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 annual report (the “Report”), guarantee that there are no false representations, misleading statements or material omissions contained in this Report, and are jointly and severally responsible for the liabilities of the Company.
All Directors were present in person at the Board meeting to consider and approve this Report except the following Director. Name of the Director Capacity of the Director Reason for failure
unable to attend the meeting unable to attend the meeting to attend the meeting
in person in person in person Name of the proxy
Cui Youping Director Failure to attend Wang Aiguo
the meeting in person
due to business engagement
Zhang Zhiyuan Independent Director Failure to attend Zhang Hong
the meeting in person
due to business engagement
The proposed profit distribution plan of the Company was considered and passed by the Board: based on the number of the shares as at the dividend distribution registration date, a dividend of RMB3.00 (tax inclusive) per 10 shares was to be paid and no bonus shares (tax inclusive) were to be delivered to all shareholders without increase of share capital from reserves.
Chen Hongguo, head of the Company, Li Dong, head in charge of accounting and Liu Jun, head of the accounting department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial statements in the annual report.
I Important Notice, Table of Contents and Definitions
Table of contents
I Important Notice, Table of Contents and Definitions...................................................................................................................3 II Company Profile..........................................................................................................................................................................5 III Summary of Accounting Data and Financial Indicators..............................................................................................................7 IVChairman’s Statement...............................................................................................................................................................10 V Directors’ Report........................................................................................................................................................................13 VI Material Matters.........................................................................................................................................................................57 VII Changes in Share Capital and Shareholders............................................................................................................................77 VIII Directors, Supervisors, Senior Management and Staff.............................................................................................................87 IX Corporate Governance..............................................................................................................................................................99 X Internal Control........................................................................................................................................................................121 XI Financial Report.......................................................................................................................................................................127 XII Documents Available for Inspection........................................................................................................................................296
I Important Notice, Table of Contents and Definitions
Definitions
Item means Definition
Company or Chenming Paper means Shandong Chenming Paper Holdings Limited
Group means Shandong Chenming Paper Holdings Limited and its subsidiaries Chenming Holdings means Shouguang Chenming Holdings Company Limited
Shenzhen Stock Exchange means Shenzhen Stock Exchange
Stock Exchange means The Stock Exchange of Hong Kong
CSRC means China Securities Regulatory Commission
Shandong CSRC means Shandong branch of China Securities Regulatory Commission Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.
Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Chenming (HK) means Chenming (HK) Limited
Guangdong Huirui means Guangdong Huirui Investment Co., Ltd.
Haiming Mining means Haicheng Haiming Mining Company Limited
Zhanjiang Chenming means Zhanjiang Chenming Pulp& Paper Co., Ltd.
Jilin Chenming means Jilin Chenming Paper Co., Ltd.
Yanbian Chenming means Yanbian Chenming Paper Co., Ltd.
RSM China means RSM China Certified Public Accountants (Special General Partnership) Ruihua means Ruihua Certified Public Accountants (Special General Partnership) Chenming GmbH means Chenming GmbH
I Important Notice, Table of Contents and Definitions
Definitions(Cont’d)
Shouguang Meilun 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.
Zhanjiang Wall Materials means Zhanjiang Chenming New-style Wall Materials Co., Ltd.
Zhanjiang Meilun means Zhanjiang Meilun Pulp& Paper Co., Ltd.
Hongxiang Printing means Shouguang Hongxiang Printing& Packaging Co., Ltd.
Shanghai Runchen means Shanghai Runchen Equity Investment Fund Co., Ltd.
Chenjian Company means Wuhan Chenjian New-style Wall Materials Co., Ltd.
Hubei Zheshang means Hubei Zheshang Wan Xing Investment Co., Ltd.
Important Risk Notice
The Company is exposed to various risk factors such as macro-economic fluctuation, adjustment of national policy, intensified competition in the industry, as well as change in interest rate and exchange rate. Investor 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 to address them as set out in the outlook on the future development of the Company inDirectors’ Report.
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 01812
Stock exchanges on which the shares are listed Shenzhen Stock Exchange and The Stock Exchange of Hong Kong 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 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
Registered address No. 595 Shengcheng Road, Shouguang City, Shandong Province Postal code of registered address 262700
Office address No. 2199 Nongsheng East Road, Shouguang City, Shandong Province Postal code of office address 262705
Website of the Company http://www.chenmingpaper.com
Email address chenmmingpaper@163.com
II. Contact persons and contact methods
Secretary to the Board Securities Affairs Representative Hong Kong Company Secretary Name Wang Chunfang Xiao Peng Poon Shiu Cheong
Correspondence Address No. 2199 East Nongsheng Road, No. 2199 East Nongsheng Road, 22nd Floor, World Wide House, Central, Shouguang City, Shandong Province Shouguang City, Shandong Province Hong Kong
Telephone (86)-0536-2158008 (86)-0536-2158008 (852)-2501 0088
Facsimile (86)-0536-2158977 (86)-0536-2158977 (852)-2501 0028
Email address chenmmingpaper@163.com chenmmingpaper@163.com kentpoon_1009@yahoo.com.hk III. Information disclosure and places for inspection
Designated newspapers for China Securities Journal, Shanghai Securities News, Securities Times, information disclosure Securities Daily and Hong Kong Commercial Daily
Designated websites for the publication of Domestic: http://www.cninfo.com.cn; Overseas: http://www.hkex.com.hk the Annual Report as approved by CSRC
Places for inspection of theCompany’s Capital operation department of the Company
Annual Report
II Company Profile
IV. Change in registration
Legal Person
Business License Taxation Registration
Date of Registration Number Organisation Code Registration Address of Registration Number
First Registration 5 May 1993 No. 595 Shengcheng Road, 16568230-2 370783613588986 61358898-6 Shouguang City,
Shandong Province
Registration at the end 2 January 2014 No. 595 Shengcheng Road, 370000400001170 370783613588986 61358898-6 of the reporting period Shouguang City,
Shandong Province
Change of principal activities No
since its listing
Change of the controlling Please refer to III. Company Overview of section XI of this report.
shareholder
V. Other relevant information
CPAs engaged by the Company
Name of CPAs Ruihua Certified Public Accountants (Special General Partnership)
CPAs’ Office Address 8-9/F, Block A, Corporation Building, No. 35 Finance Street,
Xicheng District, Beijing
Name of the Signing Certified Public Wang Chuanshun and Jing Chuanxuan
Accountants
Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period
□ Applicable√ Not applicable
Financial Advisors engaged by the Company to continuously perform its supervisory function during the reporting period□ Applicable√ Not applicable
III Summary of Accounting Data andFinancialIndicators
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 year
as compared to
2013 2012 the prior year(%) 2011 Revenue (RMB) 20,388,890,067.41 19,761,679,230.05 3.17% 17,747,489,900.87 Net profit attributable to shareholders
of the Company (RMB) 710,655,331.72 221,034,822.54 221.51% 608,271,256.29 Net profit after extraordinary gains or
losses attributable to shareholders
of the Company (RMB) 406,170,148.25 -159,777,900.37 354.21% 285,121,911.63 Net cash flows from operating
activities (RMB) 1,122,616,800.91 1,956,866,477.99 -42.63% -437,463,010.89 Basic earnings per share (RMB per share) 0.35 0.11 218.18% 0.29 Diluted earnings per share (RMB per share) 0.35 0.11 218.18% 0.29 Rate of return on net assets
on weighted average basis(%) 5.11% 1.63% 3.48% 4.50% Increase/decrease
as at the end of the
year compared
As at the end As at the end to the end of As at the end of 2013 of 2012 the prior year(%) of 2011 Total assets (RMB) 47,521,883,569.18 47,725,421,927.39 -0.43% 45,630,828,967.03 Total liabilities (RMB) 32,883,530,036.29 33,380,003,994.34 -1.49% 30,643,054,107.64 Gearing ratio(%) 69.20% 69.94% -0.74% 67.15% Net assets attributable to shareholders
of the Company (RMB) 14,039,888,226.11 13,759,496,179.85 2.04% 13,528,622,319.91 Share capital (shares) 1,975,471,967.00 2,062,045,941.00 -4.20% 2,062,045,941.00 Note: The Company repurchased and cancelled 86,573,974 B shares during the reporting period and, therefore, the total number of the shares of the Company was reduced by 86,573,974 shares.
III Summary of Accounting Data andFinancialIndicators
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, overseas accounting standards and China accounting standards in the financial report
Unit: RMB Net profit attributable to shareholders Net assets attributable to shareholders of of the Company the Company
Amounts for the Amounts for
reporting period the prior period Closing balance Opening balance Under China accounting standards 710,655,331.72 221,034,822.54 14,039,888,226.11 13,759,496,179.85 Items and amounts adjusted
under international accounting
standards and overseas
accounting standards
Under international
accounting standards 710,655,331.72 221,034,822.54 14,039,888,226.11 13,759,496,179.85 Under overseas
accounting standards 710,655,331.72 221,034,822.54 14,039,888,226.11 13,759,496,179.85
III Summary of Accounting Data andFinancialIndicators
III. Items and amounts of extraordinary gains or losses
Unit: RMB Item Amounts for 2013 Amounts for 2012 Amounts for 2011 Explanation
Profit or loss from disposal
of non-current assets
(including write-off of provision
for assets impairment) -6,367,477.99 26,092,788.22 26,249,093.41
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 174,947,619.19 235,157,521.57 236,198,625.29
Gain arising from investment
costs for acquisition of
subsidiaries, associates and
joint-ventures by the corporation
being less than its share of fair
value of identifiable net assets of
the investees on acquisition 2,408,368.37 44,188,866.15
Profit or loss from
debt restructuring 268,577.19 941,444.43 -18,179,889.32
Changes in fair value
of consumable biological assets 11,221,828.76 47,882,076.87 48,173,926.26
Non-operating gains and losses
other than the above items 299,225,913.46 114,342,091.81 31,840,643.86
Less: Effect of income tax 98,299,197.38 40,604,179.01 32,413,333.65
Effect of minority interests
(after tax) 78,920,448.13 2,999,020.98 12,908,587.34
Total 304,485,183.47 380,812,722.91 323,149,344.66—
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
IVChairman’s Statement
Dear shareholders,
It is my pleasure to present the report for the financial year ended 31 December 2013 to all shareholders and express my gratitude, for allshareholders’ concern and support to Chenming Paper on behalf of the board of directors.
During the reporting period, a higher concentration ratio was secured due to slowdown in the growth of the supply in the paper making industry and elimination of outdated production capacity, which was conducive to a proactive increase in price proposed by enterprises. The continued appreciation of RMB and the increased downward pressure of raw material prices relieved the pressure on the operating costs of enterprises. Meanwhile, the Company proactively explore new markets by strengthening internal management, resulting in an increase in sales of pulp. As compared to the corresponding period of the prior year, the production costs decreased year on year. The gross profit margin of theCompany’s principal operations grew steadily with significant improvement in profitability. Hence, the profit for the year increased significantly.
During the reporting period, the Company focused on bases consolidation and efficiency enhancement, as well as overall continuous improvement. Facing complex and volatile market environment, the Company timely adjusted its business strategies and proactively responded to the market to ensure a balance between sales and production. Meanwhile, the Company placed great emphasis on production management, accelerating restructuring, stable machine operation, strengthening inventory reduction and promoting process optimisation.
2013 saw a strong momentum in theCompany’s corporate restructuring and development. WuhanChenming’s household paper project, JilinChenming’s environment protection relocation project and ShouguangCity’s 100,000 tonnes paper additives project commenced operation respectively, which played an important role in theCompany’s restructuring, cost reduction and efficiency enhancement. JiangxiChenming’s 350,000 tonnes high-grade packaging paper project, the 180,000 tonnes paper cup sheets and 190,000 tonnes culture paper projects in Zhanjiang, GuangdongHuirui’s Haidong New District Waterfront comprehensive regulation works project, Wan Xing RealEstate’s real estate project in Wuhan,Haicheng’s magnesite mining project and other projects commenced, which accelerated the restructuring of the Company and promoted corporate transformation and upgrading, thus further enhancing the strength of the Company. In addition, HuanggangChenming’s integrated forestry, pulp and paper project is under planning and pending approval, which will play a significant role in enhancing theCompany’s overall competitiveness.
During the reporting period, the establishment of a finance company within Chenming Group was approved by the China Banking Regulatory Commission, being the first enterprise in the paper making industry to own a finance company. This marked theCompany’s formal participation in the financial sector paved the way for theGroup’s diversification.
I. Operating Results
During the reporting period, the Company completed machine-made paper production of 4,160,000 tonnes, representing an increase of 210,000 tonnes or5.32% as compared with 3,950,000 tonnes in the corresponding period of the prior year. TheCompany’s revenue amounted to RMB20,389 million, up by RMB627 million or up by3.17% from 2012. The operating costs were RMB16,652 million, down by RMB42 million or0.25% from 2012. The operating profit and net profit attributable to equity holders of the Company were RMB404 million and RMB711 million respectively, up by196.95% and221.51% respectively.
II. Corporate Governance
During the reporting period, the Company regulated its operation under the requirements 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 and the related provisions of CSRC. It kept on improving and optimising its legal person governance structure and regulating its operation in practice. 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.
IVChairman’s Statement
II. Corporate Governance(Cont’d)
During the reporting period, the Board strived to regulate the operation of the Company by improving its corporate governance. It improved corporate governance practice in a timely manner and formulated and optimised management systems including the revision of Procedural Rules of the Board of Directors Meeting, Rules of Supervisors Meeting, Management System of Connected Transactions, Procedural Rules of the General Meeting and Implementation Rules for the Nomination Committee of the Board of Directors, as well as formulation of the amended Decision Making System to Substantial Transaction, Decision Making System to External Investment, Decision Making System for External Guarantee, Investor Relationship Management System, Board Diversity Policy and Articles of Association in accordance with the regulatory requirements.
III. Dividend Distribution
Consistent with our long-term goal of pursuing the maximisation of corporate values, the Company has always placed much emphasis onshareholders’ benefits and returns. In view of the operating results realised in 2013 and after considering the financial position and cash flow condition of the Company as a whole, the Board recommended a proposed profit distribution plan for 2013 as follows: based on the number of the shares as at the dividend distribution registration date, a cash dividend of RMB3.00 (tax inclusive) was to be paid to all shareholders for every 10 shares held. Based on the total share capital of 1,975,471,967 shares of the Company as at 31 December 2013, cash dividend for 2013 amounted to RMB592,641,590.10 (tax inclusive), which represented83.39% of the net profit attributable to shareholders of the Company as set out in the 2013 consolidated financial statements prepared in accordance with Accounting Standards for Business Enterprises. After such profit distribution, the undistributed profit would be rolled over for distribution in subsequent years. As always, the Company will continue to stay focused on its long-term development and maximise returns for shareholders by delivering better results.
IV. Future Development
The industry to which the Company belongs is the paper making industry, which is a light industry. The business sentiments of the industry are highly related to the macroeconomic growth. The overall profitability of the paper making industry hovered around at a low level during the past two years. However, a higher concentration ratio was obtained due to slowdown in the growth of the supply of the paper making industry and elimination of outdated production capacity. In the long run, the development conditions of the paper making industry gradually improve. The National Development and Reform Commission, Ministry of Industry and Communication and State Forestry Administration have jointly issued the Twelfth Five-Year Plan for the Development of the Paper Making Industry, which clearly states the general direction of “controlling total volume, promoting concentration, optimising raw materials and reducing energy consumption and emission”, from which the Company is expected to benefit in the long run.
In recent years, the Company is committed to the integrated development of forestry, pulp and paper with a longer industry chain and more comprehensive paper types. During the reporting period, the Company carried out a series of capacity expansion on paper types with better prospects. TheCompany’s direction of development was in line with the requirements of the development plan of the entire paper making industry. Meanwhile, the Company expanded its industry chain by entering into the financial and energy industries with a more rationalised industry positioning, which further strengthened theCompany’s competitiveness and development potential. As the economy and industry gradually recover, it is expected that the result of the Company will record stable growth. TheCompany’s future performance is what the market can look forward to.
IVChairman’s Statement
IV. Future Development(Cont’d)
In 2014, the Company will focus on an overall strengthening of management and improving operational quality to ensure a sustainable development. In view of this, the Company has adopted the guidelines of “team building, strict management, outstanding business performance, achieving good results” as the working principles of the year. The Company will focus on the following areas in 2014 In line with its strategic objectives:
(I) Corporate Management. The Company will firmly establish and strictly implement the working principles of “team building, strict management, outstanding business performance, achieving good results”. It will revise the existing management system by making it simple, effective, and easy to implement in order to create the basic conditions for strict management. It will enhance team building by preparing good training materials, adopting strict examinations, employment of qualified employees and dismissal of unqualified employees; improve incentive schemes by innovative incentives and adoption of appointment through competition to further mobilise the enthusiasm of the cadres and staff. The Company will also focus on corporate culture building and regulation of staff behaviour to achieve the objective of “a high degree of integration of corporate management and corporate culture”, thus building an innovative corporate culture of the Company.
(II) Operation and management. The Company will increase efficiency by optimising product structure and increase investment in high-efficiency areas. It will make reference to advanced corporate marketing incentives and improve performance appraisal systems to fully arouse the enthusiasm of sales staff. It aims to reduce inventory and costs to proactively respond to the market through measures including market research and timely developed marketing strategies. The Company will also enhance new product promotion and establish professional sales teams for high value-added products including thermal paper and glassine paper to increase the revenue of the Company.
(III) Production management. The Company places great emphasis on the operation of production upgrade projects and new production projects. It focuses on the management of its 800,000 tonnes coated paper project, 600,000 tonnes bleached kraft liner board project, JilinChenming’s environment protection relocation project,Meilun’s paper additives projects andWuhan’s specialty paper upgrade and household paper projects to accelerate growth in efficiency. It will speed up product restructuring and new product development, enrich product structure, improve the ability to respond to the market, and increase sales of new products and high value-added products. Special emphasis will be placed on technology development and application to improve theCompany’s core competitiveness. The Company will continue to implement post setting and staffing and reduce labour costs through post consolidation and improvement in automation.
(IV) Project management. The Company will revise and improve its original project management system to make the system fully reflect the principle for project construction of “careful planning, casting quality products, striving for progress and effectiveness verification”. For projects under construction including JiangxiChenming’s 350,000 tonnes high-grade packaging paper, ZhanjiangChenming’s 180,000 tonnes paper cup sheets and 190,000 tonnes culture paper projects, the Company will ensure comprehensive control and assessment, as well as strict quality and cost control to ensure timely commencement of production. Projects under planning and pending approval including HuanggangChenming’s integrated forestry, pulp and paper project will undergo repeated verification and optimisation to ensure that these projects will become world-class quality products.
(V) Other areas. The Company will accelerate the establishment of finance company, application for the establishment of finance leasing company to make full use of foreign funds and reduce finance costs. It will reduce finance costs by increasing use of foreign funds, expanding financing channels and improving capital use efficiency. It aims to achieve economic efficiency by increasing trade volume through import and export companies, developing new customer sources, establishing strategic partnerships and controlling quality supplies. It will also reduce inventory, promote the business with manufacturers, merchants and banks and improve contract compliance rate to reduce capital use and financing costs.
Chen Hongguo
Chairman
20 March 2014
VDirectors’ Report
I. Overview
During the reporting period, the previous round of intensive expansion in the paper making industry was basically completed. Papermaking enterprises were unlikely to expand in the near future due to the sentiment in the industry. In addition, some the small and medium-sized enterprises left the market as a result of elimination of outdated production capacity and stricter environmental protection policy. This lowered the pressure of the new production capacity on the supply in the industry to a certain extent. A higher concentration ratio was secured due to the slowdown in the growth of the supply of the paper making industry and the elimination of outdated production capacity, which was conducive to a proactive increase in price proposed by enterprises. The continued appreciation of RMB and the increased downward pressure of raw material prices relieved the pressure on the operating costs of enterprises. Meanwhile, the Company proactively explored new markets by strengthening internal management, resulting in an increase in sales of pulp. As compared to the corresponding period of the prior year, the production costs decreased year on year. The gross profit margin of theCompany’s principal operations steadily grew with significant improvement in profitability. Hence, the profit for the year increased significantly.
During the reporting period, the Company focused on bases consolidation and efficiency enhancement, as well as overall continuous improvement. Firstly, new working principles and management concept have been specified according to different business segments. Secondly, overall management was regulated and system construction was improved. On the basis of improvement of the system, alarming cases have been formed based on the existing problems in the management process. Thirdly, special emphasis was placed on performance management. Full implementation of cost reduction incentives and efficiency improvement incentives enabled cadres and staff with outstanding performance to realise actual benefits. Fourthly, personnel management was strengthened. Increased efforts were made in attracting employees with high qualifications and sharp talents, and their abilities were fully demonstrated in their respective posts and achieved good results.
During the reporting period, facing complex and volatile market environment, the Company timely adjusted its business strategies and proactively responded to the market to ensure a balance between sales and production. Firstly, significant progress was achieved in team building. All sales staff had maintained ideological stability with increased work initiative, thus enhancing sales performance. Secondly, proactive changes were made to marketing strategies. Investment in markets of close proximity was increased and the system of contracted dealers was improved. Thirdly, theCompany’s brand influence continued to increase. Customer relations continued to improve as ZhanjiangChenming’s high-grade offset paper products were widely recognised by customers for their high quality, and their high-grade coated paper with stable quality gained the 3-star EU certification. Fourthly, capital use continued to be reduced through reduction in inventories, promotion of the business with manufacturers, merchants and banks and improvement of contract compliance rate.
During the reporting period, the Company placed great emphasis on production management. Firstly, restructuring was accelerated. Development of 16 new products was completed and restructuring of over 30 products were launched, thus increasing its product profitability. Secondly, stable machine operation was achieved by enhancing the operational efficiency of large machines. Thirdly, inventory reduction was strengthened to operate proactively. Fourthly, process optimisation was promoted by optimising the slurry structure and chemical processes and the use of new materials, thus increasing economic efficiency. Fifthly, labour costs were reduced by continuing implementation of fix posting setting and staffing.
VDirectors’ Report
I. Overview(Cont’d)
2013 saw a strong momentum in theCompany’s corporate restructuring and development. First, WuhanChenming’s household paper project, JilinChenming’s environment protection relocation project and ShouguangCity’s 100,000 tonnes paper additives project commenced operation respectively, which played an important role in theCompany’s restructuring, cost reduction and efficiency enhancement. Second, JiangxiChenming’s 350,000 tonnes high-grade packaging paper project, the 180,000 tonnes paper cup sheets and 190,000 tonnes culture paper projects in Zhanjiang, GuangdongHuirui’s Haidong New District Waterfront comprehensive regulation works project, Wan Xing RealEstate’s real estate project in Wuhan,Haicheng’s magnesite mining project and other projects commenced, which accelerated the restructuring of the Company and promoted corporate transformation and upgrading, thus further enhancing the strength of the Company. Third, HuanggangChenming’s integrated forestry, pulp and paper project is under planning and pending approval, which will play a significant role in enhancing theCompany’s overall competitiveness.
During the reporting period, the establishment of a finance company within Chenming Group was approved by the China Banking Regulatory Commission, being the first enterprise in the paper making industry to own a finance company. This marked theCompany’s formal participation in the financial sector paved the way for theGroup’s diversification.
During the reporting period, the Company continued to eliminate outdated production capacity by disposal of Yanbian Chenming. This was in line with theCompany’s development strategy of focusing on high-end products, which helped raising the proportion of high-end products and increase economic efficiency. Meanwhile, the Company reduced finance expenses and enhanced its profitability through overseas financing and low-interest loans.
II. Analysis of principal operations
1. Overview
During the reporting period, theCompany’s revenue amounted to RMB20,388.8901 million, up by RMB627.2108 million or3.17% from 2012. The operating costs were RMB16,651.8860 million, down by RMB41.8823 million or0.25% from 2012. Operating profit and net profit attributable to equity holders of the parent company were RMB403.5409 million and RMB710.6553 million respectively, up by196.95% and221.51% respectively. During the reporting period, the expenses for the period hit RMB3,258.4538 million, down by RMB89.0424 million or2.66% from 2012. Investment in research and development amounted to RMB379.2612 million, up by RMB85.5629 million or29.13% from 2012. Net cash flows from operating activities were RMB1,122.6168 million, down by RMB834.2497 million from 2012. Review of the development strategy disclosed before and the progress of the operating plan during the reporting period
Please refer to I. Overview of this section.
Whether theCompany’s actual operation results were lower or higher than the publicly disclosed profit forecast for the year by more than20%:
□ Applicable√ Not Applicable
2. Revenue
During the reporting period, the Company completed machine-made paper production of 4.10 million tonnes, representing an increase of 170,000 tonnes or4.33% as compared with 3.93 million tonnes in 2012. Revenue from principal operations amounted to RMB20,152.7955 million, up by RMB734.4101 million or3.78% from 2012.
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
2. Revenue(Cont’d)
Whether revenue from sales in kind is higher than revenue from services
√ Yes□ No
Increase/ By industry Item 2013 2012 decrease(%) Machine-made paper
(’0,000 tonnes) Sales 416 395 5.32% Production output 410 393 4.33% Inventories 39 45 -13.33% Explanation on why the related data was varied by more than30%
□ Applicable√ Not Applicable
Material orders in hand of the Company
□ Applicable√ Not Applicable
Significant change in or adjustment of the products or services of the Company during the reporting period
□ Applicable√ Not Applicable
Sales to major customers of the Company
Total sales to top 5 customers (RMB) 1,159,451,679.05 Total sales to top 5 customers as a percentage of the total sales for the year(%) 5.69% Information on top 5 customers of the Company
√ Applicable□ Not Applicable
As a percentage of the total sales No. Name of customer Sales (RMB) for the year(%) 1 SHANGHAI YAOJI PLAYING CARD CO., LTD. 389,138,742.02 1.91% 2 INTERNATIONAL FOREST PRODUCTS 256,306,498.57 1.26% 3 BEIJING MUCUN PAPER CO., LTD. 187,940,089.15 0.92% 4 VITAL SOLUTIONS PTE LTD 179,517,631.36 0.88% 5 SHANDONG PROVINCE PUBLISHING FOREIGN
TRADE CO., LTD. 146,548,717.95 0.72% Total－ 1,159,451,679.05 5.69%
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
3. Cost
By industry
Unit: RMB 2013 2012
As a percentage of As a percentage of Increase/ By industry Item Amounts operating costs(%) Amounts operating costs(%) decrease(%) Machine-made paper Raw materials 8,583,818,150.47 56.89% 8,937,680,153.84 57.86% -0.97% Depreciation 750,553,780.31 4.97% 835,613,946.74 5.41% -0.44% Labour costs 196,062,500.42 1.30% 157,709,922.20 1.02% 0.28% Energy and power 1,968,304,028.05 13.04% 1,893,067,781.92 12.25% 0.79% Chemicals 2,285,170,540.42 15.14% 2,346,525,338.83 15.19% -0.05% Other production costs 1,304,715,360.94 8.65% 1,277,613,441.39 8.27% 0.38% Subtotal 15,088,624,360.62 100% 15,448,210,584.92 100% — Power and steam Raw materials 950,923,905.70 84.23% 508,500,185.20 84.33% -0.10% Depreciation 90,305,114.81 8.00% 47,921,265.73 7.95% 0.05% Labour costs 33,117,524.88 2.93% 20,637,762.46 3.42% -0.49% Energy and power 725,994.07 0.06% 1,876,044.44 0.31% -0.25% Chemicals 808,268.78 0.07% 976,450.67 0.16% -0.09% Other production costs 53,068,781.97 4.70% 23,106,207.91 3.83% 0.87% Subtotal 1,128,949,590.22 100% 603,017,916.41 100% — Construction materials Raw materials 168,137,137.30 82.39% 220,811,751.70 73.27% 9.12% Depreciation 2,411,328.71 1.18% 19,089,842.87 6.33% -5.15% Labour costs 7,425,294.19 3.64% 10,526,181.03 3.49% 0.15% Energy and power 15,233,571.16 7.46% 26,814,129.05 8.90% -1.44% Chemicals 2,069,485.59 1.01% 5,808,752.64 1.93% -0.92% Other production costs 8,792,137.98 4.31% 18,334,270.30 6.08% -1.77% Subtotal 204,068,954.93 100% 301,384,927.59 100%
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
3. Cost(Cont’d)
By product
Unit: RMB 2013 2012
As a percentage of As a percentage of Increase/ By product Item Amounts operating costs(%) Amounts operating costs(%) decrease(%) Light weight Raw materials 403,151,069.97 50.57% 507,950,556.55 48.86% 1.71% coated paper Accumulated depreciation 43,101,737.46 5.41% 51,339,028.14 4.94% 0.47% Labour costs 9,700,447.50 1.22% 10,691,865.84 1.03% 0.19% Energy and power 106,700,158.31 13.39% 152,571,848.79 14.68% -1.29% Chemicals 162,546,030.80 20.39% 233,311,822.57 22.43% -2.04% Other production costs 71,944,219.52 9.03% 83,744,330.02 8.06% 0.97% Subtotal 797,143,663.55 100% 1,039,609,451.91 100%
Duplex press paper Raw materials 1,214,355,314.27 57.79% 1,508,544,683.40 60.68% -2.89% Accumulated depreciation 100,689,154.79 4.79% 122,719,701.81 4.94% -0.15% Labour costs 31,483,824.40 1.50% 29,052,082.36 1.17% 0.33% Energy and power 291,066,793.05 13.85% 326,870,055.15 13.15% 0.70% Chemicals 245,562,795.30 11.69% 302,470,956.31 12.16% -0.47% Other production costs 218,190,658.91 10.38% 196,472,313.58 7.90% 2.48% Subtotal 2,101,348,540.72 100% 2,486,129,792.61 100% — Writing paper Raw materials 149,910,988.47 60.16% 180,898,992.93 68.10% -7.94% Accumulated depreciation 10,907,314.44 4.38% 3,997,172.13 1.50% 2.88% Labour costs 3,413,557.43 1.37% 6,123,857.73 2.31% -0.94% Energy and power 30,077,128.15 12.07% 37,581,044.15 14.15% -2.08% Chemicals 33,090,532.19 13.28% 22,894,310.91 8.62% 4.66% Other production costs 21,803,390.81 8.75% 14,122,914.39 5.32% 3.43% Subtotal 249,202,911.49 100% 265,618,292.24 100% — News press paper Raw materials 771,076,094.95 69.90% 852,071,358.78 67.99% 1.91% Accumulated depreciation 70,407,567.04 6.38% 68,739,327.76 5.49% 0.89% Labour costs 3,102,670.61 0.28% 3,761,372.30 0.30% -0.02% Energy and power 135,995,525.13 12.33% 177,942,102.33 14.20% -1.87% Chemicals 23,578,983.71 2.14% 51,081,098.80 4.07% -1.93% Other production costs 98,992,990.19 8.97% 99,588,746.51 7.95% 1.02% Subtotal 1,103,153,831.64 100% 1,253,184,006.48 100%
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
3. Cost(Cont’d)
By product(Cont’d)
Unit: RMB 2013 2012
As a percentage of As a percentage of Increase/ By product Item Amounts operating costs(%) Amounts operating costs(%) decrease(%) Paperboard Raw materials 504,717,758.73 61.90% 385,462,371.32 75.07% -13.17% Accumulated depreciation 50,755,273.73 6.23% 12,785,582.16 2.49% 3.74% Labour costs 6,288,010.63 0.77% 2,887,586.26 0.56% 0.21% Energy and power 149,627,956.09 18.35% 64,353,647.64 12.53% 5.82% Chemicals 56,329,994.64 6.91% 26,924,910.64 5.24% 1.67% Other production costs 47,623,145.79 5.84% 21,054,380.92 4.10% 1.74% Subtotal 815,342,139.62 100% 513,468,478.94 100% — White paper board Raw materials 1,100,225,284.60 63.30% 998,152,198.57 60.63% 2.67% Accumulated depreciation 75,261,256.47 4.33% 105,596,006.42 6.41% -2.08% Labour costs 42,515,456.75 2.45% 4,207,558.55 0.26% 2.19% Energy and power 260,320,599.03 14.98% 140,013,026.36 8.51% 6.47% Chemicals 130,815,953.92 7.53% 261,022,549.61 15.85% -8.32% Other production costs 128,908,644.65 7.42% 137,218,957.59 8.34% -0.92% Subtotal 1,738,047,195.43 100% 1,646,210,297.10 100% — Electrostatic paper Raw materials 957,819,100.57 64.00% 860,183,425.70 70.18% -6.18% Accumulated depreciation 80,479,976.88 5.38% 60,695,729.78 4.95% 0.43% Labour costs 17,797,747.75 1.19% 11,416,394.06 0.93% 0.26% Energy and power 122,190,311.18 8.16% 63,678,054.97 5.20% 2.96% Chemicals 156,499,910.35 10.46% 133,355,981.35 10.88% -0.42% Other production costs 161,740,629.39 10.81% 96,368,721.89 7.86% 2.95% Subtotal 1,496,527,676.12 100% 1,225,698,307.75 100% — Coated paper Raw materials 1,698,992,285.99 43.98% 1,682,510,037.15 44.70% -0.72% Accumulated depreciation 173,117,736.81 4.48% 271,583,736.25 7.22% -2.74% Labour costs 38,811,650.49 1.00% 23,953,033.14 0.64% 0.36% Energy and power 497,682,186.82 12.88% 449,106,353.39 11.93% 0.95% Chemicals 1,123,166,129.58 29.07% 1,048,680,994.79 27.86% 1.21% Other production costs 331,667,388.72 8.58% 287,957,484.19 7.65% 0.93% Subtotal 3,863,437,378.40 100% 3,763,791,638.91 100% — Other machine- Raw materials 1,750,554,092.69 59.86% 2,257,093,872.24 69.35% -9.49% made paper Accumulated depreciation 140,766,220.96 4.81% 122,365,618.94 3.76% 1.05% Labour costs 45,331,938.71 1.55% 39,395,106.84 1.21% 0.34% Energy and power 352,474,902.16 12.05% 333,801,245.48 10.26% 1.79% Chemicals 395,378,019.07 13.52% 272,498,936.32 8.37% 5.15% Other production costs 239,915,850.05 8.20% 229,345,539.16 7.05% 1.15% Subtotal 2,924,421,023.65 100% 3,254,500,318.98 100% —
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
3. Cost(Cont’d)
Major suppliers of the Company
Total purchases from top 5 suppliers (RMB) 1,648,415,119.16 Total purchases from top 5 suppliers as a percentage of the total purchases for the year(%) 9.90% Information on top 5 suppliers of the Company
√ Applicable□ Not Applicable
As a percentage of the total purchases No. Name of supplier Purchases (RMB) for the year(%) 1 SHANDONG HEXIN CHEMICAL GROUP CO., LTD. 377,138,678.17 2.26% 2 ITOCHU HONG KONG LTD 337,641,104.64 2.03% 3 JIANGXI COAL SALES CO., LTD. 330,758,605.03 1.99% 4 SILENUS INTERNATIONAL CO .,LTD 320,963,829.42 1.93% 5 ZHANJIANG XINCHEN TRADING CO., LTD. 281,912,901.91 1.69% Total－ 1,648,415,119.16 9.90% 4. Expenses
Accrued during Accrued during Increase/ Item the year the prior year decrease(%) Selling and distribution expenses 1,129,145,035.51 1,144,489,246.04 -1.34% Administrative expenses 1,198,704,556.00 1,110,246,902.75 7.97% Finance expenses 930,604,174.96 1,092,760,015.04 -14.84% Loss on impairment of assets 24,104,912.81 70,250,158.94 -65.69% Loss on impairment of assets 175,938,431.91 -62,826,238.51 380.04% (1) Loss on impairment of assets decreased by65.69% as compared to the corresponding period of the prior year, mainly due to: stepping up efforts to collect proceeds and reduction of bad debt provision.
(2) Income tax expense increased by380.04% as compared to the corresponding period of the prior year, mainly due to: improved profitability of the Company as compared to the prior year.
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
5. Research and development expenditure
The research and development expenditure for 2013 totalled RMB379.2612 million, representing an increase of RMB85.5629 million or29.13% as compared with RMB293.6983 million of the corresponding period of the prior year. The research and development expenditure accounted for2.59% of the net assets, representing an increase of 0.54 percentage point as compared with2.05% of the corresponding period of the prior year. The research and development expenditure accounted for1.86% of revenue, representing an increase of 0.37 percentage point as compared with1.49% of the corresponding period of the prior year.
With the rapid development from a traditional industry into a modern industry, the paper making industry is characterised by large-scale equipment, high-speed operation, economy of scale, machinery with large production capacity, large amount of time and labour input and high output levels. Production processes, technologies and products must be adapted to market demand and the level of equipment. Research, development and application of new technology are carried out constantly, and product portfolio adjustment is crucial in shifting its focus from the traditional middle to low-end products to high-end, specialty products. The research and development activities of the paper making industry are no longer confined to laboratory research and small-scale production applications, which instead focus on the promotion of large-scale industrialisation. Most of theCompany’s research and development activities and investment are in the trial production and trial application stages. Raw materials consumption is high during this process due to factors including high speed of machines, width and large production capacity.
In 2013, the development of the Twelve Five Year Plan entered a crucial stage. The Company actively carried out research and development of new products and technologies, as well as promoted product portfolio adjustment. It launched the research and development of new products and new technologies, including bio-pulping technology (National Programs for Science and Technology Development, “863 Project”), the provincial innovation project of coated kraft liner board, fluorescence-free cigarette board, development of digital printing specialty paper technology and Takamatsu coated paper, high-end glassine paper, ASA sizing technology and filler modification technology, which optimised the product portfolio, improved the paper product quality and enhanced market competitiveness, thus injecting new impetus into theCompany’s new development. During the reporting period, the pulp/paper testing centre of theCompany’s technology research institute passed the laboratory accreditation process of China National Accreditation Service for Conformity Assessment (CNAS). Details of the major research and development projects of the Company are as follows:
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
5. Research and development expenditure(Cont’d)
(1) High-end coated white linerboard technology development
Objectives of the research and development project: The project combined the guiding ideology of structural adjustment of both the national and Shandong Province papermaking industry. According to the current and future development needs of the domestic high-end packaging paper market, the project conducted research on high-end coated white linerboard, which is produced by using OCC (waste cardboard paper pulp) and the existing production system DIP (deinked pulp) as the main raw materials and supplemented with a small amount of hardwood bleached chemical pulp, as an alternative to coated white paperboard and container paperboard widely used currently. The project focused on research and development of domestic advanced clean production technology and white linerboard sizing and new coating technology, with total water consumption of only 10 m3 per tonne of paper (industry clean production evaluation radix: 30 m3 per tonne of paper).
Progress of the research and development project: This project has been classified as technological innovative project of Shandong Province. Through project research and technology and relying on the existing national level technology centre, post-doctoral research stations and the newly built production line which reached the international advanced level, the Company developed a specialised surface sizing technology and new natural levelling coating process. The coated white linerboard developed through the new technology and process has good burst index, high transverse ring crush index and good binding force between layers, and is not easily broken and layered. The paper surface has good pigment layer, uniform ink absorption and high smoothness, and the printed surface is of low roughness and high strength. The product is not easily peeled off and powdered out and with good printability, low water absorption on the front and back surface, outstanding water resistant performance, and thus has strong competitiveness in the market. Two national patents have been applied for this specialised technology, with one national practical new type patent has been granted. The project has entered the finalisation and product acceptance phase.
Intended goals of the research and development project: The project used OCC and the DIP pulp from the existing production system as the main raw materials, supplemented with a small amount of hardwood bleached chemical pulp for the research and development of high-end coated white linerboard. The research mainly included scientific and rational pulp-to-raw materials ratio process, wet cloth filling technology, dry and wet strength enhancement technology, a special coating formulation and coating process and new cleaner production technology. The Company intended to apply for one or more national invention patent in order to obtain independent intellectual property rights. The quantitative range of the product is 110 to 220 g/m2. High- end coated white linerboard as an upgrade alternative to the existing whiteboard wrapping paper in the market will also replace similar imported products, thereby filling the gaps in the domestic market with its product quality and technical specifications and production technology, which have reached the international advanced level.
Expected impact of the research and development project on future development: The high-end coated white linerboard, with the characteristics of lightness, smooth surface, good toughness, good surface printability and elegant appearance, can be used in the manufacturing of a variety of gift box and carton box for high- end merchandise. Its advantage in printing adaptability and paper performance also provides solutions to the continued growth in demand for paper and packaging materials of various industries. Also, its lower material and energy consumption can help save a large amount of resources, and promote the sustainable development process of the Company and the industry.
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
5. Research and development expenditure(Cont’d)
(2) Sub-topic of the National “863” Project “Research and production of enzyme in papermaking: “Optimisation of process for using enzyme in papermaking and its industrialisation”
Objectives of the research and development project: The project focused on the demand for industrial enzyme corresponding to the transformation and upgrade of the papermaking industry process. In response to the core technical problems, including the poor performance, high cost and difficult application of using enzymes inChina’s papermaking industry, the project focused on the research and development of enzyme preparation of xylanase, laccase, cellulase and lipase for papermaking and its engineering applications. The project strives to achieve a breakthrough in key technologies, including high-throughput gene screening for enzyme used in papermaking, the transformation of the enzyme protein structure function analysis and molecular design, high protein expression, the large-scale preparation and compounded preparation of enzyme preparation, application performance system evaluation and engineering application process, and develop xylanase and laccase for making paper pulp and bleaching, new industrial enzymes for papermaking including fat enzyme for use in deinking and cellulase applicable for process applications, develop a new process for green transformation and upgrade of the typical papermaking industry process, and promote the large-scale application of enzyme in pulping, bleaching and deinking of the papermaking industry, in order to provide important technical support for the development of energy conservation and green economy.
Progress of the research and development project: Currently, the various task force units of the project have been co-ordinated to conduct testing and research on the application of enzymes in the pulp and paper process, especially on the applications of enzyme in chemical pulp bleaching and deinking, in order to provide the conditions for large-scale production applications of specialised enzyme for pulping. Currently, the project has achieved certain phasal result during the process with 1 piece of high standard essay being published in a domestic major magazine.
Intended goals of the research and development project: Based on the existing pulping and bleaching processes, the task force will carry out the screening, compounded preparation and preparation work for enzymes used in papermaking, and further study the application of the enzymes developed by the task force in the chemical pulp bleaching process, conducted pilot production and achieved large-scale applications, build the demonstration ton-grade production line for the application of enzyme, improve the whiteness of pulp bleaching and pulp strength by more than5%, achieve the wastewater reuse rate of80%, reduce the alkali dosage by60%, reduce the amount of chemical bleaching reagent by20-40% to reach the expected goals of the project, and apply for one invention patent.
Expected impact of the research and development project on future development: The implementation of the project will provide an exemplary base for the green and low-pollution papermaking process in China, promote co-operation between schools, businesses and research institutions in technological innovation, thereby accelerating the technological achievements transformation and promoting industry-wide technological levels and product quality improvement.
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
5. Research and development expenditure(Cont’d)
(3) Technology development of high-end glassine paper
Objective: As the pollution of environmental resources has become increasingly serious, the traditional non-dry adhesive paper, due to its leaching PE adhesive film, on one hand causes environmental pollution as PE film recycling is difficult and will not decompose easily in the natural environment even after a long time; on the other hand, raw materials of PE film come from petroleum by-products, with the scarcity of petroleum resources, the consumption of such raw material will also be shrinking. The grade and quality of products is a key factor for the further development of enterprises. Glassine paper is a high-end specialty paper used in high-grade non- dry paper products and widely used in the advertising and industrial sectors. Its market demand increases year by year and has huge market potential. In the long run, glassine paper will gradually take the place of ordinary non-dry paper. This project fully made use of the technological transformation of the existing culture paper production line for the development of high-grade glassine paper, which will help optimising theCompany’s product portfolio, adding new profit growth point and has good market prospect.
Progress: Currently, the project has completed project technology validation and the procurement of specialty equipment. The technology transformation is underway, and the next step will be to carry out the experimental design and experimental research program simultaneously.
Intended goals: The project intends to select quality chemical bleaching pulp with recycled fibre and chemical mechanical pulp, and combine with special mineral pigments and unique surface sizing process to create a highly smooth(≥ 500s), good anti-oil high-grade non-dry paper product. The product will have higher strength, improved bulk density and dimensional stability, soft colour, pure and natural appearance, lower manufacturing costs, and is also environmental friendly.
Expected impact on future development: The implementation of this project and the resulted excellent product quality can further optimise the product portfolio of the Company, increase the proportion of its high-end products, add value to its products and enhance theCompany’s market competitiveness. Meanwhile, the use of recycled fibre pulp broadens the application such raw material, thus saving a large amount of native wood fibre resources and further promoting the implementation of the process of environmental green paper making chain.
VDirectors’ Report
II. Analysis of principal operations(Cont’d)
6. Cash flows
Unit: RMB Increase/ Item 2013 2012 decrease(%) Subtotal of cash inflows from operating activities 20,363,176,118.78 19,399,885,121.58 4.97% Subtotal of cash outflows from operating activities 19,240,559,317.87 17,443,018,643.59 10.31% Net cash flows from operating activities 1,122,616,800.91 1,956,866,477.99 -42.63% Subtotal of cash inflows from investing activities 1,926,791,350.79 1,020,659,994.81 88.78% Subtotal of cash outflows from investing activities 3,837,739,389.14 3,666,784,910.10 4.66% Net cash flows from investing activities -1,910,948,038.35 -2,646,124,915.29 27.78% Subtotal of cash inflows from financing activities 23,126,276,064.56 25,318,157,575.12 -8.66% Subtotal of cash outflows from financing activities 23,958,313,170.73 24,594,961,130.78 -2.59% Net cash flows from financing activities -832,037,106.17 723,196,444.34 -215.05% Net increase in cash and cash equivalents -1,617,017,256.49 26,501,565.92 -6201.59% Explanation on why the related data varied by more than30%
√ Applicable□ Not Applicable
(1) Net cash flows from operating activities decreased by42.63% as compared to the corresponding period of the prior year mainly due to the increase of the proportion of cash payment for goods as the Company sought support from upstream suppliers and reduced its costs.
(2) Net cash flows from investing activities increased by27.78% as compared to the corresponding period of the prior year mainly due to recovery of investment with lower rate of return in order to improve capital utilisation and strengthen our existing leading operations.
(3) Net cash flows from financing activities decreased by215.05% as compared to the corresponding period of the prior year mainly due to better profitability of the Company and enhancement in capital utilisation efficiency so as to lower capital utilisation costs.
Explanation on main reasons leading to the material difference between cash flows from operating activities during the reporting period and net profit for the year
√ Applicable□ Not Applicable
Net cash flows from operating activities decreased by42.63% as compared to the corresponding period of the prior year but net profit attributable to the Company increased by221.51% as compared to the corresponding period of the prior year mainly due to the decreased in accounts payable and increase in accounts receivable during the year.
VDirectors’ Report
III. Components of principal operations
Unit: RMB Increase/decrease of Increase/decrease Increase/decrease gross profit of revenue as of operating costs margin as compared to the as compared to compared to corresponding the corresponding the corresponding Gross profit period of the prior period of the period of the Revenue Operating costs margin(%) year(%) prior year(%) prior year(%) By industry
Machine-made paper 18,244,191,565.62 15,088,624,360.62 17.30% 0.53% -2.33% 2.42% Electricity and heat 1,519,119,225.58 1,128,949,590.22 25.68% 89.81% 87.22% 1.03% Construction materials 241,343,187.87 204,068,954.93 15.44% -30.00% -32.29% 2.85% Hotel 36,324,584.14 8,589,278.93 76.35% -24.85% -31.25% 2.20% Others 111,816,968.86 62,297,587.77 44.29% 719.32% 493.74% 21.17% By products
Light weight coated paper 959,374,495.99 797,143,663.55 16.91% -18.03% -23.32% 5.74% Duplex press paper 2,573,322,197.99 2,101,348,540.72 18.34% -11.05% -15.48% 4.27% Writing paper 307,750,040.04 249,202,911.49 19.02% 10.45% -6.18% 14.35% Coated paper 4,504,344,844.03 3,863,437,378.40 14.23% 11.51% 2.65% 7.40% News press paper 1,501,678,237.85 1,103,153,831.64 26.54% -15.37% -11.97% -2.84% Paperboard 812,352,574.23 815,342,139.62 -0.37% 54.13% 58.79% -2.95% White paper board 2,161,704,531.76 1,738,047,195.43 19.60% 7.55% 5.58% 1.50% Electrostatic paper 1,906,857,070.30 1,496,527,676.12 21.52% 19.87% 22.10% -1.43% Other machine-made paper 3,516,807,573.43 2,924,421,023.65 16.84% -9.00% -10.14% 1.06% Electricity and steam 1,519,119,225.58 1,128,949,590.22 25.68% 89.81% 87.22% 1.03% Construction materials 241,343,187.87 204,068,954.93 15.44% -30.00% -32.29% 2.85% Hotel 36,324,584.14 8,589,278.93 76.35% -24.85% -31.25% 2.20% Others 111,816,968.86 62,297,587.77 44.29% 719.32% 493.74% 21.17% By geographical segment
Mainland China 17,419,575,119.36 14,112,022,512.66 18.99% 4.61% 2.02% 2.06% Other countries and regions 2,733,220,412.71 2,380,507,259.81 12.90% -1.18% -8.10% 6.55% Under the circumstances that the statistics specification for theCompany‘s principal operations data experienced adjustment in the reporting period, the principal operations data upon adjustment of the statistics specification at the end of the reporting period in the latest year.
□ Applicable√ Not Applicable
VDirectors’ Report
IV. Five-year financial summary
The following is the published summary of results and assets, liabilities and minority shareholders interests of the Group for the past five years as extracted from the published audited financial statements. This summary does not constitute a part of the audited financial statements. Financial summary is prepared in accordance with Hong Kong Accounting Standard (the data for 2009 to 2010 is prepared in accordance with International Accounting Standard, while the data from 2011 onwards is prepared in accordance with China Accounting Standards for Business Enterprises):
1. Consolidated results
Unit:RMB’0,000 For the year ended 31 December
2010
China Accounting
Standards for International
Business Accounting
2013 2012 2011 Enterprises Standard 2009 Revenue 2,038,889 1,976,168 1,774,749 1,720,312 1,709,970 1,481,525 Profit/(loss) before tax 86,629 -1,614 69,899 156,235 159,781 120,838 Tax 17,594 -6,283 11,026 26,070 26,070 21,901 Profit/(loss) for the
current period 71,066 22,103 60,827 116,334 119,034 86,295 Minority shareholders
interests -2,030 -17,435 -1,954 13,832 14,678 12,643 2. Consolidated assets, liabilities and minority shareholders interests
Unit:RMB’0,000 For the year ended 31 December
2010
China Accounting
Standards for International
Business Accounting
2013 2012 2011 Enterprises Standard 2009 Total assets 4,752,188 4,772,542 4,563,083 3,507,713 3,500,113 2,812,613 Total liabilities 3,288,353 3,338,000 3,064,305 1,981,693 2,003,482 1,371,842 Minority shareholders
interests 59,847 58,592 145,915 172,441 172,342 173,570 Total equity attributable
to equity holders of
the parent company 1,403,989 1,375,950 1,352,862 1,353,579 1,324,289 1,267,202 Gearing ratio 69.20% 69.94% 67.15% 56.50% 57.24% 48.77%
VDirectors’ Report
V. Analysis of assets and liabilities(Cont’d)
1. Material changes of asset items
Unit: RMB As at the end of 2013 As at the end of 2012
As a As a
percentage of percentage of Change in
Amounts total assets(%) Amounts total assets(%) percentage(%) Description of major changes Monetary funds 2,547,729,794.24 5.36% 4,456,217,362.86 9.34% -3.98% Monetary funds decreased mainly due to the issue of RMB3.8 billion corporate bonds on 28 December 2012 and some of the funds as at the end of the year not utilised for repayment of borrowings.
Accounts receivable 3,102,643,083.54 6.53% 3,602,955,051.18 7.55% -1.02% Accounts receivable decreased mainly due to the strengthened control over proceeds collection and the decrease in turnover days for accounts receivable. Inventories 3,725,809,877.25 7.84% 4,412,548,700.68 9.25% -1.41% Inventories decreased mainly due to the decrease in goods in stock as a result of stepping up sales efforts by the Company. Long-term equity 115,477,214.86 0.24% 356,796,777.78 0.75% -0.51% Long-term equity investments investments decreased mainly due to the decrease in long-term equity i nvestments a r i s i ng f r om disposal of investments. Fixed assets 21,181,647,488.39 44.57% 19,751,339,991.06 41.39% 3.18% Fixed assets increased mainly due to the reclassification of the white coated linerboard project of the Company as fixed assets, as well as depreciation for the year, disposal of subsidiary, Yanbian Chenming, and the decrease of fixed assets as disposed of due to the relocation of Wuhan Chenming Plant I for environmental protection reason.
VDirectors’ Report
V. Analysis of assets and liabilities(Cont’d)
1. Material changes of asset items
As at the end of 2013 As at the end of 2012
As a As a
percentage of percentage of Change in
Amounts total assets(%) Amounts total assets(%) percentage(%) Description of major changes Bills receivable 2,870,443,681.49 6.04% 1,852,478,364.46 3.88% 2.16% Bills receivable increased mainly due to the increase in bills for settlement as at the end of the year and the decrease in discount on bills receivable. Disposal of fixed assets 588,181,647.53 1.24% 287,309,818.03 0.60% 0.64% D i sposal o f f i x ed a s s e t s increased mainly due to the reclassification of assets into disposal due to the relocation of Wuhan Chenming Plant I for environmental protection reason. Deferred income 507,653,388.38 1.07% 376,938,086.60 0.79% 0.28% Deferred income tax assets tax assets increased mainly due to provision made for deferred income tax assets as a result of temporary losses of some companies under the current market conditions. 2. Material changes of liability items
Unit: RMB 2013 2012
As a As a
percentage of percentage of Change in
Amounts total assets(%) Amounts total assets(%) percentage(%) Description of major changes Short-term borrowings 9,818,885,237.85 20.66% 12,876,398,495.16 26.98% -6.32% S h o r t - t e r m b o r r o w i n g s d e c r e a s e d m a i n l y d u e t o r eduction o f f i nancing t h r ough short- t e rm l oans by the Company in order to lower finance expenses and broadening financing sources. Bills payable 290,403,790.59 0.61% 1,285,627,762.07 2.69% -2.08% Bills payable decreased mainly due to the decrease in bank acceptance bills issued by the Company for payment of goods. Other current liabilities 3,878,735,536.52 8.16% 17,659,498.56 0.04% 8.12% Other current liabilities increased mainly due to the issuance of short-term commercial paper of RMB3.8 billion by the Company.
VDirectors’ Report
V. Analysis of assets and liabilities(Cont’d)
3. Assets and liabilities measured at fair value
Unit: RMB Profit or loss Cumulative
from change in fair value Impairment Purchases Disposal
fair value during change charged provided during during during
Item Opening balance the period to equity the period the period the period Closing balance Financial assets
Consumable biological assets 1,169,269,054.15 11,221,828.76 189,043,642.16 12,924,958.49 22,385,201.20 1,317,141,123.77 Total 1,169,269,054.15 11,221,828.76 189,043,642.16 12,924,958.49 22,385,201.20 1,317,141,123.77 Financial liabilities 0.00 0.00 0.00 Whether there were any material changes on the measurement attributes of major assets of the Company during the reporting period
□ Yes√ No
VI. Analysis of Core Competitiveness
The Company is a large enterprise which primary engages in forestry, pulping and paper-making operations. It is also the first listed company with three types of listed shares (i.e. A shares, B shares and H shares) in China. Compared with other enterprises in the industry, the Company has the following advantages:
VDirectors’ Report
VI. Analysis of Core Competitiveness(Cont’d)
(1) Scale advantages: AsChina’s largest state-owned paper making enterprise, after years of development, the Company has achieved annual paper production capacity of 8.00 million tonnes and is capable to compete with international papermaking 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.
(2) Product advantages: While the production scale of the Company expanded rapidly, its product mix also continued to optimise. In recent years, the Company has built the production lines for high-end coated paper, high-end light weight coated paper, high-end white paper board and high-end duplex press paper, and achieved higher technological content of products and added values as well as a higher gross profit margin. The product mix of the Company has changed from one that focused mainly on ordinary offset paper to a wide product range including electrostatic paper, duplex press paper, light weight coated paper, news press paper, coated paper, white paper board and household paper, and thus the Company has become the enterprise that offers the widest product range inChina’s papermaking industry. Proportion of theCompany’s high-end products will further increase in the future. 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) Advantages in technical equipment: TheCompany’s overall technical equipment has reached the advanced international level. The main production equipment have been imported from internationally renowned manufacturers, including Metso and Ahlstrom of Finland, Fuyite of Germany, Andritz of Austria and ABB of the United States. Its equipment of advanced international level includes theworld’s most advanced dilution headbox, folding net, single hanging dryer machine, thin film coating machine, non-contact hot air drying and two-sided soft dense burnishing machine, and have been equipped with advanced technical equipment including online paper disease monitoring system, caliper profiler control system and intelligent quality control system. The technical equipment used by the Company generally reflects the characteristics of being technology-intensive and the integration of mechanical and electrical in the papermaking industry nowadays. The degassing technology, wet end chemical technology, intelligent sheet lateral control technology, coating preparation technology, free-jet coating technology, multi-nip pressure balanced burnishing technology and independent developed processes of the slurry system have all reached the international advanced level.
(4) Research and innovation advantages: Leveraging its research strengths and relied on state-level enterprise technical centres and post-doctoral research stations, the Company has established a comprehensive intellectual property rights system, and has continuously enlarged its technological innovation capacity and research and development efforts to actively develop new products and proprietary technology with high technology content and added values. Meanwhile, Chenming Paper Technology Centre is actively engaged in technological cooperation with universities, research units and international advanced enterprises. The above have helped the Company establish a research and development network leveraging both the domestic and international advanced papermaking research bases, and guaranteedCompany’s leading position in industry research in China.
VDirectors’ Report
VI. Analysis of Core Competitiveness(Cont’d)
(5) Comprehensive cost advantages: The Company has a relative advantage in comprehensive cost, which is mainly reflected in: first, 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, and has also increased the raw materials supply by launching the construction of the 700,000 tonnes of wood pulp project in Zhanjiang and the forestry paper integration project of Huanggang Chenming; thirdly, the Company has reduced costs through the construction of the captive power plant to ensure energy supply.
(6) Funding advantages: The papermaking industry is a capital-intensive industry, and funding is one of the most important factors for 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. In recent years, the Company has made full use of indirect financing channels to accelerate its development. While the Company has increased borrowings, it has maintained higher returns on net assets, improved its earnings ratio, and leveraged the advantage of financial leverage. All these are in line with the goal of maximisation ofshareholders’ wealth. 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 stock markets. The funds obtained have been applied effectively and has helped the Company create good market image, which has provided the Company with stronger abilities in direct financing in the stock market.
(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, red liquor comprehensive utilisation system and the sewage treatment plants, which guaranteed that the environment protection facilities can meet the demand of the rapid expansion of the Company.
VDirectors’ Report
VII. Analysis of investments
1. External equity investments
(1) External investments
External investments
Investments during
Investments during the corresponding
the reporting period (RMB) period of prior year (RMB) Change(%) 519,337,235.00 669,306,351.20 -22.41% Investees
TheCompany’s share of interest Names of the companies Principal activities in investees(%) Zhanjiang Meilun Plant fostering, forest conservation, soil improvement, 100% Pulp& Paper Co., Ltd. forestry research, construction of raw material bases;
implementation, management and operation of pulp mill
construction; manufacture, production, processing and
sales of pulp and related products
Zhanjiang Chenming New-style Production and sales of new-style wall materials, and 100% Wall Materials Co., Ltd. comprehensive utilisation of coal ash
Chenming GmbH Trading of machine-made paper 100% Shandong Chenming Paper Sales of machine-made paper, paper board, paper- 100% Group (Fuyu) Sales Co., Ltd. making materials and accessories and paper machinery
Shouguang Hongxiang Printing Pre-approval operation: Printing: forms and account 100% and Packaging Co., Ltd. books; General operation: Processing and sales of:
paper and paper products, plastic products (excluding
agricultural film), apparel, packaging materials; export
and import operation for goods and technology within
the scoped as approved by the government
Chenming (HK) Limited Export and import trade of paper products and market 100% research
Jiangxi Chenming Paper Co., Ltd. Production and processing of machine-made paper, 100% paperboard, paper panel, paper products and paper-
making raw materials
Haicheng Haiming Mining Processing and sales of magnetite and talc 60% Company Limited
Wuhan Chenming Wan Development of real estate and sales of commodity 40% Xing Real Estate Co., Ltd. house
VDirectors’ Report
VII. Analysis of investments(Cont’d)
2. Entrusted wealth management, derivatives investments and entrusted loans
(1) Entrusted loans
Unit:RMB’0,000 Use of
Related Interest Guarantor proceeds by Borrower parties Loan amount rate of loans or Collateral borrowers Jiangxi Chenming Yes 20,000 6% Not applicable Financing Paper Co., Ltd. liquidity Total — 20,000 —— —
Disclosure date of approval 29 March 2012
of entrusted loans in
board meeting
Disclosure date of approval 30 May 2012
of entrusted loans
in general meeting
3. Use of proceeds
(1) The general use of proceeds
Unit:RMB’0,000 Total proceeds 380,000 Total investment of proceeds during the reporting period 177,040 Total cumulative investment of proceeds 377,340 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% Description of the general use of proceeds
On 26 December 2012, the Company issued a total of 3,800 million corporate bonds totalling RMB3,800 million with a face value of RMB100 each at an issue price of RMB100 per bond. The coupon rate was5.65% and the proceeds amounted to RMB3,800 million. After deducting expenses of RMB27 million, the net proceeds available for use amounted to RMB3,773 million. During the reporting period, RMB1,770 million of the proceeds were used, of which approximately RMB273 million was used to replenishing the liquidity and approximately RMB1,497 million was used to repay bank borrowings and refinance short-term bank borrowings. As at 31 December 2013, RMB3,773 million of the proceeds were cumulatively used, of which approximately RMB273 million was used to replenishing the liquidity and approximately RMB3,500 million was used to repay bank borrowings, most of which were used to refinance short-term bank borrowings.
VDirectors’ Report
VII. Analysis of investments(Cont’d)
3. Use of proceeds(Cont’d)
(2) The commitment of proceeds
Unit:RMB’0,000 Change Invested Accumulated Investment Return Expected in project Total Total amount invested progress as at Expect realised return (including committed investment during the amount as at the end of date of during the being Significant Committed investment project partial investment after reporting the end of the period operation of reporting achieved change and excess proceeds change) of proceeds adjustment(1) period the period(2) (%)(3)=(2)/(1 the project period or not in project )
Committed investment project
Repayment of bank borrowings No 350,000 350,000 149,700 350,000 100% Not applicable Not applicable Yes No Financing liquidity No 27,340 27,340 27,340 27,340 100% Not applicable Not applicable Yes No Subtotal of committed investment project— 377,340 377,340 177,040 377,340 — — — — Excess proceeds
Total — 377,340 377,340 177,040 377,340 — — — — Condition and reason for not achieving planned progress or No
expected return (by special item)
Description on significant change in feasibility of project No
Amount, use and utilisation of excess proceeds Not applicable
Change in place of implementation of investment project of proceeds Not applicable
Adjustment on implementation method of investment project of proceeds Not applicable
Pre-investment and swap of investment project of proceeds Not applicable
Temporary financing liquidity by idle proceeds Not applicable
Balance and reason for proceeds arising from project implementation Not applicable
Use and direction of unused proceeds No
Issue or other condition existed in use and disclosure of proceeds No
VDirectors’ Report
VII. Analysis of investments(Cont’d)
4. Analysis of major subsidiaries and investees
Information on major subsidiaries and investees
Unit:RMB’0,000 Type of Principal products Revenue from
Name of companies companies Industry or services Registered capital Total assets Net assets operations Operating profit Net profit Zhanjiang Chenming Pulp& Subsidiary Pulp Pulp and coated
Paper Co., Ltd. paper RMB3,000 million 1,262,459.60 386,286.14 427,719.00 59,083.87 46,250.70 Jilin Chenming Paper Co., Ltd. Subsidiary Papermaking Coated paper and
writing paper RMB1,500.00 million 300,062.92 118,219.85 13,707.01 -10,198.14 457.85 Chenming (HK) Limited Subsidiary Trading of Sales of paper
paper products products, import of
raw materials and
processing US$10.10 million 393,009.33 14,246.70 516,895.20 6,473.21 5,583.38 Shandong Chenming Paper Subsidiary Trading of Sales of paper
Sales Company Limited paper products products RMB100.00 million 851,729.68 22,389.18 1,520,049.71 25,098.48 18,218.38 Jiangxi Chenming Paper Co., Ltd. Subsidiary Papermaking Duplex press paper
and coated paperUS$272.00 million 358,934.29 198,823.50 177,484.13 5,086.12 5,381.08 Shandong Chenming Subsidiary Electricity and Generation and
Power Supply Holdings steam sales of electricity
Co., Ltd. and steam RMB99.5531 million 42,264.57 33,657.39 52,752.43 7,319.95 7,538.86 Wuhan Chenming Hanyang Subsidiary Papermaking Writing paper and
Paper Holdings Co., Ltd. news press paper RMB211.3670 million 290,425.38 45,383.08 90,456.77 -26,703.90 -5,239.58 Shouguang Meilun Paper Co., Ltd. Subsidiary Papermaking Coated paper and
household paper RMB2,200.00 million 974,447.03 141,342.59 415,819.09 -66,039.63 -49,638.75 Particulars of major subsidiaries and investees:
1. In 2013, Jilin Chenming suspended all of its operations for relocation due to environmental protection reason. Loss on suspension and cost for disposal of assets were offset by the relocation subsidies. Wuhan Chenming Plant I conducted relocation. Loss on suspension and cost for disposal of assets were offset by the relocation subsidies. The sentiment for products of Plant II was low, resulting in low gross profit margin. Meilun white coated linerboard project fully commenced operation, and in the phase of market development.
2. The sentiment for major products of Zhanjiang Chenming, including pulp and high-end duplex press paper, was high, resulting in high gross profit margin and better return. Jiangxi Chenming put greater efforts on technology research and development and approved as high-tech enterprise, resulting in an increase in gross profit of products. The profitability of Chenming Power Supply improved due to the continued low price of coal, the raw material.
3. As the market gradually recovered during 2013, the gross profit margin of Sales Company and Chenming (HK) increased with profit realised.
VDirectors’ Report
VII. Analysis of investments(Cont’d)
4. Analysis of major subsidiaries and investees(Cont’d)
Acquisition and disposal of subsidiaries during the reporting period
√Applicable□ Not applicable
Methods to acquire
Purpose to acquire and and dispose of
dispose of subsidiaries subsidiaries
during the during the reporting Impact on overall production Name of companies reporting period period and results
Chenming GmbH Strengthen the sale works Capital contribution Net profit for 2013 was -RMB16.40 for paper product of the for establishment million
Company, further expand
the market share of the
Company’s products in
Europe, and establish a
wider and comprehensive
distribution network
Zhanjiang Meilun Fully utilize the existing Capital contribution Net profit for 2013 was–RMB0.40 Pulp& Paper Co., Ltd. p u b l i c u t i l i t i e s a n d for establishment million
ancillary facilities as to
diversify the product
portfolio, further reduce
c o s t s a n d i n c r e a s e
C o m p a n y’ s r i s k -
resistance ability
Zhanjiang Chenming S t r e n g t h e n Capital contribution Net profit for 2013 was–RMB0.28 New-style Wall comprehensive utilisation for establishment million
Materials Co., Ltd. of resources, proactively
r e s p o n s e t o n a t i o n a l
policy on comprehensive
utilisation of resources
and meet with the local
demand
Yanbian Chenming F u r t h e r i n c r e a s e t h e Transfer of equity Gain on disposal of equity interest was Paper Co., Ltd. proportion of high-end interest RMB13.04 million
products and enhance
e c o n o m i c b e n e f i t s
based on theCompany’s
development strategy on
high-end products
Wuhan Chenjian Operational needs for Transfer of equity Loss on disposal of equity interest was New-style Wall production interest RMB7.86 million
Materials Co., Ltd.
VDirectors’ Report
VII. Analysis of investments(Cont’d)
4. Analysis of major subsidiaries and investees(Cont’d)
Acquisition and disposal of subsidiaries during the reporting period(Cont’d)
Methods to acquire
Purpose to acquire and and dispose of
dispose of subsidiaries subsidiaries
during the during the reporting Impact on overall production Name of companies reporting period period and results
Wuhan Xingzhilian Operational needs for Cancellation No effect on results for 2013 Paper Company production
Limited
Shanghai Runchen Lower investment and Transfer of equity Disposal of assets does not affect the Equity Investment Fund enhance capital utilisation interest net profits
Co., Ltd. in order to protect the
interest of the Company
and shareholders
Jilin Chenming Waste Operational needs for Cancellation No effect on results for 2013 Collection Co., Ltd. production
Shandong Chenming Paper F a c i l i t a t e o p e r a t i o n , Capital contribution No effect on results for 2013 Group (Fuyu) Sales m a x i m i z e t h e e d g e s for establishment
Co., Ltd. of integrated sale and
s t r e n g t h e n m a r k e t
expansion
Shouguang Hongxiang Expand the industry chain Acquisition of equity Net profits realised for 2013 was Printing and Packaging o f t h e C o m p a n y a n d interest RMB10.89 million
Co., Ltd. increase revenue
Wuhan F u l l y u t i l i z e t h e Loss of control Gain on loss of control was RMB18.32 Chenming Wan i n f l u e n c e o f H u b e i million
Xing Real Zheshang in real estate
Estate Co., Ltd. development, facilitate
the reconstruction of
o l d p l a n t s o f W u h a n
C h e n m i n g , e x p l o r e
a n d u s e l a n d i n a n
efficient way, optimize
overall environment in
Wuhan Economic and
Technology Development
Zone, expand the industry
chain of the Company
a n d e n h a n c e t h e
sustainable profitability of
the Company
VDirectors’ Report
VII. Analysis of investments(Cont’d)
5. Highlights of major investments not financed by the proceeds
Unit:RMB’0,000 Accumulated
actual
investments
Investment made as of
Total made during the end of
planned the reporting the reporting Progression Revenue
Name of project investment period period of projects from projects
600,000 tonnes white 260,000 8,964.90 257,827.22 100% Capital transfer conducted coated linerboard project during the reporting period, currently at the market development stage. Relocation of 230,000 93,690.83 221,857.03 96% Trail production commenced Jilin Chenming in December 2013. As of the end of the reporting period, capital t ransfer has not conducted yet.
350,000 tonnes high-end 183,000 12,262.54 12,262.54 7% Not completed
packaging paper project
of Jiangxi Chenming
Magnesite mining 50,000 26,694.06 46,305.95 93% Not completed
180,000 tonnes paper 132,300 31,376.06 31,376.06 24% Not completed
cup project
190,000 tonnes high-end 309,700 28,495.90 28,495.90 9% Not completed
cultural paper project
Forestry paper integration 348,510 992.33 13,079.53 4% Not completed
project of Huanggang
Chenming
Total 1,513,510 202,476.62 611,204.23 ——
Index of temporary announcement disclose in designated website http://www.cninfo.com.cn/
VIII. Estimate of the operating results from January to March 2014
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
VDirectors’ Report
IX. Special purpose vehicle controlled by the Company
There was no special purpose vehicle controlled by the Company during the reporting period.
X. Outlook on the future development of the Company
1. Competition overview and development trend of the industry
The industry to which the Company belongs is the paper making industry, which is a light industry. The paper making industry is an important basic raw materials industry which is closely related to the national economy and social development. The paper making industry features capital and skills intensive characteristics with prominent economy of scale. Its growth rate is strongly and positively correlated to that of GDP. In respect of the international and domestic economic development, global diversification and economic globalisation further develop and a new round of adjustment to the industry structure has commenced. Every country focuses on real economic development generally. Advance in technology has brought significant breakthrough. China continued to implement its proactive fiscal policy and stable monetary policy. The national economy will maintain stable and rapid growth. The development conditions for the paper making industry are gradually improving. In respect of the industry, the growth rate of the downstream demand of the domestic paper making industry was still at a low level since the beginning of 2013. The weak domestic demand persisted with the overall profitability in the paper making industry hovered around at a low level. However, the development conditions for paper making industry are gradually improving in the long run. The National Development and Reform Commission, Ministry of Industry and Communication and State Forestry Administration jointly issued the Twelfth Five-Year Plan for the Development of the Paper Making Industry, which clearly states the general direction of “controlling total volume, promoting concentration, optimising raw materials and reducing energy consumption and emission”, from which the Company is expected to benefit in the long run. Elimination of outdated production capacity and the stricter environment protection policy will forced some small and medium-sized enterprises to leave the industry, thereby lowering the pressure of the new production capacity on the supply in the industry to a certain extent. A higher concentration ratio will be secured due to slowdown in the growth of the supply in the paper making industry and elimination of outdated production capacity, which is conducive to a proactive increase in price proposed by enterprises.
In recent years, the Company is committed to the integrated development of forestry, pulp and paper with a longer industry chain and more comprehensive paper types. During the reporting period, the Company carried out capacity expansion on paper types with better prospects. TheCompany’s direction of development was in line with the requirements of the development plan of the entire paper making industry. Meanwhile, the Company entered into the financial and energy industries by establishing a financial company and a financing company, and engaging in magnesite mining, thereby expanding its industry chain with a more rationalised industry positioning, which further strengthened theCompany’s competitiveness and development potential. As the economy and industry gradually recover, it is expected that the result of the Company will record stable growth. TheCompany’s future performance is what the market can look forward to.
VDirectors’ Report
X. Outlook on the future development of the Company(Cont’d)
2. Development strategy of the Company
(1) The Company will adjust its product structure and focus on developing the production of high-end paper product. Several projects of the Company have commenced operation upon completion. They are the high-end low weight coated paper project of production capacity of 800,000 tonnes, the high-end culture paper project of production capacity of 450,000 tonnes and the high-end white coated linerboard project of production capacity of 600,000 tonnes. The Company has also invested in the high-end household paper project of production capacity of 136,000 tonnes, the high-end packaging paper project of production capacity of 350,000 tonnes, the high-end cultural paper project of production capacity of 190,000 tonnes and the paper cup project of production capacity of 180,000 tonnes. The Company will take this opportunity to further upgrade its products for a higher end market and strive to gradually become one of the leading companies in the global paper making industry within a period of time.
(2) The Company will eliminate the raw material bottlenecks encountered during the development of the Company and strengthen theCompany’s product cost control. The Company will focus on the construction of Zhanjiang pulp project and ancillary raw material bases, as well as the construction of Huanggang Chenming pulp project and ancillary raw material bases. The Company will establish the “forestry-pulp-paper integration” chain industry, thereby eliminating the limitations of upstream resources on the Company and enhancingCompany’s sustainable development.
(3) The Company will pay all its attention to its environmental protection works, aiming to achieve harmonious development with energy consumption and emission reduction. Upon implementation of the new national environmental protection standards and the greater emphasis on environment regulation, the Company will endeavour to develop the recycle economy. The Company will strive to maximise its resource utilisation by waste exchange and recycling. Meanwhile, the Company will make greater efforts to construct environment friendly projects and strive to achieve its waste emission target.
(4) The Company will enhance the technology innovation and staff training. When compared with international paper making enterprises, the Company is weak in terms of existing technology and human resources. On the one hand, the Company adheres to internal training as well as external recruitment in order to enhance the overall quality of the team. On the other hand, it strives to develop its own technology and strengthen its own innovation ability.
(5) Enhance corporate management and improve operational quality. Firstly, to implement the management concept of “to manage people with system and to work up to the standard”, and improve all systems and processes to enhance implementation capability. Secondly, to improve equipment automation and information technology management, and implement post setting and staffing according to advanced international standards. Third, to deepen the reform of the remuneration system, improve the performance appraisal system, establish different promotion channels and ranks. Fourth, to strengthen the management awareness of the management staff and improve their ability to identify and solve problems
(6) Develop domestic and international markets and expand development potential. First, to implement a proactive and rational marketing strategy, timely adjust product structure according to market changes, further expand theCompany’s market share domestically and internationally through innovative sales and marketing and services. Second, to strengthen sales and marketing management with the help of management advisory body, take the lead in implementing a new management mode within the sales system, adjust the product management structure, strengthen the management of market segmentation, increase training efforts and build up a quality sales force. Thirdly, to optimise the international marketing network, strengthen overseas sales force and expand export volumes. Fourth, to commence e-commerce business, accelerate the construction of virtual terminal market, carry out customer-facing e-commerce business and expand sales channels through on-line marketing.
VDirectors’ Report
X. Outlook on the future development of the Company(Cont’d)
3. Operating plan for 2014
(I) Corporate Management. First, the Company will firmly establish and strictly implement the working principles of “team building, strict management, outstanding business performance, achieving good results”. Second, the Company will adopt four measures in corporate management, as follows:① revise the existing management system by making it simple, effective, and easy to implement in order to create the basic conditions for strict management;② enhance team building by preparing good training materials, adopting strict examinations, employment of qualified employees and dismissal of unqualified employees;③ strengthen strict and careful management, with special emphasis on “strict” and “careful”; and④ improve incentive schemes by innovative incentives and adoption of appointment through competition to further mobilise the enthusiasm of the cadres and staff.
(II) Operation and management. The Company will increase efficiency by optimising product structure and increase investment in high-efficiency areas. It will make reference to advanced corporate marketing incentives, improve performance appraisal systems to fully arouse the enthusiasm of sales staff. It will implement system optimisation, strictly control risk, and will claim on those who are subject to criminal liability for causing risks to and infringing theCompany’s interests in pursuit of personal gain in the business operation of the Company. The Company aims to reduce inventory and costs to proactively respond to the market through measures including market research and timely developed marketing strategies. The Company will also enhance new product promotion and establish professional sales teams for high value-added products including thermal paper and glassine paper to increase the revenue of the Company.
(III) Production management. Firstly, the Company places great emphasis on the operation of production upgrade projects and new production projects. It focuses on the management of its 800,000 tonnes coated paper project, 600,000 tonnes bleached kraft liner board project, JilinChenming’s environmental protection relocation project,Meilun’s paper additives projects andWuhan’s specialty paper upgrade and household paper projects to accelerate growth in efficiency. Secondly, it will speed up product restructuring and new product development, complete the development of new products including glassine paper and thermal paper, enrich product structure, improve the ability to respond to the market, and increase sales of new products and high value-added products. Thirdly, special emphasis will be placed on technology development and application to improve theCompany’s core competitiveness. Research on the use of fibre reinforced and filler modification technology as well as new alternative adhesives technology will be conducted to reduce costs and increase efficiency. Fourthly, it will implement strict equipment management to eliminate serious accidents involving equipment. Fifthly, the Company will continue to implement post setting and staffing and reduce labour costs through post consolidation and improvement in automation.
(IV) Project management. Firstly, the Company will revise and improve its original project management system to make the system fully reflect the principle for project construction of “careful planning, casting quality products, striving for progress and effectiveness verification”. Secondly, the Company will enhance the professional skills of project personnel by encouraging them to learn outside the Company and engage them to learn in the Company. Thirdly, it will adopt strict requirements from the pre-feasibility studies to process control, and from construction company tenders to selection of equipment suppliers to ensure the overall quality of the project. Fourthly, it will specific clear project details and quality objectives, highlight projectstaff’s accountability and implement a strict reward and punishment system. The Company will focus on implementing the following tasks:① for projects under construction including JiangxiChenming’s 350,000 tonnes high-grade packaging paper, ZhanjiangChenming’s 180,000 tonnes paper cup sheets and 190,000 tonnes culture paper projects, the Company will ensure comprehensive control and assessment, as well as strict quality and cost control to ensure timely commencement of production;② projects under planning and pending approval including HuanggangChenming’s integrated forestry, pulp and paper project will undergo repeated verification and optimisation to ensure that these projects will become world-class quality products.
VDirectors’ Report
X. Outlook on the future development of the Company(Cont’d)
3. Operating plan for 2014(Cont’d)
(V) Other important tasks. Firstly, the Company will accelerate the establishment of finance company to ensure timely commencement of operation. Secondly, the Company will apply for the establishment of finance leasing company to make full use of foreign funds and reduce finance costs. Thirdly, it will reduce finance costs by increasing use of foreign funds, expanding financing channels and improving capital use efficiency. Fourthly, it aims to achieve economic efficiency by increasing trade volume through import and export companies, developing new customer sources, establishing strategic partnerships and controlling quality supplies. Fifthly, it will reduce inventory, promote the business with manufacturers, merchants and banks and improve contract compliance rate to reduce capital use and financing costs.
4. Capital requirements, source of funds and plan for usage
TheCompany’s new projects were unable to make profit on a timely basis due to market reasons. At present, the Company has higher leverage. Fluctuation of the state deposit and lending interest rates will directly cause fluctuation of interests undertaken by the Company so as to affect theCompany’s profitability. Therefore, the Company specifies the following measures:
Firstly, the Company will further improve its international marketing network, improve its organisation structure of its overseas companies, adjust its sales channels and achieve economy of scale by increasing trade volume through import and export companies, developing new customer sources, establishing strategic partnerships and controlling quality supplies. It will reduce inventory, promote the business with manufacturers, merchants and banks and improve contract compliance rate to reduce capital use and financing costs.
Secondly, the Company will accelerate the progress of cross-border financing, make full use of the financing platform of the Hong Kong market, increase Hong KongChenming’s credit line and reduce finance costs by increasing use of foreign funds, expanding financing channels and improving capital use efficiency.
Thirdly, the Company will speed up the establishment of theGroup’s finance company to enhance the centralised management of theGroup’s fund and improve the efficiency of capital use so as to further increase theGroup’s fund settlement, management, investment and financing ability, thus reducing its financing cost.
Fourthly, the Company will establish a finance leasing company to promote theGroup’s diversification, further expand theCompany’s business scope and cultivate new profits to increase theCompany’s risk aversion capability. Fifthly, the Company will actively expand its financing channels, establish strategic partnerships with financial institutions and leverage on the geographical advantages of its subsidiaries to maintain low cost financial institutions credit limits.
VDirectors’ Report
X. Outlook on the future development of the Company(Cont’d)
5. Risk factors likely to be faced and the measures to be taken
As a basic raw materials industry of the national economy, the paper makingindustry’s overall efficiency has a strong correlation with the national macroeconomic performance, and is therefore a cyclical industry. The national macroeconomic performance will have a greater impact on the market demand for paper products, which will further affect the product price and cost of raw materials, and will ultimately affect the operating results of the papermaking enterprises, including the Company. There still exist some uncertainties and complexities inChina’s future macroeconomic trends. Thus, the Company still faces the risk of earnings level being affected by macroeconomic fluctuations.
Operational risk. The major raw materials used by the Company are wood pulp and waste paper. TheCompany’s products mainly comprised of high-end paper, and as the State encouraged 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, at about70%. Waste paper is only used in some low-end products, which account for about20% of the total procurement cost. The relatively high market price fluctuations of wood pulp and waste paper have affected the production cost of theCompany’s machine-made paper products, and thus have an impact on the performance of the Company. Hence, the Company will focus on the construction of Zhanjiang pulp project and ancillary raw material bases, as well as the construction of Huanggang Chenming pulp project and ancillary raw material bases. The Company will establish the “forestry-pulp-paper integration” chain industry, thereby eliminating the limitations of upper-stream resources on the Company and enhancingCompany’s sustainable development.
Industry risk. With the rapid growth of the national economy, economic globalisation andChina’s accession to the WTO,China’s papermaking industry has been facing increasingly fierce competition. After years of development, the domestic enterprises have possessed scale strength and financial strength to further expand their business scale and improve the technology level and product quality. Domestic papermaking enterprises have launched new projects, introduced advanced equipment, expanded production capacity and promoted sales. International renowned papermaking enterprises also directly set up production base in China through sole proprietorship or joint venture, and participated directly in the domestic market competition by leveraging on their advantages in scale and technology. In addition, the tariff reduction afterChina’s accession to the WTO has further exacerbated the impact of the international market. The fierce competition in the domestic papermaking industry will certainly affect theCompany’s future operating results.
Hence, the Company will work on technologyR&D and application and focus on the development of high-end paper products, thereby enhancing our core competitiveness.
Policy risk. On 30 December 2011, the National Development and Reform Commission, the Ministry of Industry and the State Forestry Administration jointly issued the “12th Five-Year Plan” of the papermaking industry, which has stipulated the guiding ideology, basic principles, development objectives, major tasks, key projects, policy initiatives and planning implementation for the industry development during the 12th Five-Year period. At present, the industry has entered into an important transition period, and the mode which supported the rapid development of the papermaking industry in the past has currently faced 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 papermaking industry and the raw material structure and product structure, in order to promote a modern papermaking industry based on recycling by integrating the forestry and papermaking industry, which will have an impact on the operating results of the Company.
Elimination of outdated production capacity and stricter environment protection policy has forced some of the SMEs exited the industry. Hence, the Company is expected to record long-term revenue.
VDirectors’ Report
X. Outlook on the future development of the Company(Cont’d)
5. Risk factors likely to be faced and the measures to be taken(Cont’d)
Environmental risk. The papermaking industry is a polluting industry. With the rising awareness of environment protection in the society and the industry, more stringent environmental protection policies of the industry have been implemented. A multi-pronged approach has been adopted to promote industrial restructuring, and the papermaking industry has entered into an important transition period of development. The higher emission standard is bound to increase theCompany’s environmental protection cost and may result in the slowing down of scale expansion, thus affecting its production and operation.
The Company always strive to achieve harmonious development with energy consumption and emission reduction. The Company will endeavour to develop the recycle economy. The Company will strive to maximise its resource utilisation by waste exchange and recycling. Meanwhile, the Company will make greater efforts to construct environmentally friendly projects and strive to achieve its waste emission target.
Interest rate risk. In recent years, greater fluctuations of the Renminbi benchmark lending rate level have an impact on theCompany’s cost of debt financing. ThePeople’s Bank of China may continue to adjust the level of the benchmark interest rate according to the macroeconomic trends, which may cause greater volatility in theCompany’s finance expenses, thus affecting its operating results.
The financial department of the Company will continue to monitor the rate level of the Group.
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 financial department of the Company is responsible for monitoring theGroup’s foreign currency transactions and scale of assets and liabilities denominated in foreign currency, aiming to minimise the exchange rate risk.
XI. Opinions of the Board of Directors and the Supervisory Committee regarding the “modifiedauditor’s report” for the reporting period issued by the accountants
Ruihua Certified Public Accountants had audited the 2013 financial report of the Company and issued a standard unqualifiedauditors’ report.
XII. Reason for changes in accounting policies, accounting estimates and accounting methods as compared to the financial report for the prior year
In accordance with the requirements of “Notice on the issuance of‘Accounting Standard for Business Enterprises No. 39– Fair ValueMeasurement’” (Cai Kuai[2014] No. 6), “Notice on the issuance of amendment to‘Accounting Standard for Business Enterprises No. 30– Presentation of FinancialStatements’” (Cai Kuai[2014] No. 7), “Notice on the issuance of amendment to‘Accounting Standard for Business Enterprises No. 9– EmployeeBenefits’” (Cai Kuai[2014] No. 8)”, and “Notice on the issuance of amendment to‘Accounting Standard for Business Enterprises No. 33– Consolidated FinancialStatements’” (Cai Kuai[2014] No. 10)” and “Notice on the issuance of‘Accounting Standard for Business Enterprises No. 40– JointArrangement’” (Cai Kuai[2014] No. 11)”, entities listed overseas are encouraged to adopt the five accounting standards published or amended in 2014 early., As a result, the Group will adopt the five accounting standards above early with effect from 1 January 2013 as approved by the Fourth Meeting of the Seventh Session of the Board of the Company. The changes in accounting policies arising from the adoption of the above accounting standards by the Group do not have any effect on the financial statements for the reporting period.
VDirectors’ Report
XIII. Reason for retrospective restatement to correct major accounting errors during the reporting period
No retrospective restatement was made to correct major accounting errors during the reporting period.
XIV. Reason for changes in scope of the consolidated financial statements as compared to the financial report for the prior year
1. During the year, five more companies were consolidated as compared to the prior year and the details are as follows:
During the reporting period, the Company established four companies through investments, namely Chenming GmbH, Zhanjiang Meilun Pulp& Paper Co., Ltd., Zhanjiang Chenming New-style Wall Materials Co., Ltd. and Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd., respectively; and acquired Shouguang Hongxiang Printing and Packaging Co., Ltd. through business combination not under common control.
(1) In order to push forward with theCompany’s sales of paper products, further expand theCompany’sproducts’ share in the European market, and establish a broader and more comprehensive marketing network, the Company decided to set up a sales company in Germany. On 7 January 2013, the Company obtained “Overseas Investment certificate” approved by the Ministry of Commerce, which ratified our establishment of Chenming GmbH with its registered capital of EUR25,000. The Company may make more investments timely based on the operations of the new company. It was included in the scope of consolidation since March 2013.
(2) In order to make full use of ancillary facilities of public works, realise diversification of the product mix of the Company, and further lower the costs and increase theCompany’s capability to resist risks, the fifth extraordinary meeting of the six session of the Board passed the “Resolution in relation to establishment of Zhanjiang Meilun Pulp& Paper Co., Ltd.” with its registered capital amounting to RMB100.00 million and the company was included in the scope of consolidation since January 2013.
(3) In order to strengthen comprehensive utilisation of resources and actively respond to national policy for resource utilisation, we decided to, based on local needs, set up Zhanjiang Chenming New-style Wall Materials Co., Ltd., which was invested by Zhanjiang Chenming, a wholly-owned subsidiary of the Company, with its registered capital amounting to RMB10.00 million. The company was included in the scope of consolidation since March 2013.
(4) In order to extend theCompany’s business chain, reduce its product packaging costs and increase its revenue, the second extraordinary meeting of the seventh session of the Board approved the “Resolution on acquisition of equity interest in Hongxiang Printing” and entered into an equity transfer agreement with Song Peijun, Tian Changzhi and Zhang Bo respectively on the acquisition of100% equity interest in Shouguang Hongxiang Printing and Packaging Co., Ltd. at a consideration of RMB2.73 million. The consideration for the acquisition of equity interest was arrived based on the assessed value of Hongxiang Printing as at the base date, i.e. 30 April 2013.
(5) In order to improve its business operation, fully leverage the advantage of centralised sales and step up efforts to develop the market, the second extraordinary meeting of the seventh session of the Board passed the “Resolution on establishment of Fuyu Sales Company” with registered capital amounting to RMB1.00 million. The company was included in the scope of consolidation since November 2013.
VDirectors’ Report
XIV. Reason for changes in scope of the consolidated financial statements as compared to the financial report for the prior year(Cont’d)
2. During the year, six companies were deconsolidated as compared to the prior year and the details are as follows:
During the reporting period, The Company lost its control over Yanbian Chenming Paper Co., Ltd., Wuhan Chenjian New-style Wall Materials Co., Ltd., Shanghai Runchen Equity Investment Fund Co., Ltd. and Wuhan Chenming Wan Xing Real Estate Co., Ltd. due to disposal of equity interest during the period. Therefore, the above three companies ceased to be included in the scope of consolidation. The registration of Wuhan Xingzhilian Paper Company Limited and Jilin Chenming Waste Collection Co., Ltd. was cancelled according to actual needs of operations during the period. Therefore, the above two companies ceased to be included in the scope of consolidation.
(1) On 26 April 2013, the seventeenth meeting of the six session of the Board of Directors of the Company passed “Resolution in relation to disposal of equity interests in Shanghai Runchen. On the same day, the Company entered into an equity transfer agreement with Shanghai Ruibao Environmental Technology Co., Ltd. to transfer98.36% equity interest in Shanghai Runchen Equity Investment Fund Co., Ltd. at a consideration of RMB300.9160 million. The Company lost its control over Shanghai Runchen and Shanghai Runchen ceased to be included in the scope of consolidation effective from 26 April 2013.
(2) On 15 May 2013, the Company entered into an equity transfer agreement with Yanbian Shixian Bailu Paper Co., Ltd and Yanbian State-owned Assets Management Co., Ltd. to transfer its49% and51% equity interest in Yanbian Chenming Paper Co., Ltd., respectively, at a consideration of RMB54.00 million and RMB56.00 million. The Company lost its control over Yanbian Chenming and Yanbian Chenming ceased to be included in the scope of consolidation effective from 15 May 2013.
(3) On 31 January 2013, Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a subsidiary of the Company, entered into an equity transfer agreement with Hubei Zhongjian Haohua Environment Protection Co., Ltd. to transfer its51% equity interest in Wuhan Chenjian New-style Wall Materials Co., Ltd. at a consideration of RMB5.10 million. The Company lost its control over Chenjian Company and Chenjian Company ceased to be included in the scope of consolidation.
(4) On 27 September 2013, the second extraordinary meeting of the seventh session of the Board approved the Resolution on the joint development of real estate project by Wuhan Chenming and Hubei Zheshang. On 27 September 2013, the Framework Contract on the Contracted Real Estate Development and the Supplementary Agreement of the Framework Contract on the Contracted Real Estate Development were entered into among Wuhan Chenming Hanyang Paper Holdings Co., Ltd., Wuhan Chenming Wan Xing Real Estate Co., Ltd. (hereinafter referred to as the “Project Company”) (both are subsidiaries of the Company) and Hubei Zheshang Wan Xing Investment Co., Ltd., whereby the Project Company changed from a wholly-owned subsidiary of theCompany’s subsidiary, Wuhan Chenming, to a40%-owned associate of the Company. The Company lost its control over the Project Company and the Project Company ceased to be included in the scope of consolidation.
(5) Jilin Chenming Waste Collection Co., Ltd. had been inactive for many years. With a view to saving relevant expenses, the Board of Jilin Chenming agreed to cancel the registration of Jilin Waste. Assets and liabilities of Jilin Waste were consolidated into Jilin Chenming for audit on 30 May 2013. Since the date of the registration cancellation of Jilin Waste, being 25 June 2013, this company ceased to be included in the scope of consolidation.
(6) According to theCompany’s strategic plans and needs of production and operation, the household paper project was assigned to Wuhan Chenming for investment and development, so as to reduce relevant expenses. It was resolved at the fourteenth meeting of the fifth session of the Board of Wuhan Chenming that the registration of Wuhan Xingzhilian Paper Company Limited was approved to be cancelled. The relevant registration cancellation procedures were completed on 18 March 2013. Since the date of the registration
cancellation of Wuhan Xingzhilian, this company ceased to be included in the scope of consolidation.
VDirectors’ Report
XV. Distribution of profit and dividend payment by the Company
During the reporting period, formulation, implementation and adjustment of profit distribution policy, especially cash dividend policy
√ Applicable□ Not applicable
During the reporting period, the Company further defined its cash dividend policy based on the its actual operations in accordance with the related requirements of China Securities Regulatory Commission, Shenzhen Stock Exchange and Shandong branch of China Securities Regulatory Commission. The dividend decision mechanism and dividend supervision and control mechanism were well defined. The amendments to the profit distribution policy set out in the Articles of Association, which was approved by the Thirteenth Meeting of the Sixth Session of the Board of the Company convened on 21 August 2012 and 2012 Second Extraordinary General Meeting convened on 5 November 2012, respectively. Independent Directors issued their separate opinions accordingly.
The 2012 Profit Distribution Plan as considered and approved by the 2012 general meeting was implemented and completed on 12 July 2013
The Company implemented its profit distribution policy in strict compliance with the Articles of Association. Its cash dividend policy was formulated and implemented in compliance with the requirements of the Articles of Association and the resolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal interests of the small shareholders were fully protected as the related decision making process and mechanism were in place, the duties of independent Directors were well-defined so that they played a role, and the small shareholders were given opportunities to sufficiently voice their opinion and make requests.
Particulars of Cash Dividend Policy
Was it in compliance with the requirements of the Articles of Association and the resolution Yes of the general meeting?
Was the dividend distribution criteria and proportion well-defined and clear? Yes Was the related decision making process and mechanism in place? Yes Did independent Directors fulfil their duties and play their role? Yes Were the small shareholders given opportunities to sufficiently voice their opinion and Yes make requests and were the legal interests of the small shareholders fully protected?
Were conditions and procedures legal and transparent in respect of cash dividend Yes policy with adjustments and changes?
The proposed profit distribution plans or profit distribution plans and the proposals on conversion of capital reserves into share capital over or the conversion plans in the past three years (the reporting period inclusive)
(1) The 2013 proposed profit distribution plan
Based on the number of the shares as at the dividend distribution registration date, a cash dividend of RMB3.00 was to be paid to all shareholders for every 10 shares held (tax inclusive). Based on the total share capital of 1,975,471,967 shares of the Company as at 31 December 2013, cash dividend for 2013 amounted to RMB592,641,590.10 (tax inclusive), which represented83.39% of the net profit attributable to shareholders of the Company as set out in the 2013 consolidated financial statements prepared in accordance with Accounting Standards for Business Enterprises.
VDirectors’ Report
XV. Distribution of profit and dividend payment by the Company(Cont’d)
(2) The 2012 profit distribution plan
On 15 May 2013, the Company convened 2012 annual general meeting and considered and approved the 2012 profit distribution plan. There were 2,062,045,941 shares in the total share capital of the Company as at 31 December 2012. After deduction of treasury shares of 86,573,974 shares to be cancelled under the repurchase of B shares of the Company, the total share capital entitled to this distribution amounted to 1,975,471,967 shares which were entitled to this distribution. Based on the 1,975,471,967 shares and a cash dividend of RMB0.60 (tax inclusive) to be paid to shareholders for every 10 shares held, a total cash dividend of RMB118, 528,318.02 (tax inclusive) was distributed. (3) The 2011 profit distribution plan
The 2011 profit distribution plan was considered and approved by the 2011 annual general meeting of the Company on 29 May 2012. Based on the total share capital of 2,062,045,941 shares of the Company as at 31 December 2011, a cash dividend of RMB1.5 was to be paid to all shareholders for every 10 shares held (tax inclusive). Distribution of cash dividend under such distribution amounted to RMB309, 306,891.20 (tax inclusive).
Cash dividends of the Company over the past three years
Unit: RMB Net profit As a percentage attributable to of net profit shareholders of the attributable to Company in the shareholders of the consolidated Company in the Amount of financial statements consolidated cash dividends during the year financial Year of distribution (tax inclusive) of distribution statements(%) 2013 592,641,590.10 710,655,331.72 83.39% 2012 118,528,318.02 221,034,822.54 53.62% 2011 309,306,891.20 608,271,256.29 50.85% The Company made a profit and had positive retained profit during the reporting period without cash dividend being proposed
□ Applicable√ Not applicable
VDirectors’ Report
XVI. Proposals on profit distribution and conversion of capital reserves into share capital during this reporting period
Numbers of bonus share per 10 shares (share(s)) 0 Dividend distribution per 10 shares (RMB) (tax inclusive) 3.00 Share base of the distribution proposal (shares) 1,975,471,967 Total cash dividend (RMB) (tax inclusive) 592,641,590.10 Distributable profits (RMB) 4,741,638,941.58 Percentage of cash dividend to total profits distribution(%) 100% Cash dividend policy:
The Company proactively implemented cash dividend. The Company shall distribute dividend by way of cash providing that there are sufficient cash flow to meet theCompany’s normal operations and long-term development. Accumulated profit distribution in cash over the recent three years shall not be less than30% of profit distributable annually realised over the past three years.
Particulars of profit distribution and conversion of capital reserves into share capital
Please refer to XV. herein for particulars of profit distribution proposal for 2013.
XVII. Fulfilment of Social Responsibility
The Company established its corporate governance structure in accordance with the requirements of the Companies Law, Securities Law, Articles of Association and other relevant laws and regulations and the actual situations of the Company. There is a clear separation of powers and responsibilities between the general meeting, the Board, the Supervisory Committee and the management which is accountable to the general manager. The management system under the structure is characterised by a separation of ownership and operation, a separation of the decision-making, execution and supervisory powers, as well as the co-existence of the general meeting, the Board, the Supervisory Committee. Strict provisions on the rights, duties and responsibilities of the general meeting, the Board, the Supervisory Committee and general manager have been stipulated. The Company has placed great emphasis on the fulfilment of social responsibility and goes beyond the concept of “profit as the only goal”. While creating value for shareholders during the process of production, operation and business development, the Company, in line with the development of the State and the society, has strived to reach a compromise between economic benefits and social benefits, short-term benefits and long-term benefits, as well as corporate development and social development, with the aim to achieve a healthy and harmonious development between the Company and its employees, the Company and the society, and the Company and the environment.
In seeking to maximise the interests of shareholders, the Company places great emphasis on the protection of the legitimate interests of creditors, strictly fulfils the obligations under the contracts signed with creditors, timely disclose material information associated with the Company, and actively protectcreditors’ right to know. In its major operating decision-making process, the Company fully considers the legitimate interests of creditors, particularly by adopting policies to maintain the financial stability of the Company to ensure its financial security.
The Company adheres to the “people-oriented” concept. In the process of business expansion, the Company also vigorously implements talent cultivation strategies, improves employment mechanism, establishes comprehensive training programs and goals, enhances engagement and training of talents, sincerely cares for, understands and respects employees, and strives to create a good working environment and living environment for all kinds of talents that encourages them to achieve outstanding performance. Regarding employment mechanism, the Company insists on placing the right people to the right positions. It actively establishes a talents development platform to provide opportunities for the talents, and establishes an “open, fair and just” competition mechanism for the selection, employment and training of talents. Efforts have been made to enhanceemployees’ sense of belonging, maximise staff enthusiasm and motivation, so that each employee achieves a high degree of harmony between personal career advancement and company development, thus achieving the goal of “to hire good talents, to make good use of talents”. This has given full play to all kinds of talents and continues to bring vigour and vitality to the scientific, healthy and sustainable development of the Company.
VDirectors’ Report
XVII. Fulfilment of Social Responsibility(Cont’d)
The mission of the Company is to produce the top quality paper and pay back the society faithfully. The Company is committed to becoming a first-class international papermaking enterprise, and persisted in leveraging science for innovation and development. The Company has continued to promote innovative corporate management, enhance product quality and strengthen new product development efforts, in order to produce high quality paper product with high technology content to meet the demand of the society, and ultimately building a world-class national paper brand and creating environment friendly and quality social wealth. “Pay back the society faithfully” is the best interpretation of theCompany’s efforts in fulfilling social responsibilities and a realisation of theCompany’s mission of “building a world-class paper manufacturing enterprise”. While striving for outstanding operating results, the Company insists on sharing its achievements with the society, and is committed to maintain harmony and unity in line with the development of the society and continuously promote the economic development and progress of the society, in order to pay back and contribute to the society with outstanding operating performance.
“Good faith, Win-Win and Sharing” is the most solemn commitment of the Company to the society and its customers. It is also the criteria for enterprises to adapt to market competition, the key to obtain the highest market share and the cornerstone for the Company to achieve greater development. The Company always upholds its faith and strives to reach a win-win situation by considering problems from the point of view of customers and upholding the principle of management, operation and service with integrity. All these have enabled the Company to give full play to the brand impact and continue to improve product quality and service standards, thereby gaining the trust of and achieving long-term cooperation with customers and business partners, and achieving the effective unity of economic benefits and social benefits.
The Company is committed to building an ecological friendly first-class international papermaking enterprise with sustainable development. As the leading papermaking enterprise in China, the Company is always committed to the development of green ecological paper, actively eliminating outdated production capacity, introducing highly efficient, energy-saving and environmental friendly world-class high-end production lines, as well as promoting corporate transformation and upgrade. Meanwhile, the Company has also installed high standard, high quality environmental protection facilities and vigorously developed raw material forest base, which highlights the concept of promoting green ecology and recycling economy. The Company adheres to the core values of “good faith, win-win and sharing”. Chenming regards good faith as the cornerstone of development and theCompany’s brand. The Company puts its brand reputation foremost and adheres to the principle of customer first, quality first, and continuously improves product quality and provides quality services to seek to establish a mutual trust and harmonious social relations and build a good corporate image. Chenming participates in the national paper making industry with a high degree of social responsibility. It participates in market competition and seeks opportunities for development, which leads to mutually beneficial resources sharing with customers, employees and society, thus achieving mutual progress and mutual development as well as the win-win strategy of environmental benefits, social benefits and economic benefits.
VDirectors’ Report
XVII. Fulfilment of Social Responsibility(Cont’d)
The Company adheres to the principle of leaving a blue sky and clean water for the future generations while creating wealth for the society. To keep corporate development in line with environment and resources protection, the Company is committed to integrated development of forestry, pulp and paper by promoting recycling economy and the development of green ecological paper, thus gaining the support of the society and creating the conditions for the healthy and sustainable development for the Company. The Company always adheres to the mission of “environmental protection first, scale expansion second” guideline and makes the pollution treatment as our “live or die project”. Thus, we have invested heavily in technology innovation to fully implement cleaner production and resource recycling. In recent years, with a total investment of more than RMB3,000 billion, the Company introduced theworld’s most advanced technology of environmental protection, and built the facilities of alkali recovery, water recycle and other environmental protection projects. Among them, the alkali recovery system which supports the 3,000 kWh generators with daily capacity of treating 450 tonnes of black liquor, a daily capacity of treating 135,000 cubic meters middle water and 130,000 cubic meters of water reuse. All the emission indicators are superior to the relevant emission standard required by the government. The Company is the first in the industry in China which passed ISO14001 environmental management system certification. The Company has been named the environmental friendly enterprise, the recycling economy exemplary enterprise, the outstanding energy efficiency unit and the outstanding unit in comprehensive utilisation of resources of Shandong province, which reflects its outstanding achievements in both economic development and environment protection. The Company will further strengthen environmental construction, increase investments in scientific research, ensure the proper operation of environmental protection facilities and fully improve the supervision and management, with an aim to achieving a stable development on the basis of a simultaneous development of production and ecology.
The support and practice of charity has become a tradition of the Company. Over the years, in the face of major sudden onset natural disasters, the Company responded promptly by making charitable donations. In addition to charitable donations, theCompany’s care for and responsibility towards the society are also demonstrated by its active participation in public welfare activities. In recent years, the amount of charitable donations made by the Company totalled more than RMB20 million and the Company was named the “Most Caring Donating Enterprise”.
Are listed companies and their subsidiaries within the heavily-polluted industry as require by the national environmental protection authority?
Yes□ No
1. During the reporting period, there were no significant environmental problems and rectification.
2. During the reporting period, major pollutants such as wastewater, waste gas and factory noise were emitted after meeting the required standards.
3. During the reporting period, the environmental protection facilities operated properly.
4 During the reporting period, in accordance with relevant provision set out in “Clean production promotion Law” and “Disclosure of Environmental Information (Trial)”, the Company, combined with its actual situation, has prepared environmental pollution emergency plans, hazardous waste emergency plans and radioactive emergency plans. Data related to majorpollutants’ emission were published in the environmental protection column of theCompany’s website in a timely manner. TheCompany’s environmental work has been at the forefront of the industry over the past years.
5. During the reporting period, theCompany’s environmental protection facilities and production facilities performed properly. Currently, environmental protection facilities being operated mainly include anaerobic reactor, primary sedimentation tank, aeration tank, secondary settling tank, sludge thickener, depth treatment works (wastewater treatment); Desulfurisation and denitrification equipment, electrostatic precipitators (gas treatment). We set up a specific post for facilities, which are managed and maintained by a designated person. Operational and examination records are complete and the operation is normal.
VDirectors’ Report
XVII. Fulfilment of Social Responsibility(Cont’d)
Do listed companies and their subsidiaries have other significant social security issues?
□ Yes No
Any administrative penalties during the reporting period?
□ Yes No
XVIII. Registration report on reception of research investigations, communications and interviews during the reporting period
Class
Place of Manner of parties Main topics of discussion Date of reception reception of reception accommodated Parties accommodated and information provided 09 July 2013 TheCompany’s On-site Institution Minsheng Tonghui Asset Recent production and conference research Management Co., Ltd. operation of the Company room investigation and development
of the industry
13 September 2013 TheCompany’s On-site Institution Everbright Prumerica Fund Recent production and conference research Management operation of the Company room investigation Company Limited and development
of the industry
31 October 2013 TheCompany’s On-site Institution Pacific Asset Management Recent production and conference research Co., Ltd, operation of the Company room investigation Ping An Asset Management and development
Co., Ltd. of the industry
14 November 2013 TheCompany’s On-site Institution Standard Chartered Recent production and conference research Bank (Hong Kong) Ltd. operation of the Company room investigation and development
of the industry
15 November 2013 TheCompany’s On-site Institution Harvest Fund Recent production and conference research Management Co., Ltd. operation of the Company room investigation and development
of the industry
20 November 2013 TheCompany’s On-site Institution Greenwoods Asset Recent production and conference research Management Co., Ltd. operation of the Company room investigation and development
of the industry
05 December 2013 TheCompany’s On-site Institution Macquarie Funds Recent production and conference research Management Hong Kong operation of the Company room investigation Limited and development
of the industry
19 December 2013 TheCompany’s On-site Institution Reliance Securities Recent production and conference research Investments Trust Co. Ltd., operation of the Company room investigation Haitong International and development
Securities Company Limited of the industry
27 December 2013 TheCompany’s On-site Other Bao Jian Shi Bao Thecompany’s
conference research development history and room investigation current situation
VDirectors’ Report
XIX. Securities interests held by Directors, Supervisors and Chief Executives under the SFO of Hong Kong
As at 31 December 2013, interests of the Company or its associated corporations (within the meaning of the Part XV of SFO) held by each of the Directors, Supervisors and Chief Executives of the Company under section 352 of the SFO are set out as follows:
The Company
Number of shares (A shares) held as at the end of the reporting period Name Position (shares) Directors
Chen Hongguo (Note 1) Chairman and General Manager 6,334,527 Yin Tongyuan Executive Director and Vice Chairman 2,423,640 Li Feng Executive Director 471,818 Geng Guanglin Executive Director 437,433 Hou Huancai Executive Director 628,915 Zhou Shaohua Executive Director 123,007 Cui Youping Non-Executive Director
Wang Xiaoqun Non-Executive Director — Wang Aiguo Independent Non-Executive Director — Zhang Zhiyuan Independent Non-Executive Director — Zhang Hong Independent Non-Executive Director — Pan Ailing Independent Non-Executive Director — Supervisors
Gao Junjie Supervisor 39,606 Wang Ju Supervisor — Yang Hongqin Supervisor — Yin Qixiang Supervisor — Guo Guangyao Supervisor — Associated corporations
Number of shares
held at the Number of beginning of the shares held at the Name of associated reporting period Change during end of the reporting Name Position corporations (shares) the period+/- period (shares) Shouguang Chenming
Chen Hongguo Holdings Company Limited 231,000,000 — 231,000,000 Chairma
n
Note 1: Save for the 6,334,527 A shares held personally, Chen Hungguo is deemed to be interested in the 429,348 A shares held by his spouse, Li Xueqin.
Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively hold43% equity interests in Shouguang Henglian Enterprise Investment Co. Ltd., (hereinafter referred to as “Shouguang Henglian”), as a result, Shouguang Henglian is deemed to be controlled by Chen Hongguo. As such, the 231,000,000 shares in Chenming Holdings (approximately13.71% of the total share capital of Chenming Holdings) held by Shouguang
Henglian is also deemed to be held by Chen Hongguo.
VDirectors’ Report
XIX. Securities interests held by Directors, Supervisors and Chief Executives under the SFO of Hong Kong(Cont’d)
Save as disclosed above, as at 31 December 2013, none of each 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 for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).
As at 31 December 2013, 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.
XX. TheCompany’s substantialshareholders’ and otherpersons’ interest in shares or debentures under the SFO of Hong Kong
As at 31 December 2013, the following shareholders (other than the directors, supervisors or chief executives of the Company) had interests or short positions in theCompany’s shares and underlying shares as shown in the share register maintained by the Company in accordance with Section 336 of the SFO:
Approximate shareholding as a percentage of(%) Number of shares
Name held (shares) Total share capital Class of shares Shouguang Chenming Holdings
Company Limited 206,403,657 A shares (L) 10.45 18.54 Agreed repurchase earmarked account
at GF SECURITIES CO., LTD. 86,600,000 A shares (L) 4.38 7.78 The National Social Security Fund Council 35,570,000 H shares (L) 1.80 9.09(L)– Long position (S)– Short position (P)– Lending pool
Save as disclosed above, as at 31 December 2013, no other person had interests or short positions in theCompany’s shares or underlying shares as recorded in the register maintained under section 336 of the SFO.
XXI. Interests in competing business
None of the Directors or controlling shareholders of the Company was interested in any business which competes or is likely to compete with the businesses of the Company and its subsidiaries.
XXII.Directors’ interests in material contracts
None of the Company or any of its subsidiaries entered into any material contracts, in which Directors had significant interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during the reporting period.
VDirectors’ Report
XXIII. Directors and SeniorManagement’s Remuneration and the Five Highest Paid Individuals Details of directors and seniormanagement’s remuneration and those of the five highest paid individuals in the Company and its subsidiaries are set out in part III of section VIII and part IX of section XI.
In 2013, the Company has 30 senior management in total, which include directors, supervisors and senior management. The remuneration of senior management falls within the following ranges:
Range of remuneration Number RMB 4.8million to RMB 5.2million 1 RMB 3.6million to RMB 4.0million
RMB 3.2million to RMB 3.6million 1 RMB 2.8million to RMB 3.2million 1 RMB 2.4million to RMB 2.8million 1 RMB 1.6million to RMB 2.0million 1 RMB 1.2million to RMB 1.6million 2 RMB 0.8million to RMB 1.2million 5 RMB 0.8million below 18 XXIV.Directors’ rights to purchase shares or debentures
At no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. XXV. Transfer into reserves
TheCompany’s contributed surplus is distributable to shareholders in accordance with the Companies Act. As of 31 December 2013, theCompany’s reserves available for cash distribution and/or distribution in specie amounted to approximately RMB5,379,887,056.23 (2012:RMB4,766,116,549.03) are set out in part II Financial Statements of section XI Financial Report.
XXVI. Purchase, sale and redemption of shares
During the year ended 31 December 2013, the Company repurchased in Shenzhen Stock Exchange 86,573,974 B shares in total, at a consideration ofHK$330,911,185.31 (representing the average price paid for purchasing shares beingHK$3.8223). All these shares have been cancelled upon the repurchase.
During the year ended 31 December 2013, the Company repurchased in Hong Kong Stock Exchange 11,484,500 H shares in total, at a consideration ofHK$39,230,260.00 (representing the average price paid for purchasing shares beingHK$3.4159). All these shares have yet to be cancelled upon the repurchase.
Save as disclosed above, the Company and its subsidiaries did not purchase, sell or redeem any listed securities of the Company during the reporting period.
XXVII. Pre-emptive rights
In accordance with the Articles of Association and the PRC laws, there are no rules requiring the Company to grant existing shareholders pre-emptive rights on newly issued shares of the Company in proportion to their shareholdings.
VDirectors’ Report
XXVIII. Sufficiency of public float
As at the date of this annual report, based on the information that is publicly available to the Company and within the knowledge of the Directors, the Company has maintained a sufficient prescribed amount of public float as required under the Hong Kong Listing Rules.
XXIX. Audited by the Audit Committee
The audited consolidated financial statements of the Company for the year ended 31 December 2013 has been audited by the Audit Committee of the Company.
XXX. Going Concern Basis
The Company is a major conglomerate focusing on forestry.pulp and paper, with comparative advantages in scale, product, technology and equipment, research and innovation, overall costs, capital and environmental management capabilities. In recent years, the Company has been committed to the development of integrated forestry, pulp and paper development, with a longer industry chain and a more comprehensive range of paper products. The development path of the Company is in line with development planning requirements of the entire paper making industry. The Company has also established a finance company and a finance leasing company as well as conducted magnesite mining. The participation in the financial and energy sectors broadened theCompany’s industry chain and rationalised the industrial layout, thus enhancing its going concern ability.
The company has a good sustained profitability. In 2013, the Company achieved operating income of RMB20.389billion, net profit attributable to shareholders of listed company was RMB711 million and net cash flow from operating activities was RMB1,123 million. Meanwhile, the Company always places emphasis on the interests of and return to shareholders, and has paid generous cash dividends for several years. With the improvement of the economic situation, the future performance of the Company is worth looking forward to.
In addition, as of the end of December 2013, the Company obtained a comprehensive credit line of RMB44.9 billion from major financial institutions, of which unused credit line amounted to RMB31.0 billion, which provided important support to theCompany’s business development. As an A-share, B-share and H-share listed company, the Company has convenient financing channels. The establishment of theGroup’s finance company will enhance the centralised management of theGroup’s fund and improve the efficiency of capital use so as to further increase theGroup’s fund settlement, management, investment and financing ability, thereby reducing its financing cost and improve its debt structure.
The auditors of the Company have prepared the 2013 annual financial report on a going concern basis, and have issued a standard unqualified audit opinion (see Financial Report section).
Therefore, the Board believes the Company has the ability to continue as a going concern.
XXXI. Closure of register of members
The register of members of the Company will be closed from 7, April 2014 (Monday) to 9, May 2014 (Friday), (both days inclusive), during which no transfer of shares of the Company will be registered. In order to be eligible to attend and vote at the annual general meeting to be held on Friday, 9 May 2014, all transfer documents accompanied by the relevant share certificate(s) must be lodged with theCompany’s Hong Kong share registrar and transfer office, Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on 4, April 2014 (Friday).
VI Material Matters
I. Material litigation and arbitration
□ Applicable√ Not applicable
The Company had no material litigation and arbitration during the reporting period.
II. Media criticism
√ Applicable□ Not applicable
Descriptions on media criticism Disclosure Date Disclosure index
Clarification on media criticism regarding the 26 February 2013 http://www.cninfo.com.cn, announcement Company relating to matters such as no.: 2013-016
“alleged discharge of waste water,
delay in reclassifying construction in progress
as fixed assets and reliance on government grants”
Explanation on results of “280,420 production 26 July 2013 http://www.cninfo.com.cn, announcement capacity of the Company and its subsidiaries no.: 2013-062
was listed in a list prescribing the first
batch of industrial enterprises which are to shed
their backward production capacity for 2013
published by the Ministry of Industry and
Information Technology of the PRC”
III. Matters related to bankruptcy and reorganisation
During the reporting period, there were no matters related to bankruptcy and reorganisation.
IV. Asset transactions
1. Acquisition of assets
Ratio of the
net profit
contribution
to the Company Relationship with the
Transaction Effect on profit and loss of the asset(s) Connected party(ies) involved
Counterparty(ies) consideration Effect on operation of of the Company over total net transaction (Applicable to Disclosure
or ultimate controller(s) Asset(s) acquired (RMB’0,000) Progress (Note 2) the Company (Note 3) (Note 4) profit(%) or not connected transaction) Date (Note 5) Disclosure index Yanbian Shixian Bailu 6350mm paper 20,400 Asset title and liability Able to further leverage The asset being in The asset No Not applicable 16 May 2013 http://www.cninfo.com. Papermaking Co., Ltd. machine were transferred. the advantage of the the installation and being in the cn existing equipment of commissioning phase installation and
the Company and at the and no effect on the commissioning
same time able to save financial position and phase
the costs of acquisition. operating results during
the reporting period.
Song Peijun, Tian 100% equity interest in 273 Asset title and liability Expand the industrial The acquisition of equity 1.52% No Not applicable 30 September http://www.cninfo.com. Changzhi Shouguang Hongxiang were transferred. chains and increase interest in Hong Xiang 2013 cn and Zhang Bo Printing and Packaging revenue Printing has an impact
Co., Ltd. on net profits of the
Company, up by RMB
2.41million
VI Material Matters
IV. Asset transactions(Cont’d)
2. Disposal of assets
Net profit
contribution Ratio of the
to the net profit
Company contribution Relationship
from the to the with
beginning of Company of counterparty
the period up disposal of (ies) Relevant Relevant
Transaction to the assets over Connected (applicable asset title liability
consideration disposal date
Effect on the disposal to total net Pricing basis transaction to connected transferred transferred
Counterparty(ies) Asset disposed of Disposal Date(RMB’0,000)(RMB’0,000)
the company (note 3) profit(%) of asset disposal or no transaction) or not or not Disclosure date Disclosure index Yanbian Shixian 49% equity interest in 15 May 2013 5,400 -192.53 Net profit increased by 0.76% Based on the No Yes Yes 16 May 2013 http://www.cninfo.com. Bailu Papermaking Yanbian Chenming RMB5.43 million due to appraised price cn Co., Ltd Paper Co., Ltd. asset disposal, in line with of an appraisal
the development strategy agency
of high-end products,
capable of improving
economic efficiency.
Yanbian State-owned51% equity interest in 15 May 2013 5,600 -200.39 Net profit increased by 0.80% Based on the No Yes Yes 16 May 2013 http://www.cninfo.com. Assets Investment Yanbian Chenming RMB5.65 million due to appraised price cn Management Co., Ltd. Paper Co., Ltd. asset disposal, in line with of an appraisal
the development strategy agency
of high-end products,
capable of improving
economic efficiency.
Hubei Zhongjian Haohua51% equity interest in 2 March 2013 510 -28.21 Net profit decreased by -0.56% Based on the No Yes Yes Not applicable Environment Wuhan Chenjian RMB4.00 million due to appraised price
Protection Co., Ltd. New - style Wall asset disposal. of an appraisal
Materials Co., ltd. agency
Shanghai Ruibao 98.36% equity interest 26 April 2013 30,091.6 56.46 Net profit remained 0% Based on the No Yes Yes 27 April 2013 http://www.cninfo.com. Environmental. in Shanghai Runchen unchanged due to asset audited net assets cn Technology Co., Ltd.) Equity Investment disposal, conducive as at 31 March
Fund Co., Ltd. to protect the interests of 2013
the Company and
shareholders, reducing
investment risk, improving
capital utilisation
efficiency.
Wuhan Chenming 60% equity interest in 5 December 6,000 -721.2 Net profit increased by 1.31% Based on the No Yes Yes 27 September http://www.cninfo.com. cn Wan Xing Real Wuhan Chenming 2013 RMB9.33 million due to audited net assets 2013
Estate Co., Ltd. Wan Xing Real Estate asset disposal, in line with as at 30 November
Co., Ltd. the development 2013
strategy of diversified
products..
VI Material Matters
V. Implementation of the equity incentive plan of the Company and its effect
There was no implementation of the equity incentive plan of the Company during the reporting period.
VI. Significant related party transactions
1. Related party transactions associated with day-to-day operation
Subject Amount of Percentage
Types of the matter of the Pricing basis of Price of related party as the amount Settlement of Available market
Related party related party related party the related party related party transactions of similar related party price of similar Disclosure Disclosure Related party relationship transactions transactions transactions transactions (RMB’0000 transactions(%) transactions transactions Date index Anhui Time Associate Sale Machine-made Market price Market price 2,152.24 0.14% Bank acceptance Not applicable Not applicable Not applicable Source paper and authorisation and telegraphic
Corporation from the Board transfer
Total － － 2,152.24 － － － － － Description of return of bulk sales in details Nil
Necessity and continuity of related party transactions and the reason Expand the sales operations in Anhui and improve theCompany’s sales performance.
for trade with related party instead of other counterparties in the market
Effect of related party transactions on the independence of the Company No effect
2. Relatedcreditors’ rights and debts transactions
Whether non-operating relatedcreditors’ rights and debts transactions existed?
□ Yes√ No
Amount
Whether the incurred
Type ofcreditor’s non-operating Opening during Closing rights and debts capital being balance the period balance Related party Related party relationship Reason used or not (RMB’0000) (RMB’0000) (RMB’0000) Anhui Time Source Corporation Associate Creditors’ rights In the ordinary No 1,573.91 84.09 1,658.00 due from a course of
related party business
Jiangxi Jiangbao Media Associate Creditors’ rights In the ordinary No 2.16 -2.16 0 Colour Printing Co. Ltd. due from a course of
related party business
Wuhan Chenming Wan Xing Associate Creditors’ rights In the ordinary No 55,196.46 55,196.46 Real Estate Co., Ltd. due from a course of
related party business
Arjo Wiggins Chenming Associate Creditors’ rights In the ordinary No 129.09 129.09 Special Paper Co., Ltd. due from a course of
related party business
Shouguang Hengtai Enterprise A company invested by Creditors’ rights In the ordinary No 1,866.87 1,866.87 Investment Company Limited senior management due to a course of
related party business
Effect of relatedcreditors’ rights The above relatedcreditors’ rights and debt amounts occurred in the ordinary course of business, with risks being kept under control by the and liabilities on the operating Company and thus, had no effect on the operating results and financial position of the Company.
results and financial position
of the Company
VI Material Matters
VI. Significant related party transactions(Cont’d)
3. Other significant connected party transactions
On 6 February 2013, the Company convened the 8th extraordinary meeting of the sixth session of the Board, in which “Resolution on capital increase in Haiming Mining and introduction of the shareholder” was passed. The current registered capital of Haiming Chenming was relatively limited and did not commence any revenue generating operation. Having considered operational risks and capital requirements for future projects of Haiming Chenming, the Company decided to increase the capital of Haiming Chenming to RMB240 million upon discussion with shareholders, which benefited the Company and shareholders as a whole and shareholders could share all risks and work together. The Company, Liaoning BeiHai Industries Group Co., Ltd. and Shouguang Hengtai Enterprise Investment Company Limited made capital contributions in the amounts of RMB74.00 million, RMB42.00 million and RMB24.00 million respectively to the registered capital of Haiming Chenming. Upon completion of the increase in capital, the registered capital of Haiming Mining increased to RMB240 million, which was owned as to60%,30% and10% by the Company, BeiHai Industries and Hengtai Enterprise respectively. As the Chairman and some of the directors, supervisors and senior management of the Company had equity interest in Hengtai Enterprise, the capital contributions by Hengtai Enterprise to Haiming Mining constituted a connected transaction. The capital increase and introduction of new shareholders of Haiming Mining was completed on 13 March 2013. The registered capital of Haiming Mining changed to RMB240 million.
Relevant information regarding the tentative announcement disclosure website for significant connected party transactions
Disclosure date of the Name of the tentative
Name of tentative announcement tentative announcement announcement disclosure website Announcement in respect of capital increase in 7 February 2013 http://www.cninfo.com.cn
Haiming Mining and connected transaction
VII. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
During the reporting period, no assets of other companies were in the custody of the Company or vice versa. Projects contributed profit or loss over10% of the total profit of the Company during the reporting period□ Applicable√ Not applicable
(2) Contracting
During the reporting period, the Company did not contract othercompanies’ assets or vice versa. Projects contributed profit or loss over10% of the total profit of the Company during the reporting period
□ Applicable√ Not applicable
(3) Leasing
During the reporting period, the Company did not lease othercompanies’ assets or vice versa.
Projects contributed profit or loss over10% of the total profit of the Company during the reporting period□ Applicable√ Not applicable
VI Material Matters
VII. Material contracts and implementation(Cont’d)
2. Guarantees
During the reporting period, the Company did not provide any guarantee to external parties (excluding those provided to its subsidiaries) and did not provide any guarantees against the rules and regulations.
During the reporting period, the Company provided guarantee to its subsidiaries with respect to application of bank loans. The guarantee amount incurred was RMB 3,121.0385 million. As of 31 December 2013, the actual balance of the guarantee provided by the Company to its subsidiaries amounted to RMB 2,959.3928 million, representing21.08% of the equity attributable to shareholders of the listed company for 2013.
Unit:RMB’0,000 External guarantees provided by the Company (excluding guarantees provided for subsidiaries
Date of the related Guarantee to announcement disclosing Amount of Guarantee date Guarantee related Name of obligor the guarantee amount guarantee (agreement date) provided Type of guarantee Term Fulfilled or not parties or not Guarantees provided by the Company for subsidiaries
Date of the related Guarantee to announcement disclosing the Amount of Guarantee date Guarantee related Name of obligor guarantee amount guarantee (agreement date) provided Type of guarantee Term Fulfilled or not parties or not Zhanjiang Chenming Pulp& Paper Co., Ltd. 28 March 2012 300,000 24 May 2012 127,981.25 General guarantee 3 years No Yes Zhanjiang Chenming Pulp& Paper Co., Ltd. 21 August 2013 200,000－ － General guarantee 3 years No Yes Jiangxi Chenming Paper Co., Ltd. 21 December 2012 20,000 21 December 2012 7,500 General guarantee 3 years No Yes Jiangxi Chenming Paper Co., Ltd. 27 March 2013 200,000－ － General guarantee 3 years No Yes Huanggang Chenming Pulp& Paper Co., Ltd. 15 November 2013 304,000－ － General guarantee 3 years No Yes Huanggang Chenming Arboriculture Co., Ltd. 25 February 2010 16,000 08 July 2010 － General guarantee 3 years Yes Yes Huanggang Chenming Arboriculture Co., Ltd. 30 March 2011 20,000 19 September 2011 2,960 General guarantee 3 years No Yes Huanggang Chenming Arboriculture Co., Ltd. 28 March 2012 20,000 27 June 2012 2,600 General guarantee 3 years No Yes Shouguang Meilun Paper Co., Ltd. 24 August 2010 79,473 10 September 2010 14,632.56 General guarantee 5 years No Yes Shouguang Meilun Paper Co., Ltd. 29 October 2010 600,000 24 September 2013 4,877.52 General guarantee 3 years No Yes Shouguang Chenming Art Paper Co., Ltd. 28 March 2012 10,000－ － General guarantee 3 years No Yes Jilin Chenming Paper Co., Ltd. 28 March 2012 100,000－ － General guarantee 3 years No Yes Jilin Chenming Paper Co., Ltd. 27 March 2013 50,000－ － General guarantee 3 years No Yes Chenming (HK) Limited 29 October 2010 50,000 13 April 2011 50,000 General guarantee 3 years No Yes Chenming (HK) Limited 28 March 2012 500,000－ － General guarantee 3 years No Yes Shandong Chenming Paper Sales Company Limited 27 October 2011 400,000 07 June 2013 81,387.95 General guarantee 3 years No Yes Shouguang Chenming Import and Export Trade Co., Ltd. 28 March 2012 200,000－ － General guarantee 3 years No Yes Zhanjiang Meilun Paper Co., Ltd. 27 March 2013 50,000－ － General guarantee 3 years No Yes Guangdong Huirui Investment Co., Ltd. 16 November 2013 4,000 28 November 2013 4000 General guarantee 2 years No Yes Total amount of guarantee provided for subsidiaries approved during the reporting period (B1) 808,000 Total amount of guarantee provided for subsidiaries during the reporting period (B2) 312,103.85 Total amount of guarantee provided for subsidiaries approved as at the end of the reporting period (B3) 3,107,473 Total balance of guarantee provided for subsidiaries as at the end of the reporting period (B4) 295,939.28 Total amount of guarantee provided by the Company (the sum of the above two main categories)
Total amount of guarantee approved during the reporting period(A1+B1) 808,000 Total amount of guarantee provided during the reporting period(A2+B2) 312,103.85 Total amount of guarantee approved as at the end of the reporting period(A3+B3) 3,107,473 Total balance of guarantee provided as at the end of the reporting period(A4+B4) 295,939.28 The percentage of total amount of guarantee provided(A4+B4) to the net assets of the Company 21.08% Of which:
Amount of guarantee provided for shareholders, beneficial controllers and its related parties (C) 0 Amount of guarantee directly or indirectly provided for obligors with gearing ratio over70% (D) 160,458 Total amount of guarantee provided in excess of50% of net assets (E) 0 Sum of the above three amount of guarantee(C+D+E) 160,458
VI Material Matters
VII. Material contracts and implementation(Cont’d)
3. Other material contracts
Appraised
Book value value of the
of subject subject
asset of the asset of the Name of Related Related
Name of the Name of party Date of the contract contract appraisal Transaction party party
company entering involved in the contract (RMB’0,000) (RMB’0,000) institute Appraisal price transaction transaction Progress as at the end into contract contract entered into (if any) (if any) (if any) date (if any) Pricing basis(RMB’0,000 or not or not of the reporting period Guangdong Huirui Zhanjiang City 6 February 2013 Not Not Not Not Not Not No Not The project involved in this contract Investment Co., Ltd. Construction Project applicable applicable applicable applicable applicable applicable applicable launched on 30 December 2013. Administration Bureau
VIII. Performance of undertakings
1. Undertakings made by the Company and shareholders interested in5% or more of the shares of the Company made in the reporting period or prior periods but subsisting to the reporting period
Party involved in Particulars on Undertaking 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) According to the plan on defective properties of the 16 January 2008 During the period Strictly implemented public offering or refinancing Holdings Co., Ltd, the Company, Shouguang Chenming Holdings Company Limited has when Chenming
controlling shareholder guaranteed and undertaken that: according to the application of Holdings was the
of the Company the Company, for defective property(ies) owned by the Company major shareholder
and its holding company which situated in the administrative area of the Company
of Shouguang city, Shouguang 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 defects cause the Company to incur any economic losses
(including but not limited to damages, penalties and relocation
costs), Shouguang Chenming Holdings will bear such economic
losses; (3) during the corrective activities taken to the defective
properties of buildings and land of subsidiaries of the Company
situated outside the local areas (including the administrative
area of Shouguang city), the economic losses such as penalties
or relocation costs implemented by competent administrative
authorities and borne by the subsidiaries arising from defects of
insufficient title documents shall be paid pursuant to the law by
Shouguang Chenming Holdings after verification.
VI Material Matters
VIII. Performance of undertakings(Cont’d)
1. Undertakings made by the Company and shareholders interested in5% or more of the shares of the Company made in the reporting period or prior periods but subsisting to the reporting period(Cont’d) Party involved in Particulars on Undertaking undertaking Details of undertaking Undertaking date Term the performance Shouguang Chenming (1) Shouguang Chenming Holdings shall not engage, whether 22 May 2008 During the period Strictly Holdings Co., Ltd, the solely, jointly, or by representing itself or any other persons or when Chenming implemented controlling shareholder companies, and shall not procure its associates (as defined in Holdings was the
of the Company The Listing Rules of Hong Kong Stock Exchange) to engage, in major shareholder
any business which competes with the business of the Company of the Company
and its subsidiaries (“Chenming Group” or “we”) directly or
indirectly, in any country and region which our business exists (or
any part of the world if in any form of electronics business), or in
any business that directly or indirectly competes with Chenming
Group’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 ChenmingGroup’s business,
or obtain any business opportunity which directly or indirectly
competes against ChenmingGroup’s business, 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 us 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 (or jointly or
representing other persons or companies) jeopardise the legal
interests of Chenming Group and its shareholders.
Other undertakings made to
minority shareholders
of the Company
Does the undertaking Yes
performed timely?
VI Material Matters
IX. Engagement or dismissal of accounting firms
Current accounting firm engaged
Name of the domestic accounting firm Ruihua Certified Public Accountants
(special general partnership)
Remuneration of the domestic accounting firm(RMB’ 0,000) 260
Continued term of service of the domestic accounting firm 1 year
Name of certified public accountants of the Wang Chuanshun and Jing Chuanxuan
domestic accounting firm
Whether to appoint another accounting firm during the period
√ Yes□ No
Whether to appoint another accounting firm during the audit period
□ Yes√ No
Whether to fulfil procedures for approval regarding the change of another accounting firm
√ Yes□ No
Explanation on the appointment and change of another accounting firm
The proposal for the engagement of the auditors for the year 2013 has been considered and approved on the 2012 Annual General Meeting held on 15 May, 2013. It was resolved to re-appoint RSM China CPA (Special General Partnership) as the auditors for the financial audit of the Company for 2013. The Company received a letter on the Change of RSM China CPA (Special General Partnership) into Ruihua CPA (Special General Partnership) from RSM in July 2013, which set out that RSM had merged with Crowe Horwath CPA and it was named as Ruihua CPA (Special General Partnership) after the merger. After the establishment of Ruihua, the staff and the business of RSM are transferred to Ruihua and RSM provides its service to its clients under the name of Ruihua. All the contracts previously entered into by RSM with the Company remain valid and Ruihua will succeed to and perform the corresponding duties, rights and obligations. The proposal for the change of the auditors was considered and approved at the 2013 First Extraordinary General Meeting on 21 August 2013, pursuant to which the Company appointed Ruihua CPA (Special General Partnership) as the auditors of the Company for 2013. For more details, please refer to the related announcements disclosed by the Company on http://www.cninfo.com.cn/ on 2 Aug 2013 and 22 Aug 2013.
Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes√ Applicable□ Not applicable
During the year, the Company engaged RSM China Certified Public Accountants as the internal control and auditing firm of the Company. The Company paid RMB600,000 for internal control and auditing fees during the period.
The Company engaged King& Wood Mallesons(Qingdo)Law Firm as its annual legal advisor and paid RMB100,000 for legal advisory fees during the period.
VI Material Matters
X. Opinions of the Supervisory Committee and Independent Shareholders (if applicable) regarding the “modifiedauditor’s report” for the reporting period issued by the accounting firm Ruihua Certified Public Accountants has conducted audit of theCompany’s 2013 annual financial report, and issued a standard unqualifiedauditor’s report.
XI. Suspension in trading or delisting upon publication of annual report
There was no suspension in trading or delisting following the disclosure of theCompany’s annual report.
XII. Explanation of other material matters
1. Official Reply of China Banking Regulatory Commission on the Establishment of Finance Company On 25 November 2013, the Company received the “Official Reply of the China Banking Regulatory Commission on the Establishment of Finance Company within Group Enterprise by Shandong Chenming Paper Holdings Limited” (Yin Jian Fu No.[2013]596)(the “Official Reply”) issued by the China Banking Regulatory Commission (the “CBRC”). Please refer to the relevant announcement (Announcement No.: 2013-108) of the Company dated 26 November 2013. 2. Results on Issuance of 2013 Short-term Commercial Paper
The first tranche of the 2013 short-term commercial paper of the Company was issued by means of public offering on the National Inter-Bank Bond Market on 11 September 2013. The bond issue is amounted to RMB1,800 million, each with a nominal amount of RMB100, for a term of 365 days. All the proceeds from the issuance of short-term commercial paper were credited to the account on 12 September 2013 for refinancing of bank loans.
The public issue of the 2013 second tranche of short-term commercial paper in the national inter-bank bond market was launched by the Company on 24 October 2013. The amount of the issue was RMB2,000 million for a term of 365 days. The nominal amount of each commercial paper is RMB100. The proceeds from this tranche of short-term commercial paper issue were fully received on 25 October 2013 to be used for refinancing of bank borrowings. 3. The First Tranche of the 2013 Private Placement Notes
The issue of the first tranche of the 2013 private placement notes was launched by the Company on 22 April 2013. The amount of the issue was RMB1,500 million for a term of 3 years. The nominal amount of each note is RMB100. The proceeds were used for refinancing of bank borrowings, so as to reduce financing costs and further adjust debt structure.
VI Material Matters
XII. Explanation of other material matters(Cont’d)
4. Information disclosure index for 2013
Websites of publication A nnouncement No. S ubject matter Date of publication a nd their path
2013-001 Third Announcement on Repurchase of B Shares 11 January 2013 http://www.cninfo.com.cn and Reduction of Registered Capital
2013-002 Announcement on Notice of 2013 First Bondholder 11 January 2013 http://www.cninfo.com.cn Meeting of “11 Chenming Bond”
2013-003 Indicative Announcement on Agreed Repurchase 23 January 2013 http://www.cninfo.com.cn Type Securities Trading by a Shareholder
2013-004 Announcement on Failure to Convene 2013 29 January 2013 http://www.cninfo.com.cn First Bondholder Meeting of “11 Chenming Bond”
2013-005 Announcement on Estimated Annual Results for 2012 31 January 2013 http://www.cninfo.com.cn 2013-006 Indicative Announcement on receipt of subsidies 31 January 2013 http://www.cninfo.com.cn 2013-007 2012 Corporate Bonds Listing Announcement 1 February 2013 http://www.cninfo.com.cn 2013-008 Announcement on Resolutions of the Seventh Interim 2 February 2013 http://www.cninfo.com.cn Meeting of the Sixth Session of the Board of Directors
2013-009 Announcement on External Investment 2 February 2013 http://www.cninfo.com.cn 2013-010 Indicative Announcement on contract entered into 7 February 2013 http://www.cninfo.com.cn by Guangdong Huirui
2013-011 Indicative Announcement on Change of 7 February 2013 http://www.cninfo.com.cn Name of Controlling Subsidiary
2013-012 Announcement on Resolutions of the Eighth Interim 7 February 2013 http://www.cninfo.com.cn Meeting of the Sixth Session of the Board of Directors
2013-013 Connected Transaction in relation to Capital Increase 7 February 2013 http://www.cninfo.com.cn in Haiming Mining
2013-014 Announcement on External Investment 7 February 2013 http://www.cninfo.com.cn 2013-015 Announcement on External Investment 7 February 2013 http://www.cninfo.com.cn 2013-016 Indicative Announcement on Media Coverage 26 February 2013 http://www.cninfo.com.cn 2013-017 Indicative Announcement on Progress of 28 February 2013 http://www.cninfo.com.cn Repurchase of Part of B shares
2013-018 Announcement on Implementation of 28 February 2013 http://www.cninfo.com.cn Repurchase of Part of B shares
2013-019 Announcement on Resolutions of the Sixteenth Meeting 28 February 2013 http://www.cninfo.com.cn of the Sixth Session of the Board of Directors
2013-020 Announcement on Resolutions of the Thirteenth Meeting 28 February 2013 http://www.cninfo.com.cn of the Sixth Session of the Board of Directors
2013-021 Notice of 2012 Annual General Meeting 28 February 2013 http://www.cninfo.com.cn 2013-022 Announcement in respect of Provision of Guarantee for 28 February 2013 http://www.cninfo.com.cn the General Banking Facilities of
Controlling Subsidiaries
2013-023 Announcement in respect of Provision of Financial 28 February 2013 http://www.cninfo.com.cn Support to Several Controlling Subsidiaries
2013-024 2012 Annual Report summary 28 February 2013 http://www.cninfo.com.cn 2 013-025 A nnouncement on Entitlement of High-tech Enterprises 3 April 2013 h ttp://www.cninfo.com.cn
VI Material Matters
XII. Explanation of other material matters(Cont’d)
4. Information disclosure index for 2013(Cont’d)
Websites of publication A nnouncement No. S ubject matter Date of publication a nd their path
2013-026 Indicative Announcement on Refunds upon Receipt 3 April 2013 http://www.cninfo.com.cn of Tax Revenue
2013-027 Indicative Announcement on Progress of 3 April 2013 http://www.cninfo.com.cn Repurchase of Part of B shares
2013-028 Announcement on Estimated Results for 3 April 2013 http://www.cninfo.com.cn the First Quarter of 2013
2013-029 Indicative Announcement on Progress of 12 April 2013 http://www.cninfo.com.cn Repurchase of Part of B shares
2013-030 Announcement on Additional Resolution of 26 April 2013 http://www.cninfo.com.cn 2012shareholders’ meeting
2013-031 Indicative Announcement on Notice of 2012 26 April 2013 http://www.cninfo.com.cn Annual General Meeting
2013-032 Announcement on Issue of Dedicated Private 26 April 2013 http://www.cninfo.com.cn Debt Financing Instruments
2013-033 Announcement on Resolutions of Seventeenth 27 April 2013 http://www.cninfo.com.cn meeting of the Sixth session of the Board
2013-034 Announcement on Disposal of Equity 27 April 2013 http://www.cninfo.com.cn Interest in Shanghai Runchun
2013-035 2013 First Quarter Report 27 April 2013 http://www.cninfo.com.cn 2013-036 Indicative Announcement 3 May 2013 http://www.cninfo.com.cn 2013-037 Indicative Announcement on Progress of 4 May 2013 http://www.cninfo.com.cn Repurchase of Part of B shares
2013-038 Indicative Announcement 7 May 2013 http://www.cninfo.com.cn 2013-039 Indicative Announcement on Progress of 15 May 2013 http://www.cninfo.com.cn Repurchase of Part of B shares
2013-040 Announcement on Resolutions of the Ninth Interim 16 May 2013 http://www.cninfo.com.cn Meeting of the Sixth Session of the Board of Directors
2013-041 Announcement on Disposal of Equity Interest in 16 May 2013 http://www.cninfo.com.cn Yanbian Chenming and Acquisition of Assets
2013-042 Announcement on Resolutions of 2012 Annual 16 May 2013 http://www.cninfo.com.cn General Meeting
2013-043 Announcement on Resolutions of the First Meeting 17 May 2013 http://www.cninfo.com.cn of the Seventh Session of the Board of Directors
2013-044 Announcement on Resolutions of the First Meeting 17 May 2013 http://www.cninfo.com.cn of the Seventh Session of the Supervisory Committee
2013-045 Indicative Announcement on Progress of Repurchase 24 May 2013 http://www.cninfo.com.cn of Part of B shares
2013-046 Indicative Announcement on Receipt of Incentive Fund 25 May 2013 http://www.cninfo.com.cn 2013-047 Indicative Announcement 28 May 2013 http://www.cninfo.com.cn 2013-048 Indicative Announcement on Progress of Repurchase 6 June 2013 http://www.cninfo.com.cn of Part of B shares (I)
2013-049 Indicative Announcement on Progress of Repurchase 6 June 2013 http://www.cninfo.com.cn of Part of B shares (II)
2013-050 Announcement on Resolutions of the First Interim 28 June 2013 http://www.cninfo.com.cn Meeting of the Seventh Session of the Board
of Directors
VI Material Matters
2013-051 Announcement on External Investment 28 June 2013 http://www.cninfo.com.cn 2013-052 Announcement on External Investment 28 June 2013 http://www.cninfo.com.cn 2013-053 Notice on 2013 first extraordinary general meeting 28 June 2013 http://www.cninfo.com.cn 2013-054 Notice of 2013 First Domestic Listed Share Class 28 June 2013 http://www.cninfo.com.cn Meeting and 2013 First Overseas Listed Share
Class Meeting
2013-055 Indicative Announcement on Receipt of Incentive Fund 28 June 2013 http://www.cninfo.com.cn 2013-056 Announcement on 2013 Dividend Payment in respect 28 June 2013 http://www.cninfo.com.cn of “11 Chenming Bond”
2013-057 Announcement on the Implementation of 3 July 2013 http://www.cninfo.com.cn Equity Distribution for 2012
2013-058 Indicative Announcement on Progress of Repurchase 3 July 2013 http://www.cninfo.com.cn of Part of B shares
2013-059 Announcement on Notice of 2013 First Bondholder 5 July 2013 http://www.cninfo.com.cn Meeting of “12 Chenming Bond”
2013-060 Announcement on Notice of 2013 First Bondholder 5 July 2013 http://www.cninfo.com.cn Meeting of “12 Chenming Bond”
2013-061 Announcement on Interim Results for 2013 11 July 2013 http://www.cninfo.com.cn 2013-062 Indicative Announcement 26 July 2013 http://www.cninfo.com.cn 2013-063 Indicative Announcement on Change of Auditors 2 August 2013 http://www.cninfo.com.cn 2013-064 Announcement on Additional Resolution of 2013 2 August 2013 http://www.cninfo.com.cn first extraordinary general meeting
2013-065 Notice on 2013 first extraordinary general meeting 2 August 2013 http://www.cninfo.com.cn 2013-066 Announcement on External Investment 2 August 2013 http://www.cninfo.com.cn 2013-067 Announcement of Provision of Guarantee to Zhanjiang 2 August 2013 http://www.cninfo.com.cn Chenming for Increase in General Banking Facilities
2013-068 Notice on 2013 First Class Meeting for Shareholders 2 August 2013 http://www.cninfo.com.cn of Domestic Listed Shares and 2013 First Class
Meeting for Shareholders of Overseas Listed Shares
2013-069 Indicative Announcement on Progress of Repurchase 2 August 2013 http://www.cninfo.com.cn of Part of B shares
2013-070 Indicative Announcement on bid for land of 17 August 2013 http://www.cninfo.com.cn Controlling Subsidiary
2013-071 2013 Interim Report Summary of Shandong Chenming 22 August 2013 http://www.cninfo.com.cn Paper Holdings Limited
2013-072 Announcement on Repurchase of H shares 22 August 2013 http://www.cninfo.com.cn and Reduction of Registered Capital
2013-073 Announcement on Resolutions of the Second Meeting 22 August 2013 http://www.cninfo.com.cn of the Seventh Session of the Board of Directors
2013-074 Announcement on Resolutions of the 2013 22 August 2013 http://www.cninfo.com.cn First Extraordinary General Meeting
VI Material Matters
XII. Explanation of other material matters(Cont’d)
4. Information disclosure index for 2013(Cont’d)
Websites of publication A nnouncement No. S ubject matter Date of publication a nd their path
2013-075 Announcement on Resolutions of the 2013 First Class 22 August 2013 http://www.cninfo.com.cn Meeting for Holders of Domestic Listed Shares
(A shares and B shares) and Resolutions of
the 2013 First Class Meeting for Holders of
Overseas Listed Shares (H shares)
2013-076 Notice of Meeting for Holders of First Tranche of 22 August 2013 http://www.cninfo.com.cn 2012 Medium-term Notes
2013-077 Announcement on Failure to Convene 2013 29 August 2013 http://www.cninfo.com.cn First Bondholder Meeting of “11 Chenming Bond”
2013-078 Announcement on Failure to Convene 2013 29 August 2013 http://www.cninfo.com.cn First Bondholder Meeting of “12 Chenming Bond”
2013-079 Announcement on Approval of Registration on 30 August 2013 http://www.cninfo.com.cn Short-term Commercial Paper
2013-080 Indicative Announcement on Progress of 5 September 2013 http://www.cninfo.com.cn Repurchase of Part of B shares
2013-081 Announcement on Resolution of Meeting for Holders 5 September 2013 http://www.cninfo.com.cn of the First Tranche of the 2012 Medium-term Notes
2013-082 Announcement on Resolution of Meeting for Holders of 5 September 2013 http://www.cninfo.com.cn the First Tranche of the 2013 Private Placement Notes
2013-083 Second Announcement on Repurchase of H Shares 7 September 2013 http://www.cninfo.com.cn and Reduction of Registered Capital
2013-084 Announcement on Results on Issuance of First 13 September 2013 http://www.cninfo.com.cn Tranche of 2013 Short-term Commercial Paper
2013-085 Third Announcement on Repurchase of H Shares 23 September 2013 http://www.cninfo.com.cn and Reduction of Registered Capital
2013-086 Announcement on Resolutions of the Second Interim 30 September 2013 http://www.cninfo.com.cn Meeting of the Seventh Session of
the Board of Directors
2013-087 Announcement on External Investment 30 September 2013 http://www.cninfo.com.cn 2013-088 Announcement on External Investment 30 September 2013 http://www.cninfo.com.cn 2013-089 Announcement on External Investment 30 September 2013 http://www.cninfo.com.cn 2013-090 Announcement of Provision of Guarantee to 30 September 2013 http://www.cninfo.com.cn Huanggang Chenming
2013-091 Announcement on Acquisition of Equity Interest 30 September 2013 http://www.cninfo.com.cn in Hongxiang Printing
2013-092 Announcement on External Investment 30 September 2013 http://www.cninfo.com.cn 2013-093 Notice on 2013 second extraordinary general meeting 30 September 2013 http://www.cninfo.com.cn 2013-094 Announcement on Resolutions of the Third Meeting 30 September 2013 http://www.cninfo.com.cn of the Seventh Session of the Board of Directors
2013-095 Indicative Announcement on Progress of Repurchase 9 October 2013 http://www.cninfo.com.cn of Part of B shares
2013-096 Indicative Announcement on Receipt of Subsidy 11 October 2013 http://www.cninfo.com.cn
VI Material Matters
4. Information disclosure index for 2013(Cont’d)
Websites of publication A nnouncement No. S ubject matter Date of publication a nd their path
2013-097 Announcement on Estimated Results for 15 October 2013 http://www.cninfo.com.cn the Nine Months Ended 30 September 2013
2013-098 2013 Third Quarter Report 28 October 2013 http://www.cninfo.com.cn 2013-099 Announcement on Additional Resolution of 29 October 2013 http://www.cninfo.com.cn 2013 second extraordinary general meeting
2013-100 Notice on 2013 second extraordinary general meeting 29 October 2013 http://www.cninfo.com.cn 2013-101 Announcement on Provision of Guarantee to 29 October 2013 http://www.cninfo.com.cn Guangdong Huirui by Zhanjiang Chenming
2013-102 Announcement on Results on Issuance of Second 29 October 2013 http://www.cninfo.com.cn Tranche of 2013 Short-term Commercial Paper
2013-103 Indicative Announcement on Progress of Repurchase 2 November 2013 http://www.cninfo.com.cn of Part of B shares
2013-104 Indicative Announcement on Progress of Repurchase 6 November 2013 http://www.cninfo.com.cn of Part of H shares
2013-105 Announcement on Resolutions of the Third Interim 16 November 2013 http://www.cninfo.com.cn Meeting of the Seventh Session of
the Board of Directors
2013-106 Announcement on Disposal of Equity Interest 16 November 2013 http://www.cninfo.com.cn in Xinli Power
2013-107 Announcement on 2013 Second extraordinary 16 November 2013 http://www.cninfo.com.cn general meeting
2013-108 Announcement on Official Reply of China Banking 26 November 2013 http://www.cninfo.com.cn Regulatory Commission on the Establishment
of Finance Company
2013-109 Indicative Announcement on Progress of Repurchase 5 December 2013 http://www.cninfo.com.cn of Part of B shares
2013-110 Announcement on change of job duty of 14 December 2013 http://www.cninfo.com.cn senior management
2013-111 Announcement on completion of repurchase of 14 December 2013 http://www.cninfo.com.cn part of B shares
2013-112 Announcement on 2013 Dividend Distribution 19 December 2013 http://www.cninfo.com.cn regarding 2012 Corporate Bond by Chenming
2013-113 Indicative Announcement on Receipt of Relocation 25 December 2013 http://www.cninfo.com.cn Compensation for a Controlling Subsidiary
2013-114 Report on completion of repurchase of part of domestic 25 December 2013 http://www.cninfo.com.cn listed foreign shares (B shares) and change in
share capital
VI Material Matters
XIII. Significant matters of the subsidiaries of the Company
1. Receipt of Relocation Compensation for a Controlling Subsidiary
Based on the meeting on “Elimination of outdated capacities and green relocation of Wuhan Chenming Company”, the Wuhan government provides subsidy to subsidises the expenditure of Wuhan Chenming on demolition, infrastructure construction, the loss of suspended production and operation as well as staff placement during the green relocation as a form of government support to relieve the funding pressure on Wuhan Chenming arising from green relocation and technology upgrade. As of 23 December 2013, Wuhan Chenming had received a sum of money amounting to RMB314.84 million as green relocation and staff placement compensation from Finance Bureau of Wuhan Economic and Technological Development Zone. The above amount was mainly used for the payment of the expenses incurred on demolition, infrastructure construction, the loss of suspended production and operation as well as staff placement during the green relocation of Wuhan Chenming. For more details, please refer to the related announcement (Announcement No.: 2013-113) disclosed by the Company on http://www.cninfo.com.cn/ on 25 December 2013.
2. Disposal of51% equity interest in Xinli Power by Chenming Power
On 15 November 2013, the Company convened the third extraordinary meeting of the seventh session of the board of directors and approved “the resolution on disposal of equity interest in Xinli Power ”, which agreed to dispose51% equity interest in Shandong Chenming Xinli Power Co., Ltd.by Shandong Chenming Power Supply Holdings Co., Ltd. ,86.71% equity interest in which was owned by the Company. On 4 March 2014, Chenming Power Supply entered into an equity interest in with Guangdong Dejun Investment Co., Ltd., for a consideration of RMB 76.1940million, to transfer its51% equity interest in Xinli Power to Guangdong Dejun Investment Co., Ltd.. Upon the completion of the above equity transfer, the Company will no longer hold any equity interest in Xinli Power.
Due to longer use of Xinli Power devices as well as higher operational costs arising from greater investments in environmental protection devices relating to desulfurisation and denitration, the disposal of theCompany’s equity interest would increase its cash flow, which allowed the Company centralize resources for developing high-end niche products to further improve its results.
For more details, please refer to the related announcements disclosed by the Company on http://www.cninfo.com.cn/ on 16 November 2013 and 5 March 2014, respectively.
3. Provision of RMB40 million Guarantee to Guangdong Huirui by Zhanjiang Chenming
In order to secure the capital requirements for the production operation and project construction of Guangdong Huirui Investment Co., Ltd. (“Guangdong Huirui”), and reduce its financial costs, the Board of the Company has agreed that Guangdong Huirui will provide bank guarantee of RMB40 million to the Administration of Agent Construction Project of Zhanjiang City to replace the implementation of RMB40 million deposit paid by Guangdong Huirui in performing its obligation under the Zhanjiang City Haidong New District Waterfront& Mudflat Comprehensive Regulation Works BT Project Contract, which can improve the efficiency of our capital utilisation. Meanwhile, as requested by the bank issuing the bank guarantee, Zhanjiang Chenming Pulp& Paper Co., Ltd. (“Zhanjiang Chenming”) will provide guarantee for the bank guarantee of RMB40 million provided by Guangdong Huirui for a term of 2 years. Details set out in the contract shall prevail. For more details, please refer to the related announcement (Announcement No.: 2013- 101) disclosed by the Company on http://www.cninfo.com.cn/ on 16 November 2013.
VI Material Matters
XIII. Significant matters of the subsidiaries of the Company(Cont’d)
4. Cooperation in Port Construction by Jiangxi Chenming
To lower the transportation cost of the Company and fully utilise the coastal line and port construction site owned by Jiangxi Chenming, Jiangxi Chenming and Nanchang Baolong jointly contributed to establish Jiangxi Chenming Port Co., Ltd. Such external investment fulfilled the transportation requirement of Jiangxi Chenming, and improved the efficiency of the Company, enhanced the profitability of Jiangxi Chenming and maintained the sustainable development of the Company. For more details, please refer to the related announcement (Announcement No.: 2013- 088) disclosed by the Company on http://www.cninfo.com.cn/ on 30 September 2013.
XIV. Issuance of corporate bonds by the Company
(1) As approved by the securities regulatory approval No.[2011] 1019 issued by China Securities Regulatory Commission on 27 June 2011, the Company was authorised to issue corporate bonds with an aggregate value not more than RMB2,000 million. The corporate bonds had a tenor of 5 years with fixed interest rate. The coupon rate of the bond was5.95%, with interest paid annually in simple interest (without compound interest). The value date started from 6 July 2011, and 6 July of each of the year 2012 to 2016 was and would be the interest payment date for the previous interest-bearing year. The principal amount and last interest payment were to be paid on the maturity date. The Company published “Announcement on 2012 interest payment of 2011 corporate bonds” on 30 June 2012, with interest payment being implemented.
(2) As approved by the securities regulatory approval No.[2012] 1612 issued by China Securities Regulatory Commission on 30 November 2012, the Company was authorised to issue corporate bonds with an aggregate value not more than RMB3,800 million. The corporate bonds had a tenor of 5 years, accompanied by an option for issuer to increase the coupon rate and a repurchase option for investors at the end of the third year. The bonds had fixed interest rate. The coupon rate of the bonds was5.65%, with interest paid annually in simple interest (without compound interest). The value date started from 26 December 2012, and 26 December of each of the year 2013 to 2017 would be the interest payment date for the previous interest-bearing year. If investors execute their repurchase option, the interest payment date of the repurchased bond is 26 December of each of the year 2013 to 2015.The principal amount and last interest payment were to be paid on the maturity date.
(3) Chenming (HK) Limited, a subsidiary of the Company issued notes of RMB500 million on 13 April 2011. The note rate is2.95% of the annual rate, while the interest of the note shall be paid every six months. The notes had a tenor of 3 years and the proceeds will be used as operation capital of Chenming (HK) Limited.
VI Material Matters
XV. Repurchase of shares by the Company
(I) Repurchase of B shares
On 12 December 2012, the Company convened the third extraordinary general meeting, domestic listed share (A share and B share) class meeting and overseas listed share (H share) class meeting, which passed the resolutions in respect to the B shares repurchase of the Company, respectively. On the following day, the Company published the announcement on resolutions of the general meeting and notice to creditors on the B shares repurchase of the Company and the reduction in registered capital.
On 28 December 2012, the Company received the Reply Letter to document Lu Shang Wu Wai Zi Zi[2012] No. 907 from Shandong Province Commerce Department, which initially agreed the Company to repurchase not more than 150 million issued domestic listed foreign shares (B share). The number of repurchased shares will be determined by the actual amount of shares repurchased and the registered capital should be reduced accordingly.
On 4 February 2013, the Company received the Reply Letter to document Shou Hui Fa[2013] No. 4 from the Shouguang branch office of SAFE, which agreed the Company to purchase not more thanHK$400 million foreign exchange for the purpose of repurchasing not more than 150 million domestic listed foreign shares (B share). On 26 February 2013, Shenzhen Stock Exchange approved the B share repurchase by the Company. The Company published announcements on share repurchase report and the repurchase of shares commenced.
As at 11 December 2013, the accumulated number of B shares repurchased by the Company was 86,573,974 shares, representing4.1985% of the total share capital of the Company. The highest and lowest purchase prices wereHK$4.00 per share andHK$3.38 per share, respectively. The total amount paid wasHK$ 330,911,185.31 (stamp duty and commission included).
On 24 December 2013, the Company completed the cancellation of shares repurchased with China Securities Depository and Clearing Co., Ltd. Shenzhen Branch. For more details, please refer to the relevant announcement disclosed by the Company on http://www.cninfo.com.cn/ on 25 December 2013.
On 30 December 2013, the Company received the “Reply on Capital Reduction of Shandong Chenming Paper Holdings Limited” (Lu Shang Wu Wai Zi Zi[2013]933) from the Department of Commerce of Shandong Province and the Certificate of Approval for Foreign Investment Enterprise upon the reduction of share capital, which agreed that the Company reduced its registered capital from RMB 2,062,045,941 to RMB 1,975,471,967.
On 2 January 2014, the Company conducted filing procedures in capital reduction with Shandong Province Industry and Commerce Bureau and obtained its business license after capital reduction, with the registered capital of RMB 1,975,471,967.
(II) Repurchase of H shares
1. Background and purpose of repurchase
In light of the global financial crisis and domestic economic downturn, it has resulted in huge adjustment of the domestic capital market since mid of 2011.
The share price of theCompany’s H shares has continued to fall. The performance of share price ofCompany’s H shares is inconsistent with theCompany’s intrinsic value and its leading position in the industry, the investment value of the Company is underestimated. This not only adversely affected the image of the Company in the capital market, but also adversely affected the protection of interest of shareholder as a whole. Therefore, in order to strengtheninvestors’ confidence in the Company, increaseCompany’s value to a reasonable level and maximiseshareholders’ value, the Company intended to repurchase part of its H shares.
VI Material Matters
XV. Repurchase of shares by the Company(Cont’d)
(II) Repurchase of H shares(Cont’d)
2. Procedures taken regarding repurchases
On 27 June 2013, the First Extraordinary Meeting of the Seventh Session of the Board of Directors approved the proposal concerning the granting of a general mandate to the Board for repurchase of part of H shares of the Company
On 21 August 2013, the Company convened the 2013 First extraordinaryshareholders’ meeting, Class Meeting for Holders of Domestic Listed Shares (A shares and B shares) and Class Meeting for Holders of Overseas Listed Shares (H shares), on which proposals concerning the repurchase of H shares of the Company were approved. On the next day, the Company disclosed an announcement in respect of H shares repurchase and capital reduction.
On 10 October 2013, Shandong Province Commerce Department issued a Preliminary Reply to Capital Reduction by Shandong Chenming Paper Holdings Limited (Lu Shang Wu Wai Zi Zi[2013] No. 705), which intended to agree that the Company repurchased no more than 39.127 million, issued overseas listed foreign shares (H share). The number of repurchased shares will be determined by the actual amount of shares repurchased and the registered capital should be reduced accordingly.
3. Progress of Repurchase
During the year ended 31 December 2013, the Company purchased a total of 11,484,500 H shares with aggregate amount ofHK$ 39,230,260.00 (i.e. the average price paid isHK$ 3.4159 per share) from Hong Kong Stock Exchange; As to the published day of this report, accumulatively 24,660,500 H shares have been repurchased, representing1.2483% of the total share capital of the Company, with the highest selling price ofHK$ 3.50 per share and the lowest selling price ofHK$ 3.17 per share. The aggregate amount paid was 83,151,325.00. Those repurchased shares have not been cancelled yet.
XVI. Post balance sheet events
(I) Establishing a financial leasing company
On 17 January 2014, the Company convened the Fourth Extraordinary Meeting of the Seventh Session of the Board of Directors, at which Resolution on Establishing a Financial Leasing Company was considered and approved. In order to promote diversified development of the Company, further expand its business scope , enhance its overall strength and comprehensive competitiveness, develop new growth point, the Company proposed to establish a financial leasing company in China through Chenming (HK) Limited , a wholly-owned subsidiary of the Company. Please refer to the announcement of the Company dated 17 January 2014 published on the website of the Stock Exchange and the announcement dated 18 January 2014 publish on the website: www.cninfo.com.cn for details. ANN NO.: 2014- 003
VI Material Matters
XVI. Post balance sheet events(Cont’d)
(II) Capital contribution to Huanggang Chenming Pulp& Paper Co., Ltd.
On 17 January 2014, the Company convened the Fourth Extraordinary Meeting of the Seventh Session of the Board of Directors , at which Resolution on Capital Contribution to Huanggang Chenming Paper Pulp Co., Ltd. , a wholly- owned subsidiary of the Company were considered and approved. In order to meet fund requirements for the construction of integrated project of Hagging Chenming and ensure successful project construction , the Company will contribute capital to Huanggang Chenming with internal funds in the amount of RMB 180 million pursuant to the requirements for project construction with internal funds as required by the Sate. Please refer to the announcement of the Company dated 17 January 2014 published on the website of the Stock Exchange and the announcement dated 18 January 2014 polished on the website: www.cninfo.com.cn for details. ANN NO.: 2014-005
(III) Repurchase of Shares by a Shareholder through Agreed Repurchase Type Securities Trading
On 20 January 2014, the Company received a letter from Shouguang Chenming Holdings Company Limited (“Chenming Holdings”), a shareholder interested in more than5% of the shares of the Company. According to the letter, Chenming Holdings has repurchased the disposed 86,600,000 shares through agreed repurchase type securities trading on 20 January 2014. The shareholding of the shareholder before and after the trading is as follow: Before the trading After the
As a As a Number of percentage of Number of percentage of shares of the the total share shares of the the total share Company being capital of the Company being capital of the Name of the shareholder held (shares) Company(%) held (shares) Company(%) Chenming Holdings 206,403,657 10.45 293,003,657 14.83 For more details, please refer to the relevant announcements (Announcement No.: 2014-008) disclosed by the Company on http://www.hkex.com.hk and on http://www.cninfo.com.cn/ dated 20 January 2014 and 21 January 2014, respectively.
(IV) Purchase an office building property asset
On 17 January 2014, the Company convened the Fourth Extraordinary Meeting of the Seventh Session of the Board of Directors , at which Resolution on Purchase an Office Building Property Asset was considered and approved. In order to speed up the pace of internationalisation of the Company, solve the problems of business operation sites in Jinan for institutions under Chenming Group Finance Company(晨鳴集團財務公司), ensure and facilitate the Company successfully carry out finance, sales, and leasing and other activities in surrounding areas in Jinan , thus further improve its comprehensive competitiveness and profitability, the Board of the Company agreed to purchase an office building for a consideration of RMB 360 million through Chenming (HK) Limited , a wholly-owned subsidiary of the company, part of which will be used for office purpose , and part of which for sale or leasing purpose. Please refer to the announcement of the Company dated 17 January 2014 published on the website of the Stock Exchange and the announcement dated 18 January 2014 published on the website: www.cninfo.com.cn for details. ANN NO.: 2014- 002.
VI Material Matters
XVI. Post balance sheet events(Cont’d)
(V) External Entrusted Loan
On 17 January 2014, the Company convened the Fourth Interim Meeting of the Seventh Session of the Board of Directors , at which Resolution on External Entrusted Loan was considered and approved. In order to raise the utilisation rate of theCompany’s capital, maximize capital utility and improve the results of the Company, the Company proposed to provide the Entrusted Loan in the total amount of not more than RMB 1 billion (inclusive), subject to withdrawal by instalments, to Shouguang Jin Choi Public Assets Management Co., Ltd.(壽光市金財公有資產經營有限公司), through Bank of Communication Co., Ltd, Weifangbranch(交通銀行濰坊分行), according to the current operation and capital condition of the Company . The term of the Entrusted Loan shall be not more than 3 years(inclusive). The interest rate for the Entrusted Loan is10% (inclusive)per annum. It is initially expected that it will contribute considerable economic benefits to the Company each year. Shouguang Infrastructure Fund ManagementCentre(壽光市基礎設施建設資金管理中心) shall pledge20% of the equity interest of the Shouguang Jin Choi Public Assets Management Co., Ltd.(壽光市金財公有資產經營有限公司)held by it Please refer to the announcement of the Company dated 17 January 2014 published on the website of the Stock Exchange and the announcement dated 18 January 2014 polished on the website: www.cninfo.com.cn for details. ANN NO.: 2014-006.
VII Changes in ShareCapital andShareholders
I. Changes in shares
Unit: Share Opening balance Change during the reporting period (Increase/decrease) Closing balance Shares converted
Amounts Percentage(%) New issue Bonus shares from reserve Others Sub-total Amounts Percentage(%) I. Restricted shares 9,336,404 0.45% 0 0 0 -1,170,185 -1,170,185 8,166,219 0.41% 1. Shares held by other
domestic investors 9,336,404 0.45% -1,170,185 -1,170,185 8,166,219 0.41% 2. Shares held by domestic
natural person 9,336,404 0.45% -1,170,185 -1,170,185 8,166,219 0.41% II. Non-restricted shares 2,052,709,537 99.55% 0 0 0 -85,403,789 -85,403,789 1,967,305,748 99.59% 1. RMB ordinary shares 1,103,942,052 53.54% 1,170,185 1,170,185 1,105,112,237 55.94% 2. Domestic listed foreign shar es 557,497,485 27.04% -86,573,974 -86,573,974 470,923,511 23.84% 3. Overseas listed foreign shares 391,270,000 18.97% 0 0 391,270,000 19.81% III. Total number of shares 2,062,045,941 100% 0 0 0 -86,573,974 -86,573,974 1,975,471,967 100% The reasons for such changes
√Applicable□Not Applicable
1. Around the change, the restricted shares held by domestic natural person changed by -1,170,185 shares from 9,336,404 shares to 8,166,219 shares. The reasons for such changes were as follows: 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(《深圳證券交易所上市公司董事、監事和高級管理人員所持本公司股份管理業務操作指南》), during the reporting period, the sales restriction on the shares held by former Directors and Senior Management of the Company leaving office more than six months was expired and released. Therefore, the nature of the 1,170,185 shares, held by the Senior Management, was changed from restricted shares held by domestic natural person to non-restricted RMB ordinary shares (A shares).
2. During the reporting period, domestic listed foreign shares changed by 86,573,974 shares from 557,497,485 shares to 470,923,511 shares. The reasons for such changes were as follows: during the reporting period, the Company repurchased part of the domestic listed foreign shares ( B shares). As to 11 December, 2013, the Company has repurchased B shares totalled to 86,573,974 shares. Cancellation of repurchased shares has been done with China Securities Depositary and Clearing Corporation (Shenzhen Branch). More details was disclosed in the “Statement related to the completion of repurchasing partial domestic listed foreign shares (B shares) as well as changes of shares” in China Securities Journal, Shanghai Securities News, Securities Times and Securities Daily, as well as on the website of CNINFO (Announcement No. 2013-114 ) on 25 December 2013.
VII Changes in ShareCapital andShareholders
I. Changes in shares(Cont’d)
Approval of changes in shareholding
√Applicable□Not Applicable
On 12 December 2012, the 2012 Third Extraordinary General Meeting, 2012 First Class Meeting for Holders of Domestic Listed Shares (A shares and B shares) and 2012 First Class Meeting of Holders of Overseas Listed Shares (H shares) Class Meeting were held by the Company, to consider and approve the proposed resolution on the repurchase of part of the domestic listed foreign shares (B shares) of the Company. It is agreed that the Company shall use its internal resources to repurchase not more than 150 million domestic listed foreign shares (B shares) at the repurchase price shall not higher thanHK$ 4 per share with the maximum repurchased amount ofHK$400 million within 12 months from the date of passing of the resolution on the repurchase at a general meeting and the class Meeting. The repurchased shares shall be cancelled by the law.
On 28 December, 2012, the Company has received the preliminary approval related to the capital reduction of Shandong Chenming Paper Holdings Limited from the Department of Commerce of Shandong Province, in which it is agreed that Company shall repurchase not more than 150 million domestic listed foreign shares (B shares). The number of repurchased shares is subject to the actual amount and registered capital shall be reduced accordingly.
On 4 February 2013, the Company has received the reply to the purchase quota of B shares repurchased by Shandong Chenming Paper Holdings Limited from the State Administration of Foreign Exchange (Shouguang City Branch), in which it is agreed that the Company shall repurchase no more than 150 million domestic listed foreign shares (B shares) withHK$400 million.
On 30 December 2013, the Company has received reply to the capital reduction of Shandong Chenming Paper Holdings Limited (Lu Shang Wu Wai Zi Zi No.[2013]933) together with Foreign investment enterprise approval certificate upon capital reduction from the Department of Commerce of Shandong Province, in which it is agreed that the Company shall reduce its registered capital to RMB 1,975,471,967 from RMB 2,062,045,941.
On 2 January, 2014, the Company conducted the filing procedure of capital reduction at Trade and Industry Bureau in Shandong Province and received the business license upon capital reduction with a registered capital of RMB 1,975,471,967. 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 original shares of the Company in the latest year and the latest period
√Applicable□Not Applicable
After the Before the Key Financial Indicators share change share change Basic earnings per share(RMB/Share) 0.35 0.34 Diluted earnings per share(RMB/Share) 0.35 0.34 Net assets per share attributable to shareholders of listed Company (RMB/Share) 7.15 6.94 Other information considered necessary by the Company or required by the securities regulation authorities to be disclosed
□Applicable√Not Applicable
VII Changes in ShareCapital andShareholders
II. Issuance and listing of securities
1. As at the end of the reporting period, issuance of securities in the last three years
Amount
approved for Termination Name of share and Issue price Amount listing and date for its derivative Issue date (or interest rate) issued Listing date trading transaction Shares
Convertible corporate bonds, bonds with warrants and corporate bonds
11 Chenming bond RMB100 each with 20,000,000 8 August 2011 20,000,000 6 July 2016 6 July 2011 a fixed rate of5.95%
12 Chenming bond RMB100 each with 38,000,000 4 February 2013 38,000,000 26 December 2017 26 December 2012 a fixed rate of5.65%
11 Chenming HK bond RMB100 each with 5,000,000 13 April 2011 5,000,000 13 April 2014 13 April 2011 a fixed rate of2.95%
Warrants
Explanation of issue of securities in the last three years
(1) On 6 July 2011, the Company issued a total of 20 million corporate bonds totalling RMB2.0 billion with a face value of RMB100 each at an issue price of RMB100 and a coupon rate of5.95%, raising a total of RMB2.0 billion. After deducting RMB18 million of expenses, the net proceeds raised amounted to RMB1.982 billion. RMB1.982 billion of the funds raised were accumulatively used, among which about RMB382 million for providing additional liquidity and about RMB1.6 billion for repaying bank loans, mainly of which were repayment of loans from financial institutions.
(2) On 26 December 2012, the Company issued a total of 38 million corporate bonds totalling RMB3.8 billion with a face value of RMB100 each at an issue price of RMB100 and a coupon rate of5.65%, raising a total of RMB3.8 billion. After deducting RMB27 million of expenses, the net proceeds raised amounted to RMB3.773 billion. As at the date of this report, RMB3.773 billion of the funds raised were accumulatively used, among which about RMB273 million for providing additional liquidity and about RMB3.5 billion for repaying bank loans, mainly of which were used for replacement of short-term bank borrowings.
(3) Chenming (HK) Limited, a subsidiary of the Company issued notes of RMB500 million on 13 April 2011. The note rate is2.95% per annum, while the interest of the note shall be paid every six months. The proceeds will be used as operating capital of Chenming (HK) Limited.
VII Changes in ShareCapital andShareholders
II. Issuance and listing of securities(Cont’d)
2. Changes in the total number of shares and structure of shareholders and the structure of the assets and liabilities of the Company
(1) During the reporting period, the Company repurchased partial of the domestic listed foreign shares ( B shares). As to 11 December, 2013, the Company has repurchased B shares totalled to 86,573,974 shares. Cancellation of repurchased shares has been done with China Securities Depositary and Clearing Corporation (Shenzhen Branch). More details are disclosed in the “Statement related to the completion of repurchasing partial domestic listed foreign shares (B shares) as well as changes of shares” (Announcement No. 2013-114 ). The total number of shares of the Company decreased to 1,975,471,967 shares from 2,062,045,941 shares upon the cancellation of the repurchased B shares.
(2) During the reporting period, the shareholding ratio of Shouguang Chenming Holdings Limited, the controlling shareholder of the Company increased to14.83% from14.21% due to the partial repurchase and cancellation of B shares. There are minor impacts on other shareholder structure. For the change in shareholder structure, please refer to the first part “Changes in shares” in this chapter.
(3) During the reporting period, the share capital of the Company reduced by RMB 86,573,974 while the capital reserve decreased by RMB 178,789,209.60. the gearing ratio increased to69.20% from68.81% due to the partial repurchase and cancellation of B shares.
3. Existing staff shares
Issue date of staff share Issue price of staff shares (RMB) Amount issued of staff shares Explanation of existing staff shares There was no staff shares of the Company
VII Changes in ShareCapital andShareholders
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unite: Share Total number of shareholders as
131,890, of which 102,456 were holders of at the end of the fifth trading day 131,173, of which 101,779 were holders of A shares, Total number of shareholders A shares, 28,873 holders of B shares and before the publication date of 28,837 holders of B shares and 557 holders of H during the reporting period 561 holders of H shares. this annual report shares.
Shareholdings of shareholders interested in more than5% of the shares of the Company or Top ten shareholders
Number of Changes
shares held (increase or
Percentage of at the end of decrease) Number of Number of
Nature of shareholding the reporting during the restricted non-restrict Share pledged Name of shareholders shareholders (%) period reporting period shares held shares held or locked-up Status of shares Number HKSCC Nominees Limited Overseas legal person 19.73% 389,816,500 67,500 0 389,816,500 － 0 Shouguang Chenming Holdings State-owned legal person 10.45% 206,403,657 -86,600,000 0 206,403,657 － 0 Company Limited
Agreed repurchase earmarked account at Domestic non-state 4.38% 86,600,000 86,600,000 0 86,600,000 － 0 GF SECURITIES CO., LTD. owned legal person
ZHONGRONG INTERNATIONAL Domestic non-state-owned 1.82% 35,873,818 35,873,818 0 35,873,818 － 0 TRUST CO., LTD. legal person
—HAITONG UMBRELLA BAO
NO. 1 SECURITIES INVESTMENT
ASSEMBLED FUNDS TRUST
－
PLATINUM ASIA FUND Overseas legal person 1.64% 32,341,052 -11,139,325 0 32,341,052 0 CAITONG FUND - EVERBRIGHT BANK Domestic non-state-owned 1.47% 29,056,556 29,056,556 0 29,056,556 － 0— CAITONG FUND legal person
—YUAN MEINO. 2 ASSETS
MANAGEMENT PROGRAMME
CAITONG FUND—EVERBRIGHT BANK Domestic non-state-owned 1.47% 28,948,049 28,948,049 0 28,948,049
－
0—YUAN MEI NO. 1 ASSETS legal person
MANAGEMENT PROGRAMME
－
BILL& MELINDA GATES Overseas legal person 1.15% 22,757,391 -3,874,244 0 22,757,391 0 FOUNDATION TRUST
－
YUNNAN INTERNATIONAL TRUST CO., LTD. Domestic non-state-owned 0.71% 13,969,597 13,969,597 0 13,969,597 0—YUNNAN TRUST GROWTH 2013 legal person
—NO. 2 ASSEMBLED FUNDS
TRUST PROGRAMME
BBH A/C VANGUARD EMERGING MARKETS Overseas legal person 0.61% 12,036,985 10,180,285 0 12,036,985 － 0 STOCK INDEX FUND
Connected relationship or connect-party Shouguang Chenming Holdings Company Limited, a state-owned legal person shareholder, is not connected with any of relationship among the above shareholders the shareholders in the above. It is not a person acting in concert under Administration of Disclosure of Information on the Change of Shareholdings in Listed Companies Procedures. Both Caitong Fund - Everbright Bank - Caitong Fund - Yuan Mei No. 2 Assets Management Programme and Caitong Fund - Everbright Bank - Yuan Mei No. 1 Assets Management Programme are funds managed by Caitong Fund Management Co., Ltd. Save for the above, it is not aware of any other shareholders of tradable shares are persons acting in concert and is also not aware of any other shareholders of tradable shares are connected with each others.
VII Changes in ShareCapital andShareholders
III. Shareholders and beneficial controllers(Cont’d)
1. Total number of shareholders and shareholdings(Cont’d)
Shareholdings of the top ten shareholders of non-restricted shares
Number of non-
restricted shares
held as at the end
Name of shareholders of the year Class of shares
Class of shares Number 389,816,500 Overseas listed 389,816,500 HKSCC Nominees Limited foreign shares
Shouguang Chenming Holdings 206,403,657 RMB ordinary shares 206,403,657 Company Limited
Agreed repurchase earmarked account 86,600,000 RMB ordinary shares 86,600,000 at GF SECURITIES CO., LTD.
ZHONGRONG 35,873,818 RMB ordinary shares 35,873,818 INTERNATIONAL TRUST
UCMOBRLTEDLLA BHAAOIT NOON.G 1 SECURITIES
INVESTMENT ASSEMBLED FUNDS TRUST
PLATINUM ASIA FUND 32,341,052 Domestic listed 32,341,052 foreign shares
CAITONG FUND—EVERBRIGHT 29,056,556 RMB ordinary shares 29,056,556 BANK—CAITONG FUND—
YUAN MEI NO. 2 ASSETS
MANAGEMENT PROGRAMME
CAITONG FUND—EVERBRIGHT 28,948,049 RMB ordinary shares 28,948,049 BANK—YUAN MEI NO. 1
ASSETS MANAGEMENT
BILPLR&O GMREALMINMDEA GATES FOUNDATION TRUST 22,757,391 RMB ordinary shares 22,757,391 YUNNAN INTERNATIONAL TRUST CO., LTD. 13,969,597 RMB ordinary shares 13,969,597—YUNNAN TRUST GROWTH
2013—NO. 2 ASSEMBLED
FUNDS TRUST
PROGRAMME 12,036,985 Domestic listed 12,036,985 BBH A/C VANGUARD foreign shares
EMERGING MARKETS STOCK
INDEX FUND
Connected relationship or connect-party Shouguang Chenming Holdings Company Limited, a state- relationship among each of owned legal person shareholder, is not connected with any of the top ten shareholders of the shareholders in the above. It is not a person acting in concert non-restricted shares, and between under Administration of Disclosure of Information on the Change the top ten shareholders of of Shareholdings in Listed Companies Procedures. Both Caitong non-restricted shares and Fund - Everbright Bank - Caitong Fund - Yuan Mei No. 2 Assets the top ten shareholders Management Programme and Caitong Fund - Everbright Bank - Yuan Mei No. 1 Assets Management Programme are funds managed by Caitong Fund Management Co., Ltd. Save for the above, it is not aware of any other shareholders of tradable shares are persons acting in concert and is also not aware of any other shareholders of tradable shares are connected with each
others.
VII Changes in ShareCapital andShareholders
III. Shareholders and beneficial controllers(Cont’d)
1. Total number of shareholders and shareholdings(Cont’d)
Whether an agreed repurchase transaction was entered during the reporting period by the shareholders of the Company
√Yes□No
(1) On 21 January 2014, Shouguang Chenming Holdings Limited, the shareholder interested in more than5% equity interest in the Company, disposed of 86,600,000 shares through agreed repurchase type securities trading. The securities company entering the transaction was GF SECURITIES CO., LTD. The term of repurchase is one year. During the reporting period, there was no repurchase trade entered by Chenming Holdings. GF SECURITIES is holding 86,600,000 shares of the Company through agreed repurchase earmarked account.
Unit: share (2) On 20 January 2014, Shouguang Chenming Holdings Limited, disposed of 86,600,000 shares through agreed repurchase type securities trading, the number of shares held by the Company before and after the transaction are set out below:
Unit: share Name of shareholders Before transaction After transaction
Percentage Number of Percentage of Number of of the total shares the total share shares held share capital held by the capital of the by the of the Company Company(%) Company Company(%) Shouguang Chenming
Holdings Company
Limited 206,403,657 10.45% 293,003,657 14.83%
VII Changes in ShareCapital andShareholders
III. Shareholders and beneficial controllers(Cont’d)
2、 Controlling shareholders of the Company
Legal person
Legal
representative/
Name of controlling Person in charge Date of Registered
shareholders of the unit establishment Enterprise code capital Principal business Shouguang Chenming Chen Hongguo 30 December 2005 78348518-9 RMB 1.685 billion investment in
Holdings Company Limited papermaking, Operating results, electricity, heat financial condition, and arboriculture cash flows and In 2013, Chenming Holdings recorded operating income of RMB 20.443 billion and operating cost of RMB future development 16.653 billion. As to 31 December 2013, the total assets of Chenming Holdings amounted to RMB 49.391 strategy billion, total liabilities amounted to RMB 34.534 billion, net cash flow generated from operating activities amounted to RMB 1.163 billion(unaudited). Shouguang Chenming Holdings Company Limited will continue to be engaged in investment in papermaking, electricity, heat and arboriculture projects in the future.
Shareholdings of controlling Shouguang Chenming Holdings Company Limited is interested in14.83% (note) equity interest of the shareholders who have Company. Save for the above, it does not have control over or hold any equity interest of other domestic or control or hold shares overseas listed companies.
in other overseas listed
companies during the
reporting period
Note: On 20 January 2014, Shouguang Chenming Holdings Limited, disposed of 86,600,000 shares through agreed repurchase type securities trading. The number of shares held by the Company upon the transaction was 293,003,657, representing14.83% of the total share capital of the Company.
The Change of controlling shareholders during the reporting period
□Applicable√Not Applicable
VII Changes in ShareCapital andShareholders
III. Shareholders and beneficial controllers(Cont’d)
3、 Beneficial owner of the Company
Legal person
Legal
representative/
Person in charge Date of Registered
Name of beneficial owner of the unit establishment Enterprise code capital Principal business State-owned Assets SupervisionFu Xingang 1 August 1991 137078300401 RMB 20,000 Responsible for the and Administration Office of management and Shouguang City capital operation of the state-owned assets of enterprises and institutions in
Shouguang city Operating results, State-owned Assets Supervision and Administration Office of Shouguang City is responsible for the financial condition, management and capital operation of the state-owned assets of the enterprises and institutions in Shouguang cash flows and City with a view to protecting and enhancing the value of state-owned assets.
future development strategy
Shareholding s of controlling Save for the Company, State-owned Assets Supervision and Administration Office of Shouguang City does not shareholders who have have control over or hold any equity interest of other domestic or overseas listed companies.
control or hold shares
in other overseas listed
companies during the
reporting period
Change of beneficial owner during the reporting period
□Applicable√Not Applicable
VII Changes in ShareCapital andShareholders
III. Shareholders and beneficial controllers(Cont’d)
3、 Beneficial owner of the Company(Cont’d)
Chart illustrating the relationship between the Company and the beneficial owner
Note: On 20 January 2014, Shouguang Chenming Holdings Limited, disposed of 86,600,000 shares through agreed repurchase type securities trading. The number of shares held by the Company upon the transaction was 293,003,657, representing14.83% of the total share capital of the Company.
Beneficial owner controlling the Company through trust or other asset management method
□Applicable√Not Applicable
VIII Directors, Supervisors and Senior Management and Staff
I. Changes in shareholdings of Directors, Supervisors and Senior Management
Increase Decrease
Shares held in the number in the number
as at the of shares of shares Shares held beginning held during held during as at the end Start date End date of the period the period the period of the period Name Position status Sex Age of the term of the term (shares) (shares) (shares) (shares) Chen Hongguo Chairman and In office M 49 16May 2013 16May 2016 6,334,527 0 0 6,334,527 general manager
Yin Tongyuan Vice Chairman In office M 56 16 May 2013 16 May 2016 2,423,640 0 0 2,423,640 Li Feng Director, deputy In office M 41 16 May 2013 16 May 2016 471,818 0 0 471,818 general manager
Geng Guanglin Director, deputy In office M 40 16 May 2013 16 May 2016 437,433 0 0 437,433 general manager
Tan Daocheng Director Retired M 47 12 April 2010 15 May 2013 185,700 0 115,600 70,100 Hou Huancai Director In office M 52 16 May 2013 16 May 2016 628,915 0 0 628,915 Zhou Shaohua Director, deputy In office M 52 16 May 2013 16 May 2016 123,007 0 0 123,007 general manager
Cui Youping Director In office M 50 16 May 2013 16 May 2016 0 0 0 0 Wang Xiaoqun Director In office M 58 16 May 2013 16 May 2016 0 0 0 0 Wang Fengrong Director Retired F 45 12 April 2010 15 May 2013 0 0 0 0 Zhang Zhiyuan Independent Director In office M 51 16 May 2013 16 May 2016 0 0 0 0 Wang Aiguo Independent Director In office M 50 16 May 2013 16 May 2016 0 0 0 0 Zhang Hong Independent Director In office F 49 16 May 2013 16 May 2016 0 0 0 0 Wang Yumei Independent Director Retired F 51 12 April 2010 15 May 2013 0 0 0 0 Wang Xiangfei Independent Director Retired M 63 12 April 2010 15 May 2013 0 0 0 0 Pan Ailing Independent Director In office F 49 16 May 2013 16 May 2016 0 0 0 0 Gao Junjie Chairman of In office M 43 16 May 2013 16 May 2016 39,606 0 0 39,606 Supervisory
Committee
Wang Ju Supervisor In office F 48 16 May 2013 16 May 2016 0 0 0 0 Yang Hongqin Supervisor In office F 46 16 May 2013 16 May 2016 0 0 0 0 Yin Qixiang Supervisor In office M 76 16 May 2013 16 May 2016 0 0 0 0 Guo Guangyao Supervisor In office M 71 16 May 2013 16 May 2016 0 0 0 0 Li Xueqin deputy general In office F 48 16 May 2013 16 May 2016 429,348 0 0 429,348 manager
Wang Chunfang Secretary to In office M 38 16 May 2013 16 May 2016 30,000 100,000 0 130,000 the Board, deputy
general manager
Hu Changqing deputy general In office M 48 16 May 2013 16 May 2016 1,238 0 0 1,238 manager
Shao Zhenzhong deputy general In office M 53 16 May 2013 16 May 2016 0 0 0 0 manager, chief
marketing officer
Chang Liting deputy general In office M 60 16 May 2013 16 May 2016 0 0 0 0 manager
Li Zhenzhong deputy general In office M 40 16 May 2013 16 May 2016 0 0 0 0 manager
Zhang Yanjun deputy general Retired M 48 30 March 2011 16 May 2013 102,393 0 0 102,393 manager
Xia Jigang deputy general Retired M 38 12 April 2010 16 May 2013 0 0 0 0 manager
Poon Shiu Company secretory, In office M 44 16 May 2013 16 May 2016 0 0 0 0 Cheong qualified
accountant
Total – – – –– – 11,207,625 100,000 115,600 11,192,025
VIII Directors, Supervisors and Senior Management and Staff
II. Employment
Major working experiences of Directors, Supervisors and Senior Management during the past five years
1. Directors of the Company
(1) Brief biographies of executive Directors
Mr. Chen Hongguo, who joined the Company in 1987, had held different positions including chief officer of manufacturing section, chief officer of branch factory, deputy general manager, Director of the Company and the chairman of Wuhan Chenming Hanyang Paper Holdings Co., Ltd., etc. He is currently the Chairman and general manager of the Company and the chairman and general manager of Shouguang Chenming Holdings Company Limited. Mr. Chen Hongguo is the spouse of Ms. Li Xueqin, a deputy general manager of the Company. Mr. Yin Tongyuan, who joined the Company in 1982, had held different positions including the chief officer of manufacturing section, director of technology department, deputy factory chief, standing deputy factory chief and general manager. He is currently the vice-chairman of the Company and a director of Shouguang Chenming Holdings Company Limited.
Mr. Li Feng, who joined the Company in 1992, had held different positions including the chief officer of manufacturing section, assistant to the general manager, deputy general manager, and chairman of Wuhan Chenming Hanyang Paper Holdings Co., Ltd. He is currently the executive Director, deputy general manager and chief marketing officer of the Company. Mr. Li Feng is the brother of Ms. Li Xueqin, a deputy general manager of the Company.
Mr. Geng Guanglin, who joined the Company in 1992, had held different positions including the chief officer of manufacturing section, the chairman of Wuhan Chenming Hanyang Paper Holdings Co., Ltd. the chairman of Jilin Chenming Paper Co., Ltd. and the chairman of Jiangxi Chenming Paper Co., Ltd.. He is currently a Director and the deputy general manager and production controller of the Company, and a director of Shouguang Chenming Holdings Company Limited.
Mr. Zhou Shaohua, who joined the Company in 1997, had held different positions including the standing deputy general manager, chief engineer, vice-chairman of Wuhan Chenming Hanyang Paper Holdings Co. Ltd. and the chairman of Jiangxi Chenming Paper Co., Ltd. He is currently a Director and deputy general manager of the Company in charge of pulp projects in Huanggang.
Mr. Hou Huancai, who joined the Company in 1983, had held different positions including the chief officer of manufacturing section, chief of branch factory, the chairman of Jilin Chenming Paper Co., Ltd. and Jiangxi Chenming Paper Co., Ltd. and the chairman of the 1st and 2nd Supervisory Committee of the Company. He is currently a Director of the Company and the general manager of Jilin Chenming.
(2) Brief biographies of non-executive Directors of the Company
Mr. Cui Youping, professor and doctor of economics, had held positions of deputy chief and chief of the Department of Economics as well as the chief of scientific research in Shandong Economic University and associate Dean of the Shandong Economic University. He currently holds positions as vice president of Shandong University of Finance and Economics, the vice chairman of Institute of Economics of Shandong Province and the Institute of Commerce and Economics of Shandong Province, and has served as a non- executive Director of the Company since April 2010.
Mr. Wang Xiaoqun was the chief of the corporate finance unit of the Shouguang City Finance Bureau between 1984 and 1988, and was the deputy chief of the State-owned Assets Supervision and Administration Commission of Shouguang City between 1989 and November 2008. He retired in December 2008. He has served as a non-executive Director of the Company since April 2010.
VIII Directors, Supervisors and Senior Management and Staff
II. Employment(Cont’d)
1. Directors of the Company(Cont’d)
(3) Brief biographies of independent non-executive Directors
Mr. Wang Aiguo, professor, doctoral tutor and post doctorate in accounting, “Nationwide Excellent Teacher”(全國優秀教師),Shandong’s Well-known Teacher(山東省教學名師), chief expert (accounting) of Shandong Institute(山東省高等學校首席專家(會計學)),Shandong’s Young Expert with Outstanding Contribution(山東省有突出貢獻的中青年專家), previously held positions including deputy chief of Department of Accounting of Shandong Economic University and deputy chief of the Department of Post-graduate Students of Shandong Economic University and chief of Department of Accounting of Shandong Economic University. He currently holds positions as the Dean of the School of Accounting of Shandong University of Finance and Economics, a director of the Accounting Society of China and the China appraisal Society, vice-chairman and secretary-general of Shandong Province Accounting Education Committee and member of the Shandong Province Enterprise Credit Rating Experts Commission. He also serves as an independent director of Shandong Iron and Steel Co., Ltd., and independent non-executive director of China Corn Oil Company Limited, Hisense Kelon Electrical Holdings Co. Ltd. and independent director of Shandong Zhanqiu Blower Co., Ltd. He has served as an independent non-executive Director of the Company since April 2010.
Mr. Zhang Zhiyuan, professor, doctor of management, economics postdoctorate, previously served as the Dean of Department of Finance of Shandong Economics College and Dean of Shandong Regional Economic Research School. He currently holds positions as Dean of Shandong University of Finance and School of Finance, Dean of the Regional Economic Research Institute and a doctoral tutor. He is also the person in charge of National Special Professional Construction Point of Finance, chief expert of emphasised discipline of Shandong Province, chief scientist of the Collaborative Innovation Centre for Financial Optimisation and Regional Development, the person in charge of the Shandong provincial government decision-making research base, the person in charge and expert of the Shandong Regional Economic Development and Research Base, Shandong university academic leaders, expert for Shandong “Hundred People Project” and one of the top ten exemplary tertiary teachers of Shandong(金融學國家級特色專業建設點負責人,山東省重點學科首席專家,金融產業優化與區域發展管理協同創新中心首席科學家,山東省政府決策服務調研基地負責人,山東省區域經濟發展研究基地負責人兼首席專家,山東省高校學科帶頭人,山東省“百人工程”理論人才,山東省高校十大師德標兵). He is concurrently Vice-Dean and Chief Secretary of Shandong Regional Economic Society, Standing Director and Member of Academic Committee of Shandong Finance Association, Standing Director of China Finance Institute(山東區域經濟學會副會長兼秘書長、山東省金融學會常務理事兼學術委員會委員、中國區域經濟學會常務理事) and others. In recent years, he was commissioned 4 national projects and 10 municipal projects and was granted several awards by the Ministry of Education and Shandong Research Institute for his achievements. He is an expert advisor to several municipal governments such as Shandong, Jinan and Rizhao. He is an independent director of Shandong Tyan Home Co., Ltd. He has served as an independent non-executive Director of the Company since April 2010.
Ms. Zhang Hong currently a professor and advisor to doctoral students at Shandong University, head of a multi-national corporation research institute, director of China Association of International Trade, director of Shandong Province External Trade Association, director of Shandong Province Commerce Association and director of Shandong Province Japanese Association. She is also an independent director of Shandong Haihua Company Limited, Shandong Xinneng Taishan Power Generation Co., Ltd.(山東新能泰山發電股份有限公司) and Shandong Gettop Acoustic Co., Ltd. She has served as an independent nonexecutive Director of the Company since April 2010.
VIII Directors, Supervisors and Senior Management and Staff
II. Employment(Cont’d)
1. Directors of the Company(Cont’d)
(3) Brief biographies of independent non-executive Directors(Cont’d)
Ms. Pan Ailing is a Ph.D. in Economics and obtained a post-doctoral degree in Financial Management. She is currently a professor of the School of Management and the chief of the Department of Accounting in Shandong University, an advisor to doctoral students and a non-practising member of CICPA (Chinese Institute of Certified Public Accountants). She is also a director of the Accounting Institute, Shandong Province(山東省會計學會), a visiting professor at Soochow University in Taiwan, a visiting scholar at University of Connecticut in the United States, a prize winner of Program for New Century Excellent Talents in University(教育部新世紀優秀人才), a state-level candidate for New Century Ten Million Talent Project(新世紀「百千萬人才工程」). She finished various research projects at national and provincial level and published more than 70 papers in CSSCI academic journals. She was awarded first prize for Excellent Achievement Award on Social Science in Shandong Province(山東省社會科學優秀成果) and first prize for Excellent Achievement Award on Soft Science(山東省軟科學優秀成果) in Shandong Province for her research achievements. She has served as an independent non-executive director of the Company since May 2013.
2. Brief biographies of Supervisors of the Company
Mr. Gao Junjie, who joined the Company in 1994, had held the positions of the chief officer of the legal section and chief officer of auditing department, etc. He is currently the chairman of supervisory committee, assistant to general manager in charge of the department of inspection, supervisor of Shouguang Chenming Holdings Company Limited and supervisor of Shouguang Henglian Enterprise Investment Co. Ltd.
Mr. Yin Qixiang previously held positions including chief of Economic and Trade Commission of Shouguang City(壽光市經濟貿易委員會), chief of Tizheng Department of Shouguang City, Shandong Province(山東省壽光市體政部), and head of Qinghua Bureau of Shouguang City(壽光市輕化局). He retired in 1998. He has served as a supervisor of the Company since April 2010.
Mr. Guo Guangyao worked for the Tai Hang Apparatus Factory of the Department of Aeronautics(航空部太行儀錶廠) as chief craftsman and engineer between 1969 and 1981, for Shouguang Chemical Fertiliser Factory(壽光化肥廠) as deputy factory chief and party committee secretary between 1981 and 1987, Shouguang Beer Factory(壽光市啤酒廠) as party committee secretary and chief engineer between 1987 and 1989 and for Shouguang Economic and Trade Committee as deputy chief and secretary of CPC Working Committee and chief of Shouguang Enterprise Management Office in March 1990. He retired in December 2003. He has served as a supervisor of the Company since May 2009.
Ms. Wang Ju, who joined the Company in 1987, had held the positions of deputy chief officer and chief officer of manufacturing section, assistant to the general manager and deputy general manager of Shouguang Chenming and deputy general manager of Shouguang Chenming Pulp Manufacturing Factory(壽光晨鳴製漿工廠). She is currently a Supervisor of the Company.
Ms. Yang Hongqin, who joined the Company in 1987, held the positions of the deputy chief and chief officer of quality control section and the chief of after sale services department of the Company and manager of property management company. She is currently a Supervisor of the Company and assistant to general manager of Shandong Chenming Power Supply Holdings. Co., Ltd.
VIII Directors, Supervisors and Senior Management and Staff
II. Employment(Cont’d)
3. Brief biographies of Senior Management of the Company
Ms. Li Xueqin was successively awarded titles including “Model Worker in Shandong Province”(山東省勞動模範), “Model Worker in the Country”(全國勞動模範) and “Nationwide May 1st Labour Medal”(全國五一勞動獎章). She was a deputy of the Tenth, Eleventh and Twelfth NationalPeople‘s Congress. She joined the Company in 1987 and held the positions of the chief of audit department and deputy general manager, etc. Ms. Li has been a deputy general manager of the Company and a director of Shouguang Chenming Holdings Company Limited since March 2003. Ms. Li Xueqin is the spouse of Mr. Chen Hongguo, chairman of the Company.
Mr. Wang Chunfang, who joined the Company in 1997, had held different positions including a financial executive of a sales branch and a financial controller of sales head office of the Company, a financial controller of Jilin Chenming Paper Co., Ltd., an assistant to the general manager of the Company chief of the finance department and the financial controller of the Company. He is currently secretary to the Board and the deputy general manager of the Company, and the chairman of the finance company (to be established).
Mr. Hu Changqing joined the Company in 1988 and had held positions as the chief of the technological reform department, chief officer of branch factory, deputy general manager and Director of the Company, etc. He is currently the deputy general manager of the Company in charge of the Zhanjiang Chenming Pulp and Paper project.
Mr. Shao Zhenzhong, aged 52, holds a bachelor’s degree from a university. He joined the Company in 2013. He had served as the marketing manager of Butler (Shanghai) Inc. and Asia Pacific regional sales and marketing vice president of UPM (China) Co., Ltd. He is currently the deputy general manager and the chief marketing officer of the Company.
Mr. Li Zhenzhong joined the Company in 1995. He had served as principal representative of the shanghai management region of a sales company, sales manager of cultural paper products. He is currently deputy general manager of the Company.
Mr. Chang Liting joined the Company in 1985. He had served as chairman of theworkers’ union of the Company and product general manger of a sales company. He is currently chairman of theworkers’ union, deputy general manager and deputy chief marketing officer of the Company in charge of legal department.
Mr. Poon Shiu Cheong is a Fellow Certified Public Accountant of Hong Kong Institute of Certified Public Accountants and CPA Australia. He obtained a master degree in Accounting from Central Queensland University and a master degree in Business Administration from Southern Cross University. He joined the Company in 2008, and is currently the qualified accountant and company secretary of the Company.
VIII Directors, Supervisors and Senior Management and Staff
II. Employment(Cont’d)
Employment at the shareholder of the Company
√ Applicable□ Not applicable
Whether receiving any remuneration Position at or allowance Name of shareholder the shareholder from shareholder of Name of employee of the Company of the Company Start date of the term End date of the term the Company Chen Hongguo Shouguang Chenming Chairman and 21 September 2013 21 September 2016 No
Holdings Company General Manager
Limited Director
Yin Tongyuan Shouguang Chenming Director 21 September 2013 21 September 2016 No
Holdings Company
Limited
Geng Guanglin Shouguang Chenming Director 21 September 2013 21 September 2016 No
Holdings Company
Limited
Li Xueqin Shouguang Chenming Director 21 September 2013 21 September 2016 No
Holdings Company
Limited
Gao Junjie Shouguang Chenming Supervisor 21 September 2013 21 September 2016 No
Holdings Company
Limited
Explanation of the employment at the shareholder Nil
of the Company
VIII Directors, Supervisors and Senior Management and Staff
II. Employment(Cont’d)
Employment at other units
√ Applicable□ Not applicable
Whether receiving any remuneration Position at Start date of End date of or allowance Name of employee Name of the other unit the other unit the term unit the term the other unit from other unit Zhang Hong Shandong Haihua Independent 27April 2011 27 April 2014 Yes
Company Limited director
Zhang Hong Shandong Xinneng Taishan Independent 27 May 2011 27 May 2014 Yes
director
Power Generation Co., Ltd.
Zhang Hong Shandong Gettop Independent 5 October 2011 5 October 2014 Yes
Acoustic Co., Ltd. director
Zhang Zhiyuan Shandong Tyan Home Independent 26 June 2008 26 June 2014 Yes
Co., Ltd. director
Wang Aiguo Shandong Iron and Steel Independent 10 April 2012 10 April 2015 Yes
Co., Ltd. director
Wang Aiguo China Corn Oil Independent 23 November 2012 23 November 2015 Yes
Company Limited director
Wang Aiguo Hisense Kelon Electrical Independent 20 January 2011 20 January 2014 Yes
Holdings Co. Ltd. director
Wang Aiguo Shandong Zhanqiu Independent 12 July 2012 12 July 2015 Yes
Blower Co., Ltd. director
Pan Ailing Shandong Sunwei Petrochemical Independent 11 April 2008 11 March2014 Yes
Engineering Co., Ltd. director
Explanation of the employment at the other unit All the above four persons were independent directors of the Company.
III. Remunerations of Directors, Supervisors and Senior Management
Decision process, basis for determining the remuneration and actual payment for the remuneration of Directors, Supervisors and Senior Management
1. The annual remuneration of each of the executive Directors and senior management of the Company was in the band of RMB0.20 million to 5.00 million (tax included) and the specific amount for each of them was determined based on the main financial indicators and operation target completed by the Company, the scope of work and main responsibilities of the Directors and senior management of the Company, the target completion of Directors and senior management as assessed by the duty and performance appraisal system, as well as business innovation capability and profit generation ability of the Directors and senior management. The actual implementation proposal shall be determined by the remuneration and assessment committee of the Board as well as considered and decided by the Board.
2. The Company will pay each of the independent non-executive Directors and non-executive Directors of the Company annual allowance of RMB40,000 to RMB100,000 (after tax). The travel expenses for attending board meetings and general meetings of the Company and fees reasonably incurred in the performance of their duties under the Articles of Association by independent non-executive Directors and non-executive Directors are reimbursed as expensed.
VIII Directors, Supervisors and Senior Management and Staff
III. Remunerations of Directors, Supervisors and Senior Management(Cont’d)
Decision process, basis for determining the remuneration and actual payment for the remuneration of Directors, Supervisors and Senior Management(Cont’d)
3. The details of the remunerations of Directors, Supervisors and Senior Management are set out in note (IX). 4 “Remuneration of key management staff” in this Financial Report.
Remunerations of Directors, Supervisors and Senior Management during the Reporting Period
Unit:RMB’0000 Actual payment Total for the Total remuneration remuneration remuneration received from during the received from shareholder reporting Name Position Sex Age Status the Company unit period Chen Hongguo Chairman, general M 49 In office 500 0 500 manager
Yin Tongyuan Vice-chairman M 56 In office 300 0 300 Li Feng Director, deputy M 41 In office 86.26 0 86.26 general manager
Geng Guanglin Director, deputy M 40 In office 279.64 0 279.64 general manager
Tan Daocheng Director M 47 Retired 20.21 0 20.21 Hou Huancai Director M 52 In office 103.57 0 103.57 Zhou Shaohua Director, deputy M 52 In office 109.83 0 109.83 general manager
Cui Youping Director M 50 In office 5 0 5 Wang Xiaoqun Director M 58 In office 5 0 5 Wang Fengrong Director F 45 Retired 2.08 0 2.08 Zhang Zhiyuan Independent M 51 In office 5 0 5 Director
Wang Aiguo Independent M 50 In office 5 0 5 Director
Zhang Hong Independent F 49 In office 5 0 5 Director
Wang Yumei Independent F 51 Retired 2.08 0 2.08 Director
Wang Xiangfei Independent M 63 Retired 5.21 0 5.21 Director
Pan Ailing Independent F 49 In office 5 0 5 Director
VIII Directors, Supervisors and Senior Management and Staff
III. Remunerations of Directors, Supervisors and Senior Management(Cont’d)
Decision process, basis for determining the remuneration and actual payment for the remuneration of Directors, Supervisors and Senior Management(Cont’d)
Unit:RMB’0000 Actual payment Total for the Total remuneration remuneration remuneration received from during the received from shareholder reporting Name Position Sex Age Status the Company unit period Gao Junjie Chairman of M 43 In office 39.28 0 39.28 Supervisory
Committee
Wang Ju Supervisor F 48 In office 18.68 0 18.68 Yang Hongqin Supervisor F 46 In office 17.62 0 17.62 Yin Qixiang Supervisor M 76 In office 2.50 0 2.50 Guo Guangyao Supervisor M 71 In office 2.50 0 2.50 Li Xueqin Deputy general F 48 In office 121.86 0 121.86 manager
Wang Chunfang Financial controller, M 38 In office 90.67 0 90.67 secretary to
the Board
Hu Changqing Deputy general M 48 In office 185.36 0 185.36 manager
Shao Zhenzhong Deputy general M 53 In office 330.73 0 330.73 manager, chief
marketing officer
Chang Liting Deputy general M 60 In office 95.72 0 95.72 manager
Li Zhenzhong Deputy general M 40 In office 126.05 0 126.05 manager
Zhang Yanjun Deputy general M 48 Retired 29.31 0 29.31 manager
Xia Jigang Deputy general M 38 Retired 43.95 0 43.95 manager
Poon Shiu Cheong Company secretary, M 44 In office 11.89 0 11.89 qualified
accountant
Total – – – – 2,555.00 0 2,555.00 Directors, Supervisors and Senior Management of the Company granted share options as incentives during the reporting period
□ Applicable√ Not applicable
VIII Directors, Supervisors and Senior Management and Staff
IV. Changes of Directors, Supervisors and Senior Management
Name Position Type Date Reason
Chen Hongguo Chairman and general Elected 16 May 2013 Change of the session
manager
Yin Tongyuan Vice Chairman Elected 16 May 2013 Change of the session
Li Feng Director Elected 16 May 2013 Change of the session
Geng Guanglin Director Elected 16 May 2013 Change of the session
Zhou Shaohua Director Elected 16 May 2013 Change of the session
Hou Huancai Director Elected 16 May 2013 Change of the session
Wang Aiguo Independent Director Elected 16 May 2013 Change of the session
Zhang Zhiyuan Independent Director Elected 16 May 2013 Change of the session
Zhang Hong Independent Director Elected 16 May 2013 Change of the session
Cui Youping Director Elected 16 May 2013 Change of the session
Pan Ailing Independent Director Elected 16 May 2013 Change of the session
Wang Xiaogun Director Elected 16 May 2013 Change of the session
Gao Junjie Chairman of Elected 16 May 2013 Change of the session
Supervisory Committee
Yang Hongqin Supervisor Elected 16 May 2013 Change of the session
Wang Ju Supervisor Elected 16 May 2013 Change of the session
Guo Guangyao Supervisor Elected 16 May 2013 Change of the session
Yin Qixiang Supervisor Elected 16 May 2013 Change of the session
Li Xueqin Deputy general manager Appointed 16 May 2013 Appointment
Li Feng Deputy general manager Appointed 16 May 2013 Appointment
Geng Guanglin Deputy general manager Appointed 16 May 2013 Appointment
Zhou Shaohua Deputy general manager Appointed 16 May 2013 Appointment
Wang Chunfang Secretary to the Board Appointed 16 May 2013 Appointment
Deputy general manager Appointed 20 March 2014 Appointment
Hu Changqing Deputy general manager Appointed 16 May 2013 Appointment
Shao Zhenzhong Deputy general manager Appointed 16 May 2013 Appointment
Li Zhenzhong Deputy general manager Appointed 16 May 2013 Appointment
Chang Liting Deputy general manager Appointed 16 May 2013 Appointment
Poon Shiu Cheong Company secretary and Appointed 16 May 2013 Appointment
qualified accountant
Tan Daocheng Director Expiration of tenure 15 May 2013 Expiration of tenure
Wang Yumei Independent Director Expiration of tenure 15 May 2013 Expiration of tenure
Wang Fengrong Director Expiration of tenure 15 May 2013 Expiration of tenure
Zhang Yanjun Deputy general manager Expiration of tenure 16 May 2013 Expiration of tenure
Xia Jigang Deputy general manager Expiration of tenure 16 May 2013 Expiration of tenure
Wang Xiangfei Independent Director Expiration of tenure 15 May 2013 Expiration of tenure
VIII Directors, Supervisors and Senior Management and Staff
V. Changes in the information of Directors and Supervisors
Under Rule 13.51(B) of the Listing Rules, changes in the information of Directors and Supervisors since the date of annual report of the year ended 31 December 2013 are set out below:
Name of Director Details of the changes
Tan Daocheng No longer an executive director since 15 May 2013 due to expiration of tenure Wang Yumei No longer an independent non-executive director since 15 May 2013 due to expiration of tenure
Wang Fengrong No longer a non-executive director since 15 May 2013 due to expiration of tenure Wang Xiangfei No longer an independent non-executive director since 15 May 2013 due to expiration of tenure
Pan Ailing Being appointed as an independent non-executive director since 16 May 2013 Vi. Change of key technical team or key technical staff (other than Directors, Supervisors and Senior Management)
During the reporting period, there was no change of key technical team or key technical staff (other than Directors, Supervisors and Senior Management) and theCompany’s operation was not affected.
VII. Personnel of the Company
At the end of the reporting period, the Group had 12,954 employees in aggregate.
(1) Speciality composition
VIII Directors, Supervisors and Senior Management and Staff
VII. Personnel of the Company(Cont’d)
(2) Education level
The Company had obligations for 4 ex-employees or retired employees, including employees of subsidiaries. (3) Remuneration policies
The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. Subject to the relevant laws and regulations of the PRC, the Company adopts different standards of remuneration for different employees, which are determined based on their performance, experience, position, etc. Details of the remuneration of employees of the Group in 2013 are set out in Note 26 to the financial statements prepared in accordance with Accounting Standards for Business Enterprises.
Meanwhile, employees of the Group in the PRC participate in state-managed retirement benefit schemes operated by local governments. The Group is required to contribute a specified percentage of theemployees’ payroll costs to the retirement benefit scheme to fund the benefits. Details of the employee pension benefits provided by the Group are set out in Note 26 of the financial statements prepared in accordance with Accounting Standards for Business Enterprises.
(4) Training program
The Company attaches great importance to staff training and actively develops a learning atmosphere. Detailed training programs are prepared annually by all departments and subsidiaries to carry out multi-form and multi-channel training for staff at different levels of different profession. It revised and improved its training management system to well define the training process and relative standards to make good use of internal resources in this respect. It also prepared simple and practical general training materials for staff, and encouraged self-learning in order to improve overall business skills.
IX Corporate Governance
I. Corporate Governance
(1) Corporate governance in practice
The Company operated in compliance with the requirement of Companies Law(《公司法》), Securities Law(《證券法》), Code of Corporate Governance for Listed Companies(《上市公司治理準則》), Rules Governing Listing of Stocks on Shenzhen Stock Exchange(《深圳證券交易所股票上市規則》), Hong Kong Listing Rules and the related requirements as required by China Securities Regulatory Commission. The Company further improved and optimised its legal person governance structure during the reporting period. Save for the details set out in subsection (ix)(i) of this section, the Board considers there is no material deviation of the Company in its corporate governance from the regulatory documentation requirements provided for listed companies in respect of corporate governance.
(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 2013. It improved corporate governance practice in a timely manner according to relevant regulations, and revised Procedure for the Board Meeting, Procedure for the Supervisory Meeting, Procedure for the General Meeting and Rules of the Nomination Committee under the Board. It formulated management systems including amendments to Decision-making Procedure on Significant Transaction, Decision-making Procedure on External Investment, Decision-making Procedure on External Guarantee, Management System of Investor Relation, the Article of Association and other systems. The Company carried out the following activities to continue to improve corporate governance:
1. In order to carry out the spirit of the Notice regarding Implementation of Investor Protection in 2013 (Zheng Jian Ban Fa[2013] No. 21) by CSRC and the Notice regarding Further Implementation of Investor Protection of Listed Companies (Lu Zheng Jian Gong Si Zi[2013] No. 33) issued by Shandong branch of China Securities Regulatory Commission, conscientiously protect investors, especially the legal rights of public investors, the Company formulated and implemented Investor Relations Management System in accordance with the Work Guidance for Relations between Listed Companies and Investors and requirement of above Notices.
2. In accordance with the amendment to the Articles of Association in relation to reduction of the number of the members of the Board of the Company and the resolution in relation to the election of directors as part of the change of the session of the Board, the number of directors in the seventh session reduced from 15 to 12, of which independent directors was reduced to 4. In response to the above change, the Company revised its Implementation Rules of the Audit Committee, Implementation Rules of the Remuneration and Assessment Committee, Implementation Rules of the Nomination Committee and implemented the rules accordingly. 3. To ensure that the decision-making on significant transactions, external investment and external guarantee was regulated and valid, the Company formulated Decision-making Procedure on Significant Transaction, Decision-making Procedure on External Investment and Decision-making Procedure on External Guarantee in accordance with requirements of relevant laws, regulations, regulatory documents and the Articles of Association, which were considered and approved at the second extraordinary general meeting of 2013 and implemented thereafter.
The Company strictly implemented its related system of internal control to facilitate its regulated operation and healthy development, thereby protecting the legal interests of investors. The corporate governance of the Company was exactly the same as what was required by the CSRC. The regulated operations and the internal control standards would grow with the development of the Company.
Any non-compliance of Companies Law and relevant requirements of CSRC in respect of corporate governance□ Yes√ No
There is no non-compliance of Companies Law and relevant requirements of CSRC in respect of corporate governance.
IX Corporate Governance
I. Corporate Governance(Cont’d)
(2) Corporate governance activities(Cont’d)
Progress of the corporate governance works and the formulation and implementation of the management policy on personnel with insider information
The Company revised the Insider Registration System(《內幕信息知情人登記制度》) in accordance with the “Rules on Establishment of Insider Registration Management System by Listed Companies” (CSRC Notice) No.[2011] 30 issued by the China Securities Regulatory Commission and relevant requirements of the amended “Memorandum on Information Disclosure No. 34– Management Matters Regarding Insider Registration” issued by Shenzhen Stock Exchange on 15 March 2011 to standardise the management of insider information, strengthen the confidentiality of its insider information and maintain information disclosure in a fair manner. The systems defined the scope of insider information, the persons with knowledge of insider information and their scope, the management of registration and filing, confidentiality and the related liabilities. As the management body of insider information, the Board designated the secretary of the Board to be responsible for the management of the insider information. The Company strengthened the registration and management systems of and the supervision and examination works of insiders to standardise the internal circulation procedure of significant information, thus ensuring the information disclosure in a fair manner and specifically preventing leakages of insider information and insider trading. The Company strictly implemented Insider Registration System and the related systems to prohibit insiders from trading the shares of the Company prior to significant and sensitive information disclosure which had an effect on the share price of the Company.
The Company identified no trading of the shares of the Company by the insiders of the Company during the price sensitive period through self examination, and there were no regulatory penalty records.
IX Corporate Governance
II. Annual general meeting and extraordinary general meeting convened during the reporting period
1. Annual general meeting during the reporting period
Convened Disclosure
Meeting Date Name of the resolutions of the meeting Resolutions date Disclosure index 2012 annual 15 May 1. To consider and approve the report of the All considered 16 May http://www.cninfo.com.cn general meeting 2013 board of directors of the Company for the year and approved 2013
2012; 2. To consider and approve the report
of the supervisory committee of the Company
for the year 2012; 3. To consider and approve
the report of the independent directors of the
Company for the year 2012; 4. To consider and
approve the full text and summary of the 2012
annual report of the Company; 5. To consider
and approve the financial statements of the
Company for the year 2012; 6. To consider
and approve the profit distribution plan of the
Company for the year 2012; 7. To consider and
approve the application for a general bank credit
line for 2013; 8. To consider and approve the
provision of guarantee for the general banking
facilities of some controlling subsidiaries; 9. To
consider and approve the provision of financial
assistance to some controlling subsidiaries; 10.
To consider and approve the engagement of the
auditors for 2013; 11. To consider and approve
the election of directors as part of the change
of the session of the Board; 12. To consider
and approve the election of supervisors as part
of the change of the session of the supervisory
committee; 13. To consider and approve the
amendment to Article 178 of the Articles of
Association of the Company in relation to
reduction of the number of the members of the
Board of the Company; 14. To consider and
approve the authorisation by the Company on
the construction project of regulated works of
Guangdong Huirui Investment.
IX Corporate Governance
II. Annual general meeting and extraordinary general meeting convened during the reporting period(Cont’d)
2. Extraordinary general meeting during the reporting period
Convened Name of the resolutions Disclosure
Meeting Date of the meeting Resolutions Resolutions date Disclosure index
2013 first 21 August 1. To consider and approve the increase of All considered 22 August http://www.cninfo.com.cn
extraordinary 2013 registered capital of Jiangxi Chenming Paper Co., and approved 2013
general meeting Ltd., a subsidiary wholly-owned by the Company; 2.
To consider and approve the high-end packaging
paper project of Jiangxi Chenming; 3. To consider
and approve the change of auditor of the Company;
4. To consider and approve the integration project
of Huanggang Chenming ; 5. To consider and
approve the provision of guarantee to Zhanjiang
Chenming for increase in general banking facilities;
and 6. To authorize the board of directors of the
Company to repurchase certain H Shares of the
Company by a general mandate
2013 first extraordinary 21 August To authorize the board of directors of the Company Considered 22 August http://www.cninfo.com.cn
Class A, B and 2013 to repurchase certain H Shares of the Company by and approved 2013
H meeting a general mandate
IX Corporate Governance
II. Annual general meeting and extraordinary general meeting convened during the reporting period(Cont’d)
2. Extraordinary general meeting during the reporting period(Cont’d)
Convened Name of the resolutions Disclosure
Meeting Date of the meeting Resolutions Resolutions date Disclosure index 2013 second 15 November 1. To consider and approve the provision of All considered 16 November http://www.cninfo.com.cn extraordinary 2013 guarantee to Huanggang Chenming; 2. To consider and approved 2013
general meeting and approve the performance of the syndicated
loan collateral contract by Zhanjiang Chenming;
3. To consider and approve the establishment of
Shandong Chenming Fuyu; 4. To consider and
approve the acquisition of land by Wuhan Wan
Xing Real Estate; 5. To consider and approve the
joint development project by Wuhan Chenming and
Hubei Zheshang; 6. To consider and approve the
joint terminal construction by Jiangxi Chenming;
7. To consider and approve the construction of
paper cup and high grade cultural paper projects
in Zhanjiang Chenming; 8. To approve and adopt
the new procedural rules of the board of directors
meeting; 9. To approve and adopt the new
procedural rules of supervisors meeting; 10. That
the amendment to the management system of the
connected transaction of the Company be approved
and confirmed; 11. To approve and adopt the
decision making system to substantial transaction
of the Company; 12. To approve and adopt the
decision making system to external investment
of the Company; 13. To approve and adopt the
decision making system to external guarantee
of the Company; 14. That the amendment to the
articles of association of the Company be approved
and confirmed; and 15. To approve and adopt the
new procedural rules of the general meeting of the
Company
IX Corporate Governance
III. Performance of Independent Directors during the reporting period
1. Attendance of Independent Directors in board meetings and general meetings
Attendance of Independent Directors in board meetings
Number
of board Absence meetings for two Name of attended Attend via Number of successive Independent during Attend communication appointed times (attend Directors the period in person channels attendance Absence in person) Zhang Zhiyuan 11 1 9 1 0 No Wang Aiguo 11 2 9 0 0 No Zhang Hong 11 2 9 0 0 No Wang Yumei 5 1 4 0 0 No Wang Xiangfei 5 0 4 1 0 No Pan Ailing 6 0 5 1 0 No No. of the general meetings
presented by Independent Dir ectors 0 Explanation on the absence from the Board meeting twice in succession:
None of the Independent Directors was absent from the Board meeting twice in succession.
2. Objections from Independent Directors on related issues of the Company
Were there any objections on related issues of the Company from the Independent Directors?
□ Yes√ No
There was no objections on related issues of the Company from the Independent Directors.
3. Other details about the performance of duties by the Independent Directors
Were there any suggestions from the Independent Directors adopted by the Company?
√ Yes□ No
Explanation on the adoption or non-adoption with related suggestions from the Independent Directors for prevention from occupational risks: Suggestion from the Independent Directors about arranging insurance cover for Directors and Senior Management on Liability Insurance for its Directors and Senior Management was adopted by the Company in order to prevent the professional risk.
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IV. Performance of duties by special committees under the Board of Directors
1. The audit committee of the Board
(1) The following major tasks were completed during 2013:
① it conducted pre-audit communication with external auditing institution engaged by the Company in respect of the 2012 financial report auditing on pre-auditing work, reviewed the 2012 auditing report and financial report and submitted such reports to the Board of the Company;
② it reviewed the 2013 interim financial statements for the six months ended 30 June 2013, which were submitted to the Board for approval.
(2) Auditing work conducted on the 2013 financial report of the Company is as follows:
① it reviewed the 2013 auditing plan and the related information of the Company with the auditing certified public accountants and the finance department of the Company prior to the on site audit and negotiated and determined the schedule of an audit of the 2013 financial statements of the Company with Ruihua Certified Public Accountants;
② it reviewed the draft of financial statements of the Company prior to an annual on site audit performed by the auditing certified public accountants and issued its approval to audit;
③ it kept in close contact with the auditors upon the annual on site audit and issued a letter to the auditors to urge the submission of theauditors’ report on schedule;
④ it reviewed the financial statements of the Company again upon the issue of draft opinion on the annual audit by the auditing certified public accountants, and considered the financial statements of the Company true, accurate and complete to reflect the overall position of the Company;
⑤ at the first meeting of the audit committee in 2013, theauditors’ report on the annual audit issued by the certified public accountants was approved and then was submitted to the Board;
⑥ it reviewed the report on internal audit and internal control of the Company for the year ended 31 December 2013.
2. The remuneration and assessment committee of the Board
The remuneration and assessment committee of the Company were primarily responsible for formulating the remuneration and assessment for the Directors and the Senior Management of the Company and formulating and examining the remuneration package of the Directors and the Senior Management of the Company, and accountable to the Board. In the reporting period, the remuneration and assessment committee formulated the 2013 remuneration package of the Directors and the Senior Management of the Company, which then was submitted to the Board for approval, based on the production and operation conditions of 2013 and assessment of the Directors and the Senior Management of the Company.
3. The nomination committee of the Board
During the reporting period, the nomination committee held one meeting. The first meeting in 2013 considered the proposed resolution in relation to the appointment and re-appointment of Directors of the Company, which was submitted to the sixteenth meeting of the sixth session of the Board of the Company for consideration and approval.
IX Corporate Governance
IV. Performance of duties by special committees under the Board of Directors(Cont’d)
4. The strategic committee of the Board
During the reporting period, the strategic committee held three meetings. The first meeting in 2013 considered the proposed resolutions in relation to the investment in household paper project and technical improvement project by Wuhan Chenming and to the construction and regulation works by Guangdong Huirui, which were submitted to the eighth meeting of the sixth session of the Board of the Company for consideration and approval; the second meeting in 2013 considered the proposed resolution in relation to the investment in high-end packaging paper project by Jiangxi Chenming, which was submitted to the first meeting of the seventh session of the Board of the Company for consideration and approval; and the third meeting in 2013 considered the proposed resolutions in relation to the establishment of Shandong Chenming Fuyu, the acquisition of land by Wuhan Wan Xing Real Estate, the joint development project by Wuhan Chenming and Hubei Zheshang, the joint terminal construction by Jiangxi Chenming and the construction of paper cup and high grade cultural paper projects in Zhanjiang Chenming, which were submitted to the second meeting of the seventh session of the Board of the Company for consideration and approval. Concerned about the authorisation on project development and financing from the Board, the strategic committee keeps constant communication with the management, and is fully aware of each issues within the scope of such authorisation.
V. Performance of duties by the Supervisory Committee
During the reporting period, the supervisory committee held six meetings.
The thirteenth meeting in 2013 considered and approved eight proposed resolutions respectively in relation to the 2012supervisors’ report, the full text and summary of the 2012 annual report of the Company, the 2012 financial statements of the Company, the provision of guarantee to certain wholly-owned subsidiaries for increase in general banking facilities, the provision of financial assistance to certain subsidiaries, the self-assessed internal control report of the Company, the engagement of an external auditor and re-election of the Supervisory Committee as part of the change of session thereof; The fourteenth meeting of the sixth session of the Supervisory Committee considered and approved one proposed resolution in relation to approving the full text and body text of the 2013 first quarterly report of the Company;
The first meeting of the seventh session of the Supervisory Committee considered and approved a proposed resolution in relation to election of the chairman of the Supervisory Committee of the Company;
The second meeting of the seventh session of the Supervisory Committee considered and approved one proposed resolution in relation to approving the full text and summary of the 2013 interim report of the Company;
The third meeting of the seventh session of the Supervisory Committee considered and approved a proposed resolution in relation to revise the procedures of the Supervisory meeting ; and
The fourth meeting of the seventh session of the Supervisory Committee considered and approved one proposed resolution in relation to approving the full text and body text of the 2013 third quarterly report of the Company;
Were there any risks of the Company identified by Supervisory Committee when performing its duties during the reporting period?
□ Yes√ No
None of those issues under the supervision was objected by Supervisory Committee during the reporting period.
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VI. Particulars about the integrity of businesses, personnel, assets, organisations, and finance from the controlling shareholder
1. In terms of business: The Company was completely independent from the controlling shareholder, and had business independence and self operation capability.
2. In terms of personnel: The labour, personnel and salary management were completely separated from the controlling shareholder.
3. In terms of assets: There was only shareholding relationship between the Company and Shouguang Chenming Holdings Company Limited. The assets of the Company were completely separated from that of the controlling shareholder.
4. In terms of organisation: The Company had a mature and independent organisation structure, which was established according to the legal processes and the business practice of the Company. It was completely separated from that of the controlling shareholder.
5. In terms of finance: The Company had its own accounting department, accounting system, financial management system, and bank accounts. The controlling shareholder did not interfere in the financial activities of the Company. All in all, the Company is totally separate in businesses, personnel, assets, organisations, and finance from the controlling shareholder, and had its business independence and self operation capability.
VII. Industry competition
There was no competition between the Company, the controlling shareholder and the beneficial owner in the industry. VIII. Assessment and incentive mechanism for the Senior Management during the reporting period
The Senior Management of the Company is assessed on monthly and annually basis. Monthly assessments were conducted in line with the direction of the annual major tasks, and were focused on appraisals of two fixed indicators, namely the completion status of in each month and the evaluation on important performance indicators. It was carried out monthly by way of cross assessment and supervision among the related departments. The annual assessments were carried out by the Remuneration and Assessment Committee with reference to the results of monthly assessments and overall performances during the year, including the integrated quality of Senior Management and internal training of talents.
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited
1. Compliance with the Code on Corporate Governance
The Company maintained high standards of corporate governance through various internal controls. The Board reviewed the corporate governance practices of the Company from time to time to enhance the corporate governance standards of the Company.
Save for the details set out in (4) “Chairman and general manager” and (17). “Communications with shareholders” of this section, the Company had fully complied with all the principles and code provisions of the Code on “Corporate Governance” as set out in Appendix 14 to the Hong Kong Listing Rules during the reporting period.
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IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
2. Securities transactions by Directors
The Directors of the Company confirmed that the Company had adopted the Model Code for Securities Transactions by Directors of Listed Companies as set out in Appendix 10 to the Hong Kong Listing Rules. Having made adequate enquiries with all Directors and Supervisors of the Company, the Company was not aware of any information that reasonably suggested that the Directors and Supervisors had not complied with the requirements as stipulated in this code during the reporting period.
3. Board of directors
The board of directors of the Company are elected at the general meeting and held accountable to the general meeting, and shall exercise the following functions and powers: (1) to be responsible for conveningshareholders’ general meeting and to report on its work to the general meeting; (2) to carry out the resolutions of general meetings; (3)to decide on the business plans and investment proposals of the Company; (4) to formulate the proposed annual financial budget and final accounts of the Company; (5) to formulate the plan for profit distribution and the plan making up losses of the Company; (6) to formulate plans for the increase or reduction in the registered capital of the Company and for the issue and listing ofCompany’s debentures or other securities; (7) to draft plans for material acquisition and repurchase of theCompany’s own shares; (8) to draft plans for the merger, division or dissolution or the change of formation of the Company; (9) to decide on external investment, acquisition and disposal of assets, pledge of assets, matter in relation to external guarantee, entrusted wealth management, connected transactions, etc. within the scope of mandate of the general meeting; (10) to decide on the establishment of theCompany’s internal management organisation; (11) to employ or dismiss the manager or secretary to the board of directors of the Company; to employ or dismiss the Senior Management, such as the deputy general manager(s) and personnel in charge of financial affairs, as proposed by the general manager; and to decide on their remuneration and rewards and punishments; (12) to formulate the basic management system of the Company; (13) to formulate proposals for amending the Articles of Association; (14) to administrate matter related to information disclosure of the Company; (15) to propose to the general meeting for the engagement or replacement of accounting firm performing audit for the Company; (16) to review work reports from managers of the Company and to inspect on their work; (17) to exercise the functions and powers as conferred upon by the Articles of Association or the general meeting.
The Board comprised six executive Directors: Chen Hongguo (Chairman), Yin Tongyuan, Li Feng, Geng Guanglin, Hou Huancai, Zhou Shaohua; two non-executive Directors: Cui Youping, Wang Xiaoqun; and four independent non- executive Directors: Zhang Zhiyuan, Wang Aiguo, Zhang Hong and Pan Ailing. Please refer to section VIII of this Annual Report for their brief biographies.
The Board is responsible for leading and monitoring the Company, and is wholly responsible for the administration and supervision of company businesses to facilitate its success. The Executive Director or the senior management is authorised to be responsible for the various divisions and functions and management of the processing. Directors of the Company shall act objectively and make decisions in the interests of the Company. The management and senior management of the Company held regular meetings with the board of directors to discuss the ordinary business operations and performance of the Company, and carried out the relevant decisions of the board of directors. The Company will arrange independent legal advice upon the request from the Directors or any committees of the Board of Directors, if the Board of Directors or any committees of the Board of Directors consider it necessary to seek for independent professional advice.
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IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
3. Board of directors(Cont’d)
During the reporting period, the Board held 11 meetings, 5 of which were regular meetings and 6 were an extraordinary meeting. Except Mr. Zhang Zhiyuan and Mr. Wang Xiangfei who was on business trip and absent from the sixteenth meeting of the sixth session of the Board and thus appointed Mr. Wang Aiguo and Ms. Zhang Hong to be present on their behalf,; and Ms. Pan Ailing who was on business trip and absent from the first meeting of the seventh session of the Board and thus appointed Ms. Zhang Hong to be present on her behalf, the other Directors of the Company attended 11 Board meetings.
Attendance of the relevant meetings (attention required/attended)
Remuneration General and meetings Audit Nomination assessment Strategic (including Board committee committee committee committee class Name Position Meetings meetings meetings meetings meetings meetings) I. Executive Directors
Chen Hongguo Chairman and 11/11 N/A 1/1 1/1 3/3 1/1 General Manager
Yin Tongyuan Vice Chairman 11/11 N/A N/A N/A 3/3 3/4 Li Feng Director, Deputy 11/11 N/A N/A N/A N/A 0/0 General Manager
Geng Guanglin Director, Deputy 11/11 N/A N/A N/A N/A 0/2 General Manager
Hou Huancai Director 11/11 N/A N/A N/A N/A 0/0 Zhou Shaohua Director, Deputy 11/11 N/A N/A N/A N/A 0/0 General Manager
II. Non-executive
Directors
Cui Youping Director 11/11 5/5 N/A N/A N/A 0/0 Wang Xiaoqun Director 11/11 N/A N/A N/A N/A 0/4 III. Independent non-
executive Directors
Zhang Zhiyuan Independent 11/11 N/A 1/1 N/A N/A 0/0 Director
Wang Aiguo Independent 11/11 5/5 1/1 1/1 N/A 0/0 Director
Zhang Hong Independent 11/11 5/5 N/A N/A 3/3 0/0 Director
Pan Ailing Independent 6/6 N/A N/A 1/1 N/A 0/0 Director
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IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
3. Board of directors(Cont’d)
Save for those disclosed in the brief profile of Directors of the Company in this Report, none of the members of the Board had any financial, business, family relations or material connections with each other.
The Board held 11 regular meetings during the year, each by giving a 14-day notice in advance to ensure that all Directors could participate in discussions of matters in the agenda. Reasonable prior notification was given for the other meetings of the Board to ensure all Directors could take time to attend.
All Directors had access to opinions and services of the secretary to the Board to ensure the procedures governing the Board and all applicable regulations and rules were complied with.
Insurance
The Company has arranged insurance cover on Directors and Senior Management Liability Insurance for its Directors and Senior Management.
Directors’ trainings and professional development
All newly appointed Directors are provided with necessary orientation information, with an aim to ensure that they will have a better understanding of operations and business of the Company as well as relevant laws and regulations and obligations under the Listing Rules.
During the year under review, the Board of directors was re-elected into a new session, comprised of the executive Directors Mr. Chen Hongguo, Mr. Yin Tongyuan, Mr. Li Feng, Mr. Geng Guanglin, Mr. Hou Huancai and Mr. Zhou Shaohua; the non-executive Directors Mr. Cui Youping and Mr. Wang Xiaoqun and the independent non-executive Directors Mr. Zhang Zhiyuan, Mr. Wang Aiguo, Ms. Zhang Hong and Ms. Pan Ailing. Members of the sixth session including Tan Daocheng, Wang Yumei, Wang Xiangfei and Wang Fengrong ceased to serve as directors of the Company upon expiry of their term of office. Directors and Supervisors of the Company were arranged by the Company to attend the 1st and the 2nd session of training courses 2013 for directors and supervisors held by China Securities Regulatory Commission, Shandong; and also, briefing paper in respect of new provisions for disclosure of inside information under SFO of Hong Kong prepared by Advisor to Hong Kong Law of the Company was distributed to all Directors and Supervisors, the above of which were to ensure all Directors and Supervisors to comply with relevant laws and sound corporate governance practice, and enhance their awareness of sound corporate governance practice.
IX Corporate Governance
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
4. Chairman and general manager
The chairman and general manager of the Company is Mr. Chen Hongguo. Please refer to section VIII of the Report for his brief biographies.
According to the Articles of Association of the Company, the chairman shall exercise the following powers: (1) presiding over general meetings, and convening and presiding over Board meetings; (2) supervising and inspecting the implementation of the resolutions of the Board; (3) signing the shares, the securities and bonds issued by the Company; (4) signing important documents of the Board and other documents which are required to be signed by legal representative of the Company; (5) performing the powers of a legal representative; (6) nominating candidates for general manager for the Board; (7) exercising the special right to operate the Company in accordance with the laws and acting for the benefits of the Company in the event of emergency situation as a result of act of God or natural disaster, and reporting to the Board meetings and general meeting afterwards; and (8) exercising other powers authorised by the Board.
The general manager shall exercise the following powers: (1) in charge of the operation and management of the Company, and organising the implementation of the resolutions of the Board; (2) organising the implementation of theCompany’s annual business plans and investment plans; (3) drafting plans for the establishment of the internal organisational structure of the Company; (4) drafting the basic management system of the Company; (5) formulating specific rules and regulations for the Company; (6) proposing the appointment or dismissal of the deputy general manager and chief financial officer; (7) appointing or dismissing management personnel other than those required to be appointed or dismissed by the Board; (8) proposing the wages, welfare, rewards, and penalties of staff and to decide the appointment or dismissal of staff of the Company; (9) proposing the convening of extraordinary meeting of the Board; and (10) exercising other powers conferred by the Articles of Association of the Company and the Board. 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 principle provisions of A.2 under Appendix 14 to Hong Kong Listing Rules. However, the Directors of the Company believe that Mr. Chen Hongguo 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.
5. Independent non-executive Directors
There are four independent non-executive Directors in the Board, which is in compliance with the minimum requirement of the number of independent non-executive directors set out in the Hong Kong Listing Rules. Wang Aiguo and Pan Ailing, the independent non-executive Directors of the Company, have appropriate accounting or related financial management expertise, which is compliance with the requirement of Rule 3.10 of the Hong Kong Listing Rules. Please refer to section VIII of the Report for their brief biographies. The Company has received from each of the independent non-executive Directors a confirmation of independence for the year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to be independent during the year.
IX Corporate Governance
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
6. Terms of Directors
According to the Articles of Association of the Company, all Directors, including non-executive Directors, are elected at general meetings with a term of three years from May 2013 to May 2016. They may be re-elected for another term upon expiry of tenure.
7.Directors’ responsibility for the financial statements
The Directors acknowledged their responsibility to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company. The Directors believed that the Company had adopted and applied consistently appropriate accounting policies in preparing the financial statements in compliance with all related accounting standards.
8. Board Committees
Pursuant to CG Code, the Board has established three committees, namely, Audit Committee, Remuneration and Assessment Committee and Nomination Committee, for overseeing particular aspects of theCompany’s affairs. Each Board Committee has its own defined written terms of reference. The written terms of reference of each Board Committee are published on websites of stock exchange and the Company.
Save for requirements of CG Code, the Company also set up Strategic Committee, for overseeing and studying long- term strategic development plan of the Company and making recommendations.
The Board was generally responsible for performing corporate governance, which includes:
(1) to develop and review thecompany’s policies and practices on corporate governance and make recommendations to the board;
(2) to review and monitor the training and continuous professional development of directors and senior management;
(3) to review and monitor thecompany’s policies and practices on compliance with legal and regulatory requirements;
(4) to develop, review and monitor the code of conduct applicable to employees and directors; and
(5) to review thecompany’s compliance with the code and disclosure in the Corporate Governance Report.
IX Corporate Governance
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
9. Audit Committee
The Audit Committee of the Company comprises two independent non-executive Directors and one non-executive Director. Its primary duties are serving as a communication media between internal and external audit and the related review and supervision. The Chairman of the Audit Committee is Zhang Hong, an independent non-executive Director, and other members are Cui Youping and Wang Aiguo. Wang Aiguo has appropriate professional qualifications or appropriate accounting or related financial management expertise, which is in compliance with the requirement of the Hong Kong Listing Rules.
The primary duties of the Audit Committee of the Company are: (1) proposing the appointment or dismissal of the external auditors; (2) supervising the internal control system of the Company and its implementation; (3) serving as a communication media between internal and external audit; (4) auditing the financial information of the Company and its disclosures; (5) reviewing the internal control system of the Company and audit the significant connected transactions; and (6) dealing with other matters as delegated by the Board.
The Audit Committee discussed with the management of the Company the accounting standards and practices adopted by the Group and discussed and reviewed this report, including the review of the financial statements of the Group for the year ended 31 December 2013 prepared in accordance with China Accounting Standards for Business Enterprises.
Particulars of the meetings held by the Audit Committee during the reporting period were detailed in part IV of this section.
10. Remuneration and Assessment Committee
The Company set up a Remuneration and Assessment Committee which comprised three Directors, including Wang Aiguo, the Chairman, and other members, namely Chen Hongguo and Pan Ailing. Two members, including the Chairman, are independent non-executive Directors, which is in compliance with Code of Corporate Governance Practice. The Remuneration and Assessment Committee is primarily responsible for formulating the criteria of appraisal of the Directors and managers and conducting the appraisal, and studying and formulating the remuneration policy and package of the Directors and the Senior Management of the Company. The Remuneration and Assessment Committee is accountable to the Board.
The primary duties of the Remuneration and Assessment Committee of the Company are: (1) formulating the remuneration plan or package based on the major scope of work, duties and importance of the Directors and the management and the remuneration level of other counterparts; (2) formulating the remuneration plan or package which mainly includes but not limited to standards, procedures and a system for performance appraisals as well as major plans and a system for rewards and sanctions; (3) examining the performance of the Directors, excluding the independent non-executive Directors, and the Senior Management and conduct annual performance appraisals for them; (4) supervising the implementation of the remuneration policy of the Company; and (5) dealing with other matters as delegated by the Board.
Particulars of themeeting’s held by the Remuneration and Assessment Committee during the reporting period are detailed in part IV of this section.
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IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
11. Nomination Committee
The Company set up a Nomination Committee which comprised three Directors, including Zhang Zhiyuan, the Chairman, and other members, namely Chen Hongguo and Wang Aiguo. Three members, including the Chairman, are independent non-executive Directors, which is in compliance with Code of Corporate Governance Practice. The Nomination Committee is primarily responsible for selecting candidates for directors and the management of the Company, determining the selection criteria and procedure and making recommendations.
The primary duties of the Nomination Committee are (1) advising the Board on the size and composition of the Board in light of thecompany’s operating activities, asset scale and shareholding structure; (2) studying the selection criteria and procedure for Directors and the management and advising the Board on the same; (3) extensively identifying qualified candidates for Directors and the management; (4) examining candidates for Director and the management and advising on the same; (5) examining other Senior Management staff pending referral to the Board for decision on their employment and advising on the same; (6) advising to the Board on appointment and re-appointment of directors and on skills, knowledge, experience, background, gender and other characteristics required in serving as a director taking into consideration diversity, balance and efficiency of the Board and benefits thereto; (7) reviewing the Board diversity policy, revising thereon in a timely manner and making relevant disclosure in the corporate governance report in the corresponding annual report; and (8) dealing with other matters as delegated by the Board.
During the reporting period, the Nomination Committee, after studying the needs of the Company for new Directors and managerial personnel and taking into consideration the Board diversity policy, identified suitable candidates for Director and managerial positions through various channels (including from the Group internally and from the human resources market). Upon acceptance of nomination by the nominated person, the Nomination Committee performed qualification review on preliminary candidates by holding meetings, review criteria include the academic qualifications, relevant experience and specialised skills of the preliminary candidates. One to two months prior to election of new Directors, the Nomination Committee submitted recommendations and relevant materials of the directorial candidates to the Board; prior to engaging new Senior Management, the Nomination Committee submitted recommendations and relevant materials of the new Senior Management personnel to the Board.
Particulars of themeeting’s held by the Nomination Committee during the reporting period are detailed in part IV of this section.
IX Corporate Governance
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
12. Strategic Committee
The Company set up a Strategic Committee which comprised three Directors, including Chen Hongguo, the Chairman, and other members, namely, Yin Tongyuan and Zhang Hong. The Strategic Committee is primarily responsible for studying the long term strategic development and major investments of the Company and making recommendations. The primary duties of the Strategic Committee are (1) conducting research and submitting proposals regarding the long term development strategic plan; (2) conducting research and submitting proposals regarding the financing plans for major investments which require approval from the Board as stipulated in the Articles of Association of the Company; (3) conducting research and submitting proposals regarding major capital operations and assets operation projects which require approval from the Board as stipulated in the Articles of Association of the Company; (4) conducting research and submitting proposals regarding other material matters that may affect the development of the Company; (5) carrying out examination on the implementation of the above matters; (6) dealing with other matters as delegated by the Board.
13. Auditors
On 18 May 2011, the 2010 annual general meeting of the Company agreed to continue to engage RSM China Certified Public Accountants as the domestic auditors of the Company for 2011 and be responsible for domestic auditing of the Company for 2011.
On 29 May 2012, the 2011 annual general meeting of the Company agreed to continue to engage RSM China Certified Public Accountants as the domestic auditors of the Company for 2012 and be responsible for domestic auditing of the Company for 2012.
On 15 May 2013, the 2012 annual general meeting of the Company agreed to continue to engage RSM China Certified Public Accountants as the domestic auditors of the Company for 2013 and be responsible for domestic auditing of the Company for 2013. As RSM China Certified Public Accountants (Special General Partnership) has merged with Crowe Horwath Certified Public Accountants (Special General Partnership), domestic auditing of the Company for 2013 was taken up by Ruihua Certified Public Accountants (Special General Partnership). Such change was approved at the first extraordinary general meeting held on 21 August 2013.
The resolution to reappoint Ruihua Certified Public Accountants (Special General Partnership) as the domestic auditors of the Company for 2014 will be proposed at the forthcoming annual general meeting of the Company. 14. Remuneration for the Auditors
The financial statements for 2013 prepared in accordance with Accounting Standards for Business Enterprises by the Group were audited by Ruihua Certified Public Accountants. In 2013, the Company paid the auditors in aggregate RMB2,000,000 and RMB600,000 in respect of audit financial statements and non-audit services in relation to internal control respectively. Save the above, no other non-audit fee was incurred during the year.
The Company passed a resolution to engage Ruihua Certified Public Accountants as the Auditors of the Company for 2013 at the first 2013 extraordinary general meeting held on 21 August 2013.
Ruihua China Certified Public Accountants have stated their reporting responsibilities on the financial statements of the Group in Section I, Chapter XI hereto.
IX Corporate Governance
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
15. Supervisors and Supervisory Committee
The Supervisory Committee is accountable to the shareholders. It monitors the financial position of the Company and the performance of the Directors, managers and Senior Management of the Company as to whether they are in accordance with relevant requirements of the laws and regulations to protect the lawful rights of the Company and the shareholders. The Supervisory Committee comprises three shareholder representatives and two staff representatives. The shareholder representatives shall be elected and removed at a general meeting and the staff representatives shall be elected and removed democratically by the staff of the Company.
Details of the work of the Supervisory Committee during the Reporting Period are set forth in Section V Performance of duties by the Supervisory Committee of this chapter.
16. Company secretary
During the reporting period, the company secretary confirmed that he has received relevant professional training for not less than 15 hours in accordance with Rule 3.29 of the Listing Rules.
17. Communications with Shareholders
The Company considers effective communication with Shareholders is essential to enable them to have a clear assessment of theGroup’s performance as well as accountability of the Board. Principal means of communication with Shareholders of the Company are as follows:
Information Disclosure onCompany’s Website
The Company endeavours to disclose all material information about the Group to all interested parties as widely and timely as possible. The Company maintains its website at www.chenmingpaper.com where important information about theGroup’s activities and corporate matters such as annual reports and interim reports to Shareholders, announcements, business development and operations, corporate governance practices and other information are available for review by Shareholders and other stakeholders.
When announcements are made through the Stock Exchange, the same information will be made available on theCompany’s website.
IX Corporate Governance
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
17. Communications with Shareholders(Cont’d)
General Meetings
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 15 May 2013 by the Company, two extraordinary general meetings and one class meeting was convened in 2013. The attendance record of Directors at each general meeting is set out below: Name Attendance of general meetings
Annual general meeting Chen Hongguo, Yin Tongyuan, Wang Xiaoqun
1st extraordinary meeting Yin Tongyuan, Geng Guanglin, Wang Xiaoqun
2nd extraordinary meeting Yin Tongyuan, Wang Xiaoqun
Class meeting Yin Tongyuan, Geng Guanglin, Wang Xiaoqun
Ms. Zhang Hong, the chairman of the audit committee, Mr. Wang Aiguo, the chairman of the remuneration and assessment committee, and Mr. Zhang Zhiyuan, the chairman of the nomination committee, were absent from the annual general meeting due to business commitments. TheCompany’s external auditor also attended the annual general meeting.
VOTING BY POLL
Resolutions put to vote at the general meetings of the Company are taken by poll. Procedures regarding the conduct of the poll are explained to the shareholders at the commencement of each general meeting, and questions from shareholders regarding the voting procedures are answered. The poll results are posted on the websites of the Stock Exchange and the Company respectively on the same day.
IX Corporate Governance
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
17. Communications with Shareholders(Cont’d)
Shareholders’ rights
(1) Procedures for convening an extraordinary general meeting by Shareholders
Pursuant to Article 90 of the Articles of Association of the Company, Shareholder(s) alone or in aggregate holding10% or more of theCompany’s shares shall be entitled to request the Board to convene extraordinary general meetings, provided that such request shall be made in writing. The Board shall, in accordance with provisions of the laws, administrative regulations and the Articles of Association, furnish a written reply stating its agreement or disagreement to the convening of an extraordinary general meeting within ten days after receiving such proposal of the same. In the event that the Board agrees to convene an extraordinary general meeting, the notice of general meeting shall be issued within five days after the passing of the relevant resolution of the Board. Any changes in the original request made in the notice shall require prior approval of Shareholders concerned.
In the event that the Board does not agree to convene an extraordinary general meeting or does not furnish any reply within ten days after receiving such proposal, Shareholder(s) alone or in aggregate holding10% or more of theCompany’s Shares shall be entitled to propose to the Supervisory Committee the convening of extraordinary general meeting, provided that such proposal shall be made in writing.
In the event that the Supervisory Committee agrees to convene an extraordinary general meeting, the notice of general meeting shall be issued within five days after receiving such request. Any changes in the original request made in the notice shall require prior approval of Shareholders concerned.
Failure of the Supervisory Committee to issue a notice of general meeting within the stipulated period shall be deemed as failure of the Supervisory Committee to convene and preside over a general meeting, and Shareholder(s) alone or in aggregate holding10% or more of theCompany’s shares for ninety consecutive days or more shall be entitled to convene and preside over the meeting on an unilateral basis.
Pursuant to Article 91 of the Articles of Association of the Company, if Shareholders determine to convene a general meeting on their own, they shall give a written notice to the Board and file the same with the local office of CSRC at the place where the Company is located and the stock exchange for records. The shareholding percentage of shareholders who convened shall not be lower than10% prior to the announcement of resolutions of the general meeting.
Shareholders who convened shall submit relevant certifications to the local office of CSRC at the place where the Company is located and the stock exchange upon the issuance of the notice of general meeting and the announcement of resolutions of the general meeting.
The Board and its secretary shall cooperate with respect to matters relating to general meetings convened by Shareholders on their own. The Board shall provide Shareholder registers as of the date of shareholding register. If a general meeting is convened by Shareholders on their own, all necessary expenses incurred shall be borne by the Company.
IX Corporate Governance
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
17. Communications with Shareholders(Cont’d)
Shareholders’ rights(Cont’d)
(2) Procedures for sendingshareholders’ enquiries to the board
Shareholders may at any time send their enquiries and concerns to the Board of the Company in writing through the Company Secretary (for H Share Shareholders)/ Secretary to the Board (for A, B Share Shareholders) whose contact details are as follows:
Company Secretary Secretary to the Board
Poon Siu Cheong Wang Chunfang
Address:22nd Floor, World Wide House, Address: No. 2199 East Nongsheng Road,
Central, Hong Kong Shouguang City, Shandong Province
Email Address:kentpoon_1009@yahoo.com.hk Email Address:chenmmingpaper@163.com Telephone: (852)-2501 0088 Telephone: (86)-0536-2158008
Facsimile: (852)-2501 0028 Facsimile: (86)-0536-2158977
The Company secretary and the secretary to the Board shall forwardshareholders’ enquiries and concerns to the Board and/or relevant Board Committees of the Company, where appropriate, to answershareholders’ questions.
(3) Procedures for putting forward proposals of Shareholders at general meetings
Pursuant to Article 102 of the Articles of Association of the Company, Shareholders individually or jointly holding over3% of the total shares of the Company are entitled to propose extraordinary motions to the Company and submit them to the Board or the secretary to the Board ten working days before the convening of the General Meeting. The Board or the secretary to the Board shall issue supplementary notice of the General Meeting to announce the extraordinary motions within two working days after receiving the proposed motions.
Save for provided above, the Board or Secretary to the Board shall not amend proposals stated in the notice of general meeting or add new proposals therein following the notice of general meeting has been issued. No voting or resolution shall be effected or adopted at the general meeting for proposals that have not been stated in the notice of general meeting or that do not comply with provisions of the Articles of Association. Extraordinary general meeting shall not resolve issues that are not contained in the notice.
Relationships with Investors
The Company recognises its responsibility to explain its activities to those with a legitimate interest and to respond to their questions. Investors are received and visited at appropriate times to explain theGroup’s business. In addition, questions received from the general public and individual shareholders are answered promptly. In all cases great care is taken to ensure that no price-sensitive information is disclosed selectively.
18. Internal Control
Particulars of internal control of the Company, please refer to section X Internal Control contained in this annual report.
IX Corporate Governance
IX. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited(Cont’d)
19. Articles of Association
Amendments to the Articles of Association of the Company were considered and approved by the Company at 2013 second extraordinary general meeting held on 15 November 2013. The purpose to make such amendments is principally in accordance with the requirements of Companies Law(《公司法》), Securities Law(《證券法》) and Listing Rules of Shenzhen Stock Exchange(《深交所上市規則》) and development and needs of the Company. Memorandum of Association and the amended version of the new Articles of Association of the Company are available on websites of the Company and Stock Exchange. As the Company completed the repurchase and cancellation of its B shares on 24 December 2013, amendments to the number of share capital were made to the Articles of Association accordingly.
20. Board Diversity
On 21 August 2013, the Company formulated policies to diversify Board members and amended the implementing rules of the nomination committee. Pursuant to the new policies, the nomination committee shall regularly review the Board diversity policy to improve efficiency and ensure interest thereof. As the re-election of directors was completed preceding the implementation of such policies, such committee has not yet issued any advice on appointing new directors thereafter, and will advise thereon accordingly when the need arises.
Such policies are summarised as follows:
The Company recognizes and embraces the benefits of having a diverse Board, and sees diversity at Board level as an essential element in maintaining a competitive advantage. A truly diverse Board will include and make good use of differences in the talents, skills, regional and industry experience, backgrounds, genders and other qualities of the members of the Board. These differences will be considered in determining the optimum composition of the Board and when possible should be balanced appropriately. All appointments of the members of the Board are made on merit, in the content of the talents, skills and experience the Board as a whole requires to be effective.
The nomination committee of the Company reviews and assesses the composition of the Board and makes recommendations to the Board on appointment of new directors of the Company. The Nomination Committee also oversees the conduct of the annual review of the effectiveness of the Board. In reviewing and assessing the composition of the Board, the Nomination Committee will consider the benefits of all aspects of diversity, including without limitation those described above, in order to maintain an appropriate range and balance of talents, skills, experience and backgrounds on the Board. In recommending candidates for appointment to the Board, the Nomination Committee will consider candidates on merit against objective criteria and with due regard for the benefits of diversity on the Board.
In overseeing the conduct of the annual review of the effectiveness of the Board, the Nomination Committee will consider the balance of talents, skills, experience, independence and knowledge on the Board and the diversity representation of the Board.
X Internal Control
I. Establishment of internal control
As requested by CSRC and Shenzhen Stock Exchange, the Company established a comprehensive and effective system of legal person governance structure, and ensured their decision-making, execution, and supervision duties to be carried out by leveraging on annual supervision and review conducted by various regulation departments and intermediate organisations as well as the general meetings, the Board, supervisory committee and management performing functions in strict compliance with relevant systems. Meanwhile, the Company also established the Strategic Committee, Nomination Committee, Audit Committee and Remuneration and Assessment Committee of the Board. In accordance with their respective term of reference, they assumed the functions of discussing the material matters and decision making, raising the science and professionalism of Board decisions. Currently half of the Directors, are external directors of the Company, who play a better role in decision making and supervision.
In compliance with the relevant requirements of Companies Law(《公司法》), Securities Law(《證券法》), Code of Corporate Governance for Listed Companies(《上市公司治理準則》), the Company formulated a series of laws and regulations of significance, such as Rules of Procedure for the General Meeting(《股東大會議事規則》), Rules of Procedure for the Board(《董事會議事規則》), Rules of Procedure for the Supervisory Committee(《監事會議事規則》), Implementation Rules(《工作細則》) of Special Committee of the Board, Code of Practice of General Managers(《總經理工作細則》), Information Disclosure Management System(《信息披露管理制度》), Work system for Independent Directors(《獨立董事工作制度》), Investor Relationship Management System(《投資者關係管理制度》), Administration Measures of Financing Proceeds(《募集資金使用管理辦法》), Internal Control System(《內部控制制度》), Financial Management System(《財務管理制度》), Special System to Take Precautions against Controlling Shareholders and Related Parties from Embezzling theCompany’s Fund(《防範控股股東及關聯方佔用上市公司資金制度》), Accountability System for Major Errors in Information Disclosure in Annual Report(《年報信息披露重大差錯責任追究制度》), Management System on External Users of Insider Information(《外部信息使用人制度》), Insider Registration System(《內幕信息知情人登記制度》), the decision making system to substantial transaction, the decision making system to external investment and the decision making system to external guarantee, which ensured the general meetings, the Board of Directors, the Supervisory Committee convened by the Company, and important decisions made to be in compliance with laws and regulations, and to be true and effective.
On the basis of basic control system of the Company, the internal management and control system formulated by the Company includes the entire production and operation process covering financial management, production management, purchase of materials, sales of products, foreign investments and administration, in order to ensure that all works are based on written-provisions, and thus forms a more standardised management structure.
1. Administration of and control over controlling subsidiaries
The Company managed its controlling subsidiaries according to the related laws and regulations and relevant listing rules of Shenzhen Stock Exchange and Hong Kong Stock Exchange. According to the requirements of Companies Law, subsidiaries established their respective board of directors and supervisory committee and lawfully conducted management and supervision duties. Sound operation and financial management systems were established according to the practices of theCompany’s business operations. By exercising its rights as a shareholder, the Company controlled the board of directors and key management nomination process and decision-making process of the subsidiaries. As a result, the Company was assured that its subsidiaries were under firm control and the decisions and systems of the Company were effectively, promptly and consistently implemented within its subsidiaries. Therefore, all the tasks within the Company and its subsidiaries were consistently dealt with.
X Internal Control
I. Establishment of internal control(Cont’d)
2. Administration of and control over connected transactions
The Articles of Association of the Company had provided clear rules for the authorities of the Board and General Meeting to examine connected transactions, the audit procedure, and abstain from voting by related Directors and shareholders. According to Shenzhen Stock Exchange Guidelines on Internal Controls of Listed Companies(《深圳證券交易所上市公司內部控制指引》), the Company had prepared its Administration on Connected Transactions(《關連交易管理制度》), which set out the regulations regarding classification, identification, contract execution and disclosure of connected transactions. The Company also set up the Special System to Take Precautions against Controlling Shareholders and Related Parties from Embezzling theCompany’s Fund(《防範控股股東及關連方佔有公司資金專項制度》). None of the capital, assets, or other resources of the Company had been appropriated or transferred by the controlling shareholder and its related persons. All connected transactions were conducted under the principles of faithfulness, fairness, willingness, and openness and their information was disclosed according to the disclosure requirements and published in the annual report of the Company. No action was conducted which was prejudical to the interest of the Company and the shareholders. Overall, the connected transactions of the Company were in compliance with “Shenzhen Stock Exchange Guidelines on Internal Controls of Listed Companies(《深圳證券交易所上市公司內部控制指引》) and the related laws and regulations.
3. Administration of and control over external guarantee
The authority of external guarantee was stipulated by the Articles of Association and the Company had implemented the requirements relating to aggregate amount of external guarantees according to the Rules Governing Listing of Stocks on Shenzhen Stock Exchange. Meanwhile, the Company had set up the decision making system to external guarantee. Except for guarantees provided to the subsidiaries, the Company made no external guarantees. Overall, external guarantees of the Company were in compliance with Shenzhen Stock Exchange Guidelines on Internal Controls of Listed Companies(《深圳證券交易所上市公司內部控制指引》)and the related laws and regulations. 4. Administration of and control over using of financing proceeds
The Company had set up Administration Measures of Financing Proceeds(《募集資金使用管理辦法》)to govern the use, approval, deposit, change of use, report and supervision of financing proceeds and liabilities. Financing proceeds were used according to their intended usage. The Company disclosed the information about the use of financing proceeds in compliance with related requirements.
5. Administration of and control over capital
The Company had organised the systems such as Capital Administration Criteria(《資金管理規定》), Working Procedures of Financing and Guarantee(《融資、擔保工作程序》), Reporting Rules of Material Financial Issues(《財務重大事項提報管理規定》), Administrative Rules of Accounts Receivable(《應收賬款管理規定》), Provisional Regulations on Management of Large Sums of Money Use(《大額資金使用管理暫行規定》) and Interim Provisions on Use and Management of Funds in Large Amounts(《大額資金使用管理暫行規定》), which set up strict procedures for authorisation and approval of receipts and payments of monetary capital, separated the incompatible positions in the process of monetary capital operation and established a checking system in the related organisation and staff. The Company set up procedures such as those for approval of receipts and payments of monetary capital and strictly implemented verification and investigation of receipts and payments of monetary capital.
X Internal Control
I. Establishment of internal control(Cont’d)
6. Administration of and control over material investments
Material investments were conducted under the principles of lawfulness, cautiousness, safety and effectiveness to control investment risk and emphasize investment returns. Also the Company formulated the decision making system to external guarantee in accordance with requirements of the Shenzhen Stock Exchange Listed Company Internal Control Guidelines(《深圳證券交易所上市公司內部控制指引》) and relevant laws and regulations.
7. Administration of and control over finance
In accordance with the laws and regulations such as Companies Law, Accounting Law, and Accounting Standards for Business Enterprises and their supplementary requirements, the Company prepared its Financial Accounting Rules(《財務會計制度》), which set out the procedures and rules for major financial decisions, standardised the procedures for accounting evidence, books and reports, defined the responsibilities of accounting staff and set up the evidence flow. Transactions were implemented with evidence timely prepared and delivered to the accounting department and filing department for record and filing. Meanwhile, the records were compared with the corresponding accounting entries to build up a sound internal control system of accounting in the form of computerisation. The Company introduced an ERP system as the common platform for the management techniques. The platform effectively standardised corporate and foundation information and business operations increased the management efficiency and timely provided the management of the Company and the Board with related information. The financial system of the Company was sound and complete and in compliance with the requirements of related laws and regulations. 8. Administration of and control over information disclosure
The Company had prepared Information Disclosure Management System(《信息披露管理制度》), Internal Reporting System of Material Information(《重大信息內部報告制度》), Investor Relationship Management Criteria(《投資者關係管理工作規範》), Investor Relation Management System(《投資者關係管理制度》)and Accountability System for Major Errors in Information Disclosure in Annual Report(《年報信息披露重大差錯責任追究制度》) which set out the extent, reporting, examination, disclosure, and confidentiality of material information. China Securities Journal, Shanghai Securities News, Securities Times, Hong Kong Commercial Daily, the website of CNINFO (www.cninfo.com. cn), ShangHai Securities News, STCH(《證券時報》), Securities Daily and Hong Kong StockExchange’s website were the designated information disclosure media of the Company, through which the information of the Company was first disclosed. The Company also timely released its public information through its own website to communicate with the investors. Investor relation activities were lawfully conducted to ensure open, just and fair information disclosure.
9. Management of internal monitoring and control
In accordance with relevant requirements of the Basic Norms of Internal Control(《公司內部控制基本規範》), the Shenzhen Stock Exchange Listed Company Internal Control Guidelines(《深圳證券交易所上市公司內部控制指引》) and the Corporate Governance Code issued by the Hong Kong Stock Exchange, the Company had management independent on controlling shareholders and established strict internal control systems in supply, production, sales, personnel, finance and resource, thereby effectively ensured the accuracy of disclosures and safety and integrity of assets. Through establishing internal systems, the Company formulated the Vertical Audit Management System, the Financial Audit System, the Procurement Audit System, the Internal Project Audit System, the Project Accounts Audit System and relevant bye-laws, thereby effectively ensured the implementation of internal monitoring and control system.
X Internal Control
I. Establishment of internal control(Cont’d)
10. Shareholding structure of the controlling subsidiaries of the Company
X Internal Control
II. TheBoard’s representation about the responsibilities for internal control
The Board of the Company believed that: Under the guidance of the laws and regulations such as Companies Law, Code of Corporate Governance for Listed Companies, Basic Internal Control Norms for Enterprises and Application Guidelines for Enterprise Internal Control(《企業內部控制應用指引》), the Company set up various internal control systems covering the operating activities of the Company under the circumstances. They were effectively implemented to reasonably assure that the operation and management of the enterprise were in compliance with the laws and regulations, its assets were in place, the financial report and the related data were truthful and complete, its risks were effectively controlled and the operating activities were ensured to be properly conducted. There was no material deviation of the Company in its corporate governance from the regulatory documentation requirements provided for listed companies in respect of corporate governance. The Company will be also continued to improve, enrich and optimize the internal control system according to the development needs and of the Company and against the deficiencies identified during the course of implementation, thus laying a solid foundation for the healthy and steady development of the Company.
The details of the Self-assessment Report on Internal Control for 2013 of the Board of the Company and theauditors’ audit opinion on the internal control report of the Company are set out in the website of Shenzhen Stock Exchange and www. cninfo.com.cn.
III. Basis of establishing internal control of financial reports
In accordance with the laws and regulations such as Companies Law, Accounting Law, and Accounting Standards for Business Enterprises and their supplementary requirements, the Company prepared a series of financial management system, which included Management System for Cash, Bank Deposit and Note(《現金、銀行存款、票據管理制度》), Management System for Payment(《付款管理制度》), Management System for Assets Inspection and Inventory Impairment(《財產清查及存貨減值管理制度》), Management System for Fixed Assets(《固定資產管理制度》) and Management System for Intangible Assets(《無形資產管理制度》), which set out the procedures and rules for major financial decisions, standardised the procedures for accounting evidence, books and reports, defined the responsibilities of accounting staff and set up the evidence flow. Transactions were implemented with evidence timely prepared and delivered to the accounting department and filing department for record and filing. Meanwhile, the records were compared with the corresponding accounting entries to build up a sound internal control system of accounting in the form of computerisation. The Company introduced an ERP system as the common platform for the management techniques. The platform effectively standardised corporate and foundation information and business operations increased the management efficiency and timely provided the management of the Company and the Board with related information. The financial system of the Company was sound and complete and in compliance with the requirements of related laws and regulations.
IV. Assessment Report on Internal Control
|||
|-|-|
|Particulars of material deficiencies in internal control detected during the reporting periodwhich was contained in the Assessment Report on Internal Control||
|No material deficiencies and major deficiencies were identified as at the end of the Reporting Period.||
|Date of Disclosure of Assessment Report on Internal Controls|20 March 2014|
|Index of Assessment Report on Internal Controls Disclosure|http://www.cninfo.com.cn|

X Internal Control
V.Auditors’ report on internal control
√ Applicable□ Not applicable
|||
|-|-|
|Auditors’ opinion contained in the Auditors’ report on internal control||
|We are of the view that Shandong Chenming Paper Holdings Limited had in all material aspects maintained effectiveinternal control over the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of31 December 2013.||
|Date of Disclosure of Auditors’ report on internal control|20 March 2014|
|Index of Auditors’ report on internal control Disclosure|http://www.cninfo.com.cn|

Any opinions of non-standardisation set out in theAuditors’ Report on Internal Control issued by accountants
□ Yes√ No
Auditors’ Report on Internal Control issued by accountants was in line withDirectors’ opinions contained in Self-assessment Report
√ Yes□ No
VI. Establishment of Accountability System for Major Errors in Information Disclosure in Annual Reports and its Implementation
The Company had clearly stipulated in the Information Disclosure Management System matters such as identifying the relevant parties responsible for breaches and errors in information disclosure and how these parties should be held responsible. During the reporting period, there were no incidents such as amendments to material accounting errors, supplementary information to material omissions and rectification of results forecast.
XI Financial Report
I. Auditors’ Report
Type ofauditors’ opinion standard and unqualifiedauditors’ opinions
The date of the audit report signed 20 March 2014
Name of the auditor Ruihua Certified Public Accountants
(special general partnership)
Reference number of theauditors’ report Rui Hua Shen Zi[2014] No.37020006
Name of certified public accountant Wang Chuanshun, Jing Chuanxuan
Text of theauditors’ report
To shareholders of Shandong Chenming Paper Holdings Limited:
We have audited the accompanying financial statements of Shandong Chenming Paper Holdings Limited (hereinafter as the “Chenming Paper Company”), which comprise the consolidated and company balance sheets as at 31 December 2013, the consolidated and company income statements, the consolidated and company cash flow statements and the consolidated and company statements of changes inshareholders’ equity for 2013 and notes to the financial statements.
1.Management’s responsibility for the financial statements
The management of Chenming Paper Company is responsible for the preparation and fair presentation of the financial statements. This responsibility includes (1) preparing the financial statements in accordance with the requirements of Accounting Standards for Business Enterprises so that the financial statements provide a fair view of the actual situation; and (2) designing, implementing and maintaining the necessary internal control so that the financial statements are free from material misstatement whether due to fraud or error.
2.Auditors’ responsibility
Our responsibility is to express an opinion on the financial statements based on the audit we have conducted. We conduct our audit in accordance with the Chinese Auditing Standards issued by the Chinese Institute of Certified Public Accountants. Those standards require that we comply with ethical codes of Chinese certified public accountants and plan and perform the audit to obtain a reasonable assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on theauditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. When conducting risk assessment, certified public accountants consider internal control relevant to the preparation and fair presentation of financial statements so as to design appropriate audit procedures. An audit also includes evaluating the appropriateness of the accounting polices used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
3. Opinion
In our opinion, the financial statements above give a true and fair view of the consolidated and company financial position of Shandong Chenming Paper Holdings Limited as at 31 December 2013 and of its consolidated and company operating results and cash flows for 2013.
Ruihua Certified Public Accountants PRC Certified Public Accountant: Wang Chuanshun (special general partnership)
Beijing, China PRC Certified Public Accountant: Jing Chuanxuan 20 March 2014
XI Financial Report
II. Financial Statements
Unless otherwise stated, the unit in the financial statements of the financial report is: RMB
1. Consolidated Balance Sheet
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Item Closing balance Opening balance
CURRENT ASSETS:
Monetary funds 2,547,729,794.24 4,456,217,362.86 Balances with clearing companies
Loans to banks and other financial institutions
Held-for-trading financial assets
Bills receivable 2,870,443,681.49 1,852,478,364.46 Accounts receivable 3,102,643,083.54 3,602,955,051.18 Prepayments 1,589,021,331.24 1,636,233,924.64 Premium receivable
Receivables from reinsurers
Reinsurance contract reserves receivable
Interest receivable
Dividend receivable
Other receivables 1,331,900,749.84 1,284,655,342.63 Financial assets purchased under agreements to resell
Inventories 3,725,809,877.25 4,412,548,700.68 Non-current assets due within one year
Other current assets 1,740,520,586.37 1,803,256,307.61 Total current assets 16,908,069,103.97 19,048,345,054.06
XI Financial Report
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Item Closing balance Opening balance NON-CURRENT ASSETS:
Entrusted loans and advances to customers
Available-for-sale financial assets
Held-to-maturity investments
Long-term receivables
Long-term equity investments 115,477,214.86 356,796,777.78
Investment properties 19,473,443.95 21,211,699.99
Fixed assets 21,181,647,488.39 19,751,339,991.06
Construction in progress 5,266,031,817.60 5,017,604,821.59
Construction materials 63,968,067.62 75,054,992.09
Disposal of fixed assets 588,181,647.53 287,309,818.03
Consumable biological assets 1,317,141,123.77 1,169,269,054.15
Oil and gas assets
Intangible assets 1,365,418,002.26 1,416,497,159.22
Development expenditure
Goodwill 20,283,787.17 20,283,787.17
Long-term prepaid expenses 168,538,483.68 184,770,685.65
Deferred income tax assets 507,653,388.38 376,938,086.60
Other non-current assets
Total non-current assets 30,613,814,465.21 28,677,076,873.33
Total assets 47,521,883,569.18 47,725,421,927.39
XI Financial Report
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Item Closing balance Opening balance
CURRENT LIABILITIES:
Short-term borrowings 9,818,885,237.85 12,876,398,495.16 Borrowings from the central bank
Customer bank deposits and due to banks and other financial institutions
Placements from banks and other financial institutions
Held-for-trading financial liabilities
Bills payable 290,403,790.59 1,285,627,762.07 Accounts payable 2,695,169,927.14 3,239,781,724.81 Advance receipts 442,432,261.58 347,835,800.87 Assets sold under agreements to repurchase
Handling charges and commission payable
Staff remuneration payables 130,271,812.18 177,847,769.71 Taxes payable 130,192,936.87 106,816,413.87 Interest payable 153,189,860.42 133,046,123.31 Dividend payable
Other payables 486,836,595.89 435,772,288.98 Due to reinsurers
Insurance contract reserves
Customer brokerage deposits
Securities underwriting brokerage deposits
Non-current liabilities due within one year 1,287,804,452.66 1,368,108,800.00 Other current liabilities 3,878,735,536.52 17,659,498.56 Total current liabilities 19,313,922,411.70 19,988,894,677.34 NON-CURRENT LIABILITIES:
Long-term borrowings 3,723,865,807.90 3,933,167,835.94 Bonds payable 5,768,418,612.73 6,256,263,237.00 Long-term payables 60,000,000.00
Special payables 971,805,561.39 641,526,872.70 Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities 3,045,517,642.57 2,560,151,371.36 Total non-current liabilities 13,569,607,624.59 13,391,109,317.00 TOTAL LIABILITIES 32,883,530,036.29 33,380,003,994.34
XI Financial Report
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Item Closing balance Opening balanceOWNERS’ EQUITY (ORSHAREHOLDERS’ EQUITY):
Paid-up capital (or share capital) 1,975,471,967.00 2,062,045,941.00 Capital reserves 6,204,682,028.94 6,414,892,999.53 Less: Treasury shares 30,954,891.40
Special reserves
Surplus reserves 1,132,116,106.40 1,132,116,106.40 General risk provisions
Retained profit 4,741,638,941.58 4,149,511,927.88 Foreign currency translation differences 16,934,073.59 929,205.04 Total equity attributable to equity holders of the company 14,039,888,226.11 13,759,496,179.85 Minority shareholders interests 598,465,306.78 585,921,753.20 Totalowners’ equity (orshareholders’ equity) 14,638,353,532.89 14,345,417,933.05 TOTAL LIABILITIES ANDOWNERS’ EQUITY (ORSHAREHOLDERS’ EQUITY) 47,521,883,569.18 47,725,421,927.39 Legal Representative: Chen Hongguo Financial controller: Li Dong Head of the financial department: Liu Jun
XI Financial Report
2. Balance sheet of the Company
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Item Closing Balance Opening balance
CURRENT ASSETS:
Monetary funds 1,454,242,620.40 3,057,756,467.02 Held-for-trading financial assets
Bills receivable 945,832,396.01 2,592,967,374.30 Accounts receivable 3,814,654,532.05 342,497,381.57 Prepayments 762,470,888.60 646,962,478.93 Interest receivable
Dividend receivable 191,300,102.21 512,215,933.76 Other receivables 11,051,622,177.96 9,232,778,999.32 Inventories 857,030,449.25 937,107,565.73 Non-current assets due within one year 200,000,000.00 500,000,000.00 Other current assets 103,214,843.26 62,260,013.84 Total current assets 19,380,368,009.74 17,884,546,214.47 NON-CURRENT ASSETS:
Available-for-sale financial assets
Held-to-maturity investments
Long-term receivables
Long-term equity investments 8,863,738,003.45 8,991,578,553.83 Investment property 19,473,443.95 21,211,699.99 Fixed assets 5,170,770,619.87 5,006,474,783.75 Construction in progress 127,095,105.63 513,157,612.96 Construction materials 1,813,442.43 2,536,053.61 Disposal of fixed assets
Productive biological assets
Oil and gas assets
Intangible assets 308,163,298.83 313,572,418.35 Development expenditure
Goodwill
Long-term prepaid expenses
Deferred income tax assets 17,082,162.53 21,517,455.45 Other non-current assets
Total non-current assets 14,508,136,076.69 14,870,048,577.94 TOTAL ASSETS 33,888,504,086.43 32,754,594,792.41
XI Financial Report
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Item Closing Balance Opening balance CURRENT LIABILITIES:
Short-term borrowings 5,119,632,573.69 7,847,558,953.68 Held-for-trading financial liabilities
Bills payable 500,000.00 643,432,387.04 Accounts payable 891,996,724.44 1,044,590,466.45 Advance receipts 185,524,508.71 417,522,231.17 Staff remuneration payables 62,091,273.25 101,268,730.42 Taxes payable 8,949,746.01 25,109,370.51 Interest payable 150,047,305.56 129,893,611.11 Dividend payable
Other payables 431,217,791.18 255,596,331.72 Non-current liabilities due within one year 343,876,000.00 514,843,000.00 Other current liabilities 3,856,239,467.95 2,328,791.64 Total current liabilities 11,050,075,390.79 10,982,143,873.74 NON-CURRENT LIABILITIES:
Long-term borrowings 594,568,035.94 352,112,035.94 Bonds payable 5,768,418,612.73 5,760,200,575.93 Long-term payables
Special payables
Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities 2,607,180,511.28 2,214,846,544.38 Total non-current liabilities 8,970,167,159.95 8,327,159,156.25 Total liabilities 20,020,242,550.74 19,309,303,029.99OWNERS’ EQUITY (ORSHAREHOLDERS’ EQUITY):
Paid-up capital (or share capital) 1,975,471,967.00 2,062,045,941.00 Capital reserves 6,005,426,779.17 6,184,215,988.77 Less: Treasury shares 30,954,891.40
Special reserves
Surplus reserves 1,119,926,524.49 1,119,926,524.49 General risk provisions
Retained profit 4,798,391,156.43 4,079,103,308.16 Foreign currency translation differences
Totalowners’ equity (orshareholders’ equity) 13,868,261,535.69 13,445,291,762.42 TOTAL LIABILITIES ANDOWNERS’ EQUITY (ORSHAREHOLDERS’ EQUITY) 33,888,504,086.43 32,754,594,792.41 Legal Representative: Chen Hongguo Financial controller: Li Dong Head of the financial department: Liu Jun
XI Financial Report
3. Consolidated Income Statement
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Amount for the Amount for the Item reporting period prior period I. Total revenue 20,388,890,067.41 19,761,679,230.05 Including: Revenue 20,388,890,067.41 19,761,679,230.05 Interest Income
Earned premium
Handling charges and commission income
II. Total operating costs 20,020,276,909.90 20,190,204,636.07 Including: Operating costs 16,651,886,019.64 16,693,768,322.36 Interest expenses
Handling charges and commission expenses
Surrenders
Net claims paid
Net change in insurance contract reserves
Policyholder dividend expenses
Expenses for reinsurance accepted
Business taxes and surcharges 85,832,210.98 78,689,990.94 Sales and distribution expenses 1,129,145,035.51 1,144,489,246.04 General and administrative expenses 1,198,704,556.00 1,110,246,902.75 Finance expenses 930,604,174.96 1,092,760,015.04 Loss on impairment of assets 24,104,912.81 70,250,158.94 Plus: Gain on change in fair value (“-” denotes loss) 11,221,828.76 47,822,076.87 Investment income (“-” denotes loss) 23,705,958.58 -35,524,960.75 Including: Investment income from associates and joint ventures 208,888.59 -637,227.71 Foreign exchange gains (“-” denotes loss)
XI Financial Report
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Amount for the Amount for the Item reporting period prior period III. Operating profit (“-” denotes loss) 403,540,944.85 -416,228,289.90 Plus: Non-operating income 504,045,185.99 421,528,346.56 Less: Non-operating expenses 41,294,461.31 21,440,038.10 Including: Loss on disposal of non-current assets 36,560,317.17 4,484,098.29 IV. Total profit (“-” denotes total loss) 866,291,669.53 -16,139,981.44 Less: Income tax expenses 175,938,431.91 -62,826,238.51 v. Net profit (“-” denotesnet loss) 690,353,237.62 46,686,257.07 Including: Net profit achieved by the acquisition before business merger
Net profit attributable to shareholders of the Company 710,655,331.72 221,034,822.54 Minority shareholders interests -20,302,094.10 -174,348,565.47 VI. Earnings per share: — — (I) Basic earnings per share 0.35 0.11 (II) Diluted earnings per share 0.35 0.11 VII.Other comprehensive income -15,416,892.44 2,250,198.82 VIII. Total comprehensive income 674,936,345.18 48,936,455.89 Total comprehensive income attributable to shareholders of the Company 695,238,439.28 223,285,021.36 Total comprehensive income attributable to minority shareholders interests -20,302,094.10 -174,348,565.47 Legal Representative: Chen Hongguo Financial controller: Li Dong Head of the financial department: Liu Jun
XI Financial Report
4. Income statement of the Company
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Amount for the Amount for the Item reporting period prior period I. Revenue 9,790,098,706.42 8,641,208,942.54 Less: Operating costs 7,831,543,846.50 7,177,585,076.21 Business taxes and surcharges 43,845,776.65 45,538,835.46 Selling and distribution expenses 301,518,944.89 287,036,491.45 General and administrative expenses 584,409,749.89 531,555,114.76 Finance expenses 545,632,757.10 509,080,279.98 Loss on impairment of assets 9,721,213.30 -8,992,017.36 Plus: Gain on change in fair value (“-” denotes loss)
Investment income (“-” denotes loss) 353,682,268.40 601,171,586.41 Including: Investment income from associates
and joint ventures -47,492.37 -19,380,904.84 II. Operating profit (“-” denotes loss) 827,108,686.49 700,576,748.45 Plus: Non-operating income 122,069,435.62 206,421,196.02 Less: Non-operating expenses 36,361,095.67 45,274,377.35 Including: Loss on disposal of non-current assets 33,861,095.67 273,373.64 III. Total profit (“-” denotes total loss) 912,817,026.44 861,723,567.12 Less: Income tax expenses 75,000,860.15 45,083,056.27 IV. Net profit (“-” denotes net loss) 837,816,166.29 816,640,510.85 V. Earnings per share: — — (I) Basic earnings per share
(II) Diluted earnings per share
VI. Other comprehensive income
VII. Total comprehensive income 837,816,166.29 816,640,510.85 Legal Representative: Chen Hongguo Financial controller: Li Dong Head of the financial department: Liu Jun
XI Financial Report
5. Consolidated cash flow statement
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Amount for the Amount for the Item reporting period prior period I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 19,924,421,264.23 18,898,272,759.78 Net increase in customer bank deposits and due to banks and other
financial institutions
Net increase in borrowings from the central bank
Net increase in placements from other financial institutions
Cash received from premiums under original insurance contracts
Net cash received from reinsurance business
Net increase in deposits from policyholders
Net increase from disposal of held-for-trading financial assets Cash
received from interest, handling charges and commissions
Net increase in placements from banks and other financial institutions Net
capital increase of repurchase business
Tax rebates received 15,764,794.45 23,554,462.43 Cash received relating to other operating activities 422,990,060.10 478,057,899.37 Subtotal of cash inflows from operating activities 20,363,176,118.78 19,399,885,121.58 Cash paid for goods and services 15,952,557,041.64 13,883,922,321.10 Net increase in loans and advances to customers
Net increase in deposits with the central bank and other financial institutions
Cash paid for claims under original insurance contracts
Cash paid for interest, handling charges and commission
Cash paid for policyholder dividend
Cash paid to and for employees 1,017,503,439.00 980,078,937.56 Payments of taxes and surcharges 1,067,579,950.69 1,046,466,624.71 Cash paid relating to other operating activities 1,202,918,886.54 1,532,550,760.22 Subtotal of cash outflows from operating activities 19,240,559,317.87 17,443,018,643.59 Net cash flows from operating activities 1,122,616,800.91 1,956,866,477.99
XI Financial Report
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Amount for the Amount for the Item reporting period prior period II. Cash flows from investing activities:
Cash received from investments
Cash received from investment income
Net cash received from disposal of fixed assets, intangible assets and other
long-term assets 201,327,878.35 81,287,275.09 Net cash received from disposal of subsidiaries and other business units 357,810,704.91 114,228,233.04 Cash received relating to other investing activities 1,367,652,767.53 825,144,486.68 Subtotal of cash inflows from investing activities 1,926,791,350.79 1,020,659,994.81 Cash paid for purchase of fixed assets, intangible assets and
other long-term assets 3,814,559,167.63 2,836,141,166.67 Cash paid on investments 20,000,000.00 779,039,794.00 Net increase in pledged loans
Net cash paid for acquisition of subsidiaries and other business units 51,603,949.43 Cash paid relating to other investing activities 3,180,221.51
Subtotal of cash outflows from investing activities 3,837,739,389.14 3,666,784,910.10 Net cash flows from investing activities -1,910,948,038.35 -2,646,124,915.29 III. Cash flows from financing activities:
Cash received from capital contribution 66,000,000.00 30,000,000.00 Including: cash received from minority interest contribution to subsidiaries 66,000,000.00 30,000,000.00 Cash received from borrowings 17,437,505,752.43 20,431,257,575.12 Cash received from bond issue 3,773,400,000.00 Cash received relating to other financing activities 5,622,770,312.13 1,083,500,000.00 Subtotal of cash inflows from financing activities 23,126,276,064.56 25,318,157,575.12 Cash repayments of amounts borrowed 21,185,990,488.38 21,884,060,289.27 Cash paid for dividend and profit distribution or interest payment 1,376,004,607.35 1,811,123,256.04 Including: dividend and profit paid to minority interests by subsidiaries 16,657,735.88 34,709,480.76 Cash paid relating to other financing activities 1,396,318,075.00 899,777,585.47 Subtotal of cash outflows from financing activities 23,958,313,170.73 24,594,961,130.78 Net cash flows from financing activities -832,037,106.17 723,196,444.34 IV. Effect of foreign exchange rate changes on cash and cash equivalents 3,351,087.12 -7,436,441.12 V. Net increase in cash and cash equivalents -1,617,017,256.49 26,501,565.92 Plus: Balance of cash and cash equivalents as at the beginning of the period 2,343,550,185.45 2,317,048,619.53 VI. Balance of cash and cash equivalents as at the end of the period 726,532,928.96 2,343,550,185.45 Legal Representative: Chen Hongguo Financial controller: Li Dong Head of the financial department: Liu Jun
XI Financial Report
6. Cash flow statement of the Company
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Amount for the Amount for the Item reporting period prior period I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 9,267,322,187.99 10,633,676,349.76 Tax rebates received
Cash received relating to other operating activities 219,142,138.18 224,089,911.79 Subtotal of cash inflows from operating activities 9,486,464,326.17 10,857,766,261.55 Cash paid for goods and services 9,497,015,627.73 7,687,404,057.11 Cash paid to and for employees 250,644,717.68 190,589,314.60 Payments of taxes and surcharges 498,627,291.39 447,492,526.52 Cash paid relating to other operating activities 1,967,541,286.56 2,395,664,137.91 Subtotal of cash outflows from operating activities 12,213,828,923.36 10,721,150,036.14 Net cash outflows from operating activities -2,727,364,597.19 136,616,225.41 II. Cash flows from investing activities:
Cash received from investments 860,916,016.71 165,000,000.00 Cash received from investment income 618,941,235.06 62,413,545.49 Net cash received from disposal of fixed assets, intangible assets and
other long-term assets 21,798,747.08 60,584,699.60 Net cash received from disposal of subsidiaries and other business units
Cash received relating to other investing activities 274,137,000.00 11,753,324.01 Subtotal of cash inflows from investing activities 1,775,792,998.85 299,751,569.10 Cash paid for purchase of fixed assets, intangible assets and other long-
term assets 316,039,924.71 444,035,770.10 Cash paid on investments 468,932,475.00 659,306,351.20 Net cash paid for acquisition of subsidiaries and other business units
Cash paid relating to other investing activities
Subtotal of cash outflows from investing activities 784,972,399.71 1,103,342,121.30 Net cash flows from investing activities 990,820,599.14 -803,590,552.20
XI Financial Report
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB Amount for the Amount for the Item reporting period prior period III. Cash flows from financing activities:
Cash received from capital contribution
Cash received from borrowings 9,915,668,095.86 13,811,876,225.40 Cash received from bond issue 3,773,400,000.00 Cash received relating to other financing activities 5,271,300,000.00 1,083,500,000.00 Subtotal of cash inflows from financing activities 15,186,968,095.86 18,668,776,225.40 Cash repayments of amounts borrowed 12,557,694,467.87 15,569,143,192.60 Cash paid for dividend and profit distribution or interest payment 1,100,076,772.93 1,118,202,959.20 Cash paid relating to other financing activities 1,515,035,053.37 813,788,127.94 Subtotal of cash outflows from financing activities 15,172,806,294.17 17,501,134,279.74 Net cash flows from financing activities 14,161,801.69 1,167,641,945.66 IV. Effect of foreign exchange rate changes on cash and cash equivalents 151,371.37 -4,083,843.36 V. Net increase in cash and cash equivalents -1,722,230,824.99 496,583,775.51 Plus: Balance of cash and cash equivalents as at the beginning of the period 1,786,622,854.08 1,290,039,078.57 VI. Balance of cash and cash equivalents as at the end of the period 64,392,029.09 1,786,622,854.08 Legal Representative: Chen Hongguo Financial controller: Li Dong Head of the financial department: Liu Jun
7. Consolidated statement of changes inowners’ equity
Prepared by: Shandong Chenming Paper Holdings Limited
Amount for the reporting period
Unit: RMB Amount for the reporting period Equity
attributable to shareholders of the Company
Paid-up capital Less: General risk
Item (or share capital) Capital reserves treasury shares Special reserves Surplus reserves provisions Retained profit Others Minority interests Totalowners’ equity I. Balance as at the end of the prior year 2,062,045,941.00 6,414,892,999.53 1,132,116,106.40 4,149,511,927.88 929,205.04 585,921,753.20 14,345,417,933.05 Plus: accounting policy change
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,414,892,999.53 1,132,116,106.40 4,149,511,927.88 929,205.04 585,921,753.20 14,345,417,933.05 III. Changes in the period (“-” denotes decrease) -86,573,974.00 -210,210,970.59 30,954,891.40 592,127,013.70 16,004,868.55 12,543,553.58 292,935,599.84 (I) Net profit 710,655,331.72 -20,302,094.10 690,353,237.62 (II) Other comprehensive income -31,421,760.99 16,004,868.55 -15,416,892.44 Sub-total of (I) and (II) above -31,421,760.99 710,655,331.72 16,004,868.55 -20,302,094.10 674,936,345.18 (III) Capital paid in and reduced by owners -86,573,974.00 -178,789,209.60 30,954,891.40 48,533,141.18 -247,784,933.82 1. Capital paid in by owners -86,573,974.00 -178,789,209.60 30,954,891.40 56,100,000.00 -240,218,075.00 2. Amounts of share-based payments
recognised inowners’ equity
3. Others -7,566,858.82 -7,566,858.82 (IV) Profit distribution -118,528,318.02 -15,687,493.50 -134,215,811.52 1. Transfer to surplus reserves
2. Transfer to general risk provision
3. Distribution to owners
(or shareholders) -118,528,318.02 -15,687,493.50 -134,215,811.52 4. Others
(V) Transfer withinowners’ equity
1. Transfer from capital reserves
to capital (or share capital)
2. Transfer from surplus reserves
to capital (or share capital)
3. Transfer from surplus reserves
to make up for losses
4. Others
(VI) Special reserves
1. Appropriated in the period
2. Used in the period
(VII) Others
IV. Balance as at the end of the period 1,975,471,967.00 6,204,682,028.94 30,954,891.40 1,132,116,106.40 4,741,638,941.58 16,934,073.59 598,465,306.78 14,638,353,532.89 2013
Annual
Report
/SHANDONG
CHENMING
PAPER
HOLDINGS
LIMITED141
XI Financial Report
Amount for the prior period
Unit: RMB Amount for the prior year
Equity attributable to shareholders of the Company
Minority interests Totalowners’ equity Paid-upcapital Less: Generalrisk Less: Paid-up capital Item (or share capital) Capital reserves treasury shares Special reserves Surplus reserves provisions Retained profit Others treasury shares (or share capital) I. Balance as at the end of the prior year 2,062,045,941.00 6,098,264,836.00 1,132,116,106.40 4,237,783,996.54 -1,588,560.03 1,459,152,539.48 14,987,774,859.39 Plus: Retrospective adjustments arising
from business combination under
common control
Plus: accounting policy changes
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,098,264,836.00 1,132,116,106.40 4,237,783,996.54 -1,588,560.03 1,459,152,539.48 14,987,774,859.39 III. Changes in the period (“-” denotes decrease) 316,628,163.53 -88,272,068.66 2,517,765.07 -873,230,786.28 -642,356,926.34 (I) Net profit 221,034,822.54 -174,348,565.47 46,686,257.07 (II) Other comprehensive income -267,566.25 2,517,765.07 2,250,198.82 Sub-total of (I) and (II) -267,566.25 221,034,822.54 2,517,765.07 -174,348,565.47 48,936,455.89 (III) Capital paid in and reduced by owners 316,895,729.78 -669,539,473.21 -352,643,743.43 1. Capital paid in by owners 156,396,050.57 156,396,050.57 2. Amounts of share-based payments
recognised inowners’ equity
3. Others 316,895,729.78 -825,935,523.78 -509,039,794.00 (IV) Profit distribution -309,306,891.20 -29,342,747.60 -338,649,638.80 1. Transfer to surplus reserves
2. Transfer to general risk provision
3. Distribution to owners
(or shareholders) -309,306,891.20 -29,342,747.60 -338,649,638.80 4, Others
(V) Transfer withinowners’ equity
1. Transfer from capital reserves
to capital (or share capital)
2. Transfer from surplus reserves
to capital (or share capital)
3. Transfer from surplus reserves
to make up for losses
4. Others
(VI) Special reserves
1. Appropriated in the period
2. Used in the period
(VII) Other
IV. Balance as at the end of the period 2,062,045,941.00 6,414,892,999.53 1,132,116,106.40 4,149,511,927.88 929,205.04 585,921,753.20 14,345,417,933.05
Legal Representative: Chen Hongguo Financial controller: Li Dong Head of the financial department: Liu Jun
142
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CHENMING
PAPER
HOLDINGS
LIMITED/2013
Annual
Report
XI Financial Report
8 Statement of changes inowners’ equity of the Company
Prepared by: Shandong Chenming Paper Holdings Limited
Amount for the reporting period
Unit: RMB Amount for the reporting period
Totalowners’ equity Paid-up capital Paid-up capital Item (or share capital) Capital reserves Less: treasury shares Special reserves Surplus reserves General risk provisions Retained profit (or share capital) I. Balance as at the end of the prior year 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 4,079,103,308.16 13,445,291,762.42 Plus: accounting policy change
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 4,079,103,308.16 13,445,291,762.42 III. Changes in the period (“-” denotes decrease) -86,573,974.00 -178,789,209.60 30,954,891.40 719,287,848.27 422,969,773.27 (I) Net profit 837,816,166.29 837,816,166.29 (II) Other comprehensive income
Sub-total of (I) and (II) above 837,816,166.29 837,816,166.29 (III) Capital paid in and reduced by owners -86,573,974.00 -178,789,209.60 30,954,891.40 -296,318,075.00 1. Capital paid in by owners -86,573,974.00 -178,789,209.60 30,954,891.40 -296,318,075.00 2. Amounts of share-based payments recognised inowners’ equity
3. Others
(IV) Profit distribution -118,528,318.02 -118,528,318.02 1. Transfer to surplus reserves
2. Transfer to general risk provision
3. Distribution to owners (or shareholders) -118,528,318.02 -118,528,318.02 4. Others
(V) Transfer withinowners’ equity
1. Transfer from capital reserves to capital (or share capital)
2. Transfer from surplus reserves to capital (or share capital)
3. Transfer from surplus reserves to make up for losses
4. Others
(VI) Special reserves
1. Appropriated in the period
2. Used in the period
(VII) Others
IV. Balance as at the end of the period 1,975,471,967.00 6,005,426,779.17 30,954,891.40 1,119,926,524.49 4,798,391,156.43 13,868,261,535.69 2013
Annual
Report
/SHANDONG
CHENMING
PAPER
HOLDINGS
LIMITED143
XI Financial Report
Amount for the prior year
Unit: RMB Amount for the prior year
Totalowners’ equity Paid-up capital Less: General Paid-up capital Item (or share capital) Capital reserves treasury shares Special reserves Surplus reserves risk provisions Retained profit (or share capital) I. Balance as at the beginning of the prior year 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 3,571,769,688.51 12,937,958,142.77 Plus: accounting policy changes
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 3,571,769,688.51 12,937,958,142.77 III. Changes in the period (“-” denotes decrease) 507,333,619.65 507,333,619.65 (I) Net profit 816,640,510.85 816,640,510.85 (II) Other comprehensive income
Sub-total of (I) and (II) 816,640,510.85 816,640,510.85 (III) Capital paid in and reduced by owners
1. Capital paid in by owners
2. Amounts of share-based payments recognised inowners’ equity
3. Others
(IV) Profit distribution -309,306,891.20 -309,306,891.20 1. Transfer to surplus reserves
2. Transfer to general risk provision
3. Distribution to owners (or shareholders) -309,306,891.20 -309,306,891.20 4. Others
(V) Transfer withinowners’ equity
1. Transfer from capital reserves to capital (or share capital)
2. Transfer from surplus reserves to capital (or share capital)
3. Transfer from surplus reserves to make up for losses
4. Others
(VI) Special reserves
1. Appropriated in the period
2. Used in the period
(VII) Other
IV. Balance as at the end of the period 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 4,079,103,308.16 13,445,291,762.42 Legal Representative: Chen Hongguo Financial controller: Li Dong Head of the financial department: Liu Jun
144
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PAPER
HOLDINGS
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Report
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XI Financial Report
III. General Information of the Company
Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”), whose predecessor was Shandong Shouguang Paper Mill Corporation, was reformed as Shandong Shouguang Paper Making, Printing and Packaging Group Company Limited through “offering to specific investors” in May 1993, with registered capital of RMB66,647,400 and total share capital of 66,647,400 shares. Its shareholding structure is as follows: 46,497,400sponsor’s state-owned shares accounting for69.76% of total share capital, 1,558,500 domestic legal person shares accounting for2.34% of total share capital and 18,591,500 staff shares, accounting for27.90% of total share capital.
On 21 August 1993, replied by the Reply on Changing Shandong Shouguang Papermaking, Printing and Packaging (Group) Incorporated Company as Shandong Shouguang Papermaking (Group) Incorporated Company (Shou Gai Fa[1993] No. 23) verified and issued by the Shandong Shouguang Office for Restructuring Economic System, Shandong Shouguang Papermaking, Printing and Packaging (Group) Incorporated Company was changed as Shandong Shouguang Papermaking (Group) Incorporated Company, with the relevant industrial and commercial alteration registration procedures completed on 8 October 1993. On 4 December 1996, according to the Letter on Agreeing to Determine Shandong Shouguang Papermaking Group Incorporated Company (Lu Ti Gai Han Zi[1996] No. 123) verified and issued by the Shandong Commission for Restructuring Economic System and the Shandong Incorporated Company Approval Certificate (Lu Zheng Gu Zi[1996] No. 98) verified and issued by thePeople’s Government of Shandong Province, it was agreed to change Shandong Shouguang Papermaking Group Incorporated Company as Shandong Chenming Paper Holdings Limited (present name of the Company).
On 27 October 1996, at the third general meeting of the Company, the Company passed the profit distribution plan to deliver 3.5 bonus shares per 10 shares for the year of 1995, and the proposal of converting such above shares into state- owned shares as well. After such bonus share issue and conversion into capital, theCompany’s share capital was changed from 66,647,400 shares into 99,840,990 shares.
In December 1996, with approval by the Letter on Recommending Shandong Shouguang Papermaking Group Incorporated Company to Issue B Shares (Lu Zheng Zi[1996] No. 270) verified and issued by thePeople’s Government of Shandong Province and Zheng Wei[1996] No. 59 of the Securities Committee of the State Council, the Company was changed as the incorporated company established by share offer.
On 4 February 1997, the Company held the fourth general meeting, which passed the proposal that the Company absorbed and merged Shouguang Yongli Paper Co., Ltd. and the profit distribution plan to deliver 4 bonus shares per 10 shares for 1996. After bonus shares distribution, theCompany’s share capital was changed from 99,840,990 shares into 158,855,665 shares.
On 30 April 1997, according to approval by the Letter on Recommending Shandong Shouguang Papermaking Group Incorporated Company to Issue B Shares (Lu Zheng Zi[1996] No. 270) verified and issued by thePeople’s Government of Shandong Province, the Reply on Shandong Chenming Paper Co., Ltd. to Issue Foreign Shares Listed in China (Zheng Wei Fa[1997] No. 26) verified and issued by the Securities Committee of the State Council, and Shen Zheng Fa[1997] No. 188 of the Shenzhen Stock Exchange, the Company issued 115,000,000 domestic listed foreign shares (B shares), which were listed on Shenzhen Stock Exchange on 26 May 1997. After issuance, theCompany’s total share capital was increased from 158,855,665 shares to 273,855,665 shares. The Company was changed as the foreign-invested incorporated company by the Reply on Changing Shandong Chenming Paper Group Incorporated Company as the Foreign-invested Incorporated Company([1997] Wai Jing Mao Zi Er Han Zi No. 415) verified and issued by the original Ministry of Foreign Trade and Economic Cooperation.
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III. General Information of the Company(Cont’d)
On 22 November 1997, the Company held the extraordinary general meeting in 1997 and passed the Proposal of Converting Capital Reserve into Share Capital by discussion, to convert capital reserve into share capital of 109,542,266 shares at the ratio of 10:4 according to theCompany’s share capital of 273,855,665 shares on 30 June 1997. Upon conversion, theCompany’s total share capital was changed to 383,397,931 shares.
With approval by the Notice about Approving Application of Shandong Chenming Paper Group Incorporated Company to Issue Shares (Zheng Jian Gong Si Zi[2000] No. 151) verified and issued by the China Securities Regulatory Commission on 30 September 2000 and the Notice of Listing (Sheng Zheng Shang[2000] No. 151) verified and issued by the Shenzhen Stock Exchange on 15 November 2000, the Company issued 70 million RMB ordinary shares (A shares), which were listed and traded on Shenzhen Stock Exchange on 20 November 2000. After issuance, theCompany’s total share capital was increased from 383,397,931 shares to 453,397,931 shares.
In May 2001, with approval by the Notice on Approving Non-listed Foreign Shares of Shandong Chenming Paper Group Incorporated Company for Circulation (Zheng Jian Gong Si Zi[2001] No. 44) verified and issued by the China Securities Regulatory Commission on 19 April 2001, 26,709,591 original non-tradable foreign legal person shares held by Guanghua Company were converted into B shares and listed on Shenzhen Stock Exchange. Listed tradable B shares of the Company were increased to 187,709,591 shares.
On 28 June 2001, the Company held 2000 general meeting and passed the year 2000 profit distribution plan by discussion. It presented 1 bonus share per 10 shares to all shareholders based on the total share capital of 453,397,931 shares at the end of 2000, to increase 45,339,793 shares in total. After the bonus shares distribution, theCompany’s total share capital was increased to 498,737,724 shares.
In May 2003, the Company implemented the 2002 profit distribution to present 2 bonus shares per 10 shares, and converted into 6 share capitals per 10 capital reserves to increase 398,990,179 shares in total. After the bonus shares distribution and conversion, theCompany’s total share capital was increased from 498,737,724 shares to 897,727,903 shares.
On 15 September 2004, with approval by the Notice on Approving Shandong Chenming Paper Group Incorporated Company to Publicly Issue Convertible Bonds([2004] No. 147) verified and issued by the China Securities Regulatory Commission, the Company publicly issued 20 million convertible bonds with face value of RMB100, total issuance of RMB2 billion and term of five years, and listed and traded on Shenzhen Stock Exchange on 30 September 2004. The conversion period lasted from 15 March 2005 to 15 September 2009. The bond was called Chenming Convertible Bond as its short name, with the convertible bond code of 125488.
On 29 April 2005, the Company held 2004 general meeting and passed the 2004 profit distribution plan by discussion. It converted into 3 share capitals per 10 capital reserves based on the total share capital of 897,727,903 shares at the end of 2004. TheCompany’s change of share capital was replied by the Reply on Agreeing Capital Increase of Shandong Chenming Paper Group Incorporated Company (Shang Zi Pi[2005] No. 1364) verified and issued by the Ministry of Commerce of thePeople’s Republic of China. According to the above resolution and reply, the Company implemented the distribution plan to deliver 2 bonus shares per 10 shares to all shareholders and converting into 3 capital shares per 10 capital reserves based on the total share capital of 897,728,913 shares on 19 May 2005, the date of record (as of 19 May 2005, the Company converted into share capital of 1,010 shares from convertible bonds). After the bonus shares distribution and conversion, theCompany’s total share capital was increased to 1,346,593,369 shares.
On 6 April 2007, theCompany’s 21st meeting of the fourth session of the board of directors discussed to pass the Proposal on Exercising Redemption Right for Convertible Bonds under Redemptive Condition but Not Converted. It decided that the Company could redeem the Chenming convertible bonds which were not converted before the date of redemption according to procedures agreed in the Prospectuses and105% of face value (including the current interests) after actually meeting relevant redemptive condition of the Prospectuses of convertible bonds. On 14 May 2007, the Company converted the Chenming Convertible Bonds and total shares were increased to 1,706,345,941 shares.
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III. General Information of the Company(Cont’d)
Replied by Zheng Jian Xu Ke[2008] No. 290 document of the Reply on Approving Shandong Chenming Paper Group Incorporated Company to Issue Foreign Shares by the China Securities Regulatory Commission, and with reply by the Stock Exchange of Hong Kong Ltd. (hereinafter referred to as the Stock Exchange of Hong Kong), the Company was approved to publicly issue the overseas listed foreign shares (H shares). The Company publicly offered 355,700,000 H shares all over the world and listed for trading on the main board of Stock Exchange of Hong Kong on 18 June 2008. The share was called Chenming Paper as its short name with the stock code of HK1812. After offering, theCompany’s total shares were increased to 2,062,045,941 shares.
Pursuant to resolutions of the 2012 Third Extraordinary General Meeting, resolutions of the 2012 First Class Meeting for Holders of Domestic Listed Share (A shares and B shares), resolutions of the 2012 First Class Meeting for Holders of Overseas Listed Share (H shares) and the Articles of Association (as amended), the Company applied for the reduction of share capital of RMB86,573,974, including a decrease of 86,573,974 Domestic Listed Foreign Shares (B shares) at RMB1 per share. From 7 March 2013 to 11 December 2013, the Company repurchased 86,573,974 Domestic Listed Shares (B shares), and the repurchased shares were cancelled on 24 December 2013. The share capital of the Company was RMB1,975,471,967 upon such change.
The Registration No. of the Business License for Enterprise Legal Person is 370000400001170.
The Company has a long business period. In the opinion of Directors of the Company, the Company is capable of operating subsidiaries of a limited business period as a going concern upon expiry of their business period.
As of 31 December 2013, the cumulatively issued total share capital of the Company was 1,975,471,967 shares. Please see Note VII. 37 for details.
The business scope of the Company and its subsidiaries (hereinafter referred to as the (“Group”) covers: 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.
Shouguang Chenming Holdings Co., Ltd is the parent company of the Group.
Shouguang Chenming Holdings Co., Ltd (hereinafter referred to as “Shouguang Chenming Holdings”) was established on 30 December 2005 by State-owned Assets Supervision and Administration Commission of Shouguang City which contributed its state-owned shares to set up the Company. The China Securities Regulatory Commission finally approved the change in the holder of state-owned Shares of Chenming Paper and the change in nature of its equity interests arising from the establishment of Shouguang Chenming Holdings on 14 August 2006 (Guo Zi Chan Quan[2005] No. 1539). Since then, the largest shareholder of the Company was changed from State-owned Assets Supervision and Administration Commission of Shouguang City to Shouguang Chenming Holdings.
TheCompany’s financial statements were approved for publication by the Board on 20 March 2014 (these financial statements will be proposed in the general meeting for approval in accordance with the Articles of Association of the Company).
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IV. Significant accounting policies, accounting estimates and differences in the previous period 1. Basis of Preparation of the Financial Statements
TheGroup’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 on 15 February 2006 and 41 specific accounting standards as promulgated and amended on and after the same date, the application guidelines of the Accounting Standards for Business Enterprises, interpretations and other related rules of the Accounting Standards for Business Enterprises (hereinafter referred to as “ASBEs”), and 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 in 2010) of China Securities Regulatory Commission.
In accordance with the requirements of “Notice on the issuance of‘Accounting Standard for Business Enterprises No. 39– Fair ValueMeasurement’” (Cai Kuai[2014] No. 6), “Notice on the issuance of amendment to‘Accounting Standard for Business Enterprises No. 30– Presentation of FinancialStatements’” (Cai Kuai[2014] No. 8), “Notice on the issuance of amendment to‘Accounting Standard for Business Enterprises No. 9– EmployeeBenefits’” (Cai Kuai[2014] No. 8)”, and “Notice on the issuance of amendment to‘Accounting Standard for Business Enterprises No. 33– Consolidated FinancialStatements’” (Cai Kuai[2014] No. 10)” and “Notice on the issuance of‘Accounting Standard for Business Enterprises No. 40– JointArrangement’” (Cai Kuai[2014] No. 11)”, entities listed overseas are encouraged to adopt the five accounting standards published or amended in 2014 early., As a result, the Group will adopt the five accounting standards above early with effect from 1 January 2013 as approved by the Fourth Meeting of the Seventh Session of the Board of the Company. For the details of changes in accounting policies arising from the adoption of the five accounting standards above, please refer to Note IV. 30 “Changes in Significant Accounting Policies and Estimates”.
TheGroup’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. Non-current assets held for sale are stated at the lower of fair value less estimated costs, and the original carrying value when it was qualified as held for sale. In the event that depreciation of assets occurs, a provision for impairment is made accordingly in accordance with the relevant regulations.
2. Statement of Compliance with the Accounting Standards for Business Enterprises
The financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financial positions of the Company and the Group as at 31 December 2013 and relevant information such as the operating results and cash flows of the Company and the Group of the first six months of 2013. 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 2010 and the notes thereto.
3. 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.
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, namely Chenming (HK) Co., Ltd., Chenming International Co., Ltd., Chenming Paper Japan Co., Ltd. and Chenming GmbH 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 Group prepares its financial statements in RMB.
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IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
5. Accounting treatment of business combination under common control and not under common control (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.
(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 bond 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 assets on the acquisition date, the difference is recognised as goodwill. Where the cost of a business combination is less than theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the acquirer shall first 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.
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IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
5. Accounting treatment 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) (see Note IV. 5(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 IV. 12 “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. Any other comprehensive income attributable to the equity interest in the acquiree prior to the acquisition date is transferred to investment income at disposal of the investment.
In consolidated financial statements, the equity interest in the acquiree held prior to the acquisition date is re-measured at fair value as at the acquisition date, and the difference between the fair value and the carrying amount is recognised as investment income for the current period. Any other comprehensive income attributable to the equity interest in the acquiree held prior to the acquisition date is transferred to investment income in the period of the acquisition date.
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IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
6. Basis for preparation of consolidated financial statements
(1) Basis for preparation of consolidated financial statements
① 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.
② Basis for preparation of the consolidated financial statements
Subsidiaries are consolidated from the date on which the Group 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 acquired through business combination under common control, the operating results and cash flows from the beginning of the consolidation period to the consolidation date are also presented in the consolidated income statement and the consolidated cash flow statements. The opening balance and comparative amounts presented in the consolidated financial statements are also adjusted accordingly.
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-group 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 interests is presented in the consolidated income statement under the” “net profit” line item as “minority interests”. 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 interests.
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IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
6. Basis for preparation of consolidated financial statements(Cont’d)
② Basis for preparation of the consolidated financial statements(Cont’d)
If the control over a subsidiary is lost due to partial disposal of 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 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 transferred to investment income at the time when the control is lost. 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 IV. 12 “Long-term equity investments” or Note IV. 9 “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 IV. 12 (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.
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IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
7. Standards for recognising cash and cash equivalents
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.
8. Foreign currency operations and translation of statements denominated in foreign currency
(1) Foreign currency operations
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 while theCompany’s foreign currency exchange operations and transactions in connection with foreign currency exchange shall be translated into functional currency at the exchange rate actually adopted.
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 (generally, a spot exchange rate is the middle price quoted by thePeople’s Bank of China on the day of transaction) on the balance sheet date. All differences are included in the consolidated income statement, except for: the differences arising from foreign currency borrowings related to the acquisition or construction of fixed assets which are qualified for capitalisation; and except for other carrying amounts of the amortisation costs, the differences arising from changes of the foreign currency items available for sale.
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 consolidated income and included in the capital reserves.
(2) Basis for translation of foreign currency financial statements
Exchange differences arising from change in exchange rate where the preparation of consolidated financial statements relates to overseas operation and foreign currency monetary items materially constitute net investment in overseas operation shall be recorded into “translation reserve” in theshareholders’ equity: disposal of overseas operation shall be included into profits and losses on disposal in the current period.
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IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
8. Foreign currency operations and translation of statements denominated in foreign currency(Cont’d) (2) Basis for translation of foreign currency financial statements(Cont’d)
The financial statements denominated in foreign currency of a foreign operation are translated to RMB in comply with the following requirement: 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 average 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 consolidated income, and presented separately as underowners’ equity items in the balance sheet. 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 operation 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.
The opening balance and the prioryear’s figures are presented according to the translated amounts of the prior year.
9. Financial instruments
(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.
(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 the following four categories for initial recognition: the financial assets at fair value through profit or loss, hold-to-maturity financial assets, loans and the account receivables, and financial assets available for sale. Financial assets are initially recognised at fair value. For financial assets 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 classified as other categories, relevant transaction costs are included in the amount initially recognised.
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IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
9. Financial instruments(Cont’d)
(2) Classification, recognition and measurement of financial assets(Cont’d)
① Financial assets carried at fair value through profit or loss for the current period
They include financial assets held for trading and financial assets designated as at fair value through profit or loss for the current period.
Financial assets may be classified as financial assets held for trading if one of the following conditions is met: A. the financial assets is acquired or incurred principally for the purpose of selling it in the near term; B. the financial assets is part of a portfolio of identified financial instruments that are managed together and for which there is objective evidence of a recent pattern of short-term profit-taking; or C. the financial assets is a derivative, excluding the derivatives designated as effective hedging instruments, the derivatives classified as financial guarantee contract, and the derivatives linked to an equity instrument investment which has no quoted price in an active market nor a reliably measured fair value and are required to be settled through that equity instrument.
A financial asset may be designated as at fair value through profit or loss upon initial recognition only when one of the following conditions is satisfied: A. Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise result from measuring assets or recognising the gains or losses on them on different bases; or B. The financial asset forms part of a group of financial assets or a group of financial assets and financial liabilities, which is managed and its performance is evaluated on a fair value basis, in accordance with theGroup’s documented risk management or investment strategy, and information about the grouping is reported to key management personnel on that basis.
A financial asset at fair value through profit or loss is subsequently measured at fair value. Any gains or losses arising from changes in the fair value and any dividend or interest income earned on the financial asset are recognised in profit or loss in the current period.
② Held-to-maturity investments
They are non-derivative financial assets with fixed maturity dates and fixed or determinable payments that the Group has positive intent and ability to hold to maturity.
Held-to-maturity investments are subsequently measured at amortised cost using the effective interest method. Gain or loss on derecognition, impairment or amortisation is recognised through profit or loss for the current period.
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income or expense over each period based on the effective interest of a financial asset or a financial liability (including a group of financial assets or financial liabilities). The effective interest is the rate that discounts future cash flows from the financial asset or financial liability over its expected life or (where appropriate) a shorter period to the carrying amount of the financial asset or financial liability. In calculating the effective interest rate, the Group will estimate the future cash flows (excluding future credit losses) by taking into account all contract terms relating to the financial assets or financial liabilities whilst considering various fees, transaction costs and discounts or premiums which are part of the effective interest rate paid or received between the parties to the financial assets or financial liabilities contracts.
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IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
9. Financial instruments(Cont’d)
(2) Classification, recognition and measurement of financial assets(Cont’d)
③ 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 Group. 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.
④ Available-for-sale financial assets
They include non-derivative financial assets that are designated in this category on initial recognition, and the financial assets other than the financial assets at fair value through profit and loss, loans and receivables and held-to-maturity investments.
Available-for-sale financial assets are subsequently measured at fair value. The gain or loss on change in fair value are recognised as other comprehensive income and charged to capital reserves, except for impairment loss and exchange differences arising from foreign monetary financial assets and amortised cost which are accounted for 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.
Interests received from available-for-sale financial assets held and the cash dividends declared by the investee are recognised as investment income.
(3) Impairment of financial assets
In addition to financial assets at fair value through profit or loss for the current period, the Group reviews the book value of other financial assets at each balance sheet date and provide for impairment where there is objective evidence that financial assets are impaired.
For a financial asset that is individually significant, the Group assesses the asset individually for impairment. For a financial asset that is not individually significant, the Group 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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
9. Financial instruments(Cont’d)
(3) Impairment of financial assets(Cont’d)
① Impairment of held-to-maturity investments and 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 shall be reversed to the extent that the carrying value of the financial assets upon reversal will not exceed 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 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 accumulative decline in fair value is more than20%. “Non-temporary decline” refers to the fair value decreased continuously for more than 12 months. The continuous decreasing period is determined on the basis of the drop of fair value accumulated over10%.
When the available-for-sale financial assets impair, the accumulated loss originally included in the capital reserve arising from the decrease in fair value was transferred out from the capital reserve and included in the profit or loss for the period. The accumulated loss that transferred out from the capital reserve is the balance of the acquired initial 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 consolidated 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.
(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 recover 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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
9. Financial instruments(Cont’d)
(4) Recognition and measurement of transfers of financial asset(Cont’d)
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 it as a related financial asset and recognises 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.
On derecognition of a financial asset, the difference between the following amounts is recognised in profit or loss for the current period: the carrying amount and the sum of the consideration received and any accumulated gain or loss that had been recognised directly in equity.
If a part of the financial assets qualifies 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 period: the sum of the consideration received and the carrying amount of the part that qualifies for derecognition and the aforementioned carrying amount.
(5) Classification and measurement of financial liabilities
Financial liabilities are classified at initial recognition: at fair value and changes are carried through profit and loss as financial liabilities and other financial liabilities. Financial liabilities are initially recognised at fair value. For 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 liabilities classified as other categories, relevant transaction costs are included in the amount initially recognised.
① Financial liabilities measured at fair value and whose changes are carried through profit or loss for the period
The criteria for a financial liability to be classified as held for trading and designated as at financial liabilities at fair value through profit or loss are the same as those for a financial asset to be classified as held for trading and designated as at financial assets at fair value through profit or loss.
Financial liabilities at fair value through profit or loss for the period are subsequently measured at fair value. The gain or loss arising from changes in fair value and dividends and interest income related to such financial liabilities are included into the current profit or loss.
② Other financial liabilities
Derivative financial liabilities which are linked to equity instruments that are not quoted in an active market and the fair value of which cannot be measured reliably measured, and which shall be settled by delivery of equity instruments are subsequently measured at cost. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Gains or losses arising from derecognition or amortisation is recognised in profit or loss for the current period.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
9. Financial instruments(Cont’d)
(5) Classification and measurement of financial liabilities(Cont’d)
③ Financial Guarantee Contracts and loan commitments
Financial guarantee contracts other than those designated as financial liabilities at fair value through profit or loss, or loan commitments other than those designated as financial liabilities at fair value through profit or loss with interest rate lower than market level, are initially recognised at fair value, and shall be subsequently measured at the higher of the following: the amount determined in accordance with Accounting Standard for Business Enterprises No. 13 “Contingencies” and the amount initially recognised less cumulative amortisation recognised in accordance with the principles set out in Accounting Standard for Business Enterprises No. 14 “Revenue”.
(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 Group (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 Group owns the legitimate rights of offsetting the recognised financial assets and financial liabilities, which are enforceable currently, and the Group plans to realise the financial assets or to clear off the financial liabilities by net amount method, the amount of the offsetting financial assets and financial liabilities shall be reported in the balance sheep. 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 of its liabilities. For equity instruments, the price received during the issue shall be added toshareholder’s equity after reducing the transaction fees.
Various distributions (excluding dividends) made by the Group to helders of equity instruments reducesowners’ equity. The Group does not recognise the movement in fair value of equity instruments.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
10. Basis for recognition and measurement of bad debt provision for accounts receivable
Basis for recognition and measurement of bad debt provision
The Group 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.
(1) Bad debt provision for individually significant accounts receivable
Basis of determination or Accounts receivable of more than RMB1 million is recognised as individually criterion of amount for significant accounts receivable by the Group.
individually significant items
Method for making bad debt For accounts receivable that is individually significant, the Group assesses provision individually for such accounts receivable individually for impairment. If it is determined individually significant items 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) Accounts receivable provided for bad debt by portfolio
Method for making
bad debt provision
Name of portfolio by portfolio Basis for determining the portfolio
Risk-free portfolio No bad debt provision Accounts receivable which are individually significant or have certain specific risk features and are determined by the management to be not impaired as at the balance sheet date upon subject to impairment tests separately.
General-risk portfolio Ageing analysis Accounts receivable for which bad debts are provided under credit risk portfolio as they are not qualified to be subject to impairment tests separately (individually significant or have certain specific risk features) and are classified into some portfolios based on the credit risk features such as age and the percentage of bad debt provision of each portfolio is determined against the common risk features of each portfolio by the management.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
10. Basis for recognition and measurement of bad debt provision for accounts receivable(Cont’d)
(2) Accounts receivable provided for bad debt by portfolio(Cont’d)
Use of ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Ratio of Ratio of accounts other accounts 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% Use of percentage of amount outstanding for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
Use of other methods for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Name of portfolio Method
Risk-free portfolio No bad debt provision
(3) Accounts receivable individually insignificant but provided for bad debt separately
Reasons for making bad Accounts receivable which are individually insignificant but have the following debt provisions separately features are subject to impairment tests separately by the Group. 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: amounts due from connected parties; 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.
(4) 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 revered 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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
11. Inventories
(1) Classification of inventories
Inventories mainly include raw materials, work in progress, goods in stock and development products etc. (2) Pricing of inventories dispatched
Pricing method: weighted average method
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 inventories of land development companies under the Company are initially measured at cost. The inventoeis primarily consist of land development products. The costs of developing products include pre- constuction costs, expenditures for auxihuliary 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 acutual costs will be determined using specific measurement methods.
(3) Recognition of net realisable value of inventory and provision for inventory impairment
At the balance sheet date, inventories are calculated at the lower of cost and net realisable value. 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 realizable value.
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. Net realisable value refers to the amount of the estimated price of inventories less the estimated cost incurred upon completion, estimated sales expenses and other amounts after tax 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.
(4) The inventory stock taking system
Stock taking system: permanent inventory system
(5) Amortisation of low-value consumables and packaging materials
Low-value consumables
Amortisation method: lump-sum
Packaging materials
Amortisation method: lump-sum
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
12. Long-term equity investments
(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 of the party being absorbed at the date of combination. For a long-term equity investment acquired through business combination not involving enterprises under common control, the business combination cost is the aggregate of assets paid, liabilities incurred or undertook and fair value of equity securities issued by the acquirer. Agent fees incurred by the 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. Transaction cost incurred for issuing equity securities or debt securities, which are used as consideration for the combination, are included in the initial recognition amount of the equity securities or debt securities.
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 Group in cash, the fair value of equity securities issued by the Group, 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 Group, 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.
(2) Subsequent measurement and profit or loss recognition
Cost method is used to account for a long-term equity investment where the investor does not have joint control or significant influence over the investee, and the investment is not quoted in an active market and its fair value cannot be reliably measured. Long-term equity investments with joint control (excluding those constitute joint ventures) or significant influence on the investee are accounted for using equity method. Long-term equity investment without control or joint control or significant influence with a fair value which can be reliably measured 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.
In addition, long-term equity investments with control on the investee are accounted for using cost method and record in theCompany’s financial statements.
① 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. 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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
12. Long-term equity investments(Cont’d)
(2) Subsequent measurement and 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 or loss represents theGroup’s share of the net profits or losses made by the investee for the current period. The Group shall recognize 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 conformity with the accounting policies and accounting periods of the Group. The unrealised gain or loss from internal transactions entered into between the Group and its associated enterprises and joint ventures is set off according to the shareholding attributable to the Group and accounted for as investment income and loss based such basis. However, the unrealised gain or loss from internal transactions entered into between the Group and its investee is not set up if belonging to impairment loss from assets transferred according to regulations such as “Accounting Standards for Business Enterprises No. 8 “Assets impairment”. In respect of the other consolidated income of investees, the carrying amount of long-term equity investments is accordingly adjusted and recognised as other consolidated income and included in the capital reserves. TheGroup’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 Group 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 Group 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 Group 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.
③ Acquisition of minority interests
Upon the preparation of the consolidated financial statements, since acquisition of minority interests increased of long-term equity investment which was compared to fair value of identifiable net assets recognised which are measured based on the continuous measurement since the acquisition date (or combination date) of subsidiaries attributable to the Group calculated according to the proportion of newly acquired shares, the difference of which recognised as adjusted capital surplus, capital surplus insufficient to set off impairment and adjusted retained earnings.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
12. Long-term equity investments(Cont’d)
(2) Subsequent measurement and profit or loss recognition(Cont’d)
④ Disposal of long-term equity investments
In these consolidated financial statements, where the parent company disposes of a portion of the longterm equity investments in a subsidiary without a change in 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 change in control, it shall be accounted for in accordance with the relevant accounting policies as described in Note IV. 6. (1) “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. Where the equity method is adopted, other comprehensive income attributable to the long term equity investments previously included inshareholders’ equity shall be transferred to through profit or loss in the current period on a pro-rata basis. The remaining equity shall be recognised as the long-term equity investments or other relevant financial assets based on the carrying amount and subsequently measured in accordance with the accounting policies of the foresaid long-term equity investments or financial assets. The retrospective adjustment shall be made in accordance with the relevant provisions if the remaining equity is accounted for using the equity method instead of the cost method.
(3) Recognition of having joint control or significant influence over the investee
The term “control” means that the Group has the power to decide anenterprise’s financial and operating policy, pursuant to which, the Group can get the power to obtain benefits from its operating activities. Joint control is the contractually agreed sharing of control over an economic activity, which only exists when relevant and important financial affairs and management decisions related to such economic activity require sharing of control by investors who unanimously agree upon. Significant influence is the power to participate in the financial and operating policy decisions of an enterprise, but to fail to control or joint control the formulation of such policies together with other parties. In determining whether there is control or significance influence over the investee, potential voting right factors (such as the convertible corporate bonds for the period and the exercisable stock warrants for the period of the investee and other invested units held) were taken into account. (4) Impairment test method and impairment provision
The Group assesses at each balance sheet date whether there is any indication that any long-term equity investments may be impaired. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated for the individual asset. If the recoverable amount of an asset is less than its carrying amount, the reduction is recognised as an impairment loss and charged to profit or loss for the current period. A provision for impairment loss of the asset is recognised accordingly. An impairment loss recognised on long- term equity investments shall not be reversed in a subsequent period.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
13. Joint arrangements
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 “long-term equity investment 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 to or purchase assets (the assets dose not constitute a business, the same below) 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 our 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.
14. Investment Property
Investment property refer to real estate held to earn rentals or for capital appreciation, or both including the land use right that have been leased out; the land use right that held and will be transferred after appreciation; and the building that have been leased out.
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 Group 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 Group adopts cost method for subsequent measurement of investment property, which is depreciated or amortised using the same policy as that for buildings and land use rights.
The method for impaired test of investment property and measurement of impairment provision are detailed in Note IV. 21 “Impairment of non-current non-monetary financial asset”.
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 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 amount and related tax and surcharges is recognised in profit or loss for the current period.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
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.
(2) Method for depreciation of different fixed assets
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. Depreciation is provided over its estimated useful life from the next month after it has been brought to its working condition for its intended use using the straight-line method. Estimated net residual value of a fixed asset is the estimated amount that the Group 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.
The useful life, estimated residual value and annual depreciation rate of each category of a fixed asset are as follows:
Annual Useful lives of Estimated depreciation Category depreciation (Year) residual value(%) rate(%) Housing and buildings structures 20-40 5%-10% 2.25-4.75 Machinery and equipment 8-20 5%-10% 4.5-11.88 Electronic equipment 5 5%-10% 18.00-19.00 Transportation equipment 5-8 5%-10% 11.25-19.00 (3) Impairment testing methods and provision for impairment methods on fixed assets
The method for impaired test of fixed asset and measurement of impairment provision are detailed in Note IV. 21 “Impairment of non-current non-monetary financial asset”.
(4) 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.
When a fixed asset is sold, transferred, retired or damaged, the Group 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 Group 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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(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 transferred 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 IV. 21 “Impairment of non-current non-monetary financial 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 borrowed for general purpose, the Group shall determine the amount of interest to be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditures on the asset 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 related to the principal and interest on a specific purpose borrowing denominated in foreign currency shall be capitalised as part of the cost of the qualifying asset. 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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
18. Consumable biological assets
Consumable biological assets refer to biological assets held for sale or to be harvested as agricultural produce in the future, which include growing commercial forests. Consumable biological assets are stated at cost at initial recognition, subsequently measured at fair value. 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 incurred after canopy closure shall be included in profit or loss for the current period.
The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carrying value using the rotation age method.
19. Intangible assets
(1) Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled by the Group.
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 Group 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 Group 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 accounted for as a change in accounting estimate. For an intangible asset with an indefinite useful life, the Group shall review the useful life of the asset in each accounting period. If there is evidence indicating that the useful life of that intangible asset is finite, Chenming Paper shall estimate the useful life of that asset and apply the accounting policies accordingly.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
19. Intangible assets(Cont’d)
(2) Research and development expenditure
Research and development expenditure of the Group 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; 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) Method for impairment test of intangible asset and measurement of impairment provision
The method for impaired test of intangible asset and measurement of impairment provision are detailed in Note IV. 21 “Impairment of non-current non-financial assets”.
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 are amortised over the estimated benefit period using the straight-line method.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
21. Impairment of non-current non-financial assets
The Group will judge if there is any indication of impairment as at the balance sheet date in respect of non-current 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 Group 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 shall be allocated to the asset groups or group of assets benefiting from synergy of business combination. If the recoverable amount is less than the carrying amount, the Group 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.
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 Group; (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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
23. Repurchase of ChenmingPaper’s shares
Share repurchase consideration paid and transaction costs to reduce theowner’s equity, repurchase, transfer or cancellation of ChenmingPaper’s shares, the gains or losses are not recognised.
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. 24. Revenue
(1) The specific criteria for recognition of 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) Basis for recognition of 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.
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 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 Group 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 theGroup’s monetary fund, and the effective interest rates.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
25. Government grant
(1) Types
Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at no consideration, excluding capital considerations from the government as an owner of the Group. 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; and② in case of general description without specifying any project in such documents, the grants are classified as related to income.
(2) Accounting policy
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 by local financial authorities in accordance with the requirements under disclosure of government information, where such policies should be open to any company satisfying conditions required and not specifically for certain companies; and③ 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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(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 Group 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 Group 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. 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 profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Group 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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
26. Deferred income tax assets/deferred income tax liabilities(Cont’d)
(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.
(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 Group, at the same time, records the net amount after offsetting its current income tax assets and current income tax liabilities.
The Group 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 Group records the net amount after offsetting its current income tax assets and current income tax liabilities.
27. Other comprehensive income
Any profit or loss not recognised in profit or loss for the current period in accordance with other accounting policies is stated as other comprehensive income. Under related accounting policies, other comprehensive income is classified into:
(1) Those not to be reclassified into profit or loss in subsequent periods, which mainly includes changes arising from re-measuring net assets or net liabilities of defined benefit plan, share ofinvestee’s other comprehensive income not to be reclassified into profit or loss in subsequent periods using the equity method;
(2) Those to be reclassified into profit or loss after meeting certain criteria in subsequent periods, which mainly includes share ofinvestee’s other comprehensive income to be reclassified into profit or loss after meeting certain criteria in subsequent periods, profit or loss arising from change of fair value of available-for-sale financial assets, profit or loss arising from reclassifying held-to-maturity investment into available-for-sale financial assets, the effectively hedged portion in profit or loss generated from cash flow hedging instruments, translation difference of foreign currencies in financial statements.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
28. 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 Group recorded as lessee
Lease payment for operating lease is recognised as related asset cost or profits and losses for the current period using the straight-line method over the lease term. The initial direct cost is directly accounted in profit or loss for the current period. Contingent rent is recognised as profit or loss for the current period upon occurrence.
(2) Operating lease business with the Group 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.
29. Employee benefits
In the accounting period in which an employee has rendered service to the Group, the Group recognises the employee benefits payable as a liability.
Expenditures paid by the Group for the social security system set up by the government, such as basic pension insurance, medical insurance, housing funds and others, are recognised in the costs of related assets or the current profit or loss.
When the Group 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 compensation for staff dismissal and account for profit or loss at the current period, when the Company cannot revoke unilaterally compensation for dismissal due to the cancellation of labour relationship plans and employee redundant proposals; the Company recognise cost and expenses related to payment of compensation for dismissal and restructuring, whichever is earlier.
The early retirement plan shall be accounted for in accordance with the accounting principles for compensation for termination of employment. 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 Group to the scheduled retirement date, shall be recognised (as compensation for termination of employment) in the current profit or loss if the recognition principles for provisions are satisfied.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
30. Changes in Significant Accounting Policies and Estimates
Any changes in significant accounting policies and accounting estimates during the reporting period
Yes□ No
In accordance with the requirements of “Notice on the issuance of‘Accounting Standard for Business Enterprises No. 39– Fair ValueMeasurement’” (Cai Kuai[2014] No. 6), “Notice on the issuance of amendment to‘Accounting Standard for Business Enterprises No. 30– Presentation of FinancialStatements’” (Cai Kuai[2014] No. 8), “Notice on the issuance of amendment to‘Accounting Standard for Business Enterprises No. 9– EmployeeBenefits’” (Cai Kuai[2014] No. 8)”, and “Notice on the issuance of amendment to‘Accounting Standard for Business Enterprises No. 33– Consolidated FinancialStatements’” (Cai Kuai[2014] No. 10)” and “Notice on the issuance of‘Accounting Standard for Business Enterprises No. 40– JointArrangement’” (Cai Kuai[2014] No. 11)”, entities listed overseas are encouraged to adopt the five accounting standards published or amended in 2014 early., As a result, the Group will adopt the five accounting standards above early with effect from 1 January 2013 as approved by the Fourth Meeting of the Seventh Session of the Board of the Company.
The changes in accounting policies arising from the adoption of the above accounting standards by the Group do not have any effect on the financial statements for the reporting period.
31. Corrections on accounting errors in prior periods
Any prior accounting errors identified during the reporting period
□ Yes√ No
There were no accounting errors for prior periods identified during the year.
32. Significant accounting policies and accounting estimates
The Group needs to make judgments, estimates and assumptions as to the carrying amount of statement items which cannot be accurately calculated during the application of theGroup’s accounting policies. Such judgments, estimates and assumptions are made based on the historical experiences of theGroup’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 cause critical adjustment to the carrying amount of assets or liabilities which may be affected in the future. The Group 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 Group needs to make judgments, estimates and assumptions as to the items amount of financial statements are set out below:
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
32. Significant accounting policies and accounting estimates(Cont’d)
Critical accounting judgments and estimate
(1) Provision for bad debts
The Group 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.
(2) Allowance for inventories
Under the accounting policies of inventories and by measuring at the lower of cost and net realisable value, the Group 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 saleability 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.
(3) Subsequent measurement of biological assets
The Group has appointed an independent professional valuer to value the fair value of the biological assets. When the valuer determines the fair value, the valuation method used by the valuer includes some assumptions. Directors have judged that the valuation method reflects the prevailing market conditions.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
32. Significant accounting policies and accounting estimates(Cont’d)
(4) Provision for impairment of non-financial non-current assets
At the balance sheet date, the Group 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.
In projecting the present value of the future cash flows, critical judgments shall be made to the output, selling price and relevant operating costs of such assets (or asset groups) and the discount rate applied in calculating the discount. In estimating the recoverable amount, the Group 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 Group 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.
(5) Depreciation and amortisation
The Group 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 Group 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 Group 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.
XI Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period(Cont’d)
32. Significant accounting policies and accounting estimates(Cont’d)
(6) 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 theGroup’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. (7) Income tax
There are some uncertainties in tax treatment and calculation for some transactions of the Group 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.
XI Financial Report
V. Taxation
1. Main Tax Types and Tax Rates of Chenming Paper
Tax type Basis of taxation Tax rate
Value added tax Sales of goods 17% for general and13% for sales of gas and water. Value- added tax is computed on the difference after deduction of input value-added tax.
Business tax Rental income 3%-5%
Urban maintenance Value-added tax and 7%
and construction business tax paid
tax
Enterprise income Taxable income 25%,15% for high-tech enterprise and20% for small-size tax enterprise
Educational Value-added tax and 3%
surcharges business tax paid
Local educational Value-added tax and 2%
surcharges business tax paid
XI Financial Report
V. Taxation(Cont’d)
1. Main Tax Types and Tax Rates of Chenming Paper(Cont’d)
Rate of income tax for subsidiaries and branch factories
Rate of Rate of Rate of Subsidiary income tax Subsidiary income tax Subsidiary income tax Shandong Chenming Paper 15% Huanggang Chenming 25% Wuhan Chenming Qianneng 25% Holdings Limited Pulp&Paper Co., Ltd. Electric Power Co., Ltd.
Wuhan Chenming Hanyang 25% Huanggang Chenming Tax free Jilin Chenming Machinery 25% Paper Holdings Co., Ltd. Arboriculture Co., Ltd. Manufacturing Co., Ltd.
Shandong Chenming Power 25% Shouguang Shun Da Customs 25% Shouguang Chenming Cement 25% Supply Holdings Co., Ltd. Declaration Co, Ltd. Co., Ltd.
Hailaer Chenming Paper 25% Chenming International — Shandong Chenming Panels 25% Co., Ltd. Co., Ltd. Co., Ltd.
Haicheng Haiming Mining 25% Shouguang Chenming Hongxin 25% Shouguang Chenming 25% Company Limited Packaging Co., Ltd. Floor Board Co., Ltd.
Jiangxi Chenming Paper 15% Shouguang Chenming 25% Shandong Chenming Xinli 25% Co., Ltd. Papermaking Machine Power Co., Ltd.
Co., Ltd.
Shouguang Chenming Tianyuan 25% Shouguang Chenming Import 25% Nanchang Chenming Tax free Arboriculture Co., Ltd. and Export Trade Co., Ltd. Arboriculture Co., Ltd.
Shandong Grand View Hotel 25% Shouguang Chenming 25% Shouguang Hongyi Decorative 25% Co., Ltd. Industrial Logistics Co., Ltd. Packaging Co., Ltd.
Shouguang Chenming Art Paper 25% Shouguang Chenming Jiatai 25% Shouguang Xinyuan Coal 25% Co., Ltd. Property Management Co., Ltd.
Co., Ltd.
Jilin Chenming Paper Co., Ltd. 25% Shouguang Hengfeng 25% Shouguang City Run Sheng 25% Storage Co., Ltd. Wasted Paper Recycle
Co., Ltd.
Zhanjiang Chenming Pulp& 25% Japan Chenming Paper — Shouguang Wei Yuan Logistics 25% Paper Co., Ltd. Company Limited Company Limited
Shouguang Meilun Paper 25% Chenming GmbH — Wuxi Song Ling Paper Co., Ltd. 25% Co. Ltd.
Shandong Chenming Paper 25% Zhanjiang Chenming New-style 25% Guangdong Huirui Investment 25% Sales Company Limited Wall Materials Co., Ltd. Co., Ltd.
Chenming (HK) Limited 16.5% Zhanjiang Chenming Tax free Shouguang Hongxiang Printing 25% Arboriculture Co., Ltd. and Packaging Co., Ltd.
Shouguang Chenming Modern 25% Yangjiang Chenming Tax free Shandong Chenming Paper 25% Logistic Co., Ltd. Arboriculture Co., Ltd. Group (Fuyu) Sales Co., Ltd.
Fuyu Chenming Paper Co., Ltd. 25% Zhanjiang Meilun Pulp& Paper 25%
Co., Ltd.
XI Financial Report
V. Taxation(Cont’d)
2. Business tax to value-added tax
Income from transportation business was previously subject to business tax at3%. Pursuant to requirements including Notice in relation to Pilot Tax Collection Policy in the Transportation Industry and Certain Modern Service Industries Issued by the Ministry of Finance and the State Administration of Taxation (Cai Shui[2013] No. 37), income of certain subsidiaries of the Company, namely Shouguang Chenming Modern Logistic Co., Ltd. and Shouguang Wei Yuan Logistics Company Limited, were subject to value-added tax at11% from 1 August 2013.
3. Tax Incentives and Approvals
(1) Enterprise Income Tax:
Pursuant to the requirements 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》) dated 16 March 2007, the Company is recognised as a high and new technology enterprise which needs the major support of the state as approved by State Taxation Administration of Shouguang, Shandong. An enterprise income tax rate of15% is applicable to the Company from 1 January 2012 to 31 December 2014.
Pursuant to the requirements 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》) dated 16 March 2007, Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, is recognised as a high and new technology enterprise which needs the major support of the state as approved by State Taxation Administration of Nanchang Economic and Technological Development Zone, Jiangxi. An enterprise income tax rate of15% is applicable to Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, from 1 January 2012 to 31 December 2015.
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. and Huanggang 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 2013 was16.5%. Except for the above preferential policies, Chenming Paper and its remaining subsidiaries are subject to enterprise income tax rate of25%.
XI Financial Report
V. Taxation(Cont’d)
3. Tax Incentives and Approvals(Cont’d)
(2) Value-added Tax (“VAT”) incentives:
Pursuant to Cai Shui[1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of Resources” issued by the State Administration of Taxation”, enterprises engaged in utilisation of raw materials containing not less than30% of coal gangue, stone coal, coal ash, bottom ash of coal boiler (excluding blast 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 2013.
Pursuant to Cai Shui Zi[1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of Resources issued by the Ministry of Finance and the State Administration of Taxation” and the relevant requirements of Cai Shui[2001] Document No. 72, Shandong Chenming Panels Co., Ltd., a subsidiary of the Company, produce products that apply integrated use of resources and is subject to an immediate VAT refund policy.
XI Financial Report
VI. Business Combination and Consolidated Financial Statements
1. Subsidiaries
(1) Subsidiaries acquired through establishment or investment
Unit: RMB Setting off of the loss attributable to the minority shareholders of the subsidiaries in the current period from theowner’s equity of the Company Balance of exceeds other projects Minority the minority that interestshareholders’ substantially used to offset portion of Actual forms net the profit or the opening investment as investment loss of balance of Place of Business Registered at the end in the Shareholding Voting rights Whether Minority the minorityowners’ equity Full name of subsidiary Subsidiary type Incorporation Nature capital Business activity of the period subsidiary (%) (%) consolidated interests interests of the subsidiary Wuhan Chenming Hanyang Controlling Wuhan, China Manufacture of 211,370,000 Manufacture and sales of 202,820,000.00 50.93% 50.93% Yes 203,521,200.00
Paper Holdings Co., Ltd. subsidiary paper paper products, the
materials of manufacture
of paper and machinery
Shandong Chenming Controlling Shouguang, Electricity 99,550,000 Manufacture and supply 157,810,000.00 86.71% 86.71% Yes 24,769,300.00
Power Supply subsidiary China of electricity and heat
Holdings Co., Ltd.
Hailaer Chenming Paper Controlling Hailaer, China Manufacture 16,000,000 Sales and processing; 12,000,000.00 75% 75% Yes 15,306,100.00
Co., Ltd. subsidiary of paper sales of machine- made
paper and pulp paper
Haicheng Haiming Controlling Haicheng, China Mining 240,000,000 Processing and sales 144,000,000.00 60% 60% Yes 96,000,000.00
Mining Company Limited subsidiary of magnesite and talc
Jiangxi Chenming wholy-owned Nanchang, China ManufactureUS$272 million Production and processing 1,206,590,000.00 100% 100% Yes 0.00
Paper Co., Ltd. subsidiary of paper of machine-made paper,
paperboard, paper panel,
paper products and
paper-making
raw materials, etc.
Shouguang Chenming Controlling Shouguang, Arboriculture 10,590,000 Development, nurture 7,200,000.00 68% 68% Yes -974,100.00
Tianyuan Arboriculture subsidiary China of fast growth
Co., Ltd. poplar, forest,
vegetable and fruit
Shandong Grand View Controlling Shouguang, Restaurant andUS$13.9057 Restaurant and 80,500,000.00 70% 70% Yes -17,199,200.000
Hotel Co., Ltd. subsidiary China beverage million beverage services
Shouguang Chenming Controlling Shouguang, ManufactureUS$20 million Production and sales 113,620,000.00 75% 75% Yes 32,654,100.00
Art Paper Co., Ltd. subsidiary China of paper of machine-made
paper and others
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
1. Subsidiaries(Cont’d)
(1) Subsidiaries acquired through establishment or investment(Cont’d)
Unit: RMB Setting off of the loss attributable to the minority shareholders of the subsidiaries in the current period from theowner’s equity of the Company Balance of exceeds other projects Minority the minority that interestshareholders’ substantially used to offset portion of Actual forms net the profit or the opening investment as investment loss of balance of Place of Business Registered at the end in the Shareholding Voting rights Whether Minority the minorityowners’ equity Full name of subsidiary Subsidiary type Incorporation Nature capital Business activity of the period subsidiary (%) (%) consolidated interests interests of the subsidiary Jilin Chenming Paper Wholly-owned Jilin City, China Manufacture of 1,500,000,000 Processing and sales 1,501,350,000.00 100% 100% Yes 0.00
Co., Ltd. subsidiary paper of machine-made
paper, paperboard,
paper product, paper pulp
Zhanjiang Chenming Wholly-owned Zhanjiang, China Paper pulp 3,000,000,000 Processing and sales 3,000,000,000.00 100% 100% Yes 0.00
Pulp& Paper Co., Ltd. subsidiary of paper pulp
Shouguang Meilun Wholly-owned Shouguang, China Manufacture 2,200,000,000.00 Production and sales 2,200,000,000.00 100% 100% Yes 0.00
Paper Co. Ltd. subsidiary of paper of machine-made
paper and paperboard
Shandong Chenming Paper Wholly-owned Shouguang, China Sales of paper 100,000,000 Sales of machine-made 100,000,000.00 100% 100% Yes 0.00
Sales Company Limited subsidiary paper, paperboard and
paper makin raw materials
Chenming (HK) Limited Wholly-owned Hong Kong, Trade of paperUS$10.10 million Export and import 62,580,000.00 100% 100% Yes
subsidiary China trade of paper products
and market research
Shouguang Chenming Wholly-owned Shouguang, Transportation 10,000,000 Transportation of goods 10,000,000.00 100% 100% Yes 0.00
Modern Logistic Co., Ltd. subsidiary China
Fuyu Chenming Paper Wholly-owned Fuyu, China Manufacture 208,000,000 Production and sales 208,000,000.00 100% 100% Yes 0.00
Co., Ltd. subsidiary of paper of machine-made paper
and paperboard
Huanggang Chenming Wholly-owned Huanggang, Manufacture 20,000,000 Operation and acquisition 20,000,000.00 100% 100% Yes 0.00
Pulp& Paper Co., Ltd. subsidiary China of paper of forest; establishment
of paper pulp projects
Huanggang Wholly-owned Huanggang, Arboriculture 70,000,000 Plantation, processing 70,000,000.00 100% 100% Yes 0.00
Chenming Arboriculture subsidiary China and sales of forests
Co., Ltd.
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
1. Subsidiaries(Cont’d)
(1) Subsidiaries acquired through establishment or investment(Cont’d)
Unit: RMB Setting off of the loss attributable to the minority shareholders of the subsidiaries in the current period from theowner’s equity of the Company Balance of exceeds other projects Minority the minority that interestshareholders’ substantially used to offset portion of Actual forms net the profit or the opening investment as investment loss of balance of Place of Business Registered at the end in the Shareholding Voting rights Whether Minority the minorityowners’ equity Full name of subsidiary Subsidiary type Incorporation Nature capital Business activity of the period subsidiary (%) (%) consolidated interests interests of the subsidiary Shouguang Shun Wholly-owned Shouguang, Customs 1,500,000 Business agency of 1,500,000.00 100% 100% Yes 0.00
Da Customs subsidiary China declaration, professional customs
Declaration Co., Ltd. inspection declaration and
declaration inspection declaration
Chenming International Wholly-owned Los Angeles, U.S. Import and US$3 million Import and export, US$3 million 100% 100% Yes 0.00
Co., Ltd. subsidiary export, technology research
technology and development
research and
development
Shouguang Chenming Wholly-owned Shouguang, Packaging 1,000,000 Sales of paper packaging 1,000,000.00 100% 100% Yes 0.00
Hongxin Packaging subsidiary China
Co., Ltd.
Shouguang Chenming Wholly-owned Shouguang, Machinery 2,000,000 Processing and repair of 2,000,000.00 100% 100% Yes 0.00
Papermaking Machine subsidiary China manufacturing paper making machines
Co., Ltd.
Shouguang Chenming Wholly-owned Shouguang, Import and 10,000,000 Import and export of 10,000,000.00 100% 100% Yes 0.00
Import and Export subsidiary China export trade goods and technology
Trade Co., Ltd.
Shouguang Chenming Wholly-owned Shouguang, Transportation 10,000,000 Land transport, storage 10,000,000.00 100% 100% Yes 0.00
Industrial Logistics subsidiary China of goods
Co., Ltd.
Shouguang Chenming Wholly-owned Shouguang, Property 1,000,000 Property management 1,000,000.00 100% 100% Yes 0.00
Jiatai Property subsidiary China management
Management Co., Ltd.
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
1. Subsidiaries(Cont’d)
(1) Subsidiaries acquired through establishment or investment(Cont’d)
Unit: RMB Setting off of the loss attributable to the minority shareholders of the subsidiaries in the current period from theowner’s equity of the Company Balance of exceeds other projects Minority the minority that interestshareholders’ substantially used to offset portion of Actual forms net the profit or the opening investment as investment loss of balance of Place of Business Registered at the end in the Shareholding Voting rights Whether Minority the minorityowners’ equity Full name of subsidiary Subsidiary type Incorporation Nature capital Business activity of the period subsidiary (%) (%) consolidated interests interests of the subsidiary Shouguang Hengfeng Wholly-owned Shouguang, Storage of 500,000 Storage and leasing, 500,000.00 100% 100% Yes 0.00
Storage Co., Ltd. subsidiary China goods, leasing storage service
Japan Chenming Wholly-owned Tokyo, Japan Trade of paperUS$1.50 million Trade of paper and US$1.50 million 100% 100% Yes 0.00
Paper Company Limited subsidiary raw materials
Chenming GmbH Wholly-owned Hamburg, Trade of EUR25,000 Trade of machine-made EUR25,000 100% 100% Yes 0.00
subsidiary Germany machine-made paper
paper
Shandong Chenming Wholly-owned Fuyu, China Sales of paper 1,000,000 Sales of machine-made 1,000,000.00 100% 100% Yes 0.00
Paper Group (Fuyu) subsidiary paper, paper board,
ySales Co., Ltd. paper-making materials
and accessories and
paper machinery
Zhanjiang Chenming Wholly-owned Zhanjiang, China Arboriculture 1,000,000 Plantation of forest, nutrition 1,000,000.00 100% 100% Yes 0.00
Arboriculture Co., Ltd. subsidiary and sales of seedling,
processing and sales of
timber and processing and
sales of by-products of
timber
Yangjiang Chenming Wholly-owned Yangjiang, China Arboriculture 1,000,000 Plantation and development 1,000,000.00 100% 100% Yes 0.00
Arboriculture Co., Ltd. subsidiary of forest, and technology
consultation of forestry
Zhanjiang Meilun Pulp& Wholly-owned Zhanjiang, China Paper pulp 100,000,000 Manufacture, production, 100,000,000.00 100% 100% Yes 0.00
Paper Co., Ltd. subsidiary processing and sales of
paper pulp and related
products
Zhanjiang Chenming Wholly-owned Zhanjiang, China Wall materials 10,000,000 Production and sales of wall 10,000,000.00 100% 100% Yes 0.00
New-style Wall subsidiary materials, and sales and
Materials Co., Ltd. mixed use of coal ash
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
1. Subsidiaries(Cont’d)
(1) Subsidiaries acquired through establishment or investment(Cont’d)
Unit: RMB Setting off of the loss attributable to the minority shareholders of the subsidiaries in the current period from theowner’s equity of the Company Balance of exceeds other projects Minority the minority that interestshareholders’ substantially used to offset portion of Actual forms net the profit or the opening investment as investment loss of balance of Place of Business Registered at the end in the Shareholding Voting rights Whether Minority the minorityowners’ equity Full name of subsidiary Subsidiary type Incorporation Nature capital Business activity of the period subsidiary (%) (%) consolidated interests interests of the subsidiary Wuhan Chenming Controlling Wuhan, China Electricity 88,240,000 Generation and sales 45,000,000.00 51% 51% Yes 39,073,900.00
Qianneng Electric subsidiary of electricity and heat
Power Co., Ltd.
Jilin Chenming Machinery Wholly-owned Jilin, China Processing of 600,000 Processing of machinery, 600,000.00 100% 100% Yes 0.00
Manufacturing Co., Ltd. subsidiary machinery manufacture, installation
and repair of the equipment
of machinery
Shouguang Chenming Wholly-owned Shouguang, Sales of cement 7,000,000 Utilisation of ash in 7,000,000.00 100% 100% Yes 0.00
Cement Co., Ltd. subsidiary China the production of cement
and sales of cement
Shandong Chenming Wholly-owned Shouguang, Sales of panels 30,000,000 Decorative board of the 30,000,000.00 100% 100% Yes 0.00
Panels Co., Ltd. subsidiary China layer of laminated board,
wooden products,
laminated board and
fortified wooden floorboard
Shouguang Chenming Wholly-owned Shouguang, Sales of floor 500,000 Production, processing and 500,000.00 100% 100% Yes 0.00
Floor Board Co., Ltd. subsidiary China board sales of fortified
wooden floorboard
and impregnated paper
Shandong Chenming Controlling Shouguang, ElectricityUS$11.8 million Generation and sales 49,820,000.00 51% 51% Yes 80,765,200.00
Xinli Power Co., Ltd. subsidiary China of electricity and steam
Nanchang Chenming Wholly-owned Nanchang, China Arboriculture 10,000,000 Processing and sales of 10,000,000.00 100% 100% Yes 0.00
Arboriculture Co., Ltd. subsidiary wooden finished products,
semi- finished products and by-products
of timber
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
1. Subsidiaries(Cont’d)
(2) Subsidiaries acquired through business combination not under common control
Unit: RMB Setting off the loss attributable to the minority shareholders of the subsidiaries in the current period from the owners’ equity of the Company Balance of exceeds other projects Minority the minority that interestshareholders’ substantially used to offset portion of the Actual forms net the profit or opening balance investment as investment loss of ofowners’ Type of Place of Nature of Registered at the end of in the Shareholding Voting rights Whether Minority the minority equity of the Full name of subsidiary subsidiary incorporation business Capital Business Activity the period subsidiary (%) (%) consolidated interests interests subsidiaries Shouguang Hongyi Wholly-owned Shouguang, Packaging 1,550,000 Processing and sales of 1,550,000.00 100% 100% Yes 0.00
Decorative Packaging subsidiary China packaging products, indoor
Co., Ltd. and outdoor decorations
Shouguang Xinyuan Wholly-owned Shouguang, Coal 3,000,000 Retail of coal, gasoline, 3,000,000.00 100% 100% Yes 0.00
Coal Co., Ltd. subsidiary China construction materials
and plumbing parts
Shouguang Runsheng Wholly-owned Shouguang, Purchase and 1,000,000 Purchase and sales of 1,000,000.00 100% 100% Yes 0.00
Waste Paper Recycle subsidiary China sales of waste waste and obsolete
Co., Ltd. and obsolete materials
materials
Shouguang Wei Yuan Wholly-owned Shouguang, Transportation 3,930,000 Transportation of goods, 3,930,000.00 100% 100% Yes 0.00
Logistics Company subsidiary China maintenance of vehicles,
Limited storage and loading of
goods, international freight
agency services
Wuxi Songling Paper Controlling Wuxi, China Papermaking 5,010,000 Sales, cutting and 5,010,000.00 100% 100% Yes 0.00
Co., Ltd. subsidiary processing of paper
Guangdong Huirui Controlling Zhanjiang, China Investment 258,000,000 Investment in marine 131,580,000.00 51% 51% Yes 124,548,70.00
Investment Co., Ltd. subsidiary engineering projects
Shouguang Hongxiang Wholly-owned Shouguang, China Printing of 800,000 Processing and sales of 2,730,000.00 100% 100% Yes 0.00
Printing and Packaging subsidiary packaging packaging products and
Co., Ltd. materials indoors and outdoors
decoration
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
2. Special purpose vehicles or operating entities whose control resulting from, among other things, entrusting to operate or lease
Chenming Paper has no special purpose vehicles or operating entities whose control resulting from, among other things, entrusting to operate or lease.
3. Explanation on changes in the scope of consolidation
Details for the change in the scope of consolidation are set out in the Notes VI. 4.
√ Applicable□ Not applicable
During the year (period), five more companies were consolidated as compared to the prior year due to the reasons as follows:
During the reporting period, the Company established four companies through investments, namely Chenming GmbH, Zhanjiang Meilun Pulp& Paper Co., Ltd., Zhanjiang Chenming New-style Wall Materials Co., Ltd. and Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd., respectively; and acquired Shouguang Hongxiang Printing and Packaging Co., Ltd. through business combination not under common control.
In order to push forward with theCompany’s sales of paper products, further expand theCompany’sproducts’ share in the european market, and establish a broader and more comprehensive marketing network, the Company decided to set up a sales company in Germany. On 7 January 2013, the Company obtained “Overseas Investment certificate” approved by the Ministry of Commerce, which ratified our establishment of Chenming GmbH (“Chenming GmbH”) with its registered capital of EUR25,000. The Company may make more investments timely based on the operations of the new company. It was included in the scope of consolidation since March 2013.
In order to make full use of ancillary facilities of public works, realise diversification of the product mix of the Company, and further lower the costs and increase theCompany’s capability to resist risks, the fifth extraordinary meeting of the sixth session of the Board passed the “Resolution in relation to establishment of Zhanjiang Meilun Pulp& Paper Co., Ltd.” and thereby approved the establishment of Zhanjiang Meilun Pulp& Paper Co., Ltd. (“Zhanjiang Meilun”), with its registered capital amounting to RMB100.00 million and the company was included in the scope of consolidation since January 2013.
In order to strengthen comprehensive utilisation of resources and actively respond to national policy for resource utilisation, we decided to, based on local needs, set up Zhanjiang Chenming New-style Wall Materials Co., Ltd. (“Zhanjiang Wall Materials”), which was invested by Zhanjiang Chenming, a wholly-owned subsidiary of our Company, with its registered capital amounting to RMB10.00 million. The company was included in the scope of consolidation since March 2013.
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
3. Explanation on changes in the scope of consolidation(Cont’d)
In order to extend theCompany’s business chain, reduce its product packaging costs and increase its revenue, the second extraordinary meeting of the seventh session of the Board approved the “Resolution on acquisition of equity interest in Hongxiang Printing” and entered into an equity transfer agreement with Song Peijun, Tian Changzhi and Zhang Bo respectively on the acquisition of100% equity interest in Shouguang Hongxiang Printing and Packaging Co., Ltd. (“Hongxiang Printing”) at a consideration of RMB2.73 million.
In order to improve its business operation, fully leverage the advantage of centralised sales and step up efforts to develop the market, the second extraordinary meeting of the seventh session of the Board passed the “Resolution on establishment of Fuyu Sales Company” and approved the establishment of Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. (“Fuyu Sales Company”) with registered capital amounting to RMB1.00 million. The company was included in the scope of consolidation since November 2013.
During the year (period), six companies were deconsolidated as compared to the prior year due to the reasons as follows:
The Company lost its control over Yanbian Chenming Paper Co., Ltd., Wuhan Chenjian New-style Wall Materials Co., Ltd., Shanghai Runchen Equity Investment Fund Co., Ltd. and Wuhan Chenming Wan Xing Real Estate Co., Ltd. due to disposal of equity interest during the period. Therefore, the above three companies ceased to be included in the scope of consolidation. The registration of Wuhan Xingzhilian Paper Company Limited and Jilin Chenming Waste Collection Co., Ltd. was cancelled according to actual needs of operations during the period. Therefore, the above two companies ceased to be included in the scope of consolidation.
On 26 April 2013, the seventeenth meeting of the sixth session of the Board of Directors of the Company passed “Resolution in relation to disposal of equity interests in Shanghai Runchen. On the same day, the Company entered into an equity transfer agreement with Shanghai Ruibao Environmental Technology Co., Ltd. (hereinafter referred to as Shanghai Runchen) to transfer98.36% equity interest in Shanghai Runchen Equity Investment Fund Co., Ltd. at a consideration of RMB300,916,016.71. The Company lost its control over Shanghai Runchen and Shanghai Runchen ceased to be included in the scope of consolidation effective from 26 April 2013.
On 15 May 2013, the Company entered into an equity transfer agreement with Yanbian Shixian Bailu Paper Co., Ltd and Yanbian State-owned Assets Management Co., Ltd. to transfer its49% and51% equity interest in Yanbian Chenming Paper Co., Ltd. (hereinafter referred to as Yanbian Chenming), respectively, at a consideration of RMB54.00 million and RMB56.00 million. The Company lost its control over Yanbian Chenming and Yanbian Chenming ceased to be included in the scope of consolidation effective from 15 May 2013.
On 31 January 2013, Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a subsidiary of the Company, entered into an equity transfer agreement with Hubei Zhongjian Haohua Environment Protection Co., Ltd. to transfer its51% equity interest in Wuhan Chenjian New-style Wall Materials Co., Ltd. (hereinafter referred to as Chenjian Company) at a consideration of RMB5.10 million. The Company lost its control over Chenjian Company and Chenjian Company ceased to be included in the scope of consolidation.
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
3. Explanation on changes in the scope of consolidation(Cont’d)
On 27 September 2013, the second extraordinary meeting of the seventh session of the Board approved the Resolution on the joint development of real estate project by Wuhan Chenming and Hubei Zheshang. On 27 September 2013, the Framework Contract on the Contracted Real Estate Development and the Supplementary Agreement of the Framework Contract on the Contracted Real Estate Development were entered into among Wuhan Chenming Hanyang Paper Holdings Co., Ltd. (hereinafter referred to as “Wuhan Chenming”), Wuhan Chenming Wan Xing Real Estate Co., Ltd. (hereinafter referred to as the “Project Company”) (both are subsidiaries of the Company) and Hubei Zheshang Wan Xing Investment Co., Ltd. (hereinafter referred to as “Hubei Zheshang”), whereby the Project Company changed from a wholly-owned subsidiary of theCompany’s subsidiary, Wuhan Chenming, to a40%-owned associate of the Company. The Company lost its control over the Project Company and the Project Company ceased to be included in the scope of consolidation.
Jilin Chenming Waste Collection Co., Ltd. had been inactive for many years. With a view to saving relevant expenses, the Board of Jilin Chenming agreed to cancel the registration of Jilin Waste. Assets and liabilities of Jilin Waste were consolidated into Jilin Chenming for audit on 30 May 2013. Since the date on cancellation of registration of Jilin Waste, on 25 June 2013, this company ceased to be included in the scope of consolidation.
According to theCompany’s strategic plans and needs of production and operation, the household paper project was assigned to Wuhan Chenming for investment and development, so as to reduce relevant expenses. It was resolved at the fourteenth meeting of the fifth session of the Board of Wuhan Chenming that the registration of Wuhan Xingzhilian Paper Company Limited was approved to be cancelled. The relevant registration cancellation procedures were completed on 18 March 2013. Since the date on cancellation of registration of Wuhan Xingzhilian, this company ceased to be included in the scope of consolidation.
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
4. Entities newly included in the scope of consolidation during the reporting period and entities ceasing to be included in the scope of consolidation during the reporting period
Subsidiaries, special purpose vehicles and operating entities whose control resulting from, among other things, entrusting to operating or leasing newly included in the scope of consolidation for the period
Unit: RMB Net assets
at the end of Net profit Name the period for the period Chenming GmbH -12,910,470.68 -16,404,255.49 Zhanjiang Meilun Pulp& Paper Co., Ltd. 99,599,761.63 -400,238.37 Zhanjiang Chenming New-style Wall Materials Co., Ltd. 9,720,643.11 -279,356.89 Shouguang Hongxiang Printing and Packaging Co., Ltd. 15,939,559.76 10,888,575.24 Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. 996,654.25 -3,345.75 (1) Chenming GmbH, Zhanjiang Meilun Pulp& Paper Co., Ltd., Zhanjiang Chenming New-style Wall Materials Co., Ltd. and Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. were new subsidiaries established by contribution during the year (Note VI. 1 (1)).
(2) Shouguang Hongxiang Printing and Packaging Co., Ltd. was a subsidiary acquired through business combination not under common control during the year, where its net profit for the year represented the net profit for the period from the date of acquisition thereof to the end of the year (Note VI. 1 (2)).
Subsidiaries, special purpose vehicles and operating entities whose control resulting from, among other things, entrusting to operating or leasing not included in the scope of consolidation for the period
Unit: RMB Net profit for the period from the beginning of Net assets as the year at the date of to the date Name disposal of disposal Yanbian Chenming Paper Co., Ltd. 128,385,259.16 -3,929,284.60 Wuhan Chenjian New-style Wall Materials Co., Ltd. 25,411,399.32 -1,086,132.46 Shanghai Runchen Equity Investment Fund Co., Ltd. 305,931,289.86 573,994.12 Wuhan Chenming Wan Xing Real Estate Co., Ltd. 69,466,030.31 -7,212,008.77 Wuhan Xingzhilian Paper Company Limited -2,715.42 Jilin Chenming Waste Collection Co., Ltd. 24,876.07 (1) Yanbian Chenming Paper Co., Ltd., Wuhan Chenjian New-style Wall Materials Co., Ltd., Shanghai Runchen Equity Investment Fund Co., Ltd. and Wuhan Chenming Wan Xing Real Estate Co., Ltd. ceased to be included in the scope of consolidated as the Company had lost control over them due to disposal of their equity interest (contribution rights) (Note VI. 3).
(2) The registrations of Wuhan Xingzhilian Paper Company Limited and Jilin Chenming Waste Collection Co., Ltd. were cancelled during the period and they ceased to be included in the scope of consolidated (Note VI. 3).
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
5. Business combination not under common control during the reporting period
Unit: RMB Amount of
Combined entity goodwill Calculation of the amount of goodwill
Shouguang Hongxiang Printing Where the cost of a business combination exceeds the and Packaging Co., Ltd. acquirer’s interest in the fair value of theacquiree’s identifiable net assets on the acquisition date, the difference is recognised as goodwill. Specific calculation is set out in the subsequent attachment.
On 27 September 2013, the Company acquired100% equity interest in Shouguang Hongxiang Printing and Packaging Co., Ltd. held by Song Peijun, Tian Changzhi and Zhang Bo. The acquisition date of the transaction was 27 September 2013, the date when the Group gained control over Shouguang Hongxiang Printing and Packaging Co., Ltd.. The acquisition date was determined based on the completion of the payment of consideration and the control over the company by appointing all directors including the general manager.
① Cost of combination and goodwill (or excess of the fair value of the identifiable net assets over the cost of combination recognised in profit or loss) are set out as follows:
Item Amount Cost of combination:
Cash paid 2,730,000.00 Total cost of combination 2,730,000.00 Less: fair value of the identifiable net assets acquired 5,138,368.37 Excess of the fair value of the identifiable net assets over
the cost of combination recognised in profit or loss 2,408,368.37 The fair value of combined net assets is determined after taking into consideration assessment conducted by Golden Standard& Headman Appraisal and Advisory Co., Ltd. Beijing Guoyou Dazeng Assets Appraisal Co., Ltd. (later renamed to Golden Standard& Headman Appraisal and Advisory Co., Ltd.)
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
5. Business combination not under common control during the reporting period(Cont’d)
② The assets, liabilities and cash flow relating to the acquisition of Shouguang Hongxiang Printing and Packaging Co., Ltd. as at the acquisition date are set out below:
Carrying amount Carrying amount Fair value as at as at the as at the end of Item the acquisition date acquisition date the prior year Cash and cash equivalents 3,713,926.53 3,713,926.53 7,832,287.65 Accounts receivable 29,654,352.30 29,654,352.30 34,286,963.97 Inventory 664,048.15 664,048.15 86,559.47 Fixed assets 6,934,536.39 4,313,021.01 4,242,337.43 Intangible assets
Deferred income tax assets 3,500,000.00 3,500,000.00
Less: borrowings
Payables 24,756,895.02 24,756,895.02 23,830,492.33 Salaries payable 67,642.25 67,642.25 9,222.72 Other liabilities 14,503,957.73 14,503,957.73 393,344.74 Net assets 5,138,368.37 2,516,852.99 22,215,088.73 Less: minority interests
Net assets acquired 5,138,368.37 2,516,852.99 22,215,088.73 Consideration paid in cash 2,730,000.00
Less: cash and cash equivalents acquired
of the acquired subsidiary 3,713,926.53
Cash from other financing activities 983,926.53
Chenming Paper adopted valuation techniques to ascertain the fair value of assets and liabilities of Beijing Guoyou Dazeng Assets Appraisal Co., Ltd. as at the acquisition date. The assessment adopted the asset-based approach with principal assumptions: that the company was a going-concern; that all assets and liabilities, whether included in the balance sheet, were identifiable on the date of the assessment; and that there was no assets or liabilities of the entity subject to the assessment having a material effect on the value thereof and being unidentifiable.
③ Income, net profit and cash flow of Shouguang Hongxiang Printing and Packaging Co., Ltd. during the period from the acquisition date to the end of the year are set out below:
Item Amount Revenue from operations 62,104,960.27 Net profit 10,888,575.24 Cash flows from operating activities -3,467,334.96 Net cash flows -3,607,156.35 Whether there was business combination through several transactions resulting in gaining control during the reporting period
□ Applicable√ Not applicable
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
6. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period
Name of the subsidiary Date of disposal Recognition method of gain or loss Yanbian Chenming Paper Co., Ltd. 15 May 2013 The excess of the disposal consideration over the share of the net assets of the subsidiary attributable to the equity interest disposed of as at the disposal date accounted for in the consolidated financial statements of the Company is recognised as the gain or loss on disposal.
Wuhan Chenjian New-style 31 January 2013 Ditto
Wall Materials Co., Ltd.
Shanghai Runchen Equity 26 April 2013 Ditto
Investment Fund Co., Ltd.
Wuhan Chenming Wan 5 December 2013 Ditto
Xing Real Estate Co., Ltd.
(1) Yanbian Chenming Paper Co., Ltd.
On 15 May 2013, Chenming Paper transferred49% and51% equity interest in Yanbian Chenming Paper Co., Ltd. held by it to Yanbian Shixian Bailu Paper Co., Ltd and Yanbian State-owned Assets Management Co., Ltd., respectively. The date of disposal was the date when the Company actually no longer had control over the net assets and financial and operating decisions of Yanbian Chenming Paper Co., Ltd.
① Disposal price and the cash flows are set out as follows:
Item Amount Disposal price 110,000,000.00 Cash and cash equivalents received from disposal 110,000,000.00 Less: cash and cash equivalents held by Yanbian Chenming 34,675.02 Net cash received from disposal 109,965,324.98②
Net assets of disposal of Yanbian Chenming are set as follows:
Net assets as at Net assets as at the end of the Item the date of disposal prior year Current assets 47,720,649.88 145,392,684.32 Non-current assets 176,574,100.70 180,333,803.65 Current liabilities 91,715,920.00 189,218,372.79 Non-current liabilities 4,193,571.42 4,193,571.42 Total net assets 128,385,259.16 132,314,543.76
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
6. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period(Cont’d)
(1) Yanbian Chenming(Cont’d)
③ Gain or loss on disposal is calculated as follows:
Item Amount
Disposal price 110,000,000.00
Less: net assets of Yanbian Chenming as at the date of disposal 128,385,259.16
Plus: other consolidated income in relation to Yanbian Chenming transferred to
gain or loss for the period of disposal 31,421,760.99
Investment gains arising from disposal 13,036,501.83
④ Revenue, expenses and profit of Yanbian Chenming from the beginning of the year of disposal to the date of disposal are set out as follows:
Item Amount
Revenue 61,124,299.59
Less: costs and expenses 66,363,345.73
Total profit -5,239,046.14
Less: income tax expenses -1,309,761.54
Net profit -3,929,284.60
⑤ On the date the Company ceased to have control over the subsidiary, other comprehensive income previously related to equity investment in such subsidiary was transferred to investment income or loss amounting to RMB36,193,592.28.
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
6. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period(Cont’d)
(2) Wuhan Chenjian New-style Wall Materials Co., Ltd.
On 31 January 2013, Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a subsidiary of the Company will transfer51% equity interest in Wuhan Chenjian New-style Wall Materials Co., ltd. to Hubei Zhongjian Haohua Environment Protection Co., Ltd. The date of disposal was the date when Chenming Paper actually no longer had control over the net assets and financial and operating decisions of Wuhan Chenjian New-style Wall Materials Co., Ltd.
① Disposal price and the cash flows are set out as follows:
Item Amount Disposal price 5,100,000.00 Cash and cash equivalents received from disposal 5,100,000.00 Less: cash and cash equivalents held by Chenjian Company 2,140,518.36 Net cash received from disposal 2,959,481.64② Net assets of disposal of Chenjian Company are set as follows:
Net assets as Net assets as at at the end of Item the date of disposal the prior year Current assets 23,489,940.59 24,552,015.23 Non-current assets 17,376,409.34 17,019,890.80 Current liabilities 15,454,950.61 11,074,374.25 Non-current liabilities
Total net assets 25,411,399.32 30,497,531.78③ Gain or loss on disposal are calculated as follows:
Item Amount Disposal price 5,100,000.00 Less: net assets of Chenjian Company attributable to the Group as at 12,959,813.65 the date of disposal
Plus: other consolidated income related transferred to gain or loss for
the current period
Investment gains arising from disposal -7,859,813.65
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
6. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period(Cont’d)
(2) Wuhan Chenjian New-style Wall Materials Co., Ltd.(Cont’d)
④ Revenue, expenses and profit of Chenjian Company from the beginning of the year of disposal to the date of disposal are set out as follows:
Item Amount Revenue 290,082.30 Less: costs and expenses 1,376,214.76 Total profit -1,086,132.46 Less: income tax expenses
Net profit -1,086,132.46⑤ On the date the Company ceased to have control over the subsidiary, other comprehensive income previously related to equity investment in such subsidiary was transferred to investment income or loss amounting to RMB0.
(3) Shanghai Runchen Equity Investment Fund Co., Ltd.
On 26 April 2013, Chenming Paper transferred98.36% equity interest in Shanghai Runchen Equity Investment Fund Co., Ltd. held by it to Shanghai Ruibao Environmental Technology Co., Ltd. The date of disposal was the date when Chenming Paper actually no longer had control over the net assets and financial and operating decisions of Shanghai Runchen Equity Investment Fund Co., Ltd..
① Disposal price and the cash flows are set out as follows:
Item Amount Disposal price 300,916,016.71 Cash and cash equivalents received from disposal 250,916,016.71 Less: cash and cash equivalents held by Shanghai Runchen 6,030,118.42 Net cash received from disposal 244,885,898.29②
Net assets of disposal of Shanghai Runchen are set as follows:
Net assets as Net assets as at the date of at the end of Item disposal the prior year Current assets 320,052,650.32 56,236,406.82 Non-current assets 269,314,863.63 268,743,677.13 Current liabilities 283,436,224.09 309,101.71 Non-current liabilities
Total net assets 305,931,289.86 324,670,982.24
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
6. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period(Cont’d)
(3) Shanghai Runchen Equity Investment Fund Co., Ltd.(Cont’d)
③ Gain or loss on disposal are calculated as follows:
Item Amount Disposal price 300,916,016.71 Less: net assets of Shanghai Runchen attributable to the Company
as at the date of disposal 300,916,016.71 Plus: other consolidated income in relation to Shanghai Runchen transferred
to gain or loss for the current period — Investment gains arising from disposal 0.00④ Revenue, expenses and profit of Shanghai Runchen from the beginning of the year of disposal to the date of disposal are set out as follows:
Item Amount Revenue — Less: costs and expenses -3,743.50 Plus: investment income 571,186.50 Total profit 3,743.50 Less: expense of income tax 935.88 Net profit 573,994.12⑤ On the date the Company ceased to have control over the subsidiary, other comprehensive income previously related to equity investment in such subsidiary was transferred to investment income or loss amounting to RMB0.
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
6. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period(Cont’d)
(4) Wuhan Chenming Wan Xing Real Estate Co., Ltd.
On 5 December 2013, Wuhan Chenming, a subsidiary of the Company, and Hubei Zheshang Wan Xing Investment Co., Ltd. contributed RMB20 million and RMB60 million into Wuhan Chenming Wan Xing Real Estate Co., Ltd., respectively. After the capital contribution, Wuhan Chenming held40% equity interest in Wan Xing Real Estate. The date of capital contribution was the date when Chenming Paper actually no longer had control over the net assets and financial and operating decisions of Wuhan Chenming Wan Xing Real Estate Co., Ltd.① Disposal price and the cash flows are set out as follows:
Item Amount Disposal price 60,000,000.00 Cash and cash equivalents received from disposal 60,000,000.00 Less: cash and cash equivalents held by Wan Xing Real Estate 83,180,221.51 Cash and cash equivalents paid to investee 20,000,000.00 Net cash received from disposal 3,180,221.51②
Net assets of disposal of Wan Xing Real Estate are set as follows:
Net assets as Net assets as at the date of at the end of Item disposal the prior year Current assets 638,939,855.90 111,002,810.67 Non-current assets 95,280.67 40,987.27 Current liabilities 569,569,106.26 114,365,758.86 Non-current liabilities
Total net assets 69,466,030.31 -3,321,960.92③
Gain or loss on disposal is calculated as follows:
Item Amount Share of net assets after capital injection 27,786,412.12 Less: amount of injection 20,000,000.00 Less: net assets of Wan Xing Real Estate attributable to the Company
as at the date of disposal -10,533,969.69 Plus: other consolidated income in relation to Wan Xing Real Estate
transferred to gain or loss for the current period
Investment gains arising from disposal 18,320,381.81
XI Financial Report
VI. Business Combination and Consolidated Financial Statements(Cont’d)
6. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period(Cont’d)
(4) Wuhan Chenming Wan Xing Real Estate Co., Ltd.(Cont’d)
④ Revenue, expenses and profit of Wan Xing Real Estate from the beginning of the year of disposal to the date of disposal are set out as follows:
Item Amount Revenue — Less: costs and expenses 7,212,008.77 Total profit -7,212,008.77 Less: expense of income tax — Net profit -7,212,008.77⑤ On the date the Company ceased to have control over the subsidiary, other comprehensive income previously related to equity investment in such subsidiary was transferred to investment income or loss amounting to RMB0.
Whether there was disposal of investment in a subsidiary through several transactions resulting in loss of control during the reporting period
□ Applicable√ Not applicable
7. Exchange rate of translating major financial statement items of overseas operating entities
Assets and liabilities items
Item 31 December 2013 1 January 2013 Chenming (HK) Limited USD1= RMB6.0969 USD1= RMB6.2855
Japan Chenming Paper JPY100= RMB5.7771 JPY100= RMB7.3049
Company Limited
Chenming GmbH EUR1= RMB8.8149 —
Revenue, expense and cash flow items
Item For the year 2013 For the year 2012 Chenming (HK) Limited USD1= RMB 6.1811 USD1= RMB6.3029
Japan Chenming Paper Company Limited JPY100= RMB 6.2623 JPY100= RMB7.7856
Chenming GmbH EUR1= RMB8.1517 —
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements
1. Monetary funds
Unit: RMB Closing balance Opening balance
Amount in Amount in
Item foreign currency Exchange rate Amount in RMB foreign currency Exchange rate Amount in RMB Cash — — 1,333,503.27 — — 1,398,324.17 RMB — — 879,154.77 — — 937,182.22–USD 40,000.00 6.0969 243,876.00 46,900.00 6.2855 294,789.95–EUR 25,000.00 8.4189 210,472.50 20,000.00 8.3176 166,352.00 Deposits with banks: — — 725,199,425.69 — — 2,342,151,861.28 RMB — — 612,023,754.51 — — 2,187,734,778.74–USD 11,698,274.37 6.0969 71,323,209.01 23,459,592.25 6.2855 147,455,267.10–EUR 1,548,593.85 8.4189 13,037,456.78 61,101.44 8.3176 508,217.34–JPY 498,558,670.00 0.057771 28,802,232.92 85,917,693.00 0.073049 6,276,201.56–HKD 16,245.21 0.78623 12,772.47 218,778.49 0.81085 177,396.54 Other monetary funds: — — 1,821,196,865.28 — — 2,112,667,177.41 RMB — — 1,788,148,011.28 — — 1,953,372,355.46–USD 5,420,599.65 6.0969 33,048,854.00 25,343,206.29 6.2855 159,294,723.14–EUR 11.88 8.3176 98.81 Total — — 2,547,729,794.24 — — 4,456,217,362.86 Amounts subject to limitations, deposited overseas and exposed to recovery risk due to security, pledge or immobilisation should be separately stated:
Note:① Other monetary funds amounted to RMB249,333,637.64 (31 December 2012: RMB987,167,187.90) were the guarantee deposit for the application for bank acceptance with the banks by the Group.
② Other monetary funds of RMB1,380,738,601.00 (31 December 2012: RMB595,207,540.73) were the guarantee deposit for the application for letter of credit with the banks by the Group.
③ Other monetary funds of RMB140,836,352.11 (31 December 2012: 394,200,000.00) were the guarantee deposit for the application for guarantees with the banks by the Group.
④ Other monetary funds amounted to RMB50,288,274.53 (31 December 2012: RMB136,092,448.78) were the guarantee deposit for the application for bank loan by the Group.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
2. Bills receivable
(1) Classification of bills receivable
Unit: RMB Category Closing balance Opening balance Bank acceptance 2,827,024,280.10 1,852,478,364.46 Commercial acceptances 43,419,401.39
Total 2,870,443,681.49 1,852,478,364.46 (2) Bills receivable pledged at the end of the period
Unit: RMB Issuing company Issuing date Maturity date Amount Remark Chengdu Jintaiyuan Paper Industry Co., Ltd. 26 July 2013 26 January 2014 5,000,000.00
Jiangxi Lanhai International Trading Co., Ltd. 26 July 2013 26 January 2014 4,000,000.00
Samson Paper (Shenzhen) Company Limited 31 July 2013 31 January 2014 4,000,000.00
Shanghai Jianglong Paper Co., Ltd. 30 July 2013 29 January 2014 4,000,000.00
Jiaxing Minhe Industry and Trade Co., Ltd. 29 September 2013 29 March 2014 3,600,000.00
Total — — 20,600,000.00 —
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
2. Bills receivable(Cont’d)
(3) Bills reclassified into accounts receivable due to default on the part of the drawer and outstanding notes endorsed to other parties by Chenming Paper at the end of the period
There were no bills reclassified into accounts receivable due to default on the part of the drawer during the reporting period.
Outstanding notes endorsed to other parties by Chenming Paper
Unit: RMB Issuing entity Issuing date Maturity date Amount Remark Quanzhou Rensheng Trading Co., Ltd. 28 November 2013 28 May 2014 5,000,000.00 De- recognised Jiangsu Publishing and Printing 29 August 2013 8 February 2014 4,000,000.00 De- Supplies Company recognised Leefung-Asco Printers (Shenzhen) Ltd. 26 September 2013 2 January 2014 4,000,000.00 De- recognised Dalian Mori Mitsui Packaging Co., Ltd. 25 October 2013 24 January 2014 3,606,094.50 De- recognised Shanghai Changyi Adhesive Products 30 October 2013 30 April 2014 3,600,000.00 De- Co., Ltd. recognised Total — — 20,206,094.50 —
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
3. Accounts receivable
(1) Disclosure of accounts receivable according to classification
Unit: RMB Closing balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts Category Amount Ratio(%) Amount Ratio(%) Amount Ratio(%) Amount Ratio(%) Accounts receivable that are individually significant and
provided for bad debts separately 48,605,549.72 1.46% 48,605,549.72 100% 48,696,549.72 1.26% 48,696,549.72 100% Accounts receivable that are provided for
bad debts on portfolio basis
Risk-free portfolio 457,124,812.49 13.73% 358,778,459.12 9.27%
General portfolio 2,823,789,275.45 84.81% 178,271,004.40 6.31% 3,461,286,305.68 89.47% 217,109,713.62 6.27% Sub-total for portfolio 3,280,914,087.94 98.54% 178,271,004.40 5.43% 3,820,064,764.80 98.74% 217,109,713.62 5.68% Accounts receivable that are individually insignificant but
are provided for bad debts separately 86,850.13 86,850.13 100% Total 3,329,519,637.66 — 226,876,554.12 — 3,868,848,164.65 — 265,893,113.47 — Presentation of accounts receivable according to ageing analysis
Unit: RMB Closing balance Opening balance
Item Amount Ratio(%) Amount Ratio(%) Within 1 year 3,172,267,013.90 95.28% 3,709,154,191.60 95.88% 1-2 years 50,136,238.22 1.50% 65,152,312.73 1.68% 2-3 years 26,223,349.82 0.79% 3,440,056.06 0.09% Over 3 years 80,893,035.72 2.43% 91,101,604.26 2.35% Total 3,329,519,637.66 100.00% 3,868,848,164.65 100.00%
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
3. Accounts receivable(Cont’d)
(1) Disclosure of accounts receivable according to classification(Cont’d)
The Group grants an average credit period of 90 days with limits to its trade customers, except for certain customers with credit period more than 90 days. The following is an ageing analysis based on the invoice date, net of impairment, as of the reporting date:
Unit: RMB Ageing Closing balance Opening balance Within 1 year 3,036,498,972.05 3,541,635,404.98 1-2 years 45,123,524.40 58,637,081.46 2-3 years 21,020,587.09 2,682,564.74 Total 3,102,643,083.54 3,602,955,051.18 The following is an ageing analysis of the overdue and uncollected accounts receivable beyond the credit period, net of impairment:
Unit: RMB Ageing Closing balance Opening balance Within 1 year 515,745,255.68 897,287,266.76 1-2 years 45,123,524.40 58,637,081.46 2- 3 years 21,020,587.09 2,682,564.74 Total 581,889,367.17 958,606,912.96 Based on the accounts receivable collection experience of the Group, the accounts receivable of over 3 years generally are uncollectable so the Group makes impairment provisions in full for the overdue receivables of over 3 years. The above overdue accounts receivable are not provided for impairment in full as the Group recognises the subsequent repayment performance and credibility of the related customers, except the individually impaired upon impairment tests.
Accounts receivable that are individually significant and are provided for bad debts separately at the end of the period
√ Applicable□ Not applicable
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
3. Accounts receivable(Cont’d)
(1) Disclosure of accounts receivable according to classification(Cont’d)
Unit: RMB Particulars of Provision for Reason for bad accounts receivable Book balance bad debts Provision rate(%) debts provision Payment for goods 48,605,549.72 48,605,549.72 100% Mainly are payment for goods overdue for over three years and are unlikely to be recovered
Total 48,605,549.72 48,605,549.72 ——
Use of ageing analysis for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
Unit: RMB Closing balance Opening balance
Book balance Book balance
Provision for Provision for Ageing Amount Ratio(%) bad debts Amount Ratio(%) bad debts Within 1 year
－ － － － － － Of which:
Within 1 year
Sub-total 2,715,360,837.57 96.16% 135,768,041.85 3,350,375,732.48 96.8% 167,518,786.62 within 1 year 2,715,360,837.57 96.16% 135,768,041.85 3,350,375,732.48 96.8% 167,518,786.62 1-2 years 50,127,138.22 1.78% 5,012,713.82 65,152,312.73 1.88% 6,515,231.27 2-3 years 26,013,813.66 0.92% 5,202,762.73 3,353,205.93 0.1% 670,641.19 Over 3 years 32,287,486.00 1.14% 32,287,486.00 42,405,054.54 1.22% 42,405,054.54－ －
Total 2,823,789,275.45 178,271,004.40 3,461,286,305.68 217,109,713.62 Accounts receivable using percentage of balance for making bad debt provision in the portfolio:
□ Applicable√ Not applicable
Accounts receivables using other methods for making bad debt provision in the portfolio:
√ Applicable□ Not applicable
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
3. Accounts receivable(Cont’d)
(1) Disclosure of accounts receivable according to classification(Cont’d)
Unit: RMB Provision for Name of portfolio Book balance debt debts Risk-free portfolio 457,124,812.49 0.00 Total 457,124,812.49 0.00 Accounts receivable that are individually insignificant but are provided for bad debts separately at the end of the period
□ Applicable√ Not applicable
(2) Reversal or recovery of accounts receivable during the reporting period
Unit: RMB Cumulative bad
Reason Original basis debt provision Amount of Particulars of for reversal for bad prior to reversal or reversal accounts receivable or recovery debt provision recovery or recovery Payment for goods Collection of Overdue for over 45,059,061.86 45,059,061.86 payment for goods three years and
unlikely to be
recovered
Total — — 45,059,061.86 — (3) Particulars of accounts receivable actually written off during the reporting period
Accounts receivable written off accumulated to RMB908,010.41. There is no accounts receivable in significant amount actually written off.
(4) There was no accounts receivable from any company in which the Company held5%(5% inclusive) or more voting rights during the reporting period.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
3. Accounts receivable(Cont’d)
(5) Particulars of top five accounts receivable
Unit: RMB As a percentage of the total Relation with of accounts Name of entity Chenming Paper Amount Term receivable(%) Shanghai Yaoji Playing Card Non- 65,717,836.66 Within 1 year 1.97% Co., Ltd. related party
Shanxi Printing Materials Company Non- 30,747,042.34 Within 1 year 0.92% related party
Hangzhou Weisheng Paper Co., Ltd. Non- 28,869,282.19 Within 1 year 0.87% related party
Hubei Changjiang Publish Print Non- 27,688,858.88 Within 1 year 0.83% Material Co., Ltd. related party
Beijing Zhongbanlian Printing Non- 26,904,618.69 Within 1 year 0.81% Materials Co., Ltd related party
Total — 179,927,638.76 5.4% (6) Particulars of accounts receivable of the related parties
Particulars of related party accounts receivable and accounts payable in Note IX. 5.
(7) Accounts receivable denominated in foreign currency stated in original currency and exchange rate are as follows:
Amount in Closing balance Translated Amount in Opening balance Translated Item foreign currency Exchange rate into RMB foreign currency Exchange rate into RMB EURO 602,271.27 8.4189 5,070,461.60
USD 66,378,968.74 6.0969 404,705,934.51 46,883,111.89 6.2855 294,683,799.78 JPY 331,554,816.00 0.057771 19,154,253.28 102,504,709.99 0.073049 7,487,866.56 Total 428,930,649.39 302,171,666.34
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
4. Other receivables
(1) Disclosure of other receivable according to classification
Unit: RMB Closing balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts Category Amount Ratio(%) Amount Ratio(%) Amount Ratio(%) Amount Ratio(%) Accounts receivable that are individually significant and
are provided for bad debtsseparately 8,918,424.06 0.64% 8,918,424.06 100% 8,918,424.06 0.66% 8,918,424.06 100% Accounts receivable that are provided for bad debts on portfolio basis
Risk-free portfolio 1,251,663,625.86 89.22% 1,213,593,786.15 89.91%
General portfolio 128,661,773.06 9.17% 48,424,649.08 37.64% 113,580,888.39 8.41% 42,519,331.91 37.44% Sub-total for portfolio 1,380,325,398.92 98.39% 48,424,649.08 3.51% 1,327,174,674.54 98.32% 42,519,331.91 3.2% Accounts receivable that are individually insignificant
but are provided for bad debts separately 13,717,509.43 0.97% 13,717,509.43 100% 13,771,354.38 1.02% 13,771,354.38 100% Total 1,402,961,332.41 — 71,060,582.57 — 1,349,864,452.98 — 65,209,110.35 — The presentation of accounts receivable according to ageing analysis is as follows
Unit: RMB Closing balance Opening balance
Item Amount Ratio(%) Amount Ratio(%) Within 1 year 1,200,466,405.38 85.57% 1,145,721,315.64 84.88% 1-2 years 100,811,139.72 7.18% 131,913,116.61 9.77% 2-3 years 41,370,171.48 2.95% 13,139,381.38 0.97% Over 3 years 60,313,615.83 4.30% 59,090,639.35 4.38% Total 1,402,961,332.41 100.00% 1,349,864,452.98 100.00% Accounts receivable that are individually significant and are provided for bad debts separately at the end of the period
√ Applicable□ Not applicable
Unit: RMB Particulars of other Provision for Reason receivable Book balance bad debts Provision rate(%) for provision Open credit 8,918,424.06 8,918,424.06 100% Mainly are amounts with customers for over three years and are unlikely to be recovered Total 8,918,424.06 8,918,424.06 ——
Use of ageing analysis for making bad debt provision in the portfolio
√ Applicable□ Not applicable
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
4. Other receivables(Cont’d)
(1) Disclosure of other receivable according to classification(Cont’d)
Unit: RMB Closing balance Opening balance
Book balance Provision for Book balance Provision for Ageing Amount Ratio(%) bad debts Amount Ratio(%) bad debts Within 1 year
Of which:
Within 1 year 44,912,660.62 34.91% 2,245,633.03 52,096,861.35 45.87% 2,604,843.05 Sub-total
within 1 year 44,912,660.62 34.91% 2,245,633.03 52,096,861.35 45.87% 2,604,843.05 1-2 years 6,967,923.12 5.42% 696,792.31 13,434,171.09 11.83% 1,343,417.10 2-3 years 39,123,706.98 30.41% 7,824,741.40 11,848,480.25 10.43% 2,369,696.05 Over 3 years 37,657,482.34 29.26% 37,657,482.34 36,201,375.70 31.87% 36,201,375.70 Total 128,661,773.06 — 48,424,649.08 113,580,888.39 — 42,519,331.90 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
Unit: RMB Provision for Name of portfolio Book balance bad debts Risk-free portfolio 1,251,663,625.86 0.00 Total 1,251,663,625.86 0.00 Other receivable that are individually insignificant but are provided for bad debts separately at the end of the period
√ Applicable□ Not applicable
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
4. Other receivables(Cont’d)
(1) Disclosure of other receivable according to classification(Cont’d)
Unit: RMB Particulars of Provision for Reason other receivable Book balance bad debts Provisionrate(%) for provision Open credit 13,717,509.43 13,717,509.43 100% Mainly are open c r e d i t f o r o v e r three years and are unlikely to be recovered Total 13,717,509.43 13,717,509.43 ——
(2) Reversal or recovery of other receivable during the reporting period
Unit: RMB Cumulative
bad debt
Reason for Original basis provision Amount of Particulars of other reversal for bad debt prior to reversal or reversal or receivable or recovery provision recovery recovery Open credit Collection of Overdue for over 7,023,563.36 7,023,563.36 open credit three years and
unlikely to be
recovered
Total — — 7,023,563.36 — (3) Particulars of other receivables actually written off during the reporting period
Unit: RMB Whether the amount is the result Nature of related of other Time of Amount of Reason for transactions Name of entity receivables written-off written-off written-off or not Wuhan Dongjing Waste Open credit 2,227,742.56 Company No Material Recycling Co. Ltd. deregistration
Total — — 2,227,742.56— —
(4) No outstanding amount within other receivables due from shareholders holding5% or more (including5%) in
the voting shares of the Company during the reporting period
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
4. Other receivables(Cont’d)
(5) Particulars of top five other receivables
Unit: RMB As a percentage of Relation with the total of other Name of entity the Company Amount Term receivable(%) Shandong Jianghe Paper Non-related 587,776,068.96 1-2years 41.9% Co. Ltd. party
Wuhan Chenming Wan Xing Related party 551,964,609.01 Within 1 year, 39.34% Real Estate Co., Ltd. 1-2years
Jiangsu Xinhai Port Non-related 60,396,083.33 Within 1 year 4.3% Engineering Co., Ltd. party
Zhanjiang Finance Bureau Non-related 30,517,103.35 Within 1 year 2.18% party
Tianyuan Construction Group Non-related 16,745,771.53 2-3 years 1.19% Co., Ltd. party
Total — 1,247,399,636.18— 88.91% (6) Particulars of other receivables of the related parties
See Note IX. 5 Related party accounts receivable and accounts payable.
5. Prepayments
(1) Prepayments stated according to ageing
Unit: RMB Closing balance Opening balance
Ageing Amount Ratio(%) Amount Ratio(%) Within 1 year 647,808,677.28 40.77% 1,458,377,404.07 89.13% 1-2 years 941,212,653.96 59.23% 177,856,520.57 10.87% Total 1,589,021,331.24 — 1,636,233,924.64 —
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
5. Prepayments(Cont’d)
(2) Particulars of top five prepayments
Unit: RMB Relation with Reasons for Name of entity the Company Amount Term unsettlement Jiangsu Xinhai Port Non-related 880,000,000.00 Within 1 year, Prepayments for Engineering Co., Ltd. party 1-2 years construction fee according to the agreed contract Each village of Huanggang City Non-related 89,821,337.60 Within 1 year, Prepayments for party 1-2 years forestry deposits according to the agreed contract Chongqing Lee& Man Non-related 22,614,881.68 Within 1 year Prepayments for Paper Manufacturing Limited party goods according t o t h e a g r e e d contracts Manzhouli Jinfa Trading Co., Non-related 19,267,277.77 Within 1 year Prepayments for Limited party goods according t o t h e a g r e e d contracts Huashang Digital Information Non-related 13,854,408.77 Within 1 year Prepayments for Co., Ltd. party goods according t o t h e a g r e e d contracts Total — 1,025,557,905.82— —
(3) No outstanding amount within other receivables due from shareholders holding5% or more (including5%) in the voting shares of the Company during the reporting period
(4) Description of payments
Prepayments denominated in foreign currency stated in original currency and exchange rate are as follows Closing balance Opening balance
Amount in Translated Amount in Translated Item foreign currency Exchange rate into RMB foreign currency Exchange rate into RMB EUR 22,541,744.63 8.4189 189,776,693.87 5,685,388.64 8.3176 47,288,788.51 USD 29,277,464.16 6.0969 178,501,771.24 42,598,033.82 6.2855 267,749,941.56 JPY 9,343,583.00 0.057771 539,788.13
Total 368,818,253.24 315,038,730.07
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
6. Inventories
(1) Categories of inventories
Unit: RMB Closing balance Opening balance
Impairment Impairment
Item Book balance provision Book value Book balance provision Book value Raw material 2,102,799,924.39 2,102,799,924.39 1,961,862,887.18 1,961,862,887.18 Work-in-process
products 55,128,694.09 55,128,694.09 179,769,195.77 179,769,195.77 Goods in stock 1,516,242,717.77 36,472,052.20 1,479,770,665.57 2,285,369,746.18 14,453,128.45 2,270,916,617.73 Products under
development 88,110,593.20 88,110,593.20
Total 3,762,281,929.45 36,472,052.20 3,725,809,877.25 4,427,001,829.13 14,453,128.45 4,412,548,700.68 (2) Impairment provision for inventories
Unit: RMB Decrease during the period
Opening book Provision during Closing book Type of inventories balance the period Reversal Write-off balance Goods in stock 14,453,128.45 36,472,052.20 14,453,128.45 36,472,052.20 Total 14,453,128.45 36,472,052.20 14,453,128.45 36,472,052.20 (3) Impairment provision for inventories
Percentage of the reversal Reason for reversal of during the period to the Basis of impairment impairment provision for closing balance of such Item provision for inventory inventory during the period inventory(%)
Goods in stock The realisable net value of
the finished goods was lower
than the cost of the inventory
due to a decrease in the
market price of white coated
linerboard.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
7. Other current assets
Unit: RMB Item Closing balance Opening balance Prepaid enterprise income tax 74,006,369.37 103,139,626.04 Non-credited VAT proceeds 1,666,514,217.00 1,700,116,681.57 Total 1,740,520,586.37 1,803,256,307.61 8. Investments in associates
Voting right Equity interest held in the investee Type of Registration Legal Nature of by the Company by the Company Name of investee enterprise place representative business Registered capital (%) (%) Wuhan Limited liability Hubei, China Wang Chun Real 100,000,000.00 40.00 40.00 Chenming estate
Wan Xing Real company developing
Estate Co., Ltd.
Arjo Wiggins Sino-foreign Shandong, Tong Chong Papermaking 267,368,330.00 30.00 30.00 Chenming Specialty joint venture China
Paper Co., Ltd.
Qingzhou Chenming Limited liability Shandong, Fang Shiming Starch 3,000,000.00 30.00 30.00 Denaturation company China
Amylum Co., Ltd.
Jiangxi Jiangbao Limited liability Jiangxi, Ou Yang Printing 23,140,000.00 21.16 21.16 Media Colour company China
Printing Co. Ltd.
(Continued)
Total assets Total liabilities Total net assets Total revenue
as at the end as at the end as at the end from operations Net profit
Name of investee of the year of the year of the year during the year for The year Relationship Organisation code Wuhan Chenming Wan 641,447,498.07 572,768,481.62 68,679,016.45 -7,999,022.63 Associate 69534385-0 Xing Real Estate Co.,
Ltd.
Arjo Wiggins Chenming Long-term equity investment was written down to zero due to excess loss for prior years Associate 78233868-9 Specialty Paper Co.,
Ltd.
Qingzhou Chenming Provided for impairment in full due to its under-performance over prior years Associate 16937769-8 Denaturation Amylum
Co., Ltd.
Jiangxi Jiangbao Media 50,143,033.28 27,717,783.98 22,425,249.30 18,689,549.86 -224,444.11 Associate 79479506-X Colour Printing Co.
Ltd.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
9. Long-term investments in equity
(1) The breakdown of long-term investment in equity
U nit: RMB Explanation of the
inconsistency of
shareholding and Impairment Accounting Shareholding in the Voting right in the voting right in the Impairment Provision Cash dividend Name of investee method Cost of investment Opening balance Changes Closing balance investee(%) investee(%) investee provision for the period for the period Wuhan Chenming Wan Xing
Real Estate Co., Ltd. Equity method 40,000,000.00 27,471,606.58 27,471,606.58 40% 40%
Arjo Wiggins Chenming
Specialty Paper Co., Ltd. Equity method 80,100,000.00 30% 30%
Qingzhou Chenming Denaturation
Amylum Co., Ltd. Equity method 900,000.00 900,000.00 900,000.00 30% 30% 900,000.00
Jiangxi Jiangbao Media Colour
Printing Co. Ltd. Equity method 6,000,000.00 4,792,675.12 -47,492.37 4,745,182.75 21.16% 21.16%
Shanghai Anzhou New Energy Co., Ltd. Equity method 250,000,000.00 268,743,677.13 -268,743,677.13
Shandong Paper Making&
Printing Enterprises Corporation Cost method 200,000.00 200,000.00 200,000.00 2% 2% 200,000.00
Jinan Shangyou Commercial
Company Limited Cost method 350,000.00 350,000.00 350,000.00 5% 5% 350,000.00
Zhejiang Province Guangyu Media
Printing Company Limited Cost method 2,000,000.00 2,000,000.00 2,000,000.00 9.96% 9.96%
Shouguang Mihe Water Company Limited Cost method 20,000,000.00 20,000,000.00 20,000,000.00 19.46% 19.46%
Shanghai Forest& Paper E-Commerce
Co., Ltd. Cost method 1,400,000.00 1,400,000.00 1,400,000.00 14% 14% 1,139,574.47
Anhui Time Source Corporation Cost method 1,000,000.00 1,000,000.00 1,000,000.00 10% 10%
Weifang Xinye Capital Investment
Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 3.76% 3.76%
Shandong Hongqiao Venture
Capital Co., Ltd. Cost method 50,000,000.00 50,000,000.00 50,000,000.00 16.67% 16.67%
Total — 461,950,000.00 359,386,352.25 -241,319,562.92 118,066,789.33 — — — 2,589,574.47
(2) Classification of long-term equity investments
Increase Decrease
Item Opening balance for the year for the year Closing balance Investment in associates 274,436,352.25 27,471,606.58 268,791,169.50 33,116,789.33 Other equity investments 84,950,000.00 84,950,000.00 Less: impairment provision
for long-term equity
investments 2,589,574.47 2,589,574.47 Total 356,796,777.78 27,471,606.58 268,791,169.50 115,477,214.86 (4) The breakdown of impairment provision for long-term equity investments
Increase Decrease
Item Opening balance for the year for the year Closing balance Qingzhou Chenming
Denaturation Amylum
Co., Ltd 900,000.00 900,000.00 Shandong Paper
Making& Printing
Enterprises Corporation 200,000.00 200,000.00 Jinan Shangyou
Commercial Company
Limited 350,000.00 350,000.00 Shanghai Forest& Paper
E-Commerce Co., Ltd. 1,139,574.47 1,139,574.47
Total 2,589,574.47 2,589,574.47
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
10. Investment properties
(1) Investment properties measured at cost
Unit: RMB Opening Increase Decrease Closing Item book balance for the period for the period book balance I. Total original carrying
amount 38,291,395.70 38,291,395.70 1. Housing and
Building Structure 38,291,395.70 38,291,395.70 II. Accumulated
depreciation and
accumulated
amortisation in total 17,079,695.71 1,738,256.04 18,817,951.75 1. Housing and
Building Structure 17,079,695.71 1,738,256.04 18,817,951.75 III. Net book value of
investment properties in
total 21,211,699.99 19,473,443.95 1. Housing and
Building Structure 21,211,699.99 19,473,443.95 IV. Book value of
investment properties in
total 21,211,699.99 19,473,443.95 1. Housing and
Building Structure 21,211,699.99 19,473,443.95 Unit: RMB For the period Depreciation and amortisation for the period 1,738,256.04 Impairment provision for investment properties for the period 0.00 (2) The breakdown of investment properties
Increase Decrease
Item Opening balance for the year for the year Closing balance Investment property
adopting cost method for
subsequent measurement 21,211,699.99 1,738,256.04 19,473,443.95 Less: impairment provision
for investment properties
Total 21,211,699.99 1,738,256.04 19,473,443.95
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
11. Fixed assets
(1) Particulars of fixed assets
Unit: RMB Opening Increase Decrease Closing Item book balance for the period for the period book balance I. Total original carrying amount: 28,412,923,014.84 3,626,770,096.17 1,743,756,557.25 30,295,936,553.76 Of which: Housing and
building structure 4,539,770,091.32 502,087,028.73 407,376,889.65 4,634,480,230.40 Machinery and equipment 23,039,134,217.46 3,064,309,919.94 1,063,710,326.14 25,039,733,811.26 Vehicle 216,843,313.45 13,854,584.67 33,207,413.55 197,490,484.57 Electronic equipment and other 617,175,392.61 46,518,562.83 239,461,927.91 424,232,027.53 Opening Increase Provision Decrease Closing book balance for the period for the period for the period book balance II. Accumulated depreciation and
accumulated amortisation in total: 8,648,567,024.93 1,322,959,919.80 883,457,879.36 9,088,069,065.37 Of which: Housing and
building structure 827,808,803.62 133,659,156.59 160,975,764.13 800,492,196.08 Machinery and equipment 7,354,849,826.06 1,128,083,337.49 529,810,479.69 7,953,122,683.86 Vehicle 88,283,565.63 26,223,777.60 19,376,368.75 95,130,974.48 Electronic equipment and other 377,624,829.62 34,993,648.12 173,295,266.79 239,323,210.95 Opening Closing book balance — book balance III. Net carrying amount of fixed assets 19,764,355,989.91 — 21,207,867,488.39 Of which: Housing and
building structure 3,711,961,287.70 — 3,833,988,034.32 Machinery and equipment 15,684,284,391.40 — 17,086,611,127.40 Vehicles 128,559,747.82 — 102,359,510.09 Electronic equipment and
others 239,550,562.99 — 184,908,816.58 IV. Total impairment provision 13,015,998.85 — 26,220,000.00 Machinery and equipment 13,015,998.85 — 26,220,000.00 Electronic equipment and other — － V. Total carrying amount of fixed assets 19,751,339,991.06 — 21,181,647,488.39 Of which: Housing and
building structure 3,711,961,287.70 — 3,833,988,034.32 Machinery and equipment 15,671,268,392.55 — 17,060,391,127.40 Vehicles 128,559,747.82 — 102,359,510.09 Electronic equipment and other 239,550,562.99 — 184,908,816.58 Depreciation for the current period amounted to RMB1,322,959,919.80. RMB3,354,109,295.74 was reclassified from construction in progress into the original value of fixed assets for the current period.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
11. Fixed assets(Cont’d)
(2) Details of restricted fixed assets
As at 31 December 2013, the ownership of buildings and structures and equipment of the carrying amount of approximately RMB6,096,739,906.27 (the original value of RMB6,696,658,597.87) (31 December 2012: carrying amount of RMB6,351,131,719.77 and original value of RMB6,654,874,429.83) was restricted as collateral for long-term borrowings of RMB2,784,334,971.96 (31 December 2012: RMB3,098,403,800.00) (Note VII. 32) and long-term borrowings due within one year of RMB269,313,900.00 (31 December 2012: RMB290,625,800.00) (Note VII. 30).
(3) Particular of Temporarily unused fixed assets
Unit: RMB Original Accumulated Provision Net
Item carrying amount depreciation for impairment carrying amount Remark Building 18,543,388.90 1,538,986.90 17,004,402.00
Machinery and equipment 59,287,663.47 1,004,224.43 58,283,439.04
Total 77,831,052.37 2,543,211.33 75,287,841.04
(4) Particulars of fixed assets without obtaining property right certificates
Reason for not yet Estimated year for obtaining property obtaining property Item right certificates right certificates
Shandong Chenming Paper Holdings Limited Processing 2014
Shouguang Meilun Paper Co., Ltd. Processing 2014
Jiangxi Chenming Paper Co., Ltd. Processing 2014
Fuyu Chenming Paper Co., Ltd. Processing 2014
Zhanjiang Chenming Pulp& Paper Co., Ltd. Processing 2014
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
12. Construction in progress
(1) Particulars of construction in progress
Unit: RMB Closing balance Opening balance
Impairment Impairment
Item Book balance provisions Carrying amount Book balance provisions Carrying amount Power plant phase III further
expansion (parent company) 483,981,213.99 483,981,213.99 Railway project (parent company) 67,825,111.06 67,825,111.06 430,297.89 430,297.89 technology upgrade for
white paper board
projects (parent company) 57,275,709.38 57,275,709.38 18,231,971.17 18,231,971.17 Zhanjiang Chenming
700,000 tonne pulp equipment
upgrade (Zhanjiang Chenming) 267,839,895.73 267,839,895.73 116,258,400.00 116,258,400.00 180,000 tonne paper cup
raw paper project
(Zhanjiang Chenming) 313,760,579.02 313,760,579.02
190,000 tonne high-end cultural
paper project
(Zhanjiang Chenming) 284,958,974.38 284,958,974.38
7,800 tonne paper machine press
section rebuild
(Jiangxi Chenming) 62,598,886.06 62,598,886.06
Desulphurisation and
denitrification project of power
plant (Jiangxi Chenming) 27,249,910.87 27,249,910.87
Packaging paper for food project
(Jiangxi Chenming) 122,625,351.96 122,625,351.96
New production line of household
paper machine upgrade in
Wuhan second factory
(Wuhan Chenming) 445,390,478.03 445,390,478.03 47,110,293.82 47,110,293.82 Technological upgrade for
specialty paper project
(Wuhan Chenming) 185,261,723.30 185,261,723.30 37,306,505.60 37,306,505.60 Relocation of Jilin
(Jilin Chenming) 2,218,570,285.48 2,218,570,285.48 1,358,160,725.92 1,358,160,725.92 Magnesite mining
(Haicheng Haiming) 463,059,536.30 463,059,536.30 196,118,936.12 196,118,936.12 600,000 tonne white coated
linerboard project
(Shouguang Meilun) 2,488,623,232.74 2,488,623,232.74 Meilun paper making additive
project (Shouguang Meilun) 339,261,614.70 339,261,614.70 50,464,830.16 50,464,830.16 Thermal paper upgrade project
(Shouguang Art Paper) 208,582,395.43 208,582,395.43 92,572.74 92,572.74 Forestry pulp integration project
(Huanggang Chenming) 130,795,345.46 130,795,345.46 120,872,039.53 120,872,039.53 Others 70,976,020.44 70,976,020.44 99,953,801.91 99,953,801.91
Total 5,266,031,817.60 5,266,031,817.60 5,017,604,821.59 5,017,604,821.59
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
12. Construction in progress(Cont’d)
(2) Changes in material construction in progress projects
Unit: RMB Of which: Capitalisation rate
Accumulated capitalised interest of the interest
Increase Transfer to Investment Construction capitalised amount amount
Name of project Budget Opening balance for the period fixed asset Other deductions to budget(%) progress interest am for the period(%) for the period Source of funds Closing balance Power plant phase III further 583,000,000.00 483,981,213.99 71,071,928.66 555,053,142.65 100% 100% 38,944,601.01 8,832,620.16 6% Capital and expansion (parent company) borrowings Railway project (parent company) 240,000,000.00 430,297.89 67,394,813.17 28% 28% 1,276,469.60 1,276,469.60 6% Capital and 67,825,111.06 borrowings technology upgrade for white paper 200,000,000.00 18,231,971.17 71,744,108.89 32,700,370.68 29% 29% Self-raised 57,275,709.38 board projects (parent company)
Zhanjiang Chenming 700,000 tonne 270,000,000.00 116,258,400.00 151,581,495.73 99% 99% 9,939,148.74 6,380,723.66 6% Capital and 267,839,895.73 pulp equipment upgrade borrowings (Zhanjiang Chenming)
180,000 tonne paper cup raw paper 1,322,000,000.00 313,760,579.02 24% 24% 16,395,272.65 16,395,272.65 6% Capital and 313,760,579.02 project (Zhanjiang Chenming) borrowings 190,000 tonne high-end cultural paper 3,097,000,000.00 284,958,974.38 9% 9% Self-raised 284,958,974.38 project (Zhanjiang Chenming)
7,800 tonne paper machine press 76,000,000.00 62,598,886.06 82% 82% 390,973.45 390,973.45 6% Capital and 62,598,886.06 section rebuild (Jiangxi Chenming) borrowings Desulphurisation and denitrification 82,000,000.00 27,249,910.87 33% 33% Self-raised 27,249,910.87 project of power plant
(Jiangxi Chenming)
Packaging paper for food project 1,830,000,000.00 122,625,351.96 7% 7% 765,014.18 765,014.18 6% Capital and 122,625,351.96 (Jiangxi Chenming) borrowings New production line of household paper 450,000,000.00 47,110,293.82 398,521,446.27 99% 99% 19,477,807.67 18,400,104.52 6.39% Capital and 445,390,478.03 machine upgrade in Wuhan second borrowings factory (Wuhan Chenming)
Technological upgrade for specialty 248,000,000.00 37,306,505.60 147,955,217.70 75% 75% 3,604,911.14 3,321,830.19 6% Capital and 185,261,723.30 paper project (Wuhan Chenming) borrowings Relocation of Jilin (Jilin Chenming) 2,300,000,000.00 1,358,160,725.92 936,908,330.16 76,498,770.60 96% 96% 5,499,999.99 Capital and 2,218,570,285.48 borrowings Magnesite mining (Haicheng Haiming) 500,000,000.00 196,118,936.12 266,940,600.18 93% 93% Self-raised 463,059,536.30 600,000 tonne white coated linerboard 2,600,000,000.00 2,488,623,232.74 89,648,981.23 2,578,272,213.97 100% 100% 200,669,260.09 Capital and project (Shouguang Meilun) borrowings Meilun paper making additive 550,000,000.00 50,464,830.16 288,796,784.54 62% 62% 7,703,579.92 7,703,579.92 6% Capital and 339,261,614.70 project (Shouguang Meilun) borrowings Thermal paper upgrade project 200,000,000.00 92,572.74 208,489,822.69 100% 100% 1,141,837.45 1,141,837.45 5.8% Capital and 208,582,395.43 (Shouguang Art Paper) borrowings Forestry pulp integration project 3,485,000,000.00 120,872,039.53 9,923,305.93 4% 4% Self-raised 130,795,345.46 (Huanggang Chenming)
Others 99,953,801.91 158,864,524.91 188,083,568.44 2,629,879.94 1,993,523.68 6% Capital and 70,976,020.44 borrowings Total 18,033,000,000.00 5,017,604,821.59 3,679,035,062.35 3,354,109,295.74 76,498,770.60 — — 308,438,755.83 66,601,949.46 —— 5,266,031,817.60 Explanation on changes in material construction in progress projects: the reason for the deduction in construction in progress of the relocation of Jilin Chenming is some assets were written off due to the relocation.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
12. Construction in progress(Cont’d)
(3) Construction progress of material construction in progress
Construction
Projects progress Remark
Power plant phase III further expansion 100% Construction progress was estimated on the basis (parent company) of the percentage of investment to budget Railway project (parent company) 28% Construction progress was estimated on the basis of the percentage of investment to budget technology upgrade for white paper 29% Construction progress was estimated on the basis board projects (parent company) of the percentage of investment to budget Zhanjiang Chenming 700,000 tonne 99% Construction progress was estimated on the basis pulp equipment upgrade of the percentage of investment to budget (Zhanjiang Chenming)
180,000 tonne paper cup raw paper 24% Construction progress was estimated on the basis project (Zhanjiang Chenming) of the percentage of investment to budget 190,000 tonne high-end cultural paper 9% Construction progress was estimated on the basis project (Zhanjiang Chenming) of the percentage of investment to budget 7,800 tonne paper machine press 82% Construction progress was estimated on the basis section rebuild (Jiangxi Chenming) of the percentage of investment to budget Desulphurisation and denitrification 33% Construction progress was estimated on the basis project of power plant of the percentage of investment to budget (Jiangxi Chenming)
Packaging paper for food project 7% Construction progress was estimated on the basis (Jiangxi Chenming) of the percentage of investment to budget New production line of household paper 99% Construction progress was estimated on the basis machine upgrade in Wuhan of the percentage of investment to budget second factory (Wuhan Chenming)
Technological upgrade for specialty 75% Construction progress was estimated on the basis paper project (Wuhan Chenming) of the percentage of investment to budget Relocation of Jilin (Jilin Chenming) 96% Construction progress was estimated on the basis of the percentage of investment to budget Magnesite mining (Haicheng Haiming) 93% Construction progress was estimated on the basis of the percentage of investment to budget 600,000 tonne white coated linerboard 100% Construction progress was estimated on the basis project (Shouguang Meilun) of the percentage of investment to budget Meilun paper making additive project 62% Construction progress was estimated on the basis (Shouguang Meilun) of the percentage of investment to budget Thermal paper upgrade project Construction progress was estimated on the basis (Shouguang Art Paper) 100% of the percentage of investment to budget Forestry pulp integration project Construction progress was estimated on the basis (Huanggang Chenming) 4% of the percentage of investment to budget
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
13. Materials for project
Unit: RMB Increase Decrease
Item Opening balance for the period for the period Closing balance Special materials 38,672,668.55 659,611,752.87 662,469,772.11 35,814,649.31 Special equipment 36,382,323.54 96,087,584.93 104,316,490.16 28,153,418.31 Total 75,054,992.09 755,699,337.80 766,786,262.27 63,968,067.62 14. Disposal of fixed assets
Unit: RMB Reasons for Opening Closing transferring Item carrying amount carrying amount to disposal Relocation of Jilin Chenming Paper Co., Ltd. due
to environmental reason 287,015,185.63 242,538,418.36 Relocation Relocation of Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. 345,643,229.17 Relocation Fuyu Chenming Paper Co., Ltd. 294,632.40
Total 287,309,818.03 588,181,647.53—
Note: The net value of fixed assets of Jilin Chenming Paper Co., Ltd. amounting to RMB17,160,644.51 was reclassified into disposal due to its relocation in 2013. Construction in progress reclassified into disposal of fixed assets was RMB76,498,770.60, while materials for projects reclassified into disposal of fixed assets was RMB19,781,725.75. The net value of assets disposed of was RMB158,004,749.34. The net value of fixed assets of Wuhan Chenming Hanyang Paper Holdings Co., Ltd. amounting to RMB520,014,570.53 was reclassified into disposal due to its relocation in 2013. The net value of assets disposed of was RMB174,371,341.36.
15. Consumable biological assets
(1) Measured at fair value
Unit: RMB Opening Increase Decrease Closing Item carrying amount for the period for the period carrying amount Forestry
Timber 1,169,269,054.15 170,257,270.82 22,385,201.20 1,317,141,123.77 Total 1,169,269,054.15 170,257,270.82 22,385,201.20 1,317,141,123.77 (1) Consumable biological assets are measure at fair value. The fair value of timber increased by RMB12,924,958.49 due to acquisition, increased by RMB146,110,483.57 due to breeding, decreased by RMB22,385,201.20 due to disposal, and increased by RMB11,221,828.76 due to change of fair value.
(2) As of 31 December 2013 there was no significant difference between the fair value and cost of the timbers planted during the year or unable to form any level of stocking in the consumable biological assets so their carrying amount was taken as their fair value. The timbers forming a level of stocking were measured at fair value and their fair value was determined based on the valuation of Golden Standard& Headmen Appraisal and Advisory Co., Ltd. The consumable biological assets measured at carrying amount as their fair value amounted to RMB124,503,050.23 and the consumable biological assets measured at assessed value
as their fair value amounted to RMB1,192,638,073.54.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
16. Intangible assets
(1) Particulars of intangible assets
Unit: RMB Opening Increase Decrease Closing Item book balance for the period for the period carrying amount I. Total original carrying
amount 1,607,671,950.95 156,276,649.45 199,061,078.12 1,564,887,522.28 Land use right 1,590,505,598.38 155,074,574.55 199,011,078.12 1,546,569,094.81 Software 17,166,352.57 1,202,074.90 50,000.00 18,318,427.47 II. Total accumulated
amortisation 191,174,791.73 31,794,800.76 23,500,072.47 199,469,520.02 Land use rights 179,397,382.19 29,769,094.70 23,471,600.25 185,694,876.64 Software 11,777,409.54 2,025,706.06 28,472.22 13,774,643.38 III. Total net carrying amount
of intangible asset 1,416,497,159.22 124,481,848.69 175,561,005.65 1,365,418,002.26 Land use right 1,411,108,216.19 125,305,479.85 175,539,477.87 1,360,874,218.17 Software 5,388,943.03 -823,631.16 21,527.78 4,543,784.09 IV. Total impairment provision 0.00 0.00 0.00 0.00 Land use rights 0.00 0.00 0.00 0.00 Software 0.00 0.00 0.00 0.00 Total carrying amount of
intangible asset 1,416,497,159.22 124,481,848.69 175,561,005.65 1,365,418,002.26 Land use rights 1,411,108,216.19 125,305,479.85 175,539,477.87 1,360,874,218.17 Software 5,388,943.03 -823,631.16 21,527.78 4,543,784.09 The amortisation amount was RMB 31,794,800.76 during the period.
① The original value of the decreased intangible assets due to disposal of subsidiaries amounted to RMB40,132,700.00 during the year. The cumulative amortisation of the decreased intangible assets due to the disposal of subsidiaries amounted to RMB1,270,868.77.
② On 31 December 2013, the ownership of intangible assets of carrying amount of RMB323,501,839.10 (31 December 2012: RMB330,717,493.46) was restricted, of which land use rights and fixed assets of carrying amount of RMB323,501,839.10were the pledge for long-term borrowings of RMB2,784,334,971.96 (31 December 2012: RMB3,098,403,800.00) and long-term borrowings due within one year of RMB269,313,900.00 (31 December 2012: RMB290,625,800.00) (For details, see Note VII. 10). The amortisation of such land use rights in 2013 amounted to RMB7,215,654.36 (2012: RMB7,215,654.36).③ The state-owned land use rights obtained by the Group in China were in compliance with PRC laws with a term of grant of 40-50 years upon receipt.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
17. Goodwill
Unit: RMB Impairment provisions at Name of investee or Opening Increase Decrease Closing the end of item generating goodwill book balance for the period for the period book balance the period Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Shandong Chenming Panels Co., Ltd. 5,969,626.57 5,969,626.57
Total 20,283,787.17 20,283,787.17
The goodwill of the Company arose from the business combined not under common control during the prior year. On the balance sheet date, the management of the Company assessed the recoverable amount of cash-generating unit which results goodwill, in order to determine whether to make provision for impairment loss accordingly. The recoverable amount of cash-generating unit is determined based on the estimated cash flow in financial budget of five years in the future by management, using the steady annual growth rate in the industry of5% (2012:5%) expected by the market, and time value of currency was estimated using the discount rate of8.32% (2012:8.32%). Management of the Company expects no provision for impairment loss is necessary to be made for goodwill during the reporting period.
For methods to test impairment on goodwill, see Note IV. 20.
18. Long-term prepaid expenses
Unit: RMB Increase Amortisation Reasons for Item Opening balance for the period for the period Other deductions Closing balance other deductions Expenses on 12,108,612.65 1,724,187.60 10,384,425.05 Disposal of improvement of Yanbian during leased assets the period Woodland expenses 170,460,955.74 2,756,861.13 6,833,966.41 166,383,850.46
Other 2,201,117.26 46,484.04 2,154,633.22
Total 184,770,685.65 2,756,861.13 8,604,638.05 10,384,425.05 168,538,483.68—
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
19. Deferred income tax assets and deferred income tax liabilities
(1) Deferred income tax assets and deferred income tax liabilities not stated as the net amount after offsetting Recognised deferred income tax assets and deferred income tax liabilities
Unit: RMB Item Closing balance Opening balance Deferred income tax assets:
Provision for impairment of assets 76,545,138.40 76,283,989.46 Deductible losses 391,818,687.83 244,104,208.24 Elimination of unrealised profit arising from intra-group 14,392,382.14 20,805,987.85 Unpaid payables 10,652,244.21 17,531,699.23 Deferred income 14,244,935.80 18,212,201.82 Sub-total 507,653,388.38 376,938,086.60 Deferred income tax liabilities:
Unit: RMB Item Closing balance Opening balance Deductible temporary differences 2,095,852.19 118,431,196.57 Deductible loss 420,230,273.61 329,374,556.35 Total 422,326,125.80 447,805,752.92
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
19. Deferred income tax assets and deferred income tax liabilities(Cont’d)
(1) Deferred income tax assets and deferred income tax liabilities not stated as the net amount after offsetting(Cont’d)
Deductible loss of unrecognised deferred income tax assets will expire by the following periods
Unit: RMB Year Closing balance Opening balance Remark 2013 74,170.94
2014 60,626,308.87 38,442,223.21
2015 37,886,444.37 67,208,911.93
2016 64,240,356.54 70,887,235.48
2017 116,631,374.76 152,762,014.79
2018 140,845,789.07
Total 420,230,273.61 329,374,556.35 — The breakdown of tax payable differences and deductible differences
Unit: RMB Amount of temporary differences The end of The beginning of Item the period the period Tax payable differences
Deductible differences
Provision for impairment of assets 328,446,526.51 322,820,452.56 Elimination of unrealised profit arising from intra-group 57,569,528.58 83,223,951.42 Unpaid payables 53,895,396.66 95,609,060.53 Deferred income 70,461,516.47 86,010,898.97 Deductible losses 1,567,274,751.26 976,416,833.00 Sub-total 2,077,647,719.48 1,564,081,196.48
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
20. Breakdown of provision for impairment of assets
Unit: RMB Opening balance Closing balance of carrying Increase Decrease for the period of carrying Item amount for the period Reversal Write-off Other amount I. Provisions for bad debts 331,102,223.82 24,715,485.83 52,082,625.22 4,864,308.41 933,639.33 297,937,136.69 II. Provisions for inventory
impairment 14,453,128.45 36,472,052.20 14,453,128.45 36,472,052.20 III. Provision for long-term
equity investment
impairment 2,589,574.47 2,589,574.47 IV. Provisions for fixed assets 13,015,998.85 15,000,000.00 1,795,998.85 26,220,000.00 V. Provisions for intangible
assets 0.00 0.00 0.00 Total 361,160,925.59 76,187,538.03 52,082,625.22 21,113,435.71 933,639.33 363,218,763.36 Explanation on provision for impairment of assets: Other deduction in provision for impairment of assets resulted from the disposal of its subsidiaries, namely Wuhan New-style Wall.
21. Assets with limited ownership or usage rights
Item Closing balance Reason for limitation
Sub-total of assets used for 6,749,964,377.30
providing guarantees:
Land (Zhanjiang) 323,501,839.10 As collaterals for bank borrowings
Fixed assets (Zhanjiang) 6,096,739,906.27 As collaterals for bank borrowings
Bills receivable 329,722,631.93 As collaterals for bank borrowings, received short-term borrowings
Sub-total of assets with limited 1,821,196,865.28
ownership or use rights
due to other reasons:
Other monetary funds 1,821,196,865.28 Secured bank borrowings, bank acceptance bills and letter of credit deposits
Total 8,571,161,242.58
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
22. Short-term borrowings
(1) Types of short-term borrowings
Unit: RMB Item Closing balance Opening balance Pledged borrowings 398,617,193.53
Guarantee loans 3,999,962,588.92 3,893,489,091.48 Credit loans 5,420,305,455.40 5,925,909,403.68 Discounted loans 3,057,000,000.00 Total 9,818,885,237.85 12,876,398,495.16 Description of types of short-term borrowings:
(1) Guarantee loans are the loans obtained by the subsidiaries of the Company from financial institutions when the Company acts as their guarantor;
(2) The Company had no short-term borrowings due and outstanding.
23. Bills payable
Unit: RMB Type Closing balance Opening balance Bank acceptance bills 290,403,790.59 1,285,627,762.07 Total 290,403,790.59 1,285,627,762.07 Amount to be due in the next accounting period amounted to RMB 290,403,790.59.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
24. Accounts payable
(1) Particulars of accounts payable
Unit: RMB Item Closing balance Opening balance Within 1 year 2,251,158,621.76 2,937,983,262.67 1- 2 years 240,434,222.13 158,572,722.64 2- 3 years 120,073,847.85 49,693,420.80 Over 3 years 83,503,235.40 93,532,318.70 Total 2,695,169,927.14 3,239,781,724.81 (2) During the reporting period, the accounts payable was not due to any shareholders or related parties holding over5%(5% inclusive) voting rights of theCompany’s shares.
(3) Explanation on significant trade payable for over 1 year
Reason of being Repaid after the Name of creditors Amount outstanding reporting date VOITH PAPEN FABRICS ASIA 116,057,475.18 Temporary No
PACIFIC. SDN.BHD outstanding
Andritz (China) Co., Ltd. 19,012,083.50 Temporary No
outstanding
Shandong Nge Logistics Co., Ltd. 10,142,997.00 Temporary No
outstanding
Itochu Corporation, Japan 3,232,405.93 Temporary No
outstanding
Styron SBR (Zhangjiagang) Co., Ltd. 2,917,572.65 Temporary No
outstanding
Total 151,362,534.26
(4) Accounts payable comprised the following balances in foreign currencies:
Closing balance Opening balance
Amount in Translated into Amount in
Item foreign currency Exchange rate RMB foreign currency Exchange rate Translated into RMB EUR 1,382,095.29 8.4189 11,635,722.04 1,574,136.46 8.3176 13,093,037.42 USD 123,474,097.22 6.0969 752,809,223.34 95,627,910.37 6.2855 601,069,230.63 JPY 256,639,724.00 0.057771 14,826,333.50
GBP 19,125.00 10.0556 192,313.35 19,125.00 10.1611 194,331.04 Total 779,463,592.23 614,356,599.09
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
25. Advance receipts
(1) Particulars of advance receipts
Unit: RMB Item Closing balance Opening balance Within 1 year 425,728,033.93 340,139,089.13 1-2 years 16,704,227.65 7,696,711.74 Total 442,432,261.58 347,835,800.87 (2) During the reporting period, advance receipts were not due to any shareholders or related parties holding over5%(5% inclusive) voting rights of theCompany’s shares.
(3) Explanation on significant advance receipts for over one year
Name of creditors Amount Reason for not being carried forward Guo Dongsheng 2,246,605.80 No delivery requirement from
the counterparty
Yong Yi Adhesive (Zhongshan) Co. Ltd. 1,384,668.41 No delivery requirement from
the counterparty
Zhanjiang Chemical Service Company 1,245,024.80 No delivery requirement from
the counterparty
Shandong Kailong Paper Science and 1,082,000.00 No delivery requirement from
Technology Co., Ltd. the counterparty
Total 5,958,299.01
(4) Advance receipts comprised the following balances in foreign currencies:
Closing balance Opening balance
Amount in Translated into Amount in Translated into Item foreign currency Exchange rate RMB foreign currency Exchange rate RMB EUR 2,067,646.02 8.4189 17,407,305.08
USD 37,181,309.64 6.0969 226,690,726.74 30,582,379.55 6.2855 192,225,546.66 JPY 4,046,425.00 0.057771 233,766.02
Total 244,331,797.84 192,225,546.66
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
26. Staff remuneration payables
Unit: RMB Opening Increase Decrease Closing Item book balance for the period for the period book balance I. Salaries, bonuses, allowance
and subsidies 113,061,559.95 665,639,708.64 704,993,755.65 73,707,512.94 II. Staff welfare 31,091,957.62 31,091,957.62
III. Social insurance premium 12,309,783.97 154,898,316.00 157,386,831.22 9,821,268.75 Of which: 1. Medical 7,814,322.06 35,263,623.74 35,783,572.58 7,294,373.22 insurance
premium
2. Pension insurance 3,130,098.40 108,356,774.08 110,111,854.15 1,375,018.33 premium
3. Unemployment 35,238.75 3,250,579.30 3,099,138.30 186,679.75 insurance
premium
4. Work-related injury 63,922.14 4,220,696.43 4,283,029.39 1,589.18 insurance
premium
5. Maternity insurance 1,266,202.62 3,806,642.45 4,109,236.80 963,608.27 premium
IV. Housing provident funds 10,020,193.56 50,251,402.81 55,065,165.93 5,206,430.44 V. Lay off welfare 23,648,552.72 12,822,469.94 13,751,093.30 22,719,929.36 VI. Non-monetary welfare
VII. Lay off welfare 3,083.97 83,865,306.12 83,856,314.94 12,075.15 VIIICash-settled
share-based payment
IX. Others 18,804,595.54 18,804,595.54 Total 177,847,769.71 998,569,161.13 1,046,145,118.66 130,271,812.18 The delayed payment in respect of staff remuneration payables amounted to RMB0.00.
Union operation costs and employee education costs amounted to RMB13,751,093.30, non-monetary welfare amounted to RMB0.00 and compensation arising from termination of service amounted to RMB83,856,314.94. There was no delayed payment staff remuneration payables. Apart from IX. Others, which is special fund for housing reform without specific payment plan, the rest are all short-term staff remuneration.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
27. Taxes payable
Unit: RMB Item Closing balance Opening balance Value added tax 6,620,418.81 39,231,100.57 Business tax 596,310.07 962,094.33 Enterprise income tax 104,402,645.76 42,565,684.15 Individual income tax 1,780,803.13 170,709.08 Urban maintenance and construction tax 1,713,580.49 2,792,836.34 Land use tax 5,495,793.45 8,114,849.29 Property tax 7,824,057.43 8,224,888.15 Educational surcharges and others 446,510.66 2,678,529.97 Stamp duty 1,312,817.07 2,075,721.99 Total 130,192,936.87 106,816,413.87 28. Interest payable
Unit: RMB Item Closing balance Opening balance Interest on corporate bonds 65,559,777.08 65,900,289.97 Interest on medium-term notes 27,455,083.34 67,145,833.34 Interest on private raised fund 60,175,000.00
Total 153,189,860.42 133,046,123.31 29. Other payables
(1) Particulars of other payables
Unit: RMB Item Closing balance Opening balance Within 1 year 419,910,089.94 310,080,861.84 1-2 years 23,967,481.29 58,740,745.82 2-3 years 16,877,980.44 16,748,468.93 Over 3 years 26,081,044.22 50,202,212.39 Total 486,836,595.89 435,772,288.98
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
29. Other payables(Cont’d)
(2) During the reporting period, other payables were not due to any shareholders or related parties holding over5%(5% inclusive) voting rights of theCompany’s shares.
For details, see Note IX. 5 Related party accounts receivable and accounts payable.
(3) Explanation on significant other payables for over 1 year
Reason of Repaid after Name of creditors Amount being outstand the reporting date State-owned Shouguang Qingshuipo Farm 8,800,000.00 Temporarily outstanding No
China Light Industry Construction Co., Ltd. 2,354,000.00 Temporarily outstanding No Fujian
Industrial Equipment Installation
Co., Ltd. Sanming Branch Company 2,280,000.00 Temporarily outstanding No
Shandong Longtai Stainless Steel
Products Co., Ltd. 1,500,000.00 Temporarily outstanding No
Jilin Jiangcheng Water Supply
Engineering Co., Limited 1,200,000.00 Temporarily outstanding No
Total 16,134,000.00
(4) Explanation of the significant other payables
Name of creditors Closing balance Nature or details
Land Management Office of Nanchang Economic 92,000,000.00 Land Payment
and Technological Development Zone
Liaoning BeiHai Industries Group Co., Ltd. 21,804,600.00 Fund for shareholders of subsidiaries
Shouguang Hengtai Enterprise Investment 18,668,679.17 Fund for shareholders
Company Limited of subsidiaries
State-owned Shouguang Qingshuipo Farm 8,800,000.00 Open credit
Jilin Installation Group Co., Ltd– Jilin N0.1 Branch 4,823,879.66 Quality guarantee deposit Total 146,097,158.83
30. Non-current liabilities due within one year
(1) Particulars of non-current liabilities due within one year
Unit: RMB Item Closing balance Opening balance Long-term borrowings due within one year 789,115,500.00 1,368,108,800.00 Payable bonds due within one year 498,688,952.66
Total 1,287,804,452.66 1,368,108,800.00
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
30. Non-current liabilities due within one year(Cont’d)
(2) Long-term borrowings due within one year
Long-term borrowings due within one year
Unit: RMB Item Closing balance Opening balance Pledged borrowings 125,710,000.00 Secured borrowings 269,313,900.00 290,625,800.00 Guarantee borrowings 175,925,600.00 562,640,000.00 Credit borrowings 343,876,000.00 389,133,000.00 Total 789,115,500.00 1,368,108,800.00 Rollover of overdue borrowings within long-term borrowing due within a year amounted to RMB0.00. Top five long-term borrowings due within one year
Unit: RMB Closing balance Opening balance Amount in Amount in
Borrowed by Date of commencement Date of termination Currency Rate(%) foreign currency Functional currency foreign currency Functional currency The Export-Import Bank 13 April 2011 12 April 2014 RMB 5.5% 100,000,000.00
of China Qingdao branch
China Development Bank 25 March 2008 24 March 2023 RMB 5.9% 86,406,900.00
Guangdong branch
China Development Bank 25 March 2008 24 March 2023 USD3.15% 30,000,000.00 182,907,000.00
Guangdong branch
Sumitomo Mitsui Banking 21 March 2012 30 November 2014 USD2.31% 40,000,000.00 243,876,000.00
Corporation (China) Limited
Mitsui syndicated loan 11 April 2011 11 March 2014 USD2.98% 24,000,000.00 146,325,600.00
Sumitomo Mitsui Banking 10 September 2010 10 September 2013 USD3.36% 64,000,000.00 402,272,000.00 Corporation (China) Limited
The Export-Import Bank 28 June 2010 27 June 2013 USD3.76% 36,000,000.00 226,278,000.00 of China Qingdao branch
China Development Bank 25 March 2008 24 March 2013 USD3.15% 30,000,000.00 188,565,000.00 Guangdong branch
China Development Bank 25 March 2008 24 March 2013 RMB 5.9% 102,060,800.00 Guangdong branch
Agricultural Bank of China 26 January 2011 28 December 2013 RMB 4.7% 100,000,000.00 Shouguang sub-branch
－ － － － － －
Total 759,515,500.00 1,019,175,800.00 Overdue borrowings within long-term borrowings due within one year: Nil.
(3) Payable bond due within one year
Unit: RMB Opening Interest accrued Interest paid Closing interest
Name of bond Nominal value Issue date Term of bond Issue amount interest payable for the period for the period payable Closing balance
11 Chenming Hong Kong debt 500,000,000.00 13 April 2011 3 years 491,750,000.00 3,152,512.20 14,740,042.66 14,750,000.00 3,142,554.86 498,688,952.66
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
31. Other current liabilities
Unit: RMB Closing Opening Item book balance book balance Deferred income to be amortised within one year 25,246,647.62 17,659,498.56 Short- term commercial paper 3,853,488,888.90
Total 3,878,735,536.52 17,659,498.56 Particulars of other current liabilities
The breakdown of the above deferred income is as follows:
Item Closing balance Opening balance Government grants in respect of assets
Special subsidy funds for environmental protection 1,693,753.30 3,129,665.41 Project fund for National technological support scheme 164,700.00 492,453.30 Special subsidy fund for Songhuajiang environmental protection project 1,030,000.08 1,030,000.08 Sewage treatment and water conservation reconfiguration project 990,418.60 990,418.60 Financial grants for technological modification project 7,260,000.00 687,067.67 Zhanjiang integrated forestry, pulp and paper project 13,956,068.49 11,305,973.76 Others 151,707.15 23,919.74 Total 25,246,647.62 17,659,498.56 The breakdown of short- term commercial paper is as follows:
Item Closing balance Opening balance short- term commercial paper
short- term commercial paper CP001 1,836,733,333.34
short- term commercial paper CP002 2,016,755,555.56
Total 3,853,488,888.90
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
32. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB Item Closing balance Opening balance Pledged borrowing 125,710,000.00 Secured borrowings 3,053,648,871.96 3,389,029,600.00 Guarantee borrowing 470,888,400.00 895,292,000.00 Credit borrowings 988,444,035.94 891,245,035.94 Less: long-term borrowings due within one year(see Note VII. 30) 789,115,500.00 1,368,108,800.00 Total 3,723,865,807.90 3,933,167,835.94 Description of types of long-term borrowings: For the category and amount of secured assets under secured borrowings, please see Note VII. 11 and Note VII. 16.
(2) Top five long-term borrowings
Unit: RMB Closing balance Opening balance Amount in Amount in
Borrowed by Date of commencement Date of termination Currency Rate(%) foreign currency Functional currency foreign currency Functional currency Bank of Communications, 31 July 2013 30 July 2016 RMB5.51% 200,000,000.00
Weighing Shouguang Branch
The Export-Import Bank of China 8 July 2013 8July 2015 USD2.31% 20,000,000.00 121,938,000.00
Qingdao branch
China Development Bank 23 March 2008 24 February 2023 RMB 5.9% 1,016,233,971.96
Guangdong branch
China Development Bank 25 March 2008 24 February 2023 USD3.15% 290,000,000.00 1,768,101,000.00
Guangdong branch Export-
Import Bank of China 7 July 2013 1 July 2015 RMB5.68% 160,000,000.00
China Development Bank 25 March 2008 24 March 2023 USD3.15% 320,000,000.00 2,011,360,000.00 Guangdong branch
China Development Bank 25 March 2008 24 March 2023 RMB 5.9% 1,087,043,800.00 Guangdong branch
Sumitomo Mitsui Banking 11 April 2011 11 March 2014 USD2.98% 40,000,000.00 251,420,000.00 Corporation (China) Limited
Mitsui syndicated loan 11 April 2011 11 March 2014 USD2.98% 39,909,633.28 250,852,000.00 The Export-Import Bank of China 13 April 2011 12 April 2014 RMB5.51% 100,000,000.00 Qingdao branch
Total — — — — — 3,266,272,971.96 — 3,700,675,800.00 For long-term borrowings, RMB 898,143,000.00 will be paid in the second year after the balance sheet date (2012: RMB 1,001,385,900.00), RMB 1,204,701,900.00 will be paid within the third to fifth year after the balance sheet date (2012: RMB 953,372,100.00) and RMB1,621,020,907.90 will be paid over after the fifth year (2012: RMB 1,978,409,835.94).
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
33. Bonds payable
Unit: RMB Opening interest Interest accrued Interest paid Closing interest
Bond name Nominal value Issue date Term of bond Issued amount payable for the period for the period payable Closing balance 11 Chenming debt 2,000,000,000.00 6 July 2011 5years 1,982,000,000.00 59,169,444.44 118,669,444.45 119,000,000.00 58,838,888.89 1,990,203,485.86 11 Chenming Hong Kong debt 500,000,000.00 13 April 2011 3years 491,750,000.00 3,152,512.20 14,740,042.66 14,750,000.00 3,142,554.86 498,688,952.66 12 Chenming debt 3,800,000,000.00 26 February 2012 5years 3,773,400,000.00 3,578,333.33 214,700,000.00 214,700,000.00 3,578,333.33 3,778,215,126.87 Sub-total 6,300,000,000.00 6,247,150,000.00 65,900,289.97 348,109,487.11 348,450,000.00 65,559,777.08 6,267,107,565.39 Less: closing balance for the year of amount
due within one year(Note VII. 30) 498,688,952.66 Total 5,768,418,612.73 34. Long-term payables
Classification of long-term payables
Borrowing
Entity Term conditions Closing balance Opening balance Nanchang Economic and Technological
Development Zone Investment December
Holdings Limited 2013– January 2019 Secure 60,000,000.00
Total 60,000,000.00
35. Special accounts payable
Unit: RMB Increase Decrease
Item Opening balance during the period during the period Closing balance Note
Relocation of Jilin Chenming
due to environmental
reason 641,526,872.70 650,000,000.00 319,721,311.31 971,805,561.39
Relocation of Wuhan
Chenming
due to environmental
reason 314,840,000.00 314,840,000.00
Total 641,526,872.70 964,840,000.00 634,561,311.31 971,805,561.39—
Note on special accounts payable:
During the year, pursuant to the relocation compensation agreement entered into with China Development Jilin Co., Ltd., the Company received relocation compensation of RMB650 million . The Company utilised the relocation compensation to offset loss on disposal of fixed asset and suspension of production of RMB86,945,723.83 and RMB99,453,494.34, respectively. Compensation and written-off for the land value of old Jilin factory amounted to RMB133,322,093.14.
During the year, pursuant to the meeting spirit related to elimination of backward production capacity and environmental relocation of Wuhan Chenming by Wuhan Government, the Company received relocation compensation of RMB314,840,000.00. The Company utilised the relocation compensation to offset loss on disposal of fixed asset
and suspension of production of RMB121,575,124.36 and RMB193,264,875.64, respectively.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
36. Other Non-current liabilities
Unit: RMB Item Closing balance Opening balance Deferred income 468,354,064.53 375,881,264.56 Medium-term notes 1,088,060,197.75 2,184,270,106.80 Private Raised Bond 1,489,103,380.29
Of which: due within 1 year 1,100,000,000.00 Due within 1-2 years
During within 2-5 years 2,600,000,000.00 1,100,000,000.00 Unamortised issuance costs -22,836,421.96 -15,729,893.20 Total 3,045,517,642.57 2,560,151,371.36 Liabilities related to government grants
Unit: RMB amount included
new grants non-operating asset-related/ Liabilities item Opening balance for the period income Other changes Closing balance revenue-related Special subsidy funds for
environmental protection 63,922,883.01 17,814,600.00 10,207,530.24 -4,491,238.09 67,038,714.68 asset-related Project fund for National
technological support
scheme 7,605,425.00 164,700.00 7,440,725.00 asset-related Special subsidy fund
for Songhuajiang
environmental protection
project 27,790,829.88 877,750.08 26,913,079.80 asset-related Modification of alkaline
recycling system 4,883,749.85 4,883,749.85 asset-related Sewage treatment and
water conservation
reconfiguration project 12,899,569.87 990,418.60 11,909,151.27 asset-related Financial grants for
technological
modification project 1,972,781.97 100,000,000.00 1,428,571.44 100,544,210.53 asset-related Zhanjiang integrated
forestry, pulp and
paper project 273,472,850.82 11,837,241.00 11,663,338.49 273,646,753.33 asset-related Others 992,672.72 327,000.00 95,345.03 1,224,327.69 asset-related Deferred income to be
amortised within 1 year -17,659,498.56 -25,246,647.62 asset-related Total 375,881,264.56 129,978,841.00 25,427,653.88 -4,491,238.09 468,354,064.53 — Deferred income of RMB129,978,841.00 was received during the period. Deferred income amortisation recognised
through profit or loss was RMB25,427,653.88. The decrease in deferred income due to disposal of equity of Yanbian
Chenming Paper Co., Ltd. was RMB4,491,238.09.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
37. Share capital
Unit: RMB Opening balance Change during the year(Increase/decrease) Closing balance Shares converted
Item Amount % New issue Bonus shares from reserve Others Sub-total Amount % I. Restricted shares
Shares held by the Senior
Management 9,336,404.00 0.45 -1,170,185.00 -1,170,185.00 8,166,219.00 0.41 Total for restricted shares 9,336,404.00 0.45 -1,170,185.00 -1,170,185.00 8,166,219.00 0.41 II. Non-restricted shares
1. RMB ordinary shares
(A shares) 1,103,942,052.00 53.54 1,170,185.00 1,170,185.00 1,105,112,237.00 55.94 2. Domestic listed foreign
shares (B shares) 557,497,485.00 27.04 -86,573,974.00 -86,573,974.00 470,923,511.00 23.84 3. Overseas listed foreign
shares (H shares) 391,270,000.00 18.97 391,270,000.00 19.81 Total for non-restricted shares 2,052,709,537.00 99.55 -85,403,789.00 -85,403,789.00 1,967,305,748.00 99.59 III. Total number of shares 2,062,045,941.00 100.00 -86,573,974.00 -86,573,974.00 1,975,471,967.00 100.00 The Company repurchased 86,573,974 overseas listed foreign shares (B shares) during 2013. The adjusted share capital was RMB1,975,471,967. The share capital was reviewed by Ruihua Certified Public Accountants, which published a capital review report named Rui Hua Yan Zi[2013] No. 91110005 for the certification of the review. 38. Capital reserves
Increase Decrease
Item Opening balance during the year during the year Closing balance Repurchase of B shares of
the Company 265,363,183.60 265,363,183.60
Repurchase of H shares of
the Company 30,954,891.40 30,954,891.40 Total 296,318,075.00 265,363,183.60 30,954,891.40 At the 2013 first extraordinary general meeting, the 2013 first class meeting for holders of domestic listed shares (A shares and B shares) and the 2013 first class meeting for holders of overseas listed shares (H shares) of the Company convened on 21 August 2013, the Company resolved to repurchase not more than 39,127,000 overseas listed shares (H shares) at a repurchase price of not more thanHK$4 per share (the repurchase price on the repurchase date shall not be higher by5% or more than the average closing price of shares on The Stock Exchange of Hong Kong Limited for the 5 preceding trading days) within twelve months from the date of the general meeting and class meetings. The amount to be used for the repurchase of shares shall not be more thanHK$160,000,000 (equivalent to approximately RMB127,000,000, based on the exchange rate ofHK$1:RMB0.79532 as at 21 August 2013). As of 31 December 2013, the Company repurchased 1,1484,500 H shares at a consideration ofHK$39,371,292.62 (including stamp duty and commission), which was equivalent to RMB30,954,891.40.
Upon expiry of the above repurchase period or completion of the repurchase, the Company will cancel all repurchased H shares and reduce its registered capital accordingly.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
39. Capital reserves
Unit: RMB Increase Decrease
Item Opening balance during the period during the period Closing balance Capital premium (share premium) 5,713,148,731.33 178,789,209.60 5,534,359,521.73 Of which: capital contributed
by investor 3,373,256,665.49 178,789,209.60 3,194,467,455.89 Exercise of conversion right of
convertible corporate bonds 2,018,215,301.98 2,018,215,301.98 Acquisition of minority interests 321,676,763.86 321,676,763.86 Other capital reserves 701,744,268.20 31,421,760.99 670,322,507.21 Of which: conversion of
capital reserves under the
previous system 701,744,268.20 31,421,760.99 670,322,507.21 Total 6,414,892,999.53 210,210,970.59 6,204,682,028.94 At the ninth extraordinary general meeting of the sixth session of the Board of the Company convened on 15 May 2013, the resolution in respect of the disposal of equity of Yanbian Chenming Paper Co., Ltd. and acquisition of assets was approved and passed. The Company transferred its49% and51% equity interest in Yanbian Chenming to Yanbian Shixian Bailu Paper Co., Ltd. and Yanbian State-owned Assets Management Co., Ltd. at a consideration of RMB54 million and RMB56 million, respectively. The conversion of capital reserves under the previous system of RMB31,421,760.99 was transferred to investment income for the current period. The Company repurchased 86,573,974 overseas listed foreign shares (B shares) at a consideration in Hong Kong dollar equivalent to RMB265,363,183.60, which offset capital premium under capital reserves of RMB178,789,209.60.
40. Surplus reserve
Unit: RMB Increase Decrease
Item Opening balance during the period during 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 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 amount 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.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
41. Retained profit
Unit: RMB Proportion of appropriation or Item Amounts allocation Retained profit as at the end of the prior year before adjustment 4,149,511,927.88 — Retained profit as at the beginning of the year after adjustment 4,149,511,927.88 — Plus : Net profit for year attributable to shareholders of
the parent company 710,655,331.72 — Ordinary dividend payable 118,528,318.02
Retained profit as at the end of the period 4,741,638,941.58 — (1) Adjustments to the retained profit breakdown as at the beginning of the year:
1). The effect of the retrospective adjustments arising from Accounting Standards for Business Enterprises and their new related requirements on the retained profit as at the beginning of the year amounted to RMB0.00.
2). The effect of changes in accounting policies on the retained profit as at the beginning of the year amounted to RMB0.00.
3). The effect of corrections of significant accounting errors on the retained profit as at the beginning of the year amounted to RMB0.00.
4). The effect of the change of the scope of combination under common control on the retained profit as at the beginning of the year amounted to RMB0.00.
5). The effect of other adjustments on the retained profit as at the beginning of the year amounted to RMB0.00.
(2) According to the proposed profit distribution plan for 2012 approved by the 2013 annual general meeting of the Company on 15 May 2013, the Company paid a cash dividend of RMB0.06 (2012: RMB0.15) per share to all shareholders. As the Company had repurchased B shares, based on the number of shares of 1,975,471,967 at the dividend registration date, the total amount to be distributed was RMB118,528,318.02 (2012: RMB309,306,892.20).
Pursuant to PRC tax laws, the Company is required to withhold10% PRC enterprise income tax when it distributes dividends to its non-PRC resident enterprise shareholders.
(3) Breakdown of the transfer to surplus reserve of subsidiaries during the reporting period
The transfer to surplus reserve of subsidiaries of the Company in 2013 was RMB45,584,915.52, of which RMB45,584,915.52 was attributable to the parent company.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
42. Revenue and operating costs
(1) Revenue and operating costs
Unit: RMB Amounts Amounts during the Item during the period prior period Revenue from principal activities 20,152,795,532.07 19,418,385,445.41 Revenue from other activities 236,094,535.34 343,293,784.64 Operating costs 16,651,886,019.64 16,693,768,322.36 (2) Principal activities (by industries)
Unit: RMB Industry name Amounts during the period Amounts during the prior period Operating revenue Operating costs Operating revenue Operating costs I. Machine-made paper 18,244,191,565.62 15,088,624,360.62 18,148,184,354.47 15,448,210,584.92 II. Electricity and steam 1,519,119,225.58 1,128,949,590.22 800,330,990.18 603,017,916.41 III. Construction materials 241,343,187.87 204,068,954.93 344,778,147.53 301,384,927.59 IV. Paper chemicals 63,109,642.95 47,193,191.78 V. Hotel 36,324,584.14 8,589,278.93 48,334,822.55 12,493,732.14 VI. Others 111,816,968.86 62,297,587.77 13,647,487.73 10,492,427.23 Total 20,152,795,532.07 16,492,529,772.47 19,418,385,445.41 16,422,792,780.07
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
42. Revenue and operating costs(Cont’d)
(3) Principal activities (by product)
Unit: RMB Product name Amounts during the period Amounts during the prior period Operating revenue Operating costs Operating revenue Operating costs Light weight coated paper 959,374,495.99 797,143,663.55 1,170,332,533.70 1,039,609,451.91 Duplex press paper 2,573,322,197.99 2,101,348,540.72 2,893,040,859.96 2,486,129,792.61 Writing paper 307,750,040.04 249,202,911.49 278,621,119.55 265,618,292.24 Coated paper 4,504,344,844.03 3,863,437,378.40 4,039,555,866.49 3,763,791,638.91 News press paper 1,501,678,237.85 1,103,153,831.64 1,774,456,795.28 1,253,184,006.48 Paperboard 812,352,574.23 815,342,139.62 527,059,863.45 513,468,478.94 White paper board 2,161,704,531.76 1,738,047,195.43 2,009,960,531.99 1,646,210,297.10 Static paper 1,906,857,070.30 1,496,527,676.12 1,590,707,172.04 1,225,698,307.75 Other machine-made paper 3,516,807,573.43 2,924,421,023.65 3,864,449,612.01 3,254,500,318.98 Electricity and steam 1,519,119,225.58 1,128,949,590.22 800,330,990.18 603,017,916.41 Building materials 241,343,187.87 204,068,954.93 344,778,147.53 301,384,927.59 Paper chemicals 63,109,642.95 47,193,191.78 Hotel 36,324,584.14 8,589,278.93 48,334,822.55 12,493,732.14 Others 111,816,968.86 62,297,587.77 13,647,487.73 10,492,427.23 Total 20,152,795,532.07 16,492,529,772.47 19,418,385,445.41 16,422,792,780.07 (4) Principal activities (by geographical areas)
Unit: RMB Region Amounts during the period Amounts during the prior period Operating revenue Operating costs Operating revenue Operating costs Mainland China 17,419,575,119.36 14,112,022,512.66 16,652,392,812.02 13,832,363,392.83 Other countries and regions 2,733,220,412.71 2,380,507,259.81 2,765,992,633.39 2,590,429,387.24 Total 20,152,795,532.07 16,492,529,772.47 19,418,385,445.41 16,422,792,780.07 (5) Operating revenue from top 5 customers of the Company
Unit: RMB Total operating Percentage of the revenue from operating revenue Period top 5 customers for the period(%) 2013 1,159,451,679.05 5.69% 2012 809,133,619.82 4.09%
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
43. Business taxes and surcharges
Unit: RMB Amounts Amounts
Item during the period during the prior period Calculation standard
Business tax 15,368,137.34 12,913,487.64 Business tax calculated at3%-5% of taxable revenue
Urban maintenance and 38,246,715.31 36,055,424.89 Calculated at7% of actual current tax construction tax paid
Educational surcharges 24,829,356.69 24,692,978.62 Calculated at3% of actual current tax paid
Water engineering funds 4,748,112.49 4,169,692.98
Local educational surcharges 2,468,807.39 811,004.25 Calculated at2% of actual current tax paid
Others 171,081.76 47,402.56
Total 85,832,210.98 78,689,990.94—
44. Selling and distribution expenses
Unit: RMB Amounts Amounts during Item during the period the prior period Wages 116,750,755.01 106,775,704.85 Depreciation expenses 18,004,121.19 21,819,218.81 Office expenses 6,365,282.20 6,794,411.68 Travel expenses 29,520,578.69 27,239,405.77 Sales commission 6,965,244.83 6,406,566.86 Transportation expenses 771,135,730.03 708,273,839.04 Cargo handling charges 24,267,204.90 25,234,845.39 Rental expenses 8,946,309.54 6,865,846.36 Hospitality expenses 65,119,426.31 75,188,472.21 Warehouse expenses 7,840,514.22 11,896,779.46 Others 74,229,868.59 147,994,155.61 Total 1,129,145,035.51 1,144,489,246.04
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
45. General and administrative expenses
Unit: RMB Amounts Amounts during Item during the period the prior period Wages and surcharges 185,735,210.11 191,908,796.59 Welfare expenses 36,143,571.41 22,478,619.26 Social insurance premium 10,261,700.98 20,136,048.25 Insurance premium 17,221,874.87 14,829,959.11 Depreciation expenses 56,957,280.03 60,751,168.63 Waste disposal expenses 24,375,706.65 28,983,197.70 Hospitality expenses 21,996,694.34 34,413,765.89 Amortisation of intangible assets 30,699,445.68 23,835,110.94 Technological development expenses 379,261,152.54 293,698,298.28 Tax 75,806,245.69 36,156,445.61 Production interruption loss 65,937,178.56 74,297,144.39 Dismissal welfares 83,865,306.31
Others 210,443,188.83 308,758,348.10 Total 1,198,704,556.00 1,110,246,902.75 46. Finance expenses
Unit: RMB Amounts Amounts during Item during the period the prior period Interest expenses 1,370,531,985.38 1,434,634,633.92 Less: interest income 211,164,138.80 167,001,504.37 Less: capitalised interest amount 128,341,431.11 212,844,904.48 Foreign exchange gains and losses -164,346,803.25 -11,933,355.58 Less: capitalised foreign exchange gains and losses amount
Others 63,924,562.74 49,905,145.55 Total 930,604,174.96 1,092,760,015.04 47. Gain on change in fair value
Unit: RMB Amounts Amounts during the Source of gain on change in fair value during the period prior period Biological assets measured at fair value 11,221,828.76 47,822,076.87 Total 11,221,828.76 47,822,076.87
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
48. Investment income
(1) Breakdown of investment income
Unit: RMB Amounts Amounts during the Item during the period prior period Income from long-term equity investments accounted for
using the equity method 208,888.59 -637,227.71 Investment gain on disposal of long-term equity investments 23,497,069.99 -34,887,733.04 Total 23,705,958.58 -35,524,960.75 (2) Income from long-term equity investments accounted for using the equity method
Unit: RMB Amounts Amounts during
Investee during the period the prior period Reason for change
Arjo Wiggins Chenming Specialty -19,385,301.17 Change in revenue of investee Paper Co., Ltd.
Jiangxi Jiangbao Media Colour -47,492.37 4,396.33 Change in revenue of investee Printing Co. Ltd.
Shanghai Anzhou New Energy Co., Ltd. 571,186.50 18,743,677.13 Change in revenue of investee Wuhan Chenming Wan Xing -314,805.54 Change in accounting methods of Real Estate Co., Ltd. investee
Total 208,888.59 -637,227.71—
49. Loss on impairment of assets
Unit: RMB Amounts Amounts during the Item during the period prior period I. Loss on bad debts -27,367,139.39 44,611,035.76 II. Loss on inventory impairment 36,472,052.20 14,419,123.18 III. Loss on fixed asset impairment 15,000,000.00 11,220,000.00 Total 24,104,912.81 70,250,158.94
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
50. Non-operating income
(1) Non-operating income
Unit: RMB Amounts included in current Amounts during Amounts during extraordinary Item the period the prior period gains and losses Total gain on disposal of non-current assets 6,695,769.19 30,576,886.51 6,695,769.19 Of which: Gain on disposal of fixed assets 6,695,769.19 30,576,886.51 6,695,769.19 Gain on debt restructuring 268,577.19 11,256,702.04 268,577.19 Government grants 190,712,413.64 258,711,984.00 174,947,619.19 Revenue from Wuhan relocation 193,264,875.64 193,264,875.64 Special payables for Jilin 99,453,494.34 95,977,067.70 99,453,494.34 Business combination not under
common control 2,408,368.37 2,408,368.37 Others 11,241,687.62 25,005,706.31 11,241,687.62 Total 504,045,185.99 421,528,346.56 488,280,391.54 (2) Breakdown of government grants
Amounts during Amounts during the Item the year prior year Amortised deferred income 25,427,653.88 19,148,832.88 Grants income 149,519,965.31 216,008,688.69 Value-added tax refund 15,764,794.45 23,554,462.43 Total 190,712,413.64 258,711,984.00 51. Non-operating expenses
Unit: RMB Amounts included in current Amounts during Amounts during extraordinary Item the period the prior period gains and losses Total loss on disposal of non-current assets 36,560,317.17 4,484,098.29 36,560,317.17 Of which: Loss on disposal of fixed assets 36,560,317.17 4,484,098.29 36,560,317.17 Loss on debt restructuring 10,315,257.61
Donation 2,800,000.00 2,800,000.00 Others 1,934,144.14 6,640,682.20 1,934,144.14 Total 41,294,461.31 21,440,038.10 41,294,461.31
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
52. Income tax expenses
Unit: RMB Amounts during Amounts during the Item the period prior period Current income tax calculated according to tax laws and relevant rules 324,213,944.11 156,822,377.11 Adjustment to deferred income tax -148,275,512.20 -219,648,615.62 Total 175,938,431.91 -62,826,238.51 Reconciliation of income tax expenses and total profit is set out as follows:
Amounts for Amounts for Item the year the prior year Profit before tax 866,291,669.53 -16,139,981.44 Income tax calculated under the tax rate under the law 216,572,917.38 -4,034,995.36 Add: Effect of non-deductible costs, expenses and loss 42,318,807.13 43,947,272.95 Less: Effect of tax concessions 115,277,133.60 59,472,189.81 Less: Utilisation of unrecognised deductible loss and
deductible temporary differences for prior years 24,000,975.01 60,826,791.73 Add: Effect of unrecognised deductible loss and deductible
temporary differences for the current period 56,324,816.01 17,560,465.44 Income tax expenses 175,938,431.91 -62,826,238.51 53. Calculation of basic earnings per share and diluted earnings per share
The basic earnings per share is computed by dividing the net profit for the period attributable to ordinary shareholders of the Company by the number of weighted average ordinary shares in issue. The number of newly issued ordinary shares is confirmed starting from the day of consideration receivables (generally the offering date of stock) according to the specific terms in the offering agreement.
The numerator of the diluted earnings per share is the net profit for the period attributable to ordinary shareholders of the Company, which is confirmed after adjusting the following factors: (1) interests of diluted potential ordinary shares recognised as expenses for the period; (2) gains or expenses arising from the transfer of diluted potential ordinary shares; and (3) effect of income tax due to the above adjustment.
The denominator of diluted earnings per share is the sum of the followings: (1) weighted average number of ordinary shares in issue of the parent company in the basic earnings per share; and (2) average weighted number of the increased ordinary shares during the transfer of the estimated diluted potential ordinary shares to ordinary shares. For the purpose of calculating the average weighted number of the increased ordinary shares during the transfer of the estimated diluted potential ordinary shares to ordinary shares in issue, diluted potential ordinary shares issued during the prior period were assumed to be transferred as at the beginning of the current period while diluted potential ordinary shares issued in the current period were assumed to be transferred on offering date.
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
53. Calculation of basic earnings per share and diluted earnings per share(Cont’d)
(1) Basic earnings per share and diluted earnings per share over the periods
Amounts during the year Amounts during the prior year Profit for the Basic earnings Diluted earnings Basic earnings Diluted earnings reporting period per share per share per share per share Net profit attributable to
ordinary shareholders of
the Company 0.35 0.35 0.11 0.11 Net profit after deducting
extraordinary gains and
losses attributable to
ordinary shareholders of
the Company 0.20 0.20 -0.08 -0.08 (2) Calculation of earnings per share and diluted earnings per share
① Net profit for the period attributable to ordinary shareholders for the purpose of calculating basic earnings per share are as follows:
Amounts during Amounts during the Item the year prior year Net profit for the period attributable to ordinary shareholders 710,655,331.72 221,034,822.54 Of which: net profit attributable to continuing operations 710,655,331.72 221,034,822.54 net profit attributable to discontinued operations Net
profit after deducting extraordinary gains and
losses attributable to ordinary shareholders
of the Company 406,170,148.25 -159,777,900.37 Of which: net profit attributable to continuing operations 406,170,148.25 -159,777,900.37 net profit attributable to discontinued operations
② For the purpose of calculating earnings per share, the denominator is the weighted average of outstanding ordinary shares. The calculation is as follows:
Amounts during Amounts during the Item the year prior year Number of outstanding ordinary shares as at
the beginning of the year 2,062,045,941 2,062,045,941 Add: number of weighted ordinary shares
issued during the year
Less: number of weighted ordinary shares
repurchased during the year 52,130,683
Number of outstanding ordinary shares as at
the end of the year 2,009,915,258 2,062,045,941
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
54. Other comprehensive income
Unit: RMB Amounts during Amounts during the Item the period prior period Translation difference of financial statements denominated in
foreign currency 16,004,868.55 2,517,765.07 Less: Disposal of overseas operation charged to the net profit or loss
for the period
Sub-total 16,004,868.55 2,517,765.07 Others
Less: Effect of income tax arising from others charged to
other comprehensive income
Reclassification to net profit or loss of others charged to
other comprehensive income during the prior period 31,421,760.99 267,566.25 Sub-total -31,421,760.99 -267,566.25 Total -15,416,892.44 2,250,198.82 Changes in other comprehensive income item
Amounts during Amounts during the Item the year prior year Opening balance 702,673,473.24 700,423,274.42 Of which: Capital reserves– conversion under the previous system 701,744,268.20 702,011,834.45 Translation difference of financial statements denominated in
foreign currency 929,205.04 -1,588,560.03 Plus: Change during the period -15,416,892.44 2,250,198.82 Of which: Capital reserves– conversion under the previous system -31,421,760.99 -267,566.25 Translation difference of financial statements denominated in
foreign currency 16,004,868.55 2,517,765.07 Closing balance 687,256,580.80 702,673,473.24 Of which: Capital reserves– conversion under the previous system 670,322,507.21 701,744,268.20 Translation difference of financial statements denominated in
foreign currency 16,934,073.59 929,205.04
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
55. Breakdown of the profit before tax of the Group after deducting items
Amounts during Amounts during Item the year the prior year Material expense 13,094,823,156.46 13,630,113,683.36 Labour costs 969,927,481.47 1,010,862,815.62 Accumulated depreciation 1,322,959,919.80 1,471,443,592.08 Energy and power 2,012,679,649.75 1,965,334,285.64 Other production costs 758,129,910.44 459,284,268.99 Changes in inventory balance -540,994,617.31 -1,053,743,319.49 Net financial expense 930,604,174.96 1,092,760,015.04 Amortisation of intangible assets 30,699,445.68 23,835,110.94 Tax 161,638,456.67 171,304,772.47 Impairment loss on assets 24,104,912.81 70,250,158.94 Loss on disposal of non-current assets 36,560,317.17 4,484,098.29 Loss on debt reduction 10,315,257.61 Production interruption loss 65,937,178.56 74,297,144.39 Transportation expense 773,000,263.65 762,494,590.62 Hospitality expense 87,116,120.65 111,439,584.31 Others 334,385,000.45 407,168,615.36 Total 20,061,571,371.21 20,211,644,674.17 56. Notes to the cash flow statements
(1) Cash received relating to other operating activities
Unit: RMB Item Amount Finance support fund 149,519,965.31 Interest income 211,164,138.80 Income on default penalty and fine 1,319,963.69 Bank balances and other income 60,985,992.30 Total 422,990,060.10
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
56. Notes to the cash flow statements(Cont’d)
(2) Cash paid relating to other operating activities
Unit: RMB Item Amount Transportation expenses 773,000,263.65 Hospitality expenses 87,116,120.65 Rental expenses 16,064,169.16 Travel expenses 43,339,796.08 Office expenses 13,856,616.40 Waste disposal expenses 24,375,706.65 Insurance premium 19,774,877.15 Repair expenses 25,589,983.20 Intermediary service expenses 5,472,804.41 Financial institutions charge 63,924,562.74 Cargo handling charges 24,267,204.90 Paid on other expense and bank balances 106,136,781.55 Total 1,202,918,886.54 (3) Cash received relating to other investing activities
Unit: RMB Item Amount Special subsidy funds received 129,978,841.00 Demolition and relocation compensation received 964,840,000.00 Business merger not under common control 983,926.53 Government grants on phasing out backward production equipment
Equity transfer deposits received 271,850,000.00 Total 1,367,652,767.53 (4) Cash paid relating to other investing activities
Unit: RMB Item Amount Net cash received from disposal of subsidiaries and other operating units 3,180,221.51 Total 3,180,221.51
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
56. Notes to the cash flow statements(Cont’d)
(5) Cash received relating to other financing activities
Unit: RMB Item Amount Short-term commercial paper 3,784,800,000.00 Privately placing bond 1,486,500,000.00 Increase in restricted bank deposits 291,470,312.13 Borrowings from Nanchang Economic and Technological Development Zone
Investment Holdings Limited 60,000,000.00 Total 5,622,770,312.13 (6) Cash paid relating to other financing activities
Unit: RMB Item Amount Repayment of medium-term notes 1,100,000,000.00 Repurchase of B shares 265,363,183.60 Repurchase of H shares 30,954,891.40 Total 1,396,318,075.00
XI Financial Report
VII. Notes to major items of the Consolidated Financial Statements(Cont’d)
57. Supplementary information on cash flow statements
(1) Supplementary information on cash flow statement
Unit: RMB Amounts during Amounts during Supplementary information the period the prior period 1. Reconciliation of net profit as cash flows from operating
－ － activities:
Net profit 690,353,237.62 46,686,257.07 Add: Provision for impairment of assets 19,539,893.55 69,456,190.75 Depreciation of fixed assets, consumption of oil and gas
assets, depreciation of productive biological assets 1,324,698,175.84 1,473,181,848.12 Amortisation of intangible assets 31,794,800.76 38,461,236.57 Amortisation of long-term prepaid expenses 8,604,638.05 14,644,085.34 Loss on disposal of fixed assets, intangible assets and other
long-term assets (“-” denotes gain) 29,864,547.98 -26,092,788.22 Loss on changes in fair value (“-” denotes gain) -11,221,828.76 -47,822,076.87 Finance expenses (“-” denotes gain) 1,238,839,467.15 1,229,226,170.56 Investment loss (“-” denotes gain) -23,705,958.58 35,524,960.75 Decrease in deferred income tax assets(“-” denotes increase) -148,275,512.20 -219,648,615.62 Decrease in inventories (“-” denotes increase) 664,719,899.68 1,216,128,795.92 Decrease in operating receivables(“-” denotes increase) -801,235,384.48 -1,006,510,462.52 Increase in operating payables(“-” denotes decrease) -1,777,633,893.33 -703,983,647.43 Decrease in consumable biological assets -123,725,282.37 -162,385,476.43 Others
Net cash flows from operating activities 1,122,616,800.91 1,956,866,477.99 2. Major investing and financing activities not involving cash
－ － settlements:
3. Net change in cash and cash equivalents: － － Cash balance at the end of the period 726,532,928.96 2,343,550,185.45 Less: cash balance at the beginning of the period 2,343,550,185.45 2,317,048,619.53 Net increase in cash and cash equivalents -1,617,017,256.49 26,501,565.92
XI Financial Report
VII、Notes to major items of the Consolidated Financial Statements(Cont’d)
57. Supplementary information on cash flow statements(Cont’d)
(2) Relevant information with respect to acquisition or disposal of subsidiaries and other operating units during the reporting period
Unit: RMB Amounts during Amounts during the Supplementary information the period prior period I. Relevant information with respect to acquisition of subsidiaries
and other operating units － － 1. Consideration from acquisition of subsidiaries and
other operating units 2,730,000.00
2. Cash and cash equivalents paid on acquisition of
subsidiaries and other operating units 2,730,000.00 131,555,073.05 Less: cash and cash equivalents held by subsidiaries
and other operating units 3,713,926.53 79,951,123.62 3. Net cash paid on acquisition of subsidiaries and other
operating units -983,926.53 51,603,949.43 4. Net assets of subsidiaries acquired 5,138,368.37 257,951,123.62 Current assets 34,032,326.98 257,951,123.62 Non-current assets 10,434,536.39
Current liabilities 39,328,495.00
II. Relevant information with respect to disposal of subsidiaries
and other operating units: － － 1. Consideration from disposal of subsidiaries and other
operating units 476,016,016.71 396,850,000.00 2. Cash and cash equivalents received from disposal of
subsidiaries and other operating units 426,016,016.71 125,000,000.00 Less: cash and cash equivalents held by subsidiaries
and other operating units 91,385,533.31 10,771,766.96 3. Net cash received from disposal of subsidiaries and
other operating units 357,810,704.91 114,228,233.04 4. Net assets of subsidiaries disposed of 529,193,978.65 432,005,299.29 Current assets 1,030,203,096.69 563,633,079.26 Non-current assets 463,360,654.34 875,610,612.06 Current liabilities 960,176,200.96 991,181,707.26 Non-current liabilities 4,193,571.42 16,056,684.77 (3) Cash and cash equivalents composition
Unit: RMB Item Closing balance Opening balance I. Cash 726,532,928.96 2,343,550,185.45 Of which: Treasury cash 1,333,503.27 1,398,324.17 Bank deposit that can be used for payment at any time 725,199,425.69 2,342,151,861.28 III. Balance of cash and cash equivalent at end of period 726,532,928.96 2,343,550,185.45 Explanation on supplementary information of cash flow statements: Restricted cash and cash equivalent used by the Group is not included in cash and cash equivalent.
XI Financial Report
VIII. Segment reporting
The Company determined the reporting segments and disclosed the segments information according to the requirements of China Accounting Standards Explanatory Notice No.3 in 2010, and the Group no longer adopted the requirements of China Accounting Standards Explanatory Notice No.35 which was related to the determination of the geographical segment and business segments, and the requirements of disclosure of segment information of the primary reporting format and the secondary reporting format.
According to the internal organisation structure, the requirement of management and the internal reporting system of the Company, the operating businesses of the Company is categorised into 4 reporting segments, such reporting segments is based on its primary product categories. The management of the Group evaluates the financial results of such reporting segments in regular basis, in order to allocate the resources and evaluate its result. The primary products or services provided by each reporting segments of the Company are machine-made paper, construction materials, electricity and steam supply and others.
The segment reporting information disclosed according to the accounting standards and the measurements basis which reported from each segments to the management, such measurement basis is consistent with accounting and measurement basis of the preparation of the financial statements.
1. Segment revenue
Amounts unit:RMB’0,000 Machine-made paper Construction materials Electricity and heat Item The year Prior year The year Prior year The year Prior year Revenue from
external transactions 1,824,419.16 1,814,818.44 24,134.32 34,477.81 151,911.92 80,033.10 Revenue from inter-
segment transactions
6,851.53 6,512.70 107,399.99 70,568.56 Total segment revenue 1,824,419.16 1,814,818.44 30,985.85 40,990.51 259,311.91 150,601.66 Operating costs 1,608,663.81 1,668,138.63 28,058.28 40,129.05 221,873.75 132,503.75 Segment operating profit 215,755.35 146,679.81 2,927.57 861.46 37,438.16 18,097.91(Cont’d)
Amounts unit:RMB’0,000 Others Eliminations among each segment Total
Item The year Prior year The year Prior year The year Prior year Revenue from external
transactions 38,423.61 46,838.57 2,038,889.01 1,976,167.92 Revenue from
inter-segment
transactions 2,309,112.70 169,880.38 2,423,364.22 246,961.64
Total segment revenue 2,347,536.31 216,718.95 2,423,364.22 246,961.64 2,038,889.01 1,976,167.92 Operating costs 2,337,860.97 209,867.01 2,423,364.22 246,961.64 1,773,092.59 1,803,676.80 Segment operating profit 9,675.34 6,851.94 265,796.42 172,491.12 Adjustment items
Administrative expenses 58,440.97 53,155.86 Finance expenses 124,219.06 122,178.97 Profit or loss from
change in fair value -1,122.18 -4,782.21 Investment income -2,847.78 3,552.50 Gross profit 87,106.35 -1,614.00 Income tax 17,593.84 -6,282.62 Net profit 69,512.51 4,668.62
XI Financial Report
VIII. Segment reporting(Cont’d)
1. Segment assets and liabilities
Amounts unit:RMB’0,000 Machine-made paper Construction materials Electricity and steam Item The year Prior year The year Prior year The year Prior year Segment assets 4,426,572.67 4,441,797.61 18,639.91 23,011.10 282,990.91 252,032.41 Segment liabilities 3,266,397.02 3,298,322.54 9,459.70 11,974.84 14,285.74 21,122.71(Cont’d)
Amounts unit:RMB’0,000 Others Eliminations among each segment Total
Item The year Prior year The year Prior year The year Prior year Segment assets 95,985.48 114,936.41 72,000.61 59,235.34 4,752,188.36 4,772,542.19 Segment liabilities 70,211.15 65,815.65 72,000.61 59,235.34 3,288,353.00 3,338,000.40 IX. Related parties and related party transactions
1. Parent company of the Company
Shareholding of Voting right of
the parent the parent
Place of Legal company on company on Ultimate controlling party Organisation Name of parent company Relationship Company type incorporation representativeBusiness nature Registered capital the Company(%) the Company(%) of the Company code Shouguang Chenming Controlling Limited liability Shouguang Chen Investment in manufacture RMB1,685.42 million 10.45% 10.45% Shouguang Chenming 78348518-9 Holdings Co., Ltd. shareholder company City Hongguo of paper, electricity, Holdings Co., Ltd.
steam, arboriculture
2. Information on subsidiaries, joint ventures and associates of the Company
Details please refer to Note (VI). 1. Subsidiaries, Note (VII). 8. Associates and Note (VII). 9. Long-term equity investments.
3. Information on other related parties of the Company
Name of other related parties Relationship with the Company Organisation code Shouguang Hengtai Enterprise Company invested by the
Investment Company Limited senior management of the Company 56251690-6
XI Financial Report
IX. Related parties and related party transactions(Cont’d)
4. Related party transactions
(1) Related party transactions involving sales of goods and provision of services
Table on sales of goods and provision of services
Unit: RMB Amounts during the period Amounts during the prior period Pricing principle of
related party As As Details of transactions and a percentage of a percentage of related party decision making similar transaction similar transaction Related party transactions process Amount amounts(%) Amount amounts(%) Anhui Time Source Corporation Sales of paper Market price 21,522,366.71 0.14% 78,374,277.12 0.4% Authorised by
the Board
Jiangxi Jiangbao Media ColourSales of paper Market price 8,429.40 18,484.62
Printing Co., Ltd. Authorised by
the Board
XI Financial Report
IX. Related parties and related party transactions(Cont’d)
4. Related party transactions(Cont’d)
(2) Guarantees provided for related parties
Unit: RMB Whether performance Amounts under Starting date Expiry date of of guarantee Guarantor Party being guaranteed guarantee of guarantee guarantee is completed The Company Chenming (HK) Limited 500,000,000.00 13 April 2011 12 April 2014 No Huanggang Chenming
The Company Arboriculture Co., Ltd. 29,600,000.00 19 September 2011 18 September 2014 No Huanggang Chenming
The Company Arboriculture Co., Ltd. 26,000,000.00 27 June 2012 26 June 2015 No The Company Shouguang Meilun Paper Co., Ltd. 146,325,600.00 10 September 2010 10 February 2014 No The Company Shouguang Meilun Paper Co., Ltd. 48,775,200.00 9 June 2013 10 December 2014 No Shandong Chenming Paper Sales
The Company Company Limited 399,996,000.00 7 November 2013 12 January 2014 No Shandong Chenming Paper Sales
The Company Company Limited 413,883,518.50 7 June 2013 6 June 2014 No The Company Jiangxi Chenming Paper Co., Ltd. 75,000,000.00 13 December 2012 13 April 2014 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 73,162,800.00 13 November 2013 13 November 2015 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 160,000,000.00 3 July 2013 3 July 2015 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 160,000,000.00 4 September 2013 10 September 2014 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 100,000,000.00 27 June 2013 26 June 2014 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 330,000,000.00 23 July 2013 22 July 2015 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 54,826,000.00 5 August 2013 5 August 2014 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 100,000,000.00 15 November 2013 14 November 2014 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 51,823,650.00 27 December 2013 26 March 2014 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 150,000,000.00 10 December 2013 10 March 2014 No Zhanjiang Chenming
The Company Pulp& Paper Co., Ltd. 100,000,000.00 12 November 2013 9 December 2014 No Zhanjiang Chenming Guangdong Huirui Investment
Pulp& Paper Co., Ltd. Co., Ltd. 40,000,000.00 28 November 2013 27 November 2015 No
XI Financial Report
IX. Related parties and related party transactions(Cont’d)
4. Related party transactions(Cont’d)
(3) Related parties loans
Unit: RMB Related party Loan amount Starting date Expiry date Explanation Loan to
Jiangxi Chenming Paper
Co., Ltd. 200,000,000.00 19 December 2013 19 December 2014 Entrusted loan (4) Distribution band of remuneration of key management staff
① Distribution band of remuneration of key management staff
Amounts during Amounts during the Band of annual remuneration the year prior year Total RMB25.5500 million RMB21.1587 million Of which: (number of staff in each band of amount)
RMB4.80-5.20 million 1
RMB3.60-4.00 million 1 RMB3.20-3.60 million 1
RMB2.80-3.20 million 1
RMB2.40-2.80 million 1 1 RMB1.60-2.00 million 1 1 RMB1.20-1.60 million 2 1 RMB0.80-1.20 million 5 8 Below RMB0.80 million 18 19
XI Financial Report
IX. Related parties and related party transactions(Cont’d)
4. Related party transactions(Cont’d)
(4) Distribution band of remuneration of key management staff(Cont’d)
② Breakdown of remuneration of key management staff
Amounts during the year
Basic Social Payments of
annual welfare housing
Key management staff remuneration contribution funds Total Zhang Zhiyuan (note 1 and 2) 5.00 5.00 Wang Aiguo (note 1 and 2) 5.00 5.00 Zhang Hong (note 1 and 2) 5.00 5.00 Pan Ailing (note 2) 5.00 5.00 Wang Yumei (note 1) 2.08 2.08 Wang Xiangfei (note 1) 5.21 5.21 Sub-total of Independent
Non-executive Directors 27.29 — — 27.29 Cui Youping (note 1 and 2) 5.00 5.00 Wang Xiaoqun (note 1 and 2) 5.00 5.00 Wang Fengrong (note 1) 2.08 2.08 Sub-total of Non-executive Directors 12.08 12.08 Chen Hongguo (note 1 and 2) 495.21 3.35 1.44 500.00 Yin Tongyuan (note 1 and 2) 295.21 3.35 1.44 300.00 Li Feng (note 1 and 2) 81.47 3.35 1.44 86.26 Geng Guanglin (note 1 and 2) 274.85 3.35 1.44 279.64 Hou Huancai (note 1 and 2) 98.78 3.35 1.44 103.57 Zhou Shaohua (note 1 and 2) 104.16 4.29 1.38 109.83 Tan Daocheng (note 1) 15.42 3.35 1.44 20.21 Sub-total of Executive Directors 1,365.28 24.26 9.97 1,399.51 Gao Junjie (note 1 and 2) 34.49 3.35 1.44 39.28 Wang Ju (note 1 and 2) 14.84 2.69 1.15 18.68 Yang Hongqin (note 1 and 2) 14.19 2.40 1.03 17.62 Yin Qixiang (note 1 and 2) 2.50 2.50 Guo Guangyao (note 1 and 2) 2.50 2.50 Total of Supervisor 68.52 8.44 3.62 80.58 Sub-total of other senior management 1,006.80 20.10 8.64 1,035.54 Total 2,479.79 52.93 22.28 2,555.00
XI Financial Report
IX. Related parties and related party transactions(Cont’d)
4. Related party transactions(Cont’d)
(4) Distribution band of remuneration of key management staff(Cont’d)
② Breakdown of remuneration of key management staff(Cont’d)
Amounts during the prior year
Social Payments of
Basic annual welfare housing
Key management staff remuneration contribution funds Total Zhang Zhiyuan 5.00 5.00 Wang Aiguo 5.00 5.00 Zhang Hong 5.00 5.00 Pan Ailing — Wang Yumei 5.00 5.00 Wang Xiangfei 12.50 12.50 Sub-total of Independent
Non-executive Directors 32.50 32.50 Cui Youping 5.00 5.00 Wang Xiaoqun 5.00 5.00 Wang Fengrong 5.00 5.00 Sub-total of Non-executive Directors 15.00 15.00 Chen Hongguo 394.92 2.98 1.30 399.20 Yin Tongyuan 263.92 2.98 1.30 268.20 Li Feng 95.90 2.98 1.30 100.18 Geng Guanglin 117.18 2.98 1.30 121.46 Hou Huancai 87.51 2.98 1.30 91.79 Zhou Shaohua 119.01 0.65 0.23 119.89 Tan Daocheng 55.74 2.98 1.30 60.02 Sub-total of Executive Directors 1,134.18 18.53 8.03 1,160.74 Gao Junjie 45.72 2.98 1.30 50.00 Wang Ju 13.72 2.98 1.30 18.00 Yang Hongqin 12.37 2.88 1.30 16.55 Yin Qixiang 2.50 2.50 Guo Guangyao 2.50 2.50 Total of Supervisor 76.81 8.84 3.90 89.55 Sub-total of other senior management 781.37 25.89 10.82 818.08 Total 2,039.86 53.26 22.75 2,115.87 Notes: (A) The annual remuneration is determined by reference to the stipulations of the Group and individual performance of directors, and approved by the Remuneration Committee.
(B) “Note 1” ---- Resigned on 15 May 2013
“Note 2” ---- Appointed on 16 May 2013
XI Financial Report
IX. Related parties and related party transactions(Cont’d)
4. Related party transactions(Cont’d)
(4) Distribution band of remuneration of key management staff(Cont’d)
③ The five highest paid individuals of the Group during the year comprised of 3 directors and 2 other senior management of the Company. The remuneration band of the 2 senior management were RMB3.20-3.60 million and RMB1.60-2.00 million, respectively.
The five highest paid individuals of the Group during 2012 comprised of 4 directors and 1 other senior management of the Company. The remuneration band of the senior management was RMB1.60-2.00 million.
A. Remuneration of the five highest paid individuals
Amounts during Amounts during the prior year Item the year(RMB’0000) (RMB’0000) Basic annual remuneration 1,581.36 1,080.39 Provident fund 4.32 4.13 Social welfare contribution 10.05 9.59 Total 1,595.73 1,094.11 B. Distribution band of remuneration of the five highest paid individuals
Number of Number of individual during individual during Band of annual remuneration the year the prior year RMB4.80-5.20 million 1
RMB3.60-4.00 million 1 RMB3.20-3.60 million 1
RMB2.80-3.20 million 1
RMB2.40-2.80 million 1 1 RMB1.60-2.00 million 1 1 RMB1.20-1.60 million 1 RMB0.80-1.20 million 1④ During the year, no other emoluments were paid by the Group to the directors of the Company and the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors waived any emoluments during the year.
XI Financial Report
IX. Related parties and related party transactions(Cont’d)
4. Related party transactions(Cont’d)
(5) Joint investment of the Company and related parties
Contribution
by Shouguang
Hengtai
Enterprise
Contribution Investment Contribution
by the Company by non-related Registered
Name of investee Company Limited shareholder capital Business nature Haicheng Haiming Mining RMB144.00 RMB24.00 RMB72.00 RMB240.00 Processing and sales of Company Limited million million million million magnetite and talc As of 31 December 2013, the total assets of Haicheng Haiming Mining amounted to RMB466,945,780.81. Its total liabilities and net asset amounted to RMB226,945,780.81 and RMB240,000,000.00, respectively. No revenue was recorded during the period.
5. Related party accounts receivable and accounts payable
Accounts receivables of the listed company due from the related party
Unit: RMB At the end of period At the beginning of the period Bad debt Bad debt Item Related party Book balance provision Book balance provision Accounts receivable Anhui Time Source Corporation 16,580,021.04 829,001.05 15,739,073.73 786,953.69 Jiangxi Jiangbao Media Colour
Accounts receivable Printing Co., Ltd. 21,627.00 1,081.35 Wuhan Chenming Wan Xing Real
Other receivables Estate Co., Ltd. 551,964,609.01
Arjo Wiggins Chenming Specialty
Other receivables Paper Co., Ltd. 1,290,901.12 1,290,901.12 1,290,901.12 1,290,901.12 Accounts payables of the listed company due to the related party
Unit: RMB Item Related party Closing balance Opening balance Shouguang Hengtai Enterprise
Other payables Investment Company Limited 18,668,679.17
X. Contingency
As of 31 December 2013, no significant contingent event had to be disclosed by the Group.
XI Financial Report
XI. Commitments
1. Significant commitments
(1) Capital commitment
RMB 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 2,437,963,978.39 3,492,740,126.70– Huirui BT Project 3,637,017,103.35
– Commitments in relation to external investment 6,028,000.00
Total 6,081,009,081.74 3,492,740,126.70 (2) Operating lease commitments
As at the balance sheet date, the Company entered into irrevocable operating lease contracts with external companies as follows:
RMB Item Closing balance Opening balance Minimum lease payments under irrevocable operating leases:
The first year after balance sheet date 21,250,728.73 25,750,281.07 The second year after balance sheet date 13,786,011.70 14,197,441.54 The third year after balance sheet date 13,814,410.50 13,894,570.34 In the years thereafter 572,915,704.51 592,968,638.50 Total 621,766,855.44 646,810,931.45 2. Performance of commitments for the prior period
As of 31 December 2013, no significant commitments had to be disclosed by the Group.
XI Financial Report
XII. Other material matters
1. Assets and liabilities measured at fair value
Unit: RMB Profit or loss Accumulated
from change in change in Provision for
fair value for fair value charged impairment
Item Opening balance the period to equity during the period Closing balance Financial assets
Consumable biological assets 1,169,269,054.15 11,221,828.76 189,043,642.16 1,317,141,123.77 Aggregate amount 1,169,269,054.15 11,221,828.76 189,043,642.16 1,317,141,123.77 Financial liabilities 0.00 0.00 0.00 2. Financial assets and liabilities denominated in foreign currency
Profit or loss Accumulated
from change in change in Provision for
fair value for fair value charged impairment
Item Opening balance the period to equity during the period Closing balance Financial assets
Monetary funds 314,173,046.44 146,678,873.68 Accounts receivable 302,171,666.34 428,930,649.39 Prepayments 315,038,730.07 368,818,253.24 Sub-total of financial assets 931,383,442.85 944,427,776.31 Financial liabilities 6,195,056,274.80 7,883,240,255.94 3. Net current assets/liabilities, total assets less current liabilities
Item Closing balance Opening balance Net current assets/(liabilities) (2,405,853,307.73) (940,549,623.28) Total assets less current liabilities 28,207,961,157.48 27,736,527,250.05
XI Financial Report
XII. Other material matters(Cont’d)
4. Others
(1) On 6 February 2013, Guangdong Huirui Investment Co., Ltd, a controlling subsidiary of the Group, entered into a major contract with Zhanjiang City Construction Project Administration Bureau: Zhanjiang City Haidong New District Waterfront& Mudflat Comprehensive Regulation Works BT Project— Build— Transfer (BT) Contract. The investment of the project amounted to approximately RMB4,607,000,000. On 30 December 2013, the preparation works for the construction project was completed with the construction works officially commenced. The construction project is expected to take approximately 17 months to complete.
(2) On 21 January 2013, Chenming Holdings, the largest shareholder of the Company, disposed of 86,600,000 shares, representing4.2% of the total share capital of the Company through agreed repurchase type securities trading. The repurchase period is not more than 365 days. On 20 January 2014, Shouguang Chenming Holdings Co., Ltd. repurchased the disposed 86,600,000 shares through agreed repurchase type securities trading. The shareholding after the transaction as follows:
Before After the transaction Item the transaction
Number of shares of the Company being held 206,403,657.00 293,003,657.00 Total share capital of the Company 1,975,471,967.00 1,975,471,967.00 As a percentage of the total share capital of the Company 10.45% 14.83%
XI Financial Report
XIII. Financial risk management and financial instruments
TheGroup’s activities expose it to a variety of financial risks: market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk. TheGroup’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on theGroup’s financial performance.
1. Market risk
(1) Foreign currency risk
TheGroup’s principal operations are conducted in the PRC and its major activities are settled in RMB. The foreign currency risk of the Group arises from financing activities and commercial activities using foreign currencies (main sources are USD). The finance department of the headquarters of the Group is responsible for monitoring the size of theGroup’s transactions in foreign currency and its foreign currency-denominated assets and liabilities to minimise its foreign currency risk exposure. As a result, the Group may enter into forward foreign exchange contracts to avoid foreign currency risk. In 2013, the Group did not entered into any forward foreign exchange contracts.
As at 31 December 2013 and 31 December 2012, the foreign currency-denominated assets and foreign currency-denominated liabilities held by the Group were translated into RMB as follows:
31 December 2013 Item USD EUR GBP HKD JPY Assets denominated in foreign currency-
Monetary funds 104,615,939.01 13,247,929.28 12,772.47 28,802,232.92 Accounts receivable 404,705,934.51 5,070,461.60 19,154,253.28 Prepayments 178,501,771.24 189,776,693.87 539,788.13 Sub-total 687,823,644.76 208,095,084.75 12,772.47 48,496,274.33 Liabilities denominated in
foreign currency-
Short-term borrowing 3,841,095,426.52 248,718,551.35 111,382,488.00 Accounts payable 752,809,223.34 11,635,722.04 192,313.35 14,826,333.50 Advance receipts 226,690,726.74 17,407,305.08 233,766.02 Non-current liabilities due within
one year 573,108,600.00
Long-term borrowings 2,085,139,800.00
Sub-total 7,478,843,776.60 277,761,578.47 192,313.35 126,442,587.52
XI Financial Report
XIII. Financial risk management and financial instruments(Cont’d)
1. Market risk(Cont’d)
(1) Foreign currency risk(Cont’d)
31 December 2012 Item USD EUR GBP HKD JPY Assets denominated in foreign currency-
Monetary funds 307,044,780.19 674,668.15 177,396.54 6,276,201.56 Accounts receivable 294,683,799.78 7,487,866.56 Prepayments 267,749,941.56 47,288,788.51
Sub-total 869,478,521.53 47,963,456.66 177,396.54 13,764,068.12 Liabilities denominated in
foreign currency-
Short-term borrowing 1,867,902,093.11
Accounts payable 601,069,230.63 13,093,037.42 194,331.04
Advance receipts 192,225,546.66
Non-current liabilities due within
one year 1,006,248,000.00
Long-term borrowings 2,514,324,035.94
Sub-total 6,181,768,906.34 13,093,037.42 194,331.04
As at 31 December 2013, for various USD, EUR, GBP, HKD and JPY financial assets and financial liabilities of the Group, if RMB against USD, EUR and GBP had appreciated or depreciated by5% with all other variables held constant, theGroup’s profit would have increased or decreased by approximately RMB346,940,623.98 (31 December 2012: approximately RMB263,183,641.60).
(2) Interest rate risk
The interest rate risk of the Group arises from the interest bearing debt such as bank loans and bonds payable. Variable-rate financial liabilities make the Group expose to cash flow interest rate risk. Fixed-rate financial liabilities make the Group expose to fair value interest rate risk. The Group determines the proportion between fixed-rate and variable-rate contracts based on the prevailing market environment. As at 31 December 2013, the interest bearing debts of the Group mainly consisted of variable-rate borrowing contract in RMB and USD amounting to RMB14,331,866,545.75 (31 December 2012: RMB18,177,675,131.10), and fixed-rate interest rate contracts in RMB amounting to RMB12.7 billion (31 December 2012: RMB8.5 billion).
XI Financial Report
XIII. Financial risk management and financial instruments(Cont’d)
1. Market risk(Cont’d)
(2) Interest rate risk(Cont’d)
The finance department of the headquarters of the Group continuously monitors the interest rate level of the Group. When the interest rate increases, the cost of the new interest bearing debts and the outstanding interest expenses incurred by the variable-rate interest bearing debts of the Group will increase, thereby having an adverse effect on the financial results of the Group. The management will make timely adjustment based on the latest market conditions. Directors of the Company believe that the change in future interest rate will not have significant adverse effect on the operating results of the Group.
On 31 December 2013, if the interest rate of the interest bearing debts increases or decrease by10% with all other variables held constant, the profit for the year would have increased or decreased by approximately RMB69,367,358.72 (2012: RMB100,696,983.81) mainly due to the increase and decrease of the interest expenses.
2. Credit risk
The Group manages the credit risk by portfolio. Credit risk mainly arises from bank deposit, accounts receivable, other receivables and bills receivable. The majority of theGroup’s cash at banks are deposited in state-owned banks and other medium or large listed banks. All of the bills receivable are bank acceptance. There is no significant credit risk in the opinion of the Group and no significant loss will be incurred due to default by the counterparties. Sales are settled through the combination of advance and credit. Customers are granted a credit period through a strict credit approval system. The Group has set up a department specialising in reviewing the credibility of the trade customers regularly, thereby reasonably control the credit line and term of each trade customer, recovering amounts in arrears on a timely basis and examining the recoverable amounts in respect of accounts receivables one by one and making corresponding bad debt provisions in full at the end of the period. As a result, there is no significant credit risk in trade customers.
The management of the Group believe that no significant loss will be incurred due to default by the aforesaid parties. 3. Liquidity risk
Each subsidiary of the Group is responsible for its own cash flows forecast. The finance department of the headquarters continuously monitors the short-term and long-term funding requirement at the group level based on the consolidated cash flow forecast of each subsidiary, thereby ensuring a sufficient cash reserve. The department continues to monitor the compliance of borrowing agreements and obtains sufficient facilities from major financial institutions to satisfy theGroup’s short-term and long-term funding requirement.
XI Financial Report
XIII. Financial risk management and financial instruments(Cont’d)
3. Liquidity risk(Cont’d)
As at the balance sheet date, the undiscounted contracted cash flows of various financial assets and financial liabilities of the Group are set out according to the maturity date as follows:
31 December 2013 Item Within one year One to two years Two to five years Over five years Total Financial assets
Monetary funds 2,547,729,794.24 2,547,729,794.24 Bills receivable 2,870,443,681.49 2,870,443,681.49 Accounts receivable 3,172,267,013.90 50,136,238.22 107,116,385.54 3,329,519,637.66 Other receivables 1,200,466,405.38 100,811,139.72 101,683,787.31 1,402,961,332.41 Prepayments 647,808,677.28 941,212,653.96 1,589,021,331.24 Sub-total 10,438,715,572.29 1,092,160,031.90 208,800,172.85 11,739,675,777.04 Financial liabilities-
Short-term borrowing 9,818,885,237.85 9,818,885,237.85 Bills payable 290,403,790.59 290,403,790.59 Accounts payable 2,251,158,621.76 240,434,222.13 203,577,083.25 2,695,169,927.14 Advance receipts 425,728,033.93 16,704,227.65 442,432,261.58 Other payables 419,910,089.94 23,967,481.29 42,959,024.66 486,836,595.89 Non-current liabilities due within one year 1,289,115,500.00 1,289,115,500.00 Long-term borrowing 898,143,000.00 1,204,701,900.00 1,621,020,907.90 3,723,865,807.90 Bonds payable 5,800,000,000.00 5,800,000,000.00 Long-term payables 60,000,000.00 60,000,000.00 Medium-term notes 1,100,000,000.00 1,100,000,000.00 Private placing bond 1,500,000,000.00 1,500,000,000.00 Short-term commercial paper 3,800,000,000.00 3,800,000,000.00 Sub-total 18,295,201,274.07 1,179,248,931.07 9,851,238,007.91 1,681,020,907.90 31,006,709,120.95
XI Financial Report
XIII. Financial risk management and financial instruments(Cont’d)
3. Liquidity risk(Cont’d)
31 December 2012 Item Within one year One to two years Two to five years Over five years Total Financial assets
Monetary funds 4,456,217,362.86 4,456,217,362.86 Bills receivable 1,852,478,364.46 1,852,478,364.46 Accounts receivable 3,709,154,191.60 65,152,312.73 94,541,660.32 3,868,848,164.65 Other receivables 1,145,721,315.64 131,913,116.61 72,230,020.73 1,349,864,452.98 Prepayments 1,458,377,404.07 177,856,520.57 1,636,233,924.64 Sub-total 12,621,948,638.63 374,921,949.91 166,771,681.05 13,163,642,269.59 Financial liabilities-
Short-term borrowing 12,876,398,495.16 12,876,398,495.16 Bills payable 1,285,627,762.07 1,285,627,762.07 Accounts payable 2,937,983,262.67 158,572,722.64 143,225,739.50 3,239,781,724.81 Advance receipts 340,139,089.13 4,460,841.54 3,235,870.20 347,835,800.87 Other payables 310,080,861.84 58,740,745.82 66,950,681.32 435,772,288.98 Non-current liabilities due within one year 1,368,108,800.00 1,368,108,800.00 Long-term borrowing 732,072,000.00 102,692,035.94 3,098,403,800.00 3,933,167,835.94 Bonds payable 6,300,000,000.00 6,300,000,000.00 Medium-term notes 1,100,000,000.00 1,100,000,000.00 2,200,000,000.00 Sub-total 20,218,338,270.87 953,846,310.00 7,716,104,326.96 3,098,403,800.00 31,986,692,707.83 An analysis of the repayment of bank loans and bonds payable is as follows:
Closing balance Opening balance
Bank loans Bonds payable Bank loans Bonds payable Loans with the last repayment date
within five years 12,710,845,637.85 12,700,000,000.00 15,079,271,331.10 8,500,000,000.00 Loans with the last repayment date
over five years 1,621,020,907.90 3,098,403,800.00
Total 14,331,866,545.75 12,700,000,000.00 18,177,675,131.10 8,500,000,000.00
XI Financial Report
XIII. Financial risk management and financial instruments(Cont’d)
4. Fair value
(1) Financial instruments not measured at fair value
The financial assets and liabilities not measured at fair value mainly consist of: accounts receivable, short-term borrowings, accounts payable, long-term borrowings, bonds payable and long-term payables.
Except the financial liabilities below, the carrying amount of other financial assets and liabilities not measured at fair value deviates from the fair value by a small amount.
Closing balance Opening balance
Carrying amount Fair value Carrying amount Fair value Financial liabilities-Bonds 12,697,760,032.33 12,700,000,000.00 8,440,533,343.80 8,500,000,000.00 For long-term borrowings, long-term payables and bonds payable, their fair value is determined by the present value of the contracted future cash flows discounted by the interest rate which is comparable in terms of credit rating and offers substantially same cash flows on equal conditions in the market.
(2) As at 31 December 2013, the Group had no financial instruments measured at fair value (31 December 2012: Nil).
XI Financial Report
XIV. Notes to major financial statement items of the parent company
1. Accounts receivable
(1) Accounts receivable
Unit: RMB Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision Category Amount Percentage(%) Amount Percentage(%) Amount Percentage(%) Amount Percentage(%) Accounts receivable collectively provided for bad debt
Risk-free portfolio 3,810,425,562.91 99.77% 335,827,030.39 96.73%
General-risk portfolio 8,776,614.79 0.23% 4,547,645.65 51.82% 11,346,123.83 3.27% 4,675,772.65 41.21% Portfolio sub-total 3,819,202,177.70 100% 4,547,645.65 0.12% 347,173,154.22 100% 4,675,772.65 1.35% Total 3,819,202,177.70 — 4,547,645.65 — 347,173,154.22 — 4,675,772.65 — Accounts receivable stated according to ageing
Unit: RMB Closing balance Opening balance
Item Amount Percentage(%) Amount Percentage(%) Within 1 year 3,814,870,507.13 99.89% 342,848,452.68 98.75% 1 to 2 years 6,969.03
2 to 3 years
Over 3 years 4,324,701.54 0.11% 4,324,701.54 1.25% Total 3,819,202,177.70 100.00% 347,173,154.22 100.00% Accounts receivable individually significant and separately provided for bad debt as at the end of the period.□Applicable Not applicable
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on the ageing method
Applicable□Not applicable
Unit: RMB Closing balance Opening balance
Book balance Bad debt provision
Ageing Amount Percentage(%) Book balance Amount Percentage(%) Bad debt provision Within 1 year
Of which: — — — — — — Within 1 year 4,444,944.22 50.65% 222,247.21 7,021,422.29 61.88% 351,071.11 Sub-total of
within 1 year 4,444,944.22 50.65% 222,247.21 7,021,422.29 61.88% 351,071.11 1 to 2 years 6,969.03 0.08% 696.90
Over 3 years 4,324,701.54 49.27% 4,324,701.54 4,324,701.54 38.12% 4,324,701.54 Total 8,776,614.79 — 4,547,645.65 11,346,123.83 — 4,675,772.65
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
1. Accounts receivable(Cont’d)
(1) Accounts receivable(Cont’d)
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on the percentage of total accounts receivable method.
□Applicable Not applicable
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on other methods.
Applicable□Not applicable
Unit: RMB Portfolio Book balance Bad debt provision Risk-free portfolio 3,810,425,562.91 0.00 Total 3,810,425,562.91 0.00 Accounts receivable not individually significant but separately provided for bad debt as at the end of the period.□Applicable Not applicable
(2) Reversal or recovery of accounts receivable during the reporting period
Unit: RMB Amounts
provided or
Reason for bad debts Amounts Reason for recognising bad before reversal reversed Accounts receivable reversal or recovery debt provision or recovery or recovered Open credit Recovery of Most of which were
open credit open credit
for over 3 years and
unlikely to be recovered 128,127.00 128,127.00 Total — — 128,127.00 — (3) No accounts receivable actually written-off during the reporting period.
(4) No outstanding amount within the accounts receivable due from shareholders holding5% or more (including5% inclusive) in the voting shares of the Company during the reporting period
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
1. Accounts receivable(Cont’d)
(5) Top five other receivables are as follows:
Unit: RMB As a percentage of the total Relationship with accounts Entity name the Company Amount Term receivable(%) Shandong Chenming Paper Sales Related party within the 2,078,754,449.86 Within 1 year 54.43% Co., Ltd. scope of consolidation
Shouguang Meilun Paper Co., Ltd. Related party within the 1,626,851,840.56 Within 1 year 42.6% scope of consolidation
Zhanjiang Meilun Pulp& Paper Co., Ltd. Related party within the 92,000,000.00 Within 1 year 2.41% scope of consolidation
Fuyu Chenming Paper Co., Ltd. Related party within the 7,931,070.49 Within 1 year 0.21% scope of consolidation
Shandong Grand View Hotel Co., Ltd. Related party within the 4,888,202.00 Within 1 year 0.13% scope of consolidation
Total — 3,810,425,562.91— 99.78% (6) Information on accounts receivable of the related parties
Unit: RMB As a percentage of Relationship with the total accounts Entity name the Company Amount receivable(%) Shandong Chenming Paper Sales Co., Ltd. Related party within the 2,078,754,449.86 54.43% scope of consolidation
Shouguang Meilun Paper Co., Ltd. Related party within the 1,626,851,840.56 42.6% scope of consolidation
Zhanjiang Meilun Pulp& Paper Co., Ltd. Related party within the 92,000,000.00 2.41% scope of consolidation
Fuyu Chenming Paper Co., Ltd. Related party within the 7,931,070.49 0.21% scope of consolidation
Shandong Grand View Hotel Co., Ltd. Related party within the 4,888,202.00 0.13% scope of consolidation
Total — 3,810,425,562.91 99.78%
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
2. Other receivables
(1) Other receivables
Unit: RMB Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision Category Amount Percentage(%) Amount Percentage(%) Amount Percentage(%) Amount Percentage(%) Other receivables which are individually significant and
are separately provided for bad debt 8,918,424.06 0.08% 8,918,424.06 100% 8,918,424.06 0.1% 8,918,424.06 100% Other receivables collectively provided for bad debt
Risk-free portfolio 10,991,002,770.81 99% 9,181,123,808.55 99%
General-risk portfolio 89,083,928.68 0.8% 28,464,521.53 31.95% 70,216,527.05 0.76% 18,561,336.28 26.43% Portfolio sub-total 11,080,086,699.49 99.8% 28,464,521.53 0.26% 9,251,340,335.60 99.76% 18,561,336.28 0.2% Other receivables which are not individually significant but
are separately provided for bad debt 13,717,509.43 0.12% 13,717,509.43 100% 13,771,354.38 0.14% 13,771,354.38 100% Total 11,102,722,632.98 — 51,100,455.02 — 9,274,030,114.04 — 41,251,114.72 — Other receivable stated according to ageing
Unit: RMB Closing balance Opening balance
Item Amount Percentage(%) Amount Percentage(%) Within 1 year 10,479,494,850.60 94.39% 8,748,242,463.91 94.33% 1 to 2 years 542,640,693.82 4.89% 476,756,180.58 5.14% 2 to 3 years 38,955,846.94 0.35% 12,693,819.63 0.14% Over 3 years 41,631,241.62 0.37% 36,337,649.92 0.39% Total 11,102,722,632.98 100.00% 9,274,030,114.04 100.00% Other receivables individually significant and separately provided for bad debt as at the end of the period Applicable□Not applicable
Unit: RMB Amount of Percentage of
Other receivables Book balance bad debt provision(%) Reason
Open credit 8,918,424.06 8,918,424.06 100% Most of which were open credit for over 3 years and unlikely to
be recovered
Total 8,918,424.06 8,918,424.06 ——
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
2. Other receivables(Cont’d)
(1) Other receivables(Cont’d)
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the ageing method
Applicable□Not applicable
Unit: RMB Closing balance Opening balance
Book balance Bad debt provision
Ageing Amount Percentage(%) Bad debt provision Amount Percentage(%) Book balance Within 1 year
Of which: — — — — — — Within 1 year 26,419,111.28 29.66% 1,320,955.56 35,120,692.33 50.02% 1,756,034.63 Sub-total of
within 1 year 26,419,111.28 29.66% 1,320,955.56 35,120,692.33 50.02% 1,756,034.63 1 to 2 years 5,856,440.10 6.57% 585,644.01 11,321,624.73 16.12% 1,132,162.48 2 to 3 years 37,813,069.17 42.45% 7,562,613.83 10,126,338.52 14.42% 2,025,267.70 Over 3 years 18,995,308.13 21.32% 18,995,308.13 13,647,871.47 19.44% 13,647,871.47 Total 89,083,928.68 — 28,464,521.53 70,216,527.05 — 18,561,336.28 In respect of portfolio, the measurement of bad debt provision for other receivables is based on the percentage of total accounts receivable method
□Applicable Not applicable
In respect of portfolio, the measurement of bad debt provision for other receivables is based on other methods Applicable□Not applicable
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
2. Other receivables(Cont’d)
(1) Other receivables(Cont’d)
Unit: RMB Portfolio Book balance Bad debt provision Risk-free portfolio 10,991,002,770.81 0.00 Total 10,991,002,770.81 0.00 Other receivables not individually significant but separately provided for bad debt as at the end of the period Applicable□Not applicable
Unit: RMB Bad debt Percentage of
Other receivables Book balance provision provision(%) Reason
Open credit 13,717,509.43 13,717,509.43 100% Most of which were open credit for over 3 years and unlikely to be recovered
Total 13,717,509.43 13,717,509.43 ——
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
2. Other receivables(Cont’d)
(2) No reversal or recovery during the year.
(3) No other receivables actually written-off during the reporting period.
(4) Outstanding amount within the other receivables due from shareholders holding5% or more(5% inclusive) in the voting shares of the Company during the reporting period.
(5) Top five other receivables are as follows
Unit: RMB As a percentage of the total other Relationship with receivable Entity name the Company Amount Term (%) Shouguang Meilun Paper Co., Ltd. Related party 5,429,394,926.60 Within 1 year 58.42% within the scope of
consolidation
Shandong Chenming Paper Related party 2,227,137,124.40 Within 1 year 23.96% Sales Co., Ltd. within the scope of
consolidation
Shouguang Chenming Art Paper Related party 615,847,164.89 Within 1 year 6.63% Co., Ltd. within the scope of
consolidation
Shandong Jianghe Paper Co., Ltd. Non-related party 587,776,068.96 Within 1 year 6.32% Jilin Chenming Paper Co., Ltd. Related party 434,046,658.51 Within 1 year 4.67% within the scope of
consolidation
Total — 9,294,201,943.36— 100%
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
2. Other receivables(Cont’d)
(6) Overview of other receivables of the related parties
Unit: RMB As a percentage of Relationship with the total other Entity name the Company Amount receivable(%) Shouguang Meilun Paper Co., Ltd. Related party within the 5,429,394,926.60 48.90% scope of consolidation
Shandong Chenming Paper Sales Co., Ltd. Related party within the 2,227,137,124.40 20.06% scope of consolidation
Shouguang Chenming Art Paper Co., Ltd. Related party within the 615,847,164.89 5.55% scope of consolidation
Jilin Chenming Paper Co., Ltd. Related party within the 434,046,658.51 3.91% scope of consolidation
Shandong Grand View Hotel Co., Ltd. Related party within the 357,743,572.80 3.22% scope of consolidation
Wuhan Chenming Hanyang Paper Holdings Related party within the 339,934,233.11 3.06% Co., Ltd. scope of consolidation
Fuyu Chenming Paper Co., Ltd. Related party within the 194,723,941.49 1.75% scope of consolidation
Haicheng Haiming Mining Co., Ltd. Related party within the 186,467,033.33 1.68% scope of consolidation
Zhanjiang Chenming Arboriculture Co., Ltd. Related party within the 166,808,715.34 1.50% scope of consolidation
Huanggang Chenming Arboriculture Co., Ltd. Related party within the 159,542,057.24 1.44% scope of consolidation
Huanggang Chenming Pulp& Paper Co., Ltd. Related party within the 116,742,213.13 1.05% scope of consolidation
Zhanjiang Chenming Pulp& Paper Co., Ltd. Related party within the 65,563,939.48 0.59% scope of consolidation
Wuhan Chenming Qianneng Electric Power Co., Ltd. Related party within the 64,328,165.05 0.58% scope of consolidation
Jiangxi Chenming Paper Co., Ltd. Related party within the 22,887,456.65 0.21% scope of consolidation
Shouguang Chenming Industrial Logistics Co., Ltd. Related party within the 6,665,040.00 0.06% scope of consolidation
Yangjiang Chenming Arboriculture Co., Ltd. Related party within the 3,015,000.00 0.03% scope of consolidation
Shouguang Chenming Tianyuan Arboriculture Related party within the 2,427,092.83 0.02% Co., Ltd. scope of consolidation
Arjo Wiggins Chenming Specialty Paper Co., Ltd. Related party out of the
scope of consolidation 1,290,901.12 0.01% Wuhan Chenming Wan Xing Real Estate Co., Ltd. Related party out of the
scope of consolidation 1,142,777.77 0.01% Hailaer Chenming Paper Co., Ltd. Related party within the 198,660.63 0% scope of consolidation
Total — 10,395,906,674.37 93.63%
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
3. Long-term equity investments
Unit: RMB Explanation of the
Equity interest in the Voting right in the inconsistent of equity
Accounting investee held by investee by the interest and voting right Impairment provision Cash dividend for Investee method Investment cost Opening Balance Change Closing balance the Company(%) Company(%) in the investee Impairment provision during the period the period Shandong Chenming Power Supply Holdings Co., Ltd. Cost method 157,810,117.43 157,810,117.43 157,810,117.43 86.71% 86.71% 30,213,771.35 Wuhan Chenming Hanyang Paper Holdings Co., Ltd. Cost method 202,824,716.34 202,824,716.34 202,824,716.34 50.93% 50.93%
Hailaer Chenming Paper Co., Ltd. Cost method 12,000,000.00 12,000,000.00 12,000,000.00 75% 75%
Yanbian Chenming Paper Co., Ltd. Cost method 96,789,333.01 96,725,533.01 -96,725,533.01 100%
Shouguang Chenming Tianyuan Arboriculture Co., Ltd. Cost method 7,199,000.00 7,199,000.00 7,199,000.00 68% 68%
Jiangxi Chenming Paper Co., Ltd. Cost method 697,548,406.40 697,548,406.40 125,319,240.00 822,867,646.40 51% 51% 11,300,102.21 Shandong Grand View Hotel Co., Ltd. Cost method 80,500,000.00 80,500,000.00 80,500,000.00 70% 70%
Jilin Chenming Paper Co., Ltd. Cost method 1,501,350,000.00 1,501,350,000.00 1,501,350,000.00 100% 100%
Zhanjiang Chenming Pulp& Paper Co., Ltd. Cost method 2,500,000,000.00 3,000,000,000.00 3,000,000,000.00 100% 100% 180,000,000.00 Chenming (HK) Limited Cost method 783,310.00 783,310.00 61,800,000.00 62,583,310.00 100% 100%
Shouguang Chenming Modern Logistic Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 100% 100% 63,500,000.00 Fuyu Chenming Paper Co., Ltd. Cost method 208,000,000.00 208,000,000.00 208,000,000.00 100% 100%
Shouguang Chenming Art Paper Co., Ltd. Cost method 113,616,063.80 113,616,063.80 113,616,063.80 75% 75%
Huanggang Chenming Arboriculture Co., Ltd. Cost method 10,000,000.00 70,000,000.00 70,000,000.00 100% 100%
Huanggang Chenming Pulp& Paper Co., Ltd. Cost method 20,000,000.00 20,000,000.00 20,000,000.00 100% 100%
Shouguang Meilun Paper Co., Ltd. Cost method 2,200,000,000.00 2,200,000,000.00 2,200,000,000.00 100% 100%
Chenming International Co., Ltd. Cost method 19,861,955.00 19,861,955.00 19,861,955.00 100% 100%
Shouguang Shun Da Customs Declaration Co, Ltd. Cost method 1,500,000.00 1,500,000.00 1,500,000.00 100% 100%
Shandong Chenming Paper Sales Co., Ltd. Cost method 100,000,000.00 100,000,000.00 100,000,000.00 100% 100%
Shouguang Hengfeng Storage Co., Ltd. Cost method 500,000.00 500,000.00 500,000.00 100% 100%
Shouguang Chenming Import and Export Trade Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 100% 100% 8,000,000.00 Shouguang Chenming Jiatai Property Management Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 100% 100%
Shouguang Chenming Papermaking Machine Co., Ltd. Cost method 2,000,000.00 2,000,000.00 2,000,000.00 100% 100% 15,000,000.00 Shouguang Chenming Industrial Logistics Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 100% 100%
Shouguang Chenming Hongxin Packaging Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 100% 100%
Shanghai Runchen Equity Investment Fund Co., Ltd. Cost method 300,000,000.00 300,000,000.00 -300,000,000.00 98.36% 19,313,686.50 Japan Chenming Paper Co., Ltd. Cost method 9,465,450.00 9,306,351.20 9,306,351.20 100% 100%
Haicheng Haiming Mining Co., Ltd. Cost method 70,000,000.00 70,000,000.00 74,000,000.00 144,000,000.00 70% 60%
Chenming GmbH Cost method 4,083,235.00 4,083,235.00 4,083,235.00 100% 100%
Shouguang Hongxiang Printing and Packaging Co., Ltd. Cost method 2,730,000.00 2,730,000.00 2,730,000.00 100% 100%
Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 100% 100%
Equity
Qingzhou Chenming Denaturation Amylum Co., Ltd. method 900,000.00 900,000.00 900,000.00 30% 30% 900,000.00
Equity
Arjo Wiggins Chenming Specialty Paper Co., Ltd. method 80,100,000.00 30% 30%
Equity
Jiangxi Jiangbao Media Colour Printing Co. Ltd. method 6,000,000.00 4,792,675.12 -47,492.37 4,745,182.75 21.15% 21.16%
Shandong Paper Making& Printing Enterprises Corporation Cost method 200,000.00 200,000.00 200,000.00 2% 2% 200,000.00
Jinan Shangyou Commercial Co., Ltd. Cost method 350,000.00 350,000.00 350,000.00 5% 5% 350,000.00
Zhejiang Province Guangyu Media Printing Co., Ltd. Cost method 2,000,000.00 2,000,000.00 2,000,000.00 9.96% 9.96%
Shouguang Mihe Water Co., Ltd. Cost method 20,000,000.00 20,000,000.00 20,000,000.00 19.46% 19.46%
Shanghai Forest& Paper E-Commerce Co., Ltd. Cost method 1,400,000.00 1,400,000.00 1,400,000.00 14% 14% 1,139,574.47
Anhui Shidai Resources Holdings Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 10% 10%
Weifang Xinye Capital Investment Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 3.76% 3.76%
Shandong Hongqiao Venture Capital Co., Ltd. Cost method 50,000,000.00 50,000,000.00 50,000,000.00 16.67% 16.67%
Total — 8,523,511,586.98 8,994,168,128.30 -127,840,550.38 8,866,327,577.92 — — — 2,589,574.47 327,327,560.06
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
3. Long-term equity investments(Cont’d)
Description of long-term equity investments
(1) Category of long-term equity investments
Item Opening balance Increase for the year Decrease for the year Closing balance Investments in subsidiaries 8,903,525,453.18 268,932,475.00 396,725,533.01 8,775,732,395.17 Investments in associates 5,692,675.12 47,492.37 5,645,182.75 Other equity investments 84,950,000.00 84,950,000.00 Less: Long-term equity
investments less
impairment provision 2,589,574.47 2,589,574.47 Total 8,991,578,553.83 268,932,475.00 396,773,025.38 8,863,738,003.45 (2) Details of impairment provision on long-term equity investments
Increase for Decrease for
Item Opening balance the year the year Closing balance Qingzhou Chenming
Denaturation Amylum
Co., Ltd. 900,000.00 900,000.00 Shandong Paper Making
& Printing Enterprises
Corporation 200,000.00 200,000.00 Jinan Shangyou
Commercial Company
Limited 350,000.00 350,000.00 Shanghai Forest&
Paper E-Commerce
Co., Ltd. 1,139,574.47 1,139,574.47 Total 2,589,574.47 2,589,574.47
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
4. Revenue and operating costs
(1) Revenue
Unit: RMB Amounts during Amounts during the Item the period prior period Revenue from principal activities 8,581,184,184.97 7,725,612,244.79 Revenue from other activities 1,208,914,521.45 915,596,697.75 Total 9,790,098,706.42 8,641,208,942.54 Operating costs 7,831,543,846.50 7,177,585,076.21 (2) Principal activities (by industries)
Unit: RMB Amounts during the period Amounts during the prior period Industry name Revenue Operating costs Revenue Operating costs Machine-made paper 6,381,206,521.11 5,004,862,835.94 6,517,417,558.81 5,371,654,396.22 Electricity and heat 2,199,977,663.86 1,665,925,576.42 1,208,194,685.98 936,846,647.26 Total 8,581,184,184.97 6,670,788,412.36 7,725,612,244.79 6,308,501,043.48 (3) Principal activities (by products)
Unit: RMB Amounts during the period Amounts during the prior period Product name Revenue Operating costs Revenue Operating costs Machine-made paper 6,381,206,521.11 5,004,862,835.94 6,517,417,558.81 5,371,654,396.22 Electricity and steam 2,199,977,663.86 1,665,925,576.42 1,208,194,685.98 936,846,647.26 Total 8,581,184,184.97 6,670,788,412.36 7,725,612,244.79 6,308,501,043.48
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
4. Revenue and operating costs(Cont’d)
(4) Principal activities (by geographical areas)
Unit: RMB Amounts during the period Amounts during the prior period Geographical area Revenue Operating costs Revenue Operating costs Mainland China 8,209,025,421.21 6,359,495,311.78 7,276,157,262.26 5,934,723,083.20 Other countries and regions 372,158,763.76 311,293,100.58 449,454,982.53 373,777,960.28 Total 8,581,184,184.97 6,670,788,412.36 7,725,612,244.79 6,308,501,043.48 (5) Revenue from top 5 customers of the Company
Percentage of the Total revenue from revenue for Period top 5 customers the period(%) 2013 6,373,240,074.26 65% 2012 6,492,496,014.66 75% 5. Investment income
(1) Breakdown of investment income
Unit: RMB Amounts during Amounts during the Item the period prior period Income from long-term equity investments accounted for using
the cost method 327,327,560.06 540,703,203.89 Income from long-term equity investments accounted for using
the equity method -47,492.37 -19,380,904.84 Investment gain on disposal of long-term equity investments 14,190,483.70 -4,350,000.00 Interest income from entrusted loans 12,211,717.01 33,926,275.36 Merger and acquisition of wholly-owned subsidiaries 50,273,012.00 Total 353,682,268.40 601,171,586.41 Note: There is no significant restriction on investment income repatriation of the Company.
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
5. Investment income(Cont’d)
(2) Income from long-term equity investments accounted for using the cost method
Unit: RMB Amounts during Amounts during Reason for change of this Investee the period the prior period period compared to prior period Shandong Chenming Power Supply
Holdings Co., Ltd. 30,213,771.35 28,487,270.13
Shandong Chenming Paper Group
Qihe Paperboard Co., Ltd. 412,453,350.99
Yibian Chenming Paper Co., Ltd. 99,762,582.77
Jiangxi Chenming Paper Co., Ltd. 11,300,102.21
Zhanjiang Chenming Pulp& Paper Co., Ltd. 180,000,000.00
Shouguang Chenming Papermaking
Machine Co., Ltd. 15,000,000.00
Shouguang Chenming Import and Export
Trade Co., Ltd. 8,000,000.00
Shouguang Chenming Modern Logistic Co., Ltd. 63,500,000.00
Shanghai Runchen Equity Investment Fund
Co., Ltd. 19,313,686.50
Total 327,327,560.06 540,703,203.89 —
(3) Income from long-term equity investments accounted for using the equity method
Unit: RMB Reason for change of Amounts during Amounts during this period compared Investee the period the prior period to prior period Arjo Wiggins Chenming Specialty Paper
Co., Ltd. -19,385,301.17
Jiangxi Jiangbao Media Colour Printing
Co., Ltd. -47,492.37 4,396.33
Shouguang Liben Paper Making Co., Ltd.
Total -47,492.37 -19,380,904.84 —
(4) Merger and acquisition of wholly-owned subsidiaries
Amounts during Amounts during the Item the year prior year Net assets as at merger date 66,123,366.16 Less: investment costs 15,850,354.16 Investment gains 50,273,012.00
XI Financial Report
XIV. Notes to major financial statement items of the parent company(Cont’d)
6. Supplementary information on cash flow statement
Unit: RMB Amounts during Amounts during the Supplementary information the period prior period 1. Reconciliation of net profit as cash flows from operating activities: — — Net profit 837,816,166.29 816,640,510.85 Plus: Provision for impairment of assets 9,721,213.30 -8,963,763.50 Depreciation of fixed assets, consumption of oil and gas assets,
depreciation of productive biological assets 496,354,243.03 547,076,293.15 Amortisation of intangible assets 9,458,835.52 9,268,344.48 Loss on disposal of fixed assets, intangible assets and other long-
term asset (“-” denotes gain) 30,220,440.63 -22,464,472.24 Finance expenses (“-” denotes gain) 1,081,677,851.91 856,109,701.51 Investment loss (“-” denotes gain) -353,682,268.40 -601,171,586.41 Decrease in deferred income tax assets (“-” denotes increase) 4,435,292.92 19,870,870.48 Decrease in inventory (“-” denotes increase) 80,077,116.48 236,731,919.18 Decrease in operating receivables (“-” denotes increase) -4,081,899,803.22 -1,793,247,193.24 Increase in operating payables (“-” denotes decrease) -841,543,685.65 76,765,601.15 Net cash flows from operating activities -2,727,364,597.19 136,616,225.41 2. Major investing and financing activities not involving
cash settlements: — — 3. Net change in cash and cash equivalents: — — Cash balance at the end of the period 64,392,029.09 1,786,622,854.08 Less: cash balance at the beginning of the period 1,786,622,854.08 1,290,039,078.57 Net increase in cash and cash equivalents -1,722,230,824.99 496,583,775.51
XI Financial Report
XV. Supplementary information
1. Breakdown of extraordinary gains and losses for the current period
Unit: RMB Item Amount Description Profit or loss from disposal of non-current assets (included offset amount
of provision for assets impairment) –6,367,477.99
Government grants included in profit and loss for the current period
(except for government grants closely related to the ordinary
course of business of the Company that were given under at a
fixed standard amount or quantity as stipulated by the State) 174,947,619.19
Profit arising from investment costs for acquisition of subsidiary,
associated corporation and joint-venture by the corporation being
less than its share of fair value of identifiable net assets of the
invested entity on acquisition 2,408,368.37
Gains and losses from debt restructuring 268,577.19
Profit or loss from changes in fair value of consumable biological assets 11,221,828.76
Non-operating gains and losses other than the above items 299,225,913.46
Less: Effect of income tax 98,299,197.38
Effect of minority interests (after tax) 78,920,448.13
Total 304,485,183.47 — Government grants included in profit and loss for the current period are operating gains and losses. Explanation on each disclosure should be made.
□Applicable Not applicable
2. 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
Unit: RMB Net profit attributable to shareholders Net assets attributable to shareholders of of the Company the Company
Amounts for Amounts for the
the period prior period Closing balance Opening balance Under China
accounting standards 710,655,331.72 221,034,822.54 14,039,888,226.11 13,759,496,179.85 Items and amounts
adjusted under international
accounting standards
XI Financial Report
XV. Supplementary information(Cont’d)
2. Difference in accounting data under domestic and overseas accounting standards(Cont’d)
(2) Differences between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report
Unit: RMB Net profit attributable to shareholders Net assets attributable to shareholders of the Company of the Company
Amounts for Amounts for
the period the prior period Closing balance Opening balance Under China
accounting standards 710,655,331.72 221,034,822.54 14,039,888,226.11 13,759,496,179.85 Items and amounts adjusted
under overseas
accounting standards
3. Return on net assets and earnings per share
Unit: RMB Weighted average Earnings per share
return on net Basic earnings Diluted earnings Profit during the reporting period assets(%) per share per share Net profit attributable to holders of ordinary
shares of the Company 5.11% 0.35 0.35 Net profit attributable to holders of ordinary shares
of the Company, after deducting
extraordinary gains and losses 2.92% 0.20 0.20 4. Explanation of irregular movements in major accounting statement items of the Company
Items in balance sheet:
(1) The closing balance of monetary funds as at 31 December 2013 was RMB2,547,729,794.24, down by42.83% as compared with the opening balance mainly due to monetary funds decreased mainly due to the issue of RMB3.8 billion corporate bonds on 28 December 2012 and some of the funds as at the end of the year not utilised for repayment of borrowings.
(2) The closing balance of bills receivable as at 31 December 2013 was RMB2,870,443,681.49, up by54.95% as compared with the opening balance mainly due to the increase in bills for settlement as at the end of the year and the decrease in discount on bills receivable.
(3) The closing balance of accounts receivable as at 31 December 2013 was RMB3,102,643,083.54, down by13.89% as compared with the opening balance mainly due to the strengthened control over proceeds collection and the decrease in turnover days for accounts receivable.
(4) The closing balance of inventories as at 31 December 2013 was RMB3,725,809,877.25, down by15.56% as compared with the opening balance mainly due to the production of the Company based on orders received, and, in turn, the decrease in goods in stock.
(5) The closing balance of long-term equity investments as at 31 December 2013 was RMB115,477,214.86, down by67.64% as compared with the opening balance mainly due to the decrease in long-term equity investments arising from disposal of investment items and to the fact that Wuhan Chenming Wan Xing Real Estate Co., Ltd. was no longer within the scope of consolidation and was accounted for using equity method.
XI Financial Report
XV. Supplementary information(Cont’d)
4. Explanation of irregular movements in major accounting statement items of the Company(Cont’d) (6) The closing balance of fixed assets as at 31 December 2013 was RMB21,181,647,488.39, up by7.24% as compared with the opening balance mainly due to the reclassification of the white coated linerboard project as fixed assets as well as depreciation for the year, disposal of subsidiary, Yanbian Chenming, and the decrease of fixed assets as disposed of due to the relocation of Wuhan Chenming Plant I for environmental protection reason.
(7) The closing balance of disposal of fixed assets as at 31 December 2013 was RMB588,181,647.53, up by104.72% as compared with the opening balance mainly due to disposal of assets from the relocation of a factory of Wuhan Chenming for environmental protection reason.
(8) The closing balance of deferred income tax assets as at 31 December 2013 was RMB507,653,388.38, up by34.68% as compared with the opening balance mainly due to provision made for deferred income tax assets as a result of temporary losses of some companies under the current market conditions.
(9) The closing balance of short-term loans as at 31 December 2013 was RMB9,818,885,237.85, down by23.75% as compared with the opening balance mainly due to reduction of financing through short-term loans by the Company in order to lower finance expenses and broadening financing sources.
(10) The closing balance of bills payable as at 31 December 2013 was RMB290,403,790.59, down by77.41% as compared with the opening balance mainly due to the decrease in bank acceptance bills issued by the Company for payment of goods.
(11) The closing balance of accounts payable as at 31 December 2013 was RMB2,695,169,927.14, down by16.81% as compared with the opening balance mainly due to the increase in payment for goods.
(12) The closing balance of other current liabilities as at 31 December 2013 was RMB3,878,735,536.52, up by21864.0% as compared with the opening balance mainly due to the issuance of short-term commercial paper of RMB3.8 billion by the Company.
(13) The closing balance of bonds payable as at 31 December 2013 was RMB5,768,418,612.73, down by7.80% as compared with the opening balance mainly due to the transfer of Chenming Hong Kong debt of 500 million to non-current liabilities due within 1 year.
(14) The closing balance of long-term payables as at 31 December 2013 was RMB60,000,000, mainly due to borrowings from the Management Committee of Nanchang Economic and Technological Development Zone to Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, for promotion of the smooth commencement of its phase II project.
(15) The closing balance of special payables as at 31 December 2013 was RMB971,805,561.39, up by51.48% as compared with the opening balance mainly due to the special government grants of RMB650 million in relation to relocation due to environmental protection reason received by Jilin Chenming Paper Co., Ltd., a subsidiary of the Company.
(16) The closing balance of share capital as at 31 December 2013 was RMB1,975,471,967, down by4.20% as compared with the opening balance mainly due to the repurchase of overseas listed foreign shares (B shares) by the Company and cancellation of repurchased shares.
(17) The closing balance of capital reserves as at 31 December 2013 was RMB6,204,682,028.94, down by3.28% as compared with the opening balance mainly due to the decrease in share premium under capital reserves as a result of purchase of B shares by the Company, the transfer of equity interest in Yanbian Chenming Paper Co., Ltd., and transfer of capital reserves attributable to parent company to investment income.
(18) The closing balance of treasury shares as at 31 December 2013 was RMB30,954,891.40, mainly due to the expenditure on the repurchase of H shares by the Company with the repurchased shares not yet cancelled.
XI Financial Report
XV. Supplementary information(Cont’d)
4. Explanation of irregular movements in major accounting statement items of the Company(Cont’d) Items in income statement and cash flow statement:
(1) Revenue for 2013 was RMB20,388,890,067.41, up by3,17% from the prior year mainly due to the increase in sales of machine-made paper and the increase in electricity sales.
(2) Operating costs for 2013 was RMB16,651,886,019.64, down by0.25% from the prior year mainly due to a decline in raw material costs.
(3) Finance expenses for 2013 was RMB930,604,174.96, down by14,84% from the prior year mainly due to the appreciation of RMB, an increase in foreign exchange gains and a decrease in interest expenses.
(4) Loss on impairment of assets for 2013 was RMB24,104,912.81, down by65.69% from the prior year mainly due to stepping up efforts to collect proceeds and reduction of bad debt provision.
(5) Investment income for 2013 was RMB23,705,958.58, up by166.73% from the prior year mainly due to investment income arising from disposal of subsidiaries.
(6) Non-operating income for 2013 was RMB504,045,185.99, up by19.58% from the prior year mainly due to the compensation for the suspension of Wuhan Plant I and transfer of government grants.
(7) Non-operating expense for 2013 was RMB41,294,461.31, up by92.60% from the prior year mainly due to the increase in loss on disposal of non-current assets.
(8) Income tax expenses for 2013 were RMB175,938,431.91, up by380.04% from the prior year mainly due to better profitability of the Company as compared to the prior year.
(9) Net cash flows from operating activities in 2013 were RMB1,122,616,800.91, down by42.63% from the prior year mainly due to the increase of the proportion of cash payment for goods as the Company sought support from upstream suppliers and reduced its costs.
(10) Net cash flows from investment activities in 2013 were RMB-1,910,948,038.35, up by27.78% from the prior year mainly due to recovery of investment with lower rate of return in order to improve capital utilisation. (11) Net cash flows from financial activities in 2013 were RMB-832,037,106.17, down by215.05% from the prior year mainly due to better profitability of the Company and enhancement in capital utilisation efficiency so as to lower capital utilisation costs.
XII. 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 original copy of theauditors’ report which is sealed by the accounting firm and signed by the certified public accountant;
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 annual report disclosed on the Stock Exchange of Hong Kong Limited;
V. Other related information.
Shandong Chenming Paper Holdings Limited
20 March 2014