中 國 農 林 低 碳 控 中國農林低碳控股有限公司 中國農林低碳控股有限公司 股 有 China Agroforestry Low-Carbon Holdings Limited 限 China Agroforestry Low-Carbon Holdings Limited 公 司 （於開曼群島註冊成立的有限公司） (Incorporated in the Cayman Islands with limited liability) C （股份代號：01069） h (Stock Code : 01069) in a A g r o f o r e s t r y L o w - C a r b o n H o ld in g s L im it e d A n n u a l R e p o r t 2 年報 0 Annual Report 1 3 2013 年 2013 報 China Agroforestry Low-Carbon Holdings Limited Annual Report 2013 1 CONTENTS Page CORPORATE INFORMATION 2 FINANCIAL HIGHLIGHTS 4 CHAIRMAN’S STATEMENT 5 MANAGEMENT DISCUSSION AND ANALYSIS 7 BIOGRAPHICAL INFORMATION OF DIRECTORS AND SENIOR MANAGEMENT 32 DIRECTORS’ REPORT 35 CORPORATE GOVERNANCE REPORT 42 INDEPENDENT AUDITOR’S REPORT 53 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 55 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 56 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 57 CONSOLIDATED STATEMENT OF CASH FLOWS 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 60 2 China Agroforestry Low-Carbon Holdings Limited Annual Report 2013 CORPORATE INFORMATION DIRECTORS REMUNERATION COMMITTEE Executive Directors: Mr. Liang Guoxin (Appointed as member and chairman on 1 November 2013 and 22 January 2014 respectively) Mr. Lei Zuliang (Chairman) Mr. Cai Shuiyong Mr. Cai Shuiyong Mr. Liu Zhaoxiang (Appointed on 16 April 2014) Mr. Long Weihua (Redesignated from an independent Mr. Zhou Wei (Appointed as member and chairman non-executive Director on 1 November 2013) on 17 June 2013 and Mr. Cai Shuiping (Resigned on 14 February 2013) 24 June 2013 respectively and resigned as chairman and member on 22 January 2014 and Non-executive Directors: 16 April 2014, respectively) Mr. Long Weihua (Resigned on 1 November 2013) Professor Liu Zhikun Ms. Chan Ling (Resigned on 24 June 2013) Mr. Zhou Xianyan (Appointed on 5 March 2014) NOMINATION COMMITTEE Independent Non-executive Directors: Mr. Liu Zhaoxiang (Appointed as chairman on Ms. Tian Guangmei (Appointed on 17 June 2013) 16 April 2014) Mr. Liang Guoxin (Appointed on 1 November 2013) Mr. Cai Shuiyong Mr. Liu Zhaoxiang (Appointed on 16 April 2014) Mr. Liang Guoxin (Appointed on 1 November 2013) Mr. Zhou Wei (Appointed on 17 June 2013 and resigned on Mr. Zhou Wei (Appointed as member and chairman on 16 April 2014) 17 June and 24 June 2013 respectively and resigned on Ms. Chan Ling (Resigned on 24 June 2013) 16 April 2014) Mr. Liu Jianlin (Resigned on 19 June 2013) Mr. Long Weihua (Resigned on 1 November 2013) Ms. Chan Ling (Resigned on 24 June 2013) AUDIT COMMITTEE COMPLIANCE OFFICER Ms. Tian Guangmei (Appointed as member and chairman on 24 June 2013 and 22 January 2014 respectively) Mr. Cai Shuiyong Mr. Liang Guoxin (Appointed on 1 November 2013) Mr. Liu Zhaoxiang (Appointed on 16 April 2014) JOINT COMPANY SECRETARIES Mr. Zhou Wei (Appointed as member and chairman on 17 June 2013 and 19 June 2013 respectively Mr. Ding Liang CGA, ACCA (Appointed on 24 June 2013) and resigned as chairman and member on 22 January Mr. Leung Man Kit CPA (Appointed on 16 April 2014) 2014 and 16 April 2014, respectively) Ms. Chan Ling CPA, MSc (Appointed on 24 June 2013 and Mr. Long Weihua (Resigned on 1 November 2013) resigned on 16 April 2014) Ms. Chan Ling (Resigned on 24 June 2013) Mr. Kwong Ping Man CPA, ACIS, ACS Mr. Liu Jianlin (Resigned on 19 June 2013) (Resigned on 4 June 2013) AUTHORISED REPRESENTATIVES Mr. Cai Shuiyong Mr. Ding Liang CGA, ACCA (Appointed on 4 June 2013) Mr. Kwong Ping Man CPA, ACIS, ACS (Resigned on 4 June 2013) China Agroforestry Low-Carbon Holdings Limited Annual Report 2013 3 CORPORATE INFORMATION (continued) INDEPENDENT AUDITORS HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE CCTH CPA Limited Certified Public Accountants Tricor Investor Services Limited Level 22, Hopewell Centre REGISTERED OFFICE 183 Queen’s Road East Wanchai Clifton House Hong Kong 75 Fort Street PO Box 1350 PRINCIPAL BANKER Grand Cayman KY1-1108 China Construction Bank (Asia) Corporation Limited Cayman Islands 11/F, Devon House 979 King’s Road PRINCIPAL PLACE OF BUSINESS IN Quarry Bay, Hong Kong HONG KONG COMPANY WEBSITE Rooms 1002-1003, 10/F Great Eagle Centre www.chinacaflc.com 23 Harbour Road Wanchai STOCK CODE Hong Kong 01069 HEAD OFFICE IN THE PEOPLE’S REPUBLIC OF CHINA (“CHINA” OR THE “PRC”) 40F, Landmark 4028 Jintian Road Futian District Shenzhen City Guangdong Province The PRC CAYMAN ISLANDS SHARE REGISTRAR AND TRANSFER OFFICE Appleby Trust (Cayman) Ltd. Clifton House 75 Fort Street PO Box 190 Grand Cayman KY1-1108 Cayman Islands 4 China Agroforestry Low-Carbon Holdings Limited Annual Report 2013 FINANCIAL HIGHLIGHTS ANNUAL PERFORMANCE FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 • Turnover for the financial year ended 31 December 2013 amounted to approximately Renminbi (“RMB”) 67.0 million (2012: RMB92.4 million), representing a decrease of approximately 27.5% as compared with the corresponding period in 2012. • Turnover from the forestry business for the financial year ended 31 December 2013 was approximately RMB28.9 million (2012: nil) and segment profit from the forestry business for the financial year ended 31 December 2013 was approximately RMB10.4 million (2012: RMB1.5 million). • Loss attributable to the owners of the Company for the financial year ended 31 December 2013 amounted to approximately RMB19.6 million (2012: RMB20.0 million), representing a decrease of approximately 2.0% as compared with the corresponding period in 2012. • Total comprehensive expenses attributable to the owners of the Company for the financial year ended 31 December 2013 amounted to approximately RMB17.7 million (2012: RMB20.0 million), representing a decrease of approximately 11.5% as compared with the corresponding period in 2012. • Basic loss per share for the financial year ended 31 December 2013 amounted to approximately RMB0.0514 (2012: RMB0.0542). • The board (the “Board”) of directors of the Company (the “Directors”) does not recommend the payment of a final dividend for the financial year ended 31 December 2013 (2012: nil). China Agroforestry Low-Carbon Holdings Limited Annual Report 2013 5 CHAIRMAN’S STATEMENT On behalf of the Board, I present to our valued shareholders and investors the annual report (the “Annual Report”) of China Agroforestry Low-Carbon Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) for the financial year ended 31 December 2013. In 2013, the global economy continued its slow recovery from the global financial crisis. The Federal Reserve took its first steps of tapering of its third round of quantitative easing as the economic growth of the United States continued to pick up. The economy of the European Union has showed signs of recovery, having rebounded from a low and the growth rate of the other developing countries slowed to some extent but still experienced relatively strong growth. The year of 2013 saw the economic growth of the People’s Republic of China (“China” or the “PRC”) slowing down. However, the country is on track for steady economic development with most economic indicators being positive during the year, easing worries of a sharp economic downturn. The Third Plenary Session of the 18th Central Committee of China’s Communist Party issued development guidance to comprehensively push through/deepen reforms and presented a series of practical measures that are expected to be rolled out. These measures are largely viewed as a positive signal for the ongoing support of the comprehensive development of China. The impact of the fluctuation of raw material prices and the rise of the statutory minimum wages, resulted in the year of 2013 being a difficult and challenging one for the Group’s garment manufacturing business in China. The factories in China faced escalating manufacturing costs, insufficient skilled sewing workers and keen competition both domestically and from overseas. As a result, the garment business of the Group was adversely affected for the financial year ended 31 December 2013. As a result of the continuing adverse conditions in the garment business segment, the Group ventured into the forestry business via acquisitions of companies engaging in the operation and management of forest lands in the PRC. As discussed in the 2013 interim report, the acquisition of China Timbers Limited (“China Timbers”) and its subsidiaries was completed in late May 2013 and the Group has positioned the forestry business as its core business. As at 31 December 2013, the Group held long and medium-lease forest lands of approximately 3,530 Chinese Mu and 21,045 Chinese Mu in Dali City of Yunan Province and Jiange County of Sichuan Province of the PRC, respectively. The Group began harvesting works in September 2013 and for the period until 31 December 2013, the Group harvested approximately 25,000 cubic metres of forest stock in the Jiange County of Sichuan Province. The Company also entered into a strategic cooperation framework agreement with the People’s Government of Jiange County (劍閣縣人民政府) in Sichuan Province in July 2013 to invest by phases in forest management on more than 400,000 Chinese Mu forestry land in Jiange County and receive a harvest quota of not less than 60,000 cubic metres (“m3”) per annum. The Company also agreed to consider investing in the low carbon industry by engaging in research and development of biomass fuel produced by wood waste and investing in timber processing enterprises in Jiange County of the PRC. 6 China Agroforestry Low-Carbon Holdings Limited Annual Report 2013 CHAIRMAN’S STATEMENT (continued) Meanwhile, the forest lands situated in Dali City of Yunan Province have been under various maintenance works. The logging and transportation permits are being applied for before the commencement of the harvesting works. In view of the opportunities and the growth potential of utilising forestry waste to produce biomass fuel, the Company and Central South University of Forestry and Technology (中南林業科技大學) entered into a strategic cooperation agreement in September 2013, forming a strategic alliance for the joint research and development in the areas of biomass materials and biofuels. This would provide the Group access to the academic resources of the university and the Board holds the view the development of its biomass fuel business will benefit greatly from the scientific research provided by the university. The first phase of biomass fuel base located in the Jiange County has formally been put into production on 9 January 2014, with the designed capacity of 30,000 to 40,000 tonnes per year. Looking forward to 2014, the Group will remain committed to developing its forestry business by increasing the harvesting operations in Jiange County of Sichuan Province and commencing harvesting work in Dali City of Yunan Province. In respect of the biomass fuel business of the Group, the market of biomass fuel in the surrounding areas of Jiange County, such as Guangyuan and Mianyang, is still in the start-up stage, and demand is still growing. The current selling price of similar products in the PRC is approximately RMB900 to RMB1,000 per tonne. The Company will strive to expand the production capacity of its biomass fuel base in 2014. Further, the Group will consider expanding its low carbon agriculture and forestry business in both the Hunan Province and Guangdong Province of the PRC. In conclusion, on behalf of the Board, I would like to express my sincere gratitude to our shareholders, business partners and others who have extended their invaluable support to the Group and my fellow directors and all staff for their considerable contributions to the Group. On behalf of the Board Lei Zuliang Chairman Shenzhen, the PRC, 31 March 2014 China Agroforestry Low-Carbon Holdings Limited Annual Report 2013 7 MANAGEMENT DISCUSSION AND ANALYSIS BUSINESS AND OPERATIONAL REVIEW As a result of the continuing adverse conditions in the garment business segment and the implementation of strategic diversification, the Company had been actively seeking for diversified business opportunities since 2012. In 2013, the Company started to venture into the forestry business via acquisitions of companies engaging in the operation and management of forest lands in the PRC. After the completion of the acquisition of China Timbers Limited (“China Timbers”) and its subsidiaries in late May 2013, the Group had positioned the forestry business as its core business, with over 24,500 Chinese Mu of forest lands under management as at 31 December 2013. The Group is also engaged in the manufacturing and wholesaling of apparels under its own brand name and on an original equipment manufacturing (“OEM”) basis in the PRC. Forestry business As at 31 December 2013, the long and medium-lease forest lands in the PRC owned by the Group were approximately 3,530 Chinese Mu and 21,045 Chinese Mu in Dali City of Yunnan Province and Jiange County of Sichuan Province, respectively. The Group began harvesting works in September 2013. The Group harvested approximately 25,000 cubic metres of forest stock in the Jiange County of Sichuan Province from September 2013 to December 2013. Approximately 43.2% of the revenue of the Group was contributed by China Timbers for the financial year ended 31 December 2013 (2012: nil). The forest lands situated in Dali City of Yunnan Province have been under various maintenance works, and the logging and transportation permits of the forest lands are being applied before the commencement of harvesting work. Accordingly, no revenue has been contributed by Rongxuan Forestry Investment Holdings Limited (“Rongxuan”) to the Group for the financial year ended 31 December 2013 (2012: nil). Garment business For the financial year ended 31 December 2013, the Group’s garment business consisted of manufacturing and wholesaling of apparels on an OEM basis and manufacturing and sales of branded products in the PRC. The apparels under its own brand name of the Company are mainly sold to domestic import and export companies, and overseas trading companies for export. Accordingly, the Group’s garment business is mainly operated in the PRC. Approximately 56.8% of the Group’s revenue was generated from the garment business for the financial year ended 31 December 2013 (2012: 100%). The PRC market did not grow to the extent that the Company had hoped during the financial year ended 31 December 2013. During the year, the Group’s garment business faced a very complex and volatile environment both domestically and internationally. The core garment manufacturing business of the Group has been significantly impacted by the unfavorable and uncertain global macroeconomic environment and the said business continues to face considerable head winds from mounting manufacturing costs, shortage of skilled sewing workers, slowing domestic demand as well as strong domestic and international competitions. As a result, the garment business of the Group was adversely affected for the financial year ended 31 December 2013. 8 China Agroforestry Low-Carbon Holdings Limited Annual Report 2013 MANAGEMENT DISCUSSION AND ANALYSIS (continued) FINANCIAL REVIEW Turnover During the financial year ended 31 December 2013, the Company recorded a turnover of approximately RMB67.0 million, representing a decrease of approximately 27.5% as compared to approximately RMB92.4 million for 2012. Such significant drop was mainly due to the slowdown of both domestic and overseas demand and the fierce competition in the garment industry in the PRC, which is partially offset by the new stream of revenue generated from the forestry business. Turnover from the Company’s forestry business for the year ended 31 December 2013 was approximately RMB28.9 million (2012: nil). This is attributable to the sale of the forest stock harvested from the Jiange County of Sichuan Province from September 2013 to December 2013. The Group expects the revenue generated from this business to further increase in the coming year with a full year of harvesting of the forest land situated in Jiange County of Sichuan Province and the commencement of harvesting of the forest land situated in the Dali City of Yunan Province in 2014. Turnover from the Company’s OEM apparels sold to domestic import and export companies and overseas trading companies for export for the year ended 31 December 2013 was approximately RMB32.9 million (2012: RMB74.0 million), which is approximately 55.5% lower than that for the corresponding period in 2012. Such decrease was mainly attributable to the impact of the unstable global economic conditions which slowed down the export of the Group’s apparel products. The Company also distributes its own brand apparels to local chain stores, its franchise stores and through its wholesale outlet in the PRC. The turnover of the distribution of the Company’s brand apparels for the financial year ended 31 December 2013 was approximately RMB5.2 million (2012: RMB18.5 million), which is approximately 71.9% lower than that for the corresponding period in 2012. Such decrease was mainly attributable to the weaker market sentiment in the PRC. In terms of product mix, turnover of OEM products represented approximately 86.4% of the total garment business turnover (2012: 80.0%) while turnover of the brand products only accounted for approximately 13.6% (2012: 20.0%). Gross Loss The Group recorded a gross loss of approximately RMB1.7 million for the financial year ended 31 December 2013 (2012: RMB0.9 million), representing an increase of approximately 88.9% as compared to that for the corresponding period in 2012. The Group’s forestry business recorded nil gross profit for the financial year ended 31 December 2013 (2012: nil). Cost of sales of the Group’s forestry business mainly included timber costs, measured at its fair value less costs to sell at the point of harvest, and forest protection fund paid to the government authorities. China Agroforestry Low-Carbon Holdings Limited Annual Report 2013 9 MANAGEMENT DISCUSSION AND ANALYSIS (continued) The Group’s garment business recorded a gross loss of approximately RMB1.7 million for the financial year ended 31 December 2013 (2012: RMB0.9 million), representing an increase of approximately 88.9% as compared to that for the corresponding period in 2012. Cost of sales of the Group’s garment business mainly included costs incurred from raw materials, direct labour costs and manufacturing overheads. The decrease in the Group’s cost of sales for the financial year ended 2013 was mainly a result of the decreased costs of raw materials owing to the drop of the sales volume in apparel products. The gross margin of the Group’s garment business, calculated by dividing gross profit by turnover, is not applicable for the financial year ended 31 December 2012 and 2013 as a gross loss was recorded for both years. The gross loss in 2013 was mainly attributable to the decreased sales volume of the Group’s apparel products as a result of the fierce competition in the garment industry, the weaker market sentiment in the PRC and the direct labour costs owing to the statutory minimal wages policy in the PRC. VALUATION OF THE PLANTATION FOREST ASSETS Change in fair value of plantation forest assets During the year ended 31 December 2013, the Group recognised a gain on change in fair value less costs to sell of plantation forest assets of approximately RMB13.1 million (2012: RMB1.8 million). The change in fair value was mainly attributable to the newly acquired forest lands in Jiange County, Sichuan Province of the PRC of approximately RMB12.3 million. Qualifications and independence of the valuer and forestry specialist consultant Ascent Partners Valuation Service Limited (“Ascent Partners” or the “Independent Valuer”) is an independent professional qualified valuer appointed by the Company for the purpose of preparing the valuation reports dated 30 March 2014 and 14 March 2014 (the “Valuation Reports”) on the fair market value of the plantation forest assets with a total site area of approximately 3,530 Chinese Mu and 21,045 Chinese Mu located in Dali City of Yunan Province (the “Dali Forests”) and Jiange County of Sichuan Province (the “Jiange Forests”, together with the Dali Forests, the “Forests”), the PRC, respectively. The Independent Valuer has extensive experience in performing valuation of businesses, tangible and intangible assets and financial instruments, and has served as the independent valuer for various forestry projects for listed companies on the Stock Exchange. The Valuation Report was prepared by Mr. William SW Yuen and Mr. Paul Wu of Ascent Partners. Mr. William SW Yuen is a Chartered Financial Analyst and Financial Risk Manager. He holds a Master degree of Science in Finance and has extensive experience in valuation of business entities, tangible and intangible assets and financial instruments for private and public companies in various industries. He has over six years of experience in the valuation industry and has experience in valuing biological assets. Mr. Paul Wu, holder of a Master degree of Science, had worked in the senior management of world class technology companies. He has extensive experience in corporate valuation and advisory, as well as financial and statistical analyses and solutions. He has over five years of experience in the valuation industry and has experience in valuing biological assets.