Shandong Chenming Paper Holdings Limited 2014 Annual Report Summary Stock code: 000488, 200488 Stock abbreviation: Chenming Paper, Chenming B Announcement No.: 2015-008 Shandong Chenming Paper Holdings Limited
2014 Annual Report Summary
1. IMPORTANT NOTICE
This annual report summary is extracted from the text of the annual report. For details, investors should carefully read the text of the annual report published, at the same time, on the designated websites such as the website of Shenzhen Stock Exchange as approved by China Securities Regulatory Commission or the website of the Stock Exchange of Hong Kong Limited.
Company profile
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|Stock abbreviation|晨鳴紙業|Stock Code|000488|
|Stock abbreviation|晨鳴 B|Stock Code|200488|
|Stock abbreviation|Chenming Pape|Stock Code|01812|
|Stock exchanges on which||||
||Shenzhen Stock Exchange and The Stock Exchange of Hong Kong|||
|the shares are listed||||
||Secretary to the Board|Securities Affairs Representative|Hong Kong Company Secretary|
|Name|Wang Chunfang|Xiao Peng|Poon Shiu Cheong|
||No. 2199 East Nongsheng Road,||22nd Floor, World Wide House,|
|||22nd Floor, World Wide House,||
|Correspondence Address|Shouguang City, Shandong||Central, Hong Kong|
|||Central, Hong Kong||
||Province|||
|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|

 2. MAJOR FINANCIAL DATA AND CHANGE OF SHAREHOLDERS
(1) Major financial data
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||
||2014|2013|the year as compared|2012|
||||to the prior year||
|Revenue (RMB)|19,101,677,077.69|20,388,890,067.41|-6.31%|19,761,679,230.05|
|Net profit attributable to shareholders of|505,204,384.73|710,655,331.72|||
||||-28.91%|221,034,822.54|
|the Company (RMB)|||||
|Net profit after extraordinary gains or|||||
|losses attributable to shareholders of the|130,445,644.83|406,170,148.25|-67.88%|-159,777,900.37|
|Company (RMB)|||||
|Net cash flows from operating activities|985,399,735.85|1,122,616,800.91|||
||||-12.22%|1,956,866,477.99|
|(RMB)|||||
|Basic earnings per share (RMB per share)|0.26|0.35|-25.71%|0.11|
|Diluted earnings per share (RMB per|0.26|0.35|||
||||-25.71%|0.11|
|share)|||||

Shandong Chenming Paper Holdings Limited 2014 Annual Report Summary
||||||
|-|-|-|-|-|
|Rate of return on net assets on weighted|||||
||3.62%|5.11%|-1.49%|1.63%|
|average basis|||||
||||Increase/decrease as at||
||||the end of the year|As at the end of2012|
||As at the end of 2014|As at the end of 2013|||
||||compared to the end of||
||||the prior year (%)||
|Total assets (RMB)|56,822,026,545.21|47,521,883,569.18|19.57%|47,725,421,927.39|
|Net assets attributable to shareholders of|13,917,343,301.15|14,039,888,226.11|||
||||-0.87%|13,759,496,179.85|
|the Company (RMB)|||||

(2) Table setting out shareholding of top ten shareholders of ordinary shares
||||||||||
|-|-|-|-|-|-|-|-|-|
||||Total number of shareholdersof ordinary shares as at the endof the fifth trading day beforethe publication date of thisannual report||||||
||128,595, of which 101,044 were|||||122,870, of which 96,097 were|||
|Total number of shareholders|||||||||
||holders of A shares, 27,008 holders|||||holders of A shares, 26,232|||
|of ordinary shares as at the|||||||||
||of B shares and 543 holders of H|||||holders of B shares and 541|||
|end of the reporting period|||||||||
||shares|||||holders of H shares|||
|Shareholdings of top ten shareholders of ordinary shares|||||||||
||||||||Share pledged or||
|||||Percentag|||||
|||||||Number of|locked-up||
|||Nature of||e of|Number of||||
|Name of shareholders||||||Restricted|Status||
|||shareholders||sharehold|shares held||||
|||||ing||shares held|of|Number|
||||||||shares||
|HKSCC NOMINEES LIMITED||Overseas legalperson||18.11%|350,634,500|0|||
|SHOUGUANG CHENMING HOLDINGSCOMPANY LIMITED||State-owned legalperson||15.13%|293,003,657|0|Pledge||
|||||||||146,500,000|
||||||||d||
|PLATINUM ASIA FUND||Overseas legalperson||1.67%|32,341,052|0|||
|BBH A/C VANGUARD EMERGING MARKETSSTOCK INDEX FUND||Overseas legalperson||0.62%|11,946,985|0|||
|BILL & MELINDA GATES FOUNDATION TRUST||Overseas legalperson||0.52%|10,033,077|0|||
|JIN Xing||Domestic natureperson||0.46%|8,856,400|0|||
|RONGTONG NEW BLUE CHIP SECURITIESINVESTMENT FUND||Others||0.41%|8,000,012|0|||
|CHINA CONSTRUCTION BANK-NANFANGSHENGYUAN DIVIDEND FUND||Others||0.41%|7,999,830|0|||
|ZHONG Honglei||Domestic natureperson||0.35%|6,845,568|0|||
|CHEN Hongguo||Domestic natureperson||0.33%|6,434,527|0|||
||Shouguang Chenming Holdings Company Limited, a state-owned legal person shareholder, is not||||||||
|Connected relationship or|connected with any of the shareholders above. They are not persons acting in concert under||||||||
|connected party relationship|Administration of Disclosure of Information on the Change of Shareholdings in Listed Companies||||||||
|among the above|Procedures. Save for the above, it is not aware that any other shareholders of tradable shares are persons||||||||
|shareholders|acting in concert and is also not aware that any other shareholders of tradable shares are connected with||||||||
||each others.||||||||

(3) Table setting out shareholding of top ten shareholders of preference shares
□ Applicable√ Not applicable
There was no shareholding of shareholder of preference share during the reporting period.
Shandong Chenming Paper Holdings Limited 2014 Annual Report Summary (4) Chart disclosing the relationship between the Company and the beneficial owner
3. MANAGEMENT DISCUSSION AND ANALYSIS
(1) Operating review for 2014
During the reporting period, on the one hand, with the impact of macroeconomic slowdown, demand was continuously weak in the paper making industry. On the other hand, new production capacity of the paper making industry had been released over the past few years, resulting in the current transitional capacity saturation and excess capacity. Due to fierce competition, product prices continued to decline, profit margins were narrowed, and profitability of the paper making industry stood at a low level.
During the reporting period, the Company achieved revenue of RMB19,101.6771 million with a year-on-year decrease of6.13% and incurred operating costs of RMB15,323.1028 million with a year-on-year decrease of7.98%. Total profit and net profit attributable to equity holders of the Company were respectively RMB561.0083 million and RMB505.2044 million, down by35.24% and28.91% from the prior year.
Currently, with basically stable production capacity, excess capacity has become the primary problem to be resolved in the industry. 2015 is a key year for reform and innovation forChina’s paper making industry as the industry was entering a new stage of transformation and upgrade. Elimination of outdated production capacity and increasingly stringent environmental policies are forcing some small and medium-sized enterprises out of the market. To some extent, this eases the pressure of new capacity on the supply of the industry. For major paper making enterprises, fully utilising advantages of capital, technology and scale to achieve a change in the growth pattern may help the Company gain new market share. Meanwhile, with the impact of a weak demand, raw material prices have been hovering at a low level, easing the pressure of operating costs on paper making enterprises. Eliminating outdated production capacity will remove obstacles for theindustry’s development, while replenishment of and substitution of advanced production capacity will bring fresh blood and drive to the industry, conductive to a higher concentration ratio to creating a favourable industry lifecycle.China’s paper making industry is embarking on the road of rebirth.
(2) Material changes of asset items
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||As at the end of 2014||As at the end of 2013||||
|||As a||As a|Change||
|||percenta||percenta|in|Description of major changes|
||Amounts|ge of|Amounts|ge of|percenta||
|||total||total|ge||
|||assets||assets|||
||5,475,658,186.10||2,547,729,794.24|||Mainly due to the increase in bankers’|
|Monetary funds||9.64%||5.36%|4.28%|acceptances issued by the Company, letters|
|||||||of guarantee and the deposits for loans.|
|Accounts|3,489,409,369.20||3,102,643,083.54|||Mainly due to increase in sales as at the year|
|||6.14%||6.53%|-0.39%||
|receivable||||||end.|
||36,087,848.12||32,216,789.33|||Mainly due to new equity investments in|
|Long-term|||||||
|||||||Shouguang Chenming Huisen New-style|
|equity||0.06%||0.07%|-0.01%||
|||||||Construction Materials Co., Ltd. and Jiangxi|
|investments|||||||
|||||||Chenming Port Co., Ltd.|

Shandong Chenming Paper Holdings Limited 2014 Annual Report Summary
||||||||
|-|-|-|-|-|-|-|
||24,744,731,705.04||21,181,647,488.39|||Mainly due to the increase in assets|
|||||||reclassified upon completion of the|
|||||||environmental protection relocation project of|
|Fixed assets||43.55%||44.57%|-1.02%|Jilin Chenming, the household paper and|
|||||||specialty paper projects of Wuhan Chenming,|
|||||||the 180,000 tonne paper cup raw paper project|
|||||||of Zhanjiang Chenming and the paper|
|||||||additives projects of Meilun.|
||3,709,270,828.53||5,266,031,817.60|||Mainly due to the decrease in assets|
|||||||reclassified upon completion of the|
|||||||environmental protection relocation project of|
|Construction in||6.53%||11.08%|-4.55%|Jilin Chenming, the household paper and|
|progress||||||specialty paper projects of Wuhan Chenming,|
|||||||the 180,000 tonne paper cup raw paper project|
|||||||of Zhanjiang Chenming and the paper|
|||||||additives projects of Meilun.|
|||||||Mainly due to the increase in amounts|
|Bills receivable|3,047,541,556.15|5.36%|2,870,443,681.49|6.04%|-0.68%|receivable settled through bills as at the end of|
|||||||the year.|
|||||||Mainly due to the increase in prepayments for|
|Prepayments|1,838,017,454.90|3.23%|1,589,021,331.24|3.34%|-0.11%||
|||||||raw materials as at the year end.|
|||||||Mainly due to the increase in borrowings from|
|||||||Wuhan Chenming to Wuhan Chenming Wan|
|Other||||||Xing Real Estate Co., Ltd., an unconsolidated|
||1,776,467,886.07|3.13%|1,331,900,749.84|2.80%|0.33%||
|receivables||||||related party, and the leaseback payment due|
|||||||within a year from Financial Leasing|
|||||||Company.|
|||||||Mainly due to realisation of the equity|
|Available-for-sa|||||||
|||||||investments in Weifang Xinye Capital|
|le financial|73,000,000.00|0.13%|83,260,425.53|0.18%|-0.05%||
|||||||Investment Co., Ltd. and Shanghai Forest &|
|assets|||||||
|||||||Paper E-Commerce Co., Ltd.|
|||||||Mainly due to the new financial leasing|
|||||||business of Shandong Chenming Financial|
|Long-term|||||||
||1,420,598,667.99|2.50%|||2.50%|Leasing Co., Ltd., a company newly|
|receivables|||||||
|||||||established by Chenming (HK), a subsidiary|
|||||||of the Company.|
|||||||Mainly due to the asset reclassification of the|
|Construction|||||||
||22,955,982.38|0.04%|63,968,067.62|0.13%|-0.09%|environmental protection relocation project of|
|materials|||||||
|||||||Jilin Chenming.|
|||||||Mainly due to the provision made for deferred|
|Deferred|||||||
|||||||income tax assets as a result of temporary|
|income tax|620,267,636.44|1.09%|507,653,388.38|1.07%|0.02%||
|||||||losses of some companies under the current|
|assets|||||||
|||||||market conditions.|
|Other|||||||
|non-current|1,094,124,242.00|1.93%|||1.93%|Mainly due to new external entrusted loans.|
|assets|||||||

(3) Material changes of liability items
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||2014||2013||||
|||As apercenta||As apercentag|Change in||
||||||percentag|Description of major changes|
||Amounts|ge of|Amounts|e of total|e||
|||totalassets||assets|||
||20,470,296,592.92||9,818,885,237.85|||Mainly due to higher liquidity needs|
|Short-term||||||resulting from increased investment in|
|||36.03%||20.66%|15.37%||
|borrowings||||||construction in progress, production|
|||||||capacity and operation scale.|

Shandong Chenming Paper Holdings Limited 2014 Annual Report Summary
||||||||
|-|-|-|-|-|-|-|
|Long-term|4,378,290,245.19||3,723,865,807.90||||
|||7.71%||7.84%|-0.13%|Mainly due to new long-term financing.|
|borrowings|||||||
|||||||Mainly due to the increase in bank|
|Bills payable|1,598,110,792.85|2.81%|290,403,790.59|0.61%|2.20%|acceptance bills issued by the Company for|
|||||||payment of goods.|
|||||||Mainly due to increased raw material|
|Accounts payable|3,408,366,113.93|6.00%|2,695,169,927.14|5.67%|0.33%||
|||||||purchase.|
|||||||Mainly due to the decrease in advance|
|Advance receipts|270,056,726.88|0.48%|442,432,261.58|0.93%|-0.45%|receipts resulting from intensified market|
|||||||competition.|
|Staff||||||Mainly due to the increase in outstanding|
||153,926,042.30|0.27%|130,271,812.18|0.27%|0.00%||
|remuneration||||||remuneration payable to chief executives.|
|||||||Mainly due to the increase in outstanding|
|Tax payable|161,100,088.94|0.28%|130,192,936.87|0.27%|0.01%||
|||||||value-added tax payable.|
|||||||Mainly due to the borrowings from|
|Other payables|783,790,884.61|1.38%|486,836,595.89|1.02%|0.36%||
|||||||Shouguang Chenming Holdings Co., Ltd.|
|Non-current|||||||
|||||||Mainly due to the payment of RMB bonds|
|liabilities due|1,099,968,900.00|1.94%|1,287,804,452.66|2.71%|-0.77%||
|||||||of RMB500 million due for repayment.|
|within one year|||||||
|||||||Mainly due to the short-term commercial|
|Other current|||||||
||||3,853,488,888.90|8.11%|-8.11%|paper of RMB3.8 billion of the Company|
|liabilities|||||||
|||||||due for repayment.|
|||||||Mainly due to the surplus funds upon|
|||||||completion of environmental protection|
|Special payables|161,983,516.66|0.29%|971,805,561.39|2.04%|-1.75%|relocation projects of Jilin Chenming and|
|||||||Wuhan Chenming reclassified to deferred|
|||||||income.|

(4) Cash flows
Unit: RMB
|||||
|-|-|-|-|
|Item|2014|2013|Increase/decrease|
|Subtotal of cash inflows from operating activities|17,924,508,169.86|20,363,176,118.78|-11.98%|
|Subtotal of cash outflows from operating activities|16,939,108,434.01|19,240,559,317.87|-11.96%|
|Net cash flows from operating activities|985,399,735.85|1,122,616,800.91|-12.22%|
|Subtotal of cash inflows from investing activities|1,022,916,113.63|1,926,791,350.79|-46.91%|
|Subtotal of cash outflows from investing activities|4,096,185,535.33|3,837,739,389.14|6.73%|
|Net cash flows from investing activities|-3,073,269,421.70|-1,910,948,038.35|-60.82%|
|Subtotal of cash inflows from financing activities|25,487,820,197.15|23,126,276,064.56|10.21%|
|Subtotal of cash outflows from financing activities|23,159,468,612.66|23,958,313,170.73|-3.33%|
|Net cash flows from financing activities|2,328,351,584.49|-832,037,106.17|379.84%|
|Net cash flows from financing activities|249,563,932.34|-1,617,017,256.49|115.43%|

 (1) Net cash flows from operating activities decreased by12.22% as compared to the corresponding period of the prior year mainly due to the decrease in cash inflow of operating activities as a result of the decrease in prices of machine-made paper.
(2) Net cash flows from investing activities decreased by60.82% as compared to the corresponding period of the prior year mainly due to the decrease in relocation compensation and the consideration of equity transfer received.
(3) Net cash flows from financing activities increased by379.84% as compared to the corresponding period of the prior year mainly due to increase in loans for project investment and other purposes.
(5) Outlook on the future development of the Company
1. Competition overview and development trend of the industry
(1) Competition overview and development trend of the industry
The Company is engaged in the paper making industry, which is a light industry. The business sentiments of the industry are
highly related to the macroeconomic growth. In recent years, on the one hand, with the impact of macroeconomic slowdown, demand
Shandong Chenming Paper Holdings Limited 2014 Annual Report Summary was continuously weak in the paper making industry. On the other hand, new production capacity of the paper making industry had been released together over the past few years, resulting in the transitional overcapacity of some paper types. Due to fierce competition, product prices continued to decline, narrowing profit margins of papermaking enterprises.
In the long run, the development conditions of the paper making industry are gradually improving. Currently, with basically stable production capacity, excess capacity has become the primary problem to be resolved in the industry. 2014 was a key year for reform and innovation forChina’s paper making industry as the industry was entering a new stage of transformation and upgrading. As 2015 is the last year of the “Twelfth Five-Year” Plan, elimination of outdated production capacity and increasingly stringent environmental policies are forcing some small and medium-sized enterprises out of the market. To some extent, this eases the pressure of new capacity on the supply of the industry, which is conducive for enterprises to initiate a price rise. For major paper making enterprises, fully utilising advantages of capital, technology and scale to achieve a change in the growth pattern may help them gain new market share. Meanwhile, with the impact of a weak demand, raw material prices have been hovering at a low level, easing the pressure of operating costs on paper making enterprises. Eliminating outdated production capacity will remove obstacles for theindustry’s development, while replenishment of and substitution of advanced production capacity will bring fresh blood and drive to the industry, conductive to a higher concentration ratio to creating a favourable industry lifecycle.
Faced with increasingly fierce competition in the industry, the Company gains competitive edge by leveraging on our strong corporate strength to improve equipment and technologies, enrich product mix, upgrade product quality, and focus on research and development of high-end products. The adjustment of product mix has injected new driving force for our corporate restructuring and development, while continuous management refinement has opened up our growth bottleneck, releasing vigour to the Company. Our diversified development brought new sources of profit growth for the Company, accelerating the process of the Company to becoming a world-class paper making enterprise. As the economic situation improves and the industry is gradually recovering, theCompany’s performance will have steady growth.
2. Development strategy of the Company
Adhering to our development philosophy of “creating innovative ideas, maintaining our leading position and becoming an international enterprise”, the Company strives to become a leading international paper maker which focuses on environmental protection and sustainable development. The Company accelerates our transformation and upgrade process, and implements our new round of strategic planning. Hence, a development trend focusing on principal operations as well as diversification, and environmental protection and standardised management takes shape. We also promote detailed management. Being market-oriented, the Company has been optimising our product mix with an increasing proportion of high value-added and high-end products. The Company strives to become a world-class paper making enterprise with rapid growth based on the philosophy of “High-end Positioning, Production of First-class Products”.
3. Operating plan for 2015
In 2015, the Company will proactively adapt to the “new normal” of economic development, accelerate transformation and upgrade process, as well as enhance operation efficiency. The Company will consistently implement our working direction of “Team Building, Strict Management, Outstanding Business Performance, Achieving Good Results”. To achieve our operating goals, the Company will pay special attention to the following aspects:
(1) Team building. The Company will optimise our human resources allocation mechanism through various means such as management work reporting, management assessment, and training and examination, thus making our team building move on to a new stage.
(2) Basic management. The Company will ensure comprehensive optimisation and implementation on the system establishment and improvement. We will put greater efforts into system inspection and appraisal in order to strengthen policy implementation. (3) Operating focus. The Company will focus on solving major issues on, among other things, efficiency management, risk control, capital utilisation, slow-moving product and foreign operations management, aiming to achieve great improvement. (4) Production management. The Company will strengthen our system optimisation and execution: In respect of trial operation of new systems, the Company will conduct verification and make conclusion. We will identify areas for further improvement under the system and make rectification as soon as possible, and strictly implement such rectification. The Company will also standardise equipment operating parameters: With reference to the operation of similar advanced equipment in local and overseas markets, the Company will conduct comparison and adjustment in order to ensure the best operation of the equipment. The Company will accelerate adjustment on product portfolio: In order to complete the development of new products such as high-bulk white paper board, food paper and liquid packaging paper, the Company will introduce high quality technical talents. In accordance with the human resources allocation standard in leading local enterprises, the Company will continue to work on position establishment and appointment through position consolidation, automation and other measures. The Company will highly focus on our environmental protection, safety and fire prevention works. We will learn from the past experience of overseas leading enterprises or our peers, aiming to reach the highest standard in the industry.
(5) Procurement efficiency. Leveraging the commencement of operation of the railroad of Shouguang Chenming, the Company will enhance the procurement at source of materials in bulk in order to lower procurement costs. With sufficient capital reserved, the Company aims to lower procurement price through advance payment and other means, thereby maximising our return. We will increase trade volume through import and export companies, and establish strategic partnerships with quality customers, thus securing quality supplies. In addition, the Company will enhance logistics management and optimise operating mode, thereby optimising logistics efficiency.
(6) Project progress. For projects under construction such as JiangxiChenming’s 350,000 tonne high-end packaging paper and ZhanjiangChenming’s 190,000 tonne culture paper projects, the Company will have control and assessment at key points to ensure timely commencement of operation. For HuanggangChenming’s integrated forestry, pulp and paper project, the Company will
Shandong Chenming Paper Holdings Limited 2014 Annual Report Summary improve its preparation works and it is going to commence construction during the year. The Company will also proactively facilitate ShouguangChenming’s 400,000 tonne chemical pulp project, aiming to achieve substantive progress in a short period of time. (7) Financial benefits. The Financial Leasing Company will strictly control its risk exposures, aiming to achieve growth amid stability. The Finance Company will strengthen its management to provide impetus for our results growth. The Company will expand our financing channels through various means including issue of preference shares, thus lowering the finance expenses and improve our liabilities structure.
(8) Service operation. The Company nurtures new sources of profit growth through the measures such as improving procurement at source to reduce the raw material procurement price, and proactive external business expansion to further optimise our industry chain.
4. EVENTS RELATING TO THE FINANCIAL REPORT
(1) Reason for changes in accounting policies, accounting estimates and accounting methods as compared to the financial report for the prior year
√ Applicable□ Not applicable
In early 2014, the Ministry of Finance issued “Accounting Standard for Business Enterprises No. 39– Fair Value Measurement”, “Accounting Standard for Business Enterprises No. 30– Presentation of Financial Statements”, “Accounting Standard for Business Enterprises No. 9– Employee Benefits”, “Accounting Standard for Business Enterprises No. 33– Consolidated Financial Statements”, “Accounting Standard for Business Enterprises No. 40– Joint Arrangements”, “Accounting Standard for Business Enterprises No. 2– Long-term Equity Investments (as amended in 2014)” and “Accounting Standard for Business Enterprises No. 41– Disclosure of Interest in Other Entities” in Cai Kuai[2014] No. 6, No. 7, No. 8, No. 10, No. 11, No. 14 and No. 16, requiring the above to be adopted among companies applying the Standards from 1 July 2014, and encouraging entities listed overseas to early adopt the above. Furthermore, the Ministry issued “Accounting Standard for Business Enterprises No. 37– Presentation of Financial Instruments (as amended in 2014)” (the “Financial Instrument Presentation Standard”) in Cai Kuai[2014] No. 23, requiring the adoption of the above standard for accounting periods starting in or after 2014.
As resolved at the fourth meeting of the Board of the seventh session held on 19 March 2014, the Company has adopted since the accounting period starting from 1 January 2013 the above five new or revised standards save for those on long-term equity investments and disclosure of interest in other entities and the Financial Instrument Presentation Standard, the first two of which has been adopted from 1 July 2014 and the last one will be first adopted in the annual report for 2014. During the year, adjustment made to current and previous items and amounts in financial statements according to application guides and transitional arrangements subsequently issued by the Ministry were as follows:
|||||
|-|-|-|-|
|||Impact on amounts in financial statements||
|||as at 1 January 2014/for 2013||
|Standard|Changes and impact|||
|||Item|Increase/decrease|
|AccountingStandard forBusinessEnterprisesNo. 2 –Long-termEquityInvestments|Prior to adoption of the standard as amended in 2014, the equityinvestment in an investee that is not under common control or significantinfluence of the Company and not quoted in an active market, and whosefair value is unable to be reliably measured was accounted for as anlong-term equity investment at cost. After the adoption, such investee isaccounted for as available-for-sale financial assets. Retrospectivelyadjustment is made based on the above accounting policy change.|Available-for-salefinancial assets|83,260,425.53|
|||Long-term equityinvestments|-83,260,425.53|
|AccountingStandard forBusinessEnterprisesNo. 30 –Presentationof FinancialStatements|The standard as amended divides other comprehensive income intotwo categories: (1) items not to be reclassified into profit or loss insubsequent accounting periods; and (2) items to be reclassified into profitor loss in subsequent accounting periods when certain criteria have beensatisfied, and provides for presentation of held-for-sales items, currentitems and non-current items. The financial statements are presented inaccordance with such standard and corresponding adjustments have beenmade to the presentation of the financial statements for comparable years.|Other comprehensiveincome|16,934,073.59|
|||Foreign currencytranslationdifferences|-16,934,073.59|
|||Other currentliabilities|-25,246,647.62|
|||Deferred income|493,600,712.15|
|||Other non-currentliabilities|-468,354,064.53|

(2) Reason for retrospective restatement to correct major accounting errors during the reporting period
□ Applicable√ Not applicable
No retrospective restatement was made to correct major accounting errors during the reporting period.
Shandong Chenming Paper Holdings Limited 2014 Annual Report Summary (3) Reason for changes in scope of the consolidated financial statements as compared to the financial report for the prior year
√ Applicable□ Not applicable
1. During the year, six more companies were consolidated as compared to the prior year and the details are as follows: During the reporting period, the Company established six companies through investments, namely Shandong Chenming Financial Leasing Co., Ltd., Shandong Chenming Investment Limited, Shandong Chenming Group Finance Co., Ltd., Chenming Arboriculture Co., Ltd., Qingdao Chenming International Logistics Co., Ltd. and Jilin Chenming New-style Wall Materials Co., Ltd. In order to promote diversified development of the Company, further expand its business scope, enhance its overall strength and comprehensive competitiveness, and develop new sources of profit growth, the Company convened the fourth extraordinary meeting of the seventh session of the Board, at which it resolved to establish in the PRC Shandong Chenming Financial Leasing Co., Ltd. (“Financial Leasing Company”) through Chenming (HK), a wholly-owned subsidiary of the Company, with paid-up registered capital of RMB300.00 million, which was subsequently increased to RMB2,700.00 million due to business needs. It has been consolidated into the financial statements of the Company since March 2014.
In order to promote diversified development of the Company, further expand its business scope, enhance its overall strength and comprehensive competitiveness, and develop new sources of profit growth, the Company convened the fourth meeting of the seventh session of the Board, at which it resolved on the establishment of Shandong Chenming Investment Limited (“Investment Company”) by Chenming (HK) Limited (“Chenming (HK)”), a wholly-owned subsidiary of the Company, with paid-up registered capital of RMB200.00 million. It has been consolidated into the financial statements of the Company since June 2014. In addition, the Company, together with its wholly-owned subsidiary Chenming (HK), established in PRC Qingdao Chenming International Logistics Co., Ltd. (“Qingdao Chenming”), with a shareholding of30% and70% respectively and paid-up registered capital of RMB300.00 million. It has been consolidated into the financial statements of the Company since November 2014.
In order to cope with current difficult market environment and diversify its development, the Company decided to start financial business. It received the Approval from Shandong CBRC of the Operation of Shandong Chenming Group Finance Co., Ltd. (Lu Yin Jian Zhun[2014] No. 233) issued by China Banking Regulatory Commission Shandong office on 30 June 2014 approving the establishment of Shandong Chenming Group Finance Co., Ltd. (“Finance Company”), which had paid-up registered capital of RMB1,000 million and has been consolidated into the financial statements of the Company since July 2014.
In order to exercise the strategic integrated development of forestry, pulp and paper to improve the organisation and
professionalism of theCompany’s forestry segment and further extend the industry chain and increase technology application in forestry, the Company convened the sixth meeting of the seventh session of the Board, at which it resolved to establish Chenming Arboriculture Co., Ltd. (“Chenming Arboriculture”) with paid-up registered capital of RMB45.00 million. It has been consolidated into the financial statements of the Company since August 2014.
In order to strengthen comprehensive utilisation of resources and actively respond to state policy for resource utilisation, the Company decided to, based on local needs, set up Jilin Chenming New-style Wall Materials Co., Ltd. (“Jilin Wall Materials”), which was invested by Zhanjiang Chenming, a wholly-owned subsidiary of the Company, with its paid-up registered capital amounting to RMB10.00 million. The company has been consolidated into the financial statements of the Company since July 2014.
2. During the year (period), three companies were deconsolidated as compared to the prior year due to the reasons as follows:
During the reporting period, the Company lost its control over Shandong Chenming Xinli Power Co., Ltd. due to disposal of equity interest during the period. Therefore, the above company ceased to be included in the scope of consolidation. The registration of Shouguang Chenming Tianyuan Arboriculture Co., Ltd. and Shouguang Hengfeng Storage Co., Ltd. were 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 15 November 2013, the Company convened the third extraordinary meeting of the seventh session of the Board and approved the Resolution on Disposal of Equity Interest in Xinli Power”. On 4 March 2014, Chenming Power entered into an equity interest contract with Guangdong Dejun Investment Co., Ltd. to transfer its51% equity interest in Shandong Chenming Xinli Power Co., Ltd. at a consideration of RMB76.1940 million. After such transfer, the Company lost its control over Xinli Power, which ceased to be included in the scope of consolidation with effect from 4 March 2014.
To consolidate resources and enhance overall economic efficiency, the Company cancelled the registration of Shouguang Chenming Tianyuan Arboriculture Co., Ltd. and Shouguang Hengfeng Storage Co., Ltd. According to actual production and operational needs. The above two companies ceased to be included in the scope of consolidation with effect from the date of such cancellation.
(4) 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 2014 financial report of the Company and issued a standard unqualifiedauditors’ report.
Shandong Chenming Paper Holdings Limited 26 March 2015