<PAGE> 1
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 March 6 , 1998
-------------------
Dransfield China Paper Corporation
-------------------------------------------------------------
(Translation of registrant's name into English)
36-42 Pok Man Street, 2/F, Mongkok, Kowloon, Hong Kong
-------------------------------------------------------------
(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
----- -----
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3- 2(b):82-_________]
<PAGE> 2
Attached for filing are the unaudited interim financial statements of the
registrant for the six months ended September 30, 1997. These financial
statements amend the six-month financial statements filed as Form 6-K for the
month of October 31, 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: March 6, 1998
2
<PAGE> 3
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
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 - 13
</TABLE>
1
<PAGE> 5
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>
ASSETS
Current assets
Cash and bank balances 3,254 6,503 840
Accounts receivable, net 21,255 16,582 2,142
Inventories, net 5 12,441 3,945 510
Prepaid expenses 4,359 2,130 275
Due from fellow subsidaries 6 29,902 14,257 1,842
---------- ---------- ----------
Total current assets 71,211 43,417 5,609
Fixed assets 123,161 164,311 21,222
Loan to a related company 7 13,366 14,942 1,930
Deposit for Fixed Assets 1,011 -- --
Deferred tax asset 3 517 517 67
Other assets 200 200 26
---------- ---------- ----------
209,466 223,387 28,854
========== ========== ==========
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 6 719 905 117
Due to fellow subsidiaries 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 8 107,286 72,100 9,313
Loan from a related company 7 13,366 14,942 1,930
---------- ---------- ----------
176,201 114,151 14,745
Shareholders' equity:
Common Stock, no par value,
40,000,000 shares authorized;
(3/31/97:9,800,000) 14,250,000 shares issued, 9 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
Additional paid-in capital 11 -- 539 70
Contributed surplus 1,530 1,530 197
Retained earnings 2,044 76 10
---------- ---------- ----------
Total shareholders' equity 33,265 109,236 14,109
---------- ---------- ----------
Total liabilities and shareholders' equity 209,466 223,387 28,854
========== ========== ==========
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements.
2
<PAGE> 6
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 11 (7,193) (3,321) (429)
- fellow subsidiaries (2,731) (1,597) (206)
-------- -------- --------
(9,924) (4,918) (635)
Interest income 30 4 1
Interest expense (2,149) (311) (40)
-------- -------- --------
(2,119) (307) (39)
Other income/(expenses)
- compensation from supplier -- 750 97
- loss on disposal of subsidiaries 4 -- (406) (52)
- corporate promotion expenses 12 -- (644) (83)
- others 72 672 87
-------- -------- --------
72 372 49
Income/(loss) before income taxes 140 (1,917) (245)
Provision for income taxes 3
- Current (614) (51) (7)
- Deferred 520 -- --
-------- -------- --------
(94) (51) (7)
-------- -------- --------
Income/(loss) before minority interests 46 (1,968) (252)
Minority interests 336 -- --
-------- -------- --------
Net income/(loss) 382 (1,968) (252)
======== ======== ========
Earnings/(loss) per share (cent) 10 112.54 (19.79) (2.56)
======== ======== ========
Shares used in computation of
earnings/(loss) per share 10 339,424 12,195,083 12,195,083
======== ======== ========
</TABLE>
The accompanying notes form an integal part of these
consolidated financial statements.
3
<PAGE> 7
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 operating activities 835 15,999 2,068
Cash flows 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 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.
4
<PAGE> 8
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE 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 the management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a presentation have been included. Operating results for
the six months 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$"), the official currency of Hong Kong. Solely for the convenience
of the reader, the financial statements have been translated into
United States dollars ("US$") prevailing on September 30, 1997 which
was US$1.00 = HK$7.742. No representation is made that the Hong Kong
dollar amounts could have been, or could be, converted into US$ at that
rate or any other certain rate on September 30, 1997.
3. INCOME TAXES
The Company was incorporated in the British Virgin Islands and, under
current law of the British Virgin Islands, is not subject to tax on
income or on capital gains.
5
<PAGE> 9
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
3. INCOME TAXES (continued)
Grandom Dransfield (International) and Company Limited and Dransfield
Paper (HK) Trading Limited ("DPT"), wholly-owned subsidiaries of the
Company, were incorporated in Hong Kong and under the current Hong Kong
tax law, any income arising in and deriving from business carried on in
Hong Kong is subject to Hong Kong tax. No tax is charged on dividends
received and capital gains earned.
Guangzhou Dransfield Paper Limited, a co-operative joint venture formed
in the PRC in which the Company has a 100% interest, and Jiang Ying
Dransfield Paper Co. Ltd. ("JYDP"), an equity joint venture formed in
the PRC in which the Company has a 48% interest, are subject to PRC
income taxes at the applicable tax rate of 33% for Sino-foreign joint
venture enterprises. These two joint ventures are eligible for full
exemption from joint venture income tax for the first two years
starting from its first profitable year of operations followed by a 50%
deduction from the third to fifth year. Under the Income Tax Law
applicable to Sino-foreign joint ventures, no PRC income tax was levied
on the above companies as they have not commenced operation as at
September 30, 1997.
Total income tax expense differs from the amount computed by applying
Hong Kong statutory income tax rate of 16.5% (1996: 16.5%) to income
before taxes as follows:
<TABLE>
<CAPTION>
Six months Six months Six months
ended ended ended
9/30/96 9/30/97 9/30/97
HK$ HK$ US$
<S> <C> <C> <C>
Computed expected income taxes (23) 316 41
Non-deductible losses of subsidiaries (31) (367) (48)
Difference between Hong Kong
statutory rate and Singapore
statutory tax rate (40) - -
Other
---- ---- ----
(94) (51) (7)
==== ==== ====
</TABLE>
The deferred tax asset arises from temporary difference associated with
tax losses carried forward.
6
<PAGE> 10
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
4. ACQUISITION AND DISPOSAL OF SUBSIDIARIES
On March 27, 1997, the Company entered into a sale and purchase
agreement to acquire the remaining 33.3% interest in CS Paper Holdings
(International) Limited, a 66.7% subsidiary of the Company, and
certain of its wholly-owned subsidiaries (collectively the "CSP
Group") and to dispose of Dransfield Paper (S.E.A.) Pte. Limited
("DPSEA") and Central National Hong Kong Limited ("CN"), subsidiaries
in which the group have 66.7% and 34% equity interests, respectively.
The consideration for the disposal of DPSEA was HK$0.001. The
consideration for the acquisition of the CSP Group and the disposal of
CN was based on the net book value of the respective companies as at
September 30, 1996.
The amount of consideration payable to the minority shareholder of
HK$3,000 was settled in cash during the six months ended September 30,
1997.
The agreement was conditional on the shareholders of the DHL passing,
at an extraordinary general meeting, an ordinary resolution approving
the agreement and the transactions. The agreement was declared
unconditional on 9 May 1997 pursuant to a shareholders resolution.
The above transaction has been accounted for using the purchase method
of accounting. The excess of cost over the fair value of the net assets
is HK$406 (US$52), which is reflected in the Company's statements of
income for the six months ended September 30, 1997.
7
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1997
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
5. INVENTORIES, NET
Inventories are comprised of:
<TABLE>
<CAPTION>
(Unaudited)(Unaudited)
3/31/97 9/30/97 9/30/97
HK$ 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>
6. DUE FROM (TO) FELLOW SUBSIDIARIES
Balances with fellow subsidiaries are unsecured, interest-free and
repayable within one year. The Group utilised the banking facilities of
certain fellow subsidiaries and the interest incurred on the banking
facilities were reimbursed by the Group.
7. 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.
8
<PAGE> 12
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)
7. LOANS WITH A RELATED COMPANY (Continued)
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.
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.
8. 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.
9
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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)
9. 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.
At September 30, 1997, the aggregate and per share amount of the
cumulative dividends in arrears was HK$1,977 (US$255) and HK$0.85
(US$0.11), respectively.
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.
10. EARNINGS/(LOSS) PER SHARE
The earnings per common and common equivalent share for the six months
ended September 30, 1996 were computed by dividing net income
applicable to common and common equivalent shares by the weighted
average number of 339,424 shares of common stock and common stock
equivalent outstanding during the six months ended September 30, 1996.
The 2.3 million shares of 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 was converted into one
share of Common Stock on May 30, 1997. The number of shares issuable on
conversion of preferred stock was added to the number of common shares.
10
<PAGE> 14
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. EARNINGS/(LOSS) PER SHARE (Continued)
The loss per common and common equivalent share for 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
12,195,083 shares of common stock and common stock equivalents
outstanding during the six months ended September 30, 1997. The net
loss applicable to common and common equivalent shares excludes
dividends in arrears amounting to HK$446 (US$57) attributable to the
series A convertible preferred stock for the period from April 1, 1997
to May 30, 1997 (date of conversion to common stock - see note 9). The
conversion of the 2.3 million shares of the Series A convertible
preferred stock before May 30, 1997 and the exercise of warrants and
stock options were not assumed in the calculation of loss per common
and common equivalent share because the effect would have been
antidilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per share" ("FAS 128"), which is required
to be adopted on March 31, 1998. At that time, the Company will be
required to change the method currently used to compute earnings per
share to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock
options will be excluded. The impact of FAS 128 on the calculation of
earnings per share for the year ended March 31, 1997 is not expected to
be materials.
11
<PAGE> 15
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)
11. STOCK OPTION
The Company has adopted a stock option plan ("the Plan") since November
20, 1996 which were further amended on May 29, 1997. The Plan provides
that non-transferable option may be granted by the directors to any
employee, director, officer, consultant or advisor of the Company, its
corporate parent, or its subsidiaries. The options are for 4 year terms
but may not be exercised during the first year from date of grant. The
exercise price for each option shall be set by the directors but may
not be less than 80 percent of the average or closing price of the
Company's Common Stock during the five trading days prior to the date
of grant or, if the Common Stock is not trading, not less than the net
book value per share of the Company's Common Stock as reflected in the
Company's latest balance sheet. The total number of shares of Common
Stock which can be subject to the options at any time, both under the
Plan and otherwise, shall not exceed 10 percent of the number of shares
of Common Stock then issued and outstanding. No person can be granted
options which, if fully exercised, would result in that person's owning
more than 25 percent of the aggregate number of shares issuable under
the Plan.
The options of 575,000 shares with an exercise price of US$2.80 per
share remained outstanding on September 30, 1997. The Company accounts
for all options under APB Opinion No. 25 and related interpretations,
under which an amount of HK$539 (US$70) representing amortization of
stock option expenses for the six months period to September 30, 1997
has been charged to selling, general and administrative expenses with
the corresponding credit being reflected as additional paid in capital.
12. CORPORATE PROMOTION EXPENSES
The Company became a listed company on Nasdaq in April 1997. An amount
of approximately HK$644 (US$83) has been incurred and expended during
the six months period to September 30, 1997 for corporate expenses
incurred in relation to various expenses associated with reporting,
communicating to shareholders and investors and the maintenance costs
associated with the various compliance filings as required by various
authorities.
12
<PAGE> 16
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
13. 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.
14. 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.
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.
13
