Shandong CChenminng Papeer Holdings Limmited
INNTERIMM REPOORT 20016
Auugust 20016
I Important Notice, Table of Contents and Definitions
The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”), supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the truthfulness, accuracy and completeness of the contents of the interim report (the “Report”), guarantee that there are no false representations, misleading statements or material omissions contained in the Report, and are jointly and severally responsible for the liabilities associated with the Report.
All Directors were present at the Board meeting to consider and approve this Report.
The Company does not propose distribution of cash dividends or bonus shares, and there will be no increase of share capital from reserves.
Chen Hongguo, head of the Company, Dong Lianming, head in charge of accounting and Li Dong, head of the accounting department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial statements in the interim report.
The Company is exposed to various risk factors such as macro-economic fluctuation, adjustment of state policy, intensified competition in the industry, as well as change in exchange rate. Public investors should be aware of investment risks. For further details, please refer to the risk factors likely to be faced and the measures to be taken as set out in the outlook on the future development of the Company in theDirectors’ Report.
16 INTERIM REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 1
I Important Notice, Table of Contents and Definitions
Table of Contents
2016 Interim Report
I Important Notice, Table of Contents and Definitions 3 II Company Profile 4 III Summary of Accounting Data and Financial Indicators 6 IV Directors’ Report 8 V Material Matters 24 VI Changes in Share Capital and Shareholders 43 VII Preference Shares 47 VIII Directors, Supervisors and Senior Management 48 IX Financial Report 50 X Documents Available for Inspection 156 16
INTERIM
REPORT
2
SHANDONG CHENMING PAPER HOLDINGS LIMITED
I Important Notice, Table of Contents and Definitions
Definitions
Item Definition
Company, Group, Chenming means Shandong Chenming Paper Holdings Limited and its subsidiaries Group or Chenming Paper
Parent Company or means Shandong Chenming Paper Holdings Limited
Shouguang Headquarters
Chenming Holdings means Shouguang Chenming Holdings Company Limited
Shenzhen Stock Exchange means Shenzhen Stock Exchange
Stock Exchange means The Stock Exchange of Hong Kong Limited
CSRC means China Securities Regulatory Commission
Shandong CSRC means Shandong branch of China Securities Regulatory Commission
Zhanjiang Chenming means Zhanjiang Chenming Pulp& Paper Co., Ltd.
Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.
Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Chenming (HK) means Chenming (HK) Limited
Haiming Mining means Haicheng Haiming Mining Company Limited 16 INTERIM Jilin Chenming means Jilin Chenming Paper Co., Ltd. REPORT Shouguang Meilun or Meilun Paper means Shouguang Meilun Paper Co., Ltd.
Chenming Sales Company means Shandong Chenming Paper Sales Company Limited
Chenming Power means Shandong Chenming Power Supply Holdings Co., Ltd.
Finance Company means Shandong Chenming Group Finance Co., Ltd.
Financial Leasing Company means Shandong Chenming Financial Leasing Co., Ltd.
reporting period means The period from 1 January 2016 to 30 June 2016
SHANDONG CHENMING PAPER HOLDINGS LIMITED 3
II Company Profile
I. Company profile
Stock abbreviation 晨鳴紙業 Stock Code 000488
Stock abbreviation 晨鳴B Stock Code 200488
Stock abbreviation Chenming Paper Stock Code 1812
Stock exchanges on which the shares are listed Shenzhen Stock Exchange and The Stock Exchange of Hong Kong Limited
Legal name in Chinese of the Company 山東晨鳴紙業集團股份有限公司
Legal short name in Chinese of the Company (if any) 晨鳴紙業
Legal name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED Legal short name in English of the Company (if any) SCPH
Legal representative of the Company Chen Hongguo
II. Contact persons and contact methods
Securities Affairs Securities Affairs Hong Kong
Representative Representative Company Secretary
Name Xiao Peng Yuan Xikun Poon Shiu Cheong
Correspondence No. 2199 East Nongsheng Road, No. 2199 East Nongsheng Road, 22nd Floor, World Wide House, Address Shouguang City, Shouguang City, Central, Hong Kong
Shandong Province Shandong Province
Telephone (86)-0536-2158008 (86)-0536-2158008 (852)-2501 0088
Facsimile (86)-0536-2158977 (86)-0536-2158977 (852)-2501 0028
16
Email address chenmmingpaper@163.com chenmmingpaper@163.com kentpoon_1009@yahoo.com.hk INTERIM
REPORT III. Other information
1. Contact methods of the Company
Whether the registered address, office address, postal code, website, email of the Company changed during the reporting period
□ Applicable√ Not applicable
There was no change of the registered address, office address, postal code, website and email of the Company during the reporting period. Please refer to 2015 Annual Report for details.
2. Information disclosure and places for inspection
Whether the information disclosure and places for inspection changed during the reporting period
□ Applicable√ Not applicable
There was no change of the newspapers designated by the Company for information disclosure, designated websites for the publication of the Interim Report as approved by CSRC and places for inspection of theCompany’s Interim Report during the reporting period. Please refer to 2015 Annual Report for details.
4
SHANDONG CHENMING PAPER HOLDINGS LIMITED
II Company Profile
III. Other information(Cont’d)
3. Change of registration information
Whether the registration information changed during the reporting period
√ Applicable□ Not applicable
Legal person Taxation
Date of Registration business license registration
registration place registration number number Organisation code At the beginning 28 May 2014 Shandong Administration 370000400001170 370783613588986 61358898-6
of the reporting for Industry
period and Commerce
At the end of the 21 June 2016 Shandong Administration 913700006135889860 913700006135889860 913700006135889860 reporting for Industry
period and Commerce
16 INTERIM REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 5
III Summary of Accounting Data and Financial Indicators
I. Major accounting data and financial indicators
Retrospective adjustment to or restatement of the accounting data for prior years by the Company due to change of accounting policies and correction of accounting errors
□ Yes√ No
Increase/decrease for the reporting period as compared to the The corresponding corresponding The reporting period of period of period the prior year the prior year Revenue (RMB) 10,606,358,733.02 9,718,697,677.76 9.13% Net profit attributable to shareholders of the Company (RMB) 939,164,870.60 276,388,070.51 239.80% Net profit after extraordinary gains or losses attributable
to shareholders of the Company (RMB) 741,811,083.82 174,462,219.94 325.20% Net cash flows from operating activities (RMB) -2,697,509,853.04 -2,222,755,634.73 -21.36% Basic earnings per share (RMB per share) 0.45 0.14 221.43% Diluted earnings per share (RMB per share) 0.45 0.14 221.43% Rate of return on net assets on weighted average basis 5.89% 1.97% 3.92% Increase/decrease 16 as at the end of the reporting INTERIM
REPORT As at the end period as compared of the As at the end of to the end reporting period the prior year of the prior year Total assets (RMB) 86,628,494,212.59 77,961,699,547.59 11.12% Net assets attributable to shareholders of the Company (RMB) 19,314,182,445.78 16,871,494,584.82 14.48% Explanation: Net profit attributable to ordinary shareholders of the Company should exclude the effect of interest payment deferred and accumulated to subsequent periods for perpetual bonds under other equity instruments. When calculating financial indicators such as earnings per share and rate of return on net assets on weighted average basis, the interests incurred but not declared for perpetual bonds in the first half of 2016 (amounting to RMB76,151,584.70) are deducted. II. Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report
□ Applicable√ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report during the reporting period.
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report
□ Applicable√ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report during the reporting period.
6
SHANDONG CHENMING PAPER HOLDINGS LIMITED
III Summary of Accounting Data and Financial Indicators
III. Items and amounts of extraordinary gains or losses
√ Applicable□ Not applicable
Unit: RMB Item Amount Explanation
Profit or loss from disposal of non-current assets -1,626,686.16
Government grants (except for the government
grants closely related to the normal operation
of the company and granted constantly at
a fixed amount or quantity in accordance with
a certain standard based on state policies)
accounted for in profit or loss for
the current period 214,412,568.80
Profit or loss from debt restructuring 1,909,002.10
Profit or loss arising from external entrusted loans 44,212,264.15
Gain or loss from changes in fair value of
consumable biological assets subsequently
measured at fair value -10,599,543.68
Non-operating gains and losses other than
the above items 4,597,886.08
Less: Effect of income tax 53,745,876.48
Effect of minority interests 1,805,828.03
16 Total 197,353,786.78—
INTERIM REPORT Notes for theCompany‘s extraordinary gain or loss items as defined in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses and the extraordinary gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items
□ Applicable√ Not applicable
No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses were defined by the Company as its recurring gain or loss items during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 7
IVDirectors’ Report
I. Overview
During the reporting period, the situation of oversupply in the paper making industry continued on the whole, but the difference between supply and demand narrowed. Efforts to reduce excess capacity and inventories in the industry paid off. The downward trend in raw material costs had a greater positive effect on the industry in terms of profit with a turning point in earnings indicating a clear bottoming out. In the medium to long run, by virtue the supply-side reform, environmental protection standards will be higher, small and medium-sized production capacity will accelerate to phase out, industry concentration will be further enhanced, and the performance of the paper making industry is expected to continue to improve. During the reporting period, the Company adhered to the main goal of “developing into an enterprise with hundreds of billions in value” by adhering to the principle of “achieving growth amid stability”. The Company will stick to its diversification strategy and develop an industrial system that centres on pulp production, paper making and finance to achieve synergy with forestry, real estate and mining so as to boost the core competiveness and profitability. Meanwhile, the Company will be committed to “team building, management enhancement, outstanding business performance and good results” in order to upgrade management quality.
During the reporting period, the Company completed the production of machine-made paper of 2.13 million tonnes with sales of 2.09 million tonnes and achieved revenue of RMB10.606 billion, representing a year-on-year increase of9.13%. The Company recorded operating costs of RMB7,264 million, representing a year-on-year decrease of1.44%. Total profit and net profit attributable to equity holders of the Company were RMB1,233 million and RMB939 million respectively, representing year on year increases of188.69% and239.80% respectively. As at 30 June 2016, the financial segment experienced rapid development across businesses with ever improving management systems and effective risk preventions. Financial leasing contracts of Chenming Leasing amounted to RMB29,454,821,300, which increased by21.97% from the end of 2015. During the reporting period, the Company cooperated with a first-class domestic management consulting company, and 16 leveraged the strength of an external think tank to find out problems in its business management. As a result, practicable INTERIM plans for improvement were developed, business management was strengthened and overall management was improved. REPORT
Through the measures such as adjusting product structure, boosting overseas sales, raising selling prices and making investment in places with close proximity, the efficiency of the Company was higher. Through the measures such as supporting strategic customers, boosting barter transaction volume, securing contracts, and strengthening control of cash in transit, the appropriation of funds was reduced. The Company continued to accelerate the process in relation to collateral security to strengthen risk management and control.
The Company fully boosted production efficiency through enhanced refining management. It aimed at a higher market share of high value-added products to optimise the product structure by developing products with competiveness, such as wine label, logistics label and liquid packaging paper. The Company also adjusted the structure of pulp materials, upgraded production process, and utilised new raw materials to promote technological progress.
During the reporting period, due to enhanced project management, ZhanjiangChenming’s 600,000-tonne liquid packaging paper project entered the equipment installation and calibration stage with trial operation going to take place at the end of August. This 600,000-tonne liquid packaging paper project has the widest width, fastest speed and largest production capacity for a single machine in the world. With various technical indicators reaching world-class standard, it will quickly become a new profit growth point of the Company. At the same time, the Company actively pushed on projects such asHaiming’s mining project, HuanggangChenming’s integrated forestry, pulp and paper project, and ShouguangMeilun’s 400,000-tonne chemical pulp project.
During the reporting period, the Company strengthened its financing management. The Financial Leasing Company focused on risk control. It actively explored for quality customers and sought to increase the direct credit lines of domestic banks. The Company enhanced the management of the Finance Company with focus on its fundamental business in relation to settlement, deposit and loans as well as bills, so as to boost the recovery rate of funds. The Company actively solicited interbank credit extension and diversified its interbank product offerings in order to increase efficiency. At the same time, the Company provided liquidity support to corporate operation and lowered the operating and financing costs, thus creating financial value.
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IVDirectors’ Report
II. Analysis of principal operations
Year on year changes in major financial information
Unit: RMB During the
corresponding
During the period of Increase/
reporting period the prior year decrease Reason for the change
Revenue 10,606,358,733.02 9,718,697,677.76 9.13% Sales of paper products increased and the Financial Leasing Company newly established external business.
Operating costs 7,263,967,310.23 7,370,384,661.31 -1.44%
Selling and distribution expenses 573,734,657.05 551,073,823.71 4.11%
Administrative expenses 694,013,827.38 654,253,969.26 6.08%
Finance expenses 968,343,561.61 745,472,279.11 29.90% Increase in interest expenses on higher borrowings.
Income tax expenses 307,031,422.46 173,411,302.61 77.05% A year-on-year increase in profitability of the Company.
Investments in research 305,617,867.77 278,819,214.56 9.61% Investments in research and development and development increased as Zhanjiang Chenming and Meilun Paper were qualified as high and new tech enterprises.
16 Net cash flows from -2,697,509,853.04 -2,222,755,634.73 -21.36% The Financial LeasingCompany’s external operating activities business growth. INTERIM REPORT Net cash flows from -840,208,267.12 -1,201,478,950.29 30.07% No payment for external investment of the investing activities Company in the year.
Net cash flows from 5,225,021,178.25 3,152,446,052.60 65.74% Increase in borrowings of the Company in financing activities the year.
Net increase in cash and 1,679,333,857.39 -250,918,819.93 769.27%
cash equivalents
Significant change in structure or source of profit of the Company during the reporting period
□ Applicable√ Not Applicable
There was no significant change in structure or source of profit of the Company during the reporting period.
Disclosure of future development and continued planning during the reporting period in public documents such as IPO prospectus, offering documents and asset reconstruction report
□ Applicable√ Not Applicable
There was no disclosure of future development and continued planning during the reporting period in public documents such as IPO prospectus, offering documents and asset reconstruction report.
Progress of operating plans disclosed in corporate review during the reporting period
For details, please refer to “I. Overview” of this section.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 9
IVDirectors’ Report
III. Components of principal operations
Unit: RMB Increase/decrease Increase/decrease Increase/decrease of gross profit of revenue as of operating costs margin as compared to the as compared to compared to the corresponding the corresponding corresponding Gross period of the period of the period of the Revenue Operating costs profit margin prior year prior year prior year By industry
Machine-made paper 8,931,569,299.48 6,831,111,581.63 23.52% 0.71% -1.94% 9.64% Financial leasing 1,202,014,670.10 147,407,276.78 87.74% 310.03% 1,179.91% -8.68% Electricity and steam 146,006,710.07 88,821,316.36 39.17% -19.05% -27.83% 23.28% Construction materials 101,685,213.16 76,416,729.74 24.85% 104.09% 101.90% 3.37% Chemical products 61,789,407.17 21,725,612.54 64.84% -39.47% -73.90% 251.62% Hotel 14,060,284.77 3,491,311.42 75.17% 3.57% 5.62% -0.64% Others 74,088,876.93 68,995,217.98 6.88% 140.61% 135.18% 45.48% By products
Light weight coated paper 252,822,667.89 212,689,444.25 15.87% -22.47% -23.99% 11.79% Duplex press paper 2,354,825,630.93 1,814,035,836.95 22.97% 7.97% 9.43% -4.27% Writing paper 144,936,982.41 122,237,625.46 15.66% 34.89% 41.22% -19.44% Coated paper 2,070,298,934.43 1,548,760,177.34 25.19% -1.26% -3.17% 6.25% News press paper 444,539,348.00 408,251,436.65 8.16% -7.01% 9.36% -62.74% 16
Paperboard 20,731,825.60 21,273,378.96 -2.61% -84.55% -84.06% -592.86% INTERIM White paper board 1,060,234,119.54 814,282,784.76 23.20% 21.28% 19.73% 4.45% REPORT
Electrostatic paper 925,975,105.51 642,832,215.68 30.58% 26.74% 28.42% -2.90% Other machine-made paper 1,657,204,685.17 1,246,748,681.58 24.77% -14.59% -24.68% 68.62% Financial leasing 1,202,014,670.10 147,407,276.78 87.74% 310.03% 1,179.91% -8.68% Electricity and steam 146,006,710.07 88,821,316.36 39.17% -19.05% -27.83% 23.28% Construction materials 101,685,213.16 76,416,729.74 24.85% 104.09% 101.90% 3.37% Chemical products 61,789,407.17 21,725,612.54 64.84% -39.47% -73.90% 251.62% Hotel 14,060,284.77 3,491,311.42 75.17% 3.57% 5.62% -0.64% Others 74,088,876.93 68,995,217.98 6.88% 140.61% 135.18% 45.48% By geographical segment
Mainland China 8,974,320,983.03 5,868,057,173.90 34.61% 9.52% -3.49% 8.81% Other countries and regions 1,556,893,478.65 1,369,911,872.55 12.01% 15.85% 16.64% -0.59%
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IVDirectors’ Report
IV. Analysis of liquidity, financial resources and capital structure disclosed in accordance with the listing rules of the Hong Kong Stock Exchange
As at 30 June 2016, theGroup’s current ratio was72.30%. The quick ratio was61.59%. The gearing ratio was77.27%. The accounts receivable turnover ratio was303.92% (Accounts receivable turnover ratio= turnover/weighted average accounts receivable and netbills*100%). The inventory turnover ratio was262.77% (Inventory turnover ratio= cost of sales of the products/weighted average netinventory*100%).
There was no significant seasonal trend for capital requirements of the Group.
TheGroup’s sources of capital primarily came from cash generated from operating activities, borrowings from financial institutions, open issuance of corporate bonds in the capital market, as well as issuance of privately placed bonds, medium- term notes and short-term commercial paper in the interbank market.
As at 30 June 2016, the total bank borrowings, corporate bonds, medium-term notes and privately placed bonds of the Group were RMB35,917 million, RMB5,791 million, RMB1,096 million and RMB11,653 million (As at the end of the prior year: the total bank borrowings, corporate bonds, and medium-term notes and privately placed bonds of the Group were RMB31,900 million, RMB5,787 million and RMB2,593 million, respectively). As at 30 June 2016, the Group had monetary funds of RMB11,773 million (As at the end of the prior year: RMB8,984 million) in total (For the breakdown of monetary funds, please refer to “Section IX. VII. 1 Note on Monetary Funds” in this report).
To strengthen our financial management, the Group established and optimised its strict internal control system on cash and capital management. The liquidity and repayment ability of the Group were in a good condition. As at 30 June 2016, the Group had 12,473 employees. The total staff remuneration for the first half of 2016 amounted to RMB520.3379 million (as at the end of the prior year, the Group had 11,893 employees. The total staff remuneration for 2015 amounted to RMB808.7321 million). 16 Major investment projects of the Company during the second half of 2016 will include HuanggangChenming’s integrated forestry, pulp and paper project, ShouguangCity’s 400,000 tonne chemical pulp project, HaichengHaiming’s magnesite INTERIM REPORT mining project, ZhanjingChemning’s 600,000 tonne liquid packaging cardboard project and other projects.
Our existing bank deposits were primarily used for production and operation, construction projects and investment in technology research and developments.
For details of the assets with restricted ownership of the Group as at 30 June 2016, please refer to “Section IX. VII. 58. Details of assets with restricted ownership or right of use” in this report.
As at 30 June 2016, no contingent event was required to be disclosed by the Group.
V. Analysis of Core Competitiveness
The Company is a leading player in the paper making industry of China. After entrepreneurship and innovation for more than half a century, it has developed into a large and integrated modern conglomerate principally engaged in paper making, finance, forestry and real estate businesses while also involved in mining, energy, logistics, construction materials, hotel operation and others. It is also the only listed company with three types of listed shares (i.e. A shares, B shares and H shares) and the first in the paper making industry having a finance company and a financial leasing company integrated with its industrial activities in China. Compared with other enterprises in the industry, the Company has the following advantages: 1. Scale advantages
After years of development, the Company has achieved annual pulp and paper production capacity of 8.50 million tonnes and is capable to compete with international paper making enterprises in scale. Large-scale centralised production has provided the Company with obvious economic benefits, which are reflected not only in the manufacturing costs of products, but also in its strong market influence in raw material procurement, product pricing and industry policymaking.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 11
IVDirectors’ Report
V. Analysis of Core Competitiveness(Cont’d)
2. Product advantages
While the production scale of the Company is expanding rapidly, its product mix also continues to optimise. In recent years, the Company has built production lines for cultural paper such as high-end coated paper, high-end light weight coated paper and high-end white paper board, and achieved higher technological content of products and added values as well as a higher gross profit margin. The product mix of the Company gradually diversified into five major paper types, namely printing paper, packaging paper, office paper, industrial paper and household paper, as well as the nine major product series which focused on high and middle end products, including high-end coated paper, white paper board, coated linerboard, news press paper, light weight coated paper, duplex press paper, light weight paper, electrostatic paper and household paper. Thus, the Company has become the enterprise that offers the widest product range inChina’s paper making industry. Diversification and gentrification of the product mix has not only greatly enhanced theCompany’s ability to withstand market risks, but also enabled the Company to maintain a relatively high profitability
3. Comprehensive cost advantages
The Company has a relative advantage in comprehensive cost, which is mainly reflected in: firstly, the Company has optimised the operation of the production lines through stringent management, which has substantially lowered the waste of resources in evaporating, emitting, dripping or leaking, and theCompany’s energy consumption per ton of paper was also controlled at a relatively low level; secondly, the Company has established several advanced pulp production lines, thus increasing the supply of major raw materials through the 700,000-tonne pulp project of Zhanjiang Chenming and forestry pulp integration project of Huanggang Chenming; thirdly, the Company has reduced costs through the construction of the captive power plant to ensure energy supply.
16
4. Advantages in technical equipment
INTERIM TheCompany’s overall technical equipment has reached the advanced international level. The main production REPORT
equipment have been imported from internationally renowned manufacturers, including Valmet, Ahlstrom and Metso of Finland, Voith of Germany and TBC of the United States. In particular, ShouguangMeilun’s production lines for high- end white coated linerboard project of production capacity of 600,000 tonnes and high-end low weight coated paper project of production capacity of 800,000 tonnes, as well as ZhanjiangChenming’s production line for high-end cultural paper project of production capacity of 650,000 tonnes were leading production lines with greatest production capacity, widest length of paper produced and highest equipment standard among similar production line worldwide. In addition, various technical indicators of products had reached the international leading level.
5. Advantages in research and innovation and new product development
The Company is an important high and new-technology enterprise listed in national torch plan. It established various technology carriers including the national enterprise technology centre and the national post-doctoral working station as well as an international high-quality innovation team, injecting endless vitality to its technology research. It undertook the national “863” plan, national science support plans for the “11th Five Years” and “12th Five Years”, and tens of key provincial technological special projects, making outstanding contribution to the scientific progress within the industry. The Company has obtained over 150 national patents, with 7 products selected as national new products and 29 products covering blank areas in China. It also participated in formulating 4 national standards, as well as obtained the honours including “China Patent Shandong Star Enterprise”. The Company became the “green engine” to promote transformation and upgrading of the paper making industry and leadChina’s paper making industry into the direction of the newest and most advanced technology.
6. Funding advantages
The paper making industry is a capital-intensive industry, and funding is one of the most important factors influencing the development of the industry. The Company has high profitability and credit status, and has maintained long-term stable cooperative relations with its bankers, which provide the Company with an unobstructed indirect financing capacity. Since its listing, the Company has maintained good operating results and a sound corporate governance structure. It has conducted several financing activities in domestic and foreign capital markets. As the funds obtained have been applied effectively with good market image, the Company has stronger abilities in direct financing in the capital market.
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IVDirectors’ Report
V. Analysis of Core Competitiveness(Cont’d)
7. Advantages in environmental regulation capacity
Over the years, the Company has firmly established “environmental protection first, scale expansion second” as the concept of development. The Company has ensured the enhancement of economic and environmental benefits simultaneously by giving equal importance to environmental protection and production. In recent years, the Company and its subsidiaries have constructed the pollution treatment facilities including the alkali recovery system, middle water treatment system, white water recovery system and black liquor comprehensive utilisation system, as well as the sewage treatment plants, which guarantee that the environmental protection facilities can meet the demand of the rapid expansion of the Company. The environmental emission indicators of the Company are in the top rank among industry peers.
8. Advantages in diversified development
The Company has established a financial segment, which comprises of the Financial Leasing Company, the Finance Company, the Investment Company and the New Third Board Investment Fund. The financial segment maintained a good development momentum, which becomes a new profit growth point through the leaseback business of the Financial Leasing Company and the credit business of the Finance Company. Apart from entering into the financial industry, the Company has also entered into the fields of energy exploration and waterfront regulation works. It proactively facilitates diversified development, thereby further enhancing its competiveness and strength.
VI. Analysis of Investments
1. External equity investments
16 (1) External investments
INTERIM REPORT□ Applicable√ Not applicable
The Company did not have any external investment during the reporting period.
(2) Shareholding in financial companies
√ Applicable□ Not applicable
Initial Shareholding as Number of shares Shareholding Carrying amount Gain or loss for
investment Initial number of at the beginning held as at the end as at the end of as at the end of the reporting
Name of company Type (RMB) shares held (share) of the period of the period (share) the period the period (RMB) period (RMB) Accounting treatment Source of shares Shandong Chenming Group Other 1,000,000,000.00 N/A 100.00% N/A 100.00% 1,000,000,000.00 43,835,594.00 Long-term Capital contribution Finance Co., Ltd. equity investment
Total 1,000,000,000.00 N/A — N/A — 1,000,000,000.00 43,835,594.00— —
SHANDONG CHENMING PAPER HOLDINGS LIMITED 13
IVDirectors’ Report
VI. Analysis of Investments(Cont’d)
1. External equity investments(Cont’d)
(3) Security investments
□ Applicable√ Not applicable
The Company did not have any security investments during the reporting period.
(4) Equity interest in other listed companies
□ Applicable√ Not applicable
The Company did not have any equity interest in other listed companies during the reporting period.
2. Entrusted wealth management, derivative investments and entrusted loans
(1) Entrusted wealth management
□ Applicable√ Not applicable
The Company did not have any entrusted wealth management during the reporting period.
(2) Derivatives investments
□ Applicable√ Not applicable
16
The Company did not have any derivative investments during the reporting period.
INTERIM
REPORT
(3) Entrusted loans
√ Applicable□ Not applicable
Unit:RMB’0,000 Interest rate
Borrower Related parties Loan amount of loans Guarantor or Collateral Use of proceeds by borrowers Shouguang Jin Cai Public No 90,000 10.00% Shouguang Infrastructure Fund Construction, investment and Assets Management Management Centre shall pledge20% of operation of urban and rural Co., Ltd. the equity interest of Shouguang Jin Cai infrastructure.
Public Assets Management Co., Ltd. held
by it.
Total — 90,000 —— —
Disclosure date of approval of entrusted loans in board meeting (if any) 18 January 2014
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IVDirectors’ Report
VI. Analysis of Investments(Cont’d)
3. Utilisation of proceeds raised
√ Applicable□ Not applicable
(1) The general use of proceeds
√ Applicable□ Not applicable
Unit:RMB’0,000 Total proceeds 225,000 Total investment of proceeds during the reporting period 223,875 Total cumulative investment of proceeds 223,875 Total proceeds of changed use during the reporting period 0 Total cumulative proceeds of changed use during the reporting period 0 Ratio of total cumulative proceeds of changed use 0.00% Description of the general use of proceeds
On 17 September 2015, the Company received the Approval of the Non-Public Issuance of Preference Shares of Shandong Chenming Paper Holdings Limited (Zheng Jian Xu Ke[2015] No. 2130) from the China Securities Regulatory Commission. On 17 March 2016, the gross proceeds from the issuance of preference shares amounted to RMB2,250.0000 million and the proceeds from the same net of paid issuance expenses of RMB11.2500 million amounted to RMB2,238.7500 million, which was deposited to the designated account for the proceeds of such issuance. At the tenth extraordinary meeting of the seventh session of the Board held on 24 March 2016, the Resolution On Replacement Of Self-raised Funds Invested In Advance To Projects Financed By Proceeds With 16 Proceeds From Issue Of Preference Shares approving the replacement of self-raised funds invested in advance INTERIM to projects financed by proceeds with RMB2,238.7500 million from the proceeds of initial non-public issue of REPORT preference shares was passed.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 15
IVDirectors’ Report
VI. Analysis of Investments(Cont’d)
3. Utilisation of proceeds raised(Cont’d)
(2) The commitment of proceeds
√ Applicable□ Not applicable
Unit:RMB’0,000 Accumulated
Change Invested invested Investment Return
in project Total Total amount amount as progress as Expect realised Expected (including committed investment during the at the end at the end date o during the return being Significant Committed investment project partial investment after reporting of the of the operation of reporting achieved change in and excess proceeds change) of proceeds adjustment(1) period period(2) period(3)=(2)/(1) the project period or not project Committed investment project
Repayment of bank borrowings No 300,000 300,000 223,875 223,875 74.63% 24 March 2016Not applicable Yes No Replenishment of liquidity No 150,000 150,000 0 0 0.00% Not applicable No No Subtotal of committed investment project — 450,000 450,000 223,875 223,875 — — Not applicable — — Excess proceeds
Total — 450,000 450,000 223,875 223,875 — — Not applicable — — Condition and reason for not achieving planned progress Not applicable
or expected return (by special item)
Description of significant change in feasibility of project Not applicable
Amount, use and utilisation of excess proceeds Not applicable
Change in place of implementation of
investment project of proceeds Not applicable
16
Adjustment on implementation method of
INTERIM investment project of proceeds Not applicable
REPORT
Pre-investment and swap of investment project Applicable
of proceeds At the tenth extraordinary meeting of the seventh session of the Board held on 24 March 2016, the Resolution On Replacement Of Self-raised Funds Invested In Advance To Projects Financed By Proceeds With Proceeds From Issue Of Preference Shares approving the replacement of self-raised funds invested in advance to projects financed by proceeds with RMB2,238.7500 million from the proceeds of initial non-public issue of preference shares was passed. Please refer to the relevant announcement dated 25 March 2016 published on www.cninfo.com.cn.
Temporary replenishment of liquidity by idle proceeds Not applicable
Balance and reason for proceeds arising from
project implementation Not applicable
Use and direction of unused proceeds Not applicable
Use of proceeds and problems disclosed or other issues Not applicable
(3) Change in use of proceeds
□ Applicable√ Not applicable
The Company did not have any change in use of proceeds during the reporting period.
(4) Fund-raising activities
Fund-raising activity Date of disclosure Disclosure index
Non-public issue of preference shares 25 March 2016 http://www.cninfo.com.cn
16
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IVDirectors’ Report
VI. Analysis of Investments(Cont’d)
4. Analysis of major subsidiaries and investees
√ Applicable□ Not applicable
Information on major subsidiaries and investees
Unit: RMB Type of Principal products Registered Revenue from
Name of companies companies Industry or services capital Total assets Net assets operations Operating profit Net profit Zhanjiang Chenming Subsidiary Paper making Pulp, duplex press and RMB3,200.00 million 17,481,935,204.29 3,701,676,320.42 2,351,397,261.17 235,622,032.25 209,289,208.26 Pulp& Paper Co., Ltd. electrostatic paper
Chenming (HK) Limited Subsidiary Trading of paper Sales of paper products, US$29.90 million 28,305,573,747.20 4,575,798,159.44 4,120,018,686.23 579,626,001.49 520,479,192.79 products import of raw materials
and processing
Shouguang Meilun Paper Subsidiary Paper making Coated paper, RMB3,000.00 million 31,180,687,246.02 985,289,450.25 2,533,171,167.07 449,812,136.12 337,917,126.66 Co., Ltd. white coated linerboard
and household paper
5. Highlights of major investments not financed by the proceeds
√ Applicable□ Not applicable
Unit:RMB’0,000 16 Accumulated
actual
INTERIM REPORT Investment investment
made during made as of the
Total planned the reporting end of the Progression Revenue Date of
Name of project investment period reporting period of projects from projects disclosure (if any) Disclosure index (if any) Integrated forestry and paper project 348,500 28,959.15 95,007.72 27.26% Not put into operation 2 August 2013 http://www.cninfo.com.cn/ of Huanggang Chenming
600,000 tonne liquid packaging paper 380,000 51,505.93 310,461.62 81.70% Not put into operation 19 December 2015 http://www.cninfo.com.cn/ Total 728,500 80,465.08 405,469.34 －－ － －
VII. Estimate of the operating results from January to September 2016
Warning of cumulative net profit for the period between the beginning of the year to the end of the next reporting period being projected to be at a loss or expected to have material changes as compared to the corresponding period of prior year and its explanation
□ Applicable√ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 17
IVDirectors’ Report
VIII. Outlook on the future development of the Company
(I) Competition overview and development trend of the industry
In recent years, on the one hand, with the impact of macroeconomic slowdown, demand was continuously weak in the paper making industry. On the other hand, new production capacity of the paper making industry had been released together over the past few years, resulting in the transitional overcapacity of some paper types. Due to fierce competition, product prices continued to decline, narrowing profit margins of papermaking enterprises.
In the long run, the development conditions of the paper making industry are gradually improving. Elimination of obsolete production capacity and increasingly stringent environmental policies are forcing some small and medium- sized enterprises out of the market. To some extent, this eases the pressure of new capacity on the supply of the industry, which is conducive for enterprises to initiate a price rise. For major paper making enterprises, fully utilising advantages of capital, technology and scale to achieve a change in the growth pattern may help them gain new market share. Meanwhile, with the impact of a weak demand, raw material prices have been hovering at a low level, easing the pressure of operating costs on paper making enterprises. Eliminating obsolete production capacity will remove obstacles for theindustry’s development, while replenishment of and substitution of advanced production capacity will bring fresh blood and drive to the industry, conducive to a higher concentration ratio to creating a favourable industry lifecycle and a bright outlook for the paper making industry.
Furthermore, under the slowing macro-economic growth and economic transformation, the financial leasing industry as a favoured supplementary corporate financing channel and an effective tool to use assets at hand embraced continuously mounting market demand and was stepping into a golden age for its development. The financial leasing industry in China is at the early stage and has a promising outlook. In fact, it is on a solid track of rapid growth. It is expected that the market size will reach RMB1,200 billion by 2020. The financial leasing industry has bright prospects in 16 China as a result of its growth momentum under the “new normal” of the economy.
INTERIM
REPORT
(II) Development strategy
Looking forward, the Company will adhere to the principal of achieving growth amid stability, and emphasise on environmental protection, low carbon, recycling and sustainable development. Following the “Made in China 2025 Plan” and the principles of scientific development and quality and efficiency enhancement, it will comprehensively improve its quality and efficiency, management level, technology application, sense of happiness and brand image through the integration between its production and manufacture segment and financial services segment, incorporation of smart technology into its industrial activities, reorganised methodology and restructuring so as to expand and improve itself and strive to become one of the world-class companies with the highest growth rate in the “Thirteenth Five Year Plan” period.
(III) Operating plan for the second half of 2016
The main goal of the Company for 2016 is to “develop into an enterprise with hundreds of billions in value” by adhering to the principle of “achieving growth amid stability”. The Company will stick to its diversification strategy and develop an industrial system that centres on pulp production, paper making and finance to achieve synergy with forestry, real estate and mining so as to boost the core competiveness and profitability. Meanwhile, the Company will be committed to “team building, management enhancement, outstanding business performance and good results” in order to upgrade management quality. The measures to be taken by the Company are as follows:
1. Enhance management to upgrade management quality
The Company will work with leading management consultants in China. It will identify the problems in management and formulate practical plans to address the issues with the help of external experts in order to enhance the management level. It will improve fundamental management and recruit competent employees in a timely manner to the management team to deal with the current problems arising from lack of sufficient management. The Company will also further optimise the management system and procedures to provide strong support to the strengthening of management standard.
18
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IVDirectors’ Report
VIII. Outlook on the future development of the Company(Cont’d)
(III) Operating plan for the second half of 2016(Cont’d)
2. Enhance operation management and take initiatives to expand market
The Company will step up in its efforts in team building and talent recruitment to develop a talent pool and promotion channels while laying off unqualified employees. It will focus on efficiency in performance evaluation to stimulateemployees’ incentives. It will enhance fundamental management and perform monthly inspection to groundwork so as to “cover all aspects of the system”. The Company will also optimise the system in a timely manner and set up standards for procedures, so that the implementation will be strict, effective and highly efficient. The Company will formulate plans for major and difficult tasks and closely monitor, inspect and evaluate such tasks to rectify problems. It will enhance efficiency management, adjust product structure, boost overseas sales, raise price, and make investment in places with close proximity, in the pursuit of higher efficiency. Meanwhile, it will support strategic customers, boost volume of trade, secure contracts and strengthen control of cash in transit to reduce appropriation of funds. It will enhance risk control and the marketing team will set its priority on the collection of receivables. The dedicated receivables collection team will carry out their work and strictly monitor receivables. The Company will also accelerate the process in relation to collateral security. 3. Enhance and refine production management
The Company will boost production efficiency through refining management. It will cooperate with professional consultants to optimise management and actively recruit and nurture talents in order to enhance fundamental management capability. It will aim at a higher market share of high value-added products and optimise the product structure by developing products with competiveness, such as wine label, logistics label and liquid packaging paper. The Company will adjust the structure of pulp materials, upgrade production process, and utilise 16 new raw materials to promote technological progress. It will step up inspection efforts to identify safety risks and INTERIM REPORT protect the environment in accordance with the new national standards and requirements, thereby ensuring the fulfilment of targets on time.
4. Enhance project management for high quality and efficiency
The Company will enhance implementation and management of ZhanjiangChenming’s 600,000 tonne liquid packaging paper project, Haiming Mining, HuanggangChenming’s integrated forestry, pulp and paper project and ShouguangChenming’s 400,000 tonne chemical pulp project so as to ensure the timely commencement of operation, which will provide new sources of profit growth. The Company will adopt strict quality control on project construction by clarifying responsibility and enhancing control so as to ensure construction quality and safety at the work sites. The Company will fully prepare for the projects and optimise the organisational structure. It will set up a management team and recruit technicians, while developing training programmes for the staff at all levels, so as to lay a solid foundation for production and operation and ensure the smooth operation of the projects upon completion.
5. Enhance financing management to create extra value
The Financial Leasing Company will focus on risk control. It will actively explore for quality customers, seek to increase the direct credit lines of domestic banks and obtain additional banking facilities. The Company will enhance the management of the Finance Company with a focus on its fundamental business in relation to settlement, deposit and loans as well as bills, so as to boost the recovery rate of funds. The Company will actively solicit interbank credit extension and diversify its interbank product offerings in order to increase efficiency. At the same time, Qingdao Chenming will commence financial leasing business at bonded areas to provide liquidity support to theCompany’s operation and lower the financing cost.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 19
IVDirectors’ Report
VIII. Outlook on the future development of the Company(Cont’d)
(III) Operating plan for the second half of 2016(Cont’d)
6. Enhance procurement management to raise resources efficiency
Leveraging the development of “cross-border e-commerce” and “Internet Plus”, the Company will seek to gain market influence by establishing an online marketing platform for import and export of goods. The Company will also develop complementary distributor management policy and pricing policy to boost efficiency of external sales. In addition, it will set up an electronic merchandise exchange centre for pulp and paper products, and develop an integrated supply chain for the storage and logistics of pulp and paper products in the country, with the goal of buildingChina’s market price index centre of pulp and paper products, and a global information centre of paper products.
7. Enhance service operation and business expansion
The Company will enhance the management of the brick plant, cement and construction materials companies. In terms of internal measure, it will enhance the service quality; and in terms of external measure, it will actively expand business to boost profit.
(IV) Future capital requirements, source of funds and plan for use
With the extension of theCompany’s industry chain and expansion of business scale, the Company has greater demand for working capital. To this end, the Company has identified the following measures:
Firstly, the Company will raise fund through non-public offering of shares and preference shares. This will help the 16
Company meet our financing needs together with our business development. The issue of preference shares which may INTERIM be accounted for in equity will also help reduce theCompany’s gearing ratio, thus improving theCompany’s capital REPORT
structure and enhancing theCompany’s risk aversion capability.
Secondly, the Company will establish diversified financing channels. Various financing methods, such as increasing direct financing and issuing super and short term commercial paper and perpetual bonds, will be used to reduce theCompany’s finance expenses, improve theCompany’s liabilities structure and ensure funding for theCompany’s sustainable and healthy development.
Thirdly, the Company will make progress in cross-border financing. Leveraging the financing platform of the Hong Kong market, the Company will make effort to increase the credit line of Chenming (HK), avert exchange rate risks through multi-currency financing and improve the efficiency of capital use so as to reduce finance expenses.
Fourthly, the Company will capitalise on the financial advantages of the Finance Company and the Financial Leasing Company to expand theGroup’s financing channels. They will grow amid stability, provide new impetus for theCompany’s earnings growth and boost profit.
Fifthly, the Company will further improve our international and domestic sales and marketing network, expand our export sales and increase our investment in products of high profit so as to increase economic benefits. The Company will take strict control measures to reduce inventories and improve contract compliance rate in order to reduce use of funds, further reducing the finance expenses.
20
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IVDirectors’ Report
VIII. Outlook on the future development of the Company(Cont’d)
(V) Risk factors likely to be faced and the measures to be taken
Industry risk
As a basic raw materials industry of the national economy, the paper makingindustry’s overall efficiency has a strong correlation with economic cycles, and is therefore a cyclical industry fluctuating with the national macroeconomic performance, which will further affect the profitability of paper making enterprises. With the rapid growth of the national economy and economic globalisation,China’s paper making industry has been facing increasingly fierce competition, and overcapacity and lower demand will have impact on the operating results of the Company to a certain extent in the future.
In light of the above, the Company will enhance the level of its equipment and technology, enrich its product portfolio, raise its product quality and put emphasis on developing high-end products to increase its competitiveness.
Policy risk
At present, the industry has entered into an important transitional period, and the mode which has supported the rapid development of the paper making industry in the past currently face the dual pressures of resources and environment. From the point of view ofChina’s policy, China will change the mode of growth through optimising the layout of the paper making industry and the raw material structure and product structure in order to promote a modern paper making industry based on recycling by integrating the forestry and paper making industry, and adjust the industry through entry requirements, environmental standards and energy saving. The development of the Company will be affected by the direction of such policies.
16 Elimination of obsolete production capacity and stricter environmental protection policy have forced some small and medium-sized enterprises to exit the industry. Hence, the Company is expected to record long-term revenue. INTERIM REPORT Operational risk
The major raw materials used by the Company are wood pulp and waste paper. TheCompany’s products are mainly comprised of high-end paper, and as the State encourages the increase of the proportion of wood pulp used by the industry, wood pulp, thus, has accounted for a higher proportion of the production cost. The market price fluctuations of raw material have significantly affected the production cost of the Company. In addition to intensified market competition resulting from surging capacity in the industry in recent years, the market price fluctuation of raw materials will have an impact on the performance of the Company.
Hence, the Company will remain steadfast in the “forestry-pulp-paper integration” development path and focus on the construction of Zhanjiang Chenming pulp project, Huanggang Chenming pulp project and Shouguang chemical pulp project, thereby eliminating the limitations of upstream resources on theCompany’s development and enhancing theCompany’s sustainable development.
Environmental protection risk
The new Environmental Protection Law took effect on 1 January 2015. More stringent environmental protection policies have been implemented in the paper making industry. A multi-pronged approach has been adopted to promote industrial restructuring, and the paper making industry has entered into an important transitional period of development. The higher emission standard is bound to increase theCompany’s environmental protection costs and high entry standards may result in the slowdown of scale expansion, thus affecting the production and operation of the Company. The Company always strive to achieve harmonious development with energy conservation and emission reduction. The Company will endeavour to develop the recycling economy through waste exchange and recycling and strive to maximise its resource utilisation. Meanwhile, the Company will make greater efforts to construct environment friendly projects and strive to achieve its waste emission target.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 21
IVDirectors’ Report
VIII. Outlook on the future development of the Company(Cont’d)
(V) Risk factors likely to be faced and the measures to be taken(Cont’d)
Exchange rate risk
The value of Renminbi is affected by the domestic and international economic and political environment and the supply and demand for Renminbi. As an import and export enterprise, the exchange rate of Renminbi against other currencies in future will affect theCompany’s operating results. The foreign currency transactions of the Company are mainly denominated inUS$. The operations of raw material imports, product exports andUS$ borrowings of the Company will face the risk of exchange rate changes.
The Company lowers the proportion of imported goods procurement denominated in foreign currency. The Company uses more domestic raw materials and spare parts in its production, and increases its Renminbi settlement while decreasing its foreign exchange settlement. Meanwhile, the Company expands its overseas sales, increases repatriation on exports and repays its domestic US dollar loans in order to mitigate its exchange rate risk exposure.
IX. Opinions of the Board and the Supervisory Committee regarding the “modifiedauditor’s report” for the reporting period issued by the accountants
□ Applicable√ Not applicable
X. Opinions of the Board regarding the “modifiedauditor’s report” for the prior year
□ Applicable√ Not applicable
16
INTERIM XI. Particulars of profit distribution by the Company during the reporting period
REPORT
Implementation and adjustment of profit distribution proposals, especially the cash dividend proposal and proposal on conversion of capital reserves into share capital during the reporting period
√ Applicable□ Not applicable
The 2015 profit distribution plan was considered and approved in the 2015 annual general meeting convened by the Company on 18 May 2016. Based on the number of the shares as at the dividend distribution registration date of 1,936,405,467 shares, a cash dividend of RMB3 (tax inclusive) was to be paid to all shareholders for every 10 shares held. The total cash dividend to be distributed amounted to RMB580,921,640.10 (tax inclusive). The dividend distribution was implemented and completed on 15 July 2016. For details, please refer to the announcement on payment of final dividend and withholding and payment of enterprise income tax for non-resident enterprise shareholders published on the Hong Kong Stock Exchange on 4 July 2016, and the announcement on the implementation of the 2015 profit distribution and dividend plan for A share and B share published on http://www.cninfo.com.cn on 7 July 2016.
Particulars of Cash Dividend Policy
Was it in compliance with the requirements of the Articles of
Association and the resolutions of the general meeting? Yes
Were the dividend distribution criteria and proportion well-defined and clear? Yes
Were the related decision making process and mechanism in place? Yes
Did independent Directors fulfil their duties and play their role? Yes
Were the minority shareholders given opportunities to sufficiently voice
their opinion and make requests and were the legal interests of
the minority shareholders fully protected? Yes
Were conditions and procedures legal and transparent in respect of
cash dividend policy with adjustments and changes? Yes
22
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IVDirectors’ Report
XII. Proposals on profit distribution and conversion of capital reserves into share capital during this reporting period
□ Applicable√ Not applicable
The Company does not intend to distribute cash dividend and bonus share, and conduct conversion of capital reserves into share capital for the interim period.
XIII. Registration report on reception of research investigations, communications and interviews during the reporting period
√ Applicable□ Not applicable
Place of Manner of Class of parties Main topics of discussion Date of reception reception reception accommodated Parties accommodated and information provided 5 May 2016 TheCompany’s On-site research Institution 96 individuals in total from Bosera Funds, E Fund, Recent production and operation of conference room investigation Shenwan Hongyuan, Lombarda China Fund, Tianhong the Company and development of the Asset Management, Ping An Asset Management, industry
Guotai Junan, Minsheng Royal Fund, China
Merchants Fund, Harvest Fund, China Re Asset,
Wanjia Fund, China AMC, BOC Schroder Fund,
Huatai Securities, CICC Wealth Management, CSCI,
Industrial Securities, Galaxy Securities, New China
Fund, Huabao Investment, GF Asset Management,
GF Securities, Guosen Securities, Central China
Securities, Fortune SGAM, BOC International, Ping
An Fund, Anxin Fund, Congrong Investment, Double- 16 Safeguard,.Starrock Investment, Guofu Fund, Bohong
INTERIM Capital, DH Fund, Huaxia Jiusheng, Changsheng REPORT Fund, Zheshang Securities, Zhonghai Fund, Infore
Capital, Great Abundance Year Asset Management,
China Life AMP, SWS MU, Manulife Teda, Sinosafe
Property Insurance, COAMC, Changjiang Securities,
Costone Value Selection, Essence Securities, Sealand
Securities, Shandong Jincheng Lida Fund, Zhongtai
Securities and Sudou Private Equity.
19 May 2016 LeasingCompany’s On-site research Institution CCB Principal Asset Management, Galaxy Securities Recent production and operation of conference room investigation and Ping An Securities. the Company and development of the industry
27 June 2016 TheCompany’s On-site research Institution Haitong Securities, Haitong Asset, Harvest Fund, Recent production and operation of conference room investigation Caida Securities, Longrising Asset, Ping and CSCI. the Company and development of the industry
SHANDONG CHENMING PAPER HOLDINGS LIMITED 23
V Material Matters
I. Overview of corporate governance
1. Corporate Governance in practice
The Company operated in compliance with the requirement of Companies Law, Securities Law, Code of Corporate Governance for Listed Companies, Rules Governing Listing of Stocks on Shenzhen Stock Exchange, Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the related requirements as required by the CSRC. The Company further improved and optimised its legal person governance structure in practice during the reporting period. The Board considered the state of theCompany’s corporate governance was substantially in compliance with the requirements and requests of the regulatory documents such as Code of Corporate Governance for Listed Companies.
2. Corporate governance activities
During the reporting period, the Board strived to regulate the operation of the Company by improving corporate governance based on relevant special activities carried out in 2015. Pursuant to the requirements of the CSRC, the Shenzhen Stock Exchange and the Shandong Securities Regulatory Bureau, it made the following efforts to continuously improve the corporate governance level:
(1) According to relevant provisions of the Company Law, Code of Corporate Governance for Listed Companies and other laws and regulations, and based on circumstances of the Company, the Board amended the Articles of Association.
(2) According to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as amended and effective 1 January 2016), the Board amended the Implementing Rules of the Audit Committee. 16
The Company strictly implemented its related system of internal control to facilitate its regulated operation and healthy INTERIM development, thereby protecting the legal interests of investors. The corporate governance of the Company was exactly REPORT
the same as what was required by the CSRC. The regulated operations and the internal control standards would enhance with the development of the Company.
3. Corporate Governance Code
The Company is committed to attaining good standard of corporate governance practices in order to enhanceshareholders’ value. Saved as disclosed below, none of the Directors is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the reporting period, in compliance with the Corporate Governance Code and Corporate Governance Report, as set out in Appendix 14 of the Listing Rules.
(1) The chairman and general manager of the Company is Mr. Chen Hongguo. Mr. Chen Hongguo performs the roles of the chairman and the general manager for the overall management of the Company. This constitutes a deviation from the principles and code provisions of A2 - Directors and Chief Executive Office in Corporate Governance Code and Corporate Governance Report under Appendix 14 to Listing Rules. However, the Directors of the Company believe that Mr. Chen Hongguo acting as the chairman and the general manager will enable the Company to more effectively plan and implement the business strategies so that the Group can effectively and rapidly seize business opportunities. As all major decisions will be made after consultation with other members of the Board, the Company believes that the supervision of the Board and independent non-executive Directors will strike a sufficient balance of power and authority.
24
SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
I. Overview of corporate governance(Cont’d)
3. Corporate Governance Code(Cont’d)
(2) Communication with shareholders
TheCompany’s annual general meeting provides a useful platform for direct communication between the Board and Shareholders. Various resolutions are proposed on each substantially separate issue at the general meetings. Save for the annual general meeting held on 18 May 2016 by the Company, two extraordinary general meetings and one class meeting were convened during the reporting period. Pursuant to section E1.2 of Appendix 14 to the Corporate Governance Code and Corporate Governance Report, the chairman of the board should attend the annual general meeting. He should also invite the chairmen of the audit, remuneration, nomination and any other committees (as appropriate) to attend. In their absence, he should invite another member of the committee or failing this his duly appointed delegate, to attend.
The attendance record of Directors at each general meeting is set out below:
Name Attendance of general meetings
Annual General Meeting for 2015 Yin Tongyuan, Geng Guanglin and Pan Ailing
First extraordinary general meeting for 2016 Yin Tongyuan
Second extraordinary general meeting for 2016 Yin Tongyuan, Geng Guanglin and Wang Chunfang
First class meeting for 2016 Yin Tongyuan, Geng Guanglin and Wang Chunfang
Mr. Chen Hongguo, the chairman of the Company and its strategy committee, Ms. Zhang Hong, the chairman of the audit committee, and Mr. Zhang Zhiyuan, the chairman of the nomination committee, were absent from the 16 annual general meeting due to business commitments. TheCompany’s external auditor also attended the annual INTERIM general meeting as the scrutineer. REPORT 4. Securities transactions by Directors and Supervisors
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Listing Rules as the code of conduct forDirectors’ securities transactions. The Company had made specific enquiry of all Directors and Supervisors and all Directors and Supervisors confirmed that they had complied with the requirements as set out in the Model Code for the six months ended 30 June 2016. 5. Audit Committee
The audit committee of the Company now comprises two independent non-executive Directors and one non-executive Director. The members of the audit committee are Ms. Pan Ailing, Ms. Wang Fengrong and Ms. Yang Guihua. The audit committee reviewed the accounting standards and practices adopted by the Group with the management of the Company and discussed and reviewed the interim results and interim report for the six months ended 30 June 2016 prepared in accordance with the accounting standards.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 25
V Material Matters
II. Litigation
Material litigation and arbitration
□ Applicable√ Not applicable
The Company was not involved in any material litigation and arbitration during the reporting period.
Other litigations
□ Applicable√ Not applicable
III. Questioning from the Media
√ Applicable□ Not applicable
Media Attention Date of Disclosure Disclosure Index Report about Chenming Paper currently under reprimand for 26 April 2016 http://www.cninfo.com.cn violating environmental regulations and required to take
remedial action
IV. Matter related to bankruptcy and reorganisation
□ Applicable√ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
16
INTERIM V. Asset transactions
REPORT
1. Acquisition of assets
□ Applicable√ Not applicable
There was no acquisition of assets during the reporting period.
2. Disposal of assets
□ Applicable√ Not applicable
There was no disposal of assets during the reporting period.
3. Business combination
□ Applicable√ Not applicable
There was no business combination during the reporting period.
26
SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
VI. Implementation of the equity incentive plan of the Company and its effect
□ Applicable√ Not applicable
There was no implementation of the equity incentive plan of the Company during the reporting period.
VII. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable□ Not applicable
Percentage
Subject as the
matter of Pricing basis Amount of amount Amount of
Types of the the related of the Price of related party of similar transactions Whether Market price of
Related related party party related party related party transactions transactions approved exceeding Settlement of related available similar
Related party party relationship transactions transactions transactions transactions(RMB’0000) (%)(RMB’0000) approved cap party transactions transaction Disclosure date Disclosure index Jiangxi Chenming Under indirect control of Procurement Energy such as Market price Market price 14,321.39 1.97% 36,000 No Bank acceptance and Not applicable 31 March 2016 http://www.cninfo.com.cn Natural Gas Co., Ltd. directors, supervisors or natural gas and telegraphic transfer
senior management of heavy oil
the Company
Total — — 14,321.39 36,000 —— — —— Particulars on refund of bulk sale No
16 Estimated total amount for day-to-day related party transactions to be conducted during the period No
(by types of transactions) and their actual implementing during the reporting period (if any) INTERIM REPORT Reason for the difference between transaction price and market reference price (if applicable) Not applicable
2. Related party transaction connected to purchase or sale of assets
□ Applicable√ Not applicable
There was no related party transaction of the Company connected to purchase or sale of assets during the reporting period.
3. Related party transaction connected to joint external investment
□ Applicable√ Not applicable
There was no related party transaction of the Company connected to joint external investment during the reporting period.
4. Relatedcreditors’ rights and debts transactions
√ Applicable□ Not applicable
Was there any non-operating relatedcreditors’ rights and debts transaction?
□ Yes√ No
There was no non-operating relatedcreditors’ rights and debts transactions of the Company during the reporting period. 5. Other related party transactions
□ Applicable√ Not applicable
There was no other related party transaction of the Company during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 27
V Material Matters
VIII. Appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating purposes
□ Applicable√ Not applicable
There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating purposes during the reporting period.
IX. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
□ Applicable√ Not applicable
There was no custody of the Company during the reporting period.
(2) Contracting
□ Applicable√ Not applicable
There was no contracting of the Company during the reporting period.
(3) Leasing
□ Applicable√ Not applicable
There was no leasing of the Company during the reporting period.
16
INTERIM
2. Guarantees
REPORT
√ Applicable□ Not applicable
28
SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
IX. Material contracts and implementation(Cont’d)
2. Guarantees(Cont’d)
Unit:RMB’0,000 Guarantees between the Company and its subsidiaries
Date of
the related Guarantee announcement to related disclosing the Amount Guarantee date Guarantee Type of Fulfilled parties Name of obligee guarantee amount of guarantee (agreement date) provided guarantee Term or not or not Zhanjiang Chenming Pulp& 27 October 2014 650,000 3 June 2015 242,719.88 General 3 years No No Paper Co., Ltd. guarantee
Zhanjiang Chenming Pulp& 30 March 2016 150,000 General 3 years No No Paper Co., Ltd. guarantee
Shandong Chenming Financial 26 March 2015 500,000 22 May 2015 295,092.04 General 7 years No No Leasing Co., Ltd. guarantee
Shandong Chenming Financial 30 March 2016 300,000 General 7 years No No Leasing Co., Ltd. guarantee
Huanggang Chenming Arboriculture 27 October 2014 10,000 18 December 2014 3,000 General 3 years No No Co., Ltd. guarantee
Huanggang Chenming Pulp& 26 March 2015 400,000 28 July 2015 44,499.28 General 7 years No No Paper Co., Ltd. guarantee
16 Huanggang Chenming Pulp& 30 March 2016 550,000 General 7 years No No INTERIM Paper Co., Ltd. guarantee REPORT Jiangxi Chenming Paper Co., Ltd. 27 October 2014 200,000 6 January 2015 75,683.54 General 3 years No No guarantee
Jiangxi Chenming Paper Co., Ltd. 30 March 2016 150,000 General 3 years No No guarantee
Shouguang Meilun Paper Co., Ltd. 16 December 2010 600,000 13 April 2015 44,725 General 10 years No No guarantee
Shandong Chenming Paper 27 October 2014 400,000 9 January 2015 328,739.3 General 3 years No No Sales Co., Ltd. guarantee
Shandong Chenming Paper 30 March 2016 200,000 General 3 years No No Sales Co., Ltd. guarantee
Chenming (HK) Limited 27 October 2014 500,000 31 July 2015 403,621.68 General 3 years No No guarantee
Chenming (HK) Limited 30 March 2016 100,000 General 3 years No No guarantee
Shouguang Chenming Import and 27 October 2014 200,000 General 3 years No No Export Trade Co., Ltd. guarantee
Jilin Chenming Paper Co., Ltd. 27 October 2014 150,000 General 3 years No No guarantee
Haicheng Haiming Mining Co., Ltd. 27 August 2014 60,000 General 3 years No No guarantee
Shandong Chenming Group 13 February 2015 400,000 General 3 years No No Finance Co., Ltd. guarantee
Total amount of guarantee provided for subsidiaries 1,450,000 Total amount of guarantee provided for subsidiaries during the 851,428.65 approved during the reporting period (B1) reporting period (B2)
Total amount of guarantee provided for subsidiaries 5,520,000 Total balance of guarantee provided for subsidiaries as at the 1,438,080.72 approved as at the end of the reporting period (B3) end of the reporting period (B4)
SHANDONG CHENMING PAPER HOLDINGS LIMITED 29
V Material Matters
IX. Material contracts and implementation(Cont’d)
2. Guarantees(Cont’d)
Guarantees provided by subsidiaries for subsidiaries
Date of
the related Guarantee announcement to related disclosing the Amount Guarantee date Guarantee Type of Fulfilled parties Name of obligee guarantee amount of guarantee (agreement date) provided guarantee Term or not or not Chenming (HK) Limited 30 March 2016 100,000 20 April 2016 58,326.84 General 3 years No No guarantee
Chenming (HK) Limited 30 March 2016 100,000 20 April 2016 10,355.95 General 3 years No No guarantee
Chenming (HK) Limited 30 March 2016 100,000 20 April 2016 48,822.5 General 3 years No No guarantee
Total amount of guarantee provided for subsidiaries 300,000 Total amount of guarantee provided for subsidiaries during the 117,505.29 approved during the reporting period (C1) reporting period (C2)
Total amount of guarantee provided for subsidiaries 300,000 Total balance of guarantee provided for subsidiaries as at the 117,505.29 approved as at the end of the reporting period (C3) end of the reporting period (C4)
Total amount of guarantee provided by the Company (the sum of the above three main categories)
Total amount of guarantee approved during the reporting 1,750,000 Total amount of guarantee provided during the reporting period 968,933.94 period(B1+C1) (B2+C2)
16
Total amount of guarantee approved as at the end of the 5,820,000 Total balance of guarantee provided as at the end of the 1,555,586.01 INTERIM
REPORT reporting period(B3+C3) reporting period(B4+C4)
The percentage of total amount of guarantee provided(B4+C4) to the net assets of the Company 80.54% Of which:
Amount of guarantee provided for shareholders, beneficial controllers and its related parties (D) 0 Amount of guarantee directly or indirectly provided for obligors with gearing ratio over70% (E) 914,276.22 Total amount of guarantee provided in excess of50% of net assets (F) 589,876.88 Sum of the above three amount of guarantee(D+E+F) 1,504,153.11 (1) External guarantees against the rules and regulations
□ Applicable√ Not applicable
There was no external guarantee provided by the Company which was against the rules and regulations during the reporting period.
30
SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
IX. Material contracts and implementation(Cont’d)
3. Other material contracts
√ Applicable□ Not applicable
Appraisal
Book value value of
of the subject the subject Progress asset of asset of Name of Related as at the Name of Date of the contract the contract appraisal Appraisal Transaction party Related end of the Name of the company party involved the contract (if any) (if any) institute date Pricing price transaction party reporting entering into contract in the contract Subject matter entered into(RMB’0,000) (RMB’0,000) (if any) (if any) basis(RMB’0,000) or not relationship period Shandong Chenming Jinan Hi-Tech A7-2 plot of the 9 May 2014 Not applicable Not applicable Not applicable Not applicable Market price 36,000 No Not applicable In progress Paper Holdings Limited Holding Group Han Yu Jin Gu
Co., Ltd.
Huanggang Chenming FMW Foerderanlagen Materials and 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price EUR No Not applicable In progress Pulp& Paper Co., Ltd. Gmbh. equipment for 7.80 million
chemical pulp
Huanggang Chenming Valmet Technologies Equipment 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price EUR No Not applicable In progress Pulp& Paper Co., Ltd. Oy 65.631 million
Huanggang Chenming Valmet (China) Co., Equipment and 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price 36,076.4 No Not applicable In progress Pulp& Paper Co., Ltd. Ltd. spare parts
Huanggang Chenming Andritz Oy Steam equipment 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price EUR No Not applicable In progress 16 Pulp& Paper Co., Ltd. system 7.044 million
Huanggang Chenming Andritz (China) Ltd. Steam equipment 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price 3,060.4 No Not applicable In progress INTERIM REPORT Pulp& Paper Co., Ltd.
4. Other material transactions
□ Applicable√ Not applicable
There was no other material transaction of the Company during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 31
V Material Matters
X. Undertakings made by the Company and shareholders interested in5% or more of the shares of the Company made during the reporting period or prior periods but subsisting to the reporting period
√ Applicable□ Not applicable
Party involved Particulars on Undertaking in undertaking Details of undertaking Undertaking date Term the performance Undertaking on shareholding
structure reformation
Undertaking made in offering
documents or shareholding
alternation documents
Undertaking made during asset
reconstruction
Undertaking made on initial Shouguang Chenming (1) Shouguang Chenming Holdings Co., Ltd. (“Shouguang 22 May 2008 During the period Strictly implemented public offering or refinancing Holdings Co., Ltd. Chenming Holdings”) shall not engage, whether solely, jointly, when Chenming
or by representing itself or any other persons or companies, and Holdings was the
shall not procure its associates (as defined in The Listing Rules major shareholder
of Hong Kong Stock Exchange) to engage, in any business which of the Company
competes with the business of the Company and its subsidiaries
16
(“Chenming Group” or “we”) directly or indirectly, in any country
and region which our business exists (or any part of the world if in
INTERIM
REPORT any form of electronics business), or in any business that directly
or indirectly competes with ChenmingGroup’s business which we
operate from time to time (including but not limited to any business
in the form of sole proprietorship, joint ventures or acquisitions, or
holding interests directly or indirectly in such enterprises, or by any
other means); (2) in the event that Shouguang Chenming Holdings
is required by its business to, whether solely, jointly, or by
representing itself or any other persons or companies, engage in
business which directly or indirectly competes against the business
of Chenming Group, or obtain any business opportunity which
directly or indirectly competes against the business of Chenming
Group, it shall endeavour to procure that Chenming Group shall
have priority to obtain the right to operate such business or to
obtain such business opportunity; (3) if Shouguang Chenming
Holdings is in breach of the abovementioned undertakings, it
shall indemnify the Company for any loss caused by such breach
and the Company shall have the right to acquire all businesses
of Shouguang Chenming Holdings, which directly or indirectly
compete with the businesses of our Group, at market price or cost
price (whichever price is lower); (4) Shouguang Chenming Holdings
shall not make use of its position as the controlling shareholder (as
defined in The Listing Rules of Hong Kong Stock Exchange) of our
Group to jeopardise the legal interests of Chenming Group and its
shareholders with other persons or companies or on their behalf.
32
SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
X. Undertakings made by the Company and shareholders interested in5% or more of the shares of the Company made during the reporting period or prior periods but subsisting to the reporting period(Cont’d)
Party involved Particulars on Undertaking in undertaking Details of undertaking Undertaking date Term the performance Shouguang Chenming (1) According to the plan on defective properties of the Company, 16 January 2008 During the period Strictly implemented Holdings Co., Ltd. Shouguang Chenming Holdings Co., Ltd. (“Shouguang Chenming when Chenming
Holdings”) has guaranteed and undertaken that: according to the Holdings was
application of the Company, for defective property(ies) owned the major
by the Company and its holding subsidiary company which shareholder
situated in the administrative area of Shouguang city, Shouguang of the Company
Chenming Holdings will purchase it(them) and have it(them) being
transferred to itself pursuant to the law in accordance with the
result of the related asset valuation if the Company decides to
transfer and dispose of it(them) and there is no other transferee;
(2) before the Company transfers and disposes of the defective
properties pursuant to the law, if the Company suffers any
economic losses due to the defects of the title (including but not
limited to damages, penalties and relocation costs), Shouguang
Chenming Holdings will bear such economic losses; (3) during the
regulatory process taken to the defective properties of buildings
and land of subsidiaries of the Company situated outside the local
16 areas (outside the administrative area of Shouguang city), the
economic losses such as penalties or relocation costs imposed
INTERIM REPORT by competent administrative authorities to be borne by the
subsidiaries arising from defects of insufficient title documents
shall be paid pursuant to the law by Shouguang Chenming
Holdings after verification.
Other undertakings made to Shouguang Chenming As Chenming Holdings is confident of the prospects of the 8 July 2015 From 8 July 2015 to Completed minority shareholders of Holdings Co., Ltd. economic development in China and the future development of 8 January 2016
the Company the Company, in order to maintain the stability of capital market
and promote the sustainable, stable and healthy development of
the Company, Chenming Holdings has undertaken that it will not
reduce its shareholding in the Company in the coming six months.
Does the undertaking Yes
performed timely?
SHANDONG CHENMING PAPER HOLDINGS LIMITED 33
V Material Matters
XI. Engagement or dismissal of accounting firms
Has the interim financial report been audited?
□ Yes√ No
The interim financial report is unaudited.
XII. Punishment and rectification
□ Applicable√ Not applicable
There was no punishment and rectification of the Company during the reporting period.
XIII. Risk of delisting due to non-compliance
□ Applicable√ Not applicable
The Company was not exposed to the risk of delisting due to non-compliance during the reporting period.
XIV. Purchase, sale and redemption of shares
During the reporting period, the Company did not purchase, sell or redeem any listed securities of the Company. XV. Other matters of significance
√ Applicable□ Not applicable
16 1. Non-public issue of A shares
INTERIM
REPORT
At the 13th extraordinary meeting of the seventh session of the Board, the second extraordinary general meeting for 2016 and the first domestic and overseasshareholders’ class meeting for 2016, it was passed, among others, resolutions relating to the non-public issue of A shares by the Company. Under such issue, no more than 686,015,831 shares (inclusive) were to be issued for gross proceeds of no more than RMB5,200.0000 million (inclusive), of which RMB3,700 million would be used in the bleached sulfate chemical pulp project with annual production capacity of 400,000 tonne and RMB1,500 million for repayment of bank loans. On 20 June 2016, the Company received the Notice of Acceptance of Application for Administrative Approval (No. 161455) from the China Securities Regulatory Commission (the “CSRC”). On 19 July 2016, the Company received the Notice of Feedback on Administrative Approval Application (No. 161455) from the CSRC, a reply to which was published on www.cninfo.com.cn and submitted to the CSRC. As of the disclosure date of the Report, the Company has not received the related approval of the CSRC. The Company will perform its obligation to disclose the related information on a timely basis based on the approval of the CSRC. 2. Obtaining high and new tech enterprise qualifications by the Company and its subsidiaries
The Company received a high and new technology enterprise certificate jointly issued by the Shandong Provincial Office of SAT, Shandong Local Taxation Bureau, the Shandong Province Finance Bureau and the Department of Science& Technology of Shandong Province certifying the Company as a high and new technology enterprise with a certification number of GR201537000611 valid for three years.
Shouguang Meilun Paper Co., Ltd. (“Shouguang Meilun”), a wholly-owned subsidiary, received a high and new technology enterprise certificate jointly issued by the Shandong Provincial Office of SAT, Shandong Local Taxation Bureau, the Shandong Province Finance Bureau and the Department of Science& Technology of Shandong Province certifying the Company as a high and new technology enterprise with a certification number of GR201537000228 valid for three years.
Zhanjiang Chenming Pulp& Paper Co., Ltd. (“Zhanjiang Chenming”), a controlling subsidiary of the Company, received a high and new technology enterprise certificate jointly issued by the Guangdong Provincial Office of SAT, Guangdong Local Taxation Bureau, the Guangdong Province Finance Bureau and the Department of Science& Technology of Guangdong Province certifying the Company as a high and new technology enterprise of Guangdong with a certification number of GR201544000146 valid for three years.
Pursuant to relevant requirements, the Company, Shouguang Meilun and Zhanjiang Chenming are eligible for relevant national preferential treatment enjoyable by high and new tech enterprises for three years and subject to a corporate income tax rate of15%.
34
SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
XV. Other matters of significance(Cont’d)
3. Information disclosure index for the first half of 2016
Announcement Publication website No. Subject matter Date of publication and index
2016-001 Announcement on Pledge of Shares by Shareholders 5 January 2016 http://www.cninfo.com.cn 2016-002 Announcement on Progress of increase in 5 January 2016 http://www.cninfo.com.cn shareholding of the Company by Controlling
Shareholder
2016-003 Announcement on Progress of Undertaking by the 9 January 2016 http://www.cninfo.com.cn Controlling Shareholder of the Company
2016-004 Announcement on Pledge of Shares by Shareholders 13 January 2016 http://www.cninfo.com.cn 2016-005 Announcement on Progress of increase in 13 January 2016 http://www.cninfo.com.cn shareholding of the Company by Controlling
Shareholder
2016-006 Full Report of Changes in Equity 15 January 2016 http://www.cninfo.com.cn 2016-007 Second Supplementary Notice of the 2016 15 January 2016 http://www.cninfo.com.cn First Extraordinary General Meeting
2016-008 Supplementary Announcement on Full Report of 19 January 2016 http://www.cninfo.com.cn Changes in Equity
2016-009 Announcement on Result of the Issue of 2016 First 20 January 2016 http://www.cninfo.com.cn Tranche of Super& Short-term Commercial Paper
2016-010 Announcement on Progress of Registered Capital 23 January 2016 http://www.cninfo.com.cn 16 Decrease by Controlling Shareholder
INTERIM 2016-011 Announcement on Estimated Annual Results for 2015 26 January 2016 http://www.cninfo.com.cn REPORT 2016-012 Indicative Announcement of 2016 First 29 January 2016 http://www.cninfo.com.cn Extraordinary General Meeting
2016-013 Indicative Announcement on Subsidiary 29 January 2016 http://www.cninfo.com.cn Receiving Subsidy
2016-014 Announcement on Resolutions of the 2015 First 4 February 2016 http://www.cninfo.com.cn Extraordinary General Meeting
2016-015 Announcement on Result of the Issue of 2016 Second 12 March 2016 http://www.cninfo.com.cn Tranche of Super& Short-term Commercial Paper
2016-016 Announcement on Pledge of Shares by Shareholders 12 March 2016 http://www.cninfo.com.cn 2016-017 Announcement on Result of the Issue of 2016 Third 15 March 2016 http://www.cninfo.com.cn Tranche of Super& Short-term Commercial Paper
2016-018 Announcement in Respect of Resolutions of the Ninth 16 March 2016 http://www.cninfo.com.cn Extraordinary Meeting of the Seventh Session of
the Board of Directors
2016-019 Announcement on Investment of China Development 16 March 2016 http://www.cninfo.com.cn Bank Development Fund Co., Ltd. in Subsidiary
Zhanjiang Chenming
2016-020 Indicative announcement on refund of value-added 19 March 2016 http://www.cninfo.com.cn tax received by a subsidiary
2016-021 Announcement on Undertakings and Performance 25 March 2016 http://www.cninfo.com.cn under Non-public Issue of Preference Shares
2016-022 Announcement on Resolution of the 10th 25 March 2016 http://www.cninfo.com.cn Extraordinary Meeting of the Seventh Session of
the Board of Directors
2016-023 Announcement on Replacement of Self-raised Funds 25 March 2016 http://www.cninfo.com.cn Invested in Advance to Projects with Proceeds
from Issue of Preference Shares
2016-024 Announcement on Resolution of the First 25 March 2016 http://www.cninfo.com.cn
Extraordinary Meeting of the Seventh Session of
the Supervisory Committee
SHANDONG CHENMING PAPER HOLDINGS LIMITED 35
V Material Matters
XV. Other matters of significance(Cont’d)
3. Information disclosure index for the first half of 2016(Cont’d)
Announcement Publication website No. Subject matter Date of publication and index
2016-025 Announcement on Entering into Proceeds 29 March 2016 http://www.cninfo.com.cn Supervision Agreement
2016-026 Announcement on Subsidiaries Obtaining High and 29 March 2016 http://www.cninfo.com.cn New Tech Enterprise Qualifications
2016-027 Indicative Announcement on Medium-term Notes 29 March 2016 http://www.cninfo.com.cn Issue Registered
2016-028 Announcement in respect of Resolutions of the 13th 31 March 2016 http://www.cninfo.com.cn Meeting of the Seventh Session of
the Board of Directors
2016-029 Announcement on Resolution of the 13th Meeting of 31 March 2016 http://www.cninfo.com.cn the Seventh Session of the Supervisory Committee
2016-030 2015 Annual Report Summary 31 March 2016 http://www.cninfo.com.cn 2016-031 Notice of 2015 Annual General Meeting 31 March 2016 http://www.cninfo.com.cn 2016-032 Announcement on Provision of Guarantee for 31 March 2016 http://www.cninfo.com.cn Comprehensive Credit Line of
Relevant Subsidiaries
2016-033 Announcement in relation to External Investment 31 March 2016 http://www.cninfo.com.cn 2016-034 Announcement on Expected Ordinary Connected 31 March 2016 http://www.cninfo.com.cn 16
Transactions in 2016
INTERIM
REPORT 2016-035 Announcement on Entering into a Strategic 1 April 2016 http://www.cninfo.com.cn Cooperation Agreement with Postal Savings
Bank of China (Shandong Branch)
2016-036 Announcement on the Company and Subsidiaries 2 April 2016 http://www.cninfo.com.cn Obtaining High and New Tech Enterprise
Qualifications
2016-037 Transfer Announcement on Non-public Issue of 7 April 2016 http://www.cninfo.com.cn Preference Shares
2016-038 Announcement on Estimated Results for 7 April 2016 http://www.cninfo.com.cn the First Quarter of 2016
2016-039 Announcement on Suspension of Trading 12 April 2016 http://www.cninfo.com.cn In Relation To Major Event
2016-040 Announcement on Synchronised Information 12 April 2016 http://www.cninfo.com.cn Disclosure on Two Stock Exchanges
2016-041 Announcement in respect of Resolutions of the 11th 16 April 2016 http://www.cninfo.com.cn Extraordinary Meeting of the Seventh Session of
the Board of Directors
2016-042 Announcement on Resolution of the Second 16 April 2016 http://www.cninfo.com.cn Extraordinary Meeting of the Seventh Session of
the Supervisory Committee
2016-043 Announcement on Dilution of Current Returns and 16 April 2016 http://www.cninfo.com.cn Remedial Measures upon Non-public Offering
2016-044 Notice of 2016 Second Extraordinary General Meeting 16 April 2016 http://www.cninfo.com.cn 2016-045 Notice of the 2016 First Domestic Listed Share Class 16 April 2016 http://www.cninfo.com.cn Meeting and 2016 First Overseas Listed
Share Class Meeting
2016-046 Announcement on Resumption of Trading 16 April 2016 http://www.cninfo.com.cn 2016-047 Announcement on Capital Increase of 16 April 2016 http://www.cninfo.com.cn Chenming Leasing
2016-048 Indicative Announcement for H Shares 19 April 2016 http://www.cninfo.com.cn
36
SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
XV. Other matters of significance(Cont’d)
3. Information disclosure index for the first half of 2016(Cont’d)
Announcement Publication website No. Subject matter Date of publication and index
2016-049 Supplemental Notice of 2016 Second 20 April 2016 http://www.cninfo.com.cn Extraordinary General Meeting
2016-050 Supplementary Notice of the 2016 First Domestic 20 April 2016 http://www.cninfo.com.cn Listed Share Class Meeting and 2016
First Overseas Listed Share
2016-051 Announcement on Result of the Issue of 2016 Fifth 20 April 2016 http://www.cninfo.com.cn Tranche of Super& Short-term Commercial Paper
2016-052 Announcement on Result of the Issue of 2016 Sixth 23 April 2016 http://www.cninfo.com.cn Tranche of Super& Short-term Commercial Paper
2016-053 Indicative Announcement on Media Coverage 26 April 2016 http://www.cninfo.com.cn 2016-054 2016 First Quarterly Report 28 April 2016 http://www.cninfo.com.cn 2016-055 Announcement on Total New Borrowings for 28 April 2016 http://www.cninfo.com.cn 2015 and 2016
2016-056 Announcement in respect of Resolutions of the 12th 29 April 2016 http://www.cninfo.com.cn Extraordinary Meeting of the Seventh Session of
the Board of Directors
2016-057 Announcement on Revision on the Date of 29 April 2016 http://www.cninfo.com.cn 2015 Annual General Meeting
16 2016-058 Notice of 2015 Annual General Meeting 29 April 2016 http://www.cninfo.com.cn INTERIM 2016-059 Announcement on Revision on the Date of 29 April 2016 http://www.cninfo.com.cn REPORT 2016 Second Extraordinary General Meeting
2016-060 Announcement on Revision on the Date of 2016 29 April 2016 http://www.cninfo.com.cn First Domestic Listed Share Class Meeting and
2016 First Overseas Listed Share
2016-061 Notice of 2016 Second Extraordinary 29 April 2016 http://www.cninfo.com.cn General Meeting
2016-062 Notice of 2016 First Domestic Listed Share Class 29 April 2016 http://www.cninfo.com.cn Meeting and 2016 First Overseas Listed Share
2016-063 Announcement in respect of Resolutions of the 15th 30 April 2016 http://www.cninfo.com.cn Meeting of the Seventh Session of
the Board of Directors
2016-064 Announcement on Resolution of the 15th Meeting of 30 April 2016 http://www.cninfo.com.cn the Seventh Session of the Supervisory Committee
2016-065 Announcement on Additional Resolutions Proposed 30 April 2016 http://www.cninfo.com.cn at the 2015 General Meeting
2016-066 Supplemental Notice of 2015 General Meeting 30 April 2016 http://www.cninfo.com.cn 2016-067 Notice of Investor Reception Day 4 May 2016 http://www.cninfo.com.cn 2016-068 Announcement on Result of the Issue of 2016 Seven 8 May 2016 http://www.cninfo.com.cn Tranche of Super& Short-term Commercial Paper
2016-069 Indicative Announcement on 2015 General Meeting 13 May 2016 http://www.cninfo.com.cn 2016-070 Announcement in respect of Resolutions of the 13th 18 May 2016 http://www.cninfo.com.cn Meeting of the Seventh Session of
the Board of Directors
2016-071 Announcement on Resolution of the Third 18 May 2016 http://www.cninfo.com.cn Extraordinary Meeting of the Seventh Session of
the Supervisory Committee
2016-072 Announcement on Additional Resolutions Proposed 18 May 2016 http://www.cninfo.com.cn at the 2016 Second Extraordinary General Meeting
SHANDONG CHENMING PAPER HOLDINGS LIMITED 37
V Material Matters
XV. Other matters of significance(Cont’d)
3. Information disclosure index for the first half of 2016(Cont’d)
Announcement Publication website No. Subject matter Date of publication and index
2016-073 Announcement on Additional Resolutions Proposed 18 May 2016 http://www.cninfo.com.cn at 2016 First Domestic Listed Share Class Meeting
and 2016 First Overseas Listed Share
2016-074 Supplementary Notice of 2016 Second 18 May 2016 http://www.cninfo.com.cn Extraordinary General Meeting
2016-075 Supplementary Notice of 2016 First Domestic 18 May 2016 http://www.cninfo.com.cn Listed Share Class Meeting and 2016
First Overseas Listed Share
2016-076 Announcement on Dilution of Current Returns and 18 May 2016 http://www.cninfo.com.cn Remedial Measures upon Non-public
Offering (Revision)
2016-077 Announcement on Entering into Conditional Share 18 May 2016 http://www.cninfo.com.cn Purchase Agreement and Connected
Transactions under the Non-public Offering of
A Share (Revision)
2016-078 Announcement on Revision of Non-public 18 May 2016 http://www.cninfo.com.cn Offering for 2016
2016-079 Announcement on Resolutions of 19 May 2016 http://www.cninfo.com.cn 16
the 2015 General Meeting
INTERIM
REPORT 2016-080 Announcement in respect of Resolutions of the 19 May 2016 http://www.cninfo.com.cn 1st Meeting of the Eighth Session of
the Board of Directors
2016-081 Announcement on Resolutions of the 1st Meeting of 19 May 2016 http://www.cninfo.com.cn the Eighth Session of the Supervisory Committee
2016-082 Indicative Announcement on 2016 Second 26 May 2016 http://www.cninfo.com.cn Extraordinary General Meeting
2016-083 Indicative Announcement on 2016 First Domestic 26 May 2016 http://www.cninfo.com.cn Listed Share Class Meeting and
2016 First Overseas Listed Share
2016-084 Announcement on Resolutions of 2016 Second 3 June 2016 http://www.cninfo.com.cn Extraordinary General Meeting
2016-085 Poll Results Announcement of the 2016 First 3 June 2016 http://www.cninfo.com.cn Domestic AShareholders’ and BShareholders’
Class Meeting and the 2016 First Overseas
HShareholders’ Class Meeting
2016-086 Announcement on Pledge of Shares 7 June 2016 http://www.cninfo.com.cn by Shareholders
2016-087 Notice of Investor Reception Day 14 June 2016 http://www.cninfo.com.cn 2016-088 Announcement on Resignation of 15 June 2016 http://www.cninfo.com.cn Senior Management
2016-089 Announcement on receipt of CSRC Notice of 21 June 2016 http://www.cninfo.com.cn Acceptance of Application for
Administrative Approval
2016-090 Announcement on Result of the Issue of 2016 August 25 June 2016 http://www.cninfo.com.cn Tranche of Super& Short-term Commercial Paper
2016-091 Announcement on Redemption, Dividend Payment 30 June 2016 http://www.cninfo.com.cn and Delisting of “11 Chenming Bond” for 2016
38
SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
XVI. Corporate bonds
Are there any corporate bonds offered to the public and listed on stock exchanges which do not become due as at the date of approval of interim report or overdue but not fully settled?
Yes
1. Basic information on corporate bonds
Outstanding
amount of
the bonds
Name of bond Bond abbreviation Bond code Issue date Maturity date (RMB’0,000) Interest rate Payment method 2011 corporate bonds 11 Chenming Bond 112031 6 July 2011 6 July 2016 200,000 5.95% Interest is paid of Shandong Chenming annually. The principal Paper Holdings Limited amount and the last interest payment will be paid on the maturity date.
2012 corporate bonds 12 Chenming Bond 112144 26 December 26 December 380,000 5.65% Interest is paid of Shandong Chenming 2012 2017 annually. The principal Paper Holdings Limited amount and the last interest payment will be paid on the maturity 16 date.
INTERIM REPORT Stock exchange on which Shenzhen Stock Exchange
corporate bonds
are listed or transferred
Investor eligibility Online subscription: Public investors with A share security account opened under China Securities Depository and Clearing Co., Ltd. arrangement
Offline subscription: Institutional investors with A share security account opened under China Securities Depository and Clearing Co., Ltd.
Interest payment of There was no payment of interest or redemption during the reporting period. The payment of interest on and redemption of 11 corporate bonds during Chenming Bond were completed on 6 July 2016. For details, please refer to the Announcement on Redemption, Dividend Payment the reporting period and Delisting of “11 Chenming Bond” for 2016 published by the Company on 30 June 2016.
2. Information on bond custodian and credit rating agency
Bond custodian:
Name UBS Securities Office address 12/F and 15/F, Contact person Chen Yang Telephone of 010-5832 8888 Co., Ltd. Winland International contact
Finance Centre, person
7 Financial Street,
Xicheng District, Beijing
Credit rating agency(ies) which conducted rating on corporate bonds during the reporting period:
Name China Chengxin Securities Valuation Company Limited Office address 8/F, Anji Building, 760 Xizang South Road, Huangpu District, Shanghai
SHANDONG CHENMING PAPER HOLDINGS LIMITED 39
V Material Matters
XVI. Corporate bonds(Cont’d)
3. Use of proceeds from corporate bonds
Use of proceeds from corporate The use of proceeds from issuance of corporate bonds has strictly complied bonds and its implementation with relevant application and approval procedures. As at the end of the reporting period, the proceeds from 11 Chenming Bond and 12 Chenming Bond were fully used.
Balance as at the end of 0
the year (RMB’0,000)
Operation of special account Special account for proceeds is used for the deposit of special capital from for proceeds bonds.
Is the use of proceeds consistent Yes
with the use of proceeds guaranteed
under the prospectus, proposed use
of proceeds and other agreement?
4. Credit rating of corporate bonds
The credit rating of 11 Chenming Bond and 12 Chenming Bond as granted by China Chengxin Securities Valuation Company Limited remained atAA+, and the rating for the Company wasAA+ (stable outlook). The 2011 corporate bond rating report (2016) and 2012 corporate bond rating report (2016) were published on CNINFO on 27 April 2016. 16
5. Credit enhancement mechanism, repayment plan and other repayment guarantee measures for INTERIM corporate bonds
REPORT
There was no change in credit enhancement mechanism, repayment plan and other repayment guarantee measures, which were consistent with relevant commitments as set out in the prospectuses, during the reporting period. 6. Convening of meeting for bondholders during the reporting period
Not applicable.
7. Performance of bond custodian during the reporting period
The bond custodian performed its duties in accordance with the agreement during the reporting period.
40
SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
XVI. Corporate bonds(Cont’d)
8. Major accounting data and financial indicators of the Company as at the end of the reporting period and last year (or for the reporting period and the corresponding period last year)
Unit: RMB’0,000 Increase/decrease as at the end of the reporting period as compared As at the end of As at the end of to the end Item the reporting period the prior year of the prior year Current ratio 79.72% 72.30% 7.42% Gearing ratio 77.27% 77.86% -0.59% Quick ratio 69.94% 61.59% 8.35% Increase/decrease as at the end of the reporting period The corresponding as compared period of to the end The reporting period the prior year of the prior year EBITDA interest coverage ratio 2.9 3.24 -10.49% 16 Loans payment ratio 100.00% 100.00% 0.00% Interest payment ratio 100.00% 100.00% 0.00% INTERIM REPORT Major reason for more than30% in year-on-year change for the above accounting data and financial indicators□ Applicable√ Not applicable
9. Restriction on asset rights as at the end of the reporting period
Item Amount Purpose
Fixed assets 4,673,799,362.90 As pledge for bank borrowings
Intangible assets 342,444,168.04 As pledge for bank borrowings
10. Overdue liabilities
□ Applicable√ Not applicable
The Company did not have any liabilities overdue.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 41
V Material Matters
XVI. Corporate bonds(Cont’d)
11. Interest payment on other bonds, debt and financing instruments during the reporting period Amount of Item interest payment Privately placed bonds 81,925,000.00 Medium-term notes 54,010,000.00 Total 135,935,000.00 12. Bank credit obtained, its use and repayment of bank loans during the reporting period
During the reporting period, the Company obtained bank credit of RMB60,200 million, of which RMB38,700 million was utilised with RMB21,500 million outstanding. The Company repaid bank loans of RMB26,300 million.
13. Performance of relevant agreements or commitments under the prospectus of corporate bonds during the reporting period
Not applicable.
14. Matters of significance happened during the reporting period
Nil.
16
15. Is there any guarantor for corporate bonds?
INTERIM
REPORT
□ Yes√ No
42
SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Changes in Share Capital and Shareholders
I. Changes in shares
Unit: share Opening balance Change during the reporting period(+/-) Closing balance Shares
Converted
Amounts Percentage New issue Bonus issue from reserve Others Sub-total Amounts Percentage I. Restricted shares 8,241,219 0.43% 187,981 187,981 8,429,200 0.44% 1. Shares held by other domestic investors 8,241,219 0.43% 187,981 187,981 8,429,200 0.44% Shares held by domestic natural persons 8,241,219 0.43% 187,981 187,981 8,429,200 0.44% II. Non-restricted shares 1,928,164,248 99.57% -187,981 -187,981 1,927,976,267 99.56% 1. RMB ordinary shares 1,105,037,237 57.07% -187,981 -187,981 1,104,849,256 57.05% 2. Domestic listed foreign shares 470,923,511 24.32% 470,923,511 24.32% 3. Overseas listed foreign shares 352,203,500 18.19% 352,203,500 18.19% III. Total number of shares 1,936,405,467 100.00% 0 0 1,936,405,467 100.00% The reasons for such changes
√ Applicable□ Not applicable
Before the change, the number of restricted shares held by domestic natural persons decreased by 187,981 from 8,241,219 to 8,429,200, due to the fact that: according to the Practice Guidance for theCompany’s Shares Held by the Directors, Supervisors and Senior Management of the Listed Companies of Shenzhen Stock Exchange,25% of RMB shares without restriction held by senior management were put under restriction for half a year since the resignation thereof during the reporting period.
Approval of changes in shareholding 16□ Applicable√ Not applicable
IN RET PE ORI RM T Transfer of shares arising from changes in shareholding
□ Applicable√ Not applicable
The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings per share and net assets per share attributable to shareholders of ordinary shares of the Company for the latest year and the latest period□ Applicable√ Not applicable
Other information considered necessary by the Company or required by the securities regulatory authorities to be disclosed□ Applicable√ Not applicable
Changes in the total number of shares and structure of shareholders and the structure of the assets and liabilities of the Company
□ Applicable√ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 43
VI Changes in Share Capital and Shareholders
II. Total number of shareholders and shareholdings
Unit: share Total number of shareholders of ordinary shares as at the end of the reporting 119,339, Total number of shareholders of preference shares with restored voting right as at the 0 period of which 93,187 end of the reporting period
were holders of A shares,
25,656 were holders of
B shares and 496 were
holders of H shares
Shareholdings of shareholders of ordinary shares interested in more than5% of the shares of the Company or top ten shareholders of ordinary shares
Share pledged or locked-up Number of Changes
shares held (increase or
at the end decrease) Number of Number of
of the during the restricted non-restricted
Nature of Percentage of reporting reporting ordinary ordinary Status of Name of shareholders shareholders shareholding period period shares held shares held shares Number SHOUGUANG CHENMING HOLDINGS COMPANY LIMITED State-owned legal 15.13% 293,003,657 0 0 293,003,657 Pledged 145,189,000 person
HKSCC NOMINEES LIMITED Overseas legal person 13.74% 266,013,900 -25,997,000 0 266,013,900
CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal person 5.74% 111,217,683 39,434,503 0 111,217,683
CENTRAL HUIJIN ASSET MANAGEMENT LTD. State-owned legal 2.07% 40,137,900 0 0 40,137,900
person
HUATAI SECURITIES CO., LTD. Domestic non-state- 1.22% 23,671,737 5,976,969 0 23,671,737
owned legal person
AGRICULTURAL BANK OF CHINA - XINHUA SECTOR ROTATION Others 0.55% 10,556,179 10,556,179 0 10,556,179
16
FLEXIBLE-DISPOSITION MIXED-TYPE SECURITIES INVESTMENT FUND
INTERIM BOSERA FUNDS-BANK OF CHINA - PING AN LIFE INSURANCE - PING Others 0.52% 10,000,000 10,000,000 0 10,000,000
REPORT
AN LIFE INSURANCE ENTRUSTED INVESTMENT
NO.1 ASSET MANAGEMENT PLAN
BBH A/C VANGUARD EMERGING MARKETS STOCK INDEX FUND Overseas legal person 0.44% 8,608,238 0 0 8,608,238
JIN Xing Domestic nature person 0.41% 7,922,300 -72,700 0 7,922,300
CHINA MERCHANTS BANK CO.,LTD - BOSERA SHS EXCELLENT Others 0.36% 7,000,000 7,000,000 0 7,000,000
ENTERPRISES HYBRID FUND
Connected relationship or connected party relationship A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Shouguang among the above shareholders Chenming Holdings Company Limited, which is a state-owned legal person. Hence they are persons acting in concert under Administration of Disclosure of Information on the Change of Shareholdings in Listed Companies Procedures. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in concert and is also not aware that any other shareholders of tradable shares are connected with each other.
44
SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Changes in Share Capital and Shareholders
II. Total number of shareholders and shareholdings(Cont’d)
Shareholdings of the top ten shareholders of ordinary shares of non-restricted shares
Number of
non-restricted
shares held
as at the end
of the reporting
Name of shareholders period Class of shares
Class of shares Number SHOUGUANG CHENMING HOLDINGS COMPANY LIMITED 293,003,657 RMB ordinary shares 293,003,657 HKSCC NOMINEES LIMITED 266,013,900 Overseas listed 266,013,900 foreign shares
CHENMING HOLDINGS (HONG KONG) LIMITED 111,217,683 Domestically listed 26,238,183 foreign shares
Overseas listed 84,979,500 foreign shares
CENTRAL HUIJIN ASSET MANAGEMENT LTD. 40,137,900 RMB ordinary shares 40,137,900 HUATAI SECURITIES CO., LTD. 23,671,737 RMB ordinary shares 23,671,737 AGRICULTURAL BANK OF CHINA - XINHUA SECTOR ROTATION 10,556,179 RMB ordinary shares 10,556,179 FLEXIBLE-DISPOSITION MIXED-TYPE SECURITIES INVESTMENT FUND
BOSERA FUNDS-BANK OF CHINA— PING AN LIFE INSURANCE— 10,000,000 RMB ordinary shares 10,000,000 PING AN LIFE INSURANCE ENTRUSTED
16 INVESTMENT NO.1 ASSET MANAGEMENT PLAN
INTERIM BBH A/C VANGUARD EMERGING MARKETS STOCK INDEX FUND 8,608,238 Domestically listed 8,608,238 REPORT foreign shares
JIN Xing 7,922,300 Domestically listed 7,922,300 foreign shares
CHINA MERCHANTS BANK CO.,LTD - BOSERA 7,000,000 RMB ordinary shares 7,000,000 SHS EXCELLENT ENTERPRISES HYBRID FUND
Connected relationship or connected party relationship among the top ten A shareholder, Chenming Holdings (Hong Kong) Limited, which is an shareholders of ordinary shares of non-restricted shares, and between the top overseas legal person, is a wholly-owned subsidiary of a shareholder, ten shareholders of ordinary shares of non-restricted shares and the top ten Shouguang Chenming Holdings Company Limited, which is a state-owned shareholders of ordinary shares legal person. Hence they are persons acting in concert under Administration of Disclosure of Information on the Change of Shareholdings in Listed Companies Procedures. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in concert and is also not aware that any other shareholders of tradable shares are connected with each other.
Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 shareholders of ordinary shares and top 10 shareholders of non-restricted shares of the Company
□ Yes√ No
The top 10 shareholders of ordinary shares and top 10 shareholders of non-restricted shares of the Company did not enter any agreed repurchase transaction during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 45
VI Changes in Share Capital and Shareholders
III. Change of controlling shareholders or beneficial controllers
The Change of controlling shareholders during the reporting period
□ Applicable√ Not applicable
There was no change of controlling shareholders of the Company during the reporting period.
During the reporting period, Chenming Holdings (Hong Kong) Limited acquired additional 13,369,503 B shares and 26,065,000 H shares of the Company. As at the end of the reporting period, Chenming Holdings (Hong Kong) Limited had 26,238,183 B shares and 84,979,500 H shares of the Company, which amounted to 111,217,683 shares, representing a shareholding of5.74%.
As at the end of the reporting period, Shouguang Chenming Holdings Company Limited and its party acting in concert, namely Chenming Holdings (Hong Kong) Limited, held 293,003,657 A shares, 26,238,183 B shares and 84,979,500 H shares of the Company in aggregate, representing a shareholding of20.87%.
Change of beneficial owner during the reporting period
□ Applicable√ Not applicable
There was no change of beneficial owner of the Company during the reporting period.
IV. Plan on increase of shareholding proposed or implemented by shareholders of the Company and their persons acting in concert during the reporting period
√ Applicable□ Not applicable
16
Number of Resulting Number Resulting Announcement End of INTERIM
REPORT shares to increase in of shares increase in date of purchase Name of shareholder/party acting in concert be purchased shareholding purchased shareholding purchase period CHENMING HOLDINGS (HONG KONG) LIMITED N/A N/A 39,434,503 2.04% N/A N/A
46
SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Preference Shares
I. Issue and listing of preference shares during the reporting period
√ Applicable□ Not applicable
With listing
Issue price Issue size permission Information of Information of Method Issue date (RMB/share) Coupon rate (share) Listing date (share) Delisting date use of proceeds changes to proceeds Private 16 March 2016 100 4.36% 22,500,000 8 April 2016 22,500,000 — http://www.cninfo.com.cn http://www.cninfo.com.cn II. Holders of preference shares and their shareholdings
Unit: share Total number of shareholders of preference shares as at the end of the reporting period 5 More than5% shareholdings of the preference shares of the Company or top ten holders of preference shares
Number of
preference
shares
held at Changes
the end of during
Preference the reporting the reporting
Name Nature shareholding period period Share pledged or locked-up Status
of shares Number GUOXIN LEASING CO., LTD. Domestic non-state-owned 35.56% 8,000,000 0 0 legal person
QILU BANK CO., LTD. - QILU BANK Others 26.67% 6,000,000 0 0 16 QUANXIN WEALTH MANAGEMENT
INTERIM PRODUCT SERIES REPORT LAIWU GUANGYANG INVESTMENT Domestic non-state-owned 20.00% 4,500,000 0 0 CO., LTD. legal person
SHANDONG DONGTAI IMPORT AND Domestic non-state-owned 8.89% 2,000,000 0 0 EXPORT CO., LTD. legal person
SHANDONG TAISHAN STEEL GROUP Domestic non-state-owned 8.89% 2,000,000 0 0 COMPANY LIMITED legal person
Connected relationship or connected party relationship among the top ten holders of preference shares, and between the top ten holders of preference shares and the top ten holders of ordinary shares It is not aware that the above holders of preference shares are persons acting in concert and it is also not aware that the above shareholders of preference shares are connected with each other.
III. Repurchase or conversion
□ Applicable√ Not applicable
There was no repurchase or conversion during the reporting period.
IV. Resumption and exercise of voting rights
□ Applicable√ Not applicable
There was no resumption and exercise of voting rights conferred by preference shares during the reporting period.
V. Accounting policy and reasons therefor
√ Applicable□ Not applicable
Pursuant to requirements of Accounting Standard for Business Enterprises No. 22– Recognition and Measurement of Financial Instruments, Accounting Standard for Business Enterprises No. 37– Presentation of Financial Instruments and Provisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment, the
preference shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 47
VIII Directors, Supervisors and Senior Management
I. Changes in shareholdings of Directors, Supervisors and Senior Management
□ Applicable√ Not applicable
There was no change in shareholdings of Directors, Supervisors and senior management of the Company during the reporting period. Please see the annual report for 2015 for details.
II. Changes of Directors, Supervisors and Senior Management of the Company
√ Applicable□ Not applicable
Name Position Type Date Reason
Chen Hongguo Chairman and general manager Elected 18 May 2016 Elected upon replacement of the Board Yin Tongyuan Vice-chairman Elected 18 May 2016 Elected upon replacement of the Board Li Feng Director Elected 18 May 2016 Elected upon replacement of the Board Geng Guanglin Director Elected 18 May 2016 Elected upon replacement of the Board Hou Huancai Director Retired upon expiry of office 18 May 2016 Retired upon expiry of office Zhou Shaohua Director Retired upon expiry of office 18 May 2016 Retired upon expiry of office Yang Guihua Director Elected 18 May 2016 Elected upon replacement of the Board Wang Xiaoqun Director Retired upon expiry of office 18 May 2016 Retired upon expiry of office Zhang Zhiyuan Independent Director Retired upon expiry of office 18 May 2016 Retired upon expiry of office Wang Aiguo Independent Director Retired upon expiry of office 18 May 2016 Retired upon expiry of office Zhang Hong Director Elected 18 May 2016 Elected upon replacement of the Board Pan Ailing Independent Director Elected 18 May 2016 Elected upon replacement of the Board 16 Gao Junjie Chairman of Supervisory Elected 18 May 2016 Elected upon replacement of the Board INTERIM Committee
REPORT
Wang Ju Supervisor Retired upon expiry of office 18 May 2016 Retired upon expiry of office Yang Hongqin Supervisor Elected 18 May 2016 Elected upon replacement of the Board Yin Qixiang Supervisor Retired upon expiry of office 18 May 2016 Retired upon expiry of office Guo Guangyao Supervisor Retired upon expiry of office 18 May 2016 Retired upon expiry of office Chen Hongguo General Manager Appointed 18 May 2016 Appointed
Li Xueqin Deputy general manager Appointed 18 May 2016 Appointed
Wang Chunfang Secretary to the Board and Appointed 18 May 2016 Appointed
deputy general manager
Hu Changqing Deputy general manager Appointed 18 May 2016 Appointed
Li Zhenzhong Deputy general manager Appointed 18 May 2016 Appointed
Poon Shiu Cheong Company secretary and Appointed 18 May 2016 Appointed
qualified accountant
Wang Fengrong Independent Director Elected 18 May 2016 Elected upon replacement of the Board Huang Lei Independent Director Elected 18 May 2016 Elected upon replacement of the Board Liang Fu Independent Director Elected 18 May 2016 Elected upon replacement of the Board Liu Jilu Supervisor Elected 18 May 2016 Elected upon replacement of the Board Zhang Xiaofeng Supervisor Elected 18 May 2016 Elected upon replacement of the Board Sun Yinghua Supervisor Elected 18 May 2016 Elected upon replacement of the Board Yang Weiming Deputy general manager Appointed 18 May 2016 Appointed
Zhang Qingzhi Deputy general manager Appointed 18 May 2016 Appointed
Wang Chunfang Director Elected 18 May 2016 Elected upon replacement of the Board Wang Chunfang Director Resigned 14 June 2016 Resigned due to personal reasons Wang Chunfang Secretary to the Board and Resigned 14 June 2016 Resigned due to personal reasons deputy general manager
Geng Guanglin Deputy general manager Appointed 18 May 2016 Appointed
48
SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Directors, Supervisors and Senior Management
III. Equity interests of Directors, Supervisors and Senior Management under SFO of Hong Kong As at 30 June 2016, the interests held by each of the Directors, Supervisors and Chief Executives of the Company in the Company and its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under section 352 of the SFO, are set out as follows:
Number of shares (A shares) held as at the end of Name Position the reporting period (shares) Directors
Chen Hongguo (Note 1) Chairman and General Manager 6,434,527 Yin Tongyuan Executive Director and Vice Chairman 2,423,640 Li Feng Executive Director 471,818 Geng Guanglin Executive Director 437,433 Supervisor
Gao Junjie Supervisor 39,606 Associated corporations
Number of shares
held as at the Number of shares beginning of the Change during held as at the end Name of reporting period the reporting of the reporting Name Position associated corporation (shares) period(+/-) period (shares) 16 Chen Hongguo (Note 2) Chairman Shouguang Chenming Holdings 231,000,000 0 231,000,000 INTERIM REPORT Company Limited
Note 1: Save as the 6,434,527 A Shares personally held, Chen Hongguo was also deemed to be interested in the 429,348 A Shares held by Li Xueqin, his spouse.
Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively held43% equity interests in Shouguang Henglian Enterprise Investment Co. Ltd. As a result, Shouguang Henglian was deemed to be controlled by Chen Hongguo. As such, the 231,000,000 shares of Chenming Holdings (approximately18.65% of the total share capital of Chenming Holdings) held by Shouguang Henglian were also deemed to be held by Chen Hongguo.
Save as disclosed in the above, as at 30 June 2016, none of the Directors, Supervisors or chief executives of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations which were required to be filed in the register of the Company required to be maintained pursuant to section 352 of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code as contained in Appendix 10 to the Listing Rules.
As at 30 June 2016, none of each of the Directors, Supervisors or chief executives or their respective spouses or children under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its associated corporations.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 49
IX Financial Report
I. Auditors’ Report
Is the interim report audited
□ Yes√ No
The interim financial report is unaudited.
II. Financial Statements
The unit in the financial statements of the financial report is: RMB
1. Consolidated Balance Sheet
Prepared by: Shandong Chenming Paper Holdings Limited
30 June 2016
Unit: RMB Item Closing balance Opening balance CURRENT ASSETS:
Monetary funds 11,772,868,305.13 8,984,326,016.01 Bills receivable 3,759,908,176.21 3,998,782,845.65 Accounts receivable 3,950,271,213.66 3,951,287,979.32 Prepayments 1,569,369,035.86 1,072,990,234.05 Other receivables 1,573,176,269.30 1,469,573,364.01 16
Inventories 5,226,225,533.10 5,210,917,891.42 INTERIM
Non-current assets due within one year 4,525,169,793.00 2,893,133,653.86 REPORT
Other current assets 10,205,027,704.48 7,582,839,356.54 Total current assets 42,582,016,030.74 35,163,851,340.86 NON-CURRENT ASSETS:
Available-for-sale financial assets 109,000,000.00 109,000,000.00 Long-term receivables 10,682,888,917.02 9,084,087,143.84 Long-term equity investments 63,288,422.01 70,492,256.38 Investment property 15,127,803.85 15,996,931.87 Fixed assets 24,982,941,210.61 24,169,725,529.18 Construction in progress 5,654,059,733.57 5,829,619,258.48 Construction materials 15,391,351.31 14,662,116.76 Intangible assets 1,456,335,471.06 1,462,706,060.63 Goodwill 20,283,787.17 20,283,787.17 Long-term prepaid expenses 161,448,142.38 165,686,946.61 Deferred income tax assets 537,027,243.99 613,229,310.48 Other non-current assets 348,686,098.88 1,242,358,865.33 Total non-current assets 44,046,478,181.85 42,797,848,206.73 Total assets 86,628,494,212.59 77,961,699,547.59
50
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II. Financial Statements(Cont’d)
1. Consolidated Balance Sheet(Cont’d)
Unit: RMB Item Closing balance Opening balance CURRENT LIABILITIES:
Short-term borrowings 28,531,704,325.25 24,755,535,672.86 Bills payable 3,843,491,440.10 3,281,599,412.31 Accounts payable 2,672,610,340.38 2,942,337,386.57 Advance receipts 212,382,889.00 180,504,227.01 Staff remuneration payables 163,713,392.98 205,840,694.03 Taxes payable 204,353,134.05 194,852,483.80 Interest payable 230,076,253.71 150,075,698.23 Dividend payable 580,921,640.10
Other payables 1,035,468,204.63 1,158,567,353.38 Non-current liabilities due within one year 4,286,339,021.25 5,471,286,735.91 Other current liabilities 11,652,566,715.45 10,293,543,297.00 Total current liabilities 53,413,627,356.90 48,634,142,961.10 NON-CURRENT LIABILITIES:
Long-term borrowings 6,195,047,942.07 5,169,381,063.83 16 Bonds payable 3,791,215,868.81 3,788,539,249.59 Long-term payables 1,795,435,500.86 344,000,000.00 INTERIM REPORT Special payables 281,039,716.66 176,983,516.66 Deferred income 1,463,624,001.97 1,495,104,889.26 Other non-current liabilities 1,094,621,421.67 Total non-current liabilities 13,526,363,030.37 12,068,630,141.01 TOTAL LIABILITIES 66,939,990,387.27 60,702,773,102.11OWNERS’ EQUITY:
Share capital 1,936,405,467.00 1,936,405,467.00 Other equity instruments 4,821,550,000.00 2,582,800,000.00 Of which: Preference shares 2,238,750,000.00
Perpetual bonds 2,582,800,000.00 2,582,800,000.00 Capital reserves 6,149,150,177.41 6,149,138,276.81 Other comprehensive income -499,332,134.40 -345,014,864.26 Surplus reserves 1,132,116,106.40 1,132,116,106.40 Retained profit 5,774,292,829.37 5,416,049,598.87 Total equity attributable to equity holders of the company 19,314,182,445.78 16,871,494,584.82 Minority interest 374,321,379.54 387,431,860.66 Totalowners’ equity 19,688,503,825.32 17,258,926,445.48 TOTAL LIABILITIES ANDOWNERS’ EQUITY 86,628,494,212.59 77,961,699,547.59 Legal Representative: Chen HongguoFinancial controller: Dong LianmingHead of the financial department: Li Dong
SHANDONG CHENMING PAPER HOLDINGS LIMITED 51
IX Financial Report
II. Financial Statements(Cont’d)
2. Balance sheet of the Company
Unit: RMB Item Closing balance Opening balance CURRENT ASSETS:
Monetary funds 7,759,995,769.70 5,700,832,345.61 Bills receivable 642,494,704.84 1,279,192,805.78 Accounts receivable 3,077,142,500.14 2,054,668,707.47 Prepayments 1,010,186,691.28 354,158,061.49 Interest receivable 2,350,760.36
Dividends receivable 200,000,000.00 200,000,000.00 Other receivables 25,815,266,155.40 23,168,599,276.40 Inventories 822,615,802.07 770,515,314.04 Non-current assets due within one year 900,000,000.00
Other current assets 44,180,954.64 Total current assets 40,230,052,383.79 33,572,147,465.43 NON-CURRENT ASSETS:
Available-for-sale financial assets 73,000,000.00 73,000,000.00 Long-term equity investments 13,526,913,608.16 13,526,953,706.49 16
Investment property 15,127,803.85 15,996,931.87 INTERIM Fixed assets 3,375,035,573.45 3,494,527,564.35 REPORT
Construction in progress 65,595,314.91 39,945,237.44 Construction materials 1,445,766.52 1,480,399.83 Intangible assets 304,774,755.95 308,890,444.95 Deferred income tax assets 180,340,981.36 146,800,984.93 Other non-current assets 900,000,000.00 Total non-current assets 17,542,233,804.20 18,507,595,269.86 Total assets 57,772,286,187.99 52,079,742,735.29 CURRENT LIABILITIES:
Short-term borrowings 7,903,828,909.20 7,288,876,600.43 Bills payable 2,535,000,000.00 1,095,500,000.00 Accounts payable 925,129,538.66 952,024,758.38 Advance receipts 1,685,736,617.64 735,151,335.79 Staff remuneration payables 65,386,622.05 84,950,702.67 Taxes payable 37,501,207.92 37,964,445.54 Interest payable 230,076,253.71 150,075,698.23 Dividend payable 580,921,640.10
Other payables 3,753,483,078.96 4,342,643,198.14 Non-current liabilities due within one year 3,318,633,543.11 4,339,346,982.33 Other current liabilities 11,652,566,715.45 10,293,543,297.00 Total current liabilities 32,688,264,126.80 29,320,077,018.51
52
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II. Financial Statements(Cont’d)
2. Balance sheet of the Company(Cont’d)
Unit: RMB Item Closing balance Opening balance NON-CURRENT LIABILITIES:
Long-term borrowings 1,541,012,766.29 1,051,891,417.64 Bonds payable 3,791,215,868.81 3,788,539,249.59 Long-term payables 1,199,435,500.86
Deferred income 58,743,385.05 61,468,322.53 Other non-current liabilities 1,094,621,421.67 Total non-current liabilities 6,590,407,521.01 5,996,520,411.43 TOTAL LIABILITIES 39,278,671,647.81 35,316,597,429.94OWNERS’ EQUITY:
Share capital 1,936,405,467.00 1,936,405,467.00 Other equity instruments 4,821,550,000.00 2,582,800,000.00 Of which: Preference shares 2,238,750,000.00
Perpetual bonds 2,582,800,000.00 2,582,800,000.00 Capital reserves 5,938,852,560.70 5,938,840,660.10 Surplus reserves 1,119,926,524.49 1,119,926,524.49 16 Retained profit 4,676,879,987.99 5,185,172,653.76 INTERIM REPORT Totalowners’ equity 18,493,614,540.18 16,763,145,305.35 TOTAL LIABILITIES ANDOWNERS’ EQUITY 57,772,286,187.99 52,079,742,735.29
SHANDONG CHENMING PAPER HOLDINGS LIMITED 53
IX Financial Report
II. Financial Statements(Cont’d)
3. Consolidated Income Statement
Unit: RMB Amounts for Amounts for Item the reporting period the prior period I. Total revenue 10,606,358,733.02 9,718,697,677.76 Including: Revenue 10,606,358,733.02 9,718,697,677.76 II. Total operating costs 9,622,587,179.13 9,407,786,957.20 Including: Operating costs 7,263,967,310.23 7,370,384,661.31 Business taxes and surcharges 85,488,437.29 51,233,976.66 Sales expenses 573,734,657.05 551,073,823.71 Administrative expenses 694,013,827.38 654,253,969.26 Finance expenses 968,343,561.61 745,472,279.11 Loss on impairment of assets 37,039,385.57 35,368,247.15 Plus: Gain on change in fair value (“-” denotes loss) -10,599,543.68 -2,177,906.88 Investment income (“-” denotes loss) 37,008,429.78 46,632,746.32 Including: Investment income from associates
and joint ventures -7,203,834.37 -2,145,031.45 Foreign exchange gains (“-” denotes loss)
III. Operating profit (“-” denotes loss) 1,010,180,439.99 355,365,560.00 16 Plus: Non-operating income 228,908,354.31 75,090,038.49 Including: Gain on disposal of non-current assets 2,416,628.05 7,042,678.94 INTERIM
REPORT Less: Non-operating expenses 6,002,982.36 3,331,029.84 Including: Loss on disposal of non-current assets 4,043,314.21 2,683,749.34 IV. Total profit (“-” denotes total loss) 1,233,085,811.94 427,124,568.65 Less: Income tax expenses 307,031,422.46 173,411,302.61 V. Net profit (“-” denotes net loss) 926,054,389.48 253,713,266.04 Net profit attributable to owners of the Company 939,164,870.60 276,388,070.51 Minority interest -13,110,481.12 -22,674,804.47 VI. Other comprehensive income after tax, net -154,317,270.14 16,017,289.88 Other comprehensive income after tax attributable to
owners of the Company, net -154,317,270.14 16,017,289.88 (II) Other comprehensive income that will not be reclassified
to profit and loss in subsequent periods -154,317,270.14 16,017,289.88 5. Translation difference of financial statements denominated
in foreign currency -154,317,270.14 16,017,289.88 VII. Total comprehensive income 771,737,119.34 269,730,555.92 Total comprehensive income attributable to owners of the Company 784,847,600.46 292,405,360.39 Total comprehensive income attributable to minority interest -13,110,481.12 -22,674,804.47 VIII. Earnings per share:
(I) Basic earnings per share 0.45 0.14 (II) Diluted earnings per share 0.45 0.14 Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Li Dong
54
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II. Financial Statements(Cont’d)
4. Income Statement of the Company
Unit: RMB Amounts for Amounts for Item the reporting period the prior period I. Revenue 3,404,907,928.96 3,168,439,943.39 Less: Operating costs 2,749,395,766.42 2,599,359,718.51 Business taxes and surcharges 13,030,965.17 13,228,944.39 Selling expenses 128,062,939.31 132,390,470.24 Administrative expenses 267,555,727.82 247,053,467.37 Finance expenses 490,569,574.44 655,455,057.16 Loss on impairment of assets 1,356,150.48 613,708.24 Plus: Gain on change in fair value (“-” denotes loss)
Investment income (“-” denotes loss) 244,172,165.82 409,332,599.58 Including: Investment income from associates
and joint ventures -40,098.33 -347,400.41 II. Operating profit (“-” denotes loss) -891,028.86 -70,328,822.94 Plus: Non-operating income 40,001,738.10 4,623,094.90 Including: Gain on disposal of non-current assets 373,450.11 2,762,502.62 Less: Non-operating expenses 21,731.34 2,075,816.44 Including: Loss on disposal of non-current assets 21,731.34 1,922,928.98 16 III. Total profit (“-” denotes total loss) 39,088,977.90 -67,781,544.48 INTERIM Less: Income tax expenses -33,539,996.43 -73,979,233.89 REPORT IV. Net profit (“-” denotes net loss) 72,628,974.33 6,197,689.41 V. Other comprehensive income after tax, net
VI. Total comprehensive income 72,628,974.33 6,197,689.41 VII. Earnings per share:
(I) Basic earnings per share — — (II) Diluted earnings per share — —
SHANDONG CHENMING PAPER HOLDINGS LIMITED 55
IX Financial Report
II. Financial Statements(Cont’d)
5. Consolidated cash flow statement
Unit: RMB Amounts for Amounts for Item the reporting period the prior period I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 11,293,635,802.59 9,898,058,035.83 Tax rebates received 3,612,601.13
Cash received relating to other operating activities 390,470,872.96 571,126,879.30 Subtotal of cash inflows from operating activities 11,687,719,276.68 10,469,184,915.13 Cash paid for goods and services 6,247,052,235.36 7,576,299,500.64 Cash paid to and for employees 486,900,606.26 440,902,131.38 Payments of taxes 631,814,661.29 479,492,280.63 Cash paid relating to other operating activities 7,019,461,626.81 4,195,246,637.21 Subtotal of cash outflows from operating activities 14,385,229,129.72 12,691,940,549.86 Net cash flows from operating activities -2,697,509,853.04 -2,222,755,634.73 II. Cash flows from investing activities:
16
Cash received from investments 100,000,000.00 INTERIM
REPORT Cash received from investment income 45,750,000.00
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 213,406.40 111,852.36 Cash received relating to other investing activities 104,056,200.00 31,438,021.33 Subtotal of cash inflows from investing activities 150,019,606.40 131,549,873.69 Cash paid for purchase of fixed assets, intangible assets
and other long-term assets 990,227,873.52 947,028,823.98 Cash paid on investments 386,000,000.00 Subtotal of cash outflows from investing activities 990,227,873.52 1,333,028,823.98 Net cash flows from investing activities -840,208,267.12 -1,201,478,950.29
56
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II. Financial Statements(Cont’d)
5. Consolidated cash flow statement(Cont’d)
Unit: RMB Amounts for Amounts for Item the reporting period the prior period III. Cash flows from financing activities:
Cash received from borrowings 23,019,156,541.90 17,281,871,535.62 Cash received relating to other financing activities 12,132,838,789.75 3,585,600,000.00 Subtotal of cash inflows from financing activities 35,151,995,331.65 20,867,471,535.62 Cash repayments of amounts borrowed 19,068,968,880.27 15,175,740,399.14 Cash paid for dividend and profit distribution or interest payment 786,313,234.84 771,500,046.59 Cash paid relating to other financing activities 10,071,692,038.29 1,767,785,037.29 Subtotal of cash outflows from financing activities 29,926,974,153.40 17,715,025,483.02 Net cash flows from financing activities 5,225,021,178.25 3,152,446,052.60 IV. Effect of foreign exchange rate changes on cash and cash equivalents -7,969,200.70 20,869,712.49 V. Net increase in cash and cash equivalents 1,679,333,857.39 -250,918,819.93 Plus: Balance of cash and cash equivalents
16 as at the beginning of the period 1,888,107,493.76 976,096,861.30 INTERIM REPORT VI. Balance of cash and cash equivalents as at the end of the period 3,567,441,351.15 725,178,041.37
SHANDONG CHENMING PAPER HOLDINGS LIMITED 57
IX Financial Report
II. Financial Statements(Cont’d)
6. Cash flow statement of the Company
Unit: RMB Amounts for Amounts for Item the reporting period the prior period I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 3,582,406,689.02 3,565,908,328.69 Cash received relating to other operating activities 79,542,569.75 81,122,254.98 Subtotal of cash inflows from operating activities 3,661,949,258.77 3,647,030,583.67 Cash paid for goods and services 3,315,453,666.09 1,806,037,967.56 Cash paid to and for employees 202,298,099.22 190,552,619.28 Payments of taxes 83,292,921.05 61,089,661.71 Cash paid relating to other operating activities 127,733,680.37 73,119,210.01 Subtotal of cash outflows from operating activities 3,728,778,366.73 2,130,799,458.56 Net cash flows from operating activities -66,829,107.96 1,516,231,125.11 II. Cash flows from investing activities:
Cash received from investments 300,000,000.00 16
Cash received from return on investments 245,750,000.00 903,625.62 INTERIM
REPORT Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 93,406.40 140.00 Cash received relating to other investing activities 21,611,333.23 Subtotal of cash inflows from investing activities 245,843,406.40 322,515,098.85 Cash paid for purchase of fixed assets, intangible
assets and other long-term assets 31,377,557.00 50,797,899.17 Cash paid on investments 459,143,400.00 Subtotal of cash outflows from investing activities 31,377,557.00 509,941,299.17 Net cash flows from investing activities 214,465,849.40 -187,426,200.32
58
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II. Financial Statements(Cont’d)
6. Cash flow statement of the Company(Cont’d)
Unit: RMB Amounts for Amounts for Item the reporting period the prior period III. Cash flows from financing activities:
Cash received from borrowings 15,208,998,560.00 5,161,426,356.80 Cash received relating to other financing activities 10,733,403,288.89 3,585,600,000.00 Subtotal of cash inflows from financing activities 25,942,401,848.89 8,747,026,356.80 Cash repayments of amounts borrowed 14,730,286,609.26 8,803,455,745.75 Cash paid for dividend and profit distribution or interest payment 322,578,000.95 370,381,029.51 Cash paid relating to other financing activities 10,675,743,122.70 883,402,412.60 Subtotal of cash outflows from financing activities 25,728,607,732.91 10,057,239,187.86 Net cash flows from financing activities 213,794,115.98 -1,310,212,831.06 IV. Effect of foreign exchange rate changes on cash and cash equivalents -15,526,949.47 19,785,229.09 V. Net increase in cash and cash equivalents 345,903,907.95 38,377,322.82 Plus: Balance of cash and cash equivalents
16 as at the beginning of the period 49,438,736.95 40,590,357.33 INTERIM REPORT VI. Balance of cash and cash equivalents as at the end of the period 395,342,644.90 78,967,680.15
SHANDONG CHENMING PAPER HOLDINGS LIMITED 59
IX Financial Report
16
INTERIM
REPORT
60
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16 INTERIM REPORT
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16
INTERIM
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16 INTERIM REPORT
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IX Financial Report
III. General Information of the Company
Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”) was incorporated in May 1993 in Shouguang City, Shandong Province, with its headquarters at No. 2199 Nongsheng Road East, Shouguang City, Shandong Province.
The Company and its subsidiaries are principally engaged in processing and sale of paper products (including machine made paper and paper board), paper making raw materials and machinery; generation and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber; manufacturing, processing and sale of wood products; and manufacturing and sale of laminated boards and fortified wooden floorboards, hotel service, marine engineering project investment, equipment financial and operating leasing, etc.
The financial statements were considered, approved and issued by the Board of the Company on 24 August 2016. Subsidiaries of the Company included in the scope of consolidation for the first half of 2016 totalled 51. For details, please refer to this Note IX “Equity in other entities”.
IV. Basis of Preparation of the Financial Statements
1. Basis of preparation
TheCompany’s financial statements are prepared on a going concern basis and based on actual transactions and events, in accordance with the accounting standards for business enterprises promulgated by the Ministry of Finance of PRC ((Order of Ministry of Finance No. 33 Issue and Order of Ministry of Finance No. 76 Amendment) and 41 specific accounting standards as promulgated and amended on and after February 15 2006, the application guidelines of the Accounting Standards for Business Enterprises, interpretations and other related rules of the Accounting Standards for 16
Business Enterprises (hereinafter referred to as “ASBEs”), and the disclosure requirements of the “Regulation on the INTERIM Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial REPORT
Reports” (revised in 2015) of China Securities Regulatory Commission.
TheCompany’s financial statements have been prepared on an accrual basis in accordance with the ASBEs. Except for certain financial instruments and consumable biological assets, the financial statements are prepared under the historical cost convention. In the event that depreciation of assets occurs, a provision for impairment is made accordingly in accordance with the relevant regulations.
2. Going concern
No facts or circumstances comprise a material uncertainty about theCompany’s going concern basis within 12 months since the end of the reporting period.
V. Significant Accounting Policies and Accounting Estimates
1. Statement of Compliance with the Accounting Standards for Business Enterprises
The financial statements have been prepared by the Company in conformity with the ASBEs, which truly and fully reflect the financial position of the Company as at 30 June 2016 and relevant information such as the operating results and cash flows of the consolidated entity and the Company for the first half of 2016. In addition, the financial statements of the Company also comply with, in all material respects, the disclosure requirements of the “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” revised by the China Securities Regulatory Commission in 2014 and the notes thereto.
2. Accounting period
The accounting periods of the Company are divided into annual periods and interim periods. Interim periods refer to reporting periods that are shorter than a full accounting year. The accounting year of the Company is from 1 January to 31 December of each calendar year.
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IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
3. Operating cycle
Ordinary operating cycle refers to the period from acquisition of assets used for processing by the Company until their realisation in cash or cash equivalents. The operating cycle of the Company lasts for 12 months, and acts as an indicator for classification of liquidity of assets and liabilities.
Our subsidiaries, including Zhanjiang Chenming Arboriculture Co., Ltd., Yangjiang Chenming Arboriculture Co., Ltd., Nanchang Chenming Arboriculture Co., Ltd., Huanggang Chenming Arboriculture Co., Ltd. and Chenming Arboriculture Co., Ltd., were engaged in arboriculture cultivating, plantation and sale. Their ordinary operating cycle lasts for over 1 year.
4. Reporting currency
The Company and its domestic subsidiaries recognise RMB as their reporting currency according to the primary economic environment in which they operate. The reporting currency of the Company and its domestic subsidiaries is Renminbi (“RMB”). Overseas subsidiaries of the Company recognise U.S. dollar (“USD” or“US$”), Japanese yen (“JPY”) and Euro (“EUR”) as their respective reporting currency according to the general economic environment in which these subsidiaries operate. The Company prepares its financial statements in RMB.
5. Accounting treatment(s) of business combination under common control and not under common control Business combinations refer to the transactions or events in which two or more separate enterprises merged as a single reporting entity. Business combinations are divided into business combination under common control and not under common control. 16 INTERIM REPORT (1) Business combination under common control
A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties before and after the combination, and that control is not transitory. The party that, on the combination date, obtains control of another enterprise participating in the combination is the absorbing party, while that other enterprise participating in the combination is a party being absorbed. The combination date is the date on which one combining enterprise effectively obtains control of the other combining enterprises.
Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the combination date as recorded by the party being merged. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination (or the aggregate nominal value of shares issued as consideration) is charged to the capital reserve (share capital premium). If the capital reserve (share capital premium) is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.
Cost incurred by the absorbing party that is directly attributable to the business combination shall be charged to profit or loss in the period in which they are incurred.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 65
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
5. Accounting treatment(s) of business combination under common control and not under common control(Cont’d)
(2) Business combination not under common control
A business combination not involving enterprises under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties before and after the combination. For a business combination not involving enterprises under common control, the party that, on the acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that other enterprise participating in the combination is the acquiree. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
For business combination involving entities not under common control, the cost of a business combination is the aggregate of the fair values, on the date of acquisition, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer to be paid by the acquirer, in exchange for control of the acquire plus agency fee such as audit, legal service and evaluation consultation and other management fees charged to the profit or loss for the period when incurred. As equity or debt securities are issued by the acquirer as consideration, any attributable transaction cost is included their initial costs. Involved contingent consideration charged to the combination cost according to its fair value on the acquisition date, the combined goodwill be will be adjusted if new or addition evidence existed about the condition in the acquisition date within twelve months after the acquisition date, which is required to adjust the contingent consideration. The combination cost incurred by the acquirer and the identifiable net assets acquired from the combination are measured at their fair values. Where the cost of a business combination exceeds theacquirer’s interest in the fair value of theacquiree’s identifiable net 16
assets on the acquisition date, the difference is recognised as goodwill. Where the cost of a business combination INTERIM is less than theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the acquirer shall first REPORT
reassess the measurement of the fair value of theacquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of combination. If after such reassessment the cost of combination is still less than theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the difference is charged to profit or loss for the period.
In relation to the deductible temporary difference acquired from the acquiree, which was not recognised as deferred tax assets due to non-fulfilment of the recognition criteria at the date of the acquisition, if new or further information that is obtained within 12 months after the acquisition date indicates that related conditions at the acquisition date already existed, and that the implementation of the economic benefits brought by the deductible temporary difference of the acquiree can be expected, the relevant deferred tax assets shall be recognised and goodwill shall be deducted. When the amount of goodwill is less than the deferred tax assets that shall be recognised, the difference shall be recognised in the profit or loss of the period. Except for the above circumstances, deferred tax assets in relation to business combination are recognised in the profit or loss of the period.
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IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
5. Accounting treatment(s) of business combination under common control and not under common control(Cont’d)
(2) Business combination not under common control(Cont’d)
For a business combination not under common control is finished by a stage-up approach with several transactions, these several transactions will be judged whether they belong to “transactions in a basket” in accordance with the judgement standards on “transactions in a basket” as set out in the Notice of the Ministry of Finance on Issuing Accounting Standards for Business Enterprises Interpretation No. 5 (Cai Kuai[2012] No. 19) and “Accounting Standard for Business Enterprises No. 33– Consolidated Financial Statements” (see Note V. 6 (2)). If they belong to “transactions in a basket”, they are accounted for with reference to the descriptions as set out in the previous paragraphs of this section and Note V. 13 “Long-term equity investments”, and if they do not belong to “transactions in a basket”, they are accounted for in separate financial statements and consolidated financial reports:
In separate financial statements, the initial equity investment cost is the aggregate of the carrying amount of the equity investment in the acquiree held prior to the acquisition date and the investment cost newly added as at the acquisition date. In respect of any other comprehensive income attributable to the equity interest in the acquiree prior to the acquisition date, other comprehensive income is accounted for on the same accounting treatment as direct disposal of relevant asset or liability by the acquiree at the time of disposal (i.e. to be transferred to investment income for the period, except for the changes arising from re-measuring net assets or net liabilities of defined benefit plan using the equity method attributable to the acquiree).
In consolidated financial statements, the equity interest in the acquiree held prior to the acquisition date is 16 remeasured at fair value as at the acquisition date, and the difference between the fair value and the carrying INTERIM amount is recognised as investment income for the current period. In respect of any other comprehensive income REPORT attributable to the equity interest in the acquiree held prior to the acquisition date, other comprehensive income is accounted for on the same accounting treatment as direct disposal of relevant asset or liability by the acquiree (i.e. to be transferred to investment income at the acquisition date, except for the changes arising from re- measuring net assets or net liabilities of defined benefit plan using the equity method attributable to the acquiree) is transferred to investment income in the period of the acquisition date.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 67
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
6. Preparation of consolidated financial statements
(1) Basis for principle of determining the scope of consolidated financial statements
The scope of consolidation of the consolidated financial statements is determined on the basis of control. The term “control” refers to the fact that the Company has power over the investee and is entitled to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of those returns. The scope of consolidation includes the Company and all of its subsidiaries. A subsidiary is an entity controlled by the Company.
The Company will conduct reassessment in the event there are changes in actual condition and situation causing changes in relevant elements involved in the definition of control above.
(2) Basis for preparation of the consolidated financial statements
Subsidiaries are consolidated from the date on which the Company obtains net assets and the effective control of decision making of production and operation and are deconsolidated from the date that such control ceases. For disposal of subsidiaries, the operating results and cash flows of such subsidiaries before the date of disposal are properly included into the consolidated income statement and consolidated cash flow statements; for disposal of subsidiaries during the reporting period, no adjustment shall be made to the opening balance of the consolidated balance sheet. For those subsidiaries acquired through business combination not under common control, the operating results and cash flows after the acquisition date have been properly included in the consolidated income statements and consolidated cash flow statements. No adjustments shall be made to the opening balance of the consolidated balance sheet and the comparative consolidated financial statements amount. For those subsidiaries 16
acquired through business combination under common control, the operating results and cash flows from the INTERIM beginning of the consolidation period to the consolidation date are also presented in the consolidated income REPORT
statement and the consolidated cash flow statements. The comparative amounts presented in the consolidated financial statements are also adjusted accordingly.
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IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
6. Preparation of consolidated financial statements(Cont’d)
(2) Basis for preparation of the consolidated financial statements(Cont’d)
The financial statements of the subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Company in the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and the subsidiaries. For acquisition of subsidiaries arising from merger of entities not under same control, the financial statements of the subsidiaries will be adjusted according to the fair value of the identifiable net assets.
All intra-company significant balances, transactions and unrealised profit are eliminated in the consolidated financial statements.
Theshareholders’ equity and the portion of the profit or loss for the period that is not attributable to the Company are presented separately undershareholders’ equity and net profit in the consolidated financial statements. The portion of net profit or loss of subsidiaries for the period attributable to minority interest is presented in the consolidated income statement under the “net profit” line item as “minority interest”. When the amount of loss attributable to the minority shareholders of a subsidiary exceeds the minorityshareholders’ portion of the opening balance ofowners’ equity of the subsidiary, the excess amount shall be allocated against minority interest. For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons, the remaining equity is measured at fair value on the date when the control is lost. The difference arising from the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest over the share of net assets of the former subsidiary calculated continuously since the purchase date based on the 16 shareholding percentage before disposal are recognised as investment income in the period when the control is lost. Other comprehensive income related to equity investment in the subsidiary is accounted for on the same INTERIM REPORT accounting treatment as direct disposal of relevant asset or liability by the acquiree at the time when the control is lost (i.e. to be transferred to investment income, except for the changes arising from re-measuring net assets or net liabilities of defined benefit plan of the subsidiary using the equity method). The remaining equity interests are measured subsequently according to “Accounting Standard for Business Enterprises No. 2– Long-term Equity Investments” or “Accounting Standard for Business Enterprises No. 22– Recognition and Measurement of Financial Instruments”. See Note V. 13 “Long-term equity investments” or Note V. 10 “Financial instruments” for details.
When the Company disposes of equity investment in a subsidiary by a stage-up approach with several transactions until the control over the subsidiary is lost, it shall determine whether these several transactions related to the disposal of equity investment in a subsidiary until the control over the subsidiary is lost belong to “transactions in a basket”. Usually, these several transactions related to the disposal of equity investment in a subsidiary are accounted for as transactions in a basket when the terms, conditions and economic impacts of these several transactions meet the following one or more conditions: (i) these transactions are entered into at the same time or after considering their impacts on each other; (ii) these transactions as a whole can reach complete business results; (iii) the occurrence of a transaction depends on at least the occurrence of an other transaction; (iv) an individual transaction is not deemed as economic, but is deemed as economic when considered with other transactions. If they are not transactions in a basket, each of which are accounted for in accordance with applicable rules in “partial disposal of long-term equity investment of a subsidiary without losing control over a subsidiary” (see Note V. 13 (2)④) separately, and “the control over a subsidiary is lost due to partial disposal of equity investment or other reasons” (see the preceding paragraph). When several transactions related to the disposal of equity investment in a subsidiary until the control over the subsidiary is lost belong to transactions in a basket, each of which is accounted for as disposal of a subsidiary with a transaction until the control over a subsidiary is lost; however, the different between the amount of disposal prior to the loss of control and the net assets of a subsidiary attributable to the disposal investment shall be recognised as other comprehensive income in consolidated financial statements and transferred to profit or loss at the time when the control is lost.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 69
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
7. Classification of joint arrangements and accounting treatment for joint ventures
A joint arrangement refers to an arrangement of two or more parties have joint control. In accordance with theCompany’s rights and obligations under a joint arrangement, the Company classifies joint arrangements into: joint ventures and joint operations. Joint operations refer to a joint arrangement during which the Company is entitled to relevant assets and obligations of this arrangement. Joint ventures refer to a joint arrangement during which the Company only is entitled to net assets of this arrangement.
The Company treats investments in joint ventures by using the equity method of accounting in accordance with accounting policies as set out in Note V.13. (2)②“long-term equity investments by using equity method of accounting”. The Company shall, as a joint venture, recognise the assets held and obligations assumed solely by the Company, and recognise assets held and obligations assumed jointly by the Company in appropriation to the share of the Company; recognise revenue from disposal of the share of joint operations of the Company; recognise fees solely occurred by Company and recognise fees from joint operations in appropriation to the share of the Company.
When the Company, as a joint venture, invests or sells assets (the assets does not constitute a business, the same below) to or purchase assets from joint operations, the Company shall only recognise the part of profit or lost from this transaction attributable to other parties of joint operations before these assets are sold to the third party. If the occurrence of these assets meet the impairment loss of asset as set out in “Accounting Standard for Business Enterprises No. 8– Asset Impairment”, the Company shall recognise the full amount of this loss in relation to the Company invests in or sells assets to joint operations; the Company recognise the loss according to theCompany’s share of commitment in relation to the Company purchase assets from joint operations.
16
8. Standards for recognising cash and cash equivalents
INTERIM
REPORT
Cash and cash equivalents of the Company include cash on hand, deposits readily available for payment purpose and short-term (normally fall due within three months from the date of acquisition) and highly liquid investments held the Company which are readily convertible into known amounts of cash and which are subject to insignificant risk of value change.
9. Foreign currency operations and translation of statements denominated in foreign currency
(1) Basis for translation of foreign currency transactions
The foreign currency transactions of the Company, when initially recognised, are translated into functional currency at the prevailing spot exchange rate on the date of exchange, i.e. the middle price of RMB exchange rate published by thePeople’s Bank of China on that date in general and the same hereinafter, while the foreign currency exchange operations and transactions in connection with foreign currency exchange shall be translated into functional currency at the exchange rate actually adopted.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
9. Foreign currency operations and translation of statements denominated in foreign currency(Cont’d) (2) Basis for translation of foreign currency monetary items and foreign currency non-monetary items
On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. All differences are included in the profit or loss in the period, except for:①the differences arising from foreign currency borrowings related to the acquisition or construction of fixed assets that are qualified for capitalisation will be accounted for according to the principle of capitalisation; and② exchange difference arising from change in balance of carrying amount other than amortised cost of available for sale foreign monetary items will be included in other comprehensive income.
Exchange differences arising from change in exchange rate where the preparation of consolidated financial statements relates to foreign operations and foreign currency monetary items materially constitute net investment in foreign operations shall be recorded into “other comprehensive income”; disposal of foreign operations shall be included into profits and losses on disposal in the current period.
The foreign currency non-monetary items measured at historical cost shall still be measured by the functional currency translated at the spot exchange rate on the date of the transaction. Foreign currency non-monetary items measured at fair value are translated at the spot exchange rate on the date of determination of the fair value. The difference between the amounts of reporting currency before and after the translation will be treated as changes in fair value (including changes in foreign exchange rates) and recognised in profit or loss for the period or recognised as other comprehensive income.
(3) Basis for translation of foreign currency financial statements
16 Exchange differences arising from change in exchange rate where the preparation of consolidated financial INTERIM REPORT statements relates to foreign operations and foreign currency monetary items materially constitute net investment in foreign operations shall be recorded into “other comprehensive income” under “translation reserve”; disposal of foreign operations shall be included into profits and losses on disposal in the current period.
The financial statements denominated in foreign currency of a foreign operation are translated to RMB in compliance with the following requirements: assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date;owner’s equity items except for “retained profit” are translated at the spot exchange rates at the dates on which such items arose; income and expenses items in the income statement are translated at the spot exchange rate at the date of transaction. The retained profit brought forward are reported at the prioryear’s closing balance; the retained profit as at the end of the year are presented after translated the profit appropriation items; differences between the aggregate of asset and liability items andowners’ equity items are recognised as “translation differences arising on the translation of financial statements denominated in foreign currencies” in other comprehensive income. On disposal of foreign operations and loss of control, exchange differences arising from the translation of financial statements denominated in foreign currencies related to the disposed foreign operations which has been included inowners’ equity in the balance sheet, shall be transferred to profit or loss in whole or in proportionate share in the period in which the disposal took place.
Cash flow dominated in foreign currency or from foreign subsidiaries shall be translated at the spot exchange rate when it incurs. Effects arising from changes of exchange rate of cash shall be presented separately in the cash flow statements.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 71
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
9. Foreign currency operations and translation of statements denominated in foreign currency(Cont’d) (3) Basis for translation of foreign currency financial statements(Cont’d)
The opening balance and the prioryear’s figures are presented according to the translated amounts of the prior year.
On disposal of the entireowners’ equity in a foreign operation of the Company, or upon a loss of control over a foreign operation due to disposal of certain equity investment or other reasons, the Company transfers the exchange differences arising on translation of financial statements of this foreign operation attributable toowners’ equity of parent company presented underowners’ equity in the balance sheet, to profit or loss in the period in which the disposal took place.
In case of partial disposal of equity investment or other reason that result in reduction in shareholding in a foreign operation without losing control over it, the proportionate share of exchange differences arising from the translation of financial statements will be attributable to minority interests and will not recognised in profit or loss. For partial disposals of equity interests in foreign operations which are associates or joint ventures, the proportionate share of the exchange differences arising from the translation of financial statements of foreign operations is reclassified to profit or loss.
10. Financial instruments
Financial asset or financial liability will be recognised when the Company became one of the parties under a financial instrument contract. Financial assets and financial liabilities are initially recognised at fair value, except for equity 16
instruments that are not quoted in an active market, the fair value of which cannot be reliably measured and over INTERIM relevant investees of which the Company does not have control, joint control or significant influence, and debt financing REPORT
instruments subsequently measured at amortised cost using the effective interest method. For financial assets and financial liabilities measured at fair value and whose changes are carried through profit or loss, relevant transaction costs are directly recognised in profit or loss for the period. For financial assets and financial liabilities classified as other categories, relevant transaction costs are included in the amount initially recognised.
(1) Determination of fair values for financial assets and financial liabilities
The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a liability in an orderly transaction between market participants on the date of measurement. Financial instruments exist in an active market. Fair value is determined based on the quoted price in such market. An active market refers to where pricing is easily and regularly obtained from exchanges, brokers, industrial organisations and price fixing service organisations, representing the actual price of a market transaction that takes place in a fair deal. While financial instruments do not exist in an active market, the fair value is determined using valuation techniques. Valuation technologies include reference to be familiar with situation and prices reached in recent market transactions entered into by both willing parties, reference to present fair values of similar other financial instruments, cash flow discounting method and option pricing models.
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IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
10. Financial instruments(Cont’d)
(2) Classification, recognition and measurement of financial assets
Conventionally traded financial assets shall be recognised and derecognised at the trading date. Financial assets shall be classified into loans and accounts receivable, available-for-sale financial assets and others for initial recognition.
① Loans and receivables
They are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets, including bills receivable, accounts receivable, interest receivable, dividends receivable and other receivables are classified as loans and receivables by the Company.
Loans and receivables are measured subsequently at the amortised cost by using the effective interest rate method. Gains or losses incurred at the time of derecognition, impairment or amortisation are charged to profit or loss in the current period.
② Available-for-sale financial assets
Available-for-sale financial assets represent investments in equity instruments, where the Company does not have control, joint control or significant influence over the investee.
Available-for-sale financial assets are subsequently measured at fair value. The gain or loss on change 16 in fair value are recognised as other comprehensive income, except for impairment loss and exchange differences arising from foreign monetary financial assets and amortised cost which are accounted for INTERIM REPORT through profit or loss for the current period. The financial assets will be transferred out of the financial assets on derecognition and accounted for through profit or loss for the current period. However, for investments in equity instruments where there is no control, joint control or significant influence, and no quotation in an active market and reliable measurement of their fair value, their fair values are subsequently measured at cost.
Interests received from available-for-sale financial assets held and the cash dividends declared by the investee are recognised as investment income.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 73
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
10. Financial instruments(Cont’d)
(3) Impairment of financial assets
In addition to financial assets at fair value through profit or loss for the current period, the Company reviews the book value of other financial assets at each balance sheet date and provides for impairment where there is objective evidence that financial assets are impaired.
For a financial asset that is individually significant, the Company assesses the asset individually for impairment. For a financial asset that is not individually significant, the Company assess the asset individually for impairment or include the asset in a group of financial assets with similar credit risk characteristics and collectively assess them for impairment. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether the financial asset is individually significant or not, the financial asset is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Financial assets for which an impairment loss is individually recognised are not included in the collective assessment for impairment.
① Impairment of loans and receivables
The carrying amount of financial assets measured as costs or amortised costs are subsequently reduced to the present value discounted from its projected future cash flow. The reduced amount is recognised as impairment loss and recorded as profit or loss for the period. After recognition of the impairment loss from financial assets, if there is objective evidence showing recovery in value of such financial assets impaired and which is related to any event occurring after such recognition, the impairment loss originally recognised 16
shall be reversed to the extent that the carrying value of the financial assets upon reversal will not exceed INTERIM
REPORT the amortised cost as at the reversal date assuming there is no provision for impairment.
② Impairment of available-for-sale financial assets
In the event that decline in fair value of the available-for-sale equity instrument or fair value of the interest in theinvestee’s identifiable net assets is regarded as “severe decline” or “non-temporary decline” on the basis of comprehensive related factors, it indicates that there is impairment loss of the available-for-sale equity instrument. In particular, “severe decline” refers to decline of over20% in such fair value. “Non-temporary decline” refers to such fair value decreased continuously for more than 12 months. The continuous decreasing period is determined on the basis of the drop of such fair value accumulated over10%. When the available-for-sale financial assets impair, the accumulated loss originally included in the other comprehensive income arising from the decrease in fair value was transferred out and included in the profit or loss for the period. The accumulated loss that transferred out is the balance of the initial acquisition cost of asset, after deduction of the principal recovered, amortised amounts, current fair value and the impairment loss originally included in the profit or loss.
After recognition of the impairment loss, if there is objective evidence showing recovery in value of such financial assets impaired and which is related to any event occurring after such recognition in subsequent periods, the impairment loss originally recognised shall be reversed. The impairment loss reversal of the available-for-sale equity instrument will be recognised as other comprehensive income, and the impairment loss reversal of the available-for-sale debt instrument will be included in the profit or loss for the period. When an equity investment that is not quoted in an active market and the fair value of which cannot be measured reliably, or the impairment loss of a derivative financial asset linked to the equity instrument that shall be settled by delivery of that equity instrument, then it will not be reversed.
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IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
10. Financial instruments(Cont’d)
(4) Recognition and measurement of transfers of financial asset
Financial asset that satisfied any of the following criteria shall be derecognised:① the contract right to receive the cash flows of the financial asset has terminated;② the financial asset, along with substantially all the risk and return arising from the ownership of the financial asset, has been transferred to the transferee; and③ the financial asset has been transferred to the transferee, and the transferor has given up the control on such financial asset, though it does not assign maintain substantially all the risk and return arising from the ownership of the financial asset.
When the entity does not either assign or maintain substantially all the risk and return arising from the ownership of the financial asset and does not give up the control on such financial asset, to the extent of its continuous involvement in the financial asset, the entity recognises such financial asset and the relevant liability accordingly. The extent of the continuous involvement is the extent to which the entity exposes to changes in the value of such financial assets.
If all criteria of recognition of transfer of financial assets are satisfied, the difference between the carrying amounts of the financial assets transferred, the consideration received from the transfer and the accumulated changes in fair value originally include in other comprehensive income shall be recognised in the profit or loss of the period. If a part of the financial assets is qualified for derecognition, the carrying amount of the financial asset is allocated between the part that continues to be recognised and the part that qualifies for derecognition, based on the fair values of the respective parts. The difference between the following amounts is recognised in profit or loss for the 16 period: the sum of the consideration received and the carrying amount of the part that qualifies for derecognition and the aforementioned carrying amount. INTERIM REPORT For financial assets that are sold or transferred with recourse or endorsement, the Company need to determine whether the risk and rewards of ownership of the financial asset have been substantially transferred. If the risk and rewards of ownership of the financial asset have been substantially transferred, the financial assets shall be derecognised. If the risk and rewards of ownership of the financial asset have been retained, the financial assets shall not be derecognised. If the Company neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, the Company shall assess whether the control over the financial asset is retained, and the financial assets shall be accounting for according to the above paragraphs.
(5) Classification and measurement of financial liabilities
Financial liabilities are classified at initial recognition: financial liabilities recognised at fair value with changes carried through profit or loss and other financial liabilities. For financial liabilities measured at fair value with changes recognised in profit or loss of the current period, relevant transaction costs are directly recognised in profit or loss for the period. The amount is recognised initially at fair value and the subsequent changes in fair value will be recognised in profit or loss for the period. For other financial liabilities, relevant transaction costs are included in the amount initially recognised and subsequently measured at amortised cost using the effective interest method, and relevant gain or loss arising from derecognition or amortisation are included in current profit or loss.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 75
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
10. Financial instruments(Cont’d)
(6) Derecognition of financial liabilities
Financial liabilities are derecognised in full or in part only when the present obligation is discharged in full or in part. An agreement is entered between the Company (debtor) and a creditor to replace the original financial liabilities with new financial liabilities with substantially different terms, derecognise the original financial liabilities as well as recognise the new financial liabilities.
When financial liabilities is derecognised in full or in part, the difference between the carrying amount of the financial liabilities derecognised and the consideration paid (including transferred non-cash assets or new financial liability) is recognised in profit or loss for the current period.
(7) Offset of Financial Assets and Financial Liabilities
If the Company owns the legitimate rights of offsetting the recognised financial assets and financial liabilities, which are enforceable currently, and the Company plans to realise the financial assets or to clear off the financial liabilities on a net amount basis or simultaneously, the financial assets and financial liabilities shall be reported in the balance sheet upon offsetting. Otherwise, financial assets and financial liabilities are presented separately in the balance sheet without offsetting.
(8) Equity instruments
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all 16
of its liabilities. The issuance (including refinancing), repurchase, sale or cancellation of equity instruments by the INTERIM Company is accounted for movement in equity. The Company does not recognise the movement in fair value of REPORT
equity instruments. Transaction costs related to equity transactions are deducted from equity.
Various distributions (excluding dividends) made by the Company to holders of equity instruments reducesowners’ equity. The Company does not recognise the movement in fair value of equity instruments.
11. Accounts receivable
Accounts receivable includes accounts receivable and other receivables etc.
(1) Basis for recognition and measurement of bad debt provision
The Company carries out an overall inspection on the carrying amount of accounts receivable on the balance sheet date. Where there arises any of the following objective evidences indicating that accounts receivable have been impaired, an impairment provision will be made:① a serious financial difficulty occurs to the debtor;② the debtor breaches any of the contractual stipulations (such as he fails to pay or delays the payment of interests or the principal);③ the debtor will probably go bankrupt or carry out other financial reorganisations;④ other objective evidences show that the accounts receivable are impaired.
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
11. Accounts receivable(Cont’d)
(2) Method for making bad debt provision
① Recognition standard and method for making bad debt provision individually for individually significant accounts receivable
Accounts receivable of more than RMB1 million is recognised as individually significant accounts receivable by the Company.
For accounts receivable that is individually significant, the Company assesses such accounts receivable individually for impairment. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, the financial asset is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Accounts receivable for which an impairment loss is individually recognised are not included in a group of accounts receivable with similar credit risk characteristics and collectively assessed for impairment.
② Determination and method for making bad debt provision for accounts receivable provided for bad debt by credit risk portfolio
A. Basis for determining the credit risk portfolio
The Company classifies its individually insignificant accounts receivable and individually significant but 16 not impaired accounts receivable in accordance with their credit risk characteristics and relevance of financial assets. These credit risks usually reflect the ability of debtor in repaying all debts due based INTERIM REPORT on the contracted terms of relevant assets, and are related to the forecast on future cash flows of asset under assessment.
Portfolios are determined according to the following basis:
Portfolio Basis for determining the portfolio
Specific fund portfolio A portfolio which is classified as a category on the basis of certain specific accounts receivable
Ageing portfolio A portfolio w hich is classified as a category on the basis of credit risk features such as ageing
SHANDONG CHENMING PAPER HOLDINGS LIMITED 77
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
11. Accounts receivable(Cont’d)
(2) Method for making bad debt provision(Cont’d)
② Determination and method for making bad debt provision for accounts receivable provided for bad debt by credit risk portfolio(Cont’d)
B. Method for making bad debt provision according to credit risk characteristics
When an impairment test is performed by means of a group, bad debt provision will be assessed and ascertained according to the structure of the group of accounts receivable and similar credit risk characteristics(debtors’ ability to settle outstanding amounts based on contracted terms), taking into account historical experience of losses, prevailing economic condition and losses that are expected to incur in the group of accounts receivable.
Method for making bad debt provision for different portfolio:
Specific fund portfolio No bad debt provision provided
Ageing portfolio Ageing analysis
Use of ageing analysis for making bad debt provision in the portfolio:
Ratio of 16
Ratio of other accounts accounts INTERIM
REPORT receivable receivable Ageing provision provision Within 1 year (including 1 year) 5% 5% 1-2 years 10% 10% 2-3 years 20% 20% Over 3 years 100% 100%③ Accounts receivable individually insignificant but provided for bad debt separately
Accounts receivable which are individually insignificant but have the following features are subject to impairment tests separately by the Company. If there is objective evidence indicating that the accounts receivable are impaired, then impairment loss will be recognised and bad debts will be provided according to the difference when the present value of future cash flow is lower than its carrying amounts, such as accounts receivable with dispute against counterparties or involved in litigation or arbitration; there is obvious objective of the accounts receivable indicated that the debtor is likely to fail to comply with the repayment obligation, etc.
(3) Reversal of provision for bad debts
If there are evidences indicating that the value of the account receivable is recovered and that recovery is connected to the event subsequent to the recognition of the loss, the impairment loss previously recognised will be reversed and recorded into profit or loss for the period. However, the carrying amount so reversed shall not exceed the amortised cost of the account receivable on the date of reversal on the assumption that no impairment loss has been made.
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
12. Inventories
(1) Classification of inventories
Inventories mainly include raw materials, work in progress, goods in stock, developing products and consumable biological assets etc.
(2) Pricing of inventories received and dispatched
Inventories are measured at their actual cost when obtained. Cost of an inventory consists of purchase costs, processing costs and other costs. When used and dispatched, inventories will be calculated with weighted average method.
The developing products of land development companies under the Company are initially measured at cost. The costs of developing products include preconstruction costs, expenditures for auxiliary facilities, expenses on construction and installation, borrowing costs incurred before the completion of the subject project and other related expenses during the course of the development. Once the inventories are delivered, the actual costs will be determined using specific measurement methods.
Consumable biological assets refer to biological assets held for sale which include growing timber. Consumable biological assets without a stock are stated at cost at initial recognition, and subsequently measured at fair value when there is a stock. Changes in fair values shall be recognised as profit or loss in the current period. The cost of self-planting, self-cultivating consumable biological assets is the necessary expenses directly attributable to such assets prior to canopy closure, including borrowing costs eligible for capitalisation. Subsequent expenses such as 16 maintenance cost incurred after canopy closure shall be included in profit or loss for the current period. INTERIM The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carrying REPORT value using the batch averaging method.
(3) Recognition of net realisable value of inventory and provision for inventory impairment
Net realisable value refers to the amount of the estimated price of inventories less the estimated cost incurred upon completion, estimated sales expenses and taxes and levies in daily operation. The realisable value of inventories shall be determined on the basis of definite evidence, purpose of holding the inventories and effect of after-balance-sheet-date events.
At the balance sheet date, inventories are calculated at the lower of cost and net realisable value. Usually, provision for inventory impairment is made when the net realisable value is lower than the cost. Provisions for impairment of inventory shall be made according to the amount by which the cost of a single item exceeds its net realisable value. For large quantity and low value items of inventories, provision may be made based on categories of inventories. For items of inventories relating to a product line that is produced and marketed in the same geographical area and with the same or similar end uses or purposes, which cannot be practicable evaluated separately from other items in that product line, provision for decline in value of inventories may be determined on an aggregate basis.
After making the provision for inventory impairment, in case the factors causing inventory impairment no longer exists, and the net realisable value of an inventory is higher than its book-value, the original provision for inventory impairment shall be transferred back and incorporated into the profit or loss for the current period.
(4) We implement permanent inventory system as our inventory stock taking system.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 79
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
13. Long-term equity investments
Long-term equity investments under this section refer to long-term equity investments in which the Company has control, joint control or significant influence over the investee. Long-term equity investment without control or joint control or significant influence of the Company is accounted for as available-for-sale financial assets or financial assets measured at fair value with any change in fair value charged to profit or loss. Details on its accounting policy please refer to Note V. 10. “Financial instruments”.
Joint control is theCompany’s contractually agreed sharing of control over an arrangement, which relevant activities of such arrangement must be decided by unanimously agreement from parties who share control. Significant influence is the power of the Company to participate in the financial and operating policy decisions of an investee, but to fail to control or joint control the formulation of such policies together with other parties.
(1) Determination of investment cost
For a long-term equity investment acquired through a business combination involving enterprises under common control, the initial investment cost of the long-term equity investment shall be the absorbingparty’s share of the carrying amount of theowner’s equity under the consolidated financial statements of the ultimate controlling party on the date of combination. The difference between the initial cost of the long-term equity investment and the cash paid, non-cash assets transferred as well as the book value of the debts borne by the absorbing party shall offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. If the consideration of the merger is satisfied by issue of equity securities, the initial investment cost of the long-term equity investment shall be the absorbingparty’s share of the carrying amount of theowner’s equity 16 under the consolidated financial statements of the ultimate controlling party on the date of combination. With the INTERIM
total face value of the shares issued as share capital, the difference between the initial cost of the long-term equity REPORT
investment and total face value of the shares issued shall be used to offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. For business combination resulted in an enterprise under common control by acquiring equity of the absorbing party under common control through a stage-up approach with several transactions, these transactions will be judged whether they shall be treat as “transactions in a basket”. If they belong to “transactions in a basket”, these transactions will be accounted for a transaction in obtaining control. If they are not belong to “transactions in a basket”, the initial investment cost of the long-term equity investment shall be the absorbingparty’s share of the carrying amount of theowner’s equity under the consolidated financial statements of the ultimate controlling party on the date of combination. The difference between the initial cost of the long-term equity investment and the aggregate of the carrying amount of the long-term equity investment before merging and the carrying amount the additional consideration paid for further share acquisition on the date of combination shall offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. Other comprehensive income recognised as a result of the previously held equity investment accounted for using equity method on the date of combination or recognised for available-for-sale financial assets will not be accounted for.
For a long-term equity investment acquired through a business combination involving enterprises not under common control, the initial investment cost of the long-term equity investment shall be the cost of combination on the date of acquisition. Cost of combination includes the aggregate fair value of assets paid by the acquirer, liabilities incurred or borne and equity securities issued. For business combination resulted in an enterprise not under common control by acquiring equity of the acquiree under common control through a stage-up approach with several transactions, these transactions will be judged whether they shall be treat as “transactions in a basket”. If they belong to “transactions in a basket”, these transactions will be accounted for a transaction in obtaining control. If they are not belong to “transactions in a basket”, the initial investment cost of the long- term equity investment accounted for using cost method shall be the aggregate of the carrying amount of equity investment previously held by the acquiree and the additional investment cost. For previously held equity accounted for using equity method, relevant other comprehensive income will not be accounted for. For previously held equity investment classified as available-for-sale financial asset, the difference between its fair value and carrying amount, as well as the accumulated movement in fair value previously included in the other comprehensive income shall be transferred to profit or loss for the current period.
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
13. Long-term equity investments(Cont’d)
(1) Determination of investment cost(Cont’d)
Agent fees incurred by the absorbing party or acquirer for the acquisition such as audit, legal service, and valuation and consultation fees, and other related administration expenses are charged to profit or loss in the current period at the time such expenses incurred.
The long-term equity investment acquired through means other than a business combination shall be initially measured at its cost. Such cost is depended upon the acquired means of long-term equity investments, which is recognised based on the purchase cost actually paid by the Company in cash, the fair value of equity securities issued by the Company, the agreed value of investment contract or agreement, the fair value or original carrying amounts of the non-monetary asset exchange transaction which the asset will be transferred out of the Company, and the fair value of long-term equity investment itself. The costs, taxes and other necessary expenses that are directly attributable to the acquisition of the long-term equity investments are also included in the investment cost. For additional equity investment made in order to obtain significant influence or common control over investee without resulted in control, the relevant cost for long-term equity investment shall be the aggregate of fair value of previously held equity investment and additional investment cost determined according to “Accounting Standard for Business Enterprises No. 22– Recognition and measurement of Financial Instruments”.
(2) Subsequent measurement and method for profit or loss recognition
Long-term equity investments with joint control (excluding those constitute joint ventures) or significant influence on the investee are accounted for using equity method. In addition, long-term equity investments with control on 16 the investee are accounted for using cost method and record in theCompany’s financial statements.
INTERIM REPORT① Long-term equity investments accounted for using the cost method
Under the cost method, a long-term equity investment is measured at its initial investment cost. The cost for long-term equity investment is adjusted in the event of additional investment or investment recovery. Except receiving the actual consideration paid for the investment or the declared but not yet distributed cash dividends or profits which is included in the consideration, investment gains for the period is recognised as the cash dividends or profits declared by the investee.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 81
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
13. Long-term equity investments(Cont’d)
(2) Subsequent measurement and method for profit or loss recognition(Cont’d)
② Long-term equity investments accounted for using the equity method
Under the equity method, where the initial investment cost of a long-term equity investment exceeds theinvestor’s interest in the fair value of theinvestee’s identifiable net assets at the acquisition date, no adjustment shall be made to the initial investment cost. Where the initial investment cost is less than theinvestor’s interest in the fair value of theinvestee’s identifiable net assets at the acquisition date, the difference shall be charged to profit or loss for the current period, and the cost of the long term equity investment shall be adjusted accordingly.
Under the equity method, investment gain and other comprehensive income shall be recognised based on theCompany’s share of the net profits or losses and other comprehensive income made by the investee, respectively. Meanwhile, the carrying amount of long-term equity investment shall be adjusted. The carrying amount of long-term equity investment shall be reduced based on theCompany’s share of profit or cash dividend distributed by the investee. In respect of the other movement of net profit or loss, other comprehensive income and profit distribution of investee, the carrying value of long-term equity investment shall be adjusted and included in the capital reserves. The Company shall recognise its share of theinvestee’s net profits or losses based on the fair values of theinvestee’s individual separately identifiable assets at the time of acquisition, after making appropriate adjustments thereto. In the event of inconformity between the accounting policies and accounting periods of the investee and the Company, 16 the financial statements of the investee shall be adjusted in conformity with the accounting policies and INTERIM
accounting periods of the Company. Investment gain and other comprehensive income shall be recognised REPORT
accordingly. In respect of the transactions between the Company and its associates and joint ventures in which the assets disposed of or sold are not classified as operation, the share of unrealised gain or loss arising from internal transactions shall be eliminated by the portion attributable to the Company. Investment gain shall be recognised accordingly. However, any unrealised loss arising from internal transactions between the Company and an investee is not eliminated to the extent that the loss is impairment loss of the transferred assets. In the event that the Company disposed of an asset classified as operation to its joint ventures or associates, which resulted in acquisition of long-term equity investment by the investor without obtaining control, the initial investment cost of additional long-term equity investment shall be the fair value of disposed operation. The difference between initial investment cost and the carrying value of disposed operation will be fully included in profit or loss for the current period. In the event that the Company sold an asset classified as operation to its associates or joint ventures, the difference between the carrying value of consideration received and operation shall be fully included in profit or loss for the current period. In the event that the Company acquired an asset which formed an operation from its associates or joint ventures, relevant transaction shall be accounted for in accordance with “Accounting Standards for Business Enterprises No. 20 “Business combination”. All profit or loss related to the transaction shall be accounted for.
TheCompany’s share of net losses of the investee shall be recognised to the extent that the carrying amount of the long-term equity investment together with any long-term interests that in substance form part of theinvestor’s net investment in the investee are reduced to zero. If the Company has to assume additional obligations, the estimated obligation assumed shall be provided for and charged to the profit or loss as investment loss for the period. Where the investee is making profits in subsequent periods, the Company shall resume recognising its share of profits after setting off against the share of unrecognised losses.
If there is debit variation in relation to the long-term equity investments in associates and joint venture held prior to first adoption of the Accounting Standards for Business Enterprises by the Company on 1 January 2007, the amounts amortised over the original residual term using the straight-line method is included in the profit or loss for the period.
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
13. Long-term equity investments(Cont’d)
(2) Subsequent measurement and method for profit or loss recognition(Cont’d)
③ Acquisition of minority interest
Upon the preparation of the consolidated financial statements, capital reserve is adjusted based on the difference between the additional long term equity investment from acquisition of minority interest and the share of net assets of the subsidiary attributable to the additional shareholding from the date of acquisition (or date of combination). In the case of insufficient capital surplus to offset impairment, retained earnings shall be adjusted.
④ Disposal of long-term equity investments
In these consolidated financial statements, for disposal of a portion of the long-term equity investments in a subsidiary without loss of control, the difference between disposal cost and disposal of long-term equity investments relative to the net assets of the subsidiary is charged to theowners’ equity. If disposal of a portion of the long-term equity investments in a subsidiary by the parent company results in a loss in control, it shall be accounted for in accordance with the relevant accounting policies as described in Note V. 6. (2) “Preparation Method of the Consolidated Financial Statements”.
On disposal of a long-term equity investment otherwise, the difference between the carrying amount of the investment and the actual consideration paid is recognised through profit or loss in the current period. 16 In respect of long-term equity investment accounted for using equity method with the remaining equity interest after disposal also accounted for using equity method, other comprehensive income previously INTERIM REPORT underowners’ equity shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee on pro rata basis at the time of disposal. Theowners’ equity recognised for the movement of otherowners’ equity (excluding net profit or loss, other comprehensive income and profit distribution of investee) shall be transferred to profit or loss for the current period on pro rata basis.
In respect of long-term equity investment accounted for using cost method with the remaining equity interest after disposal also accounted for using cost method, other comprehensive income recognised using equity method or the recognition and measurement standard of financial instruments before obtaining control over the investee shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee, and transferred to profit or loss for the current period on pro rata basis. Movement of otherowners’ equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of investee accounted for and recognised using equity method) shall be transferred to profit or loss for the current period on pro rata basis.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 83
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
13. Long-term equity investments(Cont’d)
(2) Subsequent measurement and method for profit or loss recognition(Cont’d)
④ Disposal of long-term equity investments(Cont’d)
In the event of loss of control over investee due to partial disposal of equity investment by the Company, in preparing separate financial statements, the remaining equity interest which can apply common control or impose significant influence over the investee after disposal shall be accounted for using equity method. Such remaining equity interest shall be treated as accounting for using equity method since it is obtained and adjustment was made accordingly. For remaining equity interest which cannot apply common control or impose significant influence over the investee after disposal, it shall be accounted for using the recognition and measurement standard of financial instruments. The difference between its fair value and carrying amount as at the date of losing control shall be included in profit or loss for the current period. In respect of other comprehensive income recognised using equity method or the recognition and measurement standard of financial instruments before the Company obtained control over the investee, it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee at the time when the control over investee is lost. Movement of otherowners’ equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of investee accounted for and recognised using equity method) shall be transferred to profit or loss for the current period at the time when the control over investee is lost. Of which, for the remaining equity interest after disposal accounted for using equity method, other comprehensive income and otherowners’ equity shall be transferred on pro rata basis. For the remaining equity interest after disposal accounted for using the recognition and measurement 16
standard of financial instruments, other comprehensive income and otherowners’ equity shall be fully INTERIM
transferred.
REPORT
In the event of loss of common control or significant influence over investee due to partial disposal of equity investment by the Company, the remaining equity interest after disposal shall be accounted for using the recognition and measurement standard of financial instruments. The difference between its fair value and carrying amount as at the date of losing common control or significant influence shall be included in profit or loss for the current period. In respect of other comprehensive income recognised under previous equity investment using equity method, it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee at the time when equity method was ceased to be used. Movement of otherowners’ equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of investee accounted for and recognised using equity method) shall be transferred to profit or loss for the current period at the time when equity method was ceased to be used. The Company disposes its equity investment in subsidiary by a stage-up approach with several transactions until the control over the subsidiary is lost. If the said transactions belong to “transactions in a basket”, each transaction shall be accounted for as a single transaction of disposing equity investment of subsidiary and loss of control. The difference between the disposal consideration for each transaction and the carrying amount of the corresponding long-term equity investment of disposed equity interest before loss of control shall initially recognised as other comprehensive income, and subsequently transferred to profit or loss arising from loss of control for the current period upon loss of control.
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
14. Investment Property
Investment property refers to real estate held to earn rentals or for capital appreciation, or both.
Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be included in cost of investment property only when the economic benefits associated with the asset will likely flow to the Company and its cost can be measured reliably. All other expenditures on investment property shall be included in profit or loss for the current period when incurred.
The Company adopts cost method for subsequent measurement of investment property, which is depreciated using the same policy as that for buildings.
The method for impaired test of investment property and measurement of impairment provision are detailed in Note V. 19 “Impairment of long-term assets”.
In the event that an owner-occupied property or inventories is converted to an investment property (or vice versa), upon the conversion, the property shall be stated at the carrying amount prior to the conversion.
In the event that an investment property is converted to an owner-occupied property, such property shall become fixed assets or intangible assets since the date of its conversion. In the event that an owner-occupied property is converted to real estate held to earn rentals or for capital appreciation, such fixed assets or intangible assets shall become an investment property since the date of its conversion. Investment property is measured at cost during its conversion. Upon the conversion, the property shall be stated at the carrying amount prior to the conversion.
If an investment property is disposed of or if it withdraws permanently from use and no economic benefit will be 16 obtained from the disposal, the recognition of it as an investment property shall be terminated. When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of the carrying INTERIM REPORT amount and related tax and surcharges is recognised in profit or loss for the current period.
15. Fixed assets
(1) Conditions for recognition of fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and have a useful life of more than one accounting year. Fixed assets are recognised only if the Company is very likely to receive economic benefits from the asset and its cost can be measured reliably. A fixed asset shall be initially measured at cost and the effect of any expected costs of abandoning the asset at the end of its use.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 85
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
15. Fixed assets(Cont’d)
(2) Method for depreciation of each category of fixed assets
A fixed asset is depreciated over its useful life using the straight-line method since the month subsequent to the one in which it is ready for intended use. The useful life, estimated net residual value rate and annual depreciation rate of each category of fixed assets are as follows:
Method for Useful lives of Estimated Annual Category depreciation depreciation (Year) residual value depreciation rate Housing and building structure Straight-line method 20-40 5.00%-10.00% 2.25%-4.75% Machinery and equipment Straight-line method 8-20 5.00%-10.00% 4.5%-11.88% Transportation equipment Straight-line method 5-8 5.00%-10.00% 11.25%-19.00% Electronic equipment Straight-line method 5 5.00%-10.00% 18.00%-19.00% and others
Estimated net residual value of a fixed asset is the estimated amount that the Company would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the stage and in the condition expected at the end of its useful life.
(3) Methods of impairment test and provision of fixed assets
The method for impaired test of fixed assets and measurement of impairment provision are detailed in Note V. 19 16 “Impairment of long-term assets”.
INTERIM
REPORT (4) Recognition and accounting method of fixed assets acquired under finance leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of asset ownership to the lessee and titles to the assets may or may not eventually be transferred. For fixed assets acquired under finance leases, the basis for provision of leased assets depreciation is the same as that of self-owned fixed assets. When it can be reasonably determined that the ownership of a leased asset will be transferred at the end of the lease term, it is depreciated over the period of expected use; otherwise, the lease asset is depreciated over the shorter period of the lease term and the period of expected use.
(5) Explanation on other matters
Subsequent expenditures incurred for a fixed asset shall be included in the cost of the fixed asset, only if it is probable that economic benefits associated with the asset will flow to Chenming Paper and the relevant cost can be measured reliably; meanwhile the carrying amount of the replaced part shall be derecognised. Other subsequent expenditures shall be charged to profit or loss when incurred.
Fixed assets are derecognised when there is no economic benefit arising from disposal or expected use or disposal of fixed assets. When a fixed asset is sold, transferred, retired or damaged, the Company shall recognise the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes in profit or loss for the current period.
The Company reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least at each financial year-end. A change in the useful life or estimated net residual value of a fixed asset or the depreciation method used shall be accounted for as a change in accounting estimate.
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SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
V. Significant Accounting Policies and Accounting Estimates(Cont’d)
16. Construction in progress
Construction in progress is recognised based on the actual construction cost, including all expenditures incurred for construction projects, capitalised borrowing costs for the construction in progress before it has reached the working condition for its intended use, and other related expenses during the construction period. A construction in progress is reclassified to fixed assets when it has reached the working condition for its intended use.
The method for impaired test of construction in progress and measurement of impairment provision are detailed in Note V. 19 “Impairment of long-term asset”.
17. Borrowing costs
Borrowing costs include interest, amortisation of discounts or premiums related to borrowings, ancillary costs incurred in connection with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings. For borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, when expenditures for the asset and borrowing costs are being incurred, activities relating to the acquisition, construction or production of the asset that are necessary to prepare the asset for its intended use or sale have commenced, such borrowing costs shall be capitalised as part of the cost of that asset; and capitalisation shall discontinue when the qualifying asset is ready for its intended use or sale. Other borrowing costs shall be recognised as expense in the period in which they are incurred.
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used into banks or any investment income on the temporary investment of those funds. Where funds are 16 borrowed for general purpose, the Company shall determine the amount of interest to be capitalised on such borrowings INTERIM by applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditures on the asset REPORT over and above the amounts of specific-purpose borrowings. The capitalisation rate shall be the weighted average of the interest rates applicable to the general-purpose borrowings.
During the capitalisation period, exchange differences on a specific purpose borrowing denominated in foreign currency shall be capitalised. Exchange differences related to general-purpose borrowings denominated in foreign currency shall be included in profit or loss for the current period.
Qualifying assets are assets (fixed assets, investment property, inventories, etc.) that necessarily take a substantial period of time for acquisition, construction or production to get ready for their intended use or sale.
Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more than 3 months, until the acquisition, construction or production of the qualifying asset is resumed.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
18. Intangible assets
(1) Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled by the Company.
An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible asset shall be recognised as cost of the intangible asset only if it is probable that economic benefits associated with the asset will flow to the Company and the cost of the asset can be measured reliably. Other expenditures on an item asset shall be charged to profit or loss when incurred.
Land use right acquired shall normally be recognised as an intangible asset. Self-constructed buildings (e.g. plants), related land use right and the buildings shall be separately accounted for as an intangible asset and fixed asset. For buildings and structures purchased, the purchase consideration shall be allocated among the land use right and the buildings on a reasonable basis. In case there is difficulty in making a reasonable allocation, the consideration shall be recognised in full as fixed assets.
An intangible asset with a finite useful life shall be stated at cost less estimated net residual value and any accumulated impairment loss provision and amortised using the straight-line method over its useful life when the asset is available for use. Intangible assets with indefinite life are not amortised.
The Company shall review the useful life of intangible asset with a finite useful life and the amortisation method applied at least at each financial year-end. A change in the useful life or amortisation method used shall be 16 accounted for as a change in accounting estimate. For an intangible asset with an indefinite useful life, the Company shall review the useful life of the asset in each accounting period. If there is evidence indicating that the INTERIM
REPORT useful life of that intangible asset is finite, Chenming Paper shall estimate the useful life of that asset and apply the accounting policies accordingly.
(2) Research and development expenditure
Research and development expenditure of the Company was divided into expenses incurred during the research phase and expenses incurred during the development phase.
Expenses incurred during the research phase are recognised as profit or loss in the current period.
Expenses incurred during the development phase that satisfy the following conditions are recognised as intangible assets, while those that do not satisfy the following conditions are accounted for in the profit or loss for the current period:
① it is technically feasible that the intangible asset can be used or sold upon completion;
② there is intention to complete the intangible asset for use or sale;
③ the intangible asset can produce economic benefits, including there is evidence that the products produced using the intangible asset has a market or the intangible asset itself has a market; and if the intangible asset is for internal use, there is evidence that there exists usage for the intangible asset;
④ there is sufficient support in terms of technology, financial resources and other resources in order to complete the development of the intangible asset, and there is capability to use or sell the intangible asset;⑤ the expenses attributable to the development phase of the intangible asset can be measured reliably. If the expenses incurred during the research phase and the development phase cannot be distinguished separately, all development expenses incurred are accounted for in the profit or loss for the current period. (3) Methods of impairment test and provision of intangible assets
The method for impaired test of intangible assets and measurement of impairment provision are detailed in Note V.
19 “Impairment of long-term assets”.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
19. Impairment of long-term asset
The Company will judge if there is any indication of impairment as at the balance sheet date in respect of noncurrent non-financial assets such as fixed assets, construction in progress, intangible assets with a finite useful life, investment properties measured at cost, and long-term equity investments in subsidiaries, joint controlled entities and associates. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated for impairment test. Goodwill, intangible assets with an indefinite useful life and intangible assets beyond working conditions will be tested for impairment annually, regardless of whether there is any indication of impairment.
If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount, the impairment provision will be made according to the difference and recognised as an impairment loss. The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset. Anasset’s fair value is the price in a sale agreement in anarm’s length transaction. If there is no sale agreement but the asset is traded in an active market, fair value shall be determined based on the bid price. If there is neither sale agreement nor active market for an asset, fair value shall be based on the best available information. Costs of disposal are expenses attributable to disposal of the asset, including legal fee, relevant tax and surcharges, transportation fee and direct expenses incurred to prepare the asset for its intended sale. The present value of the future cash flows expected to be derived from the asset over the course of continued use and final disposal is determined as the amount discounted using an appropriately selected discount rate. Provisions for assets impairment shall be made and recognised for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company shall determine the recoverable amount of the asset group to which the asset belongs. The asset group is the smallest group of assets capable of generating cash flows independently. For the purpose of impairment testing, the carrying amount of goodwill presented separately in the financial statements 16 shall be allocated to the asset groups or group of assets benefiting from synergy of business combination. If the INTERIM REPORT recoverable amount is less than the carrying amount, the Company shall recognise an impairment loss. The amount of impairment loss shall first reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then reduce the carrying amount of other assets (other than goodwill) within the asset group or set of asset groups, pro rata on the basis of the carrying amount of each asset.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of the restorable value.
20. Long-term prepaid expenses
Long-term prepaid expenses are expenditures and other expenses which have incurred but that shall be amortised over the current period and subsequent periods of more than one year. Long-term prepaid expenses of the Company mainly include expenses on improvement of fixed assets and woodland rent. Long-term prepaid expenses are amortised over the estimated benefit period using the straight-line method.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
21. Employee benefits
Staff remuneration of the Company mainly includes short-term staff remuneration, post-employment benefits and termination benefits, in which:
Short-term remuneration mainly includes salaries, bonuses, allowance and subsides, staff welfare, medical insurance premium, maternity insurance premium, work-related injury insurance premium, housing provident funds, union operation costs and employee education costs and non-monetary welfare etc. Short-term remuneration incurred during the accounting period in which theCompany’s staff provided services for the Company is recognised as liability, and included in profit or loss for the current period or related asset costs. Of which, non-monetary welfare is measured at fair value.
Post-employment benefits mainly include defined contribution plan. Defined contribution plan mainly includes pension insurance premium and unemployment insurance premium. Relevant contribution amount is included in related asset costs or profit or loss for the current period during the period in which the expenses incurred.
When the Company terminates the employment relationship with employees before the end of the employment contracts or provides compensation as an offer to encourage employees to accept voluntary redundancy, the Company shall recognise employee compensation liabilities arising from termination benefits and included in profit or loss for the current period, when the Company cannot revoke unilaterally termination benefits due to the cancellation of labour relationship plans and employee redundant proposals; and the Company recognise cost and expenses related to payment of termination benefits and restructuring, whichever is earlier. However, if the termination benefits are not expected to be fully paid within 12 months from the reporting period, it shall be accounted for other long-term staff remuneration.
16
INTERIM The early retirement plan shall be accounted for in accordance with the same accounting principles for above REPORT
termination benefits. The salaries or wages and the social contributions to be paid for the employees who retire before schedule from the date on which the employees stop rendering services to the scheduled retirement date, shall be recognised (as termination benefits) in the current profit or loss by the Company if the recognition principles for provisions are satisfied.
The Company does not provide any other long-term employee benefit for its staff.
22. Accrued liabilities
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as accrued liabilities: (1) The obligation is a current obligation borne by the Company; (2) it is likely that an outflow of economic benefits will be resulted from the performance of the obligation; and (3) the amount of the obligation can be reliably measured. At the balance sheet date, accrued liabilities shall be measured at the best estimate of the necessary expenses required for the performance of existing obligations, after taking into account relevant risks, uncertainties, time value of money and other factors pertinent to the contingencies.
If all or some expenses incurred for settlement of accrued liabilities are expected to be borne by the third party, the compensation amount shall, on a recoverable basis, be recognised as asset separately, and compensation amount recognised shall not be more than the carrying amount of accrued liabilities.
23. Preference shares, perpetual bonds and other financial instruments
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
24. Revenue
(1) Revenue from sales of goods
Revenue is recognised when Chenming Paper has transferred to the buyer the significant risks and rewards of ownership of the goods, retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, will receive the economic benefits associated with the transaction, and can reliably measure the relevant amount of revenue and costs. Confirmation time for sales revenue: In terms of domestic sales, confirmation will be made on the day when goods are delivered to the clients. While in terms of overseas sales, confirmation will be made on the day when goods are loaded on board and declared.
(2) Revenue from the rendering of services
When the outcome of a transaction involving the rendering of services can be reliably estimated, it shall, on the balance sheet date, recognise the revenue from the rendering of services employing the percentage-of-completion method. The completion schedule of transaction concerning the rendering of services shall be ascertained according to the proportion of service costs incurred to the estimated total costs.
The outcome of a transaction concerning the rendering of services can be reliably estimated, which shall concurrently satisfy:① The relevant amount of revenue can be reliably measured;② it is probable that the economic benefits will flow into the enterprise;③ the completion schedule of the transaction can be reliably ascertained; and④ transaction costs incurred and to be incurred can be reliably measured.
16 When the outcome of a transaction involving the rendering of services cannot be reliably estimated, it shall recognise the revenue from the rendering of services based on the cost of rendering services already incurred and INTERIM REPORT expected to be compensated, and the cost of rendering services incurred shall be recognised as an expense for the current period. If the cost of rendering services is expected not to be compensated, it shall be recognised as an expense.
When a contract or agreement signed by the Company includes sales of goods and rendering of services, if sales of goods and rendering of services can be differentiated and separately measured, they will be recognised respectively. If sales of goods and rendering of services cannot be differentiated or cannot be separately measured, they will be recognised as sales of goods in full.
(3) Revenue from rendering of services
Revenue from rendering of services is recognised as income on the accrual basis in accordance with the underlying contracts or agreements.
(4) Interest income
Interest income is calculated based on the time during which theCompany’s monetary fund, and the effective interest rates.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
25. Government grants
Government grants are transfer of monetary assets or non-monetary assets from the government to the Company at no consideration, excluding capital considerations from the government as an owner of the Company. Government grants are classified into government grants related to assets and government grants related to income. Government grants obtained for acquisition or construction of long-term assets or other forms of long-term asset formation are classified as related to assets. Other government grants are classified as related to revenue. If related government documents do not specify the objective of the grants, the grants are classified as related to assets or income as follows: (1) In case a project for which the grants are granted is specified in such documents, the grants are classified as related to assets and income based on the budgeted ratio of the expenditure on asset formation and the expenditure recorded as expenses, where such ratio should be reviewed and, if necessary, changed on each balance sheet date; and (2) in case of general description without specifying any project in such documents, the grants are classified as related to income. If a government grant is in the form of a transfer of monetary asset, the item shall be measured at the amount received or receivable. If a government grant is in the form of a transfer of non-monetary asset, the item shall be measured at fair value. If fair value is not reliably determinable, the item shall be measured at a nominal amount and recognised immediately in profit or loss for the current period. Government grants are generally recognised when received and measured at the amount actually received, but are measured at the amount likely to be received when there is conclusive evidence at the end of the accounting period that the Company will meet related requirements of such grants and will be able to receive the grants. The government grants so measured should also satisfy the following conditions: (1) the amount of the grants be confirmed with competent authorities in written form or reasonably deduced from related requirements under financial fund management measures officially released without material uncertainties; (2) the grants be given based on financial support projects and fund management policies officially published and voluntarily disclosed 16
by local financial authorities in accordance with the requirements under disclosure of government information, where INTERIM
such policies should be open to any company satisfying conditions required and not specifically for certain companies; REPORT
and (3) the date of payment be specified in related documents and the payment thereof be covered by corresponding budget to ensure such grants will be paid on time as specified.
A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit or loss over the useful life of the asset. For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant shall be recognised as deferred income, and recognised in profit or loss over the periods in which the related costs are recognised; if the grant is a compensation for related expenses or losses already incurred, the grant shall be recognised immediately in profit or loss for the current period.
For the repayment of a government grant already recognised, if there is any related deferred income, the repayment shall be off set against the carrying amount of the deferred income, and any excess shall be recognised in profit or loss for the current period; if there is no related deferred income, the repayment shall be recognised immediately in profit or loss for the current period.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
26. Deferred income tax assets/deferred income tax liabilities
(1) Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods shall be measured at the amount expected to be paid (or recovered) according to the requirements of tax laws. Taxable profits, which are the basis for calculating the current income tax expense, are determined after adjusting the accounting profits before tax for the year in accordance with relevant requirements of tax laws.
(2) Deferred income tax assets and deferred income tax liabilities
Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax base, and the difference between the tax base and the carrying amount of those items that are not recognised as assets or liabilities but have a tax base that can be determined according to tax laws, shall be recognised as deferred income tax assets and deferred income tax liabilities using the balance sheet liability method.
Deferred income tax liabilities are not recognised for taxable temporary differences related to: the initial recognition of goodwill; and the initial recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Company recognises the corresponding deferred income tax liability for taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, except when both of the following conditions are satisfied: the Company is able to control the timing of the reversal of the temporary difference; and it is probable that the temporary difference will not reverse in the foreseeable future.
16 Deferred income tax assets are not recognised for deductible temporary differences related to the initial recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting INTERIM REPORT profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Company recognises the corresponding deferred income tax asset for deductible temporary differences associated with investments in subsidiaries, associates and joint ventures to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilised, except when both of the following conditions are satisfied: it is not probable that the temporary difference will reverse in the foreseeable future; and it is not probable that taxable profits will be available in the future, against which the temporary difference can be utilised. Chenming Paper recognises a deferred income tax asset for the carry forward of deductible losses and tax credits to subsequent periods, to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilised.
At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, according to the requirements of tax laws.
At the balance sheet date, Chenming Paper shall review the carrying amount of a deferred income tax asset. If it is probable that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred income tax asset to be utilised, the carrying amount of the deferred income tax asset shall be reduced. Any such reduction in amount shall be reversed when it becomes probable that sufficient taxable profits will be available. (3) Income tax expense
Income tax expense comprises current income tax expense and deferred income tax expense.
Current income tax expense (current income tax income) and deferred income tax expense (deferred income tax income) are included in profit or loss for the current period, except for: recognised as other comprehensive income or current income tax and deferred income tax related to transactions or events that are directly recognised in other comprehensive income orowners’ equity, which are recognised directly inowners’ equity, and deferred income tax arising from a business combination, which is adjusted against the carrying amount of goodwill.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
26. Deferred income tax assets/deferred income tax liabilities(Cont’d)
(4) Offset of income tax
After granted the legal rights of net settlement and with the intention to use net settlement or obtain assets, repay debt, the Company, at the same time, records the net amount after offsetting its current income tax assets and current income tax liabilities.
The Company was granted the legal rights of net settlement of current income tax assets and current income tax liabilities. Deferred income tax assets and deferred income tax liabilities are related to income tax to be paid by the same entity liable to pay tax to the same tax collection and management authority or related to different entities liable to pay tax, but the relevant entity liable to pay tax is intended to apply net settlement of current income tax assets and liabilities or, at the same time, obtain assets, repay debt whenever every deferred income tax assets and liabilities with importance would be reversed in the future, the Company records the net amount after offsetting its current income tax assets and current income tax liabilities.
27. Lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of asset ownership to the lessee and titles to the assets may or may not eventually be transferred. All other leases are classified as operating leases.
(1) Operating lease business with the Company recorded as lessee
16
Lease payment for operating lease is recognised as related asset cost or profits and losses for the current period INTERIM using the straight-line method over the lease term. The initial direct cost is directly accounted in profit or loss for REPORT
the current period. Contingent rent is recognised as profit or loss for the current period upon occurrence. (2) Operating lease business with the Company recorded as lessor
Rental income is recognised in profit or loss for the current period using the straight-line method over the lease term. The initial direct cost where the amount is larger is capitalised when incurred, and accounted for as profit or loss for the current period on the same basis as recognition of rental income over the entire lease period; the initial direct cost where the amount is fewer is included in the profit or loss for the period when incurred. Contingent rental is accounted for as profit or loss for the period in which it is incurred.
(3) Financing lease business with the Company recorded as lessee
On the beginning date of the lease, the entry value of leased asset shall be at the lower of the fair value of the leased asset and the present value of minimum lease payment at the beginning date of the lease. Minimum lease payment shall be the entry value of long-term accounts payable, with difference recognised as unrecognised financing expenses. In addition, initial direct costs attributable to leased items incurred during the process of lease negotiation and signing of lease agreement shall be included in the value of leased assets. The balance of minimum lease payment after deducting unrecognised financing expenses shall be accounted for long-term liability and long-term liability due within one year.
Unrecognised financing expenses shall be recognised as financing expenses for the current period using effective interest method during the leasing period. Contingent rent shall be included in profit or loss for the current period at the time it incurred.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
27. Lease(Cont’d)
(4) Financing lease business with the Company recorded as lessor
On the beginning date of the lease, the entry value of lease receivable shall be the aggregate of minimum lease receivable and initial direct costs at the beginning date of the lease. The unsecured balance shall be recorded. The aggregate of minimum lease receivable, initial direct costs and unsecured balance and the different between their present values shall be recognised as unrealised financing income. The balance of lease receivable after deducting unrecognised financing income shall be accounted for long-term debt and long-term debt due within one year.
Unrecognised financing income shall be recognised as financing income for the current period using effective interest method during the leasing period. Contingent rent shall be included in profit or loss for the current period at the time it incurred.
28. Discontinued operation
Discontinued operation refers to the operation disposed or classified as held-for-sale by the Company and presented separately under operation segments and financial statements, which has fulfilled one of the following criteria:① it represents an independent key operation or key operating region;② it is part of the proposed disposal plan on an independent key operation or proposed disposal in key operating region; or③ it only establishes for acquisition of subsidiary through disposal.
29. Repurchase of shares
16 Share repurchase consideration paid and transaction costs to reduce theowner’s equity, repurchase, transfer or INTERIM REPORT cancellation of ChenmingPaper’s shares, the gains or losses are not recognised.
In respect of transfer of treasury shares, the difference between the actual amount received and the carrying amount of treasury shares shall be included in capital reserve. When insufficient to dilute, capital reserve will be offset against the surplus reserve and retained profits. Treasury shares are cancelled at par value and by the number of shares cancelled to reduce the share capital. The difference between the book balance and the nominal value of the treasury shares shall be offset against the capital reserve. When insufficient to dilute, capital reserve will be offset against the surplus reserve and retained profits.
30. Changes in Significant Accounting Policies and Estimates
(1) Changes in Accounting Policies
□ Applicable√ Not applicable
(2) Changes in significant accounting estimates
□ Applicable√ Not applicable
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
31. Critical accounting judgments and estimates
The Company needs to make judgments, estimates and assumptions as to the carrying amount of statement items which cannot be accurately calculated during the application of theCompany’s accounting policies. Such judgments, estimates and assumptions are made based on the historical experiences of theCompany’s management and taking into account other relevant factors, which may affect the reported amount of revenue, expenses, assets and liabilities and disclosure of contingent liabilities at the balance sheet date. However, the outcome from such estimate uncertainties may different from the current estimation of theCompany’s management, which may cause critical adjustment to the carrying amount of assets or liabilities which may be affected in the future.
The Company regularly reviews the aforesaid judgments, estimates and assumptions on the basis of continued operation. A revision to accounting estimates is recognised in the period in which the estimate is revised if it only affects that period. A revision is recognised in the period of the revision and future periods if it affects both current and future periods.
At the balance sheet date, the critical areas where Company needs to make judgments, estimates and assumptions as to the items amount of financial statements are set out below:
(1) Classification of leases
The Company classifies its leases as operating lease and financing lease in accordance with “Accounting Standard for Business Enterprises No. 21– Leases”. When classifying leases, the management needs to analyse and judge whether all risks and returns relating to the ownership of leased out assets have transferred to the leasee, or whether the Company has obliged to all risks and returns relating to the ownership of leased assets. 16
INTERIM
REPORT (2) Provision for bad debts
The Company adopts the allowance method to account for bad debt loss under the accounting policies of accounts receivable. Impairment of accounts receivable is based on the recoverability of assessed accounts receivable. Given themanagement’s judgment and estimate required for impairment of accounts receivable, the difference between the actual outcome and original estimate will affect the carrying amount of accounts receivable and provision and reversal of bad debts of accounts receivable during the estimate revision period.
(3) Allowance for inventories
Under the accounting policies of inventories and by measuring at the lower of cost and net realisable value, the Company makes allowance for inventories which have costs higher than net realisable value or become obsolete and slow-moving. Write-down of inventories to their net realisable values is based on the sale ability of the evaluated inventory and their net realisable values. Given themanagement’s judgments and estimates required for inventory impairment on the basis of definite evidence, purpose of holding the inventories and other factors, the difference between the actual outcome and original estimate will affect the carrying amount of inventories and provision and reversal of bad debts of inventories allowance during the estimate revision period.
(4) Fair value of consumable biological assets
A consumable biological asset is measured at fair value when there is a stock. A stock is judged to be formed when the consumable biological asset - timber survives well after a growth period and the merchantable timber exceeds 0.8 cubic metres.
The fair value of a consumable biological asset is discounted using expected cash flow and estimated and measured using income approach.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
31. Critical accounting judgments and estimates(Cont’d)
(5) Impairment of available-for-sale financial assets
In respect of impairment of available-for-sale financial assets, whether impairment loss shall be recognised in income statement significantly depends on the judgments and assumptions of the management. While making judgments and assumptions, the Company shall assess the excess of cost of theinvestee’s identifiable net assets attributable to the investment over fair value and the duration.
(6) Provision for impairment of non-financial non-current assets
At the balance sheet date, the Company makes its judgment as to whether there is any evidence indicating potential impairment of non-current assets other than financial assets. Intangible assets with indefinite useful life shall be tested for impairment when there is any indication of impairment in addition to the annual impairment testing. Other non-current assets other than financial assets shall be tested for impairment if there is any evidence indicating that their carrying amount cannot be recovered.
When the carrying amount of an asset or asset groups is higher than the recoverable amount, being the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset, it indicates impairment.
The net amount of the fair value less costs of disposal is determined by making reference to the price in a sale agreement in anarm’s length transaction or the observable market price less the incremental costs directly attributable to such assets disposal.
16 In projecting the present value of the future cash flows, critical judgments shall be made to the output, selling INTERIM price and relevant operating costs of such assets (or asset groups) and the discount rate applied in calculating REPORT the discount. In estimating the recoverable amount, the Company may adopt all relevant materials including the projections as to the output, selling price and relevant operating costs based on reasonable and supportive assumptions.
The test shall be performed at least once a year as to whether there is any impairment. This requires an estimate for the present value of the future cash flows of the asset groups or sets of asset groups to which goodwill is allocated. In estimating the present value of the future cash flows, the Company needs to estimate the cash flows generated from the future asset groups or sets of asset groups. Meanwhile, the present value of future cash flows is determined using an appropriately selected discount rate.
(7) Depreciation and amortisation
The Company shall provide depreciation and amortisation for investment properties, fixed assets and intangible assets over their useful lives and after taking into account of their residual value, using straight-line method. The Company shall regularly review the useful lives to determine the amount depreciated and amortised to be accounted for in each reporting period. The useful life is determined by the Company according to its previous experience on the similar assets and estimated technical innovation. If there is any material change in the previously made estimate, the depreciation and amortisation will be adjusted over the future period.
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V. Significant Accounting Policies and Accounting Estimates(Cont’d)
31. Critical accounting judgments and estimates(Cont’d)
(8) Deferred income tax assets
It is probable that all unused tax loss will be recognised as the deferred income tax assets to the extent there will be sufficient taxable profits against which the deducible loss is available. This requires theCompany’s management to apply numerous judgments to estimate the time and amount generated from the future taxable profits so as to determine the amount of deferred income tax assets with reference to the tax planning strategy. (9) Income tax
There are some uncertainties in tax treatment and calculation for some transactions of the Company during its ordinary course of business. The approval from the tax authority is required for pre-tax expending of some items. Any difference between the final recognition outcome of such tax matters and the initially estimated amount will exert an effect on the current income tax and deferred income tax during their final recognition period. VI. Taxation
1. Main Tax Types and Tax Rates
Tax type Tax rate
Value added tax 17% for general and13% for sales of gas and water. Value-added tax is 16 computed on the difference after deduction of input value-added tax INTERIM
Business tax 3%-5% of taxable revenue
REPORT
Urban maintenance and construction tax 7% of actual payment of turnover tax
Enterprise income tax 25% of taxable income
Educational surcharges 3% of actual payment of turnover tax
Local educational surcharges 2% of actual payment of turnover tax
2. Tax Incentives
(1) Enterprise Income Tax
The Company received a high and new technology enterprise certificate jointly issued by the Shandong Provincial Office of SAT, Shandong Local Taxation Bureau, the Shandong Province Finance Bureau and the Department of Science& Technology of Shandong Province certifying the Company as a high and new technology enterprise with a certification number of GR201537000611 valid for three years.
Shouguang Meilun Paper Co., Ltd. (“Shouguang Meilun”), a wholly-owned subsidiary, received a high and new technology enterprise certificate jointly issued by the Shandong Provincial Office of SAT, Shandong Local Taxation Bureau, the Shandong Province Finance Bureau and the Department of Science& Technology of Shandong Province certifying the Company as a high and new technology enterprise with a certification number of GR201537000228 valid for three years.
Zhanjiang Chenming Pulp& Paper Co., Ltd. (“Zhanjiang Chenming”), a controlling subsidiary of the Company, received a high and new technology enterprise certificate jointly issued by the Guangdong Provincial Office of SAT, Guangdong Local Taxation Bureau, the Guangdong Province Finance Bureau and the Department of Science& Technology of Guangdong Province certifying the Company as a high and new technology enterprise of Guangdong with a certification number of GR201544000146 valid for three years.
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VI. Taxation(Cont’d)
2. Tax Incentives(Cont’d)
(1) Enterprise Income Tax(Cont’d)
Pursuant to relevant requirements, the Company, Shouguang Meilun and Zhanjiang Chenming are eligible for relevant national preferential treatment enjoyable by high and new tech enterprises for three years and subject to a corporate income tax rate of15%.
Pursuant to the requirements of Rule 27 of Law of thePeople’s Republic of China on Enterprise Income Tax(《中華人民共和國企業所得稅法》) and Rule 86 of Regulations for the Implementation of Law of thePeople’s Republic of China on Enterprise Income Tax(《中華人民共和國企業所得稅法實施條例》), subsidiaries of Chenming Paper, namely, Zhanjiang Chenming Arboriculture Co., Ltd., Yangjiang Chenming Arboriculture Co., Ltd., Nanchang Chenming Arboriculture Co., Ltd., Huanggang Chenming Arboriculture Co., Ltd. and Chenming Arboriculture Co., Ltd. are engaged in arboriculture cultivating and thus exempt from corporate income tax.
Pursuant to the “Revenue Bill 2008” passed by The Legislative Council of the Hong Kong Special Administrative Region on 26 June 2008, Chenming (HK) Limited, a subsidiary of Chenming Paper, has been subject to a corporate income tax rate of16.5% commencing 2008, and the applicable tax rate for 2015 was16.5%. Except for the above preferential policies, Chenming Paper and its remaining subsidiaries are subject to enterprise income tax rate of25%.
(2) Value-added Tax (“VAT”) incentives
Pursuant to Cai Shui[1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of 16 Resources” issued by the State Administration of Taxation, enterprises engaged in utilisation of raw materials INTERIM containing not less than30% of coal gangue, stone coal, coal ash, bottom ash of coal boiler (excluding blast REPORT furnace water quenching residue) in the production of building material products shall be exempted from VAT. Zhanjiang Chenming New-style Wall Materials Co., Ltd., a subsidiary of the Company, utilises raw materials containing above30% of coal ash in its production. It is thus qualified as an enterprise engaged in the utilisation of waste in production and is exempted from VAT in 2015.
Pursuant to the related requirements of the “Notice of the Ministry of Finance and the State Administration of Taxation on Issue Regarding Exemption from VAT for Certain Products that Comprehensively Utilize Resources” (Cai Shui[1995] No. 44) as issued by and the State Administration of Taxation and the document Cai Shui[2001] No. 72, Shandong Chenming Panels Co., Ltd., a subsidiary of the Company, produces products that apply integrated use of resources and is subject to an immediate VAT refund policy.
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VII. Notes to items of the Consolidated Financial Statements
1. Monetary funds
Unit: RMB Item Closing balance Opening balance Treasury cash 2,322,936.69 1,869,583.60 Bank deposit 3,565,118,414.46 1,886,237,910.16 Other monetary funds 8,205,426,953.98 7,096,218,522.25 Total 11,772,868,305.13 8,984,326,016.01 Of which: Total deposits in overseas banks 123,769,941.29 270,967,129.46 Notes:
① Other monetary funds of RMB2,864,822,994.92 (31 December 2015: RMB2,647,639,732.52) were the guarantee deposit for the application for bank acceptance with the banks by the Company.
② Other monetary funds of RMB2,248,859,560.88 (31 December 2015: RMB1,146,136,561.08) were the guarantee deposit for the application for letter of credit with the banks by the Company.
③ Other monetary funds of RMB2,633,664,398.18 (31 December 2015: RMB2,982,301,007.86) were the guarantee deposit for the application for guarantees with the banks by the Company.
④ Other monetary funds of RMB180,000,000.00 (31 December 2015: RMB87,691,220.79) were the guarantee deposit for the application for 16
loans with the banks by the Company.
INTERIM ⑤ Other monetary funds of RMB278,080,000.00 (31 December 2015: RMB232,450,000.00) were the statutory reserve deposit at thePeople’s REPORT
Bank of China by Shandong Chenming Financial Leasing Co., Ltd., a subsidiary of the Company.
2. Bills receivable
(1) Classification of bills receivable
Unit: RMB Item Closing balance Opening balance Bank acceptance bills 3,759,908,176.21 3,946,782,845.65 Commercial acceptance bills 52,000,000.00 Total 3,759,908,176.21 3,998,782,845.65 (2) Bills receivable of the Company pledged at the end of the period
Unit: RMB Pledged amount at the end Item of the period Bank acceptance bills 1,941,931,629.23 Total 1,941,931,629.23
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
2. Bills receivable(Cont’d)
(3) Outstanding bills receivable endorsed or discounted by the Company as at the end of the period
Unit: RMB Derecognised amount as at the Item end of the period Bank acceptance bills 3,669,975,048.59 Total 3,669,975,048.59 (4) Others
As at 30 June 2016, bills with carrying amount of RMB328,186,051.50 (31 December 2015: RMB389,088,621.98) were pledged in exchange for short-term borrowings. As at 30 June 2016, bills with carrying amount of RMB1,117,207,531.63 (31 December 2015: RMB786,353,404.24) were pledged for the issuance of acceptance bills. As at 30 June 2016, bills with carrying amount of RMB496,538,046.10 (31 December 2015: RMB456,940,733.65) were pledged for the issuance of guarantees or letters of credit.
As at 30 June 2016, the discounted bank acceptance bills issued by the Group to banks amounted to RMB1,537,289,947.88 (2015: RMB3,861,622,115.19) in aggregate, with discount expenses incurred of 16 RMB16,166,296.84 (2015: RMB65,559,613.69). As at 30 June 2016, outstanding discounted bills receivable amounted to RMB1,062,772,707.52 (2015: RMB1,296,249,121.66).
INTERIM REPORT 3. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB Closing balance Opening balance
Book balance Bad debts provision Book balance Bad debts provision
Category Amount Percentage Amount Percentage Book value Amount Percentage Amount Percentage Book value Accounts receivable that are
individually significant and
provided for bad debts separately 39,482,565.41 0.92% 39,482,565.41 100.00% 40,000,101.94 0.94% 40,000,101.94 100.00% Accounts receivable that are
provided for bad debts on
credit risk features portfolio basis 4,236,428,580.42 99.08% 286,157,366.76 6.75% 3,950,271,213.66 4,216,225,669.00 99.06% 264,937,689.68 6.28% 3,951,287,979.32 Total 4,275,911,145.83 100.00% 325,639,932.17 7.62% 3,950,271,213.66 4,256,225,770.94 100.00% 304,937,791.62 7.16% 3,951,287,979.32
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
3. Accounts receivable(Cont’d)
(1) Disclosure of accounts receivable by category(Cont’d)
Accounts receivable that are individually significant and are provided for bad debts separately as at the end of the period:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Accounts Bad debt
Receivable (by entity) receivable provision Percentage Reason for provision Foshan Shunde Xingchen 26,236,528.70 26,236,528.70 100.00% Overdue for a prolonged period Paper Co., Ltd. and unlikely to be recovered Beijing Huaxia Culture Media 9,825,843.00 9,825,843.00 100.00% Overdue for a prolonged period Co., Ltd. and unlikely to be recovered Jiangxi Longming Enterprise 1,763,987.74 1,763,987.74 100.00% Overdue for a prolonged period Co., Ltd. and unlikely to be recovered Nanchang Xingbo Paper Co., Ltd. 1,656,205.97 1,656,205.97 100.00% Overdue for a prolonged period and unlikely to be recovered 16
Total 39,482,565.41 39,482,565.41 ——
INTERIM
REPORT
Use of ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Accounts Bad debt
Ageing receivable provision Percentage Within 1 year
Of which: Within 3 months 2,697,319,812.95 134,884,920.64 5.00% Within 4-6 months 697,935,836.08 34,896,791.79 5.00% 7-12 months 332,528,797.48 16,626,439.88 5.00% Sub-total for within 1 year 3,727,784,446.51 186,408,152.31 5.00% 1-2 years 135,630,238.21 13,563,023.79 10.00% 2-3 years 43,367,555.07 8,673,511.02 20.00% Over 3 years 116,995,245.05 116,995,245.05 100.00% Total 4,023,777,484.84 325,639,932.17 8.09% Accounts receivable using percentage of balance for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
(2) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the current period amounted to RMB20,702,140.55. The amount for bad debt provision recovered or reversed during the current period was RMB0.00.
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
3. Accounts receivable(Cont’d)
(3) Top five accounts receivable according to closing balance of debtors
Bad debt Name of entity Nature Amount due Percentage(%) provision Shanxi Printing Payment for goods 101,946,323.41 2.38% 5,097,316.17 Materials Company
Xiamen ITG Group Corp., Ltd Payment for goods 53,997,695.65 1.26% 2,699,884.78 Beijing Foreign Languages Payment for goods 58,307,222.45 1.36% 2,915,361.12 Publishing and Paper Company
Xinjiang Publishing& Payment for goods 48,118,239.41 1.13% 2,405,911.97 Printing Group
Dongguan Huafa Paper Co., Ltd. Payment for goods 47,306,777.63 1.11% 2,365,338.88 Total 309,676,258.55 7.24% 15,483,812.93 4. Prepayments
(1) Presentation of prepayments stated according to ageing analysis
Unit: RMB 16 Closing balance Opening balance
Ageing Amounts Percentage Amounts Percentage INTERIM REPORT Within 1 year 1,306,619,772.54 83.26% 811,178,883.71 75.60% 1-2 years 262,749,263.32 16.74% 261,811,350.34 24.40% Total 1,569,369,035.86 — 1,072,990,234.05 — Among significant prepayments overdue for more than 1 year, the prepayments to all villages of Huanggang City of RMB86,344,778.40 were prepaid deposits for woodland acquisition.
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
4. Prepayments(Cont’d)
(2) Top five prepayment according to closing balance of prepaid parties
Name of entity Amounts Percentage(%) Term Reason for being unsettled Zhanjiang Mingli Trading 124,169,256.43 7.91% Within 1 year Prepayments for goods Co., Ltd according to
the agreed contract All villages of 86,344,778.40 5.50% 1-2 years The deposit for Huanggang City timber acquisition Shandong Longtai Stainless 35,535,053.00 2.26% Within 1 year Prepayments for Steel Products Co., Ltd. goods according to the agreed contract Shandong Hengxing Stock 33,290,180.49 2.12% Within 1 year Prepayments for goods Co. Ltd. according to
the agreed contract Hunan Printing Materials 30,510,238.63 1.94% Within 1 year Prepayments for Co., Ltd. goods according to the agreed contract Total 309,849,506.95 19.74%
16
5. Other receivables
INTERIM
REPORT
(1) Disclosure of other receivables according to category
Unit: RMB Closing balance Opening balance
Book balance Bad debts provision Book balance Bad debts provision
Category Amounts Percentage Amounts Percentage Book value Amounts Percentage Amounts Percentage Book value Other receivables that are individually
significant and are provided for
bad debts separately 8,686,748.70 0.52% 8,686,748.70 100.00% 8,686,748.70 0.56% 8,686,748.70 100.00% Other receivables that are provided
for bad debts on portfolio basis
based on credit risk features 1,643,506,163.59 98.74% 70,329,894.29 4.28% 1,573,176,269.30 1,536,522,514.58 98.76% 66,949,150.57 4.36% 1,469,573,364.01 Other receivables that are individually
insignificant and are provided
for bad debts separately 12,364,520.18 0.74% 12,364,520.18 100.00% 10,514,189.79 0.68% 10,514,189.79 100.00% Total 1,664,557,432.47 100.00% 91,381,163.17 5.49% 1,573,176,269.30 1,555,723,453.07 100.00% 86,150,089.06 5.54% 1,469,573,364.01
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
5. Other receivables(Cont’d)
(1) Disclosure of other receivables according to category(Cont’d)
Other receivables that are individually significant and are provided for bad debts separately as at the end of the period:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Other receivable (by entity) Other Receivables Bad debt provision Percentage Reason for provision Ahlstrom Finland 2,820,742.72 2,820,742.72 100.00% Overdue for over 3 years and unlikely to be recovered Qingdao Second Automotive and 1,137,295.16 1,137,295.16 100.00% Overdue for over 3 years and Transportation Logistics unlikely to be recovered Branch Company
Elof Hansson Group of Sweden 1,344,717.78 1,344,717.78 100.00% Overdue for over 3 years and unlikely to be recovered Chuan Hua Precision Corporation 2,253,993.04 2,253,993.04 100.00% Overdue for over 3 years and of Taiwan unlikely to be recovered Zibo Kaihong Energy Co., Ltd. 1,130,000.00 1,130,000.00 100.00% Overdue for over 3 years and unlikely to be recovered 16 INTERIM Total 8,686,748.70 8,686,748.70 —— REPORT Other receivables using ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Other Bad debt
Ageing Receivables provision Percentage Items within 1 year
Within 1 year 167,434,941.71 8,371,747.09 5.00% Subtotal for within 1 year 167,434,941.71 8,371,747.09 5.00% 1-2 years 42,469,612.10 4,246,961.21 10.00% 2-3 years 26,911,358.01 5,382,271.60 20.00% Over 3 years 73,380,183.27 73,380,183.27 100.00% Total 310,196,095.09 91,381,163.17
Other receivables using percentage of balance for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
Other receivables using other methods for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
5. Other receivables(Cont’d)
(2) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the year amounted to RMB6,337,245.02. The amount for bad debt provision recovered or reversed during the period was RMB0.
(3) Particulars of accounts receivable actually written off during the reporting period
Accounts receivable of RMB1,106,170.91 were written off during the reporting period.
(4) Top five other receivables according to closing balance of debtors
Unit: RMB Percentage of
closing balance Closing of total other balance of bad Name of entity Nature Closing balance Ageing receivables debt provision Wuhan Chenming Wan Xing Non-equity 1,291,492,916.67 Within 1 year, 82.09%
Real Estate Co., Ltd. investment 1-2 years,
under contract 2-3 years
and 3-4 years
16 Qingdao Chenming Nonghai Open credit 21,000,000.00 Within 1 year 1.33% 1,050,000.00 Investment Co., Ltd.
INTERIM
REPORT
Guangdong Zhongtuo Open credit 15,200,000.00 1-2 years 0.97% 1,520,000.00 Construction Co., Ltd.
The Finance Bureau Prepayments 13,114,963.35 1-2 years 0.83% 1,311,496.34 of Zhejiang for construction
Jiangsu Xinhai Port Interest on 10,330,966.70 1-2 years 0.66% 1,033,096.67 Engineering Co., Ltd. prepayments
Total — 1,351,138,846.72 — 85.89% 4,914,593.01 6. Inventories
Unit: RMB Closing balance Opening balance
Impairment Impairment
Item Book balance provision Book value Book balance provision Book value Raw materials 1,765,043,631.35 1,765,043,631.35 1,821,711,468.69 1,821,711,468.69 Work-in-process products 51,101,457.78 51,101,457.78 51,138,043.50 51,138,043.50 Goods in stock 1,547,908,314.79 1,547,908,314.79 1,520,091,660.50 1,520,091,660.50 Consumable biological assets 1,554,160,122.32 1,554,160,122.32 1,509,964,711.87 1,509,964,711.87 Developing products 308,012,006.86 308,012,006.86 308,012,006.86 308,012,006.86 Total 5,226,225,533.10 5,226,225,533.10 5,210,917,891.42 5,210,917,891.42
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
7. Non-current assets due within one year
Unit: RMB Item Closing balance Opening balance Long-term receivables due within one year 3,625,169,793.00 2,893,133,653.86 Entrusted loans due within one year 900,000,000.00
Total 4,525,169,793.00 2,893,133,653.86 8. Other current assets
Unit: RMB Item Closing balance Opening balance VAT recoverable 1,213,950,622.85 1,371,201,848.52 Prepaid income tax 13,322,351.86 50,700,246.25 Financial lease due within one year 8,977,754,729.77 6,160,937,261.77 Total 10,205,027,704.48 7,582,839,356.54 9. Available-for-sale financial assets 16 INTERIM (1) Particulars of available-for-sale financial assets
REPORT Unit: RMB Closing balance Opening balance
Provision Provision
Item Book balance for impairment Book value Book balance for impairment Book value Available-for-sale equity instruments: 110,450,000.00 1,450,000.00 109,000,000.00 110,450,000.00 1,450,000.00 109,000,000.00 At cost 110,450,000.00 1,450,000.00 109,000,000.00 110,450,000.00 1,450,000.00 109,000,000.00 Total 110,450,000.00 1,450,000.00 109,000,000.00 110,450,000.00 1,450,000.00 109,000,000.00
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
9. Available-for-sale financial assets(Cont’d)
(2) Available-for-sale financial assets measured at cost as at the end of the period
Unit: RMB Book balance Provision for impairment
Equity interest in the investee Opening Increase for Decrease for Closing Opening Increase for Decrease for Closing held by the Cash dividends Investee balance the period the period balance balance the period the period balance Company for the period QINGZHOU CHENMING
DENATURATION AMYLUM CO., LTD. 900,000.00 900,000.00 900,000.00 900,000.00 30.00% SHANDONG PAPER MAKING
& PRINTING ENTERPRISES
CORPORATION 200,000.00 200,000.00 200,000.00 200,000.00 2.00% JINAN SHANGYOU COMMERCIAL
COMPANY LIMITED 350,000.00 350,000.00 350,000.00 350,000.00 5.00% ZHEJIANG PROVINCE GUANGYU
MEDIA PRINTING COMPANY LIMITED 2,000,000.00 2,000,000.00 9.96% SHOUGUANG MIHE WATER
COMPANY LIMITED 20,000,000.00 20,000,000.00 19.46% ANHUI TIME SOURCE CORPORATION 1,000,000.00 1,000,000.00 10.00% SHANDONG HONGQIAO VENTURE
CAPITAL CO., LTD. 50,000,000.00 50,000,000.00 16.67% SHANGHAI LEADBANK ASSET
16
MANAGEMENT CO., LTD. 36,000,000.00 36,000,000.00 3.00% INTERIM
REPORT
Total 110,450,000.00 110,450,000.00 1,450,000.00 1,450,000.00 — (3) Changes in impairment of available-for-sale assets during the reporting period
Unit: RMB Available-for-sale Available-for-sale
Type of available-for-sale assets equity instruments debt instruments Total Opening balance of provision for impairment 1,450,000.00 1,450,000.00 Closing balance of provision for impairment 1,450,000.00 1,450,000.00 10. Long-term receivables
Unit: RMB Closing balance Opening balance
Provision for Provision for Range of Item Book balance impairment Book value Book balance impairment Book value discount rate(%) Finance leasing payments 15,387,768,509.04 15,387,768,509.04 13,236,155,887.30 13,236,155,887.30
Less: unrealised finance income 1,079,709,799.02 1,079,709,799.02 1,258,935,089.60 1,258,935,089.60
Less: non-current assets
due within one year 3,625,169,793.00 3,625,169,793.00 2,893,133,653.86 2,893,133,653.86
Total 10,682,888,917.02 — 10,682,888,917.02 9,084,087,143.84 9,084,087,143.84
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
11. Long-term equity investments
Unit: RMB Increase/decrease for the period
Profit/loss of Adjustment Distribution of
investment of other cash dividends Closing Investment Investment recognised under comprehensive Changes in or profit Provision balance Investee Opening balance addition reduction equity method income other equity declared for impairment Others Closing balance of provision I. Joint venture
Shouguang Chenming Huisen
New Building Materials Co., Ltd 2,976,817.51 114,692.62 3,091,510.13 Subtotal 2,976,817.51 114,692.62 3,091,510.13 II. Associate
Arjo Wiggins Chenming Specialty Paper Co., Ltd.
Jiangxi Jiangbao Media Colour Printing Co., Ltd. 4,217,690.25 -444,376.48 3,773,313.77 Zhuhai Dechen New Third Board Equity
Investment Fund Company (Limited Partnership) 50,343,241.28 289,585.53 50,632,826.81 Wuhan Chenming Wan Xing Real Estate Co., Ltd. 7,152,282.62 -7,152,282.62
Jiangxi Chenming Port Co., Ltd. 5,802,224.72 -11,453.42 5,790,771.30 Subtotal 67,515,438.87 -7,318,526.99 60,196,911.88 Total 70,492,256.38 -7,203,834.37 63,288,422.01 16 INTERIM REPORT 12. Investment properties
(1) Investment properties measured at cost
√ Applicable□ Not applicable
Unit: RMB Housing and Construction
Item building structure Land use right in progress Total I. Original carrying amount
1. Opening balance 38,291,395.70 38,291,395.70 2. Increase for the period
3. Decrease for the period
4. Closing balance 38,291,395.70 38,291,395.70 II. Accumulated depreciation
and accumulated amortization
1. Opening balance 22,294,463.83 22,294,463.83 2. Increase for the period 869,128.02 869,128.02 (1) Provision or amortisation 869,128.02 869,128.02 3. Decrease for the period
4. Closing balance 23,163,591.85 23,163,591.85 III. Impairment provision
1. Opening balance
2. Increase for the period
3. Decrease for the period
4. Closing balance
IV. Book value
1. Closing carrying amount 15,127,803.85 15,127,803.85
2. Opening carrying amount 15,996,931.87 15,996,931.87
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
13. Fixed assets
(1) Particulars of fixed assets
Unit: RMB Housing Electronic
and building Machinery equipment
Item structure and equipment Vehicles and others Total I. Original carrying amount
1. Opening balance 6,036,682,964.78 28,746,337,517.28 253,118,565.32 450,561,191.11 35,486,700,238.49 2. Increase for the period 258,021,826.70 1,301,616,788.80 20,220,008.49 5,241,614.53 1,585,100,238.52 (1) Acquisition 38,682,723.25 12,989,135.74 5,241,614.53 56,913,473.52 (2) Transferred from
construction in
progress 258,021,826.70 1,262,934,065.55 7,230,872.75 1,528,186,765.00 3. Decrease for the period 88,733,937.87 13,277,338.57 719,422.33 102,730,698.77 (1) Disposal or
retirement 88,733,937.87 13,277,338.57 719,422.33 102,730,698.77 4. Closing balance 6,294,704,791.48 29,959,220,368.21 260,061,235.24 455,083,383.31 36,969,069,778.24 II. Accumulated depreciation
1. Opening balance 1,085,579,296.88 9,877,779,115.61 114,038,824.58 239,577,472.24 11,316,974,709.31 16 2. Increase for the period 86,346,063.45 583,552,009.47 12,860,305.11 11,472,347.11 694,230,725.14 (1) Provision 86,346,063.45 583,552,009.47 12,860,305.11 11,472,347.11 694,230,725.14 INTERIM
REPORT 3. Decrease for the period 23,583,197.19 11,049,721.35 443,948.28 35,076,866.82 (1) Disposal or
retirement 23,583,197.19 11,049,721.35 443,948.28 35,076,866.82 4. Closing balance 1,171,925,360.33 10,437,747,927.89 115,849,408.34 250,605,871.07 11,976,128,567.63 III. Provision for impairment
1. Opening balance
2. Increase for the period 10,000,000.00 10,000,000.00 (1) Provision 10,000,000.00 10,000,000.00 3. Decrease for the period
4. Closing balance 10,000,000.00 10,000,000.00 IV. Book value
1. Closing carrying amount 5,122,779,431.15 19,511,472,440.32 144,211,826.90 204,477,512.24 24,982,941,210.61 2. Opening carrying amount 4,951,103,667.90 18,868,558,401.67 139,079,740.74 210,983,718.87 24,169,725,529.18 Note: As at 30 June 2016, property, plant and equipment with carrying amount of approximately RMB4,673,799,362.90 (31 December 2015: carrying amount of RMB4,567,649,044.39) and land use rights with carrying amount of RMB342,444,168.04 (31 December 2015: RMB309,070,530.88) were pledged as collateral for the long-term borrowings of RMB2,301,963,268.898.89 (31 December 2015: RMB2,304,159,268.89) (Note VII. 31), the long-term borrowings due within one year of RMB175,711,800.00 (31 December 2015: RMB281,218,900.00) (Note VII. 29) and long-term payables of RMB200,000,000.00.
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
13. Fixed assets(Cont’d)
(2) Particulars of temporarily idle fixed assets
Unit: RMB Original Accumulated Provision for
Item carrying amount depreciation impairment Book value Remark Housing and 146,488,557.23 43,050,265.90 103,438,291.33
building structure
Machinery and equipment 306,502,628.90 89,429,636.11 10,000,000.00 207,072,992.79
Electronic equipment 3,715,327.04 2,598,740.08 1,116,586.96
and others
Vehicles 4,258,029.83 3,648,466.28 609,563.55
Total 460,964,543.00 138,727,108.37 10,000,000.00 312,237,434.63
(3) Fixed assets under financial leases
Unit: RMB Original Accumulated Provision for
Item carrying amount depreciation impairment Book value 16 INTERIM Machinery and equipment 1,036,792,537.69 11,633,989.95 1,025,158,547.74 REPORT Total 1,036,792,537.69 11,633,989.95 1,025,158,547.74 (4) Particulars of fixed assets without obtaining property right certificates
Unit: RMB Reason for not yet obtaining Item Book value property right certificates Shandong Chenming Paper Holdings Limited 210,733,601.25 Processing with scheduled operation commencement not imminent Shouguang Meilun Paper Co., Ltd. 221,756,442.75 Processing with scheduled operation commencement not imminent Zhanjiang Chenming Pulp& Paper Co., Ltd. 1,473,805,159.70 Processing with scheduled operation commencement not imminent Jilin Chenming Paper Co., Ltd. 515,659,887.28 Processing with scheduled operation commencement not imminent Wuhan Chenming Hanyang Paper 80,193,407.46 Processing with scheduled Holdings Co., Ltd. operation commencement not imminent Jiangxi Chenming Paper Co., Ltd. 206,403,960.26 Processing with scheduled operation commencement not imminent Total 2,708,552,458.70
SHANDONG CHENMING PAPER HOLDINGS LIMITED 111
IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
14. Construction in progress
(1) Particulars of construction in progress
Unit: RMB Closing balance Opening balance
Provision Provision
Item Book balance for impairment Book value Book balance for impairment Book value 700,000 tonne pulp equipment
upgrade (Zhanjiang Chenming) 142,846,027.30 142,846,027.30 142,846,027.30 142,846,027.30 600,000 tonne liquid packaging paper
(Zhanjiang Chenming) 3,104,616,172.57 3,104,616,172.57 2,589,556,896.31 2,589,556,896.31 Power plant expansion project
(Zhanjiang Chenming) 147,022,000.00 147,022,000.00 15,000,000.00 15,000,000.00 Food packaging paper project
(Jiangxi Chenming) 1,299,929,248.95 1,299,929,248.95 BTMP renovation project
(Jiangxi Chenming) 66,440,550.11 66,440,550.11 Mid-water renovation project
(Jiangxi Chenming) 40,612,426.54 40,612,426.54 39,199,277.27 39,199,277.27 Power plant electro-elimination
reconstruction project
(Jiangxi Chenming) 10,641,025.68 10,641,025.68 10,641,025.68 10,641,025.68 Magnesite mining (Haicheng Haiming) 603,392,391.03 603,392,391.03 542,134,749.27 542,134,749.27 Forestry pulp integration project
16
(Huanggang Chenming) 950,077,178.20 950,077,178.20 660,485,661.78 660,485,661.78 INTERIM Others 654,852,512.25 654,852,512.25 463,385,821.81 463,385,821.81 REPORT
Total 5,654,059,733.57 5,654,059,733.57 5,829,619,258.48 5,829,619,258.48
112
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
16 INTERIM REPORT
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IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
15. Materials for project
Unit: RMB Item Closing balance Opening balance Special materials 14,159,270.18 14,128,489.39 Special equipment 1,232,081.13 533,627.37 Total 15,391,351.31 14,662,116.76 16. Intangible assets
Unit: RMB Item Land use rights Software Total I. Original carrying amount
1. Opening balance 1,697,554,320.74 22,560,247.47 1,720,114,568.21 2. Increase for the period 10,578,786.30 10,578,786.30 (1) Acquisition 10,578,786.30 10,578,786.30 3. Decrease for the period 99,186.42 99,186.42 4. Closing balance 1,708,133,107.04 22,461,061.05 1,730,594,168.09 II. Accumulated amortisation
16
1. Opening balance 240,015,070.10 17,393,437.48 257,408,507.58 INTERIM
REPORT
2. Increase for the period 16,351,545.17 498,644.28 16,850,189.45 (1) Provision 16,351,545.17 498,644.28 16,850,189.45 3. Decrease for the period — 4. Closing balance 256,366,615.27 17,892,081.76 274,258,697.03 III. Impairment provision
1. Opening balance
2. Increase for the period
3. Decrease for the period
4. Closing balance
IV. Book value
1. Closing book value 1,451,766,491.77 4,568,979.29 1,456,335,471.06 2. Opening book value 1,457,539,250.64 5,166,809.99 1,462,706,060.63 Note: (1) On 30 June 2016, property, plant and equipment of carrying amount of RMB4,673,799,362.90 (31 December 2015: RMB4,567,649,044.39) and land use rights of carrying amount of RMB342,444,168.04 (31 December 2015: RMB309,070,530.88) was pledged as collateral for the long-term borrowings of RMB2,301,963,268.898.89 (31 December 2015: RMB2,304,159,268.89) (Note VII. 31), the long-term borrowings due within one year of RMB175,711,800.00 (31 December 2015: RMB281,218,900.00) (see Note VII. 29) and long-term payables of RMB200,000,000.00.
(2) The state-owned land use rights obtained by the Company in China were in compliance with PRC laws with a term of grant of 40- 50 years upon receipt.
114
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IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
17. Goodwill
(1) Original carrying amount of goodwill
Unit: RMB Name of investee or Increase Decrease
item generating goodwill Opening balance for the period for the period Closing balance Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60 Shandong Chenming Panels 5,969,626.57 5,969,626.57 Co., Ltd.
Total 20,283,787.17 20,283,787.17 (2) Provision for impairment of goodwill
Goodwill arose from business combination not under common control during prior years.
On the balance sheet date, the management of the Company assessed the recoverable amount of cash- generating unit which results in goodwill, in order to determine whether to make provision for impairment loss accordingly. The recoverable amount of cash-generating unit was determined based on the estimated cash flow in the financial budget for the next five years by the management, and the time value of currency was estimated using the discount rate of8.32% (2014:8.32%). Results of impairment test showed that no provision for 16 impairment loss was necessary to be made for goodwill.
INTERIM REPORT 18. Long-term prepaid expenses
Unit: RMB Increase Amortisation
Item Opening balance for the period for the period Other deductions Closing balance Woodland expenses 154,540,935.69 54,236.25 3,381,452.61 559,180.57 150,654,538.76 Others 11,146,010.92 352,407.30 10,793,603.62 Total 165,686,946.61 54,236.25 3,733,859.91 559,180.57 161,448,142.38
SHANDONG CHENMING PAPER HOLDINGS LIMITED 115
IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
19. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets before offsetting
Unit: RMB Closing balance Opening balance Deductible Deductible
temporary Deferred income temporary Deferred income Item differences tax assets differences tax assets Provision for impairment 406,193,848.87 94,330,056.96 384,938,613.04 89,456,807.32 of assets
Unrealised profit arising from 140,913,322.24 35,228,330.56 130,647,470.24 32,661,867.55 intra-group transactions
Deductible loss 1,815,391,509.88 349,183,349.30 1,733,079,653.85 406,220,680.25 Outstanding payables 111,402,918.34 24,834,448.44 251,138,009.64 50,233,974.39 Deferred income 157,301,588.96 33,451,058.73 169,293,123.08 34,655,980.97 Total 2,631,203,188.29 537,027,243.99 2,669,096,869.85 613,229,310.48 (2) The breakdown of unrecognised deferred income tax assets
Unit: RMB 16
Item Closing balance Opening balance INTERIM
REPORT
Deductible temporary differences 67,227,246.50 36,714,728.52 Deductible loss 470,002,332.85 505,399,608.89 Total 537,229,579.35 542,114,337.41 (3) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows Unit: RMB Year Closing amount Opening amount Remark
2016 56,787,869.12
2017 116,596,801.25 115,377,328.84
2018 137,818,792.08 135,000,510.29
2019 96,244,881.00 95,618,971.48
2020 105,949,444.95 102,614,929.16
2021 13,392,413.57
Total 470,002,332.85 505,399,608.89—
20. Other non-current assets
Unit: RMB Item Closing balance Opening balance Entrusted loans 900,000,000.00 900,000,000.00 Prepayments of properties 315,612,834.60 310,234,623.33 Prepayments of land 33,073,264.28 32,124,242.00 Less: portion due within one year (see Note VII. 7) 900,000,000.00
Total 348,686,098.88 1,242,358,865.33
116
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IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
21. Short-term borrowings
Unit: RMB Item Closing balance Opening balance Pledged borrowings 1,090,247,999.99 472,286,374.54 Guarantee borrowings 12,015,225,099.81 10,240,162,328.25 Credit borrowings 8,179,329,225.45 8,312,516,970.07 Discounted borrowings 7,246,902,000.00 5,730,570,000.00 Total 28,531,704,325.25 24,755,535,672.86 22. Bills payable
Unit: RMB Category Closing balance Opening balance Bank acceptance bills 3,843,491,440.10 3,281,599,412.31 Total 3,843,491,440.10 3,281,599,412.31 Unpaid bills payable due as at the end of the period amounted to nil.
16 INTERIM REPORT 23. Accounts payable
(1) Particulars of accounts payable
Unit: RMB Item Closing balance Opening balance Within 1 year 2,133,183,607.71 2,485,701,891.02 1-2 years 342,018,317.33 308,215,762.61 2-3years 87,171,510.71 69,577,394.46 Over 3 years 110,236,904.63 78,842,338.48 Total 2,672,610,340.38 2,942,337,386.57
SHANDONG CHENMING PAPER HOLDINGS LIMITED 117
IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
23. Accounts payable(Cont’d)
(2) Significant accounts payable for over 1 year
Unit: RMB Reasons for outstanding or not Item Closing balance carried forward FORESTRY TASMANIA 27,995,705.76 Outstanding JIANGSU NEW CENTURY JIANGNAN ENVIRONMENTAL
PROTECTION LTD 10,247,536.71 Outstanding SHANGHAI CLEAR SCIENCE& TECHNOLOGY CO.,LTD 8,642,724.19 Outstanding FUJIAN INDUSTRIAL EQUIPMENT INSTALLATION
CO. LTD SANMIN BRANCH 5,525,547.66 Outstanding SHANDONG LONGTAI STAINLESS STEEL PRODUCTS CO., LTD. 4,165,015.91 Outstanding Total 56,576,530.23 — 24. Advance receipts
(1) Particulars of advance receipts
16
Unit: RMB INTERIM
REPORT
Item Closing balance Opening balance Within 1 year 188,992,725.70 150,907,190.21 1-2 years 23,390,163.30 29,597,036.80 Total 212,382,889.00 180,504,227.01 (2) Significant advance receipts for over 1 year
Unit: RMB Item Closing balance Reasons
QINGDAO XULIN INTERNATIONAL 5,060,000.00 No delivery requirement from the counterparty TRADING CO., LTD.
TIANJIN SHINIL INDUSTRIAL CO.,LTD. 3,324,016.55 No delivery requirement from the counterparty Total 8,384,016.55—
118
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
25. Staff remuneration payables
(1) Particulars of Staff remuneration payables
Unit: RMB Increase Decrease
Item Opening balance for the period for the period Closing balance I. Short-term remuneration 204,977,819.38 473,557,835.32 520,337,896.22 158,197,758.48 II. Retirement benefit plan–
defined contribution
scheme 850,799.50 61,135,801.49 56,483,041.64 5,503,559.35 III. Termination benefits 12,075.15 164,609.72 164,609.72 12,075.15 Total 205,840,694.03 534,858,246.53 576,985,547.58 163,713,392.98 (2) Particulars of short-term remuneration
Unit: RMB Opening Increase Decrease Closing Item balance for the period for the period balance 1. Salaries, bonuses,
16 allowance and subsidies 154,415,941.85 398,127,398.49 450,836,264.94 101,707,075.40 INTERIM REPORT 2. Staff welfare 13,623,564.10 13,623,564.10
3. Social insurance premium 4,652,435.30 23,103,146.58 23,309,404.59 4,446,177.29 Of which: Medical insurance
premium 3,638,795.41 18,712,162.16 19,639,264.60 2,711,692.97 Work-related
injury insurance
premium 35,372.57 2,500,122.27 1,768,127.38 767,367.46 Maternity
insurance
premium 978,267.32 1,890,862.15 1,902,012.61 967,116.86 4. Housing provident funds 4,460,947.36 27,943,105.93 26,567,127.99 5,836,925.30 5. Union funds and workers
education 22,663,812.89 10,252,550.50 5,606,619.76 27,309,743.63 6. Short paid leave 18,784,681.98 508,069.72 394,914.84 18,897,836.86 Total 204,977,819.38 473,557,835.32 520,337,896.22 158,197,758.48 (3) Defined contribution plan
Unit: RMB Opening Increase Decrease Closing Item balance for the period for the period balance 1. Basic pension insurance 760,184.96 57,930,835.83 53,334,979.66 5,356,041.13 2. Unemployment insurance 90,614.54 3,204,965.66 3,148,061.98 147,518.22 Total 850,799.50 61,135,801.49 56,483,041.64 5,503,559.35
SHANDONG CHENMING PAPER HOLDINGS LIMITED 119
IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
26. Taxes payable
Unit: RMB Item Closing balance Opening balance Value added tax 84,892,313.31 43,110,126.98 Business tax 246,740.79 5,019,330.14 Enterprise income tax 90,838,803.51 121,532,520.76 Individual income tax 1,417,975.98 953,632.02 Urban maintenance and construction tax 3,329,746.24 3,274,749.38 Land use tax 7,616,716.54 9,620,892.06 Property tax 11,645,547.75 5,856,496.06 Educational surcharges and others 2,985,961.64 3,940,435.85 Stamp duty 1,379,328.29 1,544,300.55 Total 204,353,134.05 194,852,483.80 27. Interest payable
Unit: RMB Item Closing balance Opening balance Interest on corporate bonds 229,626,170.51 62,445,615.01 16 Interest on medium-term notes 450,083.20 27,455,083.22 Interest on privately placed bonds 60,175,000.00 INTERIM
REPORT
Total 230,076,253.71 150,075,698.23 28. Other payables
(1) Other payables by nature
Unit: RMB Item Closing balance Opening balance Within 1 year 828,160,812.57 970,782,931.89 1-2 years 119,705,404.04 132,987,693.44 2-3 years 45,669,202.61 16,970,120.00 Over 3 years 41,932,785.41 37,826,608.05 Total 1,035,468,204.63 1,158,567,353.38 (2) Significant other payables for over 1 year
Unit: RMB Reason for outstanding
Item Closing balance or not carried forward
LIAONING BEIHAI INDUSTRIES 40,564,326.32 Debt investments as agreed by shareholders of GROUP CO., LTD. subsidiaries
SHOUGUANG HENGTAI ENTERPRISE 39,486,572.87 Debt investments as agreed by shareholders of INVESTMENT COMPANY LIMITED subsidiaries
STATE-OWNED SHOUGUANG 8,800,000.00 Temporarily outstanding
QINGSHUIPO FARM
Total 88,850,899.19—
120
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
29. Non-current liabilities due within 1 year
Unit: RMB Item Closing balance Opening balance Long-term borrowings due within 1 year 1,189,954,132.68 1,975,300,816.32 Bonds payable due within 1 year 2,000,000,000.00 1,997,824,337.74 Privately placed bonds due within 1 year 1,498,161,581.85 Medium-term notes due within 1 year 1,096,384,888.57
Total 4,286,339,021.25 5,471,286,735.91 30. Other current liabilities
Unit: RMB Item Closing balance Opening balance Short-term commercial paper 11,652,566,715.45 10,293,543,297.00 Total 11,652,566,715.45 10,293,543,297.00 Increase/decrease in short-term commercial papers payable: 16 INTERIM Unit: RMB REPORT Issue Amortisation of Redemption
Date of Opening during Interest at premium/ during Closing Name of commercial paper Par value issue Term Amount balance the period par value discount the period balance 15Lu Chenming CP001 1,800,000,000.00 2015-4-23 365 days 1,792,800,000.00 1,855,470,000.00 25,303,770.49 1,800,000.00 1,882,573,770.49
15Lu Chenming CP002 1,800,000,000.00 2015-4-27 365 days 1,794,600,000.00 1,859,450,000.00 28,750,000.00 1,800,000.00 1,890,000,000.00
15Lu Chenming SCP001 1,500,000,000.00 2015-7-6 270 days 1,497,750,000.00 1,533,808,333.34 16,593,306.00 500,000.00 1,550,901,639.34
15Lu Chenming SCP002 1,000,000,000.00 2015-8-7 220 days 998,777,778.00 1,015,085,793.00 7,286,311.48 349,207.00 1,022,721,311.48
15Lu Chenming SCP003 1,000,000,000.00 2015-8-24 270 days 998,500,000.00 1,013,669,446.10 14,950,774.15 666,665.00 1,029,286,885.25
15Lu Chenming SCP004 1,000,000,000.00 2015-10-20 270 days 998,500,000.00 1,006,644,723.23 18,850,000.00 1,000,000.00 1,026,494,723.23 15Lu Chenming SCP005 1,000,000,000.00 2015-11-5 270 days 998,500,000.00 1,004,818,334.00 18,900,000.00 1,000,000.00 1,024,718,334.00 15Lu Chenming SCP006 1,000,000,000.00 2015-11-10 270 days 998,500,000.00 1,004,596,667.33 19,950,000.00 1,000,000.00 1,025,546,667.33 16Lu Chenming SCP001 1,000,000,000.00 2016-1-18 270 days 998,500,000.00 998,500,000.00 17,100,000.00 900,000.00 1,016,500,000.00 16Lu Chenming SCP002 1,000,000,000.00 2016-3-7 268 days 998,500,000.00 998,500,000.00 11,739,444.44 632,462.69 1,010,871,907.13 16Lu Chenming SCP003 1,500,000,000.00 2016-3-11 270 days 1,497,750,000.00 1,497,750,000.00 17,437,485.02 908,333.33 1,516,095,818.35 16Lu Chenming SCP004 1,000,000,000.00 2016-4-5 230 days 998,720,000.00 998,720,000.00 9,444,444.44 473,043.48 1,008,637,487.92 16Lu Chenming SCP005 1,500,000,000.00 2016-4-15 270 days 1,497,750,000.00 1,497,750,000.00 12,968,750.00 625,000.00 1,511,343,750.00 16Lu Chenming SCP006 1,000,000,000.00 2016-4-20 190 days 998,944,400.00 998,944,400.00 8,069,444.44 388,905.26 1,007,402,749.71 16Lu Chenming SCP007 1,000,000,000.00 2016-5-10 137 days 999,238,888.89 999,238,888.89 5,819,444.44 277,777.78 1,005,336,111.11 16Lu Chenming SCP008 500,000,000.00 2016-6-24 270 days 499,250,000.00 499,250,000.00 352,500.00 16,666.68 499,619,166.68 Total —— — 18,566,581,066.89 10,293,543,297.00 8,488,653,288.89 233,515,674.91 12,338,061.21 7,375,483,606.56 11,652,566,715.45
SHANDONG CHENMING PAPER HOLDINGS LIMITED 121
IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
31. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB Item Closing balance Opening balance Secured borrowings 2,477,675,068.89 2,585,378,168.89 Guarantee borrowings 3,768,634,969.92 3,206,495,675.32 Credit borrowings 1,138,692,035.94 1,352,808,035.94 Less: long-term borrowings due within 1 year 1,189,954,132.68 1,975,300,816.32 Total 6,195,047,942.07 5,169,381,063.83 Note: (1) For the asset group of pledges of secured borrowings, please refer to Note VII.13 and Note VII.16.
(2) All guaranteed borrowings were borrowings of the subsidiaries guaranteed by the Company. Please refer to Note X.5(2) for details of maturity of the above guarantees.
32. Bonds payable
(1) Bonds payable
Unit: RMB 16
INTERIM
Item Closing balance Opening balance REPORT
12 Chenming debt 3,791,215,868.81 3,788,539,249.59 Total 3,791,215,868.81 3,788,539,249.59 (2) Increase/decrease in bonds payable (excluding other financial instruments such as preference shares and perpetual bonds classified as financial liabilities)
Unit: RMB Amortisation of Redemption Opening Issue during Interest at premium/ during Name of bond Par value Date of issue Term Amount balance the period par value discount the period Closing balance 11-year Chenming debt 2,000,000,000.00 2011/07/06 5 years 1,982,000,000.00 1,997,824,337.74 59,500,000.0000 2,175,662.26 2,000,000,000.00 12-year Chenming debt 3,800,000,000.00 2012/12/26 5 years 3,773,400,000.00 3,788,539,249.59 107,350,000.0000 2,676,619.22 3,791,215,868.81 Less: due within one year
(Note VII. 30) 1,997,824,337.74 2,000,000,000.00 Total — — — 5,755,400,000.00 3,788,539,249.59 — 166,850,000.00 4,852,281.48 — 3,791,215,868.81 33. Long-term payables
(1) By nature
Unit: RMB Item Closing balance Opening balance Retention for the financial leasing operations 246,000,000.00 194,000,000.00 Specific capital for China Development 350,000,000.00 150,000,000.00 Amounts under financial leasing 1,199,435,500.86
Total 1,795,435,500.86 344,000,000.00
122
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
34. Special accounts payable
Unit: RMB Opening Increase for Decrease for Closing
Item balance the period the period balance Reason Huanggang Chenming
integrated forestry, pulp
and paper project 176,983,516.66 104,056,200.00 281,039,716.66
Total 176,983,516.66 104,056,200.00 281,039,716.66 — 35. Deferred income
Unit: RMB Opening Increase for Decrease for Closing
Item balance the period the period balance Reason Government grants 1,495,104,889.26 10,000,000.00 41,480,887.29 1,463,624,001.97
Total 1,495,104,889.26 10,000,000.00 41,480,887.29 1,463,624,001.97 — 16 Items in respect of government grant: INTERIM REPORT Unit: RMB Include in
non-operating
New grants income for Asset-related/ Liabilities item Opening balance for the period the period Other Changes Closing balance income-related Special subsidy funds for
environmental protection 948,947,938.60 10,000,000.00 26,850,306.75 932,097,631.85 Asset-related Project fund for National technological
support scheme 5,667,571.70 922,350.00 4,745,221.70 Asset-related Special subsidy fund for Songhuajiang
environmental protection project 24,853,079.64 515,000.04 24,338,079.60 Asset-related Modification of alkaline
recycling system 4,700,609.23 4,700,609.23 Asset-related Sewage treatment and water
conservation reconfiguration project 11,848,000.99 266,550.76 11,581,450.23 Asset-related Financial grants for technological
modification project 154,983,523.51 2,967,606.58 152,015,916.93 Asset-related Zhanjiang integrated forestry,
pulp and paper project 278,275,468.02 6,800,461.99 271,475,006.03 Asset-related Interest Subsidy 50,459,164.38 2,159,414.78 48,299,749.60 Asset-related Railway line change compensation 14,250,000.00 999,196.39 13,250,803.61 Asset-related Others 1,119,533.19 1,119,533.19 Asset-related Total 1,495,104,889.26 10,000,000.00 41,480,887.29 1,463,624,001.97 —
SHANDONG CHENMING PAPER HOLDINGS LIMITED 123
IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
36. Other non-current liabilities
Unit: RMB Item Closing balance Opening balance Medium-term notes 1,096,384,888.57 1,094,621,421.67 Privately placed bonds 1,498,161,581.85 Less: the portion maturing within one year (Note VII. 30) 1,096,384,888.57 1,498,161,581.85 Total 1,094,621,421.67 37. Share capital
Increase/decrease
Item Opening balance for the year Closing balance RMB ordinary shares (A shares) 1,113,278,456.00 1,113,278,456.00 Domestic listed foreign shares (B shares) 470,923,511.00 470,923,511.00 Overseas listed foreign shares (H shares) 352,203,500.00 352,203,500.00 Total number of shares 1,936,405,467.00 1,936,405,467.00 16
38. Other equity instruments
INTERIM
REPORT
Unit: RMB Increase for Decrease for
Item Opening balance the period the period Closing balance Perpetual bonds 2,582,800,000.00 2,582,800,000.00 Preference shares 2,238,750,000.00 2,238,750,000.00 Total 2,582,800,000.00 2,238,750,000.00 4,821,550,000.00 39. Capital reserves
Unit: RMB Increase Decrease
Item Opening balance for the period for the period Closing balance Capital premium (share premium) 5,478,815,769.60 11,900.60 5,478,827,670.20 Other capital reserves 670,322,507.21 670,322,507.21 Total 6,149,138,276.81 11,900.60 6,149,150,177.41 Note: The Company received income arising from disposal of odd lots for equity distributions by China Securities Depository and Clearing Co., Ltd, with capital premium under capital reserves up by RMB11,900.60.
124
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
40. Other comprehensive income
Unit: RMB During the period
Less:
Transferred
from Other
Comprehensive
Income in Attributable
Incurred before prior periods to Attributable to minority
Income tax profit or loss Less: income to parent shareholders
Item Opening balance for the period during the period tax expenses company after tax after tax Closing balance Other comprehensive
income to be
reclassified to profit
or loss in
subsequent periods -345,014,864.26 -154,317,270.14 -154,317,270.14 -499,332,134.40 Exchange differences
on translation of
foreign operations -345,014,864.26 -154,317,270.14 -154,317,270.14 -499,332,134.40 Total other
comprehensive
income -345,014,864.26 -154,317,270.14 -154,317,270.14 -499,332,134.40 16 INTERIM 41. Surplus reserve REPORT Unit: RMB Increase Decrease
Item Opening balance for the period for the period Closing balance Statutory surplus reserve 1,132,116,106.40 1,132,116,106.40 Total 1,132,116,106.40 1,132,116,106.40 Note: Pursuant to the Companies Law and the Articles of Association, the Company transferred10% of the net profit to the statutory surplus reserves. There was no need to transfer if the accumulated amounts of the statutory reserves exceeded50% of theCompany’s registered capital.
The Company can transfer the discretionary surplus reserve upon the transfer of statutory surplus reserve. Once approved, the discretionary surplus reserve can be used to offset loss for prior years or increase the share capital.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 125
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
42. Retained profit
Unit: RMB Item The period The prior period Retained profit as at the end of the prior year before adjustment 5,416,049,598.87 4,665,921,686.21 Retained profit as at the beginning of the year after adjustment 5,416,049,598.87 4,665,921,686.21 Plus: Net profit for year attributable to shareholders of the parent company 939,164,870.60 276,388,070.51 Ordinary dividend payable 580,921,640.10 271,096,765.38 Retained profit as at the end of the period 5,774,292,829.37 4,671,212,991.34 43. Revenue and operating costs
Unit: RMB Amount for the period Amount for the prior period Item Revenue Costs Revenue Costs Principal activities 10,531,214,461.68 7,237,969,046.45 9,538,238,160.04 7,254,560,951.27 Other activities 75,144,271.34 25,998,263.78 180,459,517.72 115,823,710.04 Total 10,606,358,733.02 7,263,967,310.23 9,718,697,677.76 7,370,384,661.31 16
INTERIM
REPORT
44. Business taxes and surcharges
Unit: RMB Amount for Amount for Item the period the prior period Business tax 50,110,672.72 19,400,227.56 Urban maintenance and construction tax 19,040,816.07 16,740,456.80 Educational surcharges 13,519,315.18 12,358,128.23 Water engineering funds 2,565,046.51 1,783,828.10 Others 252,586.81 951,335.97 Total 85,488,437.29 51,233,976.66
126
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
45. Selling and distribution expenses
Unit: RMB Amount for Amount for Item the period the prior period Wages and surcharges 62,610,240.72 66,708,475.58 Depreciation expenses 7,716,005.86 7,557,306.43 Repair costs 4,159,978.36 3,091,091.71 Office expenses 2,284,579.17 3,386,030.28 Transportation expenses 398,501,300.34 385,939,578.36 Selling commissions 9,680,049.87 8,022,080.19 Cargo handling charges 7,496,104.53 8,831,019.32 Travel expenses 14,079,701.21 11,318,593.17 Business hospitality expenses 33,198,045.00 30,516,524.35 Warehouse expenses 1,750,686.55 1,237,873.64 Rental expenses 3,836,615.38 3,696,435.77 Others 28,421,350.06 20,768,814.91 Total 573,734,657.05 551,073,823.71 46. General and administrative expenses
16 Unit: RMB INTERIM REPORT Amount for Amount for Item the period the prior period Wages and surcharges 83,040,079.11 82,162,322.80 Welfare expenses 19,735,058.11 22,097,996.09 Labour insurance premium 26,637,831.86 16,700,430.65 Insurance premium 10,302,590.82 12,324,495.70 Depreciation expenses 33,670,891.00 28,262,329.34 Waste disposal expenses 12,242,348.57 9,665,816.77 Hospitality expenses 19,243,914.33 11,185,607.21 Amortisation of intangible assets 11,943,479.38 15,314,635.35 Technological development expenses 305,617,867.77 278,819,214.56 Tax 53,373,398.17 53,206,906.69 Production interruption loss 33,255,858.46 27,688,971.32 Repair fees 14,967,595.79 9,473,596.61 Others 69,982,914.01 87,351,646.17 Total 694,013,827.38 654,253,969.26
SHANDONG CHENMING PAPER HOLDINGS LIMITED 127
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
47. Finance expenses
Unit: RMB Amount for Amount for Item the period the prior period Interest expenses 1,007,251,661.57 859,956,368.86 Less: Interest income 96,175,924.81 135,953,439.72 Capitalised interest amount 82,706,472.39 65,915,001.73 Foreign exchange gains and losses 49,068,370.62 11,682,749.13 Bank charges 90,905,926.61 75,701,602.57 Total 968,343,561.61 745,472,279.11 48. Loss on impairment of assets
Unit: RMB Amount Amount Item for the period for the prior period I. Loss on bad debts 27,039,385.57 35,368,247.15 16
II. Loss on fixed assets impairment 10,000,000.00
INTERIM
Total 37,039,385.57 35,368,247.15 REPORT
49. Gain on change in fair value
Unit: RMB Amount Amount Source of gain on change in fair value for the period for the prior period Consumable biological assets measured at fair value -10,599,543.68 -2,177,906.88 Total -10,599,543.68 -2,177,906.88 50. Investment income
Unit: RMB Amount Amount Item for the period for the prior period Income from long-term equity investments accounted for
using the equity method -7,203,834.37 -2,145,031.45 Income on external entrusted loans 44,212,264.15 48,777,777.77 Total 37,008,429.78 46,632,746.32
128
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
51. Non-operating income
Unit: RMB Amounts included in extraordinary Amount Amount for gains and losses Item for the period the prior period for the period Total gain on disposal of non-current assets 2,416,628.05 7,042,678.94 2,416,628.05 Of which: Gain on disposal of fixed assets 2,416,628.05 7,042,678.94 2,416,628.05 Gain on debt restructuring 1,909,002.10 23,308.47 1,909,002.10 Government grants 218,025,169.93 58,824,671.63 214,412,568.80 Others 6,557,554.23 9,199,379.45 6,557,554.23 Total 228,908,354.31 75,090,038.49 225,295,753.18 Further particulars:
Amount Amount for Asset-related/
Grants item for the period the prior period income-related
Amortised deferred income 41,480,887.29 40,285,971.51 Asset-related
Grants income 172,931,681.51 18,538,700.12 Asset-related
16 Value-added tax refund 3,612,601.13 Asset-related
INTERIM REPORT Total 218,025,169.93 58,824,671.63—
52. Non-operating expenses
Unit: RMB Amounts included in extraordinary Amount Amount for gains and losses Item for the period the prior period for the period Total loss on disposal of non-current assets 4,043,314.21 2,683,749.34 4,043,314.21 Of which: loss on disposal of fixed assets 4,043,314.21 2,683,749.34 4,043,314.21 Others 1,959,668.15 647,280.50 1,959,668.15 Total 6,002,982.36 3,331,029.84 6,002,982.36 53. Income tax expenses
Unit: RMB Amount Amount for Item for the period the prior period Income tax expenses for the period 230,829,355.97 191,848,281.24 Deferred income tax expenses 76,202,066.49 -18,436,978.63 Total 307,031,422.46 173,411,302.61
SHANDONG CHENMING PAPER HOLDINGS LIMITED 129
IX Financial Report
VII. Notes to items of the Consolidated Financial Statements(Cont’d)
54. Other comprehensive income
For details, please see Note 40.
55. Items on statements of cash flow
(1) Cash received relating to other operating activities
Unit: RMB Amount for Amount for the Item the period prior period Finance support fund 172,931,681.51 18,538,700.12 Interest income 96,175,924.81 135,953,439.72 External security deposit of financial leasing companies 55,000,000.00 401,299,619.20 Open credit, and income from default penalty and fine 66,363,266.64 15,335,120.26 Total 390,470,872.96 571,126,879.30 (2) Cash paid relating to other operating activities
Unit: RMB Amount for Amount for the 16 Item the period prior period INTERIM
REPORT
Expense and open credit 805,195,276.10 840,721,979.08 Net increase in principal receivables relating to
finance lease business 6,214,266,350.71 3,354,524,658.13 Total 7,019,461,626.81 4,195,246,637.21 (3) Cash received relating to other investing activities
Unit: RMB Amount for Amount for the Item the period prior period Government grants 31,438,021.33 Special subsidy funds of Huanggang 104,056,200.00
Total 104,056,200.00 31,438,021.33 (4) Cash paid relating to other financing activities
Unit: RMB Amount for Amount for the Item the period prior period Issuance of short-term and super&-short term commercial papers 8,494,653,288.89 3,585,600,000.00 Issuance of preference shares 2,238,750,000.00
Capital contribution by CDB Fund to Zhanjiang Chenming 200,000,000.00
Equipment Leasing 1,199,435,500.86
Total 12,132,838,789.75 3,585,600,000.00
130
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
55. Items on statements of cash flow(Cont’d)
(5) Cash paid relating to other financing activities
Unit: RMB Amount for Amount for the Item the period prior period Repayment of private debt 1,587,000,000.00
Repayment of commercial papers 7,375,483,606.56
Increase in restricted bank deposits 1,109,208,431.73 1,767,785,037.29 Total 10,071,692,038.29 1,767,785,037.29 56. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Unit: RMB Amount Amount for Supplementary information for the period the prior period 1. Reconciliation of net profit as cash flows
from operating activities: — — 16 Net profit 926,054,389.48 253,713,266.04 INTERIM Plus: Provision for impairment of assets 37,039,385.57 35,368,247.15 REPORT Depreciation of fixed assets, consumption of oil and
gas assets, depreciation of productive biological assets 694,931,226.76 711,271,990.61 Amortisation of intangible assets 16,835,509.25 16,558,674.58 Amortisation of long-term prepaid expenses 3,733,859.91 3,502,139.60 Loss on disposal of fixed assets, intangible assets and
other long-term assets (“-” denotes gain) 1,626,686.16 -4,358,929.60 Loss on changes in fair value (“-” denotes gain) 10,599,543.68 2,177,906.88 Finance expenses (“-” denotes gain) 1,007,251,661.57 859,956,368.86 Investment loss (“-” denotes gain) -37,008,429.78 -46,632,746.32 Decrease in deferred income tax assets (“-” denotes increase) 76,202,066.49 -20,654,881.28 Decrease in inventories (“-” denotes increase) -15,307,641.68 169,131,091.67 Decrease in operating receivables (“-” denotes increase) -5,584,481,269.74 -4,362,330,469.00 Increase in operating payables (“-” denotes decrease) 165,013,159.29 159,541,706.08 Net cash flows from operating activities -2,697,509,853.04 -2,222,755,634.73 2. Major investing and financing activities not
involving cash settlements: — — 3. Net change in cash and cash equivalents: — — Closing balance of cash 3,567,441,351.15 725,178,041.37 Less: Opening balance of cash 1,888,107,493.76 976,096,861.30 Net increase in cash and cash equivalents 1,679,333,857.39 -250,918,819.93
SHANDONG CHENMING PAPER HOLDINGS LIMITED 131
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VII. Notes to items of the Consolidated Financial Statements(Cont’d)
56. Supplementary information on cash flow statement(Cont’d)
(2) Cash and cash equivalents composition
Unit: RMB Item Closing balance Opening balance I. Cash 3,567,441,351.15 1,888,107,493.76 Of which: Cash on hand 2,322,936.69 1,869,583.60 Bank deposits readily available for payment 3,565,118,414.46 1,886,237,910.16 III. Balance of cash and cash equivalent as at end of period 3,567,441,351.15 1,888,107,493.76 57. Assets with restricted ownerships or right to use
Unit: RMB Closing
Item carrying amount Reason for such restrictions
Monetary funds 8,205,426,953.98 As pledges for bank borrowings, guarantee deposits for bank acceptance bills and letter of credit deposits, and deposit reserves Bills receivable 1,941,931,629.23 As collaterals for short-term borrowings, bills 16 payable, letters of guarantee and letters of credit Fixed assets 4,673,799,362.90 As collaterals for bank borrowings and long-term INTERIM
REPORT payables
Intangible assets 342,444,168.04 As collaterals for bank borrowings and long-term payables
Total 15,163,602,114.15—
58. Foreign currency items
√ Applicable□ Not applicable
Principal Place of Reporting Name of subsidiary place of business incorporation currency Chenming (HK) Limited Hong Kong, China Hong Kong, China USD
Chenming International Co., Ltd. Los Angeles, USA Los Angeles, USA USD
Chenming Paper Japan Co., Ltd. Tokyo, Japan Tokyo, Japan JPY
Chenming GmbH Hamburg, Germany Hamburg, Germany EUR
Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea KRW
132
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VIII. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Shareholding
Principle place Place of Nature of
Name of subsidiary of business incorporation business Direct Indirect Acquisition Wuhan Chenming Hanyang Wuhan, China Wuhan, China Paper 50.93% Establishment Paper Holdings Co., Ltd. manufacture
Shandong Chenming Power Shouguang, China Shouguang, China Power 100.00% Establishment Supply Holdings Co., Ltd.
Hailaer Chenming Paper Co., Ltd. Hailaer, China Hailaer, China Paper 75.00% Establishment manufacture
Haicheng Haiming Mining Co., Ltd. Haicheng, China Haicheng, China Mining 60.00% Establishment Jiangxi Chenming Paper Co., Ltd. Nanchang, China Nanchang, China Paper 51.00% 49.00% Establishment manufacture
Jilin Chenming Paper Co., Ltd. Jilin, China Jilin, China Paper 100.00% Merger and manufacture acquisition Shandong Grand View Hotel Co., Ltd. Shouguang, China Shouguang, China Catering 70.00% Establishment Zhanjiang Chenming Zhanjiang, China Zhanjiang, China Paper 100.00% Establishment Pulp& Paper Co., Ltd. manufacture
Chenming (HK) Limited Hong Kong, China Hong Kong, China Trade of paper 100.00% Establishment Shouguang Chenming Shouguang, China Shouguang, China Transportation 100.00% Establishment Modern Logistic Co., Ltd.
Shouguang Chenming Art Shouguang, China Shouguang, China Paper 75.00% Establishment Paper Co., Ltd. manufacture
16 Fuyu Chenming Paper Co., Ltd. Fuyu, China Fuyu, China Paper 100.00% Establishment manufacture INTERIM REPORT Huanggang Chenming Huanggang, China Huanggang, China Pulp 100.00% Establishment Pulp& Paper Co., Ltd.
Huanggang Chenming Huanggang, China Huanggang, China Arboriculture 100.00% Establishment Arboriculture Co., Ltd.
Shouguang Meilun Paper Co., Ltd. Shouguang, China Shouguang, China Paper 100.00% Establishment manufacture
Shouguang Shun Da Shouguang, China Shouguang, China Customs 100.00% Establishment declaration
Customs Declaration Co, Ltd.
Shandong Chenming Paper Shouguang, China Shouguang, China Sales of paper 100.00% Establishment Sales Co., Ltd.
Chenming International Co., Ltd. Los Angeles, Los Angeles, Trade of paper 100.00% Establishment the United States the United States
Shouguang Chenming Shouguang, China Shouguang, China Packaging 100.00% Establishment Hongxin Packaging Co., Ltd.
Shouguang Chenming Shouguang, China Shouguang, China Logistics 100.00% Establishment Industrial Logistics Co., Ltd.
Shouguang Chenming Jiatai Shouguang, China Shouguang, China Property 100.00% Establishment Property Management Co., Ltd. management
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IX Financial Report
VIII. Interest in other entities(Cont’d)
1. Interest in subsidiaries(Cont’d)
(1) Constitution of the Group(Cont’d)
Shareholding
Principle place Place of Nature of
Name of subsidiary of business incorporation business Direct Indirect Acquisition Shouguang Chenming Import Shouguang, China Shouguang, China Import and100.00% Establishment and Export Trade Co., Ltd. export trade
Shouguang Chenming Papermaking Shouguang, China Shouguang, China Machinery 100.00% Establishment Machine Co., Ltd. manufacturing
Japan Chenming Paper Co., Ltd. Tokyo, Japan Tokyo, Japan Trade of 100.00% Establishment paper
Chenming GmbH Hamburg, GermanyHamburg, Trade of 100.00% Establishment Germany paper
Shouguang Hongxiang Printing and Shouguang, China Shouguang, China Printing and100.00% Merger and Packaging Co., Ltd. packaging acquisition Shandong Chenming Paper Group Fuyu, China Fuyu, China Sales of 100.00% Establishment (Fuyu) Sales Co., Ltd. paper
Shandong Chenming Group Jinan, China Jinan, China Finance 80.00% 20.00% Establishment Finance Co., Ltd.
Chenming Arboriculture Co., Ltd. Wuhan, China Wuhan, China Arboriculture100.00% Establishment Qingdao Chenming International Qingdao, China Qingdao, China Logistics 30.00% 70.00% Establishment Logistics Co., Ltd.
Jinan Chenming Investment Jinan, China Jinan, China Investment100.00% Establishment Management Co., Ltd. management
16
Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea Sales of 100.00% Establishment INTERIM paper
REPORT
Zhanjiang Chenming Zhanjiang, China Zhanjiang, China Arboriculture 100.00% Establishment Arboriculture Co., Ltd.
Yangjiang Chenming Yangjiang, China Yangjiang, China Arboriculture 100.00% Establishment Arboriculture Co., Ltd.
Guangdong Huirui Investment Zhanjiang, China Zhanjiang, China Investment 51.00% Merger and Co., Ltd. acquisition Zhanjiang Meilun Pulp& Paper Zhanjiang, China Zhanjiang, China Pulp 100.00% Establishment Co., Ltd.
Zhanjiang Chenming New-style Zhanjiang, China Zhanjiang, China Wall materials 100.00% Establishment Wall Materials Co., Ltd.
Wuhan Chenming Qianneng Wuhan, China Wuhan, China Electric Power 51.00% Establishment Electric Power Co., Ltd.
Jilin Chenming Machinery Jilin, China Jilin, China Machinery 100.00% Establishment Manufacturing Co., Limited manufacturing
Jilin Chenming New-style Jilin, China Jilin, China Wall Materials 100.00% Establishment Wall Materials Co., Ltd.
Shouguang Chenming Cement Shouguang, China Shouguang, China Cement 100.00% Establishment Co., Limited
Shandong Chenming Panels Shouguang, China Shouguang, China Panel 100.00% Merger and Co., Ltd. acquisition
134
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IX Financial Report
VIII. Interest in other entities(Cont’d)
1. Interest in subsidiaries(Cont’d)
(1) Constitution of the Group(Cont’d)
Shareholding
Principle place Place of Nature of
Name of subsidiary of business incorporation business Direct Indirect Acquisition Shandong Chenming Floor Shouguang, China Shouguang, China Floor board 100.00% Merger and Board Co., Ltd. acquisition Nanchang Chenming Arboriculture Nanchang, China Nanchang, China Arboriculture 100.00% Establishment Co., Ltd.
Shouguang Hongyi Decorative Shouguang, China Shouguang, China Packaging 100.00% Merger and Packaging Co., Ltd. acquisition Shouguang Xinyuan Coal Co., Ltd. Shouguang, China Shouguang, China Coal 100.00% Merger and acquisition Shouguang City Run Sheng Wasted Shouguang, China Shouguang, China Purchase and 100.00% Merger and Paper Recycle Co., Ltd. sales of waste acquisition and obsolete
materials
Shouguang Wei Yuan Logistics Shouguang, China Shouguang, China Logistics 100.00% Merger and Company Limited acquisition
Wuxi Song Ling Paper Co., Ltd. Wuxi, China Wuxi, China Paper 100.00% Merger and manufacture acquisition Shandong Chenming Jinan, China Jinan, China Investment 100.00% Establishment Investment Limited
Shandong Chenming Financial Jinan, China Jinan, China Financial leasing 100.00% Establishment 16 Leasing Co., Ltd.
INTERIM REPORT (2) Major non-wholly owned subsidiaries
Unit: RMB Dividend
Gain or loss to minority
attributable to interests Closing minority interests declared during balance of Name Minority interests during the period the period minority interests Wuhan Chenming Hanyang
Paper Holdings Co., Ltd. 49.07% -12,334,692.31 148,683,786.11 Shouguang Chenming
Art Paper Co., Ltd. 25.00% 2,926,553.26 34,201,371.73 Shandong Grand View
Hotel Co., Ltd. 30.00% -2,169,994.59 -31,258,936.72 Hailaer Chenming
Paper Co., Ltd. 25.00% 11,628,676.65 Haicheng Haiming
Mining Co., Ltd. 40.00% -25,533.64 95,974,466.36 Guangdong Huirui
Investment Co., Ltd. 49.00% -1,506,813.84 115,092,015.41 Total -13,110,481.12 374,321,379.54
SHANDONG CHENMING PAPER HOLDINGS LIMITED 135
IX Financial Report
16
INTERIM
REPORT
136
SHANDONG CHENMING PAPER HOLDINGS LIMITED
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IX Financial Report
VIII. Interest in other entities(Cont’d)
1. Interest in subsidiaries(Cont’d)
(1) Constitution of the Group(Cont’d)
Unit: RMB Amounts during the year Amounts during the prior year
Total Cash flows from Total Cash flows from comprehensive operating comprehensive operating Name Revenue Net profit income activities Revenue Net profit income activities Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. 554,350,364.42 -27,322,183.58 -27,322,183.58 4,831,299.33 504,601,887.41 -31,143,541.92 -31,143,541.92 -268,479,365.20 Shouguang Chenming Art Paper Co., Ltd. 312,682,091.71 11,706,212.99 11,706,212.99 461,691.92 295,354,809.85 -7,798,282.54 -7,798,282.54 193,199,052.24 Shandong Grand View Hotel Co., Ltd. 17,794,419.06 -7,233,315.31 -7,233,315.31 -844,051.71 16,833,253.63 -10,960,158.47 -10,960,158.47 89,407,600.37 Haicheng Haiming Mining Co., Ltd. -63,834.09 -63,834.09 62,143,196.78 107,237,545.29 Guangdong Huirui Investment Co., Ltd. -3,075,130.28 -3,075,130.28 -15,394.01 -5,244,648.60 -5,244,648.60 6,427.64 2. Interest in joint arrangements or associates
(1) Major joint ventures and associates
Name of joint ventures Principle place Place of Nature of Accounting and associates of business incorporation business Shareholding method Direct Indirect
Shouguang Chenming Huisen Shouguang, China Shouguang, China Construction 50.00% Equity method 16 New-style Construction materials
INTERIM Materials Co., Ltd. REPORT Arjo Wiggins Chenming Specialty Shouguang, China Shouguang, China Paper making 30.00% Equity method Paper Co., Ltd.
Jiangxi Jiangbao Media Colour Nanchang, China Nanchang, China Printing 21.16% Equity method Printing Co. Ltd.
Zhuhai Dechen New Third Board Zhuhai, China Zhuhai, China Investment 33.33% Equity method Equity Investment Fund Company management
(Limited Partnership)
Wuhan Chenming Wan Xing Wuhan, China Wuhan, China Real estate 40.00% Equity method Real Estate Co., Ltd. development
Jiangxi Chenming Port Co., Ltd. Nanchang, China Nanchang, China Handling and 40.00% Equity method transportation
of goods
and storage
SHANDONG CHENMING PAPER HOLDINGS LIMITED 137
IX Financial Report
VIII. Interest in other entities(Cont’d)
2. Interest in joint arrangements or associates(Cont’d)
(2) Key financial information of major joint ventures
Unit: RMB Closing Opening balance/amounts balance/amounts during the year during the prior year Shouguang Shouguang Chenming Chenming Huisen New-style Huisen New-style Construction Construction Materials Co., Ltd. Materials Co., Ltd. Current assets 4,564,204.70 5,729,672.61 Of which: Cash and cash equivalents 401,893.53 52,995.32 Non-current assets 11,841,571.05 12,036,429.24 Total assets 16,405,775.75 17,766,101.85 Current liabilities 10,222,755.48 11,812,466.81 Total liabilities 10,222,755.48 11,812,466.81 Equity interest attributable to shareholders of the parent company 6,183,020.27 5,953,635.04 Share of net assets based on shareholding 3,091,510.13 2,976,817.52 16 Carrying amount of investment in joint ventures 3,091,510.13 2,976,817.52 Revenue 4,433,865.82
INTERIM
REPORT Finance expenses 143,041.67 -395.35 Net profit 229,385.23 -9,851.45 Total comprehensive income 229,385.23 -9,851.45
138
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VIII. Interest in other entities(Cont’d)
2. Interest in joint arrangements or associates(Cont’d)
(3) Key financial information of major associates
Unit: RMB Closing balance/amounts during the year Opening balance/amounts during the prior year Zhuhai Dechen Zhuhai Dechen
New Third New Third
Board Equity Jiangxi Board Equity
Jiangxi Jiangbao Investment Fund Jiangxi Jiangbao Investment Fund Jiangxi Media Colour Company (Limited Chenming Media Colour Company (Limited Chenming Printing Co. Ltd. Partnership) Port Co., Ltd. Printing Co. Ltd. Partnership) Port Co., Ltd. Current assets 24,757,156.94 41,153,670.29 13,581,422.15 24,151,413.58 75,285,532.03 10,285,611.08 Non-current assets 12,499,497.75 60,760,000.00 113,607,397.40 14,157,621.78 25,760,000.00 45,773,293.56 Total assets 37,256,654.69 101,913,670.29 127,188,819.55 38,309,035.36 101,045,532.03 56,058,904.64 Current liabilities 19,424,358.96 5,000.00 112,711,891.31 18,376,661.74 5,705.20 41,553,342.83 Total liabilities 19,424,358.96 5,000.00 112,711,891.31 18,376,661.74 5,705.20 41,553,342.83Shareholders’ equity
attributable to the Company 17,832,295.73 101,908,670.29 14,476,928.24 19,932,373.62 101,039,826.83 14,505,561.81 Share of net assets
based on shareholding 3,773,313.77 50,954,335.15 5,790,771.30 4,217,690.26 50,519,913.42 5,802,224.72– Others -321,508.34 -176,672.13
Carrying amount of
investment in associates 3,773,313.77 50,632,826.81 5,790,771.30 4,217,690.26 50,343,241.28 5,802,224.72 Revenue 6,950,854.18 11,701,942.33 10,680,633.81 35,462,629.99 16 Net profit -2,100,077.89 868,843.46 -20,949.99 -1,540,788.41 14,027.30 1,839,524.19 INTERIM REPORT Total comprehensive income -2,100,077.89 868,843.46 -20,949.99 -1,540,788.41 14,027.30 1,839,524.19 (4) Excess loss of joint ventures or associates
Unit: RMB Accumulated Unrecognised Accumulated unrecognised loss (or share unrecognised loss incurred of net profit) loss as at the end Name for prior periods for the period of the period Arjo Wiggins Chenming Specialty
Paper Co., Ltd. 7,308,869.16 7,308,869.16 Wuhan Chenming Wan Xing Real
Estate Co., Ltd. 5,845,106.09 5,845,106.09
SHANDONG CHENMING PAPER HOLDINGS LIMITED 139
IX Financial Report
IX. Fair value
1. Fair value of assets and liabilities measured at fair value as at the end of the period
Unit: RMB Fair value as at the end of the period
Item Level 1 Level 2 Level 3 Total I. Continuous measurement
at fair value — — — — 1.Consumable
biological assets 1,554,160,122.32 1,554,160,122.32 Total assets continuously
measured at fair value 1,554,160,122.32 1,554,160,122.32 II. Non-continuous
measurement at fair value — — — — 2. Level 3 continuous and non-continuous measurement, valuation techniques and qualification and quantification of key inputs
The Company adopts the income method in determining the fair value of its consumable biological assets. Under the income method, the valuation is arrived at based on the aggregate expected future profit estimates from forest resources discounted to their present values at an applicable rate which is usually equivalent to yield prevailing in the forestry industry.
16
Key inputs of the method include expected annual income and discount rate. Expected annual profit= expected annual INTERIM income - expected total input Expected annual income= expected output x expected sales price
REPORT
Expected output= based on normal output of theCompany’s logging Expected sales price= normal sales price of the Company in 2015
Expected total input is based on total historic input of saplings growing of the Company up to logging. Discount rate is10.83%, based on the yield prevailing in the industry.
3. Level 3 continuous measurement, adjustment between opening and closing value and sensitivity of unobservable inputs
Opening carrying amount 1,509,964,711.87 Sapling increase during the year 110,898,148.99 Sales decrease during the year 56,103,194.86 Change in fair value through profit or loss for the year -10,599,543.68 Closing carrying amount 1,554,160,122.32
140
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
X. Related parties and related party transactions
1. Parent company of the Company
Shareholding Voting right of the parent of the parent Name of Place of Registered company in company in parent company incorporation Business nature capital the Company the Company Shouguang Chenming Shouguang Investment in manufacture of paper, 1,238,787,742.5 20.87% 20.87% Holdings Co., Ltd. City electricity, steam, arboriculture
The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office. As of the date of this report, the largest shareholder of the Company, Shouguang Chenming Holdings Co., Ltd. increased its shareholding in the Company to21.95%.
2. Subsidiaries of the Company
Please refer to Note VIII. 1. Interest in subsidiaries for details.
3. Joint ventures and associates of the Company
Please refer to Note VIII. 2. for details.
Balance of related party transaction between the Company and its joint ventures or associates during the period or prior periods are as follows:
16 Name of joint ventures or associates Relation
INTERIM REPORT Wuhan Chenming Wan Xing Real Estate Co., Ltd. An associate of the Company
Jiangxi Jiangbao Media Colour Printing Co. Ltd. An associate of the Company
Arjo Wiggins Chenming Specialty Paper Co., Ltd. An associate of the Company
Shouguang Chenming Huisen New-style A joint venture of the Company
Construction Materials Co., Ltd.
4. Other related parties
Name of other related parties Relation
Jiangxi Chenming Natural Gas Co., Ltd. A company invested by the senior management of the Company Anhui Time Source Corporation A subsidiary
Shouguang Hengtai Enterprise Investment A company invested by the senior management of the Company Company Limited
Qingdao Chenming Nonghai Investment Co., Ltd. A subsidiary of Shouguang Hengtai Enterprise
Investment Company Limited
SHANDONG CHENMING PAPER HOLDINGS LIMITED 141
IX Financial Report
X. Related parties and related party transactions(Cont’d)
5. Related party transactions
(1) Purchase and sales of goods and rendering and receiving services
Table on purchase of goods/receiving of services
Unit: RMB Whether the
Amounts Transaction transaction
Details of related during facility facility Amounts during Related party party transaction the period approved is exceeded the prior period Jiangxi Chenming Procurement
Natural Gas Co., Ltd. of energy 143,213,873.90 360,000,000.00 No 75,389,778.88 Table on sales of goods/provision of services
Unit: RMB Details of related Amounts Amount for Related party party transactions during the period the prior period Anhui Time Source Corporation Sales of paper 133,818,532.79 200,365,615.54 Jiangxi Jiangbao Media Colour Sales of paper 0.00 123,096.60 16
Printing Co. Ltd.
INTERIM
REPORT
(2) Guarantee
The Company as guarantor
Unit: RMB Amounts under Starting date Expiry date Whether performance of Party being guaranteed guarantee of guarantee of guarantee guarantee is completed Zhanjiang Chenming Pulp& Paper Co., Ltd. 75,000,000.00 5 August 2015 4 July 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 90,000,000.00 30 July 2015 29 July 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 23 August 2015 22 August 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 85,000,000.00 26 October 2015 25 October 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 15,000,000.00 30 November 2015 29 November 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 30 November 2015 29 November 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 7 December 2015 25 November 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 1 January 2016 7 December 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 4 January 2016 3 January 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 11 January 2016 10 January 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 50,000,000.00 15 January 2016 30 December 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 50,000,000.00 22 January 2016 30 December 2016 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 29 January 2016 28 January 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 40,000,000.00 1 February 2016 6 January 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 50,000,000.00 4 March 2016 26 February 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 50,000,000.00 11 March 2016 26 February 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 50,000,000.00 2 March 2016 1 March 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 50,000,000.00 5 March 2016 14 March 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 40,000,000.00 21 March 2016 20 March 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 23 March 2016 22 March 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 29 June 2015 29 June 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 8 April 2016 7 April 2017 No
142
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
X. Related parties and related party transactions(Cont’d)
5. Related party transactions(Cont’d)
(2) Guarantee(Cont’d)
Amounts under Starting date Expiry date Whether performance of Party being guaranteed guarantee of guarantee of guarantee guarantee is completed Zhanjiang Chenming Pulp& Paper Co., Ltd. 85,000,000.00 17 June 2016 16 June 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 22 April 2016 21 April 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 24 June 2016 23 June 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 109,102,033.41 27 June 2016 26 June 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 5 June 2015 21 May 2020 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 73,500,000.00 3 June 2015 21 May 2020 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 72,000,000.00 27 November 2015 27 November 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 64,322,640.00 29 June 2015 28 June 2017 No
Zhanjiang Chenming Pulp& Paper Co., Ltd. 78,274,091.99 22 October 2015 21 October 2016 No
Shandong Chenming Financial Leasing Co., Ltd. 243,375,000.00 21 April 2016 20 April 2017 No
Shandong Chenming Financial Leasing Co., Ltd. 530,496,000.00 28 August 2014 27 August 2016 No
Shandong Chenming Financial Leasing Co., Ltd. 100,038,283.20 28 November 2014 27 November 2017 No
Shandong Chenming Financial Leasing Co., Ltd. 486,833,333.32 22 May 2015 26 March 2018 No
Shandong Chenming Financial Leasing Co., Ltd. 123,088,750.00 26 November 2015 10 November 2018 No
Shandong Chenming Financial Leasing Co., Ltd. 298,259,428.57 20 November 2015 2 November 2017 No
Shandong Chenming Financial Leasing Co., Ltd. 584,557,500.00 17 December 2015 16 December 2018 No
16 Shandong Chenming Financial Leasing Co., Ltd. 291,484,642.84 3 March 2016 2 February 2019 No
Shandong Chenming Financial Leasing Co., Ltd. 292,787,500.00 21 March 2016 20 February 2016 No INTERIM REPORT Huanggang Chenming Arboriculture Co., Ltd. 30,000,000.00 26 August 2015 26 August 2016 No
Huanggang Chenming Pulp& Paper Co., Ltd. 20,000,000.00 17 August 2015 26 June 2017 No
Huanggang Chenming Pulp& Paper Co., Ltd. 20,000,000.00 17 August 2015 26 December 2017 No
Huanggang Chenming Pulp& Paper Co., Ltd. 15,000,000.00 17 August 2015 26 March 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 5,000,000.00 14 December 2015 26 March 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 20,000,000.00 14 December 2015 26 June 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 30,000,000.00 14 December 2015 26 September 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 30,000,000.00 14 December 2015 26 December 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 40,000,000.00 14 February 2015 26 March 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 39,000,000.00 24 June 2016 26 June 2019 No
Huanggang Chenming Pulp& Paper Co., Ltd. 46,418,400.00 7 August 2015 26 June 2017 No
Huanggang Chenming Pulp& Paper Co., Ltd. 46,418,400.00 7 August 2015 26 December 2017 No
Huanggang Chenming Pulp& Paper Co., Ltd. 33,156,000.00 7 August 2015 26 March 2018 No
Huanggang Chenming Pulp& Paper Co., Ltd. 100,000,000.00 30 December 2015 29 December 2018 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 29 October 2015 29 October 2016 No
Jiangxi Chenming Paper Co., Ltd. 50,000,000.00 4 November 2015 29 October 2016 No
Jiangxi Chenming Paper Co., Ltd. 50,000,000.00 18 January 2016 12 July 2016 No
Jiangxi Chenming Paper Co., Ltd. 50,000,000.00 29 January 2016 25 July 2016 No
Jiangxi Chenming Paper Co., Ltd. 50,000,000.00 29 February 2016 23 August 2016 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 14 March 2016 13 March 2017 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 11 March 2016 11 March 2017 No
Jiangxi Chenming Paper Co., Ltd. 50,000,000.00 31 March 2016 30 September 2016 No
Jiangxi Chenming Paper Co., Ltd. 150,000,000.00 20 April 2016 19 April 2017 No
Jiangxi Chenming Paper Co., Ltd. 22,811,328.00 17 February 2016 14 August 2016 No
Jiangxi Chenming Paper Co., Ltd. 10,284,417.80 29 March 2016 29 September 2016 No
Jiangxi Chenming Paper Co., Ltd. 23,739,696.00 29 March 2016 24 September 2016 No
Shouguang Meilun Paper Co., Ltd. 285,000,000.00 8 January 2016 6 July 2016 No
Shouguang Meilun Paper Co., Ltd. 162,250,000.00 11 December 2015 11 December 2016 No
SHANDONG CHENMING PAPER HOLDINGS LIMITED 143
IX Financial Report
X. Related parties and related party transactions(Cont’d)
5. Related party transactions(Cont’d)
(2) Guarantee(Cont’d)
Amounts under Starting date Expiry date Whether performance of Party being guaranteed guarantee of guarantee of guarantee guarantee is completed Shandong Chenming Paper Sales Co., Ltd. 402,445,926.99 18 May 2016 14 November 2016 No
Shandong Chenming Paper Sales Co., Ltd. 50,312,878.30 30 May 2016 23 November 2016 No
Shandong Chenming Paper Sales Co., Ltd. 499,373,074.13 8 June 2016 5 December 2016 No
Shandong Chenming Paper Sales Co., Ltd. 500,376,273.98 17 June 2016 13 December 2016 No
Shandong Chenming Paper Sales Co., Ltd. 420,000,000.00 19 January 2016 18 July 2016 No
Shandong Chenming Paper Sales Co., Ltd. 250,000,000.00 11 April 2016 30 September 2016 No
Shandong Chenming Paper Sales Co., Ltd. 104,354,032.70 19 February 2016 17 August 2016 No
Shandong Chenming Paper Sales Co., Ltd. 219,686,162.54 4 March 2016 31 August 2016 No
Shandong Chenming Paper Sales Co., Ltd. 251,951,321.83 13 May 2016 9 November 2016 No
Shandong Chenming Paper Sales Co., Ltd. 254,125,418.59 20 May 2016 16 November 2016 No
Shandong Chenming Paper Sales Co., Ltd. 187,479,649.38 6 May 2016 1 November 2016 No
Shandong Chenming Paper Sales Co., Ltd. 147,288,292.82 13 May 2016 8 November 2016 No
Chenming (HK) Limited 192,304,800.00 12 August 2015 29 July 2016 No
Chenming (HK) Limited 241,309,368.00 22 October 2015 15 August 2016 No
Chenming (HK) Limited 193,034,232.00 28 August 2015 19 August 2016 No
Chenming (HK) Limited 192,299,495.04 9 October 2015 26 September 2016 No
16
Chenming (HK) Limited 193,034,232.00 22 October 2015 13 October 2016 No
INTERIM Chenming (HK) Limited 194,957,280.00 11 November 2015 21 October 2016 No
REPORT
Chenming (HK) Limited 186,104,628.00 18 November 2015 4 November 2016 No
Chenming (HK) Limited 93,698,856.00 19 November 2015 7 November 2016 No
Chenming (HK) Limited 46,418,400.00 11 December 2015 25 November 2016 No
Chenming (HK) Limited 234,081,360.00 11 December 2015 2 December 2016 No
Chenming (HK) Limited 98,539,632.00 16 December 2015 7 December 2016 No
Chenming (HK) Limited 176,125,594.34 29 December 2015 15 December 2016 No
Chenming (HK) Limited 119,361,600.00 22 January 2016 6 January 2017 No
Chenming (HK) Limited 47,081,520.00 6 April 2016 1 March 2017 No
Chenming (HK) Limited 168,200,388.00 29 March 2016 7 March 2017 No
Chenming (HK) Limited 96,019,776.00 29 March 2016 9 March 2017 No
Chenming (HK) Limited 101,125,800.00 6 May 2016 6 April 2017 No
Chenming (HK) Limited 102,783,600.00 26 April 2016 24 April 2017 No
Chenming (HK) Limited 132,624,000.00 20 May 2016 14 April 2017 No
Chenming (HK) Limited 100,300,000.00 21 January 2016 29 December 2016 No
Chenming (HK) Limited 219,037,500.00 25 January 2016 10 January 2017 No
Chenming (HK) Limited 278,627,500.00 26 January 2016 19 January 2017 No
Chenming (HK) Limited 88,942,500.00 18 February 2016 31 January 2017 No
Chenming (HK) Limited 10,993,932.75 17 May 2016 16 June 2016 No
Chenming (HK) Limited 10,993,932.41 17 May 2016 15 July 2016 No
Chenming (HK) Limited 7,524,229.36 15 June 2016 15 August 2016 No
Chenming (HK) Limited 10,410,506.89 27 April 2016 5 July 2016 No
Chenming (HK) Limited 10,107,376.83 20 May 2016 25 July 2016 No
Chenming (HK) Limited 18,459,639.60 13 April 2016 15 August 2016 No
Chenming (HK) Limited 22,145,602.20 13 April 2016 15 August 2016 No
Chenming (HK) Limited 11,164,137.66 14 June 2016 16 August 2016 No
Chenming (HK) Limited 24,244,419.05 26 February 2016 24 August 2016 No
Chenming (HK) Limited 10,960,171.70 29 February 2016 29 August 2016 No
144
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
X. Related parties and related party transactions(Cont’d)
5. Related party transactions(Cont’d)
(2) Guarantee(Cont’d)
Amounts under Starting date Expiry date Whether performance of Party being guaranteed guarantee of guarantee of guarantee guarantee is completed Chenming (HK) Limited 23,672,210.28 4 March 2016 31 August 2016 No
Chenming (HK) Limited 9,708,103.99 9 March 2016 6 September 2016 No
Chenming (HK) Limited 24,187,951.86 9 March 2016 6 September 2016 No
Chenming (HK) Limited 14,158,493.95 21 June 2016 6 September 2016 No
Chenming (HK) Limited 8,771,025.51 10 June 2016 8 September 2016 No
Chenming (HK) Limited 7,238,812.55 30 March 2016 26 September 2016 No
Chenming (HK) Limited 23,604,465.94 1 April 2016 28 September 2016 No
Chenming (HK) Limited 24,557,921.89 2 June 2016 30 September 2016 No
Chenming (HK) Limited 21,459,454.17 6 April 2016 4 October 2016 No
Chenming (HK) Limited 27,501,454.34 8 June 2016 6 October 2016 No
Chenming (HK) Limited 26,605,799.31 13 June 2016 11 October 2016 No
Chenming (HK) Limited 20,177,912.77 17 June 2016 15 October 2016 No
Chenming (HK) Limited 18,965,920.38 26 April 2016 24 October 2016 No
Chenming (HK) Limited 23,796,415.97 26 April 2016 24 October 2016 No
Chenming (HK) Limited 20,881,662.06 4 May 2016 1 November 2016 No
Chenming (HK) Limited 8,980,005.26 4 May 2016 1 November 2016 No
16 Chenming (HK) Limited 8,754,523.24 11 May 2016 7 November 2016 No
Chenming (HK) Limited 20,882,301.44 9 May 2016 7 November 2016 No INTERIM REPORT Chenming (HK) Limited 11,253,354.35 13 June 2016 9 November 2016 No
Chenming (HK) Limited 5,694,357.99 23 June 2016 14 November 2016 No
Chenming (HK) Limited 11,438,265.17 24 June 2016 14 November 2016 No
Chenming (HK) Limited 7,646,362.78 25 May 2016 21 November 2016 No
Chenming (HK) Limited 23,903,349.24 27 May 2016 23 November 2016 No
Chenming (HK) Limited 9,360,637.60 2 June 2016 29 November 2016 No
Chenming (HK) Limited 159,148,800.00 31 July 2015 20 July 2016 No
Chenming (HK) Limited 131,297,760.00 16 March 2016 31 March 2017 No
Chenming (HK) Limited 99,468,000.00 11 April 2016 23 March 2017 No
Chenming (HK) Limited 185,003,119.37 3 June 2016 22 November 2016 No
Chenming (HK) Limited 8,350,691.71 20 April 2016 5 July 2016 No
Chenming (HK) Limited 103,559,450.40 8 September 2015 12 August 2016 No
Chenming (HK) Limited 488,225,000.00 2 February 2016 31 January 2017 No
SHANDONG CHENMING PAPER HOLDINGS LIMITED 145
IX Financial Report
X. Related parties and related party transactions(Cont’d)
6. Related party accounts receivable and accounts payable
(1) Accounts receivables
Unit: RMB Closing balance Opening balance Bad Bad Item Related party Book balance debt provision Book balance debt provision Accounts receivable Anhui Time Source Corporation 39,912,416.29 1,995,620.81 89,493,535.25 4,474,676.76 Accounts receivable Jiangxi Jiangbao Media 1,393,760.56 69,688.03 1,393,760.56 69,688.03 Colour Printing Co. Ltd.
Prepayments Jiangxi Chenming Natural 9,696,920.67 8,900,712.18
Gas Co., Ltd.
Other receivables Arjo Wiggins Chenming 1,290,901.12 1,290,901.12 1,290,901.12 1,290,901.12 Specialty Paper Co., Ltd.
Other receivables Wuhan Chenming Wan Xing 1,291,492,916.67 1,310,041,477.38
Real Estate Co., Ltd.
Other receivables Qingdao Chenming Nonghai 21,000,000.00 1,050,000.00 21,000,000.00 1,050,000.00 Investment Co., Ltd.
Other receivables Shouguang Chenming Huisen 2,083,104.72 104,155.24 2,200,000.00 110,000.00 New-style Construction
16
Materials Co., Ltd.
INTERIM
REPORT
(2) Accounts payable
Unit: RMB Closing Opening Item Related party book balance book balance Other payables Shouguang Hengtai Enterprise 39,486,572.87 37,230,586.11 Investment Company Limited
146
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IX Financial Report
XI. Undertaking and contingency
1. Significant commitments
Significant commitments as at the balance sheet date
(1) Capital commitment
Item Closing balance Opening balance Contracted but not yet recognised in the financial statements
Commitments in relation to acquisition and
construction of long-term assets 4,525,843,414.70 5,914,302,136.38 Huirui BT Project 2,500,000,000.00 2,500,000,000.00 Total 7,025,843,414.70 8,414,302,136.38 (2) Operating lease commitments
As at the balance sheet date, the Company entered into irrevocable operating lease contracts with external companies as follows:
Item Closing balance Opening balance Minimum lease payments under irrevocable operating leases:
The first year after balance sheet date 27,276,275.51 25,657,919.75 16 The second year after balance sheet date 15,236,437.57 14,982,757.03 INTERIM The third year after balance sheet date 14,929,028.82 15,251,731.80 REPORT In the years thereafter 529,833,581.19 557,568,931.29 Total 587,275,323.09 613,461,339.87 2. Contingency
(1) Significant contingencies as at balance sheet date
As of 30 June 2016, there was no significant contingency that required to be disclosed by the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 147
IX Financial Report
XII. Notes to major financial statement items of the parent company
1. Accounts receivable
(1) Accounts receivable by category
Unit: RMB Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amounts Percentage Amounts Percentage Carrying amount Amounts Percentage Amounts Percentage Carrying amount Accounts receivable that are provided
for bad debts on portfolio basis
based on credit risk features 3,082,214,913.86 100.00% 5,072,413.72 0.16% 3,077,142,500.14 2,059,434,721.08 100.00% 4,766,013.61 0.23% 2,054,668,707.47 Total 3,082,214,913.86 100.00% 5,072,413.72 0.16% 3,077,142,500.14 2,059,434,721.08 100.00% 4,766,013.61 0.23% 2,054,668,707.47 Accounts receivable that are individually significant and are provided for bad debt separately as at the end of the period:
□ Applicable√ Not applicable
Accounts receivable using ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
16
Unit: RMB INTERIM
REPORT Closing balance
Accounts Provision for
Ageing receivable bad debts Ratio Items under within 1 year
Within 1 year 3,207,917.88 160,395.90 5.00% Sub-total of within 1 year 3,207,917.88 160,395.90 5.00% 1 to 2 years 10,213,674.32 1,021,367.43 10.00% Over 3 years 3,890,650.40 3,890,650.40 100.00% Total 17,312,242.60 5,072,413.73 29.30% Accounts receivable using percentage of amount outstanding for making bad debt provision in the portfolio:□ Applicable√ Not applicable
(2) Bad debt provision made, recovered or reversed during the reporting period
The amount of bad debt provision made for the current period amounted to RMB786,053.78. The amount of bad debt provision recovered or reversed during the current period was RMB0.00.
(3) Accounts receivable written off during the reporting period
There has been no accounts receivable written off during the reporting period.
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XII. Notes to major financial statement items of the parent company(Cont’d)
1. Accounts receivable(Cont’d)
(4) Top five accounts receivable based on closing balance by debtor
Nature of Outstanding Bad debt Name of entity accounts receivable balance Percentage provision Shouguang Meilun Paper Co., Ltd. Payment for goods 2,094,469,857.69 67.95%
Shouguang Chenming Art Paper Co., Ltd. Payment for goods 408,441,356.43 13.25%
Chenming (HK) Limited Payment for goods 188,637,550.28 6.12%
Chenming International Co., Ltd. Payment for goods 175,327,200.00 5.69%
Chenming GmbH Payment for goods 81,673,060.32 2.65%
Total 2,948,549,024.72 95.66%
2. Other receivables
(1) Other receivables by category
Unit: RMB Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amounts Percentage Amounts Percentage Carrying amount Amounts Percentage Amounts Percentage Carrying amount 16 Other receivables that are individually
significant and are provided for
INTERIM REPORT bad debts separately 8,686,748.70 0.03% 8,686,748.70 100.00% 8,686,748.70 0.04% 8,686,748.70 100.00% Other receivables that are provided for
bad debts on portfolio basis based
on credit risk features 25,855,864,203.43 99.92% 40,598,048.03 0.16% 25,815,266,155.40 23,209,997,904.45 99.92% 41,398,628.05 0.18% 23,168,599,276.40 Other receivables that are individually
insignificant but are provided for
bad debts separately 12,364,520.18 0.05% 12,364,520.18 100.00% 10,514,189.79 0.05% 10,514,189.79 100.00% Total 25,876,915,472.31 100.00% 61,649,316.91 0.24% 25,815,266,155.40 23,229,198,842.94 100.00% 60,599,566.54 0.26% 23,168,599,276.40 Other receivables that are individually significant and are provided for bad debts separately as at the end of the period:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Other receivable (by entity) Other Receivables Bad debt provision Percentage Reason for provision
Ahlstrom Finland 2,820,742.72 2,820,742.72 100.00% Overdue for over 3 years and unlikely to be recovered Qingdao Second Automotive and 1,137,295.16 1,137,295.16 100.00% Overdue for over 3 years and Transportation Logistics Branch Company unlikely to be recovered Elof Hansson Group of Sweden 1,344,717.78 1,344,717.78 100.00% Overdue for over 3 years and unlikely to be recovered Chuan Hua Precision Corporation of Taiwan 2,253,993.04 2,253,993.04 100.00% Overdue for over 3 years and unlikely to be recovered Zibo Kaihong Energy Co., Ltd. 1,130,000.00 1,130,000.00 100.00% Overdue for over 3 years and unlikely to be recovered
Total 8,686,748.70 8,686,748.70 ——
SHANDONG CHENMING PAPER HOLDINGS LIMITED 149
IX Financial Report
XII. Notes to major financial statement items of the parent company(Cont’d)
2. Other receivables(Cont’d)
(1) Other receivables by category(Cont’d)
Other receivables using ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Unit: RMB Closing balance
Other Bad Provision Age receivables debt provision percentage Items under within 1 year
Within 1 year 53,191,916.51 2,659,595.82 5.00% Sub-total of within 1 year 53,191,916.51 2,659,595.82 5.00% 1 to 2 years 8,795,097.66 879,509.77 10.00% 2 to 3 years 17,737,577.73 3,547,515.55 20.00% Over 3 years 54,562,695.78 54,562,695.78 100.00% Total 134,287,287.68 61,649,316.92
Other receivables using percentage of balance for making bad debt provision in the portfolio:
16
□ Applicable√ Not applicable
INTERIM
REPORT
Other receivables using other methods for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
(2) Bad debt provision made, recovered or reversed during the reporting period
The amount of bad debt provision made for the current period amounted to RMB1,049,750.37. The amount of bad debt provision recovered or reversed during the current period was RMB0.00.
(3) Other receivables written off during the reporting period
There were no other receivables written off during the reporting period.
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XII. Notes to major financial statement items of the parent company(Cont’d)
2. Other receivables(Cont’d)
(4) Top five other receivables based on closing balance by debtor
Unit: RMB Percentage of
total closing Closing balance of other balance of bad Name of entity Nature Closing balance Ageing receivables debt provision Shouguang Meilun Paper Co., Ltd. Open credit 19,834,293,241.74 Within 1 year, 1-2 years 76.65%
Zhanjiang Chenming Pulp& Open credit 512,432,694.41 Within 1 year 1.98%
Paper Co., Ltd.
Zhanjiang Meilun Pulp& Open credit 1,007,015,000.00 Within 1 year 3.89%
Paper Co., Ltd.
Jiangxi Chenming Paper Co., Ltd. Open credit 1,582,690,786.89 Within 1 year 6.12%
Haicheng Haiming Mining Co., Ltd. Open credit 472,474,368.88 1-2 years 1.83%
Total — 23,408,906,091.92— 90.46%
3. Long-term equity investments
Unit: RMB Closing balance Opening balance
Impairment Impairment
16 Item Book balance provision Book value Book balance provision Book value INTERIM REPORT Interest in subsidiaries 13,469,415,957.45 13,469,415,957.45 13,469,415,957.45 13,469,415,957.45 Interest in associates
and joint ventures 57,497,650.71 57,497,650.71 57,537,749.04 57,537,749.04 Total 13,526,913,608.16 13,526,913,608.16 13,526,953,706.49 13,526,953,706.49
SHANDONG CHENMING PAPER HOLDINGS LIMITED 151
IX Financial Report
XII. Notes to major financial statement items of the parent company(Cont’d)
3. Long-term equity investments(Cont’d)
(1) Interest in subsidiaries
Unit: RMB Impairment Closing balance Opening Increase for Decrease for Closing provision of impairment Investee balance the period the period balance for the period provision Shandong Chenming Power
Supply Holdings Co., Ltd. 157,810,117.43 157,810,117.43
Wuhan Chenming Hanyang
Paper Holdings Co., Ltd. 202,824,716.34 202,824,716.34
Hailaer Chenming Paper Co., Ltd. 12,000,000.00 12,000,000.00
Jiangxi Chenming Paper Co., Ltd. 822,867,646.40 822,867,646.40
Shandong Grand View Hotel Co., Ltd. 80,500,000.00 80,500,000.00
Jilin Chenming Paper Co., Ltd. 1,501,350,000.00 1,501,350,000.00
Zhanjiang Chenming Pulp&
Paper Co., Ltd. 3,000,000,000.00 3,000,000,000.00
Chenming (HK) Limited 183,472,902.00 183,472,902.00
Shouguang Chenming Modern
Logistic Co., Ltd. 10,000,000.00 10,000,000.00
Fuyu Chenming Paper Co., Ltd. 208,000,000.00 208,000,000.00
Shouguang Chenming Art
Paper Co., Ltd. 113,616,063.80 113,616,063.80
Huanggang Chenming
16
Arboriculture Co., Ltd. 70,000,000.00 70,000,000.00
INTERIM Huanggang Chenming
REPORT
Pulp& Paper Co., Ltd. 1,200,000,000.00 1,200,000,000.00
Shouguang Meilun Paper Co., Ltd. 4,646,349,570.28 4,646,349,570.28
Chenming International Co., Ltd. 19,861,955.00 19,861,955.00
Shouguang Shun Da
Customs Declaration Co, Ltd. 1,500,000.00 1,500,000.00
Shandong Chenming Paper
Sales Co., Ltd. 100,000,000.00 100,000,000.00
Shouguang Chenming Import
and Export Trade Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Jiatai Property
Management Co., Ltd. 1,000,000.00 1,000,000.00
Shouguang Chenming Papermaking
Machine Co., Ltd. 2,000,000.00 2,000,000.00
Shouguang Chenming Industrial
Logistics Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Hongxin
Packaging Co., Ltd. 1,000,000.00 1,000,000.00
Japan Chenming Paper Co., Ltd. 9,306,351.20 9,306,351.20
Haicheng Haiming Mining Co., Ltd. 144,000,000.00 144,000,000.00
Chenming GmbH 4,083,235.00 4,083,235.00
Shouguang Hongxiang Printing and
Packaging Co., Ltd. 2,730,000.00 2,730,000.00
Shandong Chenming Paper Group
(Fuyu) Sales Co., Ltd. 1,000,000.00 1,000,000.00
Shandong Chenming Group
MFinance Co., Ltd. 800,000,000.00 800,000,000.00
Chenming Arboriculture Co., Ltd. 45,000,000.00 45,000,000.00
Qingdao Chenming International
Logistics Co., Ltd. 3,000,000.00 3,000,000.00
Jinan Chenming Investment
Management Co., Ltd. 100,000,000.00 100,000,000.00
Chenming Paper Korea Co., Ltd. 6,143,400.00 6,143,400.00
Total 13,469,415,957.45 13,469,415,957.45
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XII. Notes to major financial statement items of the parent company(Cont’d)
3. Long-term equity investments(Cont’d)
(2) Interest in associates and joint ventures
Unit: RMB Change for the period
Investment
gain or loss Adjustment of
recognised other Distribution of Closing balance Opening Additional Withdrawn under equity comprehensive Other change cash dividend Impairment Closing of impairment Investee balance contribution contribution method income in equity interest or profit declared provision Others balance provision I. Joint venture
Shouguang Chenming Huisen
New-style Construction
Materials Co., Ltd. 2,976,817.51 114,692.62 3,091,510.13 Sub-total 2,976,817.51 114,692.62 3,091,510.13 II. Associates
Arjo Wiggins Chenming Specialty
Paper Co., Ltd.
Jiangxi Jiangbao Media Colour
Printing Co. Ltd. 4,217,690.25 -444,376.48 3,773,313.77 Zhuhai Dechen New Third Board
Equity Investment Fund Company
16 (Limited Partnership) 50,343,241.28 289,585.53 50,632,826.81 INTERIM Sub-total 54,560,931.53 -154,790.95 54,406,140.58 REPORT Total 57,537,749.04 -40,098.33 57,497,650.71 4. Revenue and operating costs
Unit: RMB Amounts during the period Amounts during the prior period Item Revenue Costs Revenue Costs Principal activities 2,964,265,435.57 2,355,738,024.24 2,871,789,573.21 2,315,085,299.99 Other activities 440,642,493.39 393,657,742.18 296,650,370.18 284,274,418.52 Total 3,404,907,928.96 2,749,395,766.42 3,168,439,943.39 2,599,359,718.51
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XII. Notes to major financial statement items of the parent company(Cont’d)
5. Investment income
Unit: RMB Amounts during Amounts during Item the period the prior period Income from long-term equity investments accounted
for using the cost method 200,000,000.00 360,000,000.00 Income from long-term equity investments accounted
for using the equity method -40,098.33 -347,400.41 Interest income from entrusted loans 44,212,264.15 49,679,999.99 Total 244,172,165.82 409,332,599.58 XIII. Supplementary information
1. Breakdown of extraordinary gains and losses for the current period
√ Applicable□ Not applicable
Unit: RMB 16 Item Amount Remark
INTERIM
REPORT Profit or loss from disposal of non-current assets -1,626,686.16
Government grants (except for the government grants
closely related to the normal operation of the Company
and granted constantly at a fixed amount or quantity in
accordance with a certain standard based on state
policies) accounted for in profit or loss
for the current period 214,412,568.80
Gain and loss from debt restructuring 1,909,002.10
Gain or loss on external entrusted loans 44,212,264.15
Non-operating gains and losses other than the above items 4,597,886.08
Gain or loss from change in fair value of consumable
biological assets adopting fair value method
for follow-up measurements -10,599,543.68
Less: Effect of income tax 53,745,876.48
Effect of minority interest 1,805,828.03
Total 197,353,786.78—
Notes for theCompany’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses and the extraordinary gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items.□ Applicable√ Not applicable
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XIII. Supplementary information(Cont’d)
2. Returns on net assets and earnings per share
Rate of return on Earnings per share
net assets Basic Diluted on weighted
Profit for the reporting period average basis (RMB per share) (RMB per share) Net profit attributable to ordinary shareholders
of the Company 5.89% 0.45 0.45 Net profit after extraordinary gains and
losses attributable to ordinary shareholders
of the Company 4.54% 0.34 0.34 Note: Net profit attributable to ordinary shareholders of the Company excluded the effect of interest payment deferred and accumulated to subsequent periods or perpetual bonds under other equity instruments. When calculating earnings per share, the interests incurred but not declared for perpetual bonds from the value date up to 30 June 2016 are deducted.
Profit for the Item reporting period Net profit attributable to the Company 939,164,870.60 Less: Effect of cumulative interests of perpetual bonds 76,151,584.70 Net profit attributable to ordinary shareholders of the Company 863,013,285.90 16 INTERIM REPORT 3. Difference in accounting data under domestic and overseas accounting standards
(1) Differences between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report
□ Applicable√ Not applicable
(2) Differences between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report
□ Applicable√ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 155
X Documents Available for Inspection
I. The financial statements signed and sealed by the legal representative, financial representative and head of the financial department of the Company;
II. The interim report signed by the legal representative;
III. The original copies of all of the documents and announcements of the Company disclosed in the designated newspaper as approved by China Securities Regulatory Commission during the reporting period;
IV. The interim report disclosed on the Stock Exchange of Hong Kong Limited;
V. Other related information.
Shandong Chenming Paper Holdings Limited 24 August 2016
16
INTERIM
REPORT
156
SHANDONG CHENMING PAPER HOLDINGS LIMITED