2011 have been reclassified from cost of sales to other expenses under operating expenses.

(v) FixedproductioncostsofRMB10.3millionincurredduringtheShutdown

It pertained to the fixed depreciation charges and labour costs which amounted to RMB9.2 million and RMB1.2 million respectively associated with manufacturing function during the Shutdown in the 2nd quarter ended 30 April 2012, which were recognised as other expenses instead of being absorbed into cost of sales for that corresponding reporting period in accordance with accounting matching principle.

The increase in other expenses was partially offset by the decrease in research and development (R&D) expenses by 52.5% or RMB4.5 million to RMB4.1 million in FY2012 compared to the corresponding year FY2011. The comparative figures have been reclassified to conform with the current year’s presentation to better reflect the functions of the R&D expenses. R&D expenses of approximately RMB8.6 million in FY2011 have been included in the other expenses.

The Group’s net loss from ordinary activities attributable to owners of the Company

As a result of the foregoing, the Group recorded a net loss of RMB550.0 million in FY2012, compared with a net profit of RMB6.8 million in FY2011.

The Group’s Consolidated Statement of Financial Position

Non-current assets comprised of land use rights, property, plant and equipment. It reduced by 41.1% or RMB473.3 million from RMB1,150.3 million as at 31 October 2011 to RMB677.0 million as at 31 October 2012. The decrease was attributable to an impairment loss of RMB355.5 million, depreciation and amortization charges of RMB99.7 million, additions of RMB28.4 million and a disposal of RMB46.5 million during FY2012.

Current assets of the Group decreased by 18.3% or RMB97.3 million from RMB530.0 million as at 31 October 2011 to RMB432.7 million as at 31 October 2012. It was mainly due to the decrease in cash and bank balance from RMB158.4 million as at 31 October 2011 to RMB54.0 million as at 31 October 2012, representing a decline of 65.9% or RMB104.4 million. It was mainly attributed to the operating loss during FY2012.

The Group’s accounts receivable decreased to RMB223.4 million as at 31 October 2012 from RMB230.4 million as at 31 October 2011. Excluding the allowance for impairment on trade receivables of RMB13.6 million, it actually increased by RMB6.6 million. It was due to the extended settlement period offered to some of our existing customers in consideration of the prevailing business environment in the PRC during FY2012.

Deposit, prepayments and other receivables reduced sharply from RMB8.3 million as at 31 October 2011 to RMB0.2 million as at 31 October 2012, which was mainly due to advanced deposits to raw material suppliers amounting to RMB8.1 million which accrued at the last financial year ended 31 October 2011.

Inventories increased by 16.8% or RMB22.3 million, from RMB132.8 million as at 31 October 2011 to RMB155.1 million as at 31 October 2012. In light of the fluctuation in oil price since the 2nd quarter of FY2012, the Group maintained its inventory of raw material at a higher level to mitigate the impact from possible increase in raw material costs in future.

Current liabilities of the Group decreased by 37.0% or RMB20.6 million over the last financial year to RMB35.0 million as at 31 October 2012. It was largely attributable to the decrease in accounts payable by 33.1% or RMB12.9 million, from RMB39.0 million as at 31 October 2011 to RMB26.1 million as at 31 October 2012.

In addition, accruals and other payables reduced from RMB16.3 million as at 31 October 2011 to RMB8.9 million as at 31 October 2012, primarily due to the significant decrease in sales deposit received from customers during October 2012 as compared with the last corresponding period in FY2011.



Operations Review

The Group’s Consolidated Statement of Cash Flows

During FY2012, net cash outflow in operating activities of the Group amounted to approximately RMB79.0 million as compared with net cash inflow of RMB55.8 million in the last corresponding year of 2011, mainly attributable to the operating loss and cash used in the purchase of inventories during FY2012.

Net cash used in investing activities of RMB25.4 million in FY2012 was mainly used in purchase of non-current assets to replace the corresponding damaged assets. There was no cash used in financing activities during the year under review.

The Group maintains its healthy balance sheet with no borrowings. As at 31 October 2012, the Group’s cash and cash equivalents were approximately RMB54.0 million.

Despite the RMB79.0 million negative cash flow from operating activities during FY2012, barring any unforeseen circumstances, management believes that the negative cash flow situation from operating activities is temporary and the cash balances at the current year end is sufficient to support the Group’s business operation for at least the next financial year. Therefore the Group has the ability to continue its business as a going concern and management prepared the Group’s financial statements on a going concern basis.

Business Segments PerformanceWith our production issues during FY2012 and the global economy downturn, the Group remained prudent in our financial management and marketing strategy in FY2012. As our industry has been suffering from continuous price pressure and a decline in demand especially in segments of high margin, we have secured more lower margin products in order to maintain our cash inflow to cover the fixed production costs in FY2012.

As a result, the lower margin products – low shrinkage films are the highest contributors in terms of revenue for FY2012. It came first in FY2012 in terms of turnover contribution. Since its market demand was less affected by the slowdown of the PRC packaging industry, its turnover made up to approximately 46.3% of China Flexible Packaging’s total turnover in FY2012, generating sales of RMB301.3 million in FY2012, slightly down 6.5% from RMB322.2 million in FY2011. Low shrinkage films are frequently used in commercial packaging, food, medical, cosmeceutical and printing industries.

The high shrinkage film has a higher margin value and is widely used in the tobacco industry. This segment continued to be the second major turnover contribution at about 30.0% in FY2012 of the total turnover, as compared with in FY2011 with a turnover contribution of 36.7%. This was mainly due to a lower market demand from the tobacco industry.

5-layer BOPP film – the Group’s product that records the highest margin in recent years – continued to be the third major contributor to the Group’s gross profit by taking up approximately 14.1% of the total sales generated in FY2012 compared with 13.8% in FY2011. The 5-layer BOPP film is available in a wide range of film variations targeting the packaging, pressure sensitive tape, label, stationery, metalising and decorative markets.

The Group’s synthetic paper made up of 9.6% of the total Group’s revenue as compared with 12.2% in FY2011. This product has both the attributes of paper and plastic, and is widely used for the production of gift-wrapping bags, shopping bags and medium for printing books.

Under the current market sentiment in the consumer market where higher margin products market showed noticeable contraction, the Group will continue to adjust its product mix to address the changing market condition.

Industrial Outlook and Future PlansTaking a macro view, we noticed the following factors and events presented in our environment that may lift uncertainty or exert influence on the development of packaging industry:

(i) There are indications that the growth of the manufacturing industry appeared to be slowing down. According to the Purchasing Managers Index (“PMI“) statistics dated June 2012, although production growth remains positive albeit at a slower pace, new orders appeared to be shrinking. According to a report on the June 2012 PMI published by HSBC, more stimulus policies to be imposed by the PRC like reserve-ratio cuts are expected, following falling prices and significant slowdown pressures in the manufacturing industry.


14

Operations Review

Apart from this, according to the figures announced by the National Bureau of Statistics of China on 9 July 2012, the Consumer Price Index (CPI) in June 2012 eased to 2.2% year on year, representing a record low in 29 months and a month-on-month decrease of 0.6%. The National Bureau of Statistics of China also revealed that the Producer Price Index (“PPI”) in June 2012 has decreased by 2.1%, which is the 4th consecutive month in a downward trend, suggesting that the heated economic growth is slowing down. The withering global economy and the slowed local economic growth have put setbacks to nearly all industries, where the packaging industry is no exception.

(ii) The plastic packaging industry is highly fragmented with a large number of players. According to Research In China, the top five businesses accounted for only 19.4% of its total market worth in 2011, with the largest player having a market share of merely 7.2%. The industry is expected to stay fragmented in the coming years due to the new entrants of players with more advanced technology and production facilities. With new players settling in Guangdong province recently, competition is expected to intensify, putting the market share and profitability of the Group’s business under more pressure.

(iii) With the economic downturn, corporations are suffering from quickly diminishing revenue and are actively seeking ways to reduce costs. Amongst their cost cutting measures, reducing packaging is one of the

popular options especially for daily consumer goods as it poses less effect to the consumers and is beneficial to both the corporation and the environment. With more corporations opting for reduced packaging in response to the adverse economic situation, the plastic packaging industry is faced with unprecedented challenges.

However, amongst the total production output of plastic packaging industry, plastic films account for the largest production volume, with an average growth in production volume of 13.1% between 2005 and 2010. Proven by track records, the production growth of plastic film and packaging is highly sensitive to the economic cycles. When the economic recovery comes along and consumer confidence is restored, the plastic packaging industry will be hopeful to maintain a sustainable growth, although it may not happen in a very near term.

The economic recovery has suffered setbacks and uncertainty weighs heavily on our prospects. It is important for China Flexible Packaging to correctly address the adverse situation and make necessary adaptations. This new and constantly changing environment will require a rapid response with significant adjustment to our business strategy.

By stringent control of expenditure, careful risk analysis, inventory management and good relationships with suppliers and customers, the Group will continue to move forward with cautiousness. We will spend every effort and prepare ourselves for the next recovery.



Major Products

High Shrinkage Film (高收縮膜)

It refers to film that can shrink by less than 4% of its original length or width during the packaging process. It is typically used as packaging materials in many industries such as food, tobacco and pharmaceutical business.

46%of Revenue

Low Shrinkage Film (低收縮膜)

Synthetic Paper (合成紙)

It can be combined between the layers, which may be cheaper material to reduce the cost and enhance the property of the film. It is suitable for packaging meat products which need longer shelf period and high hygiene standard.

It is a new packaging material that possesses the attributes of both paper and plastic. It has more tensile strength, higher tear resistance and higher water resistance than natural paper. It can be used for production of gift wrapping bags, shopping bags and medium for printing books.

5-Layer BOPP Film (五層膜)

It refers to film that can shrink by more than 8% of its original length or width when heat or pressure is applied during the packaging process. It provides packaging that wraps the packaging product tightly and smoothly.

30%of Revenue

10%of Revenue

14%of Revenue

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16

Financial Highlights

Year ended October 31 Income 2008 2009 2010 2011 2012Statement RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Grouprevenue 960,324 728,791 963,733 864,765 650,305

Grossprofit/(loss) 265,042 118,962 157,941 100,704 (46,293 )

Otheroperatingincome 4,846 2,635 2,685 2,573 2,434

Profit/(loss)beforetaxation 130,050 48,253 58,901 13,366 (548,849 )

Profit/(loss)attributabletoshareholders 97,418 34,826 40,813 6,811 (549,954 )

Assets and Liabilities

Totalassets 1,625,692 1,674,121 1,707,157 1,680,281 1,109,726

Totalliabilities 84,709 98,208 89,276 55,612 35,043

Shareholders’fund 1,540,983 1,575,913 1,617,881 1,624,669 1,074,683

Dividends N/A N/A N/A N/A N/A

Gearingratio 0 0 0 0 0

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Corporate Structure

Jieyang CityYuntong Plastic

Packaging CompanyLimited(PRC)

Jieyang City Rui Xing

Plastic PackagingCompany Limited

(PRC)

Winton InternationalInvestment CompanyLimited(HK)

Fortune Desire Group

Limited(BVI)

China FlexiblePackaging HoldingsLimited

(Bermuda)

Full Best Limited(BVI)

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18

Board of Directors

ZENG HANMINGChairman and Executive Director

Zeng Hanming has been appointed as Chairman of our Group in July 2008. He has more than 20 years of experience in the flexible packaging industry in areas of marketing, merchandising, production and operations. Mr Zeng is responsible for the daily operations, business development and strategic planning of our manufacturing operations. He holds a Bachelor of Business Administration degree from the University of Jinan in China. Mr Zeng was re-elected as a director on 28 February 2011.

WONG TUNG LEUNGExecutive Director

Wong Tung Leung is the Executive Director of our Group. He joined our Group in 2004 as an assistant to the Chairman and has been appointed as Executive Director on September 2008. He is responsible for the overall administrative, human resource affairs and finances of the Group. Mr Wong holds a Bachelor of Business from University of Technology in Sydney, Australia and Master of Commerce from University of New South Wales, Australia. He is currently an associate member of Certified Practicing Accountant of Australian Society of Certified Public Accountants. Mr Wong Tung Leung was re-elected as a director on 28 February 2012.

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Board of Directors

PROFESSOR DU JINMINIndependent Director

Professor Du Jinmin is a member of the academic committee in the School of Business of Jinan University. He has more than 20 years of experience and graduate level courses in financial institution management, finance, corporate finance and mergers and acquisition. Professor Du is also a director in several companies in PRC. He holds a PhD in Economics from the Nanjing Agriculture University in China. Professor Du was re-elected as a director on 27 February 2010.

ONG TIEW SIAMLead Independent Director

Our Independent Director has more than 34 years of experience in finance, accounting and administration field in various industries. He is a fellow member of the Singapore Institute of Certified Public Accountants of Singapore and a member of the Singapore Institute of Directors. He also sits on the board of several listed companies on the SGX. Mr Ong holds a Bachelor of Commerce (Accountancy) honours degree from the former Nanyang University.

YEUNG KOON SANG ALIAS DAVID YEUNGIndependent Director

David Yeung is currently a practicing Certified Public Accountant. He is a practicing member of the Institute of Certified Public Accountants of Singapore and a fellow of the Association of Chartered Certified Accountants, United Kingdom. He has over 35 years of experience in the accounting and audit profession. Mr Yeung also sits on the board of several listed companies in Singapore. He holds a Master of Social Science (Accounting) degree from the University of Birmingham in England. Mr David Yeung was re-elected as a director on 27 February 2010.

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Key Management

KIT CHANFinancial Controller and Company Secretary

Mr Chan is the Financial Controller and the Joint Company Secretary of our Group. He joined our Group in 2011 and is in charge of the overall control of our Group’s finance, accounting and taxation aspects of our Group. In addition, he is responsible for implementing internal controls and corporate governance and practices, as well as liaising with external parties and regulatory bodies in respect of the Group’s financial matters. Mr Chan has several years experience in accounting and auditing for a number of listed companies in Hong Kong and Singapore. He worked in an international audit firm prior to joining our Group. He is a member of the Hong Kong Institute of Certified Public Accountants and holds a Bachelor degree in Accountancy from the Hong Kong Polytechnic University.

ZHANG JIANG ZHOUChief Engineer

He is the Chief Engineer of our Group since 2013. He was previously the Deputy Chief Engineer of the Group and is now in charge of the production technologies, material purchase and material formulation. Mr Tan has more than 33 years of experience in the Chemistry engineering field. He holds a Bachelor degree with a major in engineering from the South China University of Technology in China.

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Corporate Information

Board of Directors

Zeng Hanming (Chairman)Wong Tung Leung (Executive Director)Ong Tiew Siam (Lead Independent Director)Yeung Koon Sang alias David Yeung (Independent Director)Prof Du Jinmin (Independent Director)

Company Secretaries

Kit Chan, CPA (HKICPA)Kevin ChoCodan Services Limited (Assistant Company Secretary)

Registered Office

Clarendon House2 Church StreetHamilton Hm 11BermudaTel. No : (1) (441)-2951-422Fax. No : (1) (441)-2954-720

Principal Place of Business in PRC

689 Xiguan RoadJieyang CityGuangdong 522000PRC

Principal Place Business in Hong Kong

2503B 25 FloorGolden Center188 Des Voeux Road CentralHong Kong

Bermuda Share Registrar

Codan Services LimitedClarendon House2 Church StreetHamilton Hm 11Bermuda

Singapore Share Transfer Agent

Boardroom Corporate & AdvisoryServices Pte. Ltd.50 Raffles Place#32-01 Singapore Land TowerSingapore 049623Fax. No : (65)-6536 1360

Joint Auditors

Foo Kon Tan Grant Thornton LLPPublic Accountants AndCertified Public Accountants47 Hill Street #05-01Singapore Chinese ChamberOf Commerce & Industry Bldg.Singapore 179365Partner In-ChargeChang Fook Kay(Effective from financial year ended31 October 2012 (FY2012))

HLB Hodgson Impey ChengChartered AccountantsCertified Public Accountants31/F Gloucester TowerThe Landmark11 Pedder Street, CentralHong KongPartner In-ChargeAlex HonAppointed on 2 December 2011

Principal Banker

Industrial And CommercialBank of ChinaRongcheng Sub-BranchNo. 52 Han Si RoadJieyang CityGuangdong 522000

Investor Relations Contact

Kit [email protected]

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Corporate Governance Statement 23

Report of the Directors 31

Statement by the Directors 33

Independent Joint Auditors’ Report 34

Consolidated Statement of Comprehensive Income 36

Statements of Financial Position 37

Consolidated Statement of Changes in Equity 38

Consolidated Statement of Cash Flows 39

Notes to Consolidated Financial Statements 40

ContentsFinancial

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Corporate Governance Statement

Corporate Governance StatementThe Board of Directors of China Flexible Packaging Holdings Limited (the “Board”) is committed to setting and maintaining high standards of corporate governance to ensure greater corporate transparency and to protect shareholders’ interests and enhance shareholders’ value. This report describes the Company’s corporate governance processes and activities with specific reference made to the principles and guidelines as set out in the Code of Corporate Governance 2005 (the “Code”). Where there are deviations from the Code, appropriate explanations will be provided.

Board MattersPrinciple 1: Board’s Conduct of Affairs

The Board’s primary role is to protect and enhance long-term shareholders’ value. Board meetings are held at least once every quarter to:

• oversee the business affairs of the Group;• review and approve the financial objectives;• review and approve the strategies implemented by management; and• monitor standards of performance and issues of policy.

This enables the Board to meet on a regular basis while not interfering with the Company’s operations. The Board is free to request for further clarification and information from management on all matters within their purview. Ad hoc meetings are convened when the circumstances require. The Bye-Laws of the Company also provide for directors to convene meetings by tele-conferencing.

To assist in the execution of its responsibilities, the Board is supported by three sub-committees, namely Nominating Committee (“NC”), Remuneration Committee (“RC”) and Audit Committee (“AC”). Each Committee has its own defined terms of reference and operating procedures to discharge its responsibilities more efficiently.

The Board met 4 times in FY2012 to review the Group’s business operations and financial performance. The attendances of the Directors at meetings of the Board and Board Committees during the year are disclosed as follows:

DIRECTORS BOARD AC NC RCNumber Attended Number Attended Number Attended Number Attended

Zeng Hanming 4 4 NA NA 1 1 NA NA

Wong Tung Leung 4 4 NA NA NA NA NA NA

Prof Du Jinmin 4 3 4 3 1 1 1 1

Ong Tiew Siam 4 4 4 4 1 1 1 1

Yeung Koon Sang alias David Yeung 4 4 4 4 1 1 1 1

The Board’s approval is required for transactions or matters such as major investments, corporate restructuring, mergers and acquisitions, material acquisitions or disposal of assets, the release of the Group’s financial results announcements, interested person transactions of a material nature and declaration of dividends.

The Company is responsible for arranging regular training for the Company’s Directors from time to time particularly on changes in the relevant new laws, regulations and changing commercial risks to enable them to make well-informed decision and to ensure that the Directors are competent in carrying out their expected roles and responsibilities.

During FY2012, the independent directors have travelled to the Company’s key sites of operations to update themselves with the latest development in the Company’s operations.

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Management would conduct briefings and orientation programmes to familiarise newly appointed Directors with the various businesses, operations and processes of the Group.

Principle 2: Board Composition and Balance

The Board of Directors consists of five members, three of whom are Independent Directors. This composition complies with the Code's requirement that at least one third of the Board should be made up of independent directors.

Executive Directors

Zeng Hanming (Chairman and Executive Director)Wong Tung Leung (Executive Director)

Non-executive Directors

Ong Tiew Siam (Lead Independent Director)Yeung Koon Sang alias David Yeung (Independent Director)Prof Du Jinmin (Independent Director)

All appointments and retirements of Directors would be recommended by the NC to the Board. In addition, the NC also reviews annually the independence of each Director and board succession planning. The Board is of the view that the current Board comprises persons who as a group, provide core competencies necessary to meet the Company’s requirements and that the current board size is adequate, taking into account the nature and scope of the Company’s operations.

Principle 3: Chairman and CEO

Mr Zeng Hanming has assumed the roles of both Chairman and CEO since 21 July 2008. As such, Mr Zeng bears executive responsibility for the Company’s business as well as responsibility for the workings of the Board and ensures that procedures are introduced to comply with the Code.

Although the roles and responsibilities for the Chairman and CEO are vested in Mr Zeng, major decisions are made in consultation with the Board which comprises a majority of independent non-executive directors. The Board believes that there are adequate measures in place against any uneven concentration of power and authority in one individual.

The Company has a Lead Independent Director, Mr Ong Tiew Siam. The Lead Independent Director shall be available to the shareholders where they have concerns which contact through the normal channels of the Executive Chairman and CEO has failed to resolve or for which such contact is inappropriate. The Lead Independent Director may call for meetings of independent directors from time to time without the presence of other directors and provide feedback to the Chairman after such meetings.

Principles 4 and 5: Board membership and performance

The Nominating Committee (“NC”) comprises the following four members, three of whom are independent directors. The NC Chairman is not associated in any way with the substantial shareholders of the Company.

Yeung Koon Sang alias David Yeung (Chairman)Ong Tiew SiamProf Du JinminZeng Hanming




The principal functions of the NC are to:

1) Provide nominations for the re-appointment of our directors having regard to their contribution and performance;2) Assess the independence of the directors annually;3) Assess whether or not a director is able to and has been adequately carrying out his duties as a director;4) Review the appropriate size of the Board;5) Evaluate the effectiveness and performance of the Board; and6) Review on a yearly basis the training programmes for the Board.

The NC has reviewed the independence of each director for FY2012 in accordance with the Code’s definition of independence and is satisfied that more than half of the Board comprises independent Directors. The NC was of the view that Messrs Ong Tiew Siam, Yeung Koon Sang alias David Yeung and Prof Du Jinmin are independent.

The NC acknowledges the importance of a formal assessment of Board and Board Committees performances. An assessment system and evaluation forms have been established and adopted. The NC has conducted a formal assessment of the Board’s and Board Committees’ performances including Directors’ commitment of time for meetings of the Board and Board Committees for FY2012.

The NC has reviewed the training needs for the Directors in FY2012 and encouraged directors to attend the relevant training courses that could enhance the knowledge of directors to perform its duties as Directors of the Company.

New Directors are appointed on Board, after the NC has reviewed and considered the skills, qualifications and experience of the nominated director.

Pursuant to the existing Bye-Laws of the Company, each Director of the Company shall retire from office at least once every three (3) years by rotation. Directors who retire are eligible to offer themselves for re-election. It was also provided in the Bye-Laws of the Company that any additional Director appointed during the year shall only hold office until the next Annual General Meeting and are subject to re-election by the Shareholders.

The NC, in considering the re-appointment of a director, evaluate such director’s contribution and performance, such as his attendance at meetings of the Board and/or Board committees, participation, candour and any special contribution.

The Board has accepted NC’s nomination of the retiring director Professor Du Jinmin for re-election as a Director at this forthcoming AGM. The retiring directors, Messrs Ong Tiew Siam and Yeung Koon Sang alias David Yeung (who have already served as Independent Directors for a cumulative term of nine years) will not seek for re-election at the forthcoming AGM. A few candidates have been identified and will be selected for the appointment as new independent directors of the Company in their place. Once the selection and appointment of new Independent Directors have been reviewed by the Nominating Committee and approved by the Board of Directors, the Company will announce such appointments via SGXNet accordingly.

Principle 6: Access to information

To enable the Board to fulfill its responsibility, Management strives to provide Board members with adequate information for Board meetings on a timely and an ongoing basis. Directors are given separate and independent access to the Company’s key executives and Company Secretaries to address any enquiries. The appointment and removal of Company Secretaries should be a matter for the Board as a whole.

The Company Secretaries or their representatives attend all Board meetings and are responsible for ensuring that proper procedures at such meetings are followed. Together with the Company’s management, they are responsible to ensure that the Company complies with the requirements of the Companies Act, Listing Manual of the SGX-ST and other rules and regulations that are applicable to the Company.


26


A Director or as a group, may seek professional advice in furtherance of their duties and the costs will be borne by the Company.

Remuneration MattersPrinciple 7 – Procedures for Developing Remuneration Policies

Principle 8 – Level and Mix of Remuneration

Principle 9 – Disclosure of Remuneration

The Remuneration Committee (“RC”) comprises the following three members, all of whom are Independent Directors:

Ong Tiew Siam (Chairman)Prof Du JinminYeung Koon Sang alias David Yeung

The principal functions of the RC are to:

1) Review and approve annually the remuneration of the senior management and key executives of the Group with a goal to recruit, motivate and retain employees through competitive compensation and progressive policies; and

2) Review and approve annually the remuneration for the directors.

Each member of the RC refrains from voting on any resolutions in respect of the assessment of his remuneration. No Director will be involved in determining his own remuneration. Non-Executive Directors do not have service contracts with the Company and their terms of appointment are specified in the Bye-Laws of the Company. The Executive Directors do not receive directors’ fees. The independent directors received directors’ fees which are recommended by the Board for approval at the Company’s AGM. In setting the remuneration packages of the Executive Directors, the Company takes into account the performance of the group and that of the Executive Directors which are aligned with long term interest and risk policies of the Group.

The RC has full authority to engage any external professional advice on matters relating to remuneration as and when the need arises.




A breakdown of each individual director’s and key executive remuneration, in percentage terms showing the level and mix for FY2012, is as follows:

Fees Salary Bonus Other BenefitsTotal

Compensation% % % % %

DirectorsBelow S$250,000Zeng Hanming – 100 – – 100

Wong Tung Leung – 100 – – 100

Ong Tiew Siam 100 – – – 100

Yeung Koon Sang alias David Yeung 100 – – – 100

Prof Du Jinmin 100 – – – 100

Key ManagementBelow S$250,000Kit Chan – 100 – – 100

Tan Yao Xin – 100 – – 100

Li Zeyu – 100 – – 100

The aggregate amount of the total remuneration paid to the Key Management staff (who are not directors or CEO) is S$148,000/-.

There is no employee of the Group who is an immediate family member of a director or substantial shareholder whose remuneration exceeds S$150,000 for FY2012.

Accountability and AuditPrinciple 10: Accountability

In presenting the annual financial statements and announcements of financial results to the shareholders, it is the aim of the Board to provide the shareholders with a balanced and understandable assessment of the Company’s and Group’s performance, position and prospects.

Management currently provides the Board with appropriately detailed management accounts of the Group’s performance, position and prospects on a regular basis. The Board will update the Shareholders on the operations and financial position of the Company through quarterly and full year announcements as well as timely announcements of other matters as prescribed by the relevant rules and regulations.

Principle 11: Audit Committee

The Audit Committee (“AC”) comprises the following 3 members, of whom all are independent directors:

Ong Tiew Siam (Chairman)Yeung Koon Sang alias David YeungProf Du Jinmin

The Company has adopted and has complied with the principles of corporate governance under the Code in relation to the roles and responsibilities of the AC.


28


The profiles of the AC members are set out on page 19 of this Annual Report. The Board is of the view that the at least two members of the AC including the AC Chairman have the requisite qualification, recent and relevant financial management knowledge, expertise and experience to discharge their responsibilities properly.

The AC meets quarterly and as and when necessary to carry out the following functions:

1) Review the audit plans of our Company’s internal and external auditors;2) Review the internal and external auditors’ reports;3) Review the co-operation given by our Company’s officers to the internal and external auditors;4) Review the financial statements of our Company and the Group before their submission to the Board;5) Review the independence of external auditors and the nomination of their re-appointment as external auditors;6) Reviewing all non-audit services provided by the external auditors so as to ensure that any provision of such services

would not affect the independence of the external auditors;7) Review the Group’s material internal controls including financial, operational and compliance controls; and8) Review interested person transactions, if any.

Apart from the duties listed above, the AC shall commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material impact on the Group’s operating results and/or financial position. Each member of the AC shall abstain from voting on any resolution in respect of matters in which he is interested.

The AC has full access to and co-operation of the Management and external and internal auditors. It also has full discretion to invite any Director or key management to attend its meetings, and has been given reasonable resources to enable it to discharge its function.

The AC is responsible to conduct an annual review of the volume of audit and non-audit services provided by the Joint External Auditors to ensure such services will not prejudice the independence and objectivity of the Joint External Auditors. For FY2012, the total remuneration in respect of the review and audit services by the Joint External Auditors amounted to approximately RMB1,273,000. No non-audit services were provided by the Joint External Auditors during the year.

The Company complies with the requirements of Rules 712 and 715 of the Listing Manual of the SGX-ST.

The accounts for the year were audited by HLB Hodgson Impey Cheng and Foo Kon Tan Grant Thornton LLP whose term of office will expire upon the forthcoming annual general meeting. In March 2012, the practice of HLB Hodgson Impey Cheng was reorganized as HLB Hodgson Impey Cheng Limited. The AC has recommended to the Board of Directors that HLB Hodgson Impey Cheng Limited be nominated for appointment and that Foo Kon Tan Grant Thornton LLP be nominated for reappointment as Joint External Auditors of the Company at the forthcoming annual general meeting.

The AC meets with the Joint External Auditors, without the presence of management, at least once a year.

The Company has put in place a whistle-blowing framework, endorsed by the AC where employees of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters and to ensure that arrangements are in place for the independent investigations of such matters and for appropriate follow up actions. There were no whistle-blowing letters received during the year and until the date of this report.




Principle 12: Internal Controls

Internal Controls

The Board is responsible for the overall internal control framework and is fully aware of the need to put in place a system of internal controls within the Group to safeguard shareholders’ interests and the Group’s assets, and to manage risks. The Board recognises that no cost effective internal control system will preclude all errors and irregularities, as a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.

The Company’s internal and external auditors conduct an annual review of the effectiveness of the Company’s material internal control systems including financial, operational, compliance and information technology controls and risk assessment at least annually to ensure the adequacy thereof. In addition, annual review to ensure that safeguards, checks and balances are put in place to prevent any conflict of interest or any weakening of internal controls. Any material non-compliance or failures in internal controls and recommendations for improvements are reported to the Audit Committee (“AC”). The AC also reviews the effectiveness of the actions taken by the Management on the recommendations made by the internal and external auditors in this respect.

The Board has also received assurance from the Chairman and the Financial Controller that (i) the financial records have been properly maintained and the financial statements give a true and fair view of the Company’s operations and finances and (ii) the Company risk management and internal control systems in place are effective.

Based on the internal controls established and maintained by the Group, works performed by external and internal auditors and actions taken by the management on the on-going review and continuing efforts at enhancing controls and processes, the Board, with the concurrence of the AC, is not aware of any issues causing it to believe that the system of internal controls as inadequate and the same was reported to the Board.

The Board is satisfied that currently there are adequate internal controls systems in the Company in addressing financial, operational and compliance risks. The Board regularly reviews the effectiveness of all internal controls, including operational controls of the Group.

Risk Management

Management regularly reviews the Group’s business and operational activities to identify areas of significant business risks as well as appropriate measures to control and mitigate these risks within the Group’s policies and strategies.

During FY2012, the Company has also appointed MS Risk Management Pte Ltd to develop an Enterprise Risk Management Framework for the Group. The said Framework has been reviewed by the AC and approved by the Board of Directors. The AC and the Management will continually assess the effectiveness of the risk management framework and processes.

Principle 13: Internal Audit

In accordance with the AC’s recommendation, the Company has outsourced the internal audit function to a professional firm. The Internal Auditor reports directly to the AC Chairman on internal audit matters and to management on administrative matters. To ensure the adequacy of the internal audit function, the AC reviews and approves, on an annual basis, the internal audit plans and the recourses required to adequately perform this function.

Principle 14: Communication with Shareholders

Principle 15: Greater Shareholder Participation

The Company is committed to regular and proactive communication with its shareholders in line with continuous disclosure obligations of the Company according to the Listing Manual of the SGX-ST. Pertinent information will be disclosed to shareholders in a timely, fair and equitable manner.


30


Communication with Shareholders and the public is maintained through regular dissemination of information such as announcements on quarterly results, press releases on the SGXNet and the Company’s corporate website. Public awareness on the Company’s latest developments and businesses is also maintained through the Company’s website, http://www.cnflexpack.com.

Annual reports, circulars and notices of General Meeting will be delivered to all shareholders of the Company. The notices are also advertised in newspapers and available at SGX-ST’s website.

Shareholders can vote for resolutions or appoint up to two proxies to attend and vote at all general meetings on his/her behalf using a proxy form sent with the annual report. The participation of shareholders is encouraged at the Company’s Annual General Meeting (“AGM”) through open question and answer session. While the Chairman of the Audit, Remuneration and Nominating Committees will be available at the forthcoming AGM to address any queries or concerns relating to the works of these committees, the External Auditors will also be present to assist the Directors in addressing any relevant queries from the shareholders.

The Company will review its Bye Laws from time to time and make such amendments to the Bye Laws to be in line with the applicable requirements or rules and regulations governing the continuing listing obligations on the stock exchange which the Company’s securities are listed.

Dealings in SecuritiesThe Group has adopted a set of code in relation to dealings in the Company’s securities to all its officers pursuant to the Listing Manual of the SGX-ST. The internal code is also in compliance with Rule 1207(19) of the Listing Manual. The Company and its officers are informed via email that they are not allowed to deal in the Company’s shares during the period commencing two weeks before the announcement of the Company’s financial results for each of the first three quarters of its financial year, or one month before the announcement of the Company’s full year financial results and ending on the date of the announcement of the relevant results or when they are in possession of any unpublished price sensitive information on the Group. In addition, the Directors, key officers and employees of the Group are discouraged from dealing in the Company’s securities on short-term considerations.

The guidelines on share purchases under the share purchase mandate, renewed annually at the Company’s AGM also provides that the Company may not effect any repurchases of Shares on the SGX-ST two weeks before the announcement of the Company’s financial statements for each of the first three quarters of its financial year and one month before the release of full year financial statements and ending on the date of announcement of the relevant results.

Interested Person TransactionsDuring FY2012, there were no interested person transactions. When a potential conflict of interest arises, the Director concerned does not participate in discussions and refrains from exercising any influence over other members of the Board.

The AC will review all interested person transactions to be entered to ensure that the relevant rules under Chapter 9 of the Listing Manual of the SGX-ST are complied with.

Material ContractsThere were no material contracts of the Group or its subsidiaries involving the interest of any Director or controlling shareholder subsisting during FY2012.



Report of the Directors

The directors present their report and the audited financial statements of the Group for the year ended 31 October 2012.

DirectorsThe directors of the Company during the year and up to the date of this report are:

Executive directors:

Mr Zeng HanmingMr Wong Tung Leung

Independent non-executive directors:

Prof Du JinminMr Ong Tiew SiamMr Yeung Koon Sang, alias David Yeung

In accordance with the Company’s Bye-Laws, the directors of the Company, including the independent non-executive directors, are subject to re-election at least once every three years at an Annual General Meeting.

Arrangement to enable directors to acquire shares and debentures

Except as disclosed in this report, neither at the end of the year, nor at any time during the 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 or debentures of the Company or any other body corporate.

Directors’ interests in shares and debentures

According to the register of directors’ shareholdings, the following directors, who held office at 31 October 2012, had an interest in the shares of the Company and related corporations as stated below:

Ordinary shares of US$0.15 each of the Company as at 1 November 2011

Direct DeemedName of directors interest interest

Mr Zeng Hanming 14,268,900 6,624,569Mr Wong Tung Leung – –Prof Du Jinmin – –Mr Ong Tiew Siam – –Mr Yeung Koon Sang, alias David Yeung 100,000 –

Ordinary shares of US$0.15 each of the Company as at 31 October 2012 and 21 November 2012

Direct DeemedName of directors interest interest

Mr Zeng Hanming 14,268,900 6,624,569Mr Wong Tung Leung – –Prof Du Jinmin – –Mr Ong Tiew Siam – –Mr Yeung Koon Sang, alias David Yeung 100,000 –

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32

Report of the Directors

Directors’ service contracts

The Company has renewed the service agreements (the “Service Agreements”), effective 1 January 2013, with Mr Zeng Hanming for a period of three years (such terms of the Service Agreements may be extended only upon the mutual consent of the parties) unless otherwise terminated by either party giving not less than three months’ written notice.

Apart from the foregoing, no director proposed for re-election at the forthcoming annual general meeting has a service contract with the Company which is not determinable by the Company within one year without payment other than statutory compensation.

Options

There is presently no option scheme on the unissued shares of the Company.

Audit committee, nominating committee and remuneration committee

Details of the Company’s audit committee, nominating committee and remuneration committee are set out on pages 23 to 30 of the Corporate Governance Statement.

Directors’ interests in contracts

No director received or became 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 in which he/she is a member or with a company in which he/she has a substantial financial interest.

Internal Controls

Based on the internal controls established and maintained by the Group, works performed by external and internal auditors and actions taken by the management on the on-going review and continuing efforts at enhancing controls and processes, the Board, with the concurrence of the AC, is not aware of any issues causing it to believe that the system of internal controls as inadequate and the same was reported to the Board.

The Board is satisfied that currently there are adequate internal controls systems in the Company in addressing financial, operational and compliance risks. The Board regularly reviews the effectiveness of all internal controls, including operational controls of the Group.

Auditors

The accounts for the year were audited by HLB Hodgson Impey Cheng and Foo Kon Tan Grant Thornton LLP whose term of office will expire upon the forthcoming annual general meeting. In March 2012, the practice of HLB Hodgson Impey Cheng was reorganized as HLB Hodgson Impey Cheng Limited. A resolution for the appointment of HLB Hodgson Impey Cheng Limited as the joint external auditors of the Company for the subsequent year is to be proposed at the forthcoming annual general meeting.

ON BEHALF OF THE BOARD

Zeng Hanming Wong Tung LeungChairman Director

Date 25 January 2013



Statement by the Directors

Statement by the DirectorsThe Board of Directors is responsible for the preparation, consolidation and fair presentation of the financial statements in accordance with the International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

In the opinion of the directors, the accompanying consolidated statement of financial position, the statement of financial position of the Company, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows, together with the notes thereon, are drawn up in accordance with and comply with International Financial Reporting Standards so as to present fairly the state of affairs of the Group and of the Company as at 31 October 2012 and of the results of the business, changes in equity and cash flows of the Group for the financial year ended on that date and 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 BOARD

Zeng Hanming Wong Tung LeungChairman Director

Date 25 January 2013


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Independent Joint Auditors’ Report

31/F, Gloucester TowerThe Landmark11 Pedder Street CentralHong Kong

TO THE MEMBERS OFCHINA FLEXIBLE PACKAGING HOLDINGS LIMITED(incorporated in the Bermuda with limited liability)

We have audited the accompanying financial statements of China Flexible Packaging Holdings Limited (the “Company”) and its subsidiaries (collectively, the “Group”) set out on pages 36 to 74, which comprise the statements of financial position of the Group and the Company as at 31 October 2012, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements 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 the management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Independent Joint Auditors’ Report

OpinionIn our opinion, the consolidated financial statements of the Group and the statement of financial position of the Company present fairly, in all material respects, the state of affairs of the Group and the Company as at 31 October 2012 and the results, changes in equity and cash flows of the Group for the year ended on that date in accordance with International Financial Reporting Standards.

Emphasis of MatterWithout qualifying our opinion, we draw attention to Note 2 to the financial statements which indicates that the Group incurred net losses of approximately RMB549,954,000 and negative cash flow from operating activities of approximately RMB78,980,000 for the financial year ended 31 October 2012. These conditions, along with other matters as set forth in Note 2, indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

Other MattersThis report, including the opinion, has been prepared for and only for you, as a body, in accordance with Section 90 of the Companies Act 1981 of Bermuda and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

HLB Hodgson Impey Cheng Foo Kon Tan Grant Thornton LLPChartered Accountants Public Accountants andCertified Public Accountants Certified Public Accountants

Hong Kong Singapore25 January 2013 25 January 2013

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Consolidated Statement of Comprehensive IncomeFor the year ended 31 October 2012

Notes 2012 2011 RMB’000 RMB’000

Revenue 10 650,305 864,765

Cost of sales (696,598) (764,061 )

Gross (loss)/profit (46,293) 100,704

Other operating income 11 2,434 2,573

Selling and distribution expenses (35,432) (40,979 )

Administrative expenses (30,546) (30,574 )

Other expenses 11 (439,012) (18,358 )

(Loss)/profit before taxation 11 (548,849) 13,366

Income tax expense 12 (1,105) (6,555 )

Net(loss)/profitfortheyearattributable toownersoftheCompany (549,954) 6,811

Other comprehensive loss for the year, net of tax:

Foreign currency translation differences (at nil tax) (32) (23 )

Totalcomprehensive(loss)/incomefortheyear attributabletoownersoftheCompany (549,986) 6,788

Basicanddiluted(loss)/earningspershare 13 RMB(1.131) RMB0.014

The accompanying notes form an integral part of these financial statements.

12000685-20a-Con Statement of CI36 36 29/1/2013 15:21:48


Statements of Financial PositionAs at 31 October 2012

Group Company Notes 2012 2011 2012 2011 2010 (Restated) (Restated) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Non-currentassetsInvestments in subsidiaries 14 – – 874,305 1,066,411 1,068,970Property, plant and equipment 15 612,224 1,050,493 – – –Land use rights 16 64,764 99,815 – – –

676,988 1,150,308 874,305 1,066,411 1,068,970

CurrentassetsInventories 17 155,127 132,831 – – –Accounts receivable 18 223,420 230,447 – – –Prepayments, deposits and other receivables 19 212 8,307 – – –Cash and bank balances 20 53,979 158,388 817 640 381

432,738 529,973 817 640 381

CurrentliabilitiesAccounts payable 23 26,110 39,045 – – –Accruals and other payables 24 8,933 16,266 247 239 313Tax payable – 301 – – –

35,043 55,612 247 239 313

Netcurrentassets 397,695 474,361 570 401 68

Netassets 1,074,683 1,624,669 874,875 1,066,812 1,069,038

EquityShare capital 21 598,238 598,238 598,238 598,238 598,238Reserves 22 476,445 1,026,431 276,637 468,574 470,800

Equityattributableto ownersoftheCompany 1,074,683 1,624,669 874,875 1,066,812 1,069,038


12000685-21a-Statement of FP E.i37 37 29/1/2013 15:21:48

38

Consolidated Statement of Changes in EquityFor the year ended 31 October 2012

Foreign Issued Share currency share premium translation Statutory Other Retained capital account reserve reserve reserve earnings Total (Note21) (Note22) (Note22) (Note22) (Note22) (Note22) equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance as at 1 November 2010 598,238 304,382 3,556 85,282 36,630 589,793 1,617,881

Total comprehensive (loss)/income for the year – – (23 ) – – 6,811 6,788

Transfer to statutory reserve – – – 1,245 – (1,245 ) –

Balance as at 31 October 2011 and 1 November 2011 598,238 304,382 3,533 86,527 36,630 595,359 1,624,669

Total comprehensive loss for the year – – (32) – – (549,954) (549,986)

Balance as at 31 October 2012 598,238 304,382 3,501 86,527 36,630 45,405 1,074,683


12000685-22a-Con Change in Equit38 38 29/1/2013 15:21:47


Consolidated Statement of Cash FlowsFor the year ended 31 October 2012

Notes 2012 2011 RMB’000 RMB’000

Cashflowsfromoperatingactivities(Loss)/profit before taxation (548,849) 13,366Adjustmentsfor: Depreciation of property, plant and equipment 15 97,413 88,010 Amortisation of land use rights 16 2,299 2,494 Allowance for impairment on doubtful accounts receivable 11 13,603 – Impairment loss on non-current assets 11 355,457 – Loss on disposal of property, plant and equipment 11 43,548 – Interest income 11 (765) (530 )

Operating (loss)/profit before working capital changes (37,294) 103,340

Changesin: Inventories (22,296) (37,182 ) Accounts receivable (6,576) 12,135 Prepayments, deposits and other receivables 8,095 5,112 Accounts payable (12,935) (20,964 ) Accruals and other payables (7,333) (7 )

Cash (used in)/generated from operating activities (78,339) 62,434Tax paid (1,406) (7,195 )Interest received 765 530

Netcash(usedin)/generatedfromoperatingactivities (78,980) 55,769

CashflowsfrominvestingactivitiesPurchase of property, plant and equipment# 15 (28,438) (44,072 )Proceeds on disposal of property, plant and equipment 3,040 –

Netcashusedininvestingactivities (25,398) (44,072 )

CashflowsfromfinancingactivitiesDecrease in bank balance pledged – 7,669

Netcashgeneratedfromfinancingactivities – 7,669

Net(decrease)/increaseincashandcashequivalents (104,378) 19,366

Cash and cash equivalents at beginning of year 158,388 139,040

Effect of foreign exchange rate changes (31) (18 )

Cashandcashequivalentsatendofyear 20 53,979 158,388

# Netofutilisationofprepaymentstofixedassetsvendorsandmovementinamountspayabletofixedassetsvendors.


12000685-23a-Con Cash Flow E.ind39 39 29/1/2013 15:21:46

40

Notes to Consolidated Financial StatementsFor the year ended 31 October 2012

1. CorporateInformationThe Company is incorporated as a limited liability company and is domiciled in Bermuda. The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

The principal activity of the Company is investment holding. The Company’s subsidiaries are principally engaged in the manufacture and sale of plastic packaging films, synthetic papers and high barrier films in the People’s Republic of China, excluding Hong Kong and Macau (the “PRC”). The Group sources its raw materials from suppliers in the PRC and distributes its products in the PRC. There were no significant changes in the nature of the Group’s principal activities during the year.

The Company is listed on the Singapore Exchange Securities Trading Limited.

The financial statements of the Company were authorised and approved for issue in accordance with a resolution of the directors of the Company dated 25 January 2013.

2. GoingConcernThe Group incurred net losses of approximately RMB549,954,000 and negative cash flow from operating activities of approximately RMB78,980,000 for the financial year ended 31 October 2012.

Notwithstanding the above, the management are of the opinion that the Group and the Company are able to meet their obligations for the next financial year as and when they fall due having regard to the sufficiency of cash flows estimated by the management. Based on the cash flow forecast prepared by management for the next twelve months from the end of the reporting period, the management have estimated that adequate liquidity exists to finance the working capital requirements of the Group for the next financial year. In reviewing the cash flow forecasts, the management have considered the cash requirements of the Group as well as other key factors, including the ability of the Group to generate sufficient revenue to satisfy the Group’s future working capital needs, which may impact the operations of the Group during the next financial year. The management is of the opinion that assumptions which are included in the cash flow forecasts are reasonable.

The directors believe that the Group and the Company will have sufficient cash resources to satisfy their working capital requirements for at least the next financial year. Accordingly, the management considers it appropriate that these financial statements should be prepared on a going concern basis and do not include any adjustments that would be required should the Group and the Company fail to continue as a going concern.

3. AdoptionofNewandRevisedInternationalFinancialReportingStandardsOn 1 November 2011, the Group adopted the new and amended International Financial Reporting Standards (“IFRSs”) and interpretations from International Financial Reporting Interpretations Committee (“IFRICs”) that are mandatory and relevant for application from that date as follows:

IFRS 7 (Amendments) Financial Instruments: Disclosures – Amendments enhancing disclosures about transfers of financial assetsIFRS 24 (Revised) Related Party Disclosures – Revised definition of related partiesIFRIC 14 IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction

The adoption of these new and revised IFRSs and interpretations did not result in substantial changes to the Group’s accounting policies nor any significant impact on these financial statements.

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4. InternationalFinancialReportingStandardsnotyetEffectiveThe Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

IFRS 1 (Amendments) Government loans3

IFRS 7 (Amendments) Financial Instruments: Disclosures – Mandatory Effective Date of IFRS 9 and Transition Disclosures5

IFRS 9 Financial Instruments – Classification and Measurement5

– Accounting for Financial Liabilities and Derecognition5

IFRS 10 Consolidated Financial Statements3

IFRS 11 Joint Arrangements3

IFRS 12 Disclosure of Interests in Other Entities3

IFRS 13 Fair Value Measurement3

Amendments to IFRS 10, Transition guidance on the application of IFRS 10, IFRS 11 IFRS 11 and IFRS 12 and IFRS 12 for the first time3

IAS 1 (Amendments) Presentation of Items of Other Comprehensive Income2

IAS 12 (Amendments) Income Taxes – Limited scope amendment (recovery of underlying assets)1

IAS 19 (Revised) Amended standard resulting from the post employment benefits and termination benefits projects3

IAS 27 (Revised) Reissued as IAS 27 Separate Financial Statements (as amended in 2011)3

IAS 28 (Revised) Investments in Associates and Joint Ventures3

IAS 32 (Amendments) Offsetting Financial Assets and Financial Liabilities4

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine3

General amendments Annual Improvements to IFRSs 2009-2011 Cycle3

1 Effectiveforannualperiodsbeginningonorafter1January2012.2 Effectiveforannualperiodsbeginningonorafter1July2012.3 Effectiveforannualperiodsbeginningonorafter1January2013.4 Effectiveforannualperiodsbeginningonorafter1January2014.5 Effectiveforannualperiodsbeginningonorafter1January2015.

The directors do not anticipate that the adoption of such standards and interpretations will have a material impact on the financial statements of the Group.

5. SummaryofSignificantAccountingPolicies(a) Basisofpreparation

The financial statements have been prepared in accordance with the International Financial Reporting Standards.

The financial statements have been prepared on the historical cost basis except as stated in the significant accounting policies set out below.

The financial statements are presented in Renminbi (“RMB”) which is the Company’s functional currency. All financial information presented in RMB has been rounded to the nearest thousand, unless otherwise stated.

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42


5. SummaryofSignificantAccountingPolicies(Continued)(b) Businesscombination

The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the “Group”). The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred; b) the recognised amount of any non-controlling interest in the acquiree; and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (ie gain on a bargain purchase) is recognised in profit or loss immediately.

Acquisitions from entities under common control

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or, if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder’s consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity and any gain or loss arising is recognised directly in equity.

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5. SummaryofSignificantAccountingPolicies(Continued)(b) Businesscombination(Continued)

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

Investments in subsidiaries are stated in the Company’s statement of financial position at cost less accumulated impairment losses. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Transactions eliminated on consolidation

All inter-company balances and significant inter-company transactions and resulting unrealised profits or losses are eliminated on consolidation and the consolidated financial statements reflect external transactions and balances only.

(c) Property,plantandequipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group and the cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

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44


5. SummaryofSignificantAccountingPolicies(Continued)(c) Property,plantandequipment(Continued)

Depreciation is calculated on the straight-line basis to write off the cost of the assets over their estimated useful lives as follows:

Leasehold buildings 15 – 20 years or over the lease terms, whichever is shorterPlant and machinery 10 yearsMotor vehicles 10 yearsFurniture, fixtures and office equipment 5 yearsLeasehold improvements 5 years

Depreciation methods, useful lives and residual values are reviewed and adjusted as appropriate at the end of each reporting period.

The gain or loss on disposal or retirement of property, plant and equipment recognised in the consolidated statement of comprehensive income is the difference between the net sales proceeds and the carrying amount of the relevant asset.

(d) Landuserights

Land use rights classified as intangible assets are stated at cost less accumulated amortisation and any impairment losses. Amortisation is calculated on the straight-line basis to write off the cost of the land use rights over its land use rights period of 50 to 70 years for which the rights are attached to therein.

(e) Financialinstruments

Financial assets

Financial assets can be divided into the following categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired. The designation of financial assets is re-evaluated and classification may be changed at the end of the reporting period with the exception that the designation of financial assets at fair value through profit or loss is not revocable.

All financial assets are recognised on their trade date – the date on which the Group commits to purchase or sell the asset. Financial assets are initially recognised at fair value, plus directly attributable transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value.

Derecognition of financial assets occurs when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.

An assessment for impairment is undertaken at least at the end of the reporting period whether or not there is objective evidence that a financial asset or a group of financial assets is impaired. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the assets are impaired. The allowances recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

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5. SummaryofSignificantAccountingPolicies(Continued)(e) Financialinstruments(Continued)

Financial assets (Continued)

Non-compounding interest and other cash flows resulting from holding financial assets are recognised in profit or loss when received, regardless of how the related carrying amount of financial assets is measured.

The Group did not hold any financial assets at fair value through profit or loss, held-to-maturity investments or available-for-sale financial assets during the financial year.

Loansandreceivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides goods or services directly to a debtor with no intention of trading the receivables. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period which are classified as non-current assets.

Loans and receivables are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value is recognised in profit or loss.

Any reversal shall not result in a carrying amount that exceeds what the amortised cost would have been had any impairment loss not been recognised at the date the impairment is reversed. Any reversal is recognised in profit or loss.

Receivables are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset’s carrying amount and the present value of estimated future cash flows.

Loans and receivables comprise cash and cash equivalents, accounts receivable, and other receivables less prepayments.

Cashandcashequivalents

Cash and cash equivalents comprise cash and bank balances. For the purpose of the consolidated statement of cash flows, pledged bank balances are excluded from cash and cash equivalents.

Financial liabilities

Financial liabilities include accounts payable, accruals and other payables.

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest-related charges are recognised as an expense in the consolidated statement of comprehensive income.

Financial liabilities are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest rate method.

Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

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46


5. SummaryofSignificantAccountingPolicies(Continued)(e) Financialinstruments(Continued)

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

(f) Impairmentofnon-currentassets

The carrying amounts of the Group’s non-financial assets, other than inventories, are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. If it is not possible to estimate the recoverable amount of the individual asset, then the recoverable amount of the cash-generating unit to which the assets belong will be identified.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

Individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell and value in use, based on an internal discounted cash flow evaluation. Impairment losses are recognised in profit or loss.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount or when there is an indication that the impairment loss recognised for the asset no longer exists or decreases. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised.

(g) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(h) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability.

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5. SummaryofSignificantAccountingPolicies(Continued)(i) Employeebenefits

Short-term employee benefits

Short-term benefit obligations, including accumulated compensated absences, are measured on an undiscounted basis and are expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonuses if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Defined contribution plans

The Group pays contributions to defined contribution plans which are post-employment benefit plans under which the Group pays fixed contributions into publicly or privately administered pension insurance entities. The Group has no further payment obligations once the contributions have been paid. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(j) Researchanddevelopmentcosts

All research costs are expensed as incurred.

Expenditure incurred on projects to develop new products is capitalised and deferred only when the projects are clearly defined; the expenditure is separately identifiable and can be measured reliably; there is reasonable certainty that the projects are technically feasible; and the products have commercial value. Product development expenditure which does not meet these criteria is expensed when incurred.

(k) Operatingleases

Rentals payable under operating leases are recognised in profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

(l) Foreigncurrency

(a) Foreign currency transactions

Foreign currency transactions are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at the end of the reporting period.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction.

Foreign currency differences arising on translation are recognised in profit or loss except for differences arising from the translation of monetary items that in substance form part of the Group’s net investment in a foreign operation, which are recognised initially in a separate component of equity as foreign currency translation reserve in the consolidated statement of financial position and recognised in the consolidated statement of comprehensive income on disposal of the foreign operation. In the Group entities’ respective financial statements, such exchange differences are recognised in the profit or loss.

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48


5. SummaryofSignificantAccountingPolicies(Continued)(l) Foreigncurrency(Continued)

(b) Foreign operations

The assets and liabilities of foreign operations are translated to RMB at exchange rates at the end of the reporting period.

The income and expenses of foreign operations are translated to RMB at average exchange rates. None of the Group entities has the currency of a hyper-inflationary economy.

All resultant currency translation differences are recognised in foreign currency translation reserve in other comprehensive income. When a foreign operation is disposed of, in part or in full, the relevant amount in foreign currency translation reserve is transferred to profit or loss. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests.

(m) Incometaxes

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current taxation is provided at tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of prior years.

Deferred taxation is provided at the current taxation rate on all temporary differences existing at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of an asset or liability in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly-controlled entities to the extent that the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authorities on the same taxable entity, or on different tax entities, provided they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

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5. SummaryofSignificantAccountingPolicies(Continued)(n) Keymanagementpersonnel

Key management personnel of the Group are those persons having the authority and responsibility for the planning, directing and controlling the activities of the Group. Key management personnel include the directors and senior management of the Group.

(o) Relatedpartytransactions

A related party is a person or entity that is related to the Group.

(a) A person or a close member of that person’s family is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or of a parent of the Group.

(b) An entity is related to the Group if any of the following conditions applies:

(i) the entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

(p) Earningspershare

Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is not presented as the Company does not have any dilutive potential ordinary shares.

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50


5. SummaryofSignificantAccountingPolicies(Continued)(q) Revenuerecognition

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, goods and services taxes or other sales taxes, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. Transfer of risks and rewards occurs when the goods are received by the customer.

(r) Interestincome

Interest income is recognised on a time proportion basis using the effective interest rate method.

(s) Dividendincome

Dividend income is recognised when the right to receive dividend is established.

(t) Dividenddistribution

Final dividends proposed by the directors are not accounted for in shareholders’ equity as an appropriation of retained profit, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

Interim dividends are recognised directly as a liability when they are proposed and declared, because of the articles of association of the Company grant the directors the authority to declare interim dividends. Consequently, interim dividends are recognised directly as a liability when they are proposed and declared.

(u) Segmentreporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as Group Executive Chairman who makes strategic resources allocation decisions.

6. CriticalAccountingEstimatesandJudgmentsThe preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgment about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

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6. CriticalAccountingEstimatesandJudgments(Continued)The critical accounting estimates and assumptions used are detailed below:

Criticalaccountingestimatesandassumptions

(a) Impairment of investments in subsidiaries

Investments in subsidiaries are tested for impairment when there are indicators that the carrying amounts may not be recoverable. Recoverable amount is defined as the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value-in-use. In making this judgment, the Group evaluates the value-in-use which involves estimating the future cash flows expected from the cash-generating units and an appropriate discount rate in order to calculate the present value of the future cash flows, taking into account business outlook, including factors such as industry and sector performance, general market and economic conditions and other available information.

(b) Useful lives of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of plant and equipment to be within the range as indicated in the accounting policy for plant and equipment and depreciation. Changes in the expected level of usage and technological obsolescence could impact the economic useful lives of these assets, leading to potential changes in future depreciation charges, impairment losses and/or write-offs.

(c) Impairment of property, plant and equipment and land use rights

Property, plant and equipment and land use rights are reviewed to determine whether there is any indication that the carrying value of these assets may not be recoverable and have suffered an impairment loss. If any such indication exists, the assets are tested for impairment. The recoverable amount of the assets is estimated in order to determine the extent of the impairment loss, if any. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

The value in use calculation is based on a discounted cash flow model. Management judgment is required in the area of asset impairment, particularly in assessing: (1) whether an event has occurred that may indicate that the related asset values may not be recoverable; (2) whether the carrying value of an asset can be supported by the net present value of future cash flows which are estimated based upon the continued use of the asset in the business; (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate.

(d) Income taxes

Significant judgment is required in determining the provision for income taxes. The Group recognises, as current liabilities, liabilities for anticipated tax issues based on estimates of whether additional taxes will eventually be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

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6. CriticalAccountingEstimatesandJudgments(Continued)Criticalaccountingestimatesandassumptions(Continued)

(e) Allowance for doubtful receivables

Allowance for doubtful receivables of the Group is based on an evaluation of collectability of accounts receivable and other receivables. A considerable amount of judgment is required in assessing the ultimate realisation of these receivables, including their current creditworthiness, past collection history of each customer and ongoing dealings with them. If the financial conditions of the counterparties with which the Group contracted were to deteriorate, resulting in an impairment of their ability to make payments, additional allowance may be required.

(f) Allowance for inventories

A review is made periodically on inventories for excess inventory and decline in net realisable value below cost and a write-down of the inventory will be made for any such decline. These reviews require management to estimate future demand for our products. Possible changes in these estimates could result in revisions to the valuation of inventory.

7. ChangeofAccountingEstimatesandImpairmentofProperty,PlantandEquipmentChangeinusefullivesandimpairmentofproperty,plantandequipment

In view of the recurrence of breakdowns and significant loss on disposal of the Group’s production facilities incurred during the financial year ended 31 October 2012, during the 3rd quarter of the financial year ended 31 October 2012, the Board of Directors conducted a comprehensive review of the carrying value of its non-current assets. Consequently at the year ended 31 October 2012, the Group (i) revised its accounting estimate for depreciating production facilities by changing their useful life to 10 years from the existing useful life of 15 years in accordance with International Accounting Standard (“IAS”) 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, and; (ii) recognised an impairment loss of approximately RMB355,457,000 on the carrying value of its non-current assets as at 31 October 2012 based on the result of an impairment assessment in accordance with IAS 36 “Impairment of Assets”.

The change in accounting estimates has been applied prospectively from the start of the 4th quarter of the financial year ended 31 October 2012 as a result of the review. By its nature, it does not relate to prior periods and therefore it is not necessary to estimate the effects of applying the policy either retrospectively or prospectively from any earlier date. Accordingly, the adoption of the new policy has no effect on prior periods and years. The effect on the current financial year is to reduce the carrying amount of property, plant and equipment at the end of the financial year ended 31 October 2012 by approximately RMB16,238,000; and increase depreciation expense by the same amount.

For each of the subsequent years, the depreciation expenses in respect of the above property, plant and equipment are expected to increase by approximately RMB35,952,000 and profit for the year after taxation will decrease by approximately RMB26,964,000 until the assets are fully depreciated or disposed of.

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7. ChangeofAccountingEstimatesandImpairmentofProperty,PlantandEquipment(Continued)Impairmenttestingofproperty,plantandequipmentandlanduserights(thenon-currentassets)

The Group’s cash-generating units (“CGUs”) are identified according to the operating subsidiaries in the People’s Republic of China, namely Jieyang City Yuntong Plastic Packaging Co., Ltd. (“Yuntong”) and Jieyang City Rui Xing Plastic Packaging Co., Ltd. (“Rui Xing”).

During the current financial year ended 31 October 2012, the Group recognised substantial losses from operations and deficit in cash flows from operating activities. Under the requirements of IAS 36, Impairment of Assets, the losses and negative operating cash flows are indicators of impairment which requires management to perform impairment testing of the non-current assets.

Management is required to compute the recoverable amounts of the non-current assets which are defined as the higher of fair value less costs to sell and value in use. The management has prepared cash flow forecasts and appointed an independent firm of professional valuers to issue a valuation report on the value in use of the non-current assets dated 28 December 2012.

The recoverable amount of a CGU was determined based on value-in-use calculation. Cash flow projections used in these calculations were based on financial budgets approved by management covering a five-year period from 2013 to 2017. The cash flow projections represent expected income less related costs and are based on past experience and expectations for the plastic packaging industry in general. The growth rate is based on past performance and market development and does not exceed the current estimated long-term average growth rate in which the CGU operates. A pre-tax discount rate of 18.27% and 15.92% for Yuntong and Rui Xing has been applied to the cash flow projections.

The recoverable amounts of the non-current assets were determined to be lower than the carrying values of the non-current assets at the reporting date. The shortfall was mainly due to (a) changing market demand in all segments, (b) keen competition from existing local competitors and new market entrants, and (c) unexpected deterioration of operating performance due to recurrence of breakdown of machineries. An impairment loss of RMB355,457,000 has been recognised in the consolidated statement of comprehensive income under “Other expenses” and allocated on a pro-rata basis to the non-current assets as follows:

2012 2011 RMB’000 RMB’000

Impairment loss allocated to:Property, plant and equipment 322,705 –Land use rights 32,752 –

Total 355,457 –

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8. FinancialInstruments(a) Categoriesoffinancialinstruments

Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

FinancialassetsLoan and receivables:– Accounts receivable 223,420 230,447 – –– Deposits and other receivables 106 8,203 – –– Cash and cash equivalents 53,979 158,388 817 640

277,505 397,038 817 640

Financialliabilities Amortised cost: – Accounts payable 26,110 39,045 – –– Accruals and other payables 8,933 16,266 247 239

35,043 55,311 247 239

(b) Financialriskmanagementobjectivesandpolicies

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise adverse effects from the unpredictability of financial markets on the Company’s and the Group’s financial performance.

The Group and the Company do not hold or issue derivative financial instruments for trading purposes or to hedge against fluctuations, if any, in interest rates and foreign exchange.

(c) Marketrisk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Foreign currency risk

The Group has exposure to foreign currency risk in respect of the bank balances denominated in Hong Kong dollars (“HKD”), United States dollars (“USD”) and Singapore dollars (“SGD”).

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8. FinancialInstruments(Continued)(c) Marketrisk(Continued)

The Group’s and the Company’s exposures to foreign currencies are as follows:

Group Company 2012 2011 2012 2011RMB equivalent RMB’000 RMB’000 RMB’000 RMB’000

HKD (Note20) 1,880 252 15 18USD (Note20) 65 66 3 3SGD (Note20) 799 619 799 619

Net currency exposure 2,744 937 817 640

Sensitivityanalysis–Foreigncurrencyrisk

A 10% strengthening of the above currencies against the functional currencies of the respective subsidiaries of the Group and the Company at the reporting date would have increased/decreased loss before tax and equity by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant and does not take into account the associated tax effects.

A 10% weakening of the above currencies against the functional currencies of the respective subsidiaries of the Group and the Company would have an equal but opposite effect to the amounts shown above, on the basis that all other variables remain constant.

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8. FinancialInstruments(Continued)(c) Marketrisk(Continued)

Foreign currency risk (Continued)

Sensitivityanalysis–Foreigncurrencyrisk(Continued)

Group – 2012 HKD USD SGD TotalRMB equivalent RMB’000 RMB’000 RMB’000 RMB’000

RMB weakenedDecrease in loss before taxation and equity 188 7 80 275

Group – 2011 HKD USD SGD TotalRMB equivalent RMB’000 RMB’000 RMB’000 RMB’000

RMB weakenedDecrease in loss before taxation and equity 25 7 62 94

Company – 2012 HKD USD SGD TotalRMB equivalent RMB’000 RMB’000 RMB’000 RMB’000

RMB weakenedDecrease in loss before taxation and equity 2 – 80 82

Company – 2011 HKD USD SGD TotalRMB equivalent RMB’000 RMB’000 RMB’000 RMB’000

RMB weakenedDecrease in loss before taxation and equity 2 – 62 64

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to interest rate risk in respect of bank balances earning interest at variable rates.

For bank balances at variable rates, an increase of 50 basis points in interest rate at the reporting date would decrease the Group’s loss before taxation and equity by approximately RMB270,000 (2011: RMB791,000). A decrease of 50 basis points in interest rate would have an equal but opposite effect. The magnitude represents management’s assessment of the likely movement in interest rates under normal economic conditions. This analysis has not taken into account the associated tax effects and assumes that all other variables, in particular foreign currency rates, remain constant.

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8. FinancialInstruments(Continued)(d) Equitypricerisk

The Group is not exposed to any movement in equity price risk as it does not hold any quoted or marketable financial instruments.

(e) Creditrisk

Credit risk refers to the risk that counterparties may default on their contractual obligations resulting in financial loss to the Group. The Group’s exposure to credit risk arises primarily from accounts and other receivables.

The Group manages these risks by monitoring credit-worthiness of counterparties and limiting the aggregate risk to any individual counterparty.

The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from such defaults. The Group does not require collateral from its customers.

Cash balances are placed with reputable financial institutions of high credit rating.

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of accounts and other receivables. The main component of this allowance is a specific loss component that relates to individually significant exposures. The allowance account in respect of accounts receivable and other receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is considered irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the impaired financial asset.

The carrying amounts of accounts receivable included in the consolidated statement of financial position represent the Group’s maximum exposure to credit risk in relation to the Group’s financial assets. There is no significant concentration of credit risk, as the exposure is spread over a large number of counter-parties and customers unless otherwise disclosed in the notes to the financial statements. No other financial assets carry a significant exposure to credit risk.

At the end of the reporting period, an allowance of approximately RMB13,603,000 (2011: Nil) was made in respect of accounts receivable of certain customers of approximately RMB71,314,000 (2011: Nil) and was recognised after an assessment of the creditworthiness of the counterparties and credit quality and past collection history of the customers including potential disputes by customers on the quality of the Group’s products (refer to Note 18).

At the end of the reporting period, 5 (2011: 5) customers of two subsidiaries collectively accounted for approximately 36.2% (2011: 19.7%) of total gross accounts receivable of the Group.

(f) Liquidityrisk

Liquidity or funding risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. The Group manages liquidity risk by maintaining sufficient level of cash to meet its working capital requirement, monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. As stated in Note 2, the Group has carried out an assessment of its cash flow requirements in connection with the going concern of the Group and the Company and the directors believe that sufficient cash flow and liquidity will be generated/available from its operations and existing cash balances for at least 12 months after 31 October 2012.

The table below analyses the maturity profile of the Group’s and the Company’s financial liabilities based on contractual undiscounted cash flows.

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8. FinancialInstruments(Continued)(f) Liquidityrisk(Continued)

Group – 2012 Contractualundiscountedcashflows Carrying Lessthan Between2 Over amount Total 1yearand5years 5years RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Accounts payable (Note23) 26,110 26,110 26,110 – –Accruals and other payables(Note24) 8,933 8,933 8,933 – –

35,043 35,043 35,043 – –

Group – 2011 Contractual undiscounted cash flows Carrying Less than Between 2 Over amount Total 1 year and 5 years 5 years RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Accounts payable (Note23) 39,045 39,045 39,045 – –Accruals and other payables (Note24) 16,266 16,266 16,266 – –

55,311 55,311 55,311 – –

Company – 2012 Contractualundiscountedcashflows Carrying Lessthan Between2 Over amount Total 1yearand5years 5years RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Accrued operating expenses (Note24) 247 247 247 – –

Company – 2011 Contractual undiscounted cash flows Carrying Less than Between 2 Over amount Total 1 year and 5 years 5 years RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Accrued operating expenses (Note24) 239 239 239 – –

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8. FinancialInstruments(Continued)(g) Fairvaluesoffinancialinstruments

The fair value of financial assets and financial liabilities are determined as follows:

(i) The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market bid and ask prices respectively.

(ii) The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models (e.g. discounted cash flow analysis using observable and/or unobservable inputs).

(iii) The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

The Group’s financial instruments that are measured subsequent to initial recognition at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quote prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

No analysis is disclosed since the Group has no financial instruments that are measured subsequent to initial recognition at fair value at the end of the reporting period.

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9. OperatingSegmentsFor management reporting purposes, the Group is organised into the following reportable operating segments which are the Group’s strategic business units as follows:

(a) Manufacturing and sales – involved in the manufacturing and sales of packaging products

(b) Corporate – includes corporate office which incurs general corporate expenses and inactive Group entities

Segment accounting policies are the same as the policies described in Note 5. The Group accounts for intersegment transactions on terms agreed between the parties. Inter-segment transactions comprising advances between the segments are eliminated on consolidation.

Segmentrevenueandexpenses:

Segment revenue and expenses are the operating revenue and expenses reported in the Group’s consolidated statement of comprehensive income that are directly attributable to a segment and the relevant portion of such revenue and expense that can be allocated on a reasonable basis to a segment.

Segmentassetsandliabilities:

Segment assets and liabilities include items directly attributable to a segment as well as those can be allocated on a reasonable basis. Capital expenditure includes the total cost incurred to acquire property, plant and equipment directly attributable to the segment.

Group Executive Chairman (“Group CEC”) monitors the operating results of its operating segments for the purpose of making decisions about resource allocation and performance assessment.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group CEC.

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9. OperatingSegments(Continued) Manufacturingand salesof packagingproduct Corporate Total

2012 2011 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

SegmentrevenueSales to external customers 650,305 864,765 – – 650,305 864,765

Segmentresults (546,190) 16,504 (5,093) (5,711 ) (551,283) 10,793

Interest income 764 527 1 3 765 530Sale of scrap materials 1,592 2,038 – – 1,592 2,038Sundry income – – 77 5 77 5

(Loss)/profitbeforetaxation (543,834) 19,069 (5,015) (5,703 ) (548,849) 13,366

Income tax expenses (1,105) (6,555 ) – – (1,105) (6,555 )

(Loss)/profitaftertaxationattributable toownersoftheCompany (544,939) 12,514 (5,015) (5,703 ) (549,954) 6,811

Segmentassets 1,106,521 1,678,715 3,205 1,566 1,109,726 1,680,281

Segmentliabilities 34,569 54,874 474 738 35,043 55,612

Othersegmentinformation:

Capital expenditure 28,438 32,010 – 9 28,438 32,019

Depreciation 97,365 87,961 48 49 97,413 88,010

Amortisation 2,299 2,494 – – 2,299 2,494

Allowance for impairment on doubtful accounts receivable 13,603 – – – 13,603 –

Impairment loss on property, plant and equipment 322,705 – – – 322,705 –Impairment loss on land use rights 32,752 – – – 32,752 –

Loss on disposal of property, plant and equipment 43,548 – – – 43,548 –

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9. OperatingSegments(Continued)Geographicalinformation

The Group’s operations are located in the PRC and all of the Group’s products are sold to customers in the PRC. Hence, no analysis by geographical area of operations is provided. No revenue was derived from a single external customer amounting to 10 per cent or more of the Group’s revenue during the current financial year (2011: Nil).

Informationaboutmajorcustomers

No information about major customers is presented as no single customer contributed over 10% of the total revenue of the Group during the years ended 31 October 2012 and 2011.

10. Revenue Group 2012 2011 RMB’000 RMB’000

Sales of plastic packaging products 650,305 864,765

11. (Loss)/ProfitbeforeTaxationThe following items have been included in arriving at (loss)/profit before taxation:

Group 2012 2011 RMB’000 RMB’000

Cost of inventories included in cost of sales 557,492 619,386

Depreciation of property, plant and equipment included in – Cost of sales 80,543 81,493 – Administrative expenses 7,676 6,517 – Other expenses 9,194 –

97,413 88,010

Amortisation of land use rights included in cost of sales 2,299 2,494Auditors’ remuneration 1,273 1,275Operating lease expense 352 312Exchange loss, net 16 99Research and development expenses 4,094 8,627Repair and maintenance costs 11,800 9,450Impairment loss on non-current assets 355,457 –Loss on disposal of property, plant and equipment 43,548 –Allowance for impairment on doubtful accounts receivable 13,603 –

Directors’ remuneration: – Directors’ fee 535 518 – Salaries, bonuses and other costs 1,526 1,140

2,061 1,658

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11. (Loss)/ProfitbeforeTaxation(Continued) Group 2012 2011 RMB’000 RMB’000

Employee benefits expense: – Salaries, bonuses and other costs 17,035 14,364 – Contributions to defined contribution plans 2,230 1,199

19,265 15,563

Other operating income: Interest income 765 530 Sale of scrap materials 1,592 2,038 Sundry income 77 5

2,434 2,573

Otherexpenses: Bank charges 150 182 Exchange loss 16 99 Research and development costs 4,094 8,627 Repair and maintenance costs 11,800 9,450 Impairment loss on non-current assets (Notes15and16) 355,457 – Loss on disposal of property, plant and equipment 43,548 – Allowance for impairment on doubtful accounts receivable (Note18) 13,603 – Depreciation expense during production shutdown 9,194 – Fixed production costs during production shutdown 1,150 –

439,012 18,358

No non-audit fees were paid to the external joint auditors of the Group during the financial years ended 31 October 2012 and 2011.

12. IncomeTaxExpense Group 2012 2011 RMB’000 RMB’000

CurrenttaxexpenseCurrent year 1,105 6,555

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12. IncomeTaxExpense(Continued)Reconciliationofeffectivetaxrate

Group 2012 2011 RMB’000 RMB’000

(Loss)/profit before taxation (548,849) 13,366

Tax calculated at tax rate of 25% (2011: 25%) (137,212) 3,342Different tax rates in other countries 426 462Non-deductible expenses 3,270 1,862Temporary differences not recognised 94,242 –Deferred tax asset on tax losses not recognised 40,379 889

1,105 6,555

The temporary difference not recognised mainly relates to impairment of non-current assets that were not recognised as deferred tax assets.

Deferred tax assets have not been recognised in respect of the following:

Group 2012 2011 RMB’000 RMB’000

Deductible temporary differences 376,968 –Tax losses 161,518 –

538,486 –

The Group has not recognised a deferred tax asset in respect of the deductible temporary differences and tax losses incurred during the financial year due to the unpredictability of future profit streams. As at 31 October 2012, the Group has unrecognised tax losses of approximately RMB161,518,000 (2011: Nil) which can be carried forward to offset future taxable profits. All tax losses will expire after five years from the year of assessment they relate to.

13. (Loss)/EarningsperShare Group 2012 2011 RMB’000 RMB’000

(Loss)/profit attributable to owners of the Company (A) (549,954) 6,811

Numberofordinaryshares 2012 2011

Weighted average number of ordinary shares at the beginning and end of the year (B) 486,129,104 486,129,104

Basic and diluted (loss)/earnings per share (A)/(B) RMB(1.131) RMB0.014

The Company did not have any stock options or dilutive potential ordinary shares during the years ended 31 October 2012 and 2011.

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14. InvestmentsinSubsidiaries Company 2012 2011 2010 (Restated) (Restated) RMB’000 RMB’000 RMB’000

Unquoted equity shares, at cost 486,073 486,073 486,073Non-trade amounts due from subsidiaries 577,983 580,338 582,897

1,064,056 1,066,411 1,068,970

Impairment loss on net investment in subsidiaries (189,751) – –

874,305 1,066,411 1,068,970

The non-trade amounts owing by subsidiaries are an extension of the Company’s net investment in the subsidiaries. These are unsecured, interest-free and are not expected to be repaid within one year. Because they represent net investments, with indeterminable repayments, fair valuation is not appropriate.

Impairmentloss

During the financial year, having regard to the financial performance of certain subsidiaries that have been loss making since the previous financial years, impairment losses of approximately RMB189,751,000 were recognised in respect of the Company’s investments in these subsidiaries to reduce the carrying value of the investments to the recoverable amounts. The recoverable amounts of the investments were determined based on the value in use of the subsidiaries, and determined using pre-tax discount rates of 18.27% and 15.92% for Yuntong and Rui Xing. The value-in-use calculation was based on projected cash flows derived from the financial budgets approved by the management covering a five-year period. Cash flows were projected based on past experience and expectations for these subsidiaries.

Particulars of subsidiaries are set out below:

Countryof Effectiveequity incorporation/ interestheld Principal bytheGroup(%) Principal Nameofsubsidiary placeofbusiness 2012 2011 activities

Full Best Limited* British Virgin 100 100 Investment holding (Full Best (BVI)) Islands (“BVI”)

Fortune Desire Group BVI 100 100 Investment holding Limited*

Winton International Hong Kong 100 100 Investment holding Investment Company Limited*

Jieyang City Yuntong PRC 100 100 Manufacture and sale of Plastic Packaging plastic packaging Co., Ltd.* (“Yuntong”) films, synthetic (揭陽市運通塑料包裝有限公司) papers and high barrier films

Jieyang City Rui Xing PRC 100 100 Manufacture and sale of Plastic Packaging plastic packaging Co., Ltd.* (“Rui Xing”) films (揭陽市瑞興塑料包裝有限公司)

* AuditedbythejointauditorsHLBHodgsonImpeyChengandFooKonTanGrantThorntonLLPforconsolidationpurposes.

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15. Property,PlantandEquipment Furniture, Plant fixtures Leasehold and Motor andoffice LeaseholdGroup buildings machinery vehicles equipment improvements Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost:At 1 November 2010 537,408 940,639 11,061 174 27 1,489,309Additions 7,737 24,273 – 9 – 32,019Exchange adjustments – – (40 ) (16 ) (2 ) (58 )

At 31 October 2011 and 1 November 2011 545,145 964,912 11,021 167 25 1,521,270 Additions – 28,438 – – – 28,438Disposal – (76,661 ) (6,736 ) – – (83,397 )Exchange adjustments – – (5 ) (2 ) – (7 )

At 31 October 2012 545,145 916,689 4,280 165 25 1,466,304

Accumulateddepreciation andimpairmentlosses:At 1 November 2010 108,735 265,395 8,509 174 7 382,820Charge for the year 27,933 59,035 1,037 4 1 88,010Exchange adjustments – – (36 ) (15 ) (2 ) (53 )

At 31 October 2011 and 1 November 2011 136,668 324,430 9,510 163 6 470,777Charge for the year 25,609 71,394 403 4 3 97,413Disposal – (30,197 ) (6,612 ) – – (36,809 )Impairment loss 128,149 194,203 353 – – 322,705Exchange adjustments – – (4 ) (2 ) – (6 )

At 31 October 2012 290,426 559,830 3,650 165 9 854,080

Netbookvalue:At31October2012 254,719 356,859 630 – 16 612,224

At 31 October 2011 408,477 640,482 1,511 4 19 1,050,493

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15. Property,PlantandEquipment(Continued)As stated in Note 7, owing to substantial loss reported in the second quarter ended 30 April 2012, and according to the requirements of IAS 36, the Board of Directors engaged an independent professional valuer to conduct a review of the recoverable amount of the Group’s assets. IAS 36 requires an entity to assess whether there is any indication that an asset may be impaired at the end of each reporting period. The substantial loss reported in the second quarter is an indicator of impairment under IAS 36. The recoverable amount of the Group’s assets has been determined based on a value in use calculation on the Group’s cash-generating units for manufacture and sales of packaging products, using cash flow projections based on financial budget covering five years approved by the management. A pre-tax discount rate of 18.27% and 15.92% for the two CGUs, Yuntong and Rui Xing has been applied to the cash flow projections.

Based on the result of independent professional valuer’s report, there was a shortfall of approximately RMB355,457,000 to the carrying value of the Group’s non-current assets using the financial data for the year ended 31 October 2012. The shortfall was mainly due to the following factors; (i) changing market demand in all segments; (ii) keen competition from existing local players and new market entrants, and; (iii) unexpected deterioration of operating performance due to recurrence of breakdowns of machines. For the financial year ended 31 October 2012, impairment loss on property, plant and equipment and impairment loss on land use rights of the Group were approximately RMB322,705,000 and RMB32,752,000 respectively.

16. LandUseRights Group RMB’000

Cost: At 1 November 2010, 31 October 2011, 1 November 2011 and 31 October 2012 115,668

Accumulatedamortisationandimpairmentlosses: At 1 November 2010 13,359 Amortisation charge for the year 2,494

At 31 October 2011 and 1 November 2011 15,853 Amortisation charge for the year 2,299 Impairment loss (Note15) 32,752

At 31 October 2012 50,904

Netbookvalue: At31October2012 64,764

At 31 October 2011 99,815

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17. Inventories Group 2012 2011 RMB’000 RMB’000

Raw materials 145,685 121,462Finished goods 9,442 11,369

155,127 132,831

18. AccountsReceivable Group 2012 2011 RMB’000 RMB’000

Accounts receivable 237,023 230,447Less: Allowance for impairment (13,603) –

223,420 230,447

Accounts receivable has credit terms of between 30 to 90 days.

The movement in the allowance for impairment in respect of accounts receivable during the year was as follows:

Group 2012 2011 RMB’000 RMB’000

At beginning of the reporting period – 6,274Allowance for impairment 13,603 –Impairment loss utilised – (6,274 )

At end of the reporting period 13,603 –

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18. AccountsReceivable(Continued)The ageing analysis of accounts receivable is as follows:

2012 2011 RMB’000 RMB’000

Notimpaired – Not past due 203,134 198,834 – Past due 0 – 30 days 9,717 31,613 – Past due 31 – 60 days 10,569 –

Impaired – Not past due 9,356 – – Past due 0 – 30 days 2,288 – – Past due 31 – 60 days 1,959

237,023 230,447

As at 31 October 2012 and 2011, all accounts receivable were denominated in RMB. Details of credit risk are set out in Note 8.

19. Prepayments,DepositsandOtherReceivables Group 2012 2011 RMB’000 RMB’000

Prepaid expenses 106 104Advance to suppliers – 8,095Deposits 106 108

212 8,307

As at 31 October 2012 and 2011, prepayments, deposits and other receivables are denominated in RMB.

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20. CashandCashEquivalents Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Cash in banks 53,828 158,209 817 640Cash at hand 151 179 – –

Cash and cash equivalents as per consolidated statement of cash flows 53,979 158,388 817 640

Cash and bank balances are denominated in the following currencies:

Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

RMB 51,235 157,451 – –HKD 1,880 252 15 18USD 65 66 3 3SGD 799 619 799 619

53,979 158,388 817 640

The remittance of cash and cash equivalents denominated in RMB out of the PRC is subject to the foreign exchange control restrictions imposed by the government of the PRC.

At the end of reporting period, the weighted average effective interest rate on bank balances is 0.33% (2011: 0.50%) per annum.

21. ShareCapital Company 2012 2011 RMB’000 RMB’000

Authorised:2,000,000,000 ordinary shares of US$0.15 each at 1 November 2010, 31 October 2011 and 31 October 2012 2,490,000 2,490,000

Issued and fully paid:486,129,104 ordinary shares of US$0.15 each at 1 November 2010, 31 October 2011 and 31 October 2012 598,238 598,238

The holders of ordinary shares are entitled to receive dividends as declared from time to time.

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22. Reserves Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Share premium account 304,382 304,382 304,382 304,382Foreign currency translation reserve 3,501 3,533 – –Statutory reserve 86,527 86,527 – –Other reserve 36,630 36,630 36,630 36,630Capital reserve – – 99,175 99,175Retained earnings/(accumulated losses) 45,405 595,359 (163,550) 28,387

476,445 1,026,431 276,637 468,574

Sharepremiumaccount–GroupandCompany

The share premium account may be distributed in the form of fully paid bonus shares.

Foreigncurrencytranslationreserve–Group

The foreign currency translation reserve comprises foreign exchange differences arising from the translation of the financial statements of Group entities whose functional currencies are different from the functional currency of the Company.

Statutoryreserve–Group

In accordance with the relevant PRC regulations, Yuntong and Rui Xing are required to appropriate not less than 10% of their profits after tax to the statutory reserve, until the statutory reserve reaches 50% of their respective registered capitals. The transfer to the statutory reserve must be made before the distribution of dividends to shareholders. The statutory reserve can only be used to set off against accumulated losses or to increase the registered capitals of the subsidiaries, subject to approval from the local authorities.

Otherreserve–GroupandCompany

Other reserve comprises remuneration shares issued in prior years for the cumulative value of services received from an employee and may be distributable to shareholders.

Capitalreserve–Company

The capital reserve of the Company represents the excess of the fair value of the net assets of the subsidiaries acquired pursuant to a restructuring exercise in 2004 over the nominal value of the Company’s shares issued in exchange thereof and may not be distributable to shareholders until realised.

23. AccountsPayableAs at 31 October 2012, accounts payable, denominated in RMB and payable under credit terms of between 30 to 60 days (2011: 30 to 60 days).

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24. AccrualsandOtherPayables Group Company 2012 2011 2012 2011 RMB’000 RMB’000 RMB’000 RMB’000

Accrued operating expenses 5,154 5,957 233 239Accrued staff and related costs 1,386 1,594 14 –Payable to fixed assets vendors 2,063 2,063 – –Other payables 330 802 – –Customer deposits – 5,850 – –

8,933 16,266 247 239

25. OperatingLeaseArrangementsThe Group leases certain of its office premises under operating lease arrangements. The leases typically run for a period of one to two years, with an option to renew the lease after that date.

Future minimum lease payments payable under non-cancellable operating leases are as follows:

Group 2012 2011 RMB’000 RMB’000

Within one year 383 118Between one and five years 192 –

575 118

26. Directors’RemunerationInformation on the number of directors of the Company in remuneration bands is as follows:

Group 2012 2011

RMB5,100,000 (2011: RMB5,189,000) and above (S$1,000,000 and above) – –RMB3,825,000 (2011: RMB3,892,000) to RMB5,100,000 (2011: RMB5,184,000) (S$750,000 to S$999,999) – –RMB2,550,000 (2011: RMB2,594,000) to RMB3,825,000 (2011: RMB3,886,000) (S$500,000 to S$749,999) – –RMB1,275,000 (2011: RMB1,297,000) to RMB2,550,000 (2011: RMB2,589,000) (S$250,000 to S$499,999) – –Below RMB1,275,000 (2011: RMB1,292,000) (Below S$250,000) 5 5

5 5

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27. MaterialRelatedPartyTransactions(a) Keymanagementpersonnelcompensation

Group 2012 2011 RMB’000 RMB’000

Directors’ fee 535 518Salaries, bonuses and other costs 2,280 3,410

2,815 3,928

(b) Significantrelatedpartytransactions

Other than those disclosed elsewhere in the financial statements, the following transactions were carried out with related parties in the normal course of business on terms agreed between the parties.

Company 2012 2011 RMB’000 RMB’000

Repayment of advances to subsidiaries 1,403 2,295Payments made on behalf of subsidiaries 960 40Payments made by subsidiaries 1,541 –Expenses recharged by subsidiaries 370 304

28. DividendNo dividend was paid or proposed for years ended 31 October 2012 and 2011, nor has any dividend been proposed subsequent to year end.

29. CapitalManagementThe Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern while maximising shareholder value through the optimisation of debt and equity balance.

The Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust dividend payments, issue shares and convertible notes, obtain or repay bank borrowings. The Group currently does not adopt any formal dividend policy.

The Group has historically used equity funding as capital. From time to time, it may consider using bank and other borrowings. There were no changes in the Group’s approach to capital management during the year.

The Group monitors capital using a Gearing Ratio, which is net debt divided by total equity attributable to owners of the Company. Net debt represents bank and other borrowings.

The Group did not have any bank and other borrowings during the financial years ended 31 October 2012 and 2011.

The Company and its subsidiaries are not subject to externally imposed capital requirements.

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30. ComparativesComparatives in the financial statements have been reclassified to conform with the current year’s presentation to better reflect the nature of the transactions.

Consolidatedstatementofcomprehensive incomeoftheGroupfortheyearended31October2011

As previously As reported Reclassification restated RMB’000 RMB’000 RMB’000

Research and development costs 8,627 (8,627 ) –Repair and maintenance costs 9,450 (9,450 ) –Other expenses 281 18,077 18,358

The reclassifications above have no impact on the statement of financial position of the Group.

StatementoffinancialpositionoftheCompanyasat31October2011


Non-trade amounts due from subsidiaries 580,338 (580,338 ) –Investment in subsidiaries 486,073 580,338 1,066,411

StatementoffinancialpositionoftheCompanyasat31October2010


Non-trade amounts due from subsidiaries 582,897 (582,897 ) –Investment in subsidiaries 486,073 582,897 1,068,970

The reclassifications above have no consequential impact on the financial statements of the Company.

31. ApprovaloftheFinancialStatementsThe financial statements for the year ended 31 October 2012 were approved and authorised for issue in accordance with a resolution of the directors on 25 January 2013.

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Statistics of ShareholdingsAs at 14 January 2013

Authorised Capital USD300,000,000Issued Share Capital USD72,919,365.6No. of issued and fully paid up shares 486,129,104Class of shares Ordinary shares of USD0.15 eachVoting Rights One vote per share

There are no treasury shares held in the issued share capital of the Company.

Distribution of Shareholdings No.ofSizeofHoldings Shareholders % No.ofShares %

1 – 999 85 2.80 34,269 0.011,000 – 10,000 1,357 44.73 8,798,041 1.8110,001 – 1,000,000 1,560 51.42 93,307,069 19.191,000,001 and above 32 1.05 383,989,725 78.99

Total 3,034 100.00 486,129,104 100.00

Twenty Largest ShareholdersNo. Name No.ofShares %

1 Chong Yuen 178,025,468 36.622 DBS Nominees Pte Ltd 28,889,262 5.943 Wu Huiling 20,791,603 4.284 Li Kim Yu 15,482,425 3.185 Zhuang Shaowen 15,482,425 3.186 Zeng Hanming 14,268,900 2.947 Huang Weiwen 12,386,605 2.558 Huang Xiaohui 10,353,173 2.139 Zhang Lingyan 10,353,173 2.1310 DBS Vickers Securities (S) Pte Ltd 8,461,587 1.7411 Maybank Nominees (S) Pte Ltd 8,345,108 1.7212 Zhuang Shaochun 6,624,569 1.3613 Phillip Securities Pte Ltd 5,757,683 1.1814 OCBC Securities Private Ltd 4,828,774 0.9915 CIMB Securities (Singapore) Pte Ltd 4,108,067 0.8516 UOB Kay Hian Pte Ltd 3,976,490 0.8217 Hong Leong Finance Nominees Pte Ltd 3,891,000 0.8018 HSBC (Singapore) Nominees Pte Ltd 3,694,285 0.7619 Maybank Kim Eng Securities Pte. Ltd. 3,279,004 0.6720 Ee Hock Leong Lawrence 3,133,294 0.64

Total 362,132,895 74.48

45.87% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of SGX-ST.

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76

Statistics of ShareholdingsAs at 14 January 2013

Substantial Shareholders as at 14 January 2013NameofShareholder Direct DeemedInterest

1) Chong Yuen 178,025,468 15,482,4252) Zhuang Shaowen 15,482,425 12,386,6053) Li Kim Yu 15,482,425 178,025,4684) Huang Weiwen 12,386,605 15,482,425

Notes:

1) Mr Chong Yuen’s deemed interest is derived from 15,482,425 shares held in the name of his spouse.

2) Ms Zhuang Shaowen’s deemed interest is derived from 12,386,605 shares held in the name of her spouse.

3) Ms Li Kim Yu is the wife of Mr Chong Yuen.

4) Mr Huang Weiwen is the husband of Ms Zhuang Shaowen.

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Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Annual General Meeting (“AGM”) of China Flexible Packaging Holdings Limited (“the Company”) will be held at Conference Room, Level 3, Ramada Pearl Hotel, 9 Mingyue Yi Road, Guangzhou Main Road Central, Guangzhou, Guangdong Province, People’s Republic of China on Thursday, 28 February 2013 at 4.00 p.m. Any shareholder or depositor or proxy who wishes to take part in the AGM from Singapore, may attend via telephone conference which shall be held at August Consulting Pte Ltd’s office at 101 Thomson Road, #30-02, United Square, Singapore 307591. The persons attending the said telephone conference will be able to pose questions to the Company management and to comment on the issue on the AGM’s agenda. Please be on time to avoid disrupting the AGM which will commence sharply on Thursday, 28 February 2013 at 4.00 p.m. The AGM is convened for the following purposes:

As Ordinary Business1. To receive and adopt the Directors’ Report and the Audited Financial Statements of the Company for the year ended

31 October 2012 together with the Auditors’ Report thereon. (Resolution 1)

2. To re-elect the Director of the Company, Prof Du Jinmin retiring pursuant to Bye-Law 86(1) of the Bye-Laws of the Company. [See Explanatory Note (i)] (Resolution 2)

3. To note the retirement of the Directors of the Company, Messrs Ong Tiew Siam and Yeung Koon Sang alias David Yeung pursuant to Bye-Law 86(1) of the Bye-Laws of the Company. [See Explanatory Note (ii)]

4. To approve the payment of Directors’ fees of RMB535,000 for the year ended 31 October 2012 (previous year: RMB518,000). (Resolution 3)

5. To re-appoint Messrs Foo Kon Tan Grant Thornton LLP and appoint HLB Hodgson Impey Cheng Limited as joint Auditors of the Company and to authorise the Directors of the Company to fix their remuneration. [See Explanatory Note (iii)] (Resolution 4)

6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

As Special BusinessTo consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications:

7. Authority to issue shares

That pursuant to the Bye-Laws and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors of the Company be authorised and empowered to:

(a) (i) issue shares in the Company (“shares”) whether by way of rights or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instruments made or granted by the Directors of the Company while this Resolution was in force,

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provided that:

(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the total number of issued shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such calculation as may be prescribed by the Singapore Exchange Securities Trading Limited) for the purpose of determining the aggregate number of shares and Instruments that may be issued under sub-paragraph (1) above, the percentage of issued shares and Instruments shall be based on the total number of issued shares in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of the Instruments or any convertible securities;

(b) new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and

(c) any subsequent consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the Singapore Exchange Securities Trading Limited for the time being in force (unless such compliance has been waived by the Singapore Exchange Securities Trading Limited) and the Bye-Laws of the Company; and

(4) unless revoked or varied by the Company in a 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 (iv)] (Resolution 5)

8. Renewal of Share Purchase Mandate

That the Directors of the Company be and are hereby authorised to make purchases or otherwise acquire issued shares in the capital of the Company from time to time (whether by way of market purchases or off-market purchases on an equal access scheme) of up to ten per centum (10%) of the total number of issued shares in the capital of the Company (as ascertained as at the date of Annual General Meeting of the Company) at the price of up to but not exceeding the Maximum Price as defined in the Company’s Circular dated 11 February 2006 and in accordance with the Guidelines on Share Purchase set out in Appendix I of the said Circular and this mandate shall, unless revoked or varied by the Company in general meeting, 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 (v) & Summary Sheet] (Resolution 6)




9. Authority to issue shares under the China Flexible Packaging Holdings Limited Scrip Dividend Scheme

That pursuant to Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors of the Company be authorised and empowered to issue such number of shares in the Company as may be required to be issued pursuant to the China Flexible Packaging Holdings Limited Scrip Dividend Scheme from time to time in accordance to the “Terms and Conditions of the Scrip Dividend Scheme” set out in pages 11 to 16 of the Circular to Shareholders dated 5 February 2007 and that such authority shall, unless revoked or varied by the Company in a general meeting, 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 (vi)] (Resolution 7)

By Order of the Board

Kit ChanKevin ChoSecretariesSingapore, 13 February 2013


80


Explanatory Notes:(i) Prof Du will, upon re-election as a Director of the Company, remain as members of Audit, Nominating and Remuneration

Committees and will be considered independent.

(ii) In accordance with Bye-Law 86(1) of the Company’s Bye Laws, Messrs Ong Tiew Siam and Yeung Koon Sang alias David Yeung (who have already served as Independent Directors for a cumulative term of more than nine years) will retire from office and they will not seek re-election at the forthcoming Annual General Meeting.

(iii) In March 2012, the practice of HLB Hodgson Impey Cheng was reorganised as HLB Hodgson Impey Cheng Limited.

(iv) The Ordinary Resolution 5 in item 7 above, if passed, will empower the Directors of the Company, effective 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 or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant instruments convertible into shares and to issue shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the total number of issued shares in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders.

For determining the aggregate number of shares that may be issued, the total number of issued shares will be calculated based on the total number of issued shares in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent consolidation or subdivision of shares.

(v) The Ordinary Resolution 6 in item 8 above, if passed, will empower the Directors of the Company, effective 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 the earlier, to repurchase ordinary shares of the Company by way of market purchases or off-market purchases of up to ten per centum (10%) of the total number of issued shares in the capital of the Company at the Maximum Price as defined in the Appendix I to the Circular. The Company did not purchase any ordinary shares of the Company during the financial year ended 31 October 2011.

(vi) The Ordinary Resolution 7 in item 9 above, if passed, will empower the Directors of the Company, effective 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 or when varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company from time to time pursuant to the China Flexible Packaging Holdings Limited Scrip Dividend Scheme.

Notes:

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company.

2 If a Shareholder being a Depositor whose name appears in the Depository Register (as defined in Section 130A of the Companies Act, Cap. 50 of Singapore) wishes to attend and vote at the Annual General Meeting (the “Meeting”), then he/she/it should complete the Proxy Form and deposit the duly completed Proxy Form at the office of the Singapore Share Transfer Agent, Boardroom Corporate & Advisory Services Pte. Ltd. at 50 Raffles Place #32-01, Singapore Land Tower, Singapore 048623 at least forty-eight (48) hours before the time of the Meeting.


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ANNUAL REPORT 2012

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