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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of October 31, 1997
Dransfield China Paper Corporation
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(Translation of registrant's name into English)
36-42 Pok Man Street, 2/F, Mongkok, Kowloon, Hong Kong
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(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.]
Form 20-F X Form 40-F
----- -----
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.]
Yes No X
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[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82-_________]
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Attached for filing are the unaudited interim financial statements of the
registrant for the six months ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DRANSFIELD CHINA PAPER CORPORATION
By: /s/ Thomas J. Kenan
--------------------------------
Thomas J. Kenan, Director
Date: November 19, 1997
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FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
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INDEX TO FINANCIAL STATEMENTS
Page
----
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES:
Consolidated Balance Sheets as of March 31, 1997 and
September 30, 1997 2
Consolidated Statements of Income (unaudited) for the six months
ended September 30, 1996 and September 30, 1997 3
Condensed Consolidated Statements of Cash Flows (unaudited) for the
six months ended September 30, 1996 and September 30, 1997 4
Notes to Consolidated Financial Statements 5-9
1
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997 AND SEPTEMBER 30, 1997
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
(unaudited) (unaudited)
Notes 3/31/97 9/30/97 9/30/97
HK$ HK$ US$
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and bank balances 3,254 6,503 840
Accounts receivable, net 21,255 16,582 2,142
Inventories, net 3 12,441 3,945 510
Prepaid expenses 4,359 2,130 275
Due from fellow subsidiaries 4 29,902 14,257 1,842
------- ------- ------
Total current assets 71,211 43,417 5,609
Fixed assets 123,161 161,206 20,822
Loan to a related company 5 13,366 14,942 1,930
Deposit for Fixed Assets 1,011 -- --
Deferred tax asset 517 535 69
Other assets 200 200 26
------- ------- ------
209,466 220,300 28,456
======= ======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank loans and overdrafts, secured 16,718 10,163 1,313
Accounts payable 8,050 4,007 518
Accrued liabilities 7,007 5,722 739
Income tax payable 719 905 117
Due to fellow subsidiaries 4 15,851 6,313 815
Due to a minority shareholder 2,103 -- --
------- ------- ------
Total current liabilities 50,448 27,110 3,502
Minority interests 5,101 (1) --
Due to holding company 6 107,286 68,995 8,912
Loan from a related company 5 13,366 14,942 1,930
------- ------- ------
176,201 111,046 14,344
Shareholders' equity:
Common Stock, no par value,
40,000,000 shares authorized;
(3/31/97: 9,800,000) 14,250,000 shares issued, 7 3,004 107,091 13,832
and fully paid up
Preferred Stock, no par value,
10,000,000 shares authorized;
Convertible preferred stock - Series A:
(3/31/97: 2,300,000) Nil shares issued 26,687 -- --
and outstanding
Contributed surplus 1,530 802 104
Retained earnings 2,044 1,361 176
------- ------- ------
Total shareholders' equity 33,265 109,254 14,112
------- ------- ------
Total liabilities and shareholders' equity 209,466 220,300 28,456
======= ======= ======
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Six Six Six
months months months
Notes ended ended ended
9/30/96 9/30/97 9/30/97
HK$ HK$ US$
<S> <C> <C> <C> <C>
Net sales:
Paper handkerchiefs
-third parties -- 143 18
-fellow subsidiaries 42,747 14,048 1,815
Other paper products to
third parties 47,218 23,923 3,090
----------- ----------- -----------
89,965 38,114 4,923
Cost of sales:
Paper handkerchiefs (36,811) (12,329) (1,592)
Other paper products (45,009) (22,849) (2,951)
----------- ----------- -----------
(81,820) (35,178) (4,543)
Gross profit 8,145 2,936 380
Commission income 3,966 -- --
Selling, general and administrative
expenses
-third parties (7,193) (2,234) (289)
-fellow subsidiaries (2,731) (1,597) (206)
----------- ----------- -----------
(9,924) (3,831) (495)
Interest income 30 4 1
Interest expense (2,149) (311) (40)
----------- ----------- -----------
(2,119) (307) (39)
Other income/(expenses)
-compensation from supplier -- 750 97
-gain on disposal of subsidiaries -- 322 42
-corporate promotion expenses -- (548) (71)
-others 72 28 4
----------- ----------- -----------
72 552 72
Income/(loss) before income taxes 140 (650) (82)
Provision for income taxes
-Current (614) (51) (7)
-Deferred 520 18 2
----------- ----------- -----------
(94) (33) (5)
----------- ----------- -----------
Income/(loss) before minority
interests 46 (683) (87)
Minority interests 336 -- --
----------- ----------- -----------
Net income/(loss) 382 (683) (87)
=========== =========== ===========
Earnings/(loss) per share (cent) 8 4.11 (5.28) (0.67)
=========== =========== ===========
Shares used in computation of
earnings/(loss) per share 8 9,300,000 12,925,683 12,925,683
=========== =========== ===========
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Six Six Six
months months months
ended ended ended
9/30/96 9/30/97 9/30/97
HK$ HK$ US$
<S> <C> <C> <C>
Net cash provided by/(used for)
operating activities 835 15,999 2,068
Cash flow from investing activities:
Acquisition of fixed assets (13,673) (38,693) (4,998)
Acquisition of further interest in a subsidiary -- (5,182) (669)
Proceeds from disposal of subsidiaries -- 674 87
------ ------ -----
Net cash used in investing activities (13,673) (43,201) (5,580)
------ ------ -----
Cash flows from financing activities:
Advances from holding company 11,989 33,330 4,305
Repayment of loan to a minority shareholder (3,218) (2,103) (272)
New issue of common stock -- 5,779 746
Bank loans and overdrafts,secured 5,825 (6,555) (847)
------ ------ -----
Net cash provided by financing activities 14,596 30,451 3,932
------ ------ -----
Net increase/(decrease) in cash and cash equivalents 1,758 3,249 420
Cash and cash equivalents, at beginning
of period 853 3,254 420
------ ------ -----
Cash and cash equivalents, at end of period 2,611 6,503 840
====== ====== =====
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1997
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a presentation have been included. Operating results for
the six month period ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending
March 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended March 31,
1997 included in the previous Registration Statement.
2. FOREIGN CURRENCY EXCHANGE
The financial information has been prepared in Hong Kong dollars
("HK$"), the official currency of Hong Kong. Solely for the convenience
of the reader, the financial statements have been translated into
United States dollars prevailing on September 30, 1997 which was
US$1.00 = HK$7.742. No representation is made that the Hong Kong dollar
amounts could have been, or could be, converted into United States
dollars ("US$") at that rate or any other certain rate on September 30,
1997.
3. INVENTORIES, NET
Inventories are comprised of:
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
3/31/97 9/30/97 9/30/97
HK$ HK$ US$
<S> <C> <C> <C>
Raw materials 2,207 2,447 316
Finished goods 11,496 2,621 339
Less: Allowance for obsolescence (1,262) (1,123) (145)
------ ------ -----
Inventories, net 12,441 3,945 510
====== ====== =====
</TABLE>
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1997
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
4. DUE FROM (TO) FELLOW SUBSIDIARIES
Balances with fellow subsidiaries are unsecured, interest-free and
repayable within one year. The Group utilized the banking facilities of
certain fellow subsidiaries and the interest incurred on the banking
facilities were reimbursed by the Group.
5. LOANS WITH A RELATED COMPANY
In May 1995, the Company entered into an agreement with a third party,
Broadsino Investment Company Limited ("Broadsino") to establish
Dransfield Broadsino Paper Holdings Limited ("DBPHL"), a company which
is 80% owned by the Company. DBPHL then entered into an agreement to
establish a Sino-foreign equity joint venture company, JYDP, which is
60% owned by DBPHL and is principally engaged in paper manufacturing.
DBPHL has committed to contribute an amount of US$9.26 million
(approximately HK$72 million) to JYDP, to be financed by a
shareholders' loan.
The Company, DBPHL and Broadsino entered into a loan agreement whereby
the Company and Broadsino agreed to make an interest-free shareholders'
loan of US$9.26 million (approximately HK$72 million) (the
"Shareholders' Loan") to DBPHL. Pursuant to another agreement, the
Company agreed to make a loan of US$1,852 (approximately HK$14 million)
to Broadsino, bearing compound interest at the rate of 6 percent per
annum, to finance its share of the Shareholders' Loan to DBPHL. DBPHL
has pledged all its assets with the Company and Broadsino for the
repayment in full of the Shareholders' Loan. In addition, DBPHL also
undertakes to apply any amounts, including dividends, which may be
distributed by JYDP to it to repay, in full, the Shareholders' Loan.
Broadsino has pledged both its 20 percent shareholding in DBPHL and any
amount it may receive from DBPHL as repayment of its proportion of the
Shareholders' Loan to secure the repayment, in full, of the loan from
the Company. A promissory note has been issued by a wholly owned
subsidiary of Broadsino in favour of the Company.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1997
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
5. LOANS WITH A RELATED COMPANY (Continued)
As at September 30, 1997, the Company advanced HK$14,942 (US$1,930) to
Broadsino for the capital injection in JYDP, which is classified as a
loan to a related company. The same amount of HK$14,942 (US$1,930) is
recorded in the consolidated financial statements a long term loan
payable to Broadsino by DBPHL. The loan to and loan from a related
company have no fixed repayment terms.
6. DUE TO HOLDING COMPANY
The long term liability balance, which is used to finance the Group's
capital investment, is unsecured and interest-free. The holding company
has agreed that it will not demand payment of the amount prior to April
1, 1999.
The current balance is unsecured, interest-free and has no fixed term
of repayment.
7. NUMBER OF SHARES OUTSTANDING
On May 30, 1997, the Company issued 2.3 million shares of common stock
to the holding company on conversion of its 2.3 million shares of
Series A convertible preferred stock and issued an additional one
million shares of common stock to the holding company at US$5 per share
on conversion of HK$38,685 (US$5,000) of the amount due to the holding
company.
In early June 1997, the Company issued 150,000 new shares of common
stock at US$5 per share and is currently in the progress of public
offering of 150,000 additional new shares of common stock of the
Company at US$5 per share (based on the market price on that date).
On September 19, 1997, the Company issued one million shares of common
stock to the holding company at US$4.25 per share (based on the market
price on that date) on conversion of HK$32,936 (US$4,250) of the amount
due to the holding company.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1997
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
8. EARNINGS/(LOSS) PER SHARE
The earnings per common share for the six months ended September 30,
1996 were computed by dividing net income by 9.3 million shares of
common stock on the assumption that such shares issued to the holding
company upon the effectiveness of the merger had existed at April 1,
1996.
The loss per common and common equivalent share for the six months
ended September 30, 1997 were computed by dividing net loss applicable
to common and common equivalent shares by the weighted average number
of shares of common stock and common stock equivalents outstanding
during the period. The convertible preferred stock has been considered
to be the equivalent of common stock from its issuance on September 4,
1996. Each share of Preferred Stock is convertible into one share of
Common Stock. The number of shares issuable on conversion of preferred
stock was added to the number of common shares.
9. FINANCIAL INSTRUMENTS
The carrying amount of the Company's cash and bank balances approximate
their fair value because of the short maturity of those instruments.
The carrying amounts of the Company's borrowing approximate their fair
value based on the borrowing rates currently available for borrowings
with similar terms and average maturities, except for the loans from
holding company, which, due to their nature, the fair value is not
determinable.
10. CONCENTRATION OF RISK
Concentration of credit risk:
The Group's principal activities are distribution of fine paper and
paper handkerchiefs. The Group has long standing relationships with
most of its customers. The Group performs ongoing credit evaluation of
its customers' financial conditions and, generally does not require
collateral.
The allowance for doubtful accounts the Group maintains is based upon
the expected collectibility of all accounts receivable.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1997
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
10. CONCENTRATION OF RISK (Continued)
Current vulnerability due to certain concentrations:
The Group has investments in the PRC. The value of the Group's
investment may be adversely affected by significant political, economic
and social uncertainties in the PRC. Although the PRC government has
been pursuing economic reform policies for the past 18 years, no
assurance can be given that the PRC government will continue to pursue
such policies or that such policies may not be significantly altered,
especially in the event of a change in leadership, social or political
disruption or unforeseen circumstances affecting the PRC's political,
economic and social life. There is also no guarantee that the PRC
government's pursuit of economic reforms will be consistent or
effective.
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