SHANGDONG CHENMING PAPER HOLDINGS LIMITED
THE 2015 ANNUAL REPORT
March 2016
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, 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.
Chen Hongguo, head of the Company, Dong Lianming, head in charge of accounting and Li Dong, head of the accounting
department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial
statements in the annual report.
All Directors were present in person at the Board meeting to consider and approve this Report.
The Company is exposed to various risk factors such as macro-economic fluctuation, adjustment of state policy, intensified
competition in the industry, as well as change in exchange rate. 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 in Management Discussion and Analysis.
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 (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.
1
I Important Notice, Table of Contents and Definitions
Table of contents
I Important Notice, Table of Contents and Definitions ............................................................................................... 1
II Company Profile and Key Financial Indicators ........................................................................................................ 4
III Chairman’s Report ................................................................................................................................................... 9
IV Business Overview ................................................................................................................................................... 11
V Management Discussion and Analysis .................................................................................................................... 16
VI Directors Report ....................................................................................................................................................... 39
VII Material Matters ....................................................................................................................................................... 46
VIII Changes in Share Capital and Shareholders ........................................................................................................... 73
IX Preference Shares .................................................................................................................................................... 78
X Directors, Supervisors, Senior Management and Staff ............................................................................................ 79
XI Corporate Governance............................................................................................................................................. 89
XII Financial Report ....................................................................................................................................................... 109
XIII Documents Available for Inspection ........................................................................................................................ 253
2
I Important Notice, Table of Contents and Definitions
Definitions
Item Definition
Company, Group, Chenming means Shandong Chenming Paper Holdings Limited and its subsidiaries
Group or Chenming Paper
Parent Company or means Shandong Chenming Paper Holdings Limited
Shouguang Headquarters
Chenming Holdings means Shouguang Chenming Holdings Company Limited
Shenzhen Stock Exchange means Shenzhen Stock Exchange
Stock Exchange means The Stock Exchange of Hong Kong
CSRC means China Securities Regulatory Commission
Shandong CSRC means Shandong branch of China Securities Regulatory Commission
Zhanjiang Chenming means Zhanjiang Chenming Pulp & Paper Co., Ltd.
Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.
Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Chenming (HK) means Chenming (HK) Limited
Haiming Mining means Haicheng Haiming Mining Company Limited
Jilin Chenming means Jilin Chenming Paper Co., Ltd.
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.
Finance Company means Shandong Chenming Group Finance Co., Ltd.
Financial Leasing Company means Shandong Chenming Financial Leasing Co., Ltd.
reporting period means The period from 1 January 2015 to 31 December 2015
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II Company Profile and Key Financial Indicators
I. Company profile
Stock abbreviation , B Stock Code 000488, 200488
Stock exchanges on which the shares are listed Shenzhen Stock Exchange
Stock abbreviation Chenming Paper Stock Code 01812
Stock exchanges on which the shares are listed The Stock Exchange of Hong Kong Limited
Legal name in Chinese of the Company
Legal short name in Chinese of the Company
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 No. 2199 East Nongsheng Road, No. 2199 East Nongsheng Road, 22nd Floor, World Wide House,
Address Shouguang City, Shandong Province Shouguang City, Shandong Province Central, Hong Kong
Telephone (86)-0536-2158008 (86)-0536-2158008 (852)-25010088
Facsimile (86)-0536-2158977 (86)-0536-2158977 (852)-25010028
Email address chenmmingpaper@163.com chenmmingpaper@163.com kentpoon_1009@yahoo.com.hk
III. Information disclosure and places for inspection
Designated media for information disclosure China Securities Journal, Shanghai Securities News, Securities Times,
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 Securities and investment management department of the Company
the Company’s Annual Report
IV. Change in registration
Organisation Code 61358898-6
Change of principal activities since its listing No
Change of the controlling shareholder No
4
II Company Profile and Key Financial Indicators
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 Wang Yan and Jing Chuanxuan
Public 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
VI. 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
Ye √ No
Increase/decrease for
the year as compared to
2015 2014 the prior year (%) 2013
Revenue (RMB) 20,241,906,131.81 19,101,677,077.69 5.97% 20,388,890,067.41
Net profit attributable to shareholders of
the Company (RMB) 1,021,224,678.04 505,204,384.73 102.14% 710,655,331.72
Net profit after extraordinary gains or losses
attributable to shareholders of the Company (RMB) 719,891,359.63 130,445,644.83 451.87% 406,170,148.25
Net cash flows from operating activities (RMB) -9,721,363,524.30 985,399,735.85 -1,086.54% 1,122,616,800.91
Basic earnings per share (RMB per share) 0.50 0.26 92.31% 0.35
Diluted earnings per share (RMB per share) 0.50 0.26 92.31% 0.35
Rate of return on net assets on weighted average basis 6.73% 3.62% 3.11% 5.11%
Increase/decrease as at
the end of the year
compared to the end of
As at the end of 2015 As at the end of 2014 the prior year (%) As at the end of 2013
Total assets (RMB) 77,961,699,547.59 56,822,026,545.21 37.20% 47,521,883,569.18
Net assets attributable to shareholders of
the Company (RMB) 16,871,494,584.82 13,917,343,301.15 21.23% 14,039,888,226.11
Explanation: Net profit attributable to ordinary shareholders of the Company should exclude the effect of interest
payment deferred and accumulated to subsequent periods for perpetual bonds under other equity instruments. When
calculating financial indicators such as earnings per share and rate of return on net assets on weighted average basis,
the interests incurred but not declared for perpetual bonds from the value date up to 31 December 2015 (amounted to
RMB61,506,739.43) are deducted. For details, please refer to Note XVII. 2 of section XII of this report.
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II Company Profile and Key Financial Indicators
VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international
accounting standards and China accounting standards in the financial report
Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with international accounting
standards and China accounting standards in the financial report during the reporting period.
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting standards
and China accounting standards in the financial report
Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report during the reporting period.
VIII. Key Financial Indicators by Quarter
Unit: RMB
1Q 2Q 3Q 4Q
Revenue 4,456,654,640.64 5,262,043,037.12 5,176,528,453.85 5,346,680,000.20
Net profit attributable to shareholders of the Company 96,137,359.80 180,250,710.71 284,937,568.33 459,899,039.20
Net profit after extraordinary gains or losses
attributable to shareholders of the Company 47,531,100.97 126,931,118.97 209,199,874.65 336,229,265.04
Net cash flows from operating activities -524,893,745.34 -1,697,861,889.39 -6,401,707,699.70 -1,096,900,189.87
Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as
disclosed in the quarterly report or interim report
Yes √ No
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II Company Profile and Key Financial Indicators
IX. Five-year financial summary under Hong Kong Financial Reporting Standards
Unit: RMB’ 0,000
For the year ended 31 December
2015 2014 2013 2012 2011
Revenue 2,024,191 1,910,168 2,038,889 1,976,168 1,774,749
Profit before tax 141,017 56,101 86,629 -1,614 69,899
Tax 43,224 10,770 17,594 -6,283 11,026
Profit for the current period attributable
to shareholders of the listed company 102,122 50,520 71,066 22,103 60,827
Minority interests -4,329 -5,190 -2,030 -17,435 -1,954
Basic earnings per share (RMB/share) 0.50 0.26 0.35 0.11 0.29
Rate of return on net assets on
weighted average basis (%) 6.73% 3.62% 5.11% 1.63% 4.50%
Unit: RMB’ 0,000
For the year ended 31 December
2015 2014 2013 2012 2011
Total assets 7,796,170 5,682,203 4,752,188 4,772,542 4,563,083
Total liabilities 6,070,277 4,247,396 3,288,353 3,338,000 3,064,305
Minority interests 38,743 43,073 59,847 58,592 145,915
Equity attributable to shareholders of
the listed company 1,687,149 1,391,734 1,403,989 1,375,950 1,352,862
Net current assets/(liabilities) -1,347,029 -452,549 -106,347 24,638 -268,280
Total assets less current liabilities 2,932,756 2,872,637 2,823,321 2,775,419 2,571,188
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II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses
√ Applicable Not applicable
Unit: RMB
Item Amounts for 2015 Amounts for 2014 Amounts for 2013 Explanation
Profit or loss from disposal of non-current
assets (including write-off of provision for
assets impairment) 18,317,909.85 65,276,190.37 -6,367,477.99
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 244,716,579.78 260,000,612.10 174,947,619.19
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
Profit or loss from debt restructuring 32,089,863.80 1,725,797.17 268,577.19
Gain or loss on external entrusted loans 94,777,777.77 82,833,581.81
Non-operating gains and losses other than
the above items 10,274,311.04 49,781,358.66 299,225,913.46
Gain or loss from changes in fair value of
consumable biological assets
subsequently measured at fair value -19,078,538.02 6,856,815.32 11,221,828.76
Less: Effect of income tax 76,729,624.38 81,221,136.75 98,299,197.38
Effect of minority interests (after tax) 3,034,961.43 10,494,478.78 78,920,448.13
Total 301,333,318.41 374,758,739.90 304,485,183.47 –
Notes for the Company‘s extraordinary gain or loss items as defined in the Explanatory Announcement on Information
Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses and the extraordinary
gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their
Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items
Applicable √ Not applicable
No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for
Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses were defined by the Company as its
recurring gain or loss items during the reporting period.
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III Chairman’s Report
Dear Shareholders,
I am pleased to present to all shareholders the report of the Company for the financial year ended 31 December 2015. On behalf
of the Board, I express my sincere gratitude to all shareholders for their concern and support rendered to Chenming Paper.
On the one hand, the imbalance between the demand and supply in the paper making industry improved to a certain extent
last year with protracted low product price due to continued overcapacity of certain products and sluggish market demand.
However, in the long run, the results of the Company were likely to turn around due to the improvement of the supply and demand
fundamentals in the paper making industry, the stabilisation of the prices of raw materials, and the further concentration of the
industry as a result of the more stringent environmental protection policies, elimination of obsolete production capacity and
slowdown in new production capacity growth, as well as new growth points resulting from business transformation.
On the other hand, under the slowing macro-economic growth and economic transformation, the financial leasing industry as a
favoured supplementary corporate financing channel and an effective tool to use assets at hand embraced continuously mounting
market demand and was stepping into a golden age for its development. This industry is a sunrise one in China, and has bright
prospects in China as a result of its growth momentum under the “new normal” of the economy.
Confronted by the continuous economic slowdown and weak industry demand, the Company adopted “Team Building, Strict
Management, Outstanding Business Performance, Achieving Good Results” as its policy for 2015 to cope with difficulties and
make practical innovations for fulfilling its annual goals. Its development showed favourable signs including stronger efficiency,
management, capabilities and growth momentum with significantly higher position in the industry.
The financial segment, which was based primarily on the Financial Leasing Company and the Finance Company, experienced
rapid development across businesses after a year of steady operation with ever improving management systems and effective risk
preventions. Through the leaseback business of the Financial Leasing Company and the credit business of the Finance Company,
the Company found a new profit growth point.
I. Results of Operations
During the reporting period, the Company conducted sales of machine-made paper of 4.15 million tonnes and achieved
revenue of RMB20.242 billion, a year-on-year increase of 5.97%. The Company recorded operating costs of RMB14.765
billion, a year-on-year decrease of 3.64%. Total profit and net profit attributable to equity holders of the Company were
RMB1,411 million and RMB1,021 million respectively, up by 151.36% and 102.14% from the prior year.
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 the China Securities Regulatory Commission. The Company kept on improving and optimising its legal person
governance structure and regulating its operation in practice. The Board considered the state of the Company’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.
During the reporting period, the Board strived to regulate the operation of the Company by improving its corporate
governance. It improved corporate governance system in a timely manner and formulated and optimised management
systems including the amended the Implementing Rules for Audit Committee under the Board and amended Articles of
Association in accordance with the regulatory requirements.
Strict enforcement of relevant internal control systems had promoted a regulated operation and healthy development of the
Company, protecting the legitimate rights and interests of our investors. The overall state of corporate governance was in
compliance with the requirements of the China Securities Regulatory Commission. As the Company’s development strives
forward, its state of regulated operation and internal control will continue to improve.
9
III Chairman’s Report
III. Dividend Distribution
Consistent with our long-term goal of pursuing the maximisation of corporate values, the Company has always placed
much emphasis on the benefits of and returns to our shareholders. In view of the operating results realised in 2015 and after
considering the overall financial position and cash flow condition of the Company, the Board of Directors recommended
a proposed profit distribution plan for 2015 as follows: Based on the number of 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 1,936,405,467 shares of the Company as at 31 December 2015, cash dividend for
2015 amounted to RMB580,921,640.10 (tax inclusive), which represented 60.53% of the net profit attributable to ordinary
shareholders of the Company as set out in the 2015 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 our shareholders by delivering better results.
IV. Future Development
Elimination of obsolete production capacity in the paper making industry 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. Raw material prices have
been hovering at a low level, easing the pressure of operating costs on paper making enterprises. Eliminating obsolete
production capacity will remove obstacles for the industry’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.
The financial leasing industry as a favoured supplementary corporate financing channel and an effective tool to use assets
at hand embraced continuously mounting market demand and was stepping into a golden age for its development.
Looking forward, the Company will adhere to the principal of achieving growth amid stability, and emphasise on
environmental protection, low carbon, recycling and sustainable development. Following the “Made in China 2025 Plan” and
the principles of scientific development and quality and efficiency enhancement, it will comprehensively improve its quality
and efficiency, management level, technology application, sense of happiness and brand image through the integration
between its production and manufacture segment and financial services segment, incorporation of smart technology into
its industrial activities, reorganised methodology and restructuring so as to expand and improve itself and strive to become
one of the world-class companies with the highest growth rate in the “Thirteenth Five Year Plan” period.
Chen Hongguo
Chairman
30 March 2016
10
IV Business Overview
I. Principal operations of the Company during the Reporting Period
The Company is a large and integrated modern conglomerate principally engaged in paper making, finance, forestry and
real estate businesses while also involved in mining, energy, logistics, construction materials, hotel operation and others.
It is also the only listed company with three types of listed shares (i.e. A shares, B shares and H shares) and the first in the
paper making industry having a finance company and a financial leasing company integrated with its industrial activities in
China.
(I) Paper Making Segment
The Company is a leading player in the paper making industry in China. It has established production bases in
Shandong, Guangdong, Hubei, Jiangxi and Jilin with annual pulp and paper production capacity of over 8,500,000
tonnes. It has the largest pulp paper production base in the world and tens of pulp and paper production lines of
international advanced standards. The product mix of the Company gradually diversified into five major paper types,
namely printing paper, packaging paper, office paper, industrial paper and household paper, as well as the nine major
product series which focused on high and middle end products, including high-end cultural paper, coated paper,
white paper board, news press paper, light weight coated paper, copy paper, industrial paper, special paper and
household paper.
(II) Financial Segment
The Company has established the financial segment which was based on the Shandong Chenming Financial Leasing
Co., Ltd., Shandong Chenming Investment Co., Ltd., and Shandong Chenming Group Finance Co., Ltd. Since the
establishment of the financial segment, the Company, relying on strong capital strength and talent advantageous of
the Chenming Paper Group while giving full play to the advantages of internationalisation and marketised operation
mechanisms of a listed company, has been actively seeking the organic combination between industrial capital and
financial capital. Externally, it provided financing and value-added service solutions to state-owned enterprises, listed
companies, quality private enterprises, new and high-tech enterprise with good growth and government financing
platforms. Internally, it adapted to the trend of diverse demand for the domestic financial market and financial services
comprehensiveness within the Group, and established a business structure focused on intensive capital management
and based on four core areas, namely the traditional commercial banking business, industrial financial services,
investment banking business and financial investment business, which constructed a diversified and value-added
business development pattern.
The financial segment experienced rapid development across businesses after steady operation for more than a year
with ever improving management systems and effective risk preventions. In 2015, the financial segment maintained
good development momentum and, through the leaseback business of the Financial Leasing Company and the credit
business of the Finance Company, became a new profit growth point of the Company.
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IV Business Overview
I. Principal operations of the Company during the Reporting Period (Cont’d)
(III) Other business segments
1. Electricity and heat
Based on the operating principle of “energy-saving, serving production and environmental protection”, the
Company has established its own power plants in all of its production bases, which mainly provide electricity
and gas to each subsidiary with the surplus sold externally to contribute sales revenue. The green, low-carbon
and sustainable ecological cycle constructed had substantial economic and social benefits.
2. Hotel
Chenming International Hotel is a luxury business hotel that integrates accommodation, catering, entertainment
and conference. The hotel follows the European-style architecture of compounds with a beautiful environment
and elegant style. The guest rooms are comfortable and luxurious, the cuisine is distinctive, a comprehensive
set of recreational and leisure facilities are at service and business centres with advanced facilities are ready to
provide thoughtful and fast services. In addition, the majestic and fully functional hotel meeting centres will help
you achieve unexpected success for your commercial activities.
3. Construction materials
Chenming Construction Materials integrates the manufacturing, processing and sales of new-type environmental
materials such as planks, cement and aerated concrete brickwork. Leveraging the strong platform and brand
influence of the Chenming Group, it has introduced advanced production equipment and established a quality
guaranteeing system of high-starting point, high-level and all-roundness with first-class quality products that
apply to various buildings.
4. Logistics
With the deepening of “One Belt One Road” strategy of China, the Chenming Group has made huge investment
to establish an international logistics centre and auxiliary proprietary railways, which not only provided
comprehensive logistic services including container transportation, bonded warehousing, transit and terminal
storage, but also realised “one-stop” customs clearance. This helps Chenming Paper and Chinese enterprises
fully explore the international market and open a modern logistic “express way”.
5. Mining
Haicheng Haiming Mining Company Limited was established on 6 November 2012. The Phase I project mainly
carried out magnesite mining and high purity magnesium grains production. The subsequent project will realise
diversification of products including manufacturing of magnesium products including firebrick and magnesium
metal, which will fill the blank of relevant industries in China.
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IV Business Overview
II. Material Changes of Major Assets
1. Material Changes of Major Assets
Major assets Description
Equity The Company made equity investments in Zhuhai Dechen New Third Board
Equity Investment Fund Company (Limited Partnership) and Shanghai Leadbank
Asset Management Co., Ltd. during the reporting period, and corresponding
adjustments were made to long-term equity investments under the equity
method.
Intangible assets Land use rights were acquired by the Shouguang Headquarters and Haiming
Mining during the year.
Construction in progress Further investments were made to the 600,000-tonne liquid packaging
cardboard project of Zhanjiang Chenming, food packaging paper project of
Jiangxi Chenming, forestry pulp integration project of Huanggang Chenming and
chemical pulp project of Shouguang Meilun during the reporting period.
2. Major Assets Overseas
Applicable √ Not applicable
III. Analysis of Core Competitiveness
The Company is a leading player in the paper making industry of China. After entrepreneurship and innovation for more
than half a century, it has developed into a large and integrated modern conglomerate principally engaged in paper making,
finance, forestry and real estate businesses while also involved in mining, energy, logistics, construction materials, hotel
operation and others. It is also the only listed company with three types of listed shares (i.e. A shares, B shares and H
shares) and the first in the paper making industry having a finance company and a financial leasing company integrated with
its industrial activities in China. Compared with other enterprises in the industry, the Company has the following advantages:
1. Scale advantages
After years of development, the Company has achieved annual pulp and paper production capacity of 8.50 million
tonnes and is capable to compete with international paper making enterprises in scale. Large-scale centralised
production has provided the Company with obvious economic benefits, which are reflected not only in the
manufacturing costs of products, but also in its strong market influence in raw material procurement, product pricing
and industry policymaking.
2. Product advantages
While the production scale of the Company is expanding rapidly, its product mix also continues to optimise. In recent
years, the Company has built production lines for cultural paper such as high-end coated paper, high-end light
weight coated paper and high-end white paper board, and achieved higher technological content of products and
added values as well as a higher gross profit margin. The product mix of the Company gradually diversified into five
major paper types, namely printing paper, packaging paper, office paper, industrial paper and household paper, as
well as the nine major product series which focused on high and middle end products, including high-end coated
paper, white paper board, coated linerboard, news press paper, light weight coated paper, duplex press paper, light
weight paper, electrostatic paper and household paper. Thus, the Company has become the enterprise that offers the
widest product range in China’s paper making industry. Diversification and gentrification of the product mix has not
only greatly enhanced the Company’s ability to withstand market risks, but also enabled the Company to maintain a
relatively high profitability
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IV Business Overview
III. Analysis of Core Competitiveness(Cont’d)
3. Comprehensive cost advantages
The Company has a relative advantage in comprehensive cost, which is mainly reflected in: firstly, the Company
has optimised the operation of the production lines through stringent management, which has substantially lowered
the waste of resources in evaporating, emitting, dripping or leaking, and the Company’s energy consumption per
ton of paper was also controlled at a relatively low level; secondly, the Company has established several advanced
pulp production lines, thus increasing the supply of major raw materials through the 700,000-tonne pulp project of
Zhanjiang Chenming and forestry pulp integration project of Huanggang Chenming; thirdly, the Company has reduced
costs through the construction of the captive power plant to ensure energy supply.
4. Advantages in technical equipment
The Company’s overall technical equipment has reached the advanced international level. The main production
equipment have been imported from internationally renowned manufacturers, including Valmet, Ahlstrom and Metso
of Finland, Voith of Germany and TBC of the United States. In particular, Shouguang Meilun’s production lines for
high-end white coated linerboard project of production capacity of 600,000 tonnes and high-end low weight coated
paper project of production capacity of 800,000 tonnes, as well as Zhanjiang Chenming’s production line for high-end
cultural paper project of production capacity of 650,000 tonnes were leading production lines with greatest production
capacity, widest length of paper produced and highest equipment standard among similar production line worldwide.
In addition, various technical indicators of products had reached the international leading level.
5. Advantages in research and innovation and new product development
The Company is an important high and new-technology enterprise listed in national torch plan. It established various
technology carriers including the national enterprise technology centre and the national post-doctoral working
station as well as an international high-quality innovation team, injecting endless vitality to its technology research.
It undertook the national “863” plan, national science support plans for the “11th Five Years” and “12th Five Years”,
and tens of key provincial technological special projects, making outstanding contribution to the scientific progress
within the industry. The Company has obtained over 150 national patents, with 7 products selected as national new
products and 29 products covering blank areas in China. It also participated in formulating 4 national standards, as
well as obtained the honours including “China Patent Shandong Star Enterprise”. The Company became the “green
engine” to promote transformation and upgrading of the paper making industry and lead China’s paper making
industry into the direction of the newest and most advanced technology.
6. Funding advantages
The paper making industry is a capital-intensive industry, and funding is one of the most important factors influencing
the development of the industry. The Company has high profitability and credit status, and has maintained long-term
stable cooperative relations with its bankers, which provide the Company with an unobstructed indirect financing
capacity. Since its listing, the Company has maintained good operating results and a sound corporate governance
structure. It has conducted several financing activities in domestic and foreign capital markets. As the funds obtained
have been applied effectively with good market image, the Company has stronger abilities in direct financing in the
capital market.
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IV Business Overview
III. Analysis of Core Competitiveness(Cont’d)
7. Advantages in environmental regulation capacity
Over the years, the Company has firmly established “environmental protection first, scale expansion second” as
the concept of development. The Company has ensured the enhancement of economic and environmental benefits
simultaneously by giving equal importance to environmental protection and production. In recent years, the Company
and its subsidiaries have constructed the pollution treatment facilities including the alkali recovery system, middle
water treatment system, white water recovery system and black liquor comprehensive utilisation system, as well as
the sewage treatment plants, which guarantee that the environmental protection facilities can meet the demand of the
rapid expansion of the Company. The environmental emission indicators of the Company are in the top rank among
industry peers.
8. Advantages in diversified development
The Company has established a financial segment, which comprises of the Financial Leasing Company, the Finance
Company, the Investment Company and the New Third Board Investment Fund. The financial segment maintained
a good development momentum, which becomes a new profit growth point through the leaseback business of the
Financial Leasing Company and the credit business of the Finance Company. Apart from entering into the financial
industry, the Company has also entered into the fields of energy exploration and waterfront regulation works. It
proactively facilitates diversified development, thereby further enhancing its competiveness and strength.
15
V Management Discussion and Analysis
I. Overview
In 2015, the global economy continued to fluctuate and there had been downward pressure in China’s macro-economy
with a slowdown in growth rate. The paper making industry remained in the stage of eliminating obsolete production
capacity and adjusting the product mix, and prices of paper products hovered at a low level facing the imbalanced supply
and demand. However, in the long run, the results of the Company were likely to turn around due to the improvement of
the supply and demand fundamentals in the paper making industry, the stabilisation of the prices of raw materials, and
the further concentration of the industry as a result of the more stringent environmental protection policies, elimination of
obsolete production capacity and slowdown in new production capacity growth, as well as new growth points resulting
from business transformation.
Under the slowing macro-economic growth and economic transformation, the financial leasing industry as a favoured
supplementary corporate financing channel and an effective tool to use assets at hand embraced continuously mounting
market demand and was stepping into a golden age for its development. The financial segment set up by the Company,
which was based primarily on the Financial Leasing Company and Finance Company, experienced rapid development
across businesses after steady operation for more than a year with ever improving management systems and effective
risk preventions. In 2015, the segment maintained good development momentum and, through the leaseback business of
the Financial Leasing Company and the credit business of the Finance Company, became a new profit growth point of the
Company.
In 2015, the Company had been actively adapting to the “new normal” economic development by accelerating
transformation and upgrade and enhancing operation quality. Confronted by the continuous economic slowdown and
weak industry demand, the Company adopted “Team Building, Strict Management, Outstanding Business Performance,
Achieving Good Results” as its policy to cope with difficulties and make practical innovations for fulfilling its annual goals. Its
development was showing favourable signs including stronger efficiency, management, capabilities and growth momentum.
During the reporting period, the Company conducted production and sales of machine-made paper of 4.18 million tonnes
and 4.15 million tonnes respectively and achieved revenue of RMB20.242 billion, a year-on-year increase of 5.97%. The
Company recorded operating costs of RMB14.765 billion, a year-on-year decrease of 3.64%. Total profit and net profit
attributable to equity holders of the Company were respectively RMB1,411 million and RMB1,021 million, up by 151.36%
and 102.14% from the prior year.
(1) Strengthening sub-divided management lifting corporate management to a new level. Firstly, the overall management
of the Company was comprehensively enhanced through continuously strengthening primary management and
measures to improve systems, inspections and rectifications. Secondly, dynamics for team building were heightened
through increased training, position management and introduction of talents, which produced stronger teams, internal
energy and thus significant progress in this respect.
(2) Flexible strategies attaining breakthroughs in marketing. Firstly, team building efforts were revamped. Excellent human
resources were actively introduced under a competition mechanism based on merits. The appraisal methodology was
optimised to reward the diligent. Regular training for all staff was organised and sales personnel were equipped with
better theoretical knowledge and hands-on competence. Secondly, marketing strategies were effective and efficient.
The market-based sales work assignment toolkit significantly enhanced performance while the development of major
and new customers was strengthened. Thirdly, structural optimisation was actively carried out. High value-added
products such as cigarette card, cigarette pack, high-bulk white paper board, rosewood copperplate card, premium
electrostatic paper and Biyuntian duplex press paper were prioritised with a view to enlarging market share.
16
V Management Discussion and Analysis
I. Overview (Cont’d)
(3) Proprietary innovations to revamp production and operation. Firstly, the operational efficiency was significantly
enhanced. The operational parameters and technical standards of machinery were standardised and the appraisal
methodology was improved to strengthen real-time control over and adjustment to production lines and enhance
efficiency. Secondly, the effect of primary management was taking shape. Standardised management and processes
was consistently adhered to while production management systems were improved by adding regular inspection and
continuous rectification of issues. A competition mechanism based on merits was put in place to promote and make
good use of competent and outstanding staff, which significantly improved the primary management. Thirdly, flexible
restructuring produced efficiency. The production of high value-added products such as mid-level aging resistant
paper, high-bulk white paper board for export, Biyuntian electrostatic paper, glassine paper and cigarette card was
boosted to enlarge market share and gain the initiative in the market as well as increase efficiency. Fourthly, quality
management was steadily enhanced. Through the strict implementation of a defective product examination system,
wholesale orders for cigarette cards were received and the market recognition of glassine paper and thermal paper
was significantly raised.
(4) Accelerated projects and new blood. During the reporting period, new projects picked up speed. The 300,000-tonne
high-end cultural paper project and the biomass vaporisation upgrade project of Zhanjiang Chenming and the
350,000 food packaging paper project of Jiangxi Chenming had commenced operation upon completion and became
new efficiency growth points of the Company. The 400,000 chemical pulp project of Shouguang Chenming completed
the tender of its principal equipment and preparations for full operation. The white coated linerboard project of
Shouguang Chenming was safely relocated to Zhanjiang. The magnesite project of Haiming Mining started to install
equipment. The pulp and paper project integrated forestry of Huanggang Chenming has commenced construction.
These new projects are vital forces to drive up the core competitiveness of the Company.
(5) Stronger financing management to create new advantages for the financial segment. In order to proactively adapt
to the “new normal”, the Company put greater efforts in transformation and upgrade through the strategies of being
high-end, high-quality and highly-efficient and by striving to reinforce its principal operations while diversifying its
businesses. The Company is a large and comprehensive modern corporate group mainly engaged in paper making,
finance, forestry and real estate businesses while also involved in mining, energy, logistics, construction materials,
hospitality and others. The financial segment made exceptional contribution for 2015 with significantly higher revenue
and operating profit and became a new growth point bearing the strongest and advantageous profitability. The
Company, through innovative financing instruments, registered its first super and short term commercial paper and
perpetual note amounting to RMB13.8 billion and RMB2.6 billion respectively in the interbank market and entered into
a RMB20.0 billion strategic cooperation agreement with the Bank of China, which elevated its cooperation with banks
to a new height.
17
V Management Discussion and Analysis
II. Analysis of principal operations
1. Overview
Please see “I. Overview” under “Management Discussion and Analysis” for relevant information.
2. Revenue and cost
(1) Components of revenue
Unit: RMB
2015 2014 Increase/decrease
Amount % of revenue Amount % of revenue (%)
Total revenue 20,241,906,131.81 100% 19,101,677,077.69 100% 5.97%
By industry
Machine-made paper 18,072,997,652.53 89.29% 17,975,118,165.42 94.10% 0.54%
Financial leasing 1,084,860,187.11 5.36% 86,657,969.85 0.45% 1,151.89%
Electricity and steam 437,772,691.42 2.16% 513,786,969.44 2.69% -14.79%
Construction materials 223,266,272.44 1.10% 225,322,331.60 1.18% -0.91%
Chemicals 124,008,406.45 0.61% 59,945,519.46 0.32% 106.87%
Hotel 27,136,077.49 0.13% 26,793,066.32 0.14% 1.28%
Others 271,864,844.37 1.35% 214,053,055.60 1.12% 27.01%
By products
Light weight coated paper 612,237,436.63 3.02% 693,819,246.02 3.63% -11.76%
Duplex press paper 4,460,441,279.15 22.04% 2,967,684,563.34 15.54% 50.30%
Writing paper 289,489,121.26 1.43% 211,560,370.68 1.11% 36.84%
Coated paper 4,365,890,220.92 21.57% 4,428,510,204.03 23.18% -1.41%
Newsprint paper 970,297,912.12 4.79% 1,091,419,636.72 5.71% -11.10%
Paperboard 183,744,883.99 0.91% 754,167,430.95 3.95% -75.64%
White paper board 1,915,153,293.25 9.46% 1,991,690,191.45 10.43% -3.84%
Electrostatic paper 1,580,897,670.32 7.81% 1,742,073,088.67 9.12% -9.25%
Other machine-made paper 3,694,845,834.89 18.25% 4,094,193,433.56 21.43% -9.75%
Financial leasing 1,084,860,187.11 5.36% 86,657,969.85 0.45% 1,151.89%
Electricity and steam 437,772,691.42 2.16% 513,786,969.44 2.69% -14.79%
Construction materials 223,266,272.44 1.10% 225,322,331.60 1.18% -0.91%
Chemicals 124,008,406.45 0.61% 59,945,519.46 0.32% 106.87%
Hotel 27,136,077.49 0.13% 26,793,066.32 0.14% 1.28%
Others 271,864,844.37 1.35% 214,053,055.60 1.12% 27.01%
By geographical segment
Mainland China 16,431,182,080.91 81.17% 15,678,674,819.92 82.08% 4.80%
Other countries and regions 3,810,724,050.90 18.83% 3,423,002,257.77 17.92% 11.33%
18
V Management Discussion and Analysis
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(2) Industries, products or regions accounting for over 10% of revenue or operating profit of the Company
√ Applicable Not applicable
Unit: RMB
Increase/decrease Increase/decrease of
Increase/decrease of of operating costs gross profit margin
revenue as compared as compared to the as compared to the
to the corresponding corresponding period corresponding period
Revenue Operating costs Gross profit margin period of the prior year of the prior year of the prior year
By industry
Machine-made paper 18,072,997,652.53 13,935,285,230.54 22.89% 0.54% -4.49% 4.06%
Financial leasing 1,084,860,187.11 127,769,086.46 88.22% 1151.89% 754.06% 5.49%
By products
Duplex press paper 4,460,441,279.15 3,359,857,786.59 24.67% 50.30% 42.26% 4.26%
Coated paper 4,365,890,220.92 3,258,280,750.13 25.37% -1.41% -9.56% 6.73%
White paper board 1,915,153,293.25 1,463,666,571.72 23.57% -3.84% -9.67% 4.93%
Electrostatic paper 1,580,897,670.32 1,043,674,436.61 33.98% -9.25% -20.29% 9.14%
Financial leasing 1,084,860,187.11 127,769,086.46 88.22% 1151.89% 754.06% 5.49%
By geographical segment
Mainland China 14,262,273,601.63 11,202,087,734.99 21.46% -1.99% -2.49% 0.40%
Other countries
and regions 3,810,724,050.90 2,733,197,495.55 28.28% 11.33% -11.91% 18.92%
Under the circumstances that the statistics specification for the Company‘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
(3) Whether revenue from sales in kind is higher than revenue from services
√ Yes No
Increase/
decrease
By industry Item Unit 2015 2014 (%)
Machine-made paper Sales ’0,000 tonnes 415 419 -0.95%
Production output ’0,000 tonnes 418 426 -1.88%
Inventories ’0,000 tonnes 49 46 6.52%
Explanation on why the related data varied by more than 30%
Applicable √ Not applicable
19
V Management Discussion and Analysis
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(4) Performance of material sales contracts of the Company during the reporting period
Applicable √ Not applicable
(5) Composition of operating costBy industry
Unit: RMB
2015 2014 Increase/decrease
By industry Item Amount % of operating cost Amount % of operating cost (%)
Machine-made Raw materials 8,201,192,813.92 58.85% 8,270,309,911.65 56.68% -0.84%
paper Depreciation 717,089,611.94 5.15% 798,497,976.35 5.47% -10.20%
Labour costs 155,963,303.02 1.12% 146,157,235.36 1.00% 6.71%
Energy and power 1,431,585,168.47 10.27% 1,710,914,100.72 11.73% -16.33%
Chemicals 2,239,539,323.75 16.07% 2,364,613,555.39 16.21% -5.29%
Other production costs 1,189,915,009.44 8.54% 1,300,267,209.62 8.91% -8.49%
Subtotal 13,935,285,230.54 100.00% 14,590,759,989.08 100.00% -4.49%
Power and steam Raw materials 212,564,419.12 76.48% 285,462,227.22 82.28% -25.54%
Depreciation 26,248,475.37 9.44% 27,982,337.63 8.07% -6.20%
Labour costs 9,007,758.17 3.24% 10,256,856.25 2.96% -12.18%
Energy and power 6,764,518.93 2.43% 3,090,405.29 0.89% 118.89%
Chemicals 3,670,407.74 1.32% 1,270,455.70 0.37% 188.90%
Other production costs 19,675,742.40 7.08% 18,857,391.98 5.44% 4.34%
Subtotal 277,931,321.73 100.00% 346,919,674.07 100.00% -19.89%
Construction Raw materials 130,797,042.19 74.04% 140,409,930.75 77.58% -6.85%
materials Depreciation 4,696,431.30 2.66% 4,532,363.38 2.50% 3.62%
Labour costs 7,362,629.26 4.17% 6,756,070.59 3.73% 8.98%
Energy and power 21,178,593.05 11.99% 18,611,421.65 10.28% 13.79%
Chemicals 0.00 0.00% 2,424,223.60 1.34% -100.00%
Other production costs 12,628,034.78 7.15% 8,247,964.35 4.56% 53.10%
Subtotal 176,662,730.59 100.00% 180,981,974.32 100.00% -2.39%
(6) Change of scope of consolidation during the reporting period
Yes √ No
20
V Management Discussion and Analysis
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(7) Significant change in or adjustment of the businesses, products or services of the Company during the
reporting period
√ Applicable Not applicable
The Company has established the financial segment primarily based on the Shandong Chenming Financial
Leasing Co., Ltd., Shandong Chenming Investment Co., Ltd., and Shandong Chenming Group Finance Co., Ltd.
in order to promote diversified development of the Chenming Group, further expand its business, improve risk
resistance and enhance the overall strength and comprehensive competitiveness.
Since the establishment of the financial segment, the Company, relying on strong capital strength and talent
advantageous of the Chenming Paper Group while giving full play to the advantages of internationalisation and
marketised operation mechanisms of a listed company, has been actively seeking the organic combination
between industrial capital and financial capital. Externally, it provided financing and value-added service
solutions to state-owned enterprises, listed companies, quality private enterprises, new and high-tech enterprise
with good growth and government financing platforms. Internally, it adapted to the trend of diverse demand
for the domestic financial market and financial services comprehensiveness within the Group, and established
a business structure focused on intensive capital management and based on four core areas, namely the
traditional commercial banking business, industrial financial services, investment banking business and financial
investment business, which constructed a diversified and value-added business development pattern.
The financial segment experienced rapid development across businesses after steady operation for more than
a year with ever improving management systems and effective risk preventions. In 2015, the financial segment
maintained good development momentum and, through the leaseback business of the Financial Leasing
Company and the credit business of the Finance Company, became a new profit growth point of the Company.
(8) Sales to major customers and major suppliers
Sales to major customers of the Company
Total sales to top 5 customers (RMB) 1,362,000,050.80
Total sales to top 5 customers as a percentage of the total sales for the year 6.72%
Information on top 5 customers of the Company
As a percentage of
the total sales for
No. Name of customer Sales (RMB) the year (%)
1 ANHUI TIME SOURCE CORPORATION 348,929,757.23 1.72%
2 GUANGZHOU KEERUN PAPER CO., LTD. 272,207,428.83 1.34%
3 SHANGHAI YAOJI PLAYING CARD CO., LTD. 257,972,396.90 1.27%
4 SUN HING PAPER COMPANY LIMITED 256,146,560.47 1.27%
5 SHANXI PRINTING MATERIALS COMPANY 226,743,907.37 1.12%
Total 1,362,000,050.80 6.72%
21
V Management Discussion and Analysis
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(8) Sales to major customers and major suppliers (Cont’d)
Major suppliers of the Company
Total purchases from top 5 suppliers (RMB) 2,149,780,469.63
Total purchases from top 5 suppliers as a percentage of the total purchases for the year 14.57%
Information on top 5 suppliers of the Company
As a percentage of
the total purchases
No. Name of supplier Purchases (RMB) for the year (%)
1 ITOCHU HONGKONG LTD 553,664,267.00 3.75%
2 SHANDONG HEXIN CHEMICAL GROUP CO., LTD. 448,199,024.64 3.04%
3 GUANGDONG LEPENG TRADING CO., LTD 414,175,736.05 2.81%
4 JIANGXI COAL SALES CO., LTD. 378,223,872.37 2.56%
5 Central National Gottesman INC 355,517,569.57 2.41%
Total 2,149,780,469.63 14.57%
3. Expenses
Unit: RMB
Increase/
2015 2014 decrease (%) Reasons for material changes
Selling and distribution 1,190,961,739.99 1,148,055,535.23 3.74% Mainly due to wage increase
expenses
General and 1,384,652,496.82 1,160,542,907.39 19.31% Mainly due to increased scientific
administrative research expenditure and wage
expenses increase
Finance expenses 1,669,400,051.76 1,229,259,157.47 35.81% Mainly due to the increase in
exchange loss and interest
expenses
Business taxes and 133,046,735.23 91,030,073.05 46.16% Mainly due to the expansion of the
surcharges Financial Leasing Company
Profit or loss from -19,078,538.02 6,856,815.32 -378.24% Mainly due to loss on change in
change in fair value fair value of forestry assets of the
Company
Investment gains 88,715,519.36 69,035,637.19 28.51% Mainly due to the increase in gains
on external entrusted loan and
disposal of equity interest
22
V Management Discussion and Analysis
II. Analysis of principal operations (Cont’d)
4. Research and development expenditure
√ Applicable Not applicable
The research and development expenditure for 2015 totalled RMB649.3681 million, representing an increase of
RMB179.5416 million or 38.21% as compared with RMB469.8265 million of the corresponding period of the prior
year. In 2015, the Company actively carried out research and development of new products and technologies, and
promoted product portfolio adjustment. It made progress in the “research and production of enzyme in papermaking”
in exploring bio-pulping technology under the National Programs for Science and Technology Development 863
Project, developed technologies for developing paper for milk tea paper cups, incorporated the key technology for
production and application of new emission-and-consumption-reducing PRC APMP into the technological innovative
project plans of the province for 2015 and made delighting progress in developing new products and technologies
such as matt white copperplate paper, high-bulk white paper board and environmental drawing paper, which
optimised the product portfolio, improved the product quality and enhanced market competitiveness, thus injecting
new impetus into the Company’s new development.
Research and development expenditure
2015 2014 Changes
R&D headcount 1,108 1,004 10.36%
Ratio of R&D personnel 9.32% 7.82% 1.50%
R&D expenditure (RMB) 649,368,119.76 469,826,539.65 38.21%
R&D expenditure to revenue 3.21% 2.46% 0.75%
Reasons for significant change in total R&D expenditure to revenue
Applicable √ Not applicable
Reasons and basis for significant change in R&D capitalisation ratio
Applicable √ Not applicable
23
V Management Discussion and Analysis
II. Analysis of principal operations (Cont’d)
5. Cash flows
Unit: RMB
Increase/
decrease
Item 2015 2014 (%)
Subtotal of cash inflows from operating activities 20,059,101,045.18 17,924,508,169.86 11.91%
Subtotal of cash outflows from operating activities 29,780,464,569.48 16,939,108,434.01 75.81%
Net cash flows from operating activities -9,721,363,524.30 985,399,735.85 -1,086.54%
Subtotal of cash inflows from investing activities 641,826,148.96 1,022,916,113.63 -37.26%
Subtotal of cash outflows from investing activities 4,102,411,633.83 4,096,185,535.33 0.15%
Net cash flows from investing activities -3,460,585,484.87 -3,073,269,421.70 -12.60%
Subtotal of cash inflows from financing activities 42,750,073,812.63 25,487,820,197.15 67.73%
Subtotal of cash outflows from financing activities 28,686,399,578.97 23,159,468,612.66 23.86%
Net cash flows from financing activities 14,063,674,233.66 2,328,351,584.49 504.02%
Net increase in cash and cash equivalents 912,010,632.46 249,563,932.34 265.44%
Explanation on main effects of material changes
√ Applicable Not applicable
(1) Net cash flows from operating activities decreased by 1,086.54% as compared to the corresponding period of
the prior year mainly due to the increased external investment of the financial leasing business.
(2) Net cash flows from investing activities decreased by 12.60% as compared to the corresponding period of
the prior year mainly due to more cash used in the investment in the projects such as the forestry-pulp-paper
integration and Zhanjiang 600,000 tonne liquid packaging paper project of the Company during the year.
(3) Net cash flows from financing activities increased by 504.02% as compared to the corresponding period of the
prior year mainly due to the increase in borrowings resulting from the strengthened development of the financial
segment by the Company and the investment in projects.
Explanation on main reasons leading to the material difference between net 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 by 1,086.54% as compared to the corresponding period of the
prior year but net profit attributable to the Company increased by 115.73% as compared to the corresponding period
of the prior year mainly due to the increased external investment of the financial leasing business of the Company.
III. Analysis of non-principal operations
Applicable √ Not applicable
24
V Management Discussion and Analysis
IV. Assets and liabilities
1. Material changes of asset items
Unit: RMB
As at the end of 2015 As at the end of 2014
As a As a Change in
percentage of percentage of
Amounts total assets Amounts total assets percentage Description of major changes
Monetary funds 8,984,326,016.01 11.52% 5,475,658,186.10 9.64% 1.88% Mainly due to the increase in the deposits for bankers’
acceptances issued by the Company, letters of guarantee and
letters of credit in China
Accounts receivable 3,951,287,979.32 5.07% 3,489,409,369.20 6.14% -1.07% Mainly due to the increase in sales as at the year end
Bills receivable 3,998,782,845.65 5.13% 3,047,541,556.15 5.36% -0.23% Mainly due to the increase in amounts receivable settled
through bills as at the end of the period.
Non-current assets due 2,893,133,653.86 3.71% 865,738,333.65 1.52% 2.19% Mainly due to the increase in long-term finance lease
within one year payments due within one year.
Other current assets 7,582,839,356.54 9.73% 1,656,602,232.09 2.92% 6.81% Mainly due to the increase in finance lease receivables due
within one year.
Available-for-sale 109,000,000.00 0.14% 73,000,000.00 0.13% 0.01% Mainly due to the investment in Shanghai Leadbank Asset
financial assets Management Co., Ltd.
Long-term receivables 9,084,087,143.84 11.65% 1,420,598,667.99 2.50% 9.15% Mainly due to the increase in the financial leasing business
operated for more than one year
Long-term equity investments 70,492,256.38 0.09% 36,087,848.12 0.06% 0.03% Mainly due to the equity investments in Zhuhai Dechen New
Third Board Equity Investment Fund Company (Limited
Partnership).
Construction in progress 5,829,619,258.48 7.48% 3,709,270,828.53 6.53% 0.95% Mainly due to the increase in investment in projects including
Zhanjiang 600,000 tonne liquid packaging paper project,
Jiangxi food packaging paper project and Huanggang
Chenming integrated forestry, pulp and paper project
Short-term borrowings 24,755,535,672.86 31.75% 20,470,296,592.92 36.03% -4.28% Mainly due to higher working capital needs resulting from the
increase in investment in projects and the operation scale
expansion
Bills payable 3,281,599,412.31 4.21% 1,598,110,792.85 2.81% 1.40% Mainly due to the increase in bank acceptance bills issued by
the Company for payment of goods
Advance receipts 180,504,227.01 0.23% 270,056,726.88 0.48% -0.25% Mainly due to the decrease in advance receipts from
customers resulting from intensified market competition
Other payables 1,158,567,353.38 1.49% 783,790,884.61 1.38% 0.11% Mainly due to the increase in deposits received by the
Financial Leasing Company from other companies for the
launch of short-term operation
Non-current liabilities due 5,471,286,735.91 7.02% 1,099,968,900.00 1.94% 5.08% Mainly due to the reclassification of corporate bonds and
within one year privately placed bonds maturing within one year as bonds
maturing within one year
Other current liabilities 10,293,543,297.00 13.20% 0.00 0.00% 13.20% Mainly due to the issue of short-term commercial paper during
the year
Bond payables 3,788,539,249.59 4.86% 5,777,131,308.01 10.17% -5.31% Mainly due to the reclassification of corporate bonds as bond
maturing within one year
Long-term payables 344,000,000.00 0.44% 0.00 0.00% 0.44% Mainly due to receipt of deposits for long-term financial leasing
business and special funds from China Development Bank
25
V Management Discussion and Analysis
4. Assets and liabilities (Cont’d)
1. Material changes of asset items (Cont’d)
Unit: RMB
As at the end of 2015 As at the end of 2014
As a As a Change in
percentage of percentage of
Amounts total assets Amounts total assets percentage Description of major changes
Other non-current liabilities 1,094,621,421.67 1.40% 2,584,768,359.64 4.55% -3.15% Mainly due to reclassification of privately placed bonds of
RMB1,500 million as bonds maturing within one year
Other equity instruments 2,582,800,000.00 3.31% 0.00 0.00% 3.31% Mainly due to the issue of perpetual medium-term notes of
RMB2,600 million during the year
Other comprehensive income -345,014,864.26 -0.44% 33,763,168.13 0.06% -0.50% Mainly due to the loss on differences on translation of foreign
operations incurred by overseas subsidiaries as a result of
RMB depreciation
2. Assets and liabilities measured at fair value
√ Applicable Not applicable
Unit: RMB
Profit or loss
from change Cumulative fair Impairment
in fair value value change provided during Purchases during Disposal during
Item Opening balance during the period charged to equity the period the period the period Closing balance
Financial assets
Consumable biological assets 1,407,588,229.46 -19,078,538.02 176,821,919.46 176,026,063.51 54,571,043.08 1,509,964,711.87
Total 1,407,588,229.46 -19,078,538.02 176,821,919.46 176,026,063.51 54,571,043.08 1,509,964,711.87
Financial liabilities 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
26
V Management Discussion and Analysis
V. Analysis of Investments
1. Overview
√ Applicable Not applicable
Investments during
Investments during the corresponding
the reporting period (RMB) period of prior year (RMB) Change
4,664,143,400.00 6,714,267,162.28 -30.53%
2. Material equity investments during the reporting period
√ Applicable Not applicable
Unit: RMB
Progress as
at the date Profit or l ss Lawsuit i
Form of Period of of balance Estimated from i vestment for i volved Date of disclosure
Name of i vestees Principal activ t es i vestment Investment amount Sharehold ng Source of fund Partner(s) i vestment Product type sheet return the reporting period or not (if any) Disclosure i dex (if any)
Shandong Chenming Financia Financia l asing business, Capital 5,000,000,000.00 100.00% Self-owned Whol y-owned subsid ary 21 February Financia l asing Completed Not appl cable 618,695,309.31 No 27 March 2015 http://www.cninfo.com.cn/
Leasing Co., Ltd. operating l asing business, i crease funds 2014 -
domestic and overseas 20 February 2044
l ased assets acquis t on,
disposal and maintenance
of l ased assets, and
consultation on l asing
transactions.
Shanghai Leadbank Asset Financia consultation, Acquis t on 36,000,000.00 3.00% Self-owned Wanzhen Investment 17 January Asset Completed Not appl cable No 30 December 2014 http://www.cninfo.com.cn/
Management Co., Ltd. corporate management funds Management (Bei i g) 2008 - management
consultation, marketing Co., Ltd., Shanghai 16 January 2018
planning and conference Hengxun Information
service Technology Services
Co., Ltd., Bontai Hold ngs
Group Co., Ltd., Shanghai
Xunde Investment
Management Centre,
Suzhou Haihui Investment
Co., Ltd. and Bei i g
Taifu Rongcheng
Investment Co., Ltd.
Jinan Chenming Investment Investment with self- Newly 100,000,000.00 100.00% Self-owned Whol y-owned subsid ary Long term Investment Completed Not appl cable 173,810.09 No Not appl cable Not appl cable
Management Co., Ltd. owned assets, i vestment establ shed funds management
management, i vestment
consultation, corporate
management consultation,
commercia i formation
consultation, and financia
consultation, etc.
27
V Management Discussion and Analysis
V. Analysis of Investments (Cont’d)
2. Material equity investments during the reporting period (Cont’d)
Progress as
at the date Profit or l ss Lawsuit i
Form of Period of of balance Estimated from i vestment for i volved Date of disclosure
Name of i vestees Principal activ t es i vestment Investment amount Sharehold ng Source of fund Partner(s) i vestment Product type sheet return the reporting period or not (if any) Disclosure i dex (if any)
Zhuhai Dechen New Equity i vestment Newly 50,000,000.00 33.33% Self-owned Zhuhai Kaichenxing 7 May Investment funds Completed Not appl cable 343,241.28 No 2 Apri 2015 http://www.cninfo.com.cn/
Third Board Equity i unl sted enterprises, establ shed funds Investment Advisory 2015-
Investment Fund Company equity i vestment, Company (General 6 May 2019
(Lim ted Partnership) and l sting consultation Partnership) and
for enterprises. Shenzhen Qianhai
Financia Development
Ltd. and Zhang
Guangquan
Shanghai Zhongneng Industria i vestment, Acquis t on 300,000,000.00 30.00% Self-owned Yu Jianming and October 2007-24 Industry Transfer Not appl cable 9,533,333.33 No 2 Apri 2015 http://www.cninfo.com.cn/
Enterprise Development construction works, funds China Del x Hold ng October 2017 i vestment
(Group) Co., Ltd. commercia consultation, Group Co., Ltd.
and sales of electric ty,
power station equipment
sets, automated devices,
electromechanical
equipment, engineering
equipment,
environmental y
friendly equipment,
and construction
materia s.
Chenming Paper Korea Trading of paper products Newly 6,143,400.00 100.00% Self-owned Whol y-owned subsid ary Long term Trading Completed Not appl cable -347,992.47 No Not appl cable Not appl cable
Co., Ltd. establ shed funds
Huanggang Chenming Pulp Construction of raw Capital 1,000,000,000.00 100.00% Self-owned Whol y-owned subsid ary 26 September Manufacturing of Completed Not appl cable -674,989.71 No 28 August 2015 http://www.cninfo.com.cn/
& Paper Co., Ltd. materia bases and wood i crease funds 2008- paper pulp
procurement; manufacture, 26 September
production, processing, 2058
sale of paper pulp and
related products, project
construction and related
i port and export
business.
28
V Management Discussion and Analysis
V. Analysis of Investments (Cont’d)
3. Material non-equity investments during the reporting period
√ Applicable Not applicable
Unit: RMB
Accumulated
Industry realised
in which Accumulated return as Reasons for
Fixed the Investment actual amount of the end failure in meeting
assets investment amount during invested as of the scheduled Date of
Form of investment project the reporting of the end Estimated reporting progress and disclosure
Project name investment or not operates period of reporting period Source of fund Progress return period estimated return (if any) Disclosure index (if any)
Jiangxi Chenming’s Self- Yes Paper 380,377,149.54 1,299,929,248.95 Self-raised and 99% 0.00 Asset 28 June 2013 http://www.cninfo.com.cn/
350,000 tonne constructed making borrowings reclassification
high-end during the
packaging reporting period
paper project without profit
contribution
Shouguang’s Self- Yes Paper 250,533,449.19 259,738,841.00 Self-raised 8.66% 0.00 Not yet completed 21 March 2014 http://www.cninfo.com.cn/
400,000 constructed making and borrowings
tonne chemical
pulp project
Forestry paper Self- Yes Pulp 340,935,789.73 660,485,661.78 Self-raised and 18.95% 0.00 Not yet completed 2 August 2013 http://www.cninfo.com.cn/
integration project constructed production borrowings
of Huanggang
Chenming
600,000 tonne liquid Self- Yes Paper 2,589,556,896.31 2,589,556,896.31 Self-raised and 68.15% 0.00 Not yet completed 19 December http://www.cninfo.com.cn/
packaging paper constructed making borrowings 2015
Total 3,561,403,284.77 4,809,710,648.04 0.00
4. Financial asset investment
(1) Security investments
Applicable √ Not applicable
The Company did not have any security investments during the reporting period.
(2) Derivatives investments
Applicable √ Not applicable
The Company did not have any derivative investments during the reporting period.
5. Use of proceeds
Applicable √ Not applicable
The Company did not use the proceeds during the reporting period.
29
V Management Discussion and Analysis
VI. Disposal of material assets and equity interest
1. Disposal of material assets
Applicable √ Not applicable
The Company did not have any disposal of material assets during the reporting period.
2. Disposal of material equity interest
√ Applicable Not applicable
Ratio of
Net profit the net
contribution profit
to contribution
the Company to the
from Company Carried out as
the beginning of disposal scheduled or
of the period of equity Relevant not, if not,
up to interest Relationship equity the reasons
Transaction the disposal Effect of over total Pricing basis Related party with interest fully and measures
Counterparty Equity interest consideration date disposal on net profit of disposal of transaction counterparty transferred taken by Disclosure
(ies) disposed Disposal date (RMB ’0,000) (RMB ’0,000) the Company (%) equity interest or not (ies) or not the Company date Disclosure index
Yu Jianming 30 % of equity 20 July 2015 30,953.33 810.33 The disposal 0.79% Agreement No Not applicable Yes Not applicable 4 August 2015 http://www.cninfo.com.cn
interest in Shanghai effectively averted
Zhongneng the uncertainty
Enterprise faced by the
Development Company due to
(Group) Co., Ltd. the recent volatility
in the capital
market, ensured
the income of
the Company,
concentrated the
capital resources
of the Company
on its principal
activities and
business
diversification,
thereby
maximising its
competitiveness
and profitability.
30
V Management Discussion and Analysis
VII. Analysis of major subsidiaries and investees
√ Applicable Not applicable
Major subsidiary and investees accounting for over 10% of the net profit of the Company
Unit: RMB ’0,000
Type of Registered Revenue from Operating
Name of companies companies Principal activities capital Total assets Net assets operations profit Net profit
Zhanjiang Chenming Subsidiary Pulp, duplex press and 300,000.00 1,540,950.01 329,238.71 437,536.89 55,033.37 40,512.17
Pulp & Paper electrostatic paper
Co., Ltd.
Chenming (HK) Subsidiary Sales of paper 18,347.29 2,574,819.16 60,990.46 690,811.62 72,731.69 59,017.92
Limited products, import of
raw materials
and processing
Shouguang Meilun Subsidiary Coated paper and 300,000.00 2,456,800.19 423,788.10 561,769.58 58,253.91 46,374.99
Paper Co., Ltd. household paper
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable Not applicable
Methods to acquire
and dispose of
subsidiaries during Impact on overall
Name of companies the reporting period production and operation and results
Jinan Chenming Investment Capital contribution Net profit for 2015 was RMB173,800.
Management Co., Ltd. for establishment
Chenming Paper Korea Co., Ltd. Capital contribution Net profit for 2015 was –RMB378,000.
for establishment
Particulars of major controlling companies and investees:
(1) Zhanjiang Chenming’s major products, including commercial pulp and high-end duplex press paper, had lower costs,
high gross profit margin and better returns.
(2) Due to the fluctuation in foreign exchange rate, Chenming (HK) recorded decrease in profit as compared to the
corresponding period of the prior year. However, its subsidiary, Financial Leasing Company delivered good profit as
its financial leasing business gradually rolled out.
(3) With the higher gross profit margin from coated paper and the gains from sale of electricity, the profitability of
Shouguang Meilun gradually improved.
VIII. Structured entities controlled by the Company
Applicable √ Not applicable
31
V Management Discussion and Analysis
IX. Outlook on the future development of the Company
(I) Competition overview and development trend of the industry
In recent years, on the one hand, with the impact of macroeconomic slowdown, demand was continuously weak
in the paper making industry. On the other hand, new production capacity of the paper making industry had been
released together over the past few years, resulting in the transitional overcapacity of some paper types. Due to fierce
competition, product prices continued to decline, narrowing profit margins of papermaking enterprises.
In the long run, the development conditions of the paper making industry are gradually improving. Elimination of
obsolete production capacity and increasingly stringent environmental policies are forcing some small and medium-
sized enterprises out of the market. To some extent, this eases the pressure of new capacity on the supply of the
industry, which is conducive for enterprises to initiate a price rise. For major paper making enterprises, fully utilising
advantages of capital, technology and scale to achieve a change in the growth pattern may help them gain new
market share. Meanwhile, with the impact of a weak demand, raw material prices have been hovering at a low level,
easing the pressure of operating costs on paper making enterprises. Eliminating obsolete production capacity will
remove obstacles for the industry’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.
Under the slowing macro-economic growth and economic transformation, the financial leasing industry as a favoured
supplementary corporate financing channel and an effective tool to use assets at hand embraced continuously
mounting market demand and was stepping into a golden age for its development. As an important bridge
between the financial industry and the industries in the real economy, the financial leasing industry and the modern
business model that centres on it will provide substantial capital support to the upgrade and transformation of the
manufacturing industry in China. However, the penetration rate of financial leasing in the Chinese market is only
around 5%, as compared with 20% in the European and US markets in general. The financial leasing industry in China
is at the early stage and has a promising outlook. In fact, it is on a solid track of rapid growth. It is expected that the
market size will reach RMB1,200 billion by 2020. The financial leasing industry has bright prospects in China as a
result of its growth momentum under the “new normal” of the economy.
Looking forward, the Company will adhere to the principal of achieving growth amid stability, and emphasise on
environmental protection, low carbon, recycling and sustainable development. Following the “Made in China 2025
Plan” and the principles of scientific development and quality and efficiency enhancement, it will comprehensively
improve its quality and efficiency, management level, technology application, sense of happiness and brand
image through the integration between its production and manufacture segment and financial services segment,
incorporation of smart technology into its industrial activities, reorganised methodology and restructuring so as to
expand and improve itself and strive to become one of the world-class companies with the highest growth rate in the
“Thirteenth Five Year Plan” period.
32
V Management Discussion and Analysis
IX. Outlook on the future development of the Company (Cont’d)
(II) Development strategy
Transformation and upgrade strategy: the Company will optimise its business structure and regional development
planning, focus on developing the major industries, namely paper making, finance, forestry and real estate, and
develop an industrial system that gives synergy and high efficiency.
Green development strategy: the Company will adhere to the operating philosophy of integration of the “forestry,
pulp and paper businesses”. It will achieve clean production through technology upgrade, advanced equipment and
refined management in order to promote circular economy and establish itself as a benchmark enterprise in resources
conservation and environmental protection. It strives to maintain balance between development and environmental
protection by stepping up environmental protection efforts in scientific development so as to seek for a win-win
solution for both economic benefits and environmental conservation.
International strategy: the Company will expand to the international market based on its development in China. It will
leverage the PRC “One Belt One Road” strategy to accelerate its pace of “going global”. It will reinforce cooperation
with international companies to gradually develop the overseas market.
Excellent operation strategy: the management of the Company will aim to achieve “management enhancement, team
building, outstanding business performance and good results”. The Company will continuously enhance the whole
process management on production and operation, marketing, finance costs and project construction, which will
effectively integrate resources and keep on promoting management quality and profitability.
Talent strategy: the Company will enhance the nurturing, recruitment, appointment and incentive mechanism of
employees, with a view to developing a high-end, comprehensive, innovative and international team of talents to
establish Chenming as a world leading and fast growing enterprise.
Harmonious development strategy: the Company will step up efforts to build its corporate culture, and care for
its employees. It will actively fulfil its corporate social responsibility and enhance value creation in areas such as
economic, social and environmental development so as to develop a good corporate image of Chenming and
establish it as an enterprise that develops in a harmonious manner.
(III) Operating plan for 2016
The main goal of the Company for 2016 is to “develop into an enterprise with hundreds of billions in value” by
adhering to the principle of “achieving growth amid stability”. The Company will stick to its diversification strategy
and develop an industrial system that centres on pulp production, paper making and finance to achieve synergy with
forestry, real estate and mining so as to boost the core competiveness and profitability. Meanwhile, the Company will
be committed to “team building, management enhancement, outstanding business performance and good results” in
order to upgrade management quality. The measures to be taken by the Company are as follows:
1. Enhance management to upgrade management quality
The Company will work with leading management consultants in China. It will identify the problems in
management and formulate practical plans to address the issues with the help of external experts in order to
enhance the management level. It will improve fundamental management and recruit competent employees
in a timely manner to the management team to deal with the current problems arising from lack of sufficient
management. The Company will also further optimise the management system and procedures to provide
strong support to the strengthening of management standard.
33
V Management Discussion and Analysis
IX. Outlook on the future development of the Company (Cont’d)
(III) Operating plan for 2016 (Cont’d)
2. Enhance operation management and take initiatives to expand market
The Company will step up efforts in team building and talent recruitment to develop a talent pool and promotion
channels while laying off unqualified employees. It will focus on efficiency in performance evaluation to stimulate
employees’ incentives. It will enhance fundamental management and perform monthly inspection to groundwork
so as to “cover all aspects of the system”. The Company will also optimise the system in a timely manner and
set up standards for procedures, so that the implementation will be strict, effective and highly efficient. The
Company will formulate plans for major and difficult tasks and closely monitor, inspect and evaluate such tasks
to rectify problems. It will enhance efficiency management, adjust product structure, boost overseas sales, raise
price, and make investment in places with close proximity, in the pursuit of higher efficiency. Meanwhile, it will
support strategic customers, boost volume of trade, secure contracts and strengthen control of cash in transit
to reduce appropriation of funds. It will enhance risk control and the marketing team will set its priority on the
collection of receivables. The dedicated receivables collection team will carry out their work and strictly monitor
receivables. The Company will also accelerate the process in relation to collateral security.
3. Enhance and refine production management
The Company will boost production efficiency through refining management. It will cooperate with professional
consultants to optimise management and actively recruit and nurture talents in order to enhance fundamental
management capability. It will aim at a higher market share of high value-added products and optimise the
product structure by developing products with competiveness, such as wine label, logistics label and liquid
packaging paper. The Company will adjust the structure of pulp materials, upgrade production process, and
utilise new raw materials to promote technological progress. It will step up inspection efforts to identify safety
risks and protect the environment in accordance with the new national standards and requirements, thereby
ensuring the fulfilment of targets on time.
4. Enhance project management for high quality and efficiency
The Company will enhance implementation and management of Zhanjiang Chenming’s 600,000 tonne liquid
packaging paper project, Haiming Mining, Huanggang Chenming’s integrated forestry, pulp and paper project
and Shouguang Chenming’s 400,000 tonne chemical pulp project so as to ensure the timely commencement
of operation, which will provide new sources of profit growth. The Company will adopt strict quality control
on project construction by clarifying responsibility and enhancing control so as to ensure construction quality
and safety at the work sites. The Company will fully prepare for the projects and optimise the organisational
structure. It will set up a management team and recruit technicians, while developing training programmes
for the staff at all levels, so as to lay a solid foundation for production and operation and ensure the smooth
operation of the projects upon completion.
5. Enhance financing management to create extra value
The Financial Leasing Company will focus on risk control. It will actively explore for quality customers, seek
to increase the direct credit lines of domestic banks and obtain additional banking facilities. The Company
will enhance the management of the Finance Company with a focus on its fundamental business in relation
to settlement, deposit and loans as well as bills, so as to boost the recovery rate of funds. The Company will
actively solicit interbank credit extension and diversify its interbank product offerings in order to increase
efficiency. At the same time, Qingdao Chenming will commence financial leasing business at bonded areas to
provide liquidity support to the Company’s operation and lower the financing cost.
34
V Management Discussion and Analysis
IX. Outlook on the future development of the Company (Cont’d)
(III) Operating plan for 2016 (Cont’d)
6. Enhance procurement management to raise resources efficiency
Leveraging the development of “cross-border e-commerce” and “Internet Plus”, the Company will seek to gain
market influence by establishing an online marketing platform for import and export of goods. The Company will
also develop complementary distributor management policy and pricing policy to boost efficiency of external
sales. In addition, it will set up an electronic merchandise exchange centre for pulp and paper products, and
develop an integrated supply chain for the storage and logistics of pulp and paper products in the country, with
the goal of building China’s market price index centre of pulp and paper products, and a global information
centre of paper products.
7. Enhance service operation and business expansion
The Company will enhance the management of the brick plant, cement and construction materials companies.
In terms of internal measure, it will enhance the service quality; and in terms of external measure, it will actively
expand business to boost profit.
(IV) Future capital requirements, source of funds and plan for use
With the extension of the Company’s industry chain and expansion of business scale, some of the new projects are
unable to make profit contribution in a timely manner due to market reasons, and therefore the Company has greater
demand for working capital. To this end, the Company has identified the following measures:
Firstly, the Company will raise fund through non-public offering of preference shares. This will help the Company meet
our financing needs together with our business development. The issue of preference shares which may be accounted
for in equity will also help reduce the Company’s gearing ratio, thus improving the Company’s capital structure and
enhancing the Company’s risk aversion capability.
Secondly, the Company will establish diversified financing channels. Various financing methods, such as increasing
direct financing and issuing super and short term commercial paper and perpetual notes, will be used to reduce the
Company’s finance expenses, improve the Company’s liabilities structure and ensure funding for the Company’s
sustainable and healthy development.
Thirdly, the Company will make progress in cross-border financing. Leveraging the financing platform of the Hong
Kong market, the Company will make effort to increase the credit line of Chenming (HK), avert exchange rate risks
through multi-currency financing and improve the efficiency of capital use so as to reduce finance expenses.
Fourthly, the Company will capitalise on the financial advantages of the Finance Company and the Financial Leasing
Company to expand the Group’s financing channels. They will grow amid stability, provide new impetus for the
Company’s earnings growth and boost profit.
Fifthly, the Company will further improve our international and domestic sales and marketing network, expand our
export sales and increase our investment in products of high profit so as to increase economic benefits. The Company
will take strict control measures to reduce inventories and improve contract compliance rate in order to reduce use
of funds, further reducing the finance expenses. The Company will strengthen our management in household paper
products, making it the Company’s new source of profit growth as soon as possible.
35
V Management Discussion and Analysis
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken
Industry risk
As a basic raw materials industry of the national economy, the paper making industry’s overall efficiency has a strong
correlation with economic cycles, and is therefore a cyclical industry fluctuating with the national macroeconomic
performance, which will further affect the profitability of paper making enterprises. With the rapid growth of the
national economy, economic globalisation and China’s accession to the WTO, China’s paper making industry has
been facing increasingly fierce competition, and overcapacity and lower demand will have impact on the operating
results of the Company to a certain extent in the future.
In light of the above, the Company will enhance the level of its equipment and technology, enrich its product portfolio,
raise its product quality and put emphasis on developing high-end products to increase its competitiveness.
Policy risk
At present, the industry has entered into an important transitional period, and the mode which has supported the rapid
development of the paper making industry in the past currently face the dual pressures of resources and environment.
From the point of view of China’s policy, China will change the mode of growth through optimising the layout of the
paper making industry and the raw material structure and product structure in order to promote a modern paper
making industry based on recycling by integrating the forestry and paper making industry, and adjust the industry
through entry requirements, environmental standards and energy saving. The development of the Company will be
affected by the direction of such policies.
Elimination of obsolete production capacity and stricter environmental protection policy have forced some small and
medium-sized enterprises to exit the industry. Hence, the Company is expected to record long-term revenue.
Operational risk
The major raw materials used by the Company are wood pulp and waste paper. The Company’s products are
mainly comprised of high-end paper, and as the State encourages the increase of the proportion of wood pulp used
by the industry, wood pulp, thus, has accounted for a higher proportion of the production cost. The market price
fluctuations of raw material have significantly affected the production cost of the Company. In addition to intensified
market competition resulting from surging capacity in the industry in recent years, the market price fluctuation of raw
materials will have an impact on the performance of the Company.
Hence, the Company will remain steadfast in the “forestry-pulp-paper integration” development path and focus on the
construction of Zhanjiang Chenming pulp project, Huanggang Chenming pulp project and Shouguang chemical pulp
project, thereby eliminating the limitations of upstream resources on the Company’s development and enhancing the
Company’s sustainable development.
36
V Management Discussion and Analysis
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken (Cont’d)
Environmental protection risk
The new Environmental Protection Law took effect on 1 January 2015. More stringent environmental protection
policies have been implemented in the paper making industry. A multi-pronged approach has been adopted to
promote industrial restructuring, and the paper making industry has entered into an important transitional period of
development. The higher emission standard is bound to increase the Company’s environmental protection costs and
high entry standards may result in the slowdown of scale expansion, thus affecting the production and operation of
the Company.
The Company always strive to achieve harmonious development with energy conservation and emission reduction.
The Company will endeavour to develop the recycling economy through waste exchange and recycling and strive to
maximise its resource utilisation. Meanwhile, the Company will make greater efforts to construct environment friendly
projects and strive to achieve its waste emission target.
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 the Company’s operating results. The foreign currency transactions of the Company
are mainly denominated in US$. The operations of raw material imports, product exports and US$ borrowings of the
Company will face the risk of exchange rate changes.
The Company lowers the proportion of imported goods procurement denominated in foreign currency. The Company
uses more domestic raw materials and spare parts in its production, and increases its Renminbi settlement while
decreasing its foreign exchange settlement. Meanwhile, the Company expands its overseas sales, increases
repatriation on exports and repays its domestic US dollar loans in order to mitigate its exchange rate risk exposure.
37
V Management Discussion and Analysis
X. Reception of research investigations, communications and interviews
1. Registration report on reception of research investigations, communications and interviews during the
reporting period
√ Applicable Not applicable
Manner of Class of parties Index of particulars of
Date of reception reception accommodated research investigations
13 January 2015 On-site research Institution Details are disclosed in the investor
investigation relationship event record on CNINFO on 15
January 2015
13 January 2015 On-site research Institution Details are disclosed in the investor
investigation relationship event record on CNINFO on 15
January 2015
28 January 2015 On-site research Institution Details are disclosed in the investor
investigation relationship event record on CNINFO on 29
January 2015
Number of receptions 3
Number of institutions received 29
Number of individuals received 0
Number of other 0
entities received
Disclosure, leakage or No
divulgence of undisclosed
significant information
38
VI Directors’ Report
The Directors (the “Directors”) of the Company hereby present the annual report and the audited consolidated financial statements
of the Company and the Group for the year ended 31 December 2015.
I. Principal activities
Please refer to section IV “Business Overview”, “I. Principal operations of the Company during the Reporting Period” and “II.
Analysis of principal operations” under section V “Management Discussion and Analysis” for details of principal activities of
the Company.
II. Results and profit distribution
Please refer to section XII “Financial Report” for the results of the Group for the year ended 31 December 2015.
III. Dividends
As of the end of the reporting period, the Board proposed to pay a final dividend for the year ended 31 December 2015 (“final
dividend”) of RMB3.00 in cash for every 10 Shares (tax inclusive) (2014: dividend of RMB1.4 in cash for every 10 Shares
(tax inclusive)) to the shareholders of the Company, subject to approval of shareholders at the forthcoming Annual General
Meeting (“AGM”) of the Company held on 17 May 2016. Upon approval of shareholders of the Company at the AGM, the
Company is expected to pay the final dividend on or around 17 July 2016 to shareholders whose names appear on the
register of members of the Company on 25 May 2016.
IV. Closure of register of members
The register of members of the Company will be closed from 16 April 2016 (Saturday) to 17 May 2016 (Tuesday), (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 17 May 2016 (Tuesday), all share transfer documents accompanied by
the corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office,
Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road
East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on 15 April 2016 (Friday).
V. Five year financial summary
Please refer to “IX. Five-year financial summary under Hong Kong Financial Reporting Standards” under section II “Company
Profile and Key Financial Indicators” for the financial summary of the Company for the past five financial years.
VI. Donations
During the year, the Company donated RMB600,000 (2014: RMB1,000,000) to non-profit making organisations.
VII. Subsidiaries
Please refer to “VII. Analysis of major subsidiaries and investees” under section V “Management Discussion and Analysis”
and “XIX. Matters of significant of subsidiaries of the Company” under section VI “Material Matters” for the details of
acquisition and disposal of subsidiaries by the Company during the year.
VIII. Property, plant and equipment
Please refer to “1. Consolidated Balance Sheet” under section XII “Financial Report” for the details of changes in property,
plant and equipment of the Group for the year ended 31 December 2015.
39
VI Directors’ Report
IX. Share capital
Please refer to “I. Changes in shares” under section VIII “Changes in Share Capital and Shareholders” for details of changes
in share capital of the Company for the year ended 31 December 2015.
X. 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.
XI. Transfer into reserves
The Company’s contributed surplus is distributable to shareholders in accordance with the Companies Law. As at 31
December 2015, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
surplus of the Company, amounted to RMB6,002,557,599.09 (2014: RMB5,313,936,425.86) as set out in “1. Consolidated
Balance Sheet” under section XII “Financial Report”.
XII. Directors
As at 31 December 2015, the Directors of the Company were:
1. Executive Directors
Mr. Chen Hongguo
Mr. Yin Tongyuan
Mr. Li Feng
Mr. Geng Guanglin
Mr. Hou Huancai
Mr. Zhou Shaohua
2. Non-executive Directors
Mr. Wang Xiaoqun
Ms. Yang Guihua
3. Independent Non-executive Directors
Mr. Wang Aiguo
Mr. Zhang Zhiyuan
Mr. Zhang Hong
Ms. Pan Ailing
According to the Articles of Association of the Company, all Directors, including non-executive Directors, have been elected
at the 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.
40
VI Directors’ Report
XIII. Directors’ service contracts
All Directors have entered into service contracts with the Company for a term from 16 May 2013 to 16 May 2016, except for
non-executive Director Ms. Yang Guihua, whose service contract commenced from 9 May 2014.
None of the Directors who have offered themselves for re-election at the forthcoming AGM have entered into any service
contract with the Company or any of its subsidiaries which cannot be terminated by the Group within one year without
payment of compensation other than statutory compensation
XIV. Directors and senior management’s remuneration and the five highest paid individuals
Details of Directors and senior management’s remuneration and those of the five highest paid individuals in the Company
and its subsidiaries are set out in part V of section X and part XII of section XII.
In 2015, the Company has 24 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
RMB4.8 million to RMB5.2 million 1
RMB3.6 million to RMB4.0 million
RMB3.2 million to RMB3.6 million
RMB2.8 million to RMB3.2 million 1
RMB2.4 million to RMB2.8 million
RMB2.0 million to RMB2.4 million 1
RMB1.6 million to RMB2.0 million 3
RMB1.2 million to RMB1.6 million 1
RMB0.8 million to RMB1.2 million 1
Below RMB0.8 million 16
XV. Independent Non-executive Directors
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.
41
VI Directors’ Report
XVI. Securities interests held by Directors, Supervisors and Chief Executives
As at 31 December 2015, interests of the Company or its associated corporations (within the meaning of 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:
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 6,434,527
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
Yang Guihua 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 shares
beginning of the held at the end of
Name of associated reporting period Change during the the reporting
Name Position corporations (shares) period +/- period (shares)
Chen Hongguo Chairman Shouguang Henglian 231,000,000 — 231,000,000
Enterprise Investment
Co. Ltd. (note 2)
Note 1: Save for the 6,334,527 A shares held personally, Chen Hongguo 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 hold 43% 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 a
result, the 231,000,000 shares in Chenming Holdings (approximately 13.71% of the total share capital of Chenming Holdings) held by
Shouguang Henglian is also deemed to be held by Chen Hongguo.
42
VI Directors’ Report
Save as disclosed above, as at 31 December 2015, none of the Directors, Supervisors or chief executives of the Company
had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated
corporations which were required to be filed in the register of the Company required to be maintained pursuant to section
352 of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the
Model Code 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 2015, none 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.
XVI. Interests and short position of substantial shareholders in shares and underlying shares
As at 31 December 2015, the following shareholders (other than the Directors, Supervisors or chief executives of the
Company) had interests or short positions in the Company’s shares and underlying shares as shown in the share register
maintained by the Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
Approximate shareholding
as a percentage of
Number of shares held Total share Class of
Name (shares) capital (%) shares (%)
Shouguang Chenming Holdings Co., Ltd 293,003,657 A shares (L) 15.13 26.32
The National Social Security Fund Council 35,570,000 H shares (L) 1.84 10.10
Shouguang Chenming Holdings Co., Ltd 58,914,500 H shares (L) 3.04 16.73
Chenming Holdings (Hong Kong) Limited 58,914,500 H shares (L) 3.04 16.73
(L) – Long position (S) – Short position (P) – Lending pool
Save as disclosed above, as at 31 December 2015, no other person had interests or short positions in the Company’s
shares or underlying shares as recorded in the register maintained under section 336 of the SFO.
XVII. Relationship with employees, customers and suppliers
Please refer to “VI. Personnel of the Company” under section IX “Directors, Supervisors and Senior Management and Staff”,
“2.(8) Sales to major customers and major suppliers” of “II. Analysis of principal operations” under section V “Management
Discussion and Analysis” for details of the relationship between the Company and its employees, customers and suppliers.
XVIII. 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.
XIX. 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 any of its subsidiaries.
43
VI Directors’ Report
XX. 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.
XXI. Preference shares
Please refer to section IX “Preference Shares” for details of the issue of preference shares of the Company.
XXII. Management contracts
No contracts concerning the management and administration of the whole or any substantial part of the business of the
Company were entered into or existed in 2015.
XXIII. Major risk factors
Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “IX. Outlook on the future development
of the Company” under section V “Management Discussion and Analysis” for details of major risk factors of the Company.
XIV. Material matters
Please refer to section VI “Material Matters” for details of material matters of the Company.
XV. Future development
Please refer to “(I) Competition overview and development trend of the industry”, “(II) Development strategy”, “(III) Operating
plan for 2016” and “(IV) Future capital requirements, source of funds and plan for use” of “IX. Outlook on the future
development of the Company” under section V “Management Discussion and Analysis” for details of future development of
the Company.
XVI. Environmental protection policy and performance and compliance with laws and regulations
Please refer to XX. Fulfilment of Social Responsibility under section VI “Material Matters” for details of environmental
protection policy and performance of the Company and compliance with laws and regulations.
XVII. Purchase, sale and redemption of shares
The Company and its subsidiaries did not purchase, sell or redeem any listed securities of the Company during the reporting
period.
XVIII. Sufficiency of public float
During the reporting period, 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. Review of the Audit Committee
The audited consolidated financial statements of the Company for the year ended 31 December 2015 has been reviewed by
the Audit Committee of the Company.
44
VI Directors’ Report
XXX. Gearing ratio
As at 31 December 2015, the Company’s gearing ratio (including minority interest) was 65.06%, representing an increase
of 4.61 percentage points from 60.45% for 2014, mainly due to the increase in financing as the Company sought to obtain
sufficient liquidity for the financial leasing business and project investment during the period.
The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one
year, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).
XXXI. Going Concern Basis
The Company is a leading player in the paper making industry in China. After entrepreneurship and innovation for more
than half a century, it has developed into a large and integrated modern conglomerate principally engaged in paper making,
finance, forestry and real estate businesses while also involved in mining, energy, logistics, construction materials, hotel
operation and others. It is the only Chinese company with three types of listed shares, i.e., A shares, B shares and H shares,
and the first enterprise in the paper making industry to integrate finance and industry and own both finance company and
financial leasing company. The Group has production bases in Shandong, Guangdong, Hubei, Jiangxi and Jilin, which
deliver annual pulp and paper production capacity of over 8,500,000 tonnes.
The Company has a good sustained profitability. In 2015, the Company achieved revenue of RMB20.2 billion, net profit
attributable to shareholders of the Company of RMB102.1 million and an net increase in cash and cash equivalents of
RMB912 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 2015, the Company obtained a comprehensive credit line of RMB55.9 billion from
major financial institutions, of which unused credit line amounted to RMB22.0 billion, which provided important support to
the Company’s business development. As an A-share, B-share and H-share listed company, the Company has convenient
financing channels. The Company established Shandong Chenming Financial Leasing Co., Ltd., Shandong Chenming
Investment Limited and Shandong Chenming Group Finance Co., Ltd. as the core of the financial segment. The rapid
business development, improving management system and effective risk control provide new sources of profit growth for
the Company, further increase the Group’s fund settlement, management, investment and financing ability, and reduce its
financing cost while improving its debt structure.
The auditors of the Company have prepared the 2015 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.
45
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital
Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the
cash dividend during the reporting period
√ Applicable Not applicable
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.
Implementation of the 2014 profit distribution plan: Based on the number of the shares as at the dividend distribution
registration date of 1,936,405,467 shares, a cash dividend of RMB1.40 (tax inclusive) was to be paid to all shareholders
for every 10 shares held. The total cash dividend to be distributed amounted to RMB271,096,765.38 (tax inclusive). The
dividend distribution was implemented and completed on 14 July 2015. For details, please refer to the announcement on
payment of final dividend and withholding and payment of enterprise income tax for non-resident enterprise shareholders
published on the Hong Kong Stock Exchange on 23 June 2015, and the announcement on the implementation of the 2014
profit distribution plan for A share and B share published on CNINFO on 4 July 2015.
Particulars of Cash Dividend Policy
Was it in compliance with the requirements of the Articles of Association
and the resolutions of the general meeting? Yes
Were the dividend distribution criteria and proportion well-defined and clear? Yes
Were the related decision making process and mechanism in place? Yes
Did independent Directors fulfil their duties and play their role? Yes
Were the minority shareholders given opportunities to sufficiently voice their opinion and make requests
and were the legal interests of the minority shareholders fully protected? Yes
Were conditions and procedures legal and transparent in respect
of cash dividend policy with adjustments and changes? Yes
The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital reserves into
share capital (proposed) over the past three years (the reporting period inclusive)
(1) The 2015 profit distribution plan
Based on the number of the total 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 1,936,405,467 shares of the Company as at 31 December 2015, cash dividend for 2015 amounted to
RMB580,921,640.10 (tax inclusive), which represented 60.53% of the net profit attributable to ordinary shareholders
of the Company as set out in the 2015 consolidated financial statements prepared in accordance with Accounting
Standards for Business Enterprises.
46
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital (Cont’d)
Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the
cash dividend during the reporting period (Cont’d)
(2) The 2014 profit distribution plan
The 2014 profit distribution plan was considered and approved in the 2014 annual general meeting convened by
the Company on 15 May 2015. Based on the number of the shares as at the dividend distribution registration date
of 1,936,405,467 shares, a cash dividend of RMB1.40 (tax inclusive) was to be paid to all shareholders for every 10
shares held. The total cash dividend to be distributed amounted to RMB271,096,765.38 (tax inclusive).
(3) The 2013 profit distribution plan
The 2013 profit distribution plan was considered and approved in the 2013 annual general meeting convened by
the Company on 9 May 2014. Based on the number of the shares as at the dividend distribution registration date
of 1,936,405,467 shares, a cash dividend of RMB3.00 (tax inclusive) was to be paid to all shareholders for every 10
shares held. The total cash dividend to be distributed amounted to RMB580,921,640.10 (tax inclusive).
Cash dividends for ordinary shares of the Company over the past three years (the reporting period inclusive)
Unit: RMB
As a
percentage
Net profit of net profit
attributable attributable
to ordinary to ordinary
shareholders of shareholders
the Company in of the Amount Ratio
the consolidated Company of cash of cash
financial in the dividends dividends
Amount of statements consolidated distribution distribution
cash dividends during the year financial through through
Year of distribution (tax inclusive) of distribution statements other means other means
2015 580,921,640.10 959,717,938.31 60.53% 0.00 0.00%
2014 271,096,765.38 505,204,384.73 53.66% 0.00 0.00%
2013 580,921,640.10 710,655,331.72 81.74% 0.00 0.00%
Explanation: In 2015, net profit attributable to ordinary shareholders of the Company excluded the effect of interest
payment deferred and accumulated to subsequent periods for perpetual bonds under other equity instruments
(amounted to RMB61,506,739.43). For details, please refer to Note XVII. 2 of section XII of this report.
The Company made a profit and had positive retained profit available for ordinary shareholders during the reporting
period without cash dividend for ordinary shares being proposed
Applicable √ Not applicable
47
VII Material Matters
II. Proposals on profit distribution and conversion of capital reserves into share capital during
this reporting period
√ Applicable Not applicable
Numbers of bonus share per 10 shares (share(s)) 0
Dividend distribution per 10 shares (RMB) (tax inclusive) 3
Conversion per 10 shares (share(s)) 0
Share base of the distribution proposal (shares) 1,936,405,467
Total cash dividend (RMB) (tax inclusive) 580,921,640.10
Distributable profits (RMB) (Note 1) 5,354,542,859.44
Percentage of cash dividend to total profits distribution 100.00%
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 the Company’s normal operations and long-term development. Accumulated profit
distribution in cash over the recent three years shall not be less than 30% 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 I. herein for particulars of profit distribution proposal for 2015.
Note 1: Distributable profits excluded the effect of interest payment deferred and accumulated to subsequent periods for perpetual bonds under
other equity instruments (amounted to RMB61,506,739.43).
48
VII Material Matters
III. Performance of undertakings
1. Undertakings made by the Company, shareholders, beneficial controllers, bidders, directors,
supervisors, senior management or other related parties during the reporting period or prior periods
but subsisting to the end of the reporting period
√ Applicable Not applicable
Party involved Type of Particulars on
Undertaking in 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 Shouguang Non-competitive (1) Shouguang Chenming Holdings Co., Ltd. 22 May 2008 During the period Strictly implemented
initial public offering Chenming Holdings undertaking (“Shouguang Chenming Holdings”) shall not engage, when Chenming
or refinancing Co., Ltd. whether solely, jointly, or by representing itself or any Holdings was the
other persons or companies, and shall not procure its major shareholder of
associates (as defined in The Listing Rules of Hong the Company
Kong Stock Exchange) to engage, in any business
which competes with the business 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 the business of Chenming Group, or obtain
any business opportunity which directly or indirectly
competes against the business of Chenming Group, it
shall endeavour to procure that Chenming Group shall
have priority to obtain the right to operate such business
or to obtain such business opportunity; (3) if Shouguang
Chenming Holdings is in breach of the abovementioned
undertakings, it shall indemnify the Company for any
loss caused by such breach and the Company shall
have the right to acquire all businesses of Shouguang
Chenming Holdings, which directly or indirectly compete
with the businesses of our Group, at market price or
cost price (whichever price is lower); (4) Shouguang
Chenming Holdings shall not make use of its position
as the controlling shareholder (as defined in The Listing
Rules of Hong Kong Stock Exchange) of our Group to
jeopardise the legal interests of Chenming Group and
its shareholders with other persons or companies or on
their behalf.
49
VII Material Matters
III. Performance of undertakings (Cont’d)
1. Undertakings made by the Company, shareholders, beneficial controllers, bidders, directors,
supervisors, senior management or other related parties during the reporting period or prior periods
but subsisting to the end of the reporting period (Cont’d)
Party involved Type of Particulars on
Undertaking in undertaking undertaking Details of undertaking Undertaking date Term the performance
Shouguang Defective properties (1) According to the plan on defective properties of the 16 January 2008 During the period Strictly implemented
Chenming Holdings Company, Shouguang Chenming Holdings Co., Ltd. when Chenming
Co., Ltd. (“Shouguang Chenming Holdings”) has guaranteed Holdings was the
and undertaken that: according to the application of major shareholder of
the Company, for defective property(ies) owned by the the Company
Company and its holding subsidiary company which
situated in the administrative area 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 Company
suffers any economic losses due to the defects of the
title (including but not limited to damages, penalties and
relocation costs), Shouguang Chenming Holdings will
bear such economic losses; (3) during the regulatory
process taken to the defective properties of buildings
and land of subsidiaries of the Company situated
outside the local areas (outside the administrative area of
Shouguang city), the economic losses such as penalties
or relocation costs imposed by competent administrative
authorities to be borne by the subsidiaries arising from
defects of insufficient title documents shall be paid
pursuant to the law by Shouguang Chenming Holdings
after verification.
Equity incentive undertaking
Other undertakings Shouguang Not conducting As Chenming Holdings is confident of the prospects 8 July 2015 From 8 July 2015 to Completed
made to minority Chenming shareholding of the economic development in China and the future 8 January 2016
shareholders of Holdings Co., Ltd. reduction development of the Company, in order to maintain the
the Company stability of capital market and promote the sustainable,
stable and healthy development of the Company,
Chenming Holdings has undertaken that it will not
reduce its shareholding in the Company in the coming
six months.
Does the undertaking Yes
performed timely?
2. Description on the Company’s assets and items in meeting original profit forecast and its explanation
as there is profit forecast for assets and items of the Company and the reporting period is still within
the profit forecast period
Applicable √ Not applicable
50
VII Material Matters
IV. Appropriation of funds of the Company by the controlling shareholder and its related parties
for non-operating purposes
Applicable √ Not applicable
There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating
purposes during the reporting period.
V. Opinions of the Board, the Supervisory Committee and independent Directors (if any)
regarding the “modified auditor’s report” for the reporting period issued by the accountants
Applicable √ Not applicable
VI. Reason for changes in accounting policies, accounting estimates and accounting methods
as compared to the financial report for the prior year
Applicable √ Not applicable
There was no change in accounting policies, accounting estimates and accounting methods during the reporting period.
VII. 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.
VIII. Reason for changes in scope of the consolidated financial statements as compared to the
financial report for the prior year
√ Applicable Not applicable
During the reporting period, the Company invested and established two companies, namely Jinan Chenming Investment
Management Co., Ltd. and Chenming Paper Korea Co., Ltd.
In order to expand the customer base of the Finance Company, fully utilise the investment and financing functions of the
Finance Company and enhance its profitability, the Company established Jinan Chenming Investment Management Co.,
Ltd. The registered capital of Jinan Chenming was RMB100.00 million. Its operations complemented those of the Finance
Company. Moreover, Jinan Chenming was consolidated into the financial statements of the Company since January 2015.
In order to strengthen the paper product sales of the Company, further increase the market share of the Company’s
products in Korea and establish a wider and more comprehensive sales network, the Company established Chenming Paper
Korea Co., Ltd. The registered capital of Chenming Korea was US$1.00 million and Chenming Korea was consolidated into
the financial statements of the Company since April 2015.
51
VII 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 3
Name of certified public accountants of the domestic accounting firm Wang Yan and Jing Chuanxuan
Whether to appoint another accounting firm during the period
Yes √ No
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 Ruihua Certified Public Accountants as the internal control and auditing firm of the
Company. The Company paid RMB600,000 as internal control and auditing fees during the period. The Company engaged
King & Wood Mallesons (Qingdao) Law Firm as its regular legal advisor and paid RMB100,000 as legal advisory fees during
the period.
X. Suspension in trading or delisting upon publication of annual report
Applicable √ Not applicable
XI. Matters related to bankruptcy and reorganisation
Applicable √ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
XII. Material litigation and arbitration
Applicable √ Not applicable
The Company was not involved in any material litigation and arbitration during the reporting period.
XIII. Punishment and rectification
Applicable √ Not applicable
There was no punishment and rectification of the Company during the reporting period.
XIV. Credibility of the Company, its controlling shareholders and beneficial controllers
Applicable √ Not applicable
52
VII Material Matters
XV. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measure of the Company
Applicable √ Not applicable
There was no implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure
of the Company during the reporting period.
XVI. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable Not applicable
Subject Pricing Amount of Amount of
Types of the matter of the basis of the Price of related party Percentage as the transactions Whether Settlement of Market price of
Related related party related party related party related party transactions amount of similar approved exceeding related party available similar
Related party party relationship transactions transactions transactions transactions (RMB ‘0,000) transactions (%) (RMB ‘0,000) approved cap transactions transaction Disclosure date Disclosure index
Jiangxi Chenming Natural Enterprise control Procurement Natural gas Market price Market price 12,325.53 0.83% 32,000 No Bank acceptance and Not appl cable 27 March 2015 http://www.cninfo.com.cn
Gas Co., Ltd. by senior telegraphic transfer
management of
the Company
Total — — 12,325.53 — 32,000 — — — — —
Particulars on refund of bulk sale No
Estimated total amount for day-to-day related party transactions to be conducted during the period (by types of transactions) and their actual i plementing during the reporting period Not appl cable
Reason for the difference between transaction price and market reference price (if appl cable) Not appl cable
2. Related party transaction in connection with purchase or sale of assets or equity interest
Applicable √ Not applicable
There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest
during the reporting period.
3. Related party transaction in connection with joint external investment
Applicable √ Not applicable
There was no related party transaction of the Company connected to joint external investment during the reporting
period.
53
VII Material Matters
XVI. Significant related party transactions (Cont’d)
4. Related creditors’ rights and debts transactions
√ Applicable Not applicable
Whether non-operating related creditors’ rights and debts transactions existed
Yes √ No
There was no non-operating related creditors’ rights and debts transaction of the Company during the reporting
period.
5. Other significant related party transactions
Applicable √ Not applicable
There was no other related party transaction of the Company during the reporting period.
XVII. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
Applicable √ Not applicable
(2) Contracting
Applicable √ Not applicable
There was no contracting of the Company during the reporting period.
(3) Leasing
Applicable √ Not applicable
There was no leasing of the Company during the reporting period.
54
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees
√ Applicable Not applicable
(1) 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 RMB10,536.6329 million. As at 31 December 2015, the
balance of the guarantee provided by the Company to its subsidiaries amounted to RMB11,484.9321 million,
representing 68.07% of the equity attributable to shareholders of the Company as at the end of 2015.
Unit: RMB ’0,000
Guarantees between the Company and its subsidiaries
Date of the related Guarantee
announcement to related
disclosing the Amount Guarantee date Guarantee Type of Fulfilled parties
Name of obligee guarantee amount of guarantee (agreement date) provided guarantee Term or not or not
Zhanjiang Chenming Pulp & Paper Co., Ltd. 27 October 2014 650,000 27 October 2014 140,913.3 General guarantee 3 years No No
Shandong Chenming Financial Leasing Co., Ltd. 26 March 2015 500,000 22 May 2015 210,098.42 General guarantee 7 years No No
Huanggang Chenming Arboriculture Co., Ltd. 27 October 2014 10,000 18 December 2014 4,500 General guarantee 3 years No No
Huanggang Chenming Pulp & Paper Co., Ltd. 26 March 2015 400,000 28 July 2015 40,337.84 General guarantee 7 years No No
Jiangxi Chenming Paper Co., Ltd. 27 October 2014 200,000 6 January 2015 53,059.92 General guarantee 3 years No No
Shouguang Meilun Paper Co., Ltd. 16 December 2010 600,000 13 April 2015 31,366.27 General guarantee 10 years No No
Shandong Chenming Paper Sales Company Limited 27 October 2014 400,000 9 January 2015 316,114.46 General guarantee 3 years No No
Chenming (HK) Limited 27 October 2014 500,000 10 February 2015 352,103.00 General guarantee 3 years No No
Shouguang Chenming Import and Export Trade Co., Ltd. 27 October 2014 200,000 — 0 General guarantee 3 years No No
Jilin Chenming Paper Co., Ltd. 27 October 2014 150,000 0 General guarantee 3 years No No
Haicheng Haiming Mining Company Limited 27 August 2014 60,000 — 0 General guarantee 3 years No No
Shandong Chenming Group Finance Co., Ltd. 13 February 2015 400,000 — 0 General guarantee 3 years No No
Total amount of guarantee provided for subsidiaries approved during the reporting period 1,300,000 Total amount of guarantee provided for subsidiaries 1,053,663.29
during the reporting period
Total amount of guarantee provided for subsidiaries approved 4,070,000 Total balance of guarantee provided for subsidiaries 1,148,493.21
as at the end of the reporting period as at the end of the reporting period
The percentage of total amount of guarantee provided to the net assets of the Company 68.07%
Of which:
Amount of guarantee provided for shareholders, beneficial controllers and its related parties (D) 0
Amount of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E) 1,055,095.45
Total amount of guarantee provided in excess of 50% of net assets (F) 285,546.89
Sum of the above three amount of guarantee (D+E+F) 1,340,642.34
(2) External guarantees against the rules and regulations
Applicable √ Not applicable
There was no external guarantee provided by the Company which was against the rules and regulations during
the reporting period.
55
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
3. Entrusted cash and asset management
(1) Entrusted wealth management
Applicable √ Not applicable
The Company did not have any entrusted wealth management during the reporting period.
(2) Entrusted loans
√ Applicable Not applicable
Unit: RMB ’0,000
Actual
principal
Related party recovered Impairment Actual gains or Gains or losses
transaction Interest during provision Expected losses during the recovered during
Borrower or not rate of loans Loan amount Commencement date Expiry date the period (if any) return reporting period the reporting period
Shouguang Jin Choi Public
Assets Management
Co., Ltd. No 10.00% 90,000 18 January 2014 17 January 2017 0 0 27,000 9,477.48 Recovered on time
Total — — 90,000 — — 0 0 27,000 9,477.48 —
Source of entrusted loans Self-owned funds
Accumulated principal and return overdue but not yet recover 0
Dispute None
Disclosure date of approval of entrusted loans in board meeting 18 January 2014
Disclosure date of approval of entrusted loans at a general meeting Not applicable
Any entrusted loan plan in the future? Not applicable
56
4. Other material contracts
√ Applicable Not applicable
Appraised
Book value of value of the
subject asset subject asset Name of
of the contract of the contract appraisal Appraisal Transaction Related party Progress as at
Name of the company Name of party Date of the (if any) (if any) institute date price transaction Related party the end of the
entering into contract involved in the contract Subject matter contract entered into (RMB ‘0,000) (RMB ’0,000) (if any) (if any) Pricing basis (RMB ’0,000) or not relationship reporting period Disclosure date Disclosure index
Shandong Chenming Paper Jinan Hi-Tech Holding Group A7-2 plot of the 9 May 2014 Not applicable Not applicable Not applicable Not applicable Market price 36,000 No Not applicable In progress 10 May 2014 http://www.cninfo.com.cn
VII Material Matters
Holdings Limited Co., Ltd. Han Yu Jin Gu
Huanggang Chenming Pulp & FMW Foerderanlagen Gmbh. Materials and 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price EUR7.80 million No Not applicable Market price 23 July 2015 http://www.cninfo.com.cn
Paper Co., Ltd. equipment for
chemical pulp
Huanggang Chenming Pulp & Valmet Technologies Oy Equipment 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price EUR65.631 million No Not applicable In progress 23 July 2015 http://www.cninfo.com.cn
Paper Co., Ltd.
Huanggang Chenming Pulp & Valmet (China) Co., Ltd. Equipment and 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price 36,076.4 No Not applicable In progress 23 July 2015 http://www.cninfo.com.cn
Paper Co., Ltd. spare parts
Huanggang Chenming Pulp & Andritz Oy Steam equipment 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price EUR7.044 million No Not applicable In progress 23 July 2015 http://www.cninfo.com.cn
Paper Co., Ltd. system
Huanggang Chenming Pulp & Andritz (China) Ltd. Steam equipment 1 July 2015 Not applicable Not applicable Not applicable Not applicable Market price 3,060.4 No Not applicable In progress 23 July 2015 http://www.cninfo.com.cn
Paper Co., Ltd.
57
VII Material Matters
VXIII. Other matters of significance
√ Applicable Not applicable
1. Capital injection to Huanggang Chenming
In order to fulfil the capital requirements for the subsequent construction of the integrated forestry and paper project
of Huanggang Chenming and bank borrowings, as well as to ensure smooth project construction, the Company
intended to increase the capital of Huanggang Chenming by RMB1,000 million with its own funds. Upon the capital
injection, the registered capital of Huanggang Chenming increased to RMB1,200 million from RMB200 million. For
details, please refer to relevant announcement (announcement no.: 2015-054) of the Company published on CNINFO
on 28 August 2015.
2. Approval from the CSRC in relation to the application for non-public issuance of preference shares
On 17 September 2015, the Company received the Approval of the Non-Public Issuance of Preference Shares of
Shandong Chenming Paper Holdings Limited (Zheng Jian Xu Ke (2015) No. 2130) from the CSRC, pursuant to which
the non-public issuance of not more than 45 million preference shares by the Company was approved. Preference
shares shall be issued in tranches. The issuance of the first tranche of not less than 22.5 million shares was to be
completed within six months and the issuance of outstanding preference shares was to be completed within 24
months.
3. Disposal of equity interest in Fuyu Chenming
The Board of the Company agreed to dispose of Fuyu Chenming due to the small production capability and low
product competitiveness of Fuyu Chenming, which did not fit with the overall development plan of the Group.
The disposal price was determined based on the price under the valuation conducted by a qualified intermediary.
The disposal was conducted through public tender at an equity exchange. For details, please refer to relevant
announcement (announcement no.: 2015-040) of the Company published on CNINFO on 18 July 2015.
4. Approval of registration on medium-term notes and super & short-term commercial papers
Under the Notice of Acceptance of Registration (Zhong Shi Zhu Xie [2015] No. MTN141) issued by the National
Association of Financial Market Institutional Investors, the issue of medium-term notes by the Company was approved
and registered with an amount of RMB2.6 billion, which shall be valid for a period of two years from the date of such
notice. The issue may be made in tranches during the validity period.
Under the Notice of Acceptance of Registration (Zhong Shi Zhu Xie [2015] No. SCP104) issued by the National
Association of Financial Market Institutional Investors, the issue of super & short-term commercial papers by the
Company was approved and registered with an amount of RMB13.8 billion, which shall be valid for a period of two
years from the date of such notice. The issue may be made in tranches during the validity period.
For details, please refer to relevant announcement (announcement no.: 2015-030) of the Company published on
CNINFO on 20 June 2015.
58
VII Material Matters
VXIII. Other matters of significance (Cont’d)
5. Establishment of Zhuhai Dechen New Third Board Equity Investment Fund
To capitalise on the expertise of professional investment institutions to strengthen its capability of investment
and speed up the upgrade of its businesses and the diversification of development so as to enhance its market
competitiveness and profitability, the Company intended to contribute as a limited partner RMB50.00 million from
its own funds to the establishment of Zhuhai Dechen New Third Board Equity Investment Fund Company (Limited
Partnership) in cooperation with Zhuhai Kaichenxing Investment Advisory Company (General Partnership), Shenzhen
Qianhai Financial Development Ltd. and Zhang Guangquan. For details, please refer to relevant announcement
(announcement no.: 2015-015) of the Company published on CNINFO on 2 April 2015.
6. Establishment of Jinan Chenming Investment Management Co., Ltd. and Chenming Paper Korea Co.,
Ltd.
In order to expand the customer base of the Finance Company, fully utilise the investment and financing functions of
Finance Company and enhance its profitability, the Company established Jinan Chenming Investment Management
Co., Ltd. The registered capital of Jinan Chenming is RMB100.00 million. Its operations complemented those of the
Finance Company.
In order to strengthen the paper product sales of the Company, further increase the market share of the Company’s
products in Korea and establish a wider and more comprehensive sales network, the Company established Chenming
Paper Korea Co., Ltd. The registered capital of Chenming Korea was US$1.00 million.
59
VII Material Matters
VXIII. Other matters of significance (Cont’d)
7. Information disclosure index for 2015
Announcement
No. Subject matter Date of publication Publication website and index
2015-001 Announcement on Additional Resolutions Proposed at 29 January 2015 http://www.cninfo.com.cn
the 2015 First Extraordinary General Meeting
2015-002 Supplemental Notice of 2015 First Extraordinary General Meeting 29 January 2015 http://www.cninfo.com.cn
2015-003 Second supplementary notice of the 2015 First Domestic Listed 29 January 2015 http://www.cninfo.com.cn
Share Class Meeting and 2015 First Overseas Listed Share
Class Meeting
2015-004 Announcement on Resolutions of the 2015 First Extraordinary 14 February 2015 http://www.cninfo.com.cn
General Meeting
2015-005 Announcement on Resolutions of the 2015 First Class Meeting 14 February 2015 http://www.cninfo.com.cn
for Holders of Domestic Listed Shares (A shares and B shares)
and Resolutions of the 2015 First Class Meeting for Holders of
Overseas Listed Shares (H shares)
2015-006 Announcement on Receipt of CSRC Notice of Acceptance of 3 March 2015 http://www.cninfo.com.cn
Application for Administrative Approval
2015-007 Results of the Eighth Extraordinary Meeting of the Seventh 27 March 2015 http://www.cninfo.com.cn
Session of the Board
2015-008 Announcement of Annual Results for 27 March 2015 http://www.cninfo.com.cn
the Year Ended 31 December 2014
2015-009 Announcement on Investment in a Subsidiary 27 March 2015 http://www.cninfo.com.cn
2015-010 Announcement on Provision of Guarantee for Comprehensive 27 March 2015 http://www.cninfo.com.cn
Credit Line of Wholly-Owned Subsidiaries
2015-011 Announcement on Expected Ordinary Related 27 March 2015 http://www.cninfo.com.cn
Party Transactions in 2015
2015-012 Notice of 2014 Annual General Meeting 27 March 2015 http://www.cninfo.com.cn
2015-013 Results of the Ninth Extraordinary Meeting of 27 March 2015 http://www.cninfo.com.cn
the Seventh Session of the Supervisory Committee
2015-014 Announcement in relation to External Investment 2 April 2015 http://www.cninfo.com.cn
2015-015 Announcement in relation to External Investment 2 April 2015 http://www.cninfo.com.cn
2015-016 Announcement on Result of the Issue of 24 April 2015 http://www.cninfo.com.cn
2015 First Tranche of Short-term Commercial Paper
2015-017 Results of the Ninth Meeting of the Seventh Session of the Board 28 April 2015 http://www.cninfo.com.cn
2015-018 2015 First Quarter Report 28 April 2015 http://www.cninfo.com.cn
2015-019 Announcement on Equity Transfer at Nil Consideration between 28 April 2015 http://www.cninfo.com.cn
Wholly-owned Subsidiaries
2015-020 Announcement in Respect of Resignation of Senior Management 28 April 2015 http://www.cninfo.com.cn
2015-021 Result of the Issue of 2015 Second Tranche of Short-term 28 April 2015 http://www.cninfo.com.cn
Commercial Paper
2015-022 Supplementary Notice of 2014 Annual General Meeting 29 April 2015 http://www.cninfo.com.cn
2015-023 Warning on reduction of shareholding by shareholders 8 May 2015 http://www.cninfo.com.cn
2015-024 Results of the 2014 Annual General Meeting 16 May 2015 http://www.cninfo.com.cn
2015-025 Results of the Sixth Extraordinary Meeting of 6 June 2015 http://www.cninfo.com.cn
the Seventh Session of the Board
2015-026 Announcement on the Proposed Issue of 6 June 2015 http://www.cninfo.com.cn
Non-Public Preference Shares
2015-027 Notice of 2015 Second Extraordinary General Meeting 6 June 2015 http://www.cninfo.com.cn
60
VII Material Matters
VXIII. Other matters of significance (Cont’d)
7. Information disclosure index for 2015 (Cont’d)
Announcement
No. Subject matter Date of publication Publication website and index
2015-028 Announcement in Respect of Reply on Application for 9 June 2015 http://www.cninfo.com.cn
Non-Public Issue of Preference Shares
2015-029 Announcement in Respect of Supplementary Disclosure Required 9 June 2015 http://www.cninfo.com.cn
under the Reply from CSRC on Application for Non-Public
Issue of Preference Shares
2015-030 Announcement on Approval of Registration on Medium-term 20 June 2015 http://www.cninfo.com.cn
Notes and Super & Short-term Commercial Papers
2015-031 Announcement on 2015 Dividend Payment in Respect of 30 June 2015 http://www.cninfo.com.cn
“11 Chenming Bond”
2015-032 Second Supplementary Notice of the 2015 Second 4 July 2015 http://www.cninfo.com.cn
Extraordinary General Meeting
2015-033 Announcement on the Implementation of Equity Distribution 4 July 2015 http://www.cninfo.com.cn
to Holders of A Shares and B Shares for 2014
2015-034 Indicative Announcement on Undertaking of the Controlling 9 July 2015 http://www.cninfo.com.cn
Shareholder on no Reduction of Shareholding and Undertaking
of Some Directors, Supervisors and Senior Management
Members on Increasing Their Shareholding
2015-035 Announcement on Result of the Issue of 2015 First Tranche of 9 July 2015 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2015-036 Announcement on Result of the Issue of 11 July 2015 http://www.cninfo.com.cn
2015 First Tranche of Medium-term note
2015-037 Announcement on Unusual Movement in Share Trading 13 July 2015 http://www.cninfo.com.cn
2015-038 Indicative Announcement on Increase in Shareholding by 18 July 2015 http://www.cninfo.com.cn
Party Acting in Concert with Directors of the Company
2015-039 Results of the Seventh Extraordinary Meeting of 18 July 2015 http://www.cninfo.com.cn
the Seventh Session of the Board
2015-040 Announcement on Disposal of Fuyu Chenming 18 July 2015 http://www.cninfo.com.cn
2015-041 Indicative Announcement on Resolution of 18 July 2015 http://www.cninfo.com.cn
the 2015 Second Extraordinary General Meeting
2015-042 Indicative Announcement on 23 July 2015 http://www.cninfo.com.cn
Entering into Equipment Purchase Contracts
2015-043 Results of the 2015 Second Extraordinary General Meeting 23 July 2015 http://www.cninfo.com.cn
2015-044 Announcement on the Progress of External Investment 4 August 2015 http://www.cninfo.com.cn
2015-045 Announcement on Result of the Issue of 2015 Second Tranche of 11 August 2015 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2015-046 Resignation of Non-Executive Director 22 August 2015 http://www.cninfo.com.cn
61
VII Material Matters
VXIII. Other matters of significance (Cont’d)
7. Information disclosure index for 2015 (Cont’d)
Announcement
No. Subject matter Date of publication Publication website and index
2015-047 Announcement on Approval of the Application for Non-public Issue 22 August 2015 http://www.cninfo.com.cn
of Preference Shares by the Public Offering Review Committee of
China Securities Regulatory Commission
2015-048 Announcement on Result of the Issue of 2015 Third Tranche of 27 August 2015 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2015-049 Results of the Tenth Meeting of the Seventh Session of the Board 28 August 2015 http://www.cninfo.com.cn
2015-050 2015 Interim Report Summary 28 August 2015 http://www.cninfo.com.cn
2015-051 Announcement on Commencement of Asset Securitisation Operation 28 August 2015 http://www.cninfo.com.cn
by Financial Leasing Company
2015-052 Announcement on External Investment 28 August 2015 http://www.cninfo.com.cn
2015-053 Notice of 2015 Third Extraordinary General Meeting 28 August 2015 http://www.cninfo.com.cn
2015-054 Announcement on External Investment 28 August 2015 http://www.cninfo.com.cn
2015-055 Announcement on Result of the Issue of 12 September 2015 http://www.cninfo.com.cn
2015 Second Tranche of Medium-term Note
2015-056 Announcement on Approval of Application for Non-public Issue of 23 September 2015 http://www.cninfo.com.cn
Preference Shares by China Securities Regulatory Commission
2015-057 Second Supplementary Notice of 1 October 2015 http://www.cninfo.com.cn
the 2015 Third Extraordinary General Meeting
2015-058 Indicative Announcement on Auction of 1 October 2015 http://www.cninfo.com.cn
Equity Interest in Controlling Shareholder
2015-059 Indicative Announcement of 10 October 2015 http://www.cninfo.com.cn
2015 Third Extraordinary General Meeting
2015-060 Resignation of Independent Non-Executive Director 13 October 2015 http://www.cninfo.com.cn
2015-061 Announcement on Estimated Results for 13 October 2015 http://www.cninfo.com.cn
the First Three Quarter of 2015
2015-062 Announcement on Resolution of 16 October 2015 http://www.cninfo.com.cn
the 2015 Third Extraordinary General Meeting
2015-063 2015 Third Quarter Report 23 October 2015 http://www.cninfo.com.cn
2015-064 Announcement on Result of Issue of 2015 Fourth Tranche of 23 October 2015 http://www.cninfo.com.cn
Super & Short-term Commercial Papers
2015-065 Announcement on Entering into a Strategic Cooperation Agreement 2 November 2015 http://www.cninfo.com.cn
with Bank of China (Shandong Branch)
2015-066 Indicative Announcement on Proposed Reduction 6 November 2015 http://www.cninfo.com.cn
in Registered Capital of Controlling Shareholder
2015-067 Announcement on Result of Issue of 2015 Fifth and 13 November 2015 http://www.cninfo.com.cn
Sixth Tranche of Super & Short-term Commercial Papers
62
VII Material Matters
VXIII. Other matters of significance (Cont’d)
7. Information disclosure index for 2015 (Cont’d)
Announcement
No. Subject matter Date of publication Publication website and index
2015-068 Announcement on Increase in shareholding of H shares 14 November 2015 http://www.cninfo.com.cn
by Hong Kong Company of Controlling Shareholder
2015-069 Announcement on Increase in shareholding of the Company of 1% 17 November 2015 http://www.cninfo.com.cn
by Controlling Shareholder
2015-070 Resignation of Supervisor 20 November 2015 http://www.cninfo.com.cn
2015-071 First Indicative Announcement on the Non-adjustment of 30 November 2015 http://www.cninfo.com.cn
Coupon Rate of “12 Chenming Bond” and Repurchase Measure
for Bondholders
2015-072 Second Indicative Announcement on the Non-adjustment of 1 December 2015 http://www.cninfo.com.cn
Coupon Rate of “12 Chenming Bond” and Repurchase Measure
for Bondholders
2015-073 Announcement on Progress of Increase in shareholding of 1 December 2015 http://www.cninfo.com.cn
the Company by Controlling Shareholder
2015-074 Third Indicative Announcement on the Non-adjustment of 2 December 2015 http://www.cninfo.com.cn
Coupon Rate of “12 Chenming Bond” and Repurchase Measure
for Bondholders
2015-075 Announcement on Repurchase Report of Investor of 3 December 2015 http://www.cninfo.com.cn
“12 Chenming Bond”
2015-076 Announcement on Progress of Increase in shareholding of 10 December 2015 http://www.cninfo.com.cn
the Company by Controlling Shareholder
2015-077 Results of the Twelfth Meeting of the Seventh Session of the Board 18 December 2015 http://www.cninfo.com.cn
2015-078 Announcement on Provision of Guarantee for 18 December 2015 http://www.cninfo.com.cn
Financial Leasing Company
2015-079 Announcement on External Investment 18 December 2015 http://www.cninfo.com.cn
2015-080 Announcement on External Investment 18 December 2015 http://www.cninfo.com.cn
2015-081 Notice of 2016 First Extraordinary General Meeting 18 December 2015 http://www.cninfo.com.cn
2015-082 Announcement on External Investment 18 December 2015 http://www.cninfo.com.cn
2015-083 Announcement on 2015 Dividend Payment in 22 December 2015 http://www.cninfo.com.cn
respect of “12 Chenming Bond”
2015-084 Results of the Eight Extraordinary Meeting of 25 December 2015 http://www.cninfo.com.cn
the Seventh Session of the Board
2015-085 Announcement on Release of Stock-pledged 25 December 2015 http://www.cninfo.com.cn
Repurchase Transactions by Shareholders
2015-086 Announcement on the Result of Repurchase of 28 December 2015 http://www.cninfo.com.cn
Investors of “12 Chenming Bond”
63
VII Material Matters
XIX. Matters of significant of subsidiaries of the Company
√ Applicable Not applicable
1. Commencement of asset securitisation operation of Financial Leasing Company
To facilitate the launch of project financing and leasing operations, the Financial Leasing Company intended to
conduct asset securitisation operation for cash flow receivables from leaseback arrangements. It intended to issue
asset-backed securities of not more than RMB3.0 billion by tranches with terms of not more than 5 years. The
Financial Leasing Company Through conducted asset securitisation to revitalise idle assets, facilitate capital transfer,
broaden financing channels and optimise asset and liability structure, as well as provide a solid foundation for further
expansion of financing operations in other capital markets in the future. For details, please refer to the relevant
announcement (announcement no.: 2015-051) of the Company published on CNINFO on 28 August 2015.
2. Establishment of Qingdao Chenming Financial Leasing Co., Ltd. by Chenming (HK)
In order to promote diversified development, further expand the scale of financial leasing business, enhance overall
strength and competitiveness, and foster new sources of profit growth, the Company intended to invest to establish
Qingdao Chenming Financial Leasing Co., Ltd. in Qingdao through a wholly-owned subsidiary, Chenming (HK)
Limited. For details, please refer to the relevant announcement (announcement no.: 2015-052) of the Company
published on CNINFO on 28 August 2015.
3. Signing of equipment purchase contracts by Huanggang Chenming
In order to construct the 300,000-tonne bleached sulfate pine pulp project, Huanggang Chenming entered into
overseas and domestic equipment purchase contracts with FMW Foerderanlagen Gmbh., Valmet Technologies Oy,
Valmet (China) Co., Ltd., Andritz Oy and Andritz (China) Ltd., respectively. Total consideration for the nine contracts
was approximately RMB951 million, which will be financed by self-funds of Huanggang Chenming and bank loans.
For details, please refer to the relevant announcement (announcement no.: 2015-042) of the Company published on
CNINFO on 23 July 2015.
4. Capital injection to Financial Leasing Company by Chenming (HK)
In order to facilitate the Financial Leasing Company to engage in project financing and leasing business, and increase
the Company’s overall strength, comprehensive competitiveness and profit, Chenming (HK), a wholly-owned
subsidiary of the Company, intended to increase the capital of the Financial Leasing Company by RMB5.0 billion by
instalments with its own funds. After the completion of the capital increase, the registered capital of the Financial
Leasing Company will change to RMB9,072 million from RMB4,072 million. For details, please refer to the relevant
announcement (announcement no.: 2015-009) of the Company published on CNINFO on 27 March 2015.
5. Establishment of Zhanjiang Chenming Port Co., Ltd. through capital contribution by Zhanjiang
Chenming
In order to ensure the ordinary production and operation of Zhanjiang Chenming, lower the transportation cost of the
Company, create economic synergy and strengthen the profitability of Zhanjiang Chenming, Zhanjiang Chenming
established Zhanjiang Chenming Port Co., Ltd. with registered capital of RMB100 million through capital contribution.
64
VII Material Matters
XX. Fulfilment of Social Responsibility
√ Applicable Not applicable
The state is the strongest support for the development of Chenming, while the society is the greatest origin for Chenming’s
development and growth. During its development for more than half a century, Chenming has always adhered to its
philosophy of “building the country through industry development and paying back to society”. It has voluntary performed
its social responsibility, and cultivated the “tree of responsibility”, which has already achieved fruitful results.
The Company has 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 situation 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 mechanism of checks and balances of a legal person with separation of ownership and
operation, separation of the decision-making, execution and supervisory powers, as well as the co-existence of the general
meeting, the Board and the Supervisory Committee. Strict provisions on the rights, duties and responsibilities of the general
meeting, the Board, the Supervisory Committee and general managers have been stipulated. The Company has placed
great emphasis on 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.
Centring the corporate mission of “Creating Sharing Culture within Chenming and Achieving Win-Win Situation”, the core
value of “Good Faith, Win-Win and Sharing”, the corporate spirit of “Learning, Surpass and Leading” as well as the human
resources philosophy of “Providing Staff Trainings, Recruiting Talents, Allocating Human Resources Properly and Retaining
Talents”, the Company has established its own corporate culture, which has became the spirit and driver for the sustainable
and health development of the Company.
The Company strives to the development path of new type industrialisation with high technology contents, low energy
consumption and less pollution. It puts great efforts in the implementation of green low-carbon strategy. In addition, the
Company endeavours to facilitate business development in line with ecological development, enhance its competitiveness
in economic development and environmental protection, and establish its economic and ecological culture. It also seeks for
development while protecting the environment and maintains higher environmental protection while seeking for scientific
development, thus achieving “win-win” situation in economic development and environmental protection. The Company
has strictly in compliance with relevant environmental protection policies, laws and regulations in China. It has mitigated
the impact on environment through industrial optimisation and upgrade, reduced resources utilisation through innovative
operation, and implemented strict management with the concept of environmental protection and safety operation being
penetrated into every procedure in production and operation, thereby promoting the harmonious development between
the people and the Company, as well as that of the Company and the environment. The Company is the first in the industry
in China which passes ISO14001 environmental management system certification. The Company has been named the
environmental friendly enterprise, the recycling economy exemplary enterprise, the outstanding water efficiency unit and the
outstanding unit in comprehensive utilisation of resources of Shandong province.
65
VII Material Matters
XX. Fulfilment of Social Responsibility (Cont’d)
Leveraging its advanced production technology and manufacture equipment, extensive experience in waste treatment and
various comprehensive treatment systems, the Company strives to implement horizontal and vertical control throughout its
production processes, thus achieving low carbon emission through low energy consumption, as well as reduction of use
of resources through recycling. The Company has passed the clean production assessment organised by United Nations
Development Programme in May 1999. The Company focuses on its works in various aspects, including the establishment
of eco-friendly energy consumption system, implementation of on-site 6S management, launch of environmental protection
and hazard inspection works, wide application of new energy conservation and emission reduction technology, promotion
of key energy conservation and emission reduction projects, enhancement of innovative technology, promotion of the
industrialisation of comprehensive resources utilisation, implementation of scientific proposal on “multi-usage of water”
based on the quality, quantity and working procedure, as well as strengthening of the awareness on energy saving and
environmental protection of all staff and habit building. Hence, the Company has achieved whole process control and
management over clean and efficient production.
The Company has strictly implemented in-depth corporate governance. It has put great efforts and huge investments in
promoting the management of “the three wastes” so as to facilitate energy conservation and emission reduction, aiming to
become a low energy consumption and environment friendly enterprise. In respect of waste water treatment, the Company
has established world-class waste water treatment system. It has over 10 waste water treatment facilities for various
purposes, with the most advanced treatment technology in domestic and overseas market being adopted. Hence, the
Company has realised the comprehensive integration and upgrade of waste water treatment facilities in plants, with different
emission indicators better than relevant regulatory benchmark. In respect of solid waste treatment, the Company has
discontinued the traditional landfilling treatment. It has enhanced its technology innovation, strengthened comprehensive
resources utilisation, as well as expanded its industrial chain, thereby achieving recycling and harmless utilisation of solid
wastes. In respect of waste gas treatment, the Company has introduced advanced international environmental protection
equipment and technology for desulphurisation, denitrification and de-dusting, smelly gas treatment and closure of coal
plants. It has adopted scientific waste gas treatment as to ensure our waste gas emission is in compliance with all relevant
environmental protection standards and requirements in China.
The Company strives to create a wealthy society. It has offered more job vacancies, thereby contributing more taxes to
the government, and sharing the achievements of the Company with our staff and society. While caring our staff sincerely
and building up a harmonious relationship with the staff, the Company also greatly supports different charity programmes.
Over the past few years, the Company has donated several ten millions to Shouguang Education Fund, Shouguang Charity
Federation, Weifang Venture Association, Shandong Red Cross and districts suffered from earthquake, which reflects the
outstanding contribution of the Company to building a harmonious society in China. The Company has been honoured with
the title of “Most Caring Donating Enterprise” by Weifang and Shouguang Municipal Committee and Municipal Government
for serval times, while our chairman Mr. Chen Hongguo has been honoured with the title of “Most Caring Person”.
66
VII Material Matters
XX. Fulfilment of Social Responsibility (Cont’d)
Are the Company and its subsidiaries within the heavily-polluted industry as specified by the national environmental
protection authority?
√ Yes No Not applicable
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 in
compliance with the required standards.
3. During the reporting period, the environmental protection facilities operated properly.
4. During the reporting period, in accordance with relevant provisions set out in “Clean Production Promotion Law”
and “Disclosure of Environmental Information (Trial)”, the Company, combined with its actual situation, had prepared
environmental pollution emergency plans, hazardous waste emergency plans and radioactive emergency plans. Data
related to major pollutants’ emission in compliance with the required standards were published in the environmental
protection column of the Company’s website in a timely manner. The Company’s environmental protection work has
been at the forefront of the industry over the past years.
5. During the reporting period, the Company’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, and 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.
67
VII Material Matters
XXI. Corporate bonds
Are there any corporate bonds offered to the public and listed on stock exchanges which do not become due as at the date
of approval of annual report or overdue but not fully settled?
Yes
1. Basic information on corporate bonds
Outstanding
amount of
the bonds
Name of bond Bond abbreviation Bond code Issue date Maturity date (RMB ’0,000) Interest rate Payment method
2011 corporate bonds 11 Chenming Bond 112031 6 July 2011 6 July 2016 200,000 5.95% Interest is paid
of Shandong Chenming annually. The principal
Paper Holdings Limited amount and the last
interest payment will
be paid on the maturity
date.
2012 corporate bonds 12 Chenming Bond 112144 26 December 2012 26 December 2017 380,000 5.65% Interest is paid
of Shandong Chenming annually. The principal
Paper Holdings Limited amount and the last
interest payment will
be paid on the maturity
date.
Stock exchange on which corporate bonds Shenzhen Stock Exchange
are listed or transferred
Investor eligibility arrangement Online subscription: Public investors with A share security account opened under China Securities Depository and
Clearing Co., Ltd. Offline subscription: Institutional investors with A share security account opened under China
Securities Depository and Clearing Co., Ltd.
Interest payment of corporate bonds 1. The interests of 11 Chenming Bond for the period from 6 July 2014 (the value date) to 5 July 2015 were paid on
during the reporting period 6 July 2015. For details, please refer to the Announcement on 2015 Dividend Payment in respect of “11 Chenming
Bond” published by the Company on 30 June 2015. 2. The interests of 11 Chenming Bond for the period from 26
December 2014 (the value date) to 25 December 2015 started to pay on 28 December 2015. For details, please refer
to the Announcement on 2015 Dividend Payment in respect of “12 Chenming Bond” published by the Company on 23
December 2015.
Implementation of special terms such as In accordance to the rules under Prospectus on Public Offering of Corporate Bonds of Shandong Chenming Paper
terms in relation to options to issuer or Holdings Limited, the Company has published the First Indicative Announcement on the Non-adjustment of Coupon
investor, or exchange terms attached Rate of “12 Chenming Bond” and Repurchase Measure for Bondholders, the Second Indicative Announcement on the
to corporate bonds during the reporting Non-adjustment of Coupon Rate of “12 Chenming Bond” and Repurchase Measure for Bondholders and the Third
period (if applicable) Indicative Announcement on the Non-adjustment of Coupon Rate of “12 Chenming Bond” and Repurchase Measure
for Bondholders on 30 November 2015, 1 December 2015 and 2 December 2015, respectively. Investors can choose
to sell all or partial of their “12 Chenming Bond” to the Company at a price of RMB100 each (excluding interest) during
the repurchase registration period (30 November 2015, 1 December 2015 and 2 December 2015). According to bond
repurchase application report provided by Shenzhen Office of China Securities Depository and Clearing Co., Ltd., the
effective repurchase application for “12 Chenming Bond” was 0 with amount of RMB0. The number of outstanding
bonds in custody in Shenzhen Office of China Securities Depository and Clearing Co., Ltd. was 38 million.
68
VII Material Matters
XXI. Corporate bonds (Cont’d)
2. Information on bond custodian and credit rating agency
Bond custodian:
Name UBS Securities Co., Ltd. Office 12/F and 15/F, Contact Wen Zhe Telephone 010-5832 8888
address Winland International person of contact
Finance Centre, person
7 Financial Street,
Xicheng District, Beijing
Credit rating agency(ies) which conducted rating on corporate bonds during the reporting period:
Name China Chengxin Securities Valuation Company Limited Office 8/F, Anji Building, 760 Xizang South Road,
address Huangpu District, Shanghai
3. Use of proceeds from corporate bonds
Use of proceeds from corporate bonds and The use of proceeds from issuance of corporate bonds has
ts implementation strictly completed relevant application and approval procedures.
As at the end of the reporting period, the proceeds from 11
Chenming Bond and 12 Chenming Bond were fully used.
Balance as at the end of the year (RMB ’0,000) 0
Operation of special account for proceeds Special account for proceeds is used for the deposit of special
capital from bonds.
Is the use of proceeds consistent with the use Yes
of proceeds guaranteed under the prospectus,
proposed use of proceeds and other agreement?
4. Credit rating of corporate bonds
The credit rating of 11 Chenming Bond and 12 Chenming Bond as granted by China Chengxin Securities Valuation
Company Limited remained at AA+, and the rating for the Company was AA+ (stable outlook). The 2015 rating report
is expected to be published on CNINFO by the end of April 2016.
5. Credit enhancement mechanism, repayment plan and other repayment guarantee measures for
corporate bonds
There was no change in credit enhancement mechanism, repayment plan and other repayment guarantee measures,
which were consistent with relevant commitments as set out in the prospectuses, during the reporting period.
6. Convening of meeting for bondholders during the reporting period
Not applicable.
7. Performance of bond custodian during the reporting period
The bond custodian performed its duties in accordance with the agreement during the reporting period.
69
VII Material Matters
XXI. Corporate bonds (Cont’d)
8. Major accounting data and financial indicators of the Company over the past two years as at the end
of the reporting period
Unit: RMB ’0,000
Year-on-year
increase/decrease
Item 2015 2014 in percentage
EBITDA 435,954.20 324,673.37 34.27%
Net cash flows from investing activities -346,058.55 -307,326.94 -12.60%
Net cash flows from financing activities 1,406,367.42 232,835.16 504.02%
Balance of cash and cash equivalents
as at the end of the period 188,810.75 97,609.69 93.43%
Current ratio 72.30% 83.89% -11.59%
Gearing ratio 77.86% 74.75% 3.11%
Quick ratio 61.59% 64.60% -3.01%
Proportion of EBITDA to total debts 9.74 10.26 -0.52%
Interest coverage ratio 1.05 0.40 162.50%
Cash interest coverage ratio -7.23 0.88 -921.59%
EBITDA interest coverage ratio 3.24 2.88 12.50%
Loans payment ratio 100.00% 100.00% 0.00%
Interest payment ratio 100.00% 100.00% 0.00%
Major reason for more than 30% in year-on-year change for the above accounting data and financial indicators
√ Applicable Not applicable
To be provided by the financial department
(1) Profit before interest, tax, depreciation and amortisation increased by 34.27% as compared to last year mainly
due to the gradual realisation of profit made by the financial segment of the Company with higher profitability.
(2) Net cash flows from financing activities increased by 504.02% as compared to last year mainly due to greater
financing efforts made by the Company through the issue of short-term commercial papers and perpetual
bonds.
(3) Cash and cash equivalents as at the end of the period increased by 93.43% as compared to last year mainly
due to the increase in amounts received by the Company as at the end of the year.
(4) Interest coverage multiples increased by 162.50% as compared to last year mainly due to higher profitability of
the Company.
(5) Cash interest coverage multiples decreased by 921.59% as compared to last year mainly due to the increase
in cash outflows from operating activities due to the commencement of the financing leasing business of the
Company.
9. Restriction on asset rights as at the end of the reporting period
Item Amount Purpose
Fixed assets 4,567,649,044.39 As pledge for bank borrowings
Intangible assets 311,229,271.55 As pledge for bank borrowings
70
VII Material Matters
XXI. Corporate bonds (Cont’d)
10. Interest payment on other bonds, debt and financing instruments during the reporting period
Amount of
Item interest payment
Corporate bonds 333,671,607.19
Privately placed bonds 54,010,000.00
Medium-term notes 87,000,000.00
Total 474,681,607.19
11. Bank credit obtained, its use and repayment of bank loans during the reporting period
During the reporting period, the Company obtained bank credit of RMB55,900 million, of which RMB33,900 million
was utilised with RMB22,000 million outstanding. The Company repaid bank loans of RMB22,431 million.
12. Performance of relevant agreements or commitments under the prospectus of corporate bonds during
the reporting period
In accordance to the rules under Prospectus on Public Offering of Corporate Bonds of Shandong Chenming Paper
Holdings Limited, the Company published the First Indicative Announcement on the Non-adjustment of Coupon Rate
of “12 Chenming Bond” and Repurchase Measure for Bondholders, the Second Indicative Announcement on the
Non-adjustment of Coupon Rate of “12 Chenming Bond” and Repurchase Measure for Bondholders and the Third
Indicative Announcement on the Non-adjustment of Coupon Rate of “12 Chenming Bond” and Repurchase Measure
for Bondholders on 30 November 2015, 1 December 2015 and 2 December 2015, respectively. Investors may choose
to sell all or part of their “12 Chenming Bond” to the Company at a price of RMB100 each (without interest) during the
repurchase registration period (30 November 2015, 1 December 2015 and 2 December 2015).
According to the bond repurchase application report provided by Shenzhen Office of China Securities Depository and
Clearing Co., Ltd., the effective repurchase application for “12 Chenming Bond” was 0 with amount of RMB0. The
number of outstanding bonds in custody in Shenzhen Office of China Securities Depository and Clearing Co., Ltd.
was 38 million.
13. Matters of significance happened during the reporting period
Nil.
14. Is there any guarantor for corporate bonds?
Yes √No
71
VII Material Matters
XXII. Post balance sheet events
1. Reduction of registered capital of controlling shareholder
Chenming Holdings has completed relevant industrial and commercial alteration registration procedures for capital
reduction with Shouguang Market Supervisory Administration Bureau, and obtained new business license. Its
registered capital has decreased from RMB1,685,425,500 to RMB1,238,787,742.5, of which the shareholding of each
of Shandong Shouguang Jinxin Investment Development Holdings Group Limited, Shouguang Henglian Enterprise
Investment Limited and Shouguang Ruifeng Enterprise Investment Limited was 45.21%, 18.65% and 36.14%,
respectively. Upon the completion of the capital reduction of Chenming Holdings, Shandong Shouguang Jinxin
Investment Development Holdings Group Limited (a wholly-owned subsidiary of Shouguang Office of State-Owned
Asset Supervision and Management) remains as the major shareholder of Chenming Holdings. There will not be
any change in controlling shareholder and beneficial controller of the Company. Chenming Holdings remains as the
controlling shareholder of the Company while Shouguang Office of State-Owned Asset Supervision and Management
remains as the beneficial controller of the Company. For details, please refer to the relevant announcement
(announcement no.: 2016-010) of the Company published on CNINFO on 23 January 2016.
2. Continued increase in shareholding of the Company by controlling shareholder
From 4 January 2016 to 29 January 2016, Chenming Holdings (Hong Kong) Limited, a wholly-owned subsidiary
of Chenming Holdings, acquired 20,285,500 H shares of the Company and 9,042,243 B shares of the Company,
representing approximately 1.51% of the total share capital of the Company, through the trading system. Upon the
completion of increase in shareholding, Chenming Holdings and its parties acting in concert held 394,114,580 shares
of the Company in aggregate, representing approximately 20.35% of the total share capital of the Company.
72
VIII Changes in Share Capital and Shareholders
I. Changes in shares
1. Changes in shares
Unit: share
Opening balance Change during the reporting period (+/-) Closing balance
Shares
converted
Amounts Percentage New issue Bonus issue from reserve Others Sub-total Amounts Percentage
I. Restricted shares 8,241,219 0.42% 8,241,219 0.42%
3. Shares held by other
domestic investors 8,241,219 0.42% 8,241,219 0.42%
Shares held by domestic
natural persons 8,241,219 0.42% 8,241,219 0.42%
II. Non-restricted shares 1,928,164,248 99.58% 1,928,164,248 99.58%
1. RMB ordinary shares 1,105,037,237 57.07% 1,105,037,237 57.07%
2. Domestic listed
oreign shares 470,923,511 24.32% 470,923,511 24.32%
3. Overseas listed
foreign shares 352,203,500 18.19% 352,203,500 18.19%
III. Total number of shares 1,936,405,467 100.00% 1,936,405,467 100.00%
The reasons for such changes
Applicable √ Not applicable
Approval of changes in shareholding
Applicable √ Not applicable
Transfer of shares arising from changes in shareholding
Applicable √ Not applicable
The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings
per share and net assets per share attributable to shareholders of ordinary shares of the Company for the latest
year and the latest period
Applicable √ Not applicable
Other information considered necessary by the Company or required by the securities regulatory authorities to be
disclosed
Applicable √ Not applicable
2. Changes in restricted shares
Applicable √ Not applicable
73
VIII Changes in Share Capital and Shareholders
II. Issuance and listing of securities
1. During the reporting period, issuance of securities (excluding preference shares)
Applicable √ Not applicable
2. Changes in the total number of shares and structure of shareholders and the structure of the assets
and liabilities of the Company
Applicable √ Not applicable
3. Existing staff shares
Applicable √ Not applicable
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unit: share
Total number of 111,976, of which 84,823 Total number of 109,021, of which 82,311 Total number of 0 Total number of 0
shareholders of ordinary were holders of A shares, shareholders of ordinary were holders of A shares, shareholders of shareholders of
shares as at the end of 26,646 were holders of shares as at the end of 26,206 were holders of preference shares with preference shares with
the reporting period B shares and 507 were the month prior to B shares and 504 were restored voting right restored voting right as
holders of H shares the publication date of holders of H shares as at the end of at the end of the month
this annual report the reporting period prior to the disclosure
date of the annual report
Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
Number of Changes
shares held (increase or
at the end of decrease) Number of Number of
Percentage the reporting during the restricted shares non-restrict
Name of shareholders Nature of shareholders of shareholding period reporting period held shares held Share pledged or locked-up
Status of shares Number
SHOUGUANG CHENMING HOLDINGS
COMPANY LIMITED State-owned legal person 15.13% 293,003,657 0 0 293,003,657 Pledged 47,000,000
HKSCC NOMINEES LIMITED Overseas legal person 15.08% 292,010,900 -58,623,600 0 292,010,900
CHENMING HOLDINGS (HONG KONG) LIMITED
(Note 1) Overseas legal person 3.71% 71,783,180 71,783,180 0 71,783,180
CENTRAL HUIJIN ASSET MANAGEMENT LTD. Others 2.07% 40,137,900 40,137,900 0 40,137,900
NATIONAL SOCIAL SECURITY FUND 110 Others 1.51% 29,261,612 29,261,612 0 29,261,612
AGRICULTURAL BANK OF CHINA LIMITED -
BAOYING TRANSITIONAL MOMENTUM
FLEXIBLE ALLOCATION HYBRID SECURITIE
INVESTMENT FUND Others 1.06% 20,502,241 20,502,241 0 20,502,241
HUATAI SECURITIES CO., LTD. Others 0.91% 17,694,768 17,694,768 0 17,694,768
AGRICULTURAL BANK OF CHINA LIMITED -
E FUND RUIHUI FLEXIBLE CONFIGURATION
HYBRID SECURITIES INVESTMENT FUND Others 0.88% 16,974,585 16,974,585 0 16,974,585
NATIONAL SOCIAL SECURITY FUND 118 Others 0.62% 12,084,249 12,084,249 0 12,084,249
BBH A/C VANGUARD EMERGING MARKETS
STOCK INDEX FUND Overseas legal person 0.44% 8,608,238 -3,338,747 0 8,608,238
Connected relationship or connected party A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Shouguang Chenming
relationship among the above shareholders Holdings Company Limited, which is a state-owned legal person. Hence they are persons acting in concert under Administration of Disclosure of Information on the
Change of Shareholdings in Listed Companies Procedures. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in
concert and is also not aware that any other shareholders of tradable shares are connected with each other.
74
VIII Changes in Share Capital and Shareholders
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 of
the reporting
Name of shareholders period Class of shares
Class of shares Number
SHOUGUANG CHENMING HOLDINGS 293,003,657 RMB ordinary shares 293,003,657
COMPANY LIMITED
HKSCC NOMINEES LIMITED 292,010,900 Overseas listed 292,010,900
foreign shares
CHENMING HOLDINGS 71,783,180 Domestic listed 12,868,680
(HONG KONG) LIMITED (Note 2) foreign shares
Overseas listed 58,914,500
foreign shares
CENTRAL HUIJIN ASSET MANAGEMENT LTD. 40,137,900 RMB ordinary shares 40,137,900
NATIONAL SOCIAL SECURITY FUND 110 29,261,612 RMB ordinary shares 29,261,612
AGRICULTURAL BANK OF CHINA LIMITED 20,502,241 RMB ordinary shares 20,502,241
— BAOYING TRANSITIONAL MOMENTUM
FLEXIBLE ALLOCATION HYBRID SECURITIE
INVESTMENT FUND
HUATAI SECURITIES CO., LTD. 17,694,768 RMB ordinary shares 17,694,768
AGRICULTURAL BANK OF CHINA LIMITED - 16,974,585 RMB ordinary shares 16,974,585
E FUND RUIHUI FLEXIBLE CONFIGURATION
HYBRID SECURITIES INVESTMENT FUND
NATIONAL SOCIAL SECURITY FUND 118 12,084,249 RMB ordinary shares 12,084,249
BBH A/C VANGUARD EMERGING MARKETS 8,608,238 Domestic listed 8,608,238
STOCK INDEX FUND foreign shares
Connected relationship or connected party A shareholder, Chenming Holdings (Hong Kong) Limited, which
relationship among the top ten shareholders of is an overseas legal person, is a wholly-owned subsidiary
non-restricted shares, and between the top ten of a shareholder, Shouguang Chenming Holdings Company
shareholders of non-restricted shares and Limited, which is a state-owned legal person. Hence they are
the top ten shareholders persons acting in concert under Administration of Disclosure of
Information on the Change of Shareholdings in Listed Companies
Procedures. Save for the above, it is not aware that any other
shareholders of tradable shares are persons acting in concert and
is also not aware that any other shareholders of tradable shares
are connected with each other.
Note 1 and Note 2: As at the disclosure date of this report, Chenming Holdings (Hong Kong) Limited holds 21,910,923 B shares and 79,200,000
H shares of the Company, amounting to 101,110,923 shares and accounting 5.22% of the share capital.
Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinary
shareholders and top 10 shareholders of non-restricted shares of the Company
Yes √ No
The top 10 ordinary shareholders and top 10 shareholders of non-restricted ordinary shares of the Company did not
enter into any agreed repurchase transaction during the reporting period.
75
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
2. Controlling shareholders of the Company
Nature of controlling shareholder: regional state-owned enterprise
Type of controlling shareholder: legal person
Legal
representative
Name of controlling Person in charge Date of
shareholders of the unit establishment Enterprise code Principal business
Shouguang Chenming Holdings Chen Hongguo 30 December 2005 78348518-9 Investment in paper
Company Limited making, electricity, heat
and arboriculture
Shareholdings of controlling Save for the Company, Shouguang Chenming Holdings Company Limited does not have
shareholders who have control over or hold any equity interest of other domestic or overseas listed companies.
control or hold shares in
other domestic or
overseas listed
companies during
the reporting period
Change of controlling shareholders during the reporting period
Applicable √ Not applicable
There was no change of controlling shareholders of the Company during the reporting period.
3. Beneficial owner of the Company
Nature of the beneficial owner: Regional state-owned assets administration authority
Type of the beneficial owner: legal person
Legal
representative/
Person in
charge of Date of
Name of beneficial owner the unit establishment Enterprise code Principal business
State-owned Assets Supervision and Fu Xingang 1 August 1991 F5108355-4Responsible for the
Administration Office of management and capital
Shouguang City operation of the state-owned
assets of enterprises and
business units in
Shouguang city
Shareholdings of beneficial owner who has Save for the Company, State-owned Assets Supervision and
control or holds shares in other domestic Administration Office of Shouguang City does not have control
or overseas listed companies over or hold any equity interest of other domestic or overseas
during the reporting period listed companies.
76
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
3. Beneficial owner of the Company (Cont’d)
Change of beneficial owner during the reporting period
Applicable √ Not applicable
There was no change of beneficial owner of the Company during the reporting period.
State-owned Assets Supervision and
Administration Office of Shouguang City
100.00%
Shandong Shouguang Jinxin Investment Holdings Limited
59.73% (Note 1)
Shouguang Chenming Holdings Company Limited
100.00%
15.13% Chenming Holdings
(Hong Kong) Limited
3.71% (Note 2)
Shandong Chenming Paper Holdings Limited
Note 1: On 19 January 2016, Chenming Holdings completed the change in the industrial and commercial registration in relation to
reduction of registered capital with the Market Supervision Administration of Shouguang City and obtained the new business
licence. Its registered capital decreased from RMB1,685.42555 million to RMB1,238.7877425 million, of which Shangdong
Shouguang Jinxin Investment Holdings Limited held 45.21%.
Note 2: As at the disclosure date of this report, Chenming Holdings (Hong Kong) Limited holds 21,910,923 B shares and 79,200,000 H
shares of the Company, amounting to 101,110,923 shares and accounting 5.22% of the share capital.
Beneficial owner controlling the Company through trust or other asset management method
Applicable √ Not applicable
4. Other legal person shareholders interested in over 10% of the shares of the Company
Applicable √ Not applicable
5. Restrictions on decrease in shareholding by controlling shareholders, beneficial owner, reorganising party and
other undertaking parties
Applicable √ Not applicable
77
IX Preference Shares
As at the disclosure date of this report, the progress of the non-public issue of preference shares of the Company is as follows:
Procedure Related procedure Details of the procedure Date
1 Resolution of the The extraordinary Board meeting considered and approved the 29 December 2014
Board Resolution on Proposal of Non-public Issue of Preference Shares of
Shandong Chenming Paper Holdings Limited on 29 December 2014.
2 Resolution of the The first extraordinary general meeting for 2015 considered and 13 February 2015
general meeting approved the Resolution on Proposal of Non-public Issue of
Preference Shares of Shandong Chenming Paper Holdings Limited.
3 Resolution of the The extraordinary Board meeting considered and approved the 5 June 2015
Board Resolution on Proposal of Non-public Issue of Preference Shares of
Shandong Chenming Paper Holdings Limited on 5 June 2015.
4 Approval of the The Public Offering Review Committee of the CSRC reviewed the 21 August 2015
Public Offering application of the non-public issue of preference shares. Based on
Review Committee the results of the review, the application of the Company for the non-
public issue of preference shares was approved.
5 Approval of the Obtained the “Reply on Approving the Non-public Issue of Preference 17 September 2015
CSRC Shares of Shandong Chenming Paper Holdings Limited” (Zheng Jian
Xu Ke [2015] No. 2130) issued by the CSRC.
6 Receipt of proceeds As of 16 March 2016, the target subscribers of the issue have 16 March 2016
deposited the full amount of the subscription money to the bank
account for the issue designated by the lead underwriter, which
totaled to RMB2.25 billion.
As of 17 March 2016, the total proceeds from the non-public issue of 17 March 2016
preference shares amounted to RMB2,250,000,000. After deducting
the issue expenses paid amounting to RMB11,250,000, on 17
March 2016, the lead underwriter deposited RMB2,238,750,000 to
the special account for proceeds from issue of preference shares
(account number: 377899991010003031390) opened at the Weifang
Xiguan Branch of Bank of Communications. All proceeds were
deposited to the above account in RMB.
7 Verification of On 17 March 2016, Ruihua Certified Public Accountants (Special 17 March 2016
proceeds General Partnership) issued the “Verification Report on Actual
Subscription Money Received from Non-public Issue of Preference
Shares of Shandong Chenming Paper Holdings Limited” (Ruihua
Yan Zi [2016] No. 37020007). As of 12 noon on 17 March 2016, the
lead underwriter deposited all amount received for valid subscription,
which amounted to RMB2,238,750,000 (net of issue expenses), to
the special account of the issuer.
8 Custody registration The preference shares under this issue will be registered for custody 24 March 2016
at the Shenzhen Branch of the China Securities Depository and
Clearing Corporation Limited.
78
X. Directors, Supervisors and Senior Management and Staff
I. Changes in shareholding of Directors, Supervisors and Senior Management
Increase in Decrease in
Shares held as the number of the number of Other changes Shares held as
at the beginning shares held shares held (increase or at the end of
Start date End date of the period during the period during the period decrease) the period
Name Position Status Sex Age of the term of the term (shares) (shares) (shares) (shares) (shares)
Chen Hongguo Chairman and general manager In office M 51 16 May 2013 16 May 2016 6,434,527 0 0 0 6,434,527
Yin Tongyuan Vice Chairman In office M 58 16 May 2013 16 May 2016 2,423,640 0 0 0 2,423,640
Li Feng Director and deputy general manager In office M 43 16 May 2013 16 May 2016 471,818 0 0 0 471,818
Geng Guanglin Director and deputy general manager In office M 42 16 May 2013 16 May 2016 437,433 0 0 0 437,433
Hou Huancai Director In office M 54 16 May 2013 16 May 2016 628,915 0 0 0 628,915
Zhou Shaohua Director and deputy general manager In office M 54 16 May 2013 16 May 2016 123,007 0 0 0 123,007
Yang Guihua Director In office F 50 9 May 2014 16 May 2016 0 0 0 0 0
Wang Xiaoqun Director In office M 60 16 May 2013 16 May 2016 0 0 0 0 0
Zhang Zhiyuan Independent Director In office M 53 16 May 2013 16 May 2016 0 0 0 0 0
Wang Aiguo Independent Director In office M 52 16 May 2013 16 May 2016 0 0 0 0 0
Zhang Hong Independent Director In office F 51 16 May 2013 16 May 2016 0 0 0 0 0
Pan Ailing Independent Director In office F 51 16 May 2013 16 May 2016 0 0 0 0 0
Gao Junjie Chairman of Supervisory Committee In office M 45 16 May 2013 16 May 2016 39,606 0 0 0 39,606
Wang Ju Supervisor In office F 50 16 May 2013 16 May 2016 0 0 0 0 0
Yang Hongqin Supervisor In office F 48 16 May 2013 16 May 2016 0 0 0 0 0
Yin Qixiang Supervisor In office M 78 16 May 2013 16 May 2016 0 0 0 0 0
Guo Guangyao Supervisor Resigned M 73 16 May 2013 18 November 2015 0 0 0 0 0
Li Xueqin Deputy general manager In office F 50 16 May 2013 16 May 2016 429,348 0 0 0 429,348
Wang Chunfang Secretary to the Board and In office M 40 16 May 2013 16 May 2016 130,000 0 0 0 130,000
deputy general manager
Hu Changqing Deputy general manager In office M 50 16 May 2013 16 May 2016 1,238 0 0 0 1,238
Shao Zhenzhong Deputy general manager Resigned M 55 16 May 2013 27 April 2015 0 0 0 0 0
Chang Liting Deputy general manager Resigned M 62 16 May 2013 27 April 2015 0 0 0 0 0
Li Zhenzhong Deputy general manager In office M 42 16 May 2013 16 May 2016 0 0 0 0 0
Poon Shiu Cheong Company secretory and In office M 46 16 May 2013 16 May 2016 0 0 0 0 0
qualified accountant
Total – – – – – – 11,119,532 0 0 0 11,119,532
II. Changes of Directors, Supervisors and Senior Management of the Company
Name Position Type Date Reason
Guo Guangyao Supervisor Resigned 18 November 2015 For personal reasons.
Shao Zhenzhong Deputy general manager Dismissed 27 April 2015 For personal reasons.
Chang Liting Deputy general manager Resigned on expiry of 27 April 2015 Retirement.
term of office
79
X. Directors, Supervisors and Senior Management and Staff
III. Changes in the information of Directors and Supervisors
Under Rule 13.51(B) of the Hong Kong Listing Rules, changes in the information of Directors and Supervisors since the date
of the annual report for the year ended 31 December 2015 are set out below:
Name of Supervisor Details of the change
Guo Guangyao Resigned as Supervisor effective from 18 November 2015
IV. Employment
Professional background, major working experiences and current duties at the Company of Directors, Supervisors and
Senior Management
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 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 and deputy general manager
of the Company in charge of the sales of cultural paper products. 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 of the Company, and a director of Shouguang Chenming Holdings Company
Limited in charge of the operation of Shouguang Chenming.
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.
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 in charge of the service operation.
80
X. Directors, Supervisors and Senior Management and Staff
IV. Employment (Cont’d)
1. Directors of the Company (Cont’d)
(2) Brief biographies of non-executive Directors of the Company
Ms. Yang Guihua, aged 49, holds a doctoral degree. She served as a technician with Jinan Advanced Tissue
Paper Factory ( ), a teacher at Light Chemistry and Environmental Engineering College, Qilu
University of Technology and the leader of the key laboratory for Green Chemistry Technology of Pulping
and Papermaking and Utilisation of Biomass ( ) of the Ministry of
Education. Ms. Yang is a professor of Qilu University of Technology, a national class candidate of National
Hundred, Thousand and Ten Thousand Talent Project ( ), a National Young and Middle-aged
Expert with Outstanding Contributions ( ), a specialist who enjoys the State Council
Special Allowance ( ), a chief expert of Shandong higher education, a Tenth-batch Top
Talent in Professional Technology of Jinan ( ), a standing director of Shandong
Technical Association of Paper Industry, a member of China Technical Association of Paper Industry, a member
of American Chemical Society and a member of Society of Chemistry and Chemical Engineering of Forest
Products, Chinese Society of Forestry. She has served as a non-executive Director of the Company since May
2014.
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.
(3) Brief biographies of independent non-executive Directors
Mr. Wang Aiguo, professor, doctoral tutor and post doctorate in accounting, “Nationwide Excellent Teacher”
( ), Shandong’s Well-known Teacher ( ), chief expert (accounting) of Shandong
Institute ( ( )), Shandong’s Young Expert with Outstanding Contribution (
), previously held positions including deputy chief of Department of Accounting
of Shandong Economic University, deputy chief of the Department of Post-graduate Students of Shandong
Economic University, chief of Department of Accounting of Shandong Economic University and the Dean of
the School of Accounting of Shandong University of Finance and Economics. He currently holds positions
as the Dean of the School of Economics of University of Jinan, 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
directors of China Corn Oil Company Limited and Hisense Kelon Electrical Holdings Co. Ltd. He has served as
an independent non-executive Director of the Company since April 2010.
81
X. Directors, Supervisors and Senior Management and Staff
IV. Employment (Cont’d)
1. Directors of the Company (Cont’d)
(3) Brief biographies of independent non-executive Directors (Cont’d)
Mr. Zhang Zhiyuan, professor, doctor of management, economics postdoctoral fellow, 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 ( ,
). 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 (
) and others. In recent years, he was commissioned 4 national projects and over 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 is a Ph. D. in Economics and currently a professor and advisor to doctoral students at
Shandong University, head of a multinational corporation research institute, non-practising member of the
Chinese Institute of Certified Public Accountants, director of China Association of International Trade, director
of Shandong Province External Trade Association and independent director of Shandong Gettop Acoustic Co.,
Ltd. She has served as an independent non-executive Director of the Company since April 2010.
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, an advisor to doctoral students, the chief of the Department
of Accounting and the chief of the Investment and Financing Research Centre ( ) in Shandong
University and a non-practising member of CICPA (Chinese Institute of Certified Public Accountants). She is
also a director of the Accounting Institute, Shandong Province ( ), a council member of Shandong
Comparative Management Association, a visiting professor at Soochow University in Taiwan, a visiting scholar
at University of Connecticut in the United States and a state-level candidate for New Century Ten Million Talent
Project ( ). She is a specialist entitled to the State Council Special Allowance (
), and a Young and Middle-aged Expert with Outstanding Contributions in Shandong Province
( ). She is the chief expert of the Major Tender Projects of National Social and
Science Fund ( ). She has finished various research projects at national and
provincial level and published more than 80 academic papers. She is also an independent director of Sinotruck
Jinan Truck Co., Ltd. ( ) and Inspir Software Co., Ltd. She has served as an
independent non-executive director of the Company since May 2013.
82
X. Directors, Supervisors and Senior Management and Staff
IV. Employment (Cont’d)
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
head of the inspection department, etc. He is currently the chairman of supervisory committee, assistant to general
manager in charge of the department of securities and investment management department, 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 (
), chief of Tizheng Department of Shouguang City, Shandong Province ( ), and
head of Qinghua Bureau of Shouguang City ( ). 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 (
) as chief craftsman and engineer between 1969 and 1981, for Shouguang Chemical Fertiliser Factory (
) as deputy factory chief and party committee secretary between 1981 and 1987, Shouguang Beer Factory (
) 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 ( ). 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.
3. Brief biographies of Senior Management of the Company
Ms. Li Xueqin was successively awarded titles including “Model Worker in Shandong Province” ( ),
“Model Worker in the Country” ( ) and “Nationwide May 1st Labour Medal” ( ). She was
a deputy of the Tenth, Eleventh and Twelfth National People‘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 holds a degree of EMBA in Finance from Shanghai Jiao Tong University. He joined the Company
in 1997 and 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
the deputy general manager and secretary to the Board of the Company, and the chairman of the Finance Company
and Financial Leasing Company.
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.
83
X. Directors, Supervisors and Senior Management and Staff
IV. Employment (Cont’d)
3. Brief biographies of Senior Management of the Company (Cont’d)
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 and in charge of the sales of coated paper products of the Company.
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.
Employment at the shareholder of the Company
√ Applicable Not applicable
Whether
receiving any
remuneration or
Position at allowance from
Name of shareholder the shareholder 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 21 September 2013 21 September 2016 No
Holdings Company Limited
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
84
X. Directors, Supervisors and Senior Management and Staff
IV. Employment (Cont’d)
3. Brief biographies of Senior Management of the Company (Cont’d)
Employment at other units
√ Applicable Not applicable
Whether receiving
any remuneration
Position at or allowance from
Name of employee Name of other unit the other unit Start date of the term End date of the term other unit
Wang Aiguo Shandong Iron and Steel Co., Ltd. Independent director 10 April 2015 10 April 2018 Yes
Wang Aiguo China Corn Oil Company Limited Independent director 23 November 2015 23 November 2018 Yes
Wang Aiguo Hisense Kelon Electrical Independent director 26 June 2015 25 June 2018 Yes
Holdings Co. Ltd.
Pan Ailing Sinotruck Jinan Truck Co., Ltd. Independent director 6 May 2013 5 May 2016 Yes
Pan Ailing Inspir Software Co., Ltd. Independent director 14 March 2014 13 March 2017 Yes
Zhang Hong Sinoer Men’s Clothes Co., Ltd. Independent director 5 September 2014 4 September 2017 Yes
Zhang Hong Shandong Gettop Acoustic Independent director 16 September 2014 15 September 2017 Yes
Co., Ltd.
Zhang Hong Shandong Zhangqiu Blower Independent director 28 July 2015 27 July 2018 Yes
Co., Ltd.
Explanation of the employment at the other unit All the above three persons were independent directors of the Company.
Sanctions against current Directors, Supervisors and Senior Management of the Company and those who resigned
during the reporting period by securities regulatory authorities in the past three years
Applicable √ Not applicable
V. 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 by the
remuneration and assessment committee 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.
3. The details of the remunerations of Directors, Supervisors and Senior Management are set out in note (XI)
“Remuneration of key management staff” in this Financial Report.
85
X. Directors, Supervisors and Senior Management and Staff
V. Remunerations of Directors, Supervisors and Senior Management
Remunerations of Directors, Supervisors and Senior Management during the Reporting Period
Unit: RMB’0,000
Total Received
remuneration remuneration
before tax from related
received from parties of
Name Position Sex Age Status the Company the Company
Chen Hongguo Chairman and general manager M 51 In office 500 No
Yin Tongyuan Vice-chairman M 58 In office 300 No
Li Feng Director and deputy general manager M 43 In office 76.7 No
Geng Guanglin Director and deputy general manager M 42 In office 147.01 No
Hou Huancai Director M 54 In office 34.17 No
Zhou Shaohua Director and deputy general manager M 54 In office 169.81 No
Yang Guihua Director F 50 In office 5 No
Wang Xiaoqun Director M 60 In office 5 No
Zhang Zhiyuan Independent Director M 53 In office 5 No
Wang Aiguo Independent Director M 52 In office 5 No
Zhang Hong Independent Director F 51 In office 5 No
Pan Ailing Independent Director F 51 In office 5 No
Gao Junjie Chairman of Supervisory Committee M 45 In office 30.38 No
Wang Ju Supervisor F 50 In office 1.18 No
Yang Hongqin Supervisor F 48 In office 19.22 No
Yin Qixiang Supervisor M 78 In office 2.5 No
Guo Guangyao Supervisor M 73 In office 2.5 No
Li Xueqin Deputy general manager F 50 In office 208.72 No
Secretary to the Board and
Wang Chunfang deputy general manager M 40 In office 166.81 No
Hu Changqing Deputy general manager M 50 In office 165.23 No
Shao Zhenzhong Deputy general manager M 55 Resigned 17.46 No
Chang Liting Deputy general manager M 62 Resigned 78.05 No
Li Zhenzhong Deputy general manager M 42 In office 106.2 No
Poon Shiu Cheong Company secretary and M 46 In office 12.67 No
qualified accountant
Total – – – – 2,068.61 –
Directors, Supervisors and Senior Management of the Company granted share options as incentives during the reporting
period
Applicable √ Not applicable
86
X. Directors, Supervisors and Senior Management and Staff
VI. Personnel of the Company
1. Number of staff, specialty composition and education level
Number of staff at the Company (person) 4,199
Number of staff at major subsidiaries (person) 7,694
Total number of staff (person) 11,893
Total number of staff receiving remuneration during the period (person) 11,893
Number of ex-employees or retired employees for which the Company and
the major subsidiaries have obligations (person) 11
Specialty composition
Category of specialty composition Number of people (person)
Production staff 6,650
Sales staff 791
Technical staff 1,826
Financial staff 158
Administrative staff 1,194
Other staff 1,274
Total 11,893
Education level
Category of education level Number of people (person)
Postgraduate and above 17
Undergraduate 1,108
Post-secondary 2,866
Technical secondary and below 7,902
Total 11,893
87
X. Directors, Supervisors and Senior Management and Staff
VI. Personnel of the Company (Cont’d)
2. 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 2015 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 the employees’ 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.
3. Training program
The Company attaches great importance to staff training and actively develops a learning atmosphere. Detailed
annual 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 has revised and improved its training management
system: It has developed “Management Measures of Internal Lecturers” for the training, selection and accreditation
of internal lecturers, and strictly implemented the monitoring and evaluation of internal lecturers under the applicable
rules; and researched on the demand for online learning system and devised implementation plan for the
construction of the system.
4. Labour outsourcing
Applicable √ Not applicable
88
XI Corporate Governance
I. Corporate governance in practice
(I) Corporate governance in practice
The Company operated in compliance with the requirement of Companies Law ( ), Securities Law (
), Code of Corporate Governance for Listed Companies ( ), Rules Governing Listing of
Stocks on Shenzhen Stock Exchange ( ), 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.
(II) 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 prior year. It improved corporate governance practice
in a timely manner according to relevant regulations, and revised the Implementing Rules of the Audit Committee of
the Board and amendments to the Articles of Association and other systems. The Company carried out the following
activities to continue to improve corporate governance:
1. In view of the requirements to be implemented from 1 January 2016 pursuant to the Rules Governing the Listing
of Securities on the Stock Exchange of Hong Kong Limited (as amended) and the actual circumstances of the
Company, the Board of the Company amended the Implementing Rules of the Audit Committee of the Board.
The amendments were considered and approved at the twelfth meeting of the seventh session of the Board and
implemented thereafter.
2. According to relevant provisions of the Company Law of the People’s Republic of China, the State Council
Guidance Opinion on the launch of the preference shares pilot scheme and the Experimental Administrative
Measures on Preference Shares, and based on the issue of preference shares by the Company, the Company
amended its Articles of Association and formulated the amendments to the Articles of Association. The proposal
was considered and approved at the 2015 first extraordinary general meeting and implemented thereafter.
3. In view of the further amendments to the Proposal of Non-public Offer of Preference Share of Shandong
Chenming Paper Holdings Limited, corresponding amendments were required to be made to certain parts of
the Articles of Association that were related to the issue proposal. The resulting amendments to the Articles of
Association were considered and approved at the 2015 second extraordinary general meeting 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 material non-compliance of the regulatory documents on the governance of listed companies issued by the
CSRC in respect of actual governance of the Company
Yes √ No
There was no material non-compliance of the regulatory documents on the governance of listed companies issued by
the CSRC in respect of the actual governance of the Company.
89
XI Corporate Governance
II. Particulars about the independence in terms of businesses, personnel, assets, organisations,
and finance from the controlling shareholder
In terms of business: The Company was completely independent from the controlling shareholder, and had business
independence and self operation capability.
In terms of personnel: The labour, personnel and salary management were completely separated from the controlling
shareholder.
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.
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.
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.
III. Competition in the industry
Applicable √ Not applicable
IV. Annual general meeting and extraordinary general meeting convened during the reporting
period
1. General meetings during the reporting period
Attendance
Type of rate of
Meeting meeting investors Convened date Disclosure date Disclosure index
2015 first extraordinary general meeting, Extraordinary 0.02% 13 February 2015 14 February 2015 http://www.cninfo.com.cn
2015 first class meeting for general meeting
holders of A and B shares and
2015 first class meeting for
holders of H shares
2014 annual general meeting Annual general 0.01% 15 May 2015 16 May 2015 http://www.cninfo.com.cn
meeting
2015 second extraordinary meeting Extraordinary 0.00% 22 July 2015 23 July 2015 http://www.cninfo.com.cn
general meeting
2015 third extraordinary meeting Extraordinary 0.01% 10 October 2015 10 October 2015 http://www.cninfo.com.cn
general meeting
90
XI Corporate Governance
IV. Annual general meeting and extraordinary general meeting convened during the reporting
period (Cont’d)
2. Extraordinary general meeting requested by holders of the preference shares with voting rights
restored
Applicable √ Not applicable
V. Performance of Independent Directors during the reporting period
1. Attendance of independent Directors at Board meetings and general meetings
Attendance of Independent Directors at board meetings
Number of
attendance
required
for Board
meetings
Name of during Absent twice
independent the reporting Attendance Attendance by Attendance in a row
Directors period in person communication by proxy Absence (in person)
Zhang Zhiyuan 8 1 7 0 0 No
Wang Aiguo 8 1 7 0 0 No
Zhang Hong 8 1 7 0 0 No
Pan Ailing 8 1 7 0 0 No
Number of the general meetings attended by independent Directors 1
Explanation on absence from the Board meeting twice in a row:
None of the independent Directors was absent from the Board meeting twice in a row.
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 objection on related issues of the Company from the independent Directors during the reporting period.
91
XI Corporate Governance
V. Performance of Independent Directors during the reporting period (Cont’d)
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
During the reporting period, the independent Directors of the Company focused on the operation of the Company
and performed their duties strictly in accordance with relevant laws and regulations and the Articles of Association.
They provided a lot of valuable professional recommendations on optimising the Company’s system and decision on
daily operation. They also issued independent and fair opinion on matters arising during the reporting period which
requested opinions from independent Directors. This helped optimising the supervising system of the Company, as
well as protecting the legal rights of the Company and all shareholders.
Publication date Subject matter Opinion
26 March 2015 Matters relating to internal control self-assessment report of the Agreement
Company, external guarantees, determination of remuneration of
directors and senior management for 2014, use of proceeds by related
parties and related party transactions, appointment of accounting firm,
provision of guarantee for comprehensive credit line of wholly-owned
subsidiaries and related party transactions
17 July 2015 Matters relating to the disposal of equity interest in Fuyu Chenming Agreement
27 August 2015 Matters relating to the use of proceeds by controlling shareholders and Agreement
other related parties of the Company and external guarantees
18 December 2015 Matters relating to the provision of guarantee for the Financial Leasing Agreement
Company
92
XI Corporate Governance
VI. Performance of duties by special committees under the Board of Directors
(I) Audit committee
1. The following major tasks were completed in 2015:
(1) it conducted pre-audit communication with external auditing institution engaged by the Company in
respect of the 2014 financial report auditing, reviewed the 2014 auditing report and financial report and
submitted such reports to the Board of the Company;
(2) it reviewed the first quarter report of the Company as of 31 March 2015, which was submitted to the
Board for approval.
(3) it reviewed the interim financial statements for the six months ended 30 June 2015, which were submitted
to the Board for approval.
(4) it reviewed the third quarter report of the Company as of 30 September 2015, which was submitted to the
Board for approval.
2. Auditing work conducted on the 2015 financial report of the Company is as follows:
(1) it reviewed the 2015 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 2015 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 the auditors’ 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 2016, the auditors’ 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 2015.
(II) Remuneration and assessment committee
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 2014 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 2014 and assessment of the Directors and the Senior
Management of the Company.
93
XI Corporate Governance
VI. Performance of duties by special committees under the Board of Directors (Cont’d)
(III) Strategic committee
During the reporting period, the strategic committee held two meetings. The first meeting in 2015 considered the
proposed resolutions in relation to the capital increase of the Financial Leasing Company, which was submitted
to the eighth meeting of the seventh session of the Board of the Company for consideration and approval. The
second meeting in 2015 considered the proposed resolutions in relation to the construction of integrated terminal of
Huanggang Chenming, the construction of Zhanjiang Chenming’s 600,000-tonne liquid packaging paper project and
the investment and establishment of industry development fund, which were submitted to the twelfth 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.
VII. Performance of duties by the Supervisory Committee
During the reporting period, the supervisory committee held four meetings.
The ninth meeting of the seventh session of the Supervisory Committee considered and approved seven proposed
resolutions respectively in relation to the 2014 supervisors’ report, the full text and summary of the 2014 annual report of the
Company, the 2014 financial statements of the Company, the internal control self-assessment report of the Company and
the engagement of an external auditor for 2015;
The tenth 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 2015 first quarterly report of the Company;
The eleventh 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 2015 interim report of the Company;
The twelfth 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 2015 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.
VIII. Assessment and incentive mechanism for the Senior Management
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 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.
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XI Corporate Governance
IX. Internal Control
1. Particulars of material deficiencies in internal control detected during the reporting period
Yes √ No
2. Self-assessment Report on Internal Control
Date of Disclosure of Assessment Report on Internal Controls 30 March 2016
Index of Assessment Report on Internal Controls Disclosure http://www.cninfo.com.cn
Percentage of Total Assets Included in Assessment to
Total Assets in Consolidated Financial Statements of the Company 99.00%
Percentage of Revenue Included in Assessment to
Revenue in Consolidated Financial Statements of the Company 99.80%
Basis for identifying deficiencies
Type Financial reporting Non-financial reporting
Qualitative criteria (1) Indicators of material deficiencies in the Indicators of material deficiencies in the
internal control of financial reporting include: internal control of non-financial reporting
ineffective control environment, material loss include: major failure as a result of the decision
to and adverse impact on the Company as a making process; lack of control system or
result of misconduct by Directors, Supervisors occurrence of systematic failure in principal
and senior management; material misstatement activities and lack of effective compensation
of non-exceptional incidents; ineffectiveness in control, high turnover rate of mid to senior level
supervision of internal control of the Company management and senior technical staff; failure
by the Board, or its delegated authorities, and to address the findings of internal control
the internal audit department. (2) Indicators of assessment, in particular material deficiencies;
major deficiencies in internal control of financial and other factors which impose material
reporting include: failure in selecting and adverse impact on the Company. Indicators of
applying accounting policies in accordance major deficiencies in internal control of non-
with generally accepted accounting principles; financial reporting include: general failure
failure to establish procedures and control as a result of the decision making process;
measures to prevent corrupt practices; deficiencies in major business procedure or
failure to establish corresponding control system; high turnover rate of key staff; failure
mechanism for the accounting of unusual or to address the findings of internal control
special transactions or failure to implement assessment, in particular major deficiencies;
or set up the corresponding compensation and other factors which impose great adverse
control; failure to reasonably ensure the impact to the Company. Indicators of general
truthfulness and accuracy in the preparation of deficiencies in internal control of non-financial
financial statement, as a result of one or more reporting include: low efficiency of decision
deficiencies in the control of financial reporting making process; deficiencies in general
as of the end of the period. (3) General business procedure or system; high turnover
deficiencies: other deficiencies in internal rate of employees; and failure to rectify general
control that do not constitute material or major deficiencies.
deficiencies.
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XI Corporate Governance
IX. Internal Control (Cont’d)
2. Self-assessment Report on Internal Control (Cont’d)
Basis for identifying deficiencies
Type Financial reporting Non-financial reporting
Quantitative criteria General deficiencies: deviation of less than or General deficiencies: quantitative criterion
equal to 0.1% from the target of accounting (financial loss) less than RMB5,000,000;
error/the total revenue; Major deficiencies: major deficiencies: quantitative criterion
deviation of 0.1% - 0.5% from the target of (financial loss) between RMB5,000,000
accounting error/the total revenue; material and RMB20,000,000; material deficiencies:
deficiencies: deviation greater than 0.5% from quantitative criterion (financial loss) over
the target of accounting error/the total revenue RMB20,000,000.
in consolidated statements.
Number of material deficiencies in financial reporting: (number) 0
Number of material deficiencies in non-financial reporting: (number) 0
Number of major deficiencies in financial reporting: (number) 0
Number of major deficiencies in non-financial reporting: (number) 0
X. Auditors’ report on internal control
√ Applicable Not applicable
Auditors’ opinion contained in the Auditors’ report on internal control
We are of the opinion that Shandong Chenming Paper Holdings Limited had in all material aspects maintained effective
internal control over the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31
December 2015.
Disclosure of Auditors’ Report on Internal Control Disclosed
Date of Disclosure of Auditors’ report on internal control 30 March 2016
Index of Auditors’ Report on Internal Control Disclosure http://www.cninfo.com.cn
Type of Opinion in Auditors’ Report on Internal Control Standard and unqualified opinion
Material deficiencies in non-financial reporting No
Any opinions of non-standardisation set out in the Auditors’ Report on Internal Control issued by accountants
Yes √ No
Auditors’ Report on Internal Control issued by accountants was in line with Directors’ opinions contained in Self-assessment
Report
√ Yes No
96
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited
(I) 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 (IV) “Chairman and general manager”, (XVII) “Communications with shareholders” and
Code A.1.8 below 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.
(II) Securities transactions by Directors and Supervisors
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.
(III) 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 convening shareholders’
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 of Company’s debentures or other securities; (7) to draft plans for material
acquisition and repurchase of the Company’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 the Company’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: Yang Guihua, Wang Xiaoqun; and four independent non-
executive Directors: Zhang Zhiyuan, Wang Aiguo, Zhang Hong and Pan Ailing. Please refer to section X of this Annual
Report for their brief biographies.
Pursuant to Code A.1.8 of the code provisions, the Company should arrange appropriate insurance cover in respect
of legal action against its Directors. As at the date hereof, the Company has not made such arrangement for the year
as no consensus has been reached with the existing insurer. The Company, however, is in negotiations with another
insurer for such arrangement for 2016.
97
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board of directors (Cont’d)
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.
During the reporting period, the Board held 8 meetings, 5 of which were regular meetings and 3 were extraordinary
meetings. All Directors of the Company attended 8 Board meetings.
Attendance at the relevant meetings (attention required/attended)
Remuneration
and
Audit Nomination assessment Strategic
Board committee committee committee committee General
Name Position meetings meetings meetings meetings meetings meetings
I. Executive Directors
Chen Hongguo Chairman and 8/8 N/A 0/0 1/1 2/2 2/2
General Manager
Yin Tongyuan Vice Chairman 8/8 N/A N/A N/A 2/2 4/4
Li Feng Director and Deputy 8/8 N/A N/A N/A N/A 0/0
General Manager
Geng Guanglin Director and Deputy 8/8 N/A N/A N/A N/A 0/0
General Manager
Hou Huancai Director 8/8 N/A N/A N/A N/A 0/0
Zhou Shaohua Director and Deputy 8/8 N/A N/A N/A N/A 0/0
General Manager
II. Non-executive Directors
Yang Guihua Director 8/8 5/5 N/A N/A N/A 0/1
Wang Xiaoqun Director 8/8 N/A N/A N/A N/A 0/3
III. Independent non-executive Directors
Zhang Zhiyuan Independent Director 8/8 N/A N/A N/A N/A 0/0
Wang Aiguo Independent Director 8/8 5/5 0/0 1/1 N/A 0/1
Zhang Hong Independent Director 8/8 5/5 N/A N/A 2/2 0/0
Pan Ailing Independent Director 8/8 N/A 0/0 1/1 N/A 0/0
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XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) 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 5 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.
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.
Directors and Supervisors of the Company were arranged by the Company to attend the 1st and the 2nd session
of training courses 2015 for directors and supervisors held by China Securities Regulatory Commission, Shandong;
and, briefing paper in respect of amendments to Hong Kong Listing Rules 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.
(IV) Chairman and general manager
The chairman and general manager of the Company is Mr. Chen Hongguo. Please refer to section X of this annual
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
the Company’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.
99
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(IV) Chairman and general manager (Cont’d)
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 and code provisions under the Code on Corporate
Governance Practices as set out in 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.
(V) 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 X of this annual 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.
(VI) 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.
(VII) 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.
(VIII) Board Committees
Pursuant to Code on Corporate Governance, the Board has established three committees, namely, Audit Committee,
Remuneration and Assessment Committee and Nomination Committee, for overseeing particular aspects of the
Company’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 Code on Corporate Governance, the Company also set up Strategic Committee, for
overseeing and studying long-term strategic development plan of the Company and making recommendations.
100
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(IX) Audit Committee
The Audit Committee of the Company comprises three members, including Zhang Hong (as the chairman), Yang
Guihua and Wang Aiguo. Two of them, including the chairman, are independent non-executive Directors. The primary
duties of the Audit Committee are serving as a communication media between internal and external audit and the
related review and supervision. 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 financial control, risk control and internal control system of the Company and
audit the significant connected transactions; (6) discussing the risk management and internal control system with
the management to ensure the management has performed its duties to establish effective systems. The discussion
should include the adequacy of resources, staff qualifications and experience, training programs and budget of the
accounting and financial reporting functions of the Company; (7) studying the major investigation findings on risk
management and internal control matters on its own initiative or as delegated by the Board and the management’s
response to these findings; (8) where the annual report includes statements in relation to the risk management and
internal control system of the Company, reviewing such statements prior to submission to the Board for approval; and
(9) 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 2015 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 VI of this
section.
Risk Management and Internal Control
The Board is responsible for the risk management and internal control systems and reviewing their effectiveness.
Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can
only provide reasonable but not absolute assurance against material misstatement or loss.
The Audit Committee (on behalf of the Board) oversees management in the design, implementation and monitoring
of the risk management and internal control systems, and the management has provided a confirmation to the Audit
Committee (and the Board) on the effectiveness of these systems for the year ended 31 December 2015.
In respect of internal control system, procedures have been designed for safeguarding assets against unauthorised
use or disposition, ensuring the maintenance of proper accounting records for the provision of reliable financial
information for internal use or for publication, and ensuring compliance of applicable laws, rules and regulations.
101
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(X) Remuneration and Assessment Committee
The Remuneration and Assessment Committee of the Company comprises three members, 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 on Corporate Governance Practices.
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 the meeting’s held by the Remuneration and Assessment Committee during the reporting period are
detailed in part VI of this section.
(XI) Nomination Committee
The Nomination Committee of the Company comprises three members, including Pan Ailing (as the chairman), Chen
Hongguo and Wang Aiguo. Two of them, including the chairman, are independent non-executive Directors, which is
in compliance with Code on Corporate Governance Practices. 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 the company’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.
102
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XI) Nomination Committee (Cont’d)
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 the meetings held by the Nomination Committee during the reporting period are detailed in part VI of
this section.
(XII) Strategic Committee
The Company set up a Strategic Committee which comprised three members, 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.
(XIII) Auditors
On 29 May 2012, the 2011 annual general meeting of the Company agreed to continue to engage RSM China
Certified Public Accountants (Special General Partnership) 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 (Special General Partnership) 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.
103
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XIII) Auditors (Cont’d)
On 9 May 2014, the 2013 annual general meeting of the Company agreed to continue to engage Ruihua Certified
Public Accountants (Special General Partnership) as the domestic auditors of the Company for 2014 and be
responsible for domestic auditing of the Company for 2014.
On 15 May 2015, the 2014 annual general meeting of the Company agreed to continue to engage Ruihua Certified
Public Accountants (Special General Partnership) as the domestic auditors of the Company for 2015 and be
responsible for domestic auditing of the Company for 2015.
The resolution to reappoint Ruihua Certified Public Accountants (Special General Partnership) as the domestic
auditors of the Company for 2016 will be proposed at the forthcoming annual general meeting of the Company.
(XIV) Remuneration for the auditors
The financial statements for 2015 prepared in accordance with Accounting Standards for Business Enterprises by
the Group were audited by Ruihua Certified Public Accountants (Special General Partnership). In 2015, 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.
Ruihua Certified Public Accountants (Special General Partnership) have stated their reporting responsibilities on the
financial statements of the Group in XII. Financial Report.
(XV) 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 Report of the
Supervisory Committee in this annual report.
(XVI) 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.
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XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII)Communications with Shareholders
The Company considers effective communication with Shareholders is essential to enable them to have a clear
assessment of the Group’s performance as well as accountability of the Board. Principal means of communication
with Shareholders of the Company are as follows:
Information disclosure on the Company’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 the Group’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 the
Company’s website.
General meetings
The Company’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 2015 by the Company, three extraordinary general meetings were
convened in 2015. The attendance record of Directors at each general meeting is set out below:
Name Directors attending general meetings in person
Annual General Meeting Chen Hongguo, Yi Tongyuan, Wang Xiaoqun, Wang Aiguo and Yang Guihua
First extraordinary general meeting Yin Tongyuan and Wang Xiaoqun
Second extraordinary general meeting Yi Tongyuan
Third extraordinary general meeting Chen Hongguo, Yin Tongyuan and Wang Xiaoqun
The Company’s external auditor also attended the Annual General Meeting.
Code E.1.2 of the code provisions – This code provision requires the chairman to invite the chairmen of the audit,
remuneration and nomination committees to attend the Annual General Meeting.
Ms. Zhang Hong, the chairman of the audit committee of the Company, and Mr. Zhang Zhiyuan, the chairman of the
nomination committee of the Company, were absent from the Annual General Meeting due to business commitments.
Code A.6.7 of the code provisions – This code provision requires independent non-executive Directors and other
non-executive Directors, as equal board members, should give the Board and any committees on which they serve
the benefit of their skills, expertise and varied backgrounds and qualifications through regular attendance and active
participation. They should also attend general meetings and develop a balanced understanding of the views of
shareholders.
Mr. Wang Aiguo, Mr. Zhang Zhiyuan, Ms. Zhang Hong and Ms. Pan Ailing were absent from the Annual General
Meeting due to business commitments.
Ms. Yang Guihua, Mr. Wang Aiguo, Mr. Zhang Zhiyuan, Ms. Zhang Hong and Ms. Pan Ailing were absent from the
first extraordinary general meeting due to business commitments.
105
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII)Communications with Shareholders (Cont’d)
General meetings (Cont’d)
Mr. Wang Xiaoqun, Ms. Yang Guihua, Mr. Wang Aiguo, Mr. Zhang Zhiyuan, Ms. Zhang Hong and Ms. Pan Ailing were
absent from the second extraordinary general meeting due to business commitments.
Ms. Yang Guihua, Mr. Wang Aiguo, Mr. Zhang Zhiyuan, Ms. Zhang Hong and Ms. Pan Ailing were absent from the
third extraordinary general meeting due to business commitments.
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.
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
holding 10% or more of the Company’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 holding 10% or more of
the Company’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 holding 10% or more of the Company’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 than 10% 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.
106
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVII)Communications with Shareholders (Cont’d)
Shareholders’ rights (Cont’d)
(2) Procedures for sending shareholders’ 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/Secretary to the Board whose contact details are as follows:
Company Secretary Secretary to the Board
Poon Siu Cheong Wang Chunfang
Address: 22nd Floor, World Wide House, Central, Address: No. 2199 East Nongsheng Road,
Hong Kong Shouguang City, Shandong Province
Email Address: kentpoon_1009@yahoo.com.hk Email: 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 forward shareholders’ enquiries and concerns
to the Board and/or relevant Board Committees of the Company, where appropriate, to answer shareholders’
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
over 3% of the total shares of the Company are entitled to propose motions to the Company.
Shareholders individually or jointly holding over 3% of the total shares of the Company may submit extraordinary
motions 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 the Group’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.
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XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(XVIII) Internal Control
For details of internal control of the Company, please refer to XI. Internal Control hereunder.
(XIX) Articles of Association
On 13 February 2015 and 22 July 2015, the Company amended the Articles of Association. The amendments were
primarily relating to the issue of preference shares. 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.
(XX) 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.
Such policies are summarised as follows:
The Company recognises 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, and in the context of the talents, skills and experience of the Board as a whole.
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.
The composition of the Board of the Company is diversified basically. For details, please refer to (III) Composition of
the Board under section XI.
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XII Financial Report
I. Auditors’ Report
Type of auditors’ opinion standard and unqualified auditors’ opinions
The date of the audit report signed 30 March 2016
Name of the auditor Ruihua Certified Public Accountants (special general partnership)
Reference number of the auditors’ report Rui Hua Shen Zi [2016] No. 37020006
Name of certified public accountant Wang Yan, Jing Chuanxuan
Text of the auditors’ 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 2015, the
consolidated and company income statements, the consolidated and company cash flow statements and the consolidated
and company statements of changes in shareholders’ equity for 2015 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 the auditors’ 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, but not to express opinion on the effectiveness of internal
control. 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.
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XII Financial Report
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 2015 and of its consolidated and
company operating results and cash flows for 2015.
Ruihua Certified Public Accountants
(special general partnership) PRC Certified Public Accountant: Wang Yan
Beijing, China PRC Certified Public Accountant: Jing Chuanxuan
30 March 2016
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
31 December 2015
Unit: RMB
Item Closing balance Opening balance
CURRENT ASSETS:
Monetary funds 8,984,326,016.01 5,475,658,186.10
Bills receivable 3,998,782,845.65 3,047,541,556.15
Accounts receivable 3,951,287,979.32 3,489,409,369.20
Prepayments 1,072,990,234.05 1,838,017,454.90
Other receivables 1,469,573,364.01 1,776,467,886.07
Inventories 5,210,917,891.42 5,420,740,468.60
Non-current assets due within one year 2,893,133,653.86 865,738,333.65
Other current assets 7,582,839,356.54 1,656,602,232.09
Total current assets 35,163,851,340.86 23,570,175,486.76
NON-CURRENT ASSETS:
Available-for-sale financial assets 109,000,000.00 73,000,000.00
Long-term receivables 9,084,087,143.84 1,420,598,667.99
Long-term equity investments 70,492,256.38 36,087,848.12
Investment properties 15,996,931.87 17,735,187.91
Fixed assets 24,169,725,529.18 24,744,731,705.04
Construction in progress 5,829,619,258.48 3,709,270,828.53
Construction materials 14,662,116.76 22,955,982.38
Intangible assets 1,462,706,060.63 1,319,104,425.04
Goodwill 20,283,787.17 20,283,787.17
Long-term prepaid expenses 165,686,946.61 173,690,747.83
Deferred income tax assets 613,229,310.48 620,267,636.44
Other non-current assets 1,242,358,865.33 1,094,124,242.00
Total non-current assets 42,797,848,206.73 33,251,851,058.45
Total assets 77,961,699,547.59 56,822,026,545.21
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XII Financial Report
Unit: RMB
Item Closing balance Opening balance
CURRENT LIABILITIES:
Short-term borrowings 24,755,535,672.86 20,470,296,592.92
Bills payable 3,281,599,412.31 1,598,110,792.85
Accounts payable 2,942,337,386.57 3,408,366,113.93
Advance receipts 180,504,227.01 270,056,726.88
Staff remuneration payables 205,840,694.03 153,926,042.30
Taxes payable 194,852,483.80 161,100,088.94
Interest payable 150,075,698.23 150,047,305.50
Other payables 1,158,567,353.38 783,790,884.61
Non-current liabilities due within one year 5,471,286,735.91 1,099,968,900.00
Other current liabilities 10,293,543,297.00
Total current liabilities 48,634,142,961.10 28,095,663,447.93
NON-CURRENT LIABILITIES:
Long-term borrowings 5,169,381,063.83 4,378,290,245.19
Bonds payable 3,788,539,249.59 5,777,131,308.01
Long-term payables 344,000,000.00
Special payables 176,983,516.66 161,983,516.66
Deferred income 1,495,104,889.26 1,476,121,434.78
Other non-current liabilities 1,094,621,421.67 2,584,768,359.64
Total non-current liabilities 12,068,630,141.01 14,378,294,864.28
TOTAL LIABILITIES 60,702,773,102.11 42,473,958,312.21
OWNERS’ EQUITY:
Share capital 1,936,405,467.00 1,936,405,467.00
Other equity instruments 2,582,800,000.00
Including: Perpetual bonds 2,582,800,000.00
Capital reserves 6,149,138,276.81 6,149,136,873.41
Other comprehensive income -345,014,864.26 33,763,168.13
Surplus reserves 1,132,116,106.40 1,132,116,106.40
Retained profit 5,416,049,598.87 4,665,921,686.21
Total equity attributable to equity holders of the company 16,871,494,584.82 13,917,343,301.15
Minority interest 387,431,860.66 430,724,931.85
Total owners’ equity 17,258,926,445.48 14,348,068,233.00
TOTAL LIABILITIES AND OWNERS’ EQUITY 77,961,699,547.59 56,822,026,545.21
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Li Dong
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XII Financial Report
2. Balance sheet of the Company
Unit: RMB
Item Closing balance Opening balance
CURRENT ASSETS:
Monetary funds 5,700,832,345.61 2,345,637,944.73
Bills receivable 1,279,192,805.78 3,516,397,335.06
Accounts receivable 2,054,668,707.47 3,503,819,172.94
Prepayments 354,158,061.49 1,734,892,571.69
Dividend receivable 200,000,000.00
Other receivables 23,168,599,276.40 9,312,981,273.16
Inventories 770,515,314.04 824,854,551.21
Non-current assets due within one year 300,000,000.00
Other current assets 44,180,954.64 114,216,338.90
Total current assets 33,572,147,465.43 21,652,799,187.69
NON-CURRENT ASSETS:
Available-for-sale financial assets 73,000,000.00 73,000,000.00
Long-term equity investments 13,526,953,706.49 12,370,935,132.02
Investment properties 15,996,931.87 17,735,187.91
Fixed assets 3,494,527,564.35 3,350,685,307.94
Construction in progress 39,945,237.44 323,543,539.92
Construction materials 1,480,399.83 1,564,277.42
Intangible assets 308,890,444.95 246,581,452.71
Deferred income tax assets 146,800,984.93 41,033,875.05
Other non-current assets 900,000,000.00 900,000,000.00
Total non-current assets 18,507,595,269.86 17,325,078,772.97
TOTAL ASSETS 52,079,742,735.29 38,977,877,960.66
CURRENT LIABILITIES:
Short-term borrowings 7,288,876,600.43 9,143,654,360.01
Bills payable 1,095,500,000.00 680,548,319.01
Accounts payable 952,024,758.38 693,506,846.35
Advance receipts 735,151,335.79 1,724,744.50
Staff remuneration payables 84,950,702.67 75,683,362.25
Taxes payable 37,964,445.54 30,908,886.06
Interest payable 150,075,698.23 150,047,305.50
Other payables 4,342,643,198.14 4,141,133,979.84
Non-current liabilities due within one year 4,339,346,982.33 494,760,000.00
Other current liabilities 10,293,543,297.00
Total current liabilities 29,320,077,018.51 15,411,967,803.52
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XII Financial Report
Unit: RMB
Item Closing balance Opening balance
NON-CURRENT LIABILITIES:
Long-term borrowings 1,051,891,417.64 867,832,035.94
Bonds payable 3,788,539,249.59 5,777,131,308.01
Deferred income 61,468,322.53 44,507,433.25
Other non-current liabilities 1,094,621,421.67 2,584,768,359.64
Total non-current liabilities 5,996,520,411.43 9,274,239,136.84
Total liabilities 35,316,597,429.94 24,686,206,940.36
OWNERS’ EQUITY:
Share capital 1,936,405,467.00 1,936,405,467.00
Other equity instruments 2,582,800,000.00
Including: Perpetual bonds 2,582,800,000.00
Capital reserves 5,938,840,660.10 5,938,839,256.70
Surplus reserves 1,119,926,524.49 1,119,926,524.49
Retained profit 5,185,172,653.76 5,296,499,772.11
Total owners’ equity 16,763,145,305.35 14,291,671,020.30
TOTAL LIABILITIES AND OWNERS’ EQUITY 52,079,742,735.29 38,977,877,960.66
3. Consolidated Income Statement
Unit: RMB
Amounts for the Amounts for
Item reporting period the prior period
I. Total revenue 20,241,906,131.81 19,101,677,077.69
Including: Revenue 20,241,906,131.81 19,101,677,077.69
II. Total operating costs 19,203,692,799.70 19,011,530,814.45
Including: Operating costs 14,764,663,431.18 15,323,102,779.20
Business taxes and surcharges 133,046,735.23 91,030,073.05
Sales and distribution expenses 1,190,961,739.99 1,148,055,535.23
General and administrative expenses 1,384,652,496.82 1,160,542,907.39
Finance expenses 1,669,400,051.76 1,229,259,157.47
Loss on impairment of assets 60,968,344.72 59,540,362.11
Plus: Gain on change in fair value (“-” denotes loss) -19,078,538.02 6,856,815.32
Investment income (“-” denotes loss) 88,715,519.36 69,035,637.19
Including: Investment income from associates and
joint ventures -15,595,591.74 -5,156,941.21
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XII Financial Report
Unit: RMB
Amounts for the Amounts for
Item reporting period the prior period
III. Operating profit (“-” denotes loss) 1,107,850,313.45 166,038,715.75
Plus: Non-operating income 311,005,804.35 410,311,345.82
Including: gains on disposal of non-current assets 15,395,550.60 86,153,319.82
Less: Non-operating expenses 8,687,132.75 15,341,778.28
Including: Loss on disposal of non-current assets 6,610,974.07 12,236,126.04
IV. Total profit (“-” denotes total loss) 1,410,168,985.05 561,008,283.29
Less: Income tax expenses 432,237,378.20 107,699,410.64
V. Net profit (“-” denotes net loss) 977,931,606.85 453,308,872.65
Net profit attributable to shareholders of the Company 1,021,224,678.04 505,204,384.73
Profit or loss of minority interest -43,293,071.19 -51,895,512.08
VI. Net other comprehensive income after tax -378,778,032.39 16,829,094.54
Net other comprehensive income after tax attributable
to shareholders of the Company -378,778,032.39 16,829,094.54
(I) Other comprehensive income that will not be reclassified
to profit and loss in subsequent periods
(II) Other comprehensive income that will be reclassified
to profit and loss in subsequent periods -378,778,032.39 16,829,094.54
Exchange differences on translation of foreign operations -378,778,032.39 16,829,094.54
VII. Total comprehensive income 599,153,574.46 470,137,967.19
Total comprehensive income attributable to shareholders
of the Company 642,446,645.65 522,033,479.27
Total comprehensive income attributable to minority interest -43,293,071.19 -51,895,512.08
VIII.Earnings per share:
(I) Basic earnings per share 0.50 0.26
(II) Diluted earnings per share 0.50 0.26
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Li Dong
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XII Financial Report
4. Income statement of the Company
Unit: RMB
Amounts for the Amounts for
Item reporting period the prior period
I. Revenue 7,275,425,648.26 8,582,968,059.66
Less: Operating costs 5,993,094,498.52 7,012,489,036.44
Business taxes and surcharges 30,873,964.20 35,615,043.10
Selling and distribution expenses 279,731,973.48 298,701,273.17
General and administrative expenses 520,809,764.62 530,538,773.19
Finance expenses 1,216,334,728.73 934,446,118.52
Loss on impairment of assets 8,559,848.69 1,496,752.17
Plus: Gain on change in fair value (“-” denotes loss)
Investment income (“-” denotes loss) 736,088,507.79 1,154,412,826.75
Including: Investment income from associates and joint ventures -124,825.53 -82,608.18
II. Operating profit (“-” denotes loss) -37,890,622.19 924,093,889.82
Plus: Non-operating income 94,645,725.12 135,734,906.06
Including: gains on disposal of non-current assets 8,005,303.35 1,152,350.23
Less: Non-operating expenses 2,752,565.78 4,750,252.63
Including: Loss on disposal of non-current assets 2,049,678.31 1,321,959.79
III. Total profit (“-” denotes total loss) 54,002,537.15 1,055,078,543.25
Less: Income tax expenses -105,767,109.88 -23,951,712.53
IV. Net profit (“-” denotes net loss) 159,769,647.03 1,079,030,255.78
V. Net other comprehensive income after tax
(I) Other comprehensive income that will not be reclassified
to profit and loss in subsequent periods
(II) Other comprehensive income that will be reclassified
to profit and loss in subsequent periods
VI. Total comprehensive income 159,769,647.03 1,079,030,255.78
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XII Financial Report
5. Consolidated cash flow statement
Unit: RMB
Amounts for the Amounts for
Item reporting period the prior period
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 18,577,236,564.74 17,314,976,594.80
Tax rebates received 6,453,340.46 9,544,605.83
Cash received relating to other operating activities 1,475,411,139.98 599,986,969.23
Subtotal of cash inflows from operating activities 20,059,101,045.18 17,924,508,169.86
Cash paid for goods and services 10,916,668,800.35 10,998,606,216.24
Cash paid to and for employees 884,488,245.20 833,795,827.84
Payments of taxes and surcharges 1,130,243,926.64 914,734,942.86
Cash paid relating to other operating activities 16,849,063,597.29 4,191,971,447.07
Subtotal of cash outflows from operating activities 29,780,464,569.48 16,939,108,434.01
Net cash flows from operating activities -9,721,363,524.30 985,399,735.85
II. Cash flows from investing activities
Cash received from investments 400,000,000.00 10,000,000.00
Cash received from investment income 104,311,111.10
Net cash received from disposal of fixed assets, intangible assets
and other long-term assets 21,902,837.86 24,814,839.75
Net cash received from disposal of subsidiaries and
other business units 75,035,211.41
Cash received relating to other investing activities 115,612,200.00 913,066,062.47
Subtotal of cash inflows from investing activities 641,826,148.96 1,022,916,113.63
Cash paid for purchase of fixed assets, intangible assets
and other long-term assets 3,716,411,633.83 3,093,185,535.33
Cash paid on investments 386,000,000.00 3,000,000.00
Cash paid relating to other investing activities 1,000,000,000.00
Subtotal of cash outflows from investing activities 4,102,411,633.83 4,096,185,535.33
Net cash flows from investing activities -3,460,585,484.87 -3,073,269,421.70
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Unit: RMB
Amounts for the Amounts for
Item reporting period the prior period
III. Cash flows from financing activities:
Cash received from borrowings 29,939,346,034.63 25,487,820,197.15
Cash received relating to other financing activities 12,810,727,778.00
Subtotal of cash inflows from financing activities 42,750,073,812.63 25,487,820,197.15
Cash repayments of amounts borrowed 24,268,356,896.67 13,879,691,315.16
Cash paid for dividend and profit distribution or interest payment 1,821,385,484.85 2,143,300,146.91
Cash paid relating to other financing activities 2,596,657,197.45 7,136,477,150.59
Subtotal of cash outflows from financing activities 28,686,399,578.97 23,159,468,612.66
Net cash flows from financing activities 14,063,674,233.66 2,328,351,584.49
IV. Effect of foreign exchange rate changes on cash
and cash equivalents 30,285,407.97 9,082,033.70
V. Net increase in cash and cash equivalents 912,010,632.46 249,563,932.34
Plus: Balance of cash and cash equivalents as at the
beginning of the period 976,096,861.30 726,532,928.96
VI. Balance of cash and cash equivalents as at the end of the period 1,888,107,493.76 976,096,861.30
6. Cash flow statement of the Company
Unit: RMB
Amounts for the Amounts for
Item reporting period the prior period
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 10,435,713,825.07 7,434,789,634.68
Tax rebates received
Cash received relating to other operating activities 718,326,790.53 5,667,186,748.15
Subtotal of cash inflows from operating activities 11,154,040,615.60 13,101,976,382.83
Cash paid for goods and services 3,904,089,290.80 7,976,726,938.55
Cash paid to and for employees 216,994,869.89 237,509,541.17
Payments of taxes and surcharges 136,546,983.94 325,272,919.29
Cash paid relating to other operating activities 12,871,669,400.73 312,133,309.30
Subtotal of cash outflows from operating activities 17,129,300,545.36 8,851,642,708.31
Net cash flows from operating activities -5,975,259,929.76 4,250,333,674.52
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XII Financial Report
Unit: RMB
Amounts for the Amounts for
Item reporting period the prior period
II. Cash flows from investing activities:
Cash received from investments 600,000,000.00 10,000,000.00
Cash received from investment income 736,213,333.32 1,073,924,052.21
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 20,880,347.11 471,399.75
Cash received relating to other investing activities 20,482,200.00 102,928,415.14
Subtotal of cash inflows from investing activities 1,377,575,880.43 1,187,323,867.10
Cash paid for purchase of fixed assets, intangible assets
and other long-term assets 189,430,124.60 498,712,353.90
Cash paid on investments 1,456,143,400.00 1,951,889,592.00
Cash paid relating to other investing activities 1,000,000,000.00
Subtotal of cash outflows from investing activities 1,645,573,524.60 3,450,601,945.90
Net cash flows from investing activities -267,997,644.17 -2,263,278,078.80
III. Cash flows from financing activities:
Cash received from borrowings 11,958,735,442.42 13,143,235,684.08
Cash received relating to other financing activities 12,660,727,778.00
Subtotal of cash inflows from financing activities 24,619,463,220.42 13,143,235,684.08
Cash repayments of amounts borrowed 13,355,042,909.56 8,704,359,885.67
Cash paid for dividend and profit distribution or interest payment 1,672,364,017.12 1,669,956,508.36
Cash paid relating to other financing activities 3,346,346,021.26 4,789,896,127.16
Subtotal of cash outflows from financing activities 18,373,752,947.94 15,164,212,521.19
Net cash flows from financing activities 6,245,710,272.48 -2,020,976,837.11
IV. Effect of foreign exchange rate changes on cash
and cash equivalents 6,395,681.07 10,119,569.63
V. Net increase in cash and cash equivalents 8,848,379.62 -23,801,671.76
Plus: Balance of cash and cash equivalents as
at the beginning of the period 40,590,357.33 64,392,029.09
VI. Balance of cash and cash equivalents as at the end of the period 49,438,736.95 40,590,357.33
118
7. Consolidated statement of changes in owners’ equity
Amounts for the reporting period
Unit: RMB
For the reporting period
Equity attributable to shareholders of the Company
Other
Other equity instruments comprehensive General Total
Item Share capital Preference shares Perpetual bonds Others Capital reserves Less: treasury shares income Special reserves Surplus reserves risk provisions Retained profit Minority interest owners’ equity
XII Financial Report
I. Balance as at the end of the prior year 1,936,405,467.00 6,149,136,873.41 33,763,168.13 1,132,116,106.40 4,665,921,686.21 430,724,931.85 14,348,068,233.00
Plus: accounting policy change
Corrections of prior period errors
Business combination
under common control
II. Balance as at the beginning of the year 1,936,405,467.00 6,149,136,873.41 33,763,168.13 1,132,116,106.40 4,665,921,686.21 430,724,931.85 14,348,068,233.00
III. Changes in the period (“-” denotes decrease) 2,582,800,000.00 1,403.40 -378,778,032.39 750,127,912.66 -43,293,071.19 2,910,858,212.48
(I) Total comprehensive income -378,778,032.39 1,021,224,678.04 -43,293,071.19 599,153,574.46
(II) Capital paid in and reduced by owners 2,582,800,000.00 1,403.40 2,582,801,403.40
1. Ordinary shares paid
by shareholders 1,403.40 1,403.40
2. Capital paid by holders of
other equity instruments 2,582,800,000.00 2,582,800,000.00
3. Amounts of share-based
payments recognised
in owners’ equity
(III) Profit distribution -271,096,765.38 -271,096,765.38
1. Transfer to surplus reserves
2. Transfer to general risk provision
3. Distribution to owners
(shareholders) -271,096,765.38 -271,096,765.38
(IV) Transfer within owners’ equity
(V) Special reserves
(VI) Others
IV. Balance as at the end of the period 1,936,405,467.00 2,582,800,000.00 6,149,138,276.81 -345,014,864.26 1,132,116,106.40 5,416,049,598.87 387,431,860.66 17,258,926,445.48
119
120
Amounts for the prior period
Unit: RMB
For the prior period
Equity attributable to shareholders of the Company
Other
Other equity instruments comprehensive General Total
Item Share capital Preference shares Perpetual bonds Others Capital reserves Less: treasury shares income Special reserves Surplus reserves risk provisions Retained profit Minority interest owners’ equity
I. Balance as at the end of the prior year 1,975,471,967.00 6,204,682,028.94 30,954,891.40 16,934,073.59 1,132,116,106.40 4,741,638,941.58 598,465,306.78 14,638,353,532.89
Plus: accounting policy change
XII Financial Report
Corrections of prior period errors
Business combination
under common control
II. Balance as at the beginning of the year 1,975,471,967.00 6,204,682,028.94 30,954,891.40 16,934,073.59 1,132,116,106.40 4,741,638,941.58 598,465,306.78 14,638,353,532.89
III. Changes in the period (“-” denotes decrease) -39,066,500.00 -55,545,155.53 -30,954,891.40 16,829,094.54 -75,717,255.37 -167,740,374.93 -290,285,299.89
(I) Total comprehensive income 16,829,094.54 505,204,384.73 -51,895,512.08 470,137,967.19
(II) Capital paid in and reduced by owners -39,066,500.00 -55,545,155.53 -30,954,891.40 -61,913,669.40 -125,570,433.53
1. Ordinary shares paid
by shareholders -39,066,500.00 -55,545,155.53 -30,954,891.40 -61,913,669.40 -125,570,433.53
2. Capital paid by holders of
other equity instruments
3. Amounts of share-based
payments recognised
in owners’ equity
(III) Profit distribution -580,921,640.10 -53,931,193.45 -634,852,833.55
1. Transfer to surplus reserves
2. Transfer to general risk provision
3. Distribution to owners
(shareholders -580,921,640.10 -53,931,193.45 -634,852,833.55
(IV) Transfer within owners’ equity
(V) Special reserves
(VI) Others
IV. Balance as at the end of the period 1,936,405,467.00 6,149,136,873.41 33,763,168.13 1,132,116,106.40 4,665,921,686.21 430,724,931.85 14,348,068,233.00
8. Statement of changes in equity of shareholders of the Company
Amounts for the reporting period
Unit: RMB
For the reporting period
Other
Other equity instruments Less: comprehensive Total
Item Share capital Preference shares Perpetual bonds Others Capital reserves treasury shares income Special reserves Surplus reserves Retained profit owners’ equity
I. Balance as at the end of the prior year 1,936,405,467.00 5,938,839,256.70 1,119,926,524.49 5,296,499,772.11 14,291,671,020.30
Plus: accounting policy change
XII Financial Report
Corrections of prior period errors
II. Balance as at the beginning of the year 1,936,405,467.00 5,938,839,256.70 1,119,926,524.49 5,296,499,772.11 14,291,671,020.30
III. Changes in the period (“-” denotes decrease) 2,582,800,000.00 1,403.40 -111,327,118.35 2,471,474,285.05
(I) Total comprehensive income 159,769,647.03 159,769,647.03
(II) Capital paid in and reduced by owners 2,582,800,000.00 1,403.40 2,582,801,403.40
1. Ordinary shares paid by
shareholders 1,403.40 1,403.40
2. Capital paid by holders of other
equity instruments 2,582,800,000.00 2,582,800,000.00
3. Amounts of share-based
payments recognised
in owners’ equity
(III) Profit distribution -271,096,765.38 -271,096,765.38
1. Transfer to surplus reserves
2. Distribution to owners
(shareholders) -271,096,765.38 -271,096,765.38
(IV) Transfer within owners’ equity
(V) Special reserves
(VI) Others
IV. Balance as at the end of the period 1,936,405,467.00 2,582,800,000.00 5,938,840,660.10 1,119,926,524.49 5,185,172,653.76 16,763,145,305.35
121
122
Amounts for the prior period
Unit: RMB
Prior period
Other
Other equity instruments Less: comprehensive Total
Item Share capital Preference shares Perpetual bonds Others Capital reserves treasury shares income Special reserves Surplus reserves Retained profit owners’ equity
I. Balance as at the end of the prior year 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
Plus: accounting policy change
Corrections of prior period errors
XII Financial Report
II. Balance as at the beginning of the year 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
III. Changes in the period (“-” denotes decrease) -39,066,500.00 -66,587,522.47 -30,954,891.40 498,108,615.68 423,409,484.61
(I) Total comprehensive income 1,079,030,255.78 1,079,030,255.78
(II) Capital paid in and reduced by owners -39,066,500.00 -66,587,522.47 -30,954,891.40 -74,699,131.07
1. Ordinary shares paid
by shareholders -39,066,500.00 -66,587,522.47 -30,954,891.40 -74,699,131.07
2. Capital paid by holders of
other equity instruments
3. Amounts of share-based
payments recognied
in owners’ equity
(III) Profit distribution -580,921,640.10 -580,921,640.10
1. Transfer to surplus reserves
2. Distribution to owners
(shareholders) -580,921,640.10 -580,921,640.10
3. Others
(IV) Transfer within owners’ equity
(V) Special reserves
(VI) Others
IV. Balance as at the end of the period 1,936,405,467.00 5,938,839,256.70 1,119,926,524.49 5,296,499,772.11 14,291,671,020.30
XII Financial Report
III. General Information of the Company
Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”) was incorporated in May 1993 in
Shouguang City, Shandong Province, with its headquarters at No. 2199 Nongsheng Road East, Shouguang City, Shandong
Province.
The Company and its subsidiaries are principally engaged in processing and sale of paper products (including machine
made paper and paper board), paper making raw materials and machinery; generation and sale of electric power and
thermal power; forestry, saplings growing, processing and sale of timber; manufacturing, processing and sale of wood
products; and manufacturing and sale of laminated boards and fortified wooden floorboards, marine engineering project
investment, hotel service, equipment financial and operating leasing, etc.
The financial statements were considered and approved by the board of directors of the Company on 30 March 2015.
According to the Articles of Association, these financial statements will be submitted to the general meeting for its approval.
Subsidiaries of the Company included in the scope of consolidation in 2015 totalled 51. For details, please refer to this
Note IX “Equity in other entities”. The scope of consolidation of the Company during the year had 2 companies included
compared to the prior year. For details, please refer to this Note VIII “Changes in the scope of consolidation”.
IV. Basis of Preparation of the Financial Statements
1. Basis of preparation
The Company’s financial statements are prepared on a going concern basis and based on actual transactions
and events, in accordance with the accounting standards for business enterprises promulgated by the Ministry of
Finance of PRC ((Order of Ministry of Finance No. 33 Issue and Order of Ministry of Finance No. 76 Amendment)
and 41 specific accounting standards as promulgated and amended on and after 15 February 2006, 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 2014) of China Securities Regulatory Commission.
The Company’s financial statements have been prepared on an accrual basis in accordance with the ASBEs. Except
for certain financial instruments and consumable biological assets, the financial statements are prepared under
the historical cost convention. In the event that depreciation of assets occurs, a provision for impairment is made
accordingly in accordance with the relevant regulations.
2. Going concern
No facts or circumstances comprise a material uncertainty about the Company’s going concern basis within 12
months since the end of the reporting period.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates
1. Statement of compliance with the Accounting Standards for Business Enterprises
The financial statements have been prepared by the Company in conformity with the ASBEs, which truly and fully
reflect the financial position of the Company as at 31 December 2015 and relevant information such as the operating
results and cash flows of the Company for 2015. In addition, the financial statements of the Company also comply
with, in all material respects, the disclosure requirements of the “Regulation on the Preparation of Information
Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” revised by the
China Securities Regulatory Commission in 2014 and the notes thereto.
2. Accounting period
The accounting periods of the Company are divided into annual periods and interim periods. Interim periods refer to
reporting periods that are shorter than a full accounting year. The accounting year of the Company is from 1 January
to 31 December of each calendar year.
3. Operating cycle
Ordinary operating cycle refers to the period from acquisition of assets used for processing by the Company until
their realisation in cash or cash equivalents. The operating cycle of the Company lasts for 12 months, and acts as an
indicator for classification of liquidity of assets and liabilities.
Our subsidiaries, including Zhanjiang Chenming Arboriculture Co., Ltd., Yangjiang Chenming Arboriculture Co.,
Ltd., Nanchang Chenming Arboriculture Co., Ltd., Huanggang Chenming Arboriculture Co., Ltd. and Chenming
Arboriculture Co., Ltd., were engaged in arboriculture cultivating, plantation and sale. Their ordinary operating cycle
lasts for over 1 year.
4. Reporting currency
The Company and its domestic subsidiaries recognise RMB as their reporting currency according to the primary
economic environment in which they operate. The reporting currency of the Company and its domestic subsidiaries
is Renminbi (“RMB”). Overseas subsidiaries of the Company recognise U.S. dollar (“USD” or “US$”), Japanese yen
(“JPY”) and Euro (“EUR”) as their respective reporting currency according to the general economic environment in
which these subsidiaries operate. The Company prepares its financial statements in RMB.
5. Accounting treatment of business combination under common control and not under common control
Business combinations refer to the transactions or events in which two or more separate enterprises merged as a
single reporting entity. Business combinations are divided into business combination under common control and not
under common control.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
5. Accounting treatment of business combination under common control and not under common control
(Cont’d)
(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. Transaction cost attributable to equity or debt securities issued
by the acquirer as consideration is included in the initial costs. Contingent consideration involved is charged
to the combination cost at its fair value on the acquisition date, in the event that adjustment on the contingent
consideration is required as a result of new or additional evidence in relation to circumstances existed on the
acquisition date emerges within twelve months from the acquisition date, the combination goodwill shall also
be adjusted. The combination cost incurred by the acquirer and the identifiable net assets acquired from the
combination are measured at their fair values on the acquisition date. Where the cost of a business combination
exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets on the acquisition
date, the difference is recognised as goodwill. Where the cost of a business combination is less than the
acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the acquirer shall first reassess the
measurement of the fair value of the acquiree’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 the
acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is charged to profit or
loss for the period.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (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
In relation to the deductible temporary difference acquired from the acquiree, which was not recognised as
deferred tax assets due to non-fulfilment of the recognition criteria at the date of the acquisition, if new or
further information that is obtained within 12 months after the acquisition date indicates that related conditions
at the acquisition date already existed, and that the implementation of the economic benefits brought by the
deductible temporary difference of the acquiree can be expected, the relevant deferred tax assets shall be
recognised and goodwill shall be deducted. When the amount of goodwill is less than the deferred tax assets
that shall be recognised, the difference shall be recognised in the profit or loss of the period. Except for the
above circumstances, deferred tax assets in relation to business combination are recognised in the profit or loss
of the period.
For combination of business not under common control achieved by 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 Hui [2012] No. 19) and Rule of 51 to “Accounting
Standard for Business Enterprises No. 33 – Consolidated Financial Statements”(see Note V. 6 (2)). If they
belong to “transactions in a basket”, they are accounted for with reference to the descriptions as set out in the
previous paragraphs of this section and Note V. 13 “Long-term equity investments”, and if they do not belong
to “transactions in a basket”, they are accounted for in separate financial statements and consolidated financial
reports:
In separate financial statements, the initial equity investment cost is the aggregate of the carrying amount of
the equity investment in the acquiree held prior to the acquisition date and the investment cost newly added as
at the acquisition date. In respect of any other comprehensive income attributable to the equity interest in the
acquiree prior to the acquisition date, other comprehensive income is accounted for on the same accounting
treatment as direct disposal of relevant asset or liability by the acquiree at the time of disposal (i.e. to be
transferred to investment income for the period, except for the changes arising from re-measuring net assets or
net liabilities of defined benefit plan using the equity method attributable to the acquiree).
In consolidated financial statements, the equity interest in the acquiree held prior to the acquisition date is
remeasured 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. In respect of any other comprehensive
income attributable to the equity interest in the acquiree held prior to the acquisition date, other comprehensive
income is accounted for on the same accounting treatment as direct disposal of relevant asset or liability by
the acquiree (i.e. to be transferred to investment income at the acquisition date, except for the changes arising
from re-measuring net assets or net liabilities of defined benefit plan using the equity method attributable to the
acquiree) is transferred to investment income in the period of the acquisition date.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
6. Preparation of consolidated financial statements
(1) Basis for principle of determining the scope of consolidated financial statements
The scope of consolidation of the consolidated financial statements is determined on the basis of control. The
term “control” refers to the fact that the Company has power over the investee and is entitled to variable returns
from its involvement with the investee and the ability to use its power over the investee to affect the amount of
those returns. The scope of consolidation includes the Company and all of its subsidiaries. A subsidiary is an
entity controlled by the Company.
The Company will conduct reassessment in the event there are changes in actual condition and situation
causing changes in relevant elements involved in the definition of control above.
(2) Basis for preparation of the consolidated financial statements
Subsidiaries are consolidated from the date on which the Company obtains net assets and the effective control
of decision making of production and operation and are deconsolidated from the date that such control ceases.
For disposal of subsidiaries, the operating results and cash flows of such subsidiaries before the date of
disposal are properly included into the consolidated income statement and consolidated cash flow statements;
for disposal of subsidiaries during the reporting period, no adjustment shall be made to the opening balance
of the consolidated balance sheet. For those subsidiaries acquired through business combination not under
common control, the operating results and cash flows after the acquisition date have been properly included in
the consolidated income statements and consolidated cash flow statements. No adjustments shall be made to
the opening balance of the consolidated balance sheet and the comparative consolidated financial statements
amount. For those subsidiaries 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 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 at the acquisition date.
All intra-company significant balances, transactions and unrealised profit are eliminated in the consolidated
financial statements.
The shareholders’ equity and the portion of the profit or loss for the period of the subsidiaries that are not
attributable to the Company are presented under shareholders’ equity and net profit in the consolidated financial
statements as minority interests and net profit of minority interest respectively. The portion of net profit or loss
of subsidiaries for the period attributable to minority interest is presented in the consolidated income statement
under the “profit or loss of minority interest”. When the amount of loss attributable to the minority shareholders
of a subsidiary exceeds the minority shareholders’ portion of the opening balance of owners’ equity of the
subsidiary, the excess amount shall be allocated against minority interest.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
6. Preparation of consolidated financial statements (Cont’d)
(2) Basis for preparation of the consolidated financial statements
For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons,
the remaining equity is measured at fair value on the date when the control is lost. The difference arising from
the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest
over the share of net assets of the former subsidiary calculated continuously since the purchase date based
on the shareholding percentage before disposal are recognised as investment income in the period when the
control is lost. Other comprehensive income related to equity investment in the subsidiary is accounted for on
the same accounting treatment as direct disposal of relevant asset or liability by the acquiree at the time when
the control is lost (i.e. to be transferred to investment income, except for the changes arising from re-measuring
net assets or net liabilities of defined benefit plan of the subsidiary using the equity method). The remaining
equity interests are measured subsequently according to “Accounting Standard for Business Enterprises No. 2
– Long-term Equity Investments” or “Accounting Standard for Business Enterprises No. 22 – Recognition and
Measurement of Financial Instruments”. See Note V. 13 “Long-term equity investments” or Note V. 10 “Financial
instruments” for details.
When the Company disposes of equity investment in a subsidiary by a stage-up approach with several
transactions until the control over the subsidiary is lost, it shall determine whether these several transactions
related to the disposal of equity investment in a subsidiary until the control over the subsidiary is lost belong
to “transactions in a basket”. Usually, these several transactions related to the disposal of equity investment in
a subsidiary are accounted for as transactions in a basket when the terms, conditions and economic impacts
of these several transactions meet the following one or more conditions: these transactions are entered
into at the same time or after considering their impacts on each other; these transactions as a whole can
reach complete business results; the occurrence of a transaction depends on at least the occurrence of
another transaction; an individual transaction is not deemed as economic, but is deemed as economic when
considered with other transactions. If they are not transactions in a basket, each of which are accounted for
in accordance with applicable rules in “partial disposal of long-term equity investment of a subsidiary without
losing control over a subsidiary” (see Note V. 13 (2) ) 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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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
7. Classification of joint arrangements and accounting treatment for joint ventures
A joint arrangement refers to an arrangement of two or more parties have joint control. In accordance with the
Company’s rights and obligations under a joint arrangement, the Company classifies joint arrangements into: joint
ventures and joint operations. Joint operations refer to a joint arrangement during which the Company is entitled
to relevant assets and obligations of this arrangement. Joint ventures refer to a joint arrangement during which the
Company only is entitled to net assets of this arrangement.
The Company treats investments in joint ventures by using the equity method of accounting in accordance
with accounting policies as set out in Note V.13. (2) “long-term equity investments by using equity method of
accounting”.
The Company shall, as a joint venture, recognise the assets held and obligations assumed solely by the Company,
and recognise assets held and obligations assumed jointly by the Company in appropriation to the share of the
Company; recognise revenue from disposal of the share of joint operations of the Company; recognise fees solely
occurred by Company and recognise fees from joint operations in appropriation to the share of the Company.
When the Company, as a joint venture, invests or sells assets (the assets does not constitute a business, the same
below) to or purchase assets from joint operations, the Company shall only recognise the part of profit or lost from
this transaction attributable to other parties of joint operations before these assets are sold to the third party. If
the occurrence of these assets meet the impairment loss of asset as set out in “Accounting Standard for Business
Enterprises No. 8 – Asset Impairment”, the Company shall recognise the full amount of this loss in relation to the
Company invests in or sells assets to joint operations; the Company recognise the loss according to the Company’s
share of commitment in relation to the Company purchase assets from joint operations.
8. 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.
9. Foreign currency operations and translation of statements denominated in foreign currency
(1) Basis for translation of foreign currency transactions
The foreign currency transactions of the Company, when initially recognised, are translated into functional
currency at the prevailing spot exchange rate on the date of exchange, i.e. the middle price of RMB exchange
rate published by the People’s Bank of China on that date in general and the same hereinafter, while the
foreign currency exchange operations and transactions in connection with foreign currency exchange shall be
translated into functional currency at the exchange rate actually adopted.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Foreign currency operations and translation of statements denominated in foreign currency (Cont’d)
(2) Basis for translation of foreign currency monetary items and foreign currency non-monetary items
On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate on the
balance sheet date. All differences are included in the profit or loss in the period, except for: the differences
arising from foreign currency borrowings related to the acquisition or construction of fixed assets that are
qualified for capitalisation will be accounted for according to the principle of capitalisation; and exchange
difference arising from change in balance of carrying amount other than amortised cost of available for sale
foreign monetary items will be included in other comprehensive income.
Exchange differences arising from change in exchange rate where the preparation of consolidated financial
statements relates to foreign operations and foreign currency monetary items materially constitute net
investment in foreign operations shall be recorded into “other comprehensive income”; disposal of foreign
operations shall be included into profits and losses on disposal in the current period.
The foreign currency non-monetary items measured at historical cost shall still be measured by the functional
currency translated at the spot exchange rate on the date of the transaction. Foreign currency non-monetary
items measured at fair value are translated at the spot exchange rate on the date of determination of the fair
value. The difference between the amounts of reporting currency before and after the translation will be treated
as changes in fair value (including changes in foreign exchange rates) and recognised in profit or loss for the
period or recognised as other comprehensive income.
(3) Basis for translation of foreign currency financial statements
Exchange differences arising from change in exchange rate where the preparation of consolidated financial
statements relates to foreign operations and foreign currency monetary items materially constitute net
investment in foreign operations shall be recorded into “other comprehensive income” under “translation
reserve”; disposal of foreign operations shall be included into profits and losses on disposal in the current
period.
The financial statements denominated in foreign currency of a foreign operation are translated to RMB in
compliance with the following requirements: assets and liabilities on the balance sheet are translated at the
spot exchange rate prevailing at the balance sheet date; owner’s equity items except for “retained profit” are
translated at the spot exchange rates at the dates on which such items arose; income and expenses items in
the income statement are translated at the spot exchange rate at the date of transaction. The retained profit
brought forward are reported at the prior year’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 and owners’ equity items are recognised as “translation differences arising on the translation
of financial statements denominated in foreign currencies” in other comprehensive income. On disposal of
foreign operations and loss of control, exchange differences arising from the translation of financial statements
denominated in foreign currencies related to the disposed foreign operations which has been included in
owners’ 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 prior year’s figures are presented according to the translated amounts of the prior
year.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
9. Foreign currency operations and translation of statements denominated in foreign currency (Cont’d)
(3) Basis for translation of foreign currency financial statements (Cont’d)
On disposal of the entire owners’ equity in a foreign operation of the Company, or upon a loss of control over
a foreign operation due to disposal of certain equity investment or other reasons, the Company transfers the
exchange differences arising on translation of financial statements of this foreign operation attributable to
owners’ equity of parent company presented under owners’ equity in the balance sheet, to profit or loss in the
period in which the disposal took place.
In case of partial disposal of equity investment or other reason that result in reduction in shareholding in a
foreign operation without losing control over it, the proportionate share of exchange differences arising from
the translation of financial statements will be attributable to minority interests and will not recognised in profit
or loss. For partial disposals of equity interests in foreign operations which are associates or joint ventures, the
proportionate share of the exchange differences arising from the translation of financial statements of foreign
operations is reclassified to profit or loss.
10. Financial instruments
Financial asset or financial liability will be recognised when the Company became one of the parties under a financial
instrument contract. Financial assets and financial liabilities are initially recognised at fair value, except for equity
instruments that are not quoted in an active market, the fair value of which cannot be reliably measured and over
relevant investees of which the Company does not have control, joint control or significant influence, and debt
financing instruments subsequently measured at amortised cost using the effective interest method. For financial
assets and financial liabilities measured at fair value and whose changes are carried through profit or loss, relevant
transaction costs are directly recognised in profit or loss for the period. For financial assets and financial liabilities
classified as other categories, relevant transaction costs are included in the amount initially recognised.
(1) Determination of fair values for financial assets and financial liabilities
The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a
liability in an orderly transaction between market participants on the date of measurement. Financial instruments
exist in an active market. Fair value is determined based on the quoted price in such market. An active market
refers to where pricing is easily and regularly obtained from exchanges, brokers, industrial organisations and
price fixing service organisations, representing the actual price of a market transaction that takes place in a fair
deal. While financial instruments do not exist in an active market, the fair value is determined using valuation
techniques. Valuation technologies include reference to be familiar with situation and prices reached in recent
market transactions entered into by both willing parties, reference to present fair values of similar other financial
instruments, cash flow discounting method and option pricing models.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
10. Financial instruments (Cont’d)
(2) Classification, recognition and measurement of financial assets
Conventionally traded financial assets shall be recognised and derecognised at the trading date. Financial
assets shall be classified into loans and accounts receivable, available-for-sale financial assets and others for
initial recognition.
Loans and receivables
They are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. Financial assets, including bills receivable, accounts receivable, interest receivable,
dividends receivable and other receivables are classified as loans and receivables by the Company.
Loans and receivables are measured subsequently at the amortised cost by using the effective interest
rate method. Gains or losses incurred at the time of derecognition, impairment or amortisation are
charged to profit or loss in the current period.
Available-for-sale financial assets
Available-for-sale financial assets represent equity instruments over relevant investees of which the
Company does not have control, joint control or significant influence.
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, 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. However, for
equity investment of which the Company does not have control, joint control or significant influence, not
quoted in an active market and the fair value of which cannot be measured reliably, their fair values are
subsequently measured at cost.
Interests received from available-for-sale financial assets held and the cash dividends declared by the
investee are recognised as investment income.
(3) Impairment of financial assets
In addition to financial assets at fair value through profit or loss for the current period, the Company reviews
the book value of other financial assets at each balance sheet date and provides for impairment where there is
objective evidence that financial assets are impaired.
For a financial asset that is individually significant, the Company assesses the asset individually for impairment.
For a financial asset that is not individually significant, the Company assess the asset individually for impairment
or include the asset in a group of financial assets with similar credit risk characteristics and collectively assess
them for impairment. If it is determined that no objective evidence of impairment exists for an individually
assessed financial asset, whether the financial asset is individually significant or not, the financial asset is
included in a group of financial assets with similar credit risk characteristics and collectively assessed for
impairment. Financial assets for which an impairment loss is individually recognised are not included in the
collective assessment for impairment.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
10. Financial instruments (Cont’d)
(3) Impairment of financial assets (Cont’d)
Impairment of loans and receivables
The carrying amount of financial assets measured as costs or amortised costs are subsequently reduced
to the present value discounted from its projected future cash flow. The reduced amount is recognised
as impairment loss and recorded as profit or loss for the period. After recognition of the impairment loss
from financial assets, if there is objective evidence showing recovery in value of such financial assets
impaired and which is related to any event occurring after such recognition, the impairment loss originally
recognised 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.
Impairment of available-for-sale financial assets
In the event that decline in fair value of the available-for-sale equity instrument or fair value of the interest
in the investee’s identifiable net assets is regarded as “severe decline” or “non-temporary decline” on
the basis of comprehensive related factors, it indicates that there is impairment loss of the available-for-
sale equity instrument. In particular, “severe decline” refers to decline of over 20% in such fair value.
“Non-temporary decline” refers to such fair value decreased continuously for more than 12 months. The
continuous decreasing period is determined on the basis of the drop of such fair value accumulated over
10%.
When the available-for-sale financial assets impair, the accumulated loss originally included in the
other comprehensive income arising from the decrease in fair value was transferred out and included
in the profit or loss for the period. The accumulated loss that transferred out is the balance of the initial
acquisition cost of asset, after deduction of the principal recovered, amortised amounts, current fair value
and the impairment loss originally included in the profit or loss.
After recognition of the impairment loss, if there is objective evidence showing recovery in value of such
financial assets impaired and which is related to any event occurring after such recognition in subsequent
periods, the impairment loss originally recognised shall be reversed. The impairment loss reversal of
the available-for-sale equity instrument will be recognised as other comprehensive income, and the
impairment loss reversal of the available-for-sale debt instrument will be included in the profit or loss for
the period.
When an equity investment that is not quoted in an active market and the fair value of which cannot be
measured reliably, or the impairment loss of a derivative financial asset linked to the equity instrument that
shall be settled by delivery of that equity instrument, then it will not be reversed.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
10. Financial instruments (Cont’d)
(4) Recognition and measurement of transfers of financial asset
Financial asset that satisfied any of the following criteria shall be derecognised: the contract right to receive
the cash flows of the financial asset has terminated; 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; and
the financial asset has been transferred to the transferee, and the transferor has given up the control on such
financial asset, though it does not assign maintain substantially all the risk and return arising from the ownership
of the financial asset.
When the entity does not either assign or maintain substantially all the risk and return arising from the ownership
of the financial asset and does not give up the control on such financial asset, to the extent of its continuous
involvement in the financial asset, the entity recognises such financial asset and the relevant liability accordingly.
The extent of the continuous involvement is the extent to which the entity exposes to changes in the value of
such financial assets.
If all criteria of recognition of transfer of financial assets are satisfied, the difference between the carrying
amounts of the financial assets transferred, the consideration received from the transfer and the accumulated
changes in fair value originally include in other comprehensive income shall be recognised in the profit or loss of
the period.
If a part of the financial assets is qualified for derecognition, the carrying amount of the financial asset is
allocated between the part that continues to be recognised and the part that qualifies for derecognition, based
on the fair values of the respective parts. The difference between the following amounts is recognised in profit
or loss for the period: the sum of the consideration received and the carrying amount of the part that qualifies
for derecognition and the aforementioned carrying amount.
For financial assets that are sold or transferred with recourse or endorsement, the Company need to determine
whether the risk and rewards of ownership of the financial asset have been substantially transferred. If the risk
and rewards of ownership of the financial asset have been substantially transferred, the financial assets shall be
derecognised. If the risk and rewards of ownership of the financial asset have been retained, the financial assets
shall not be derecognised. If the Company neither transfers nor retains substantially all the risks and rewards
of ownership of the financial asset, the Company shall assess whether the control over the financial asset is
retained, and the financial assets shall be accounting for according to the above paragraphs.
(5) Classification and measurement of financial liabilities
Financial liabilities are classified at initial recognition: financial liabilities recognised at fair value with changes
carried through profit or loss and other financial liabilities. For financial liabilities measured at fair value with
changes recognised in profit or loss of the current period, relevant transaction costs are directly recognised in
profit or loss for the period. The amount is recognised initially at fair value and the subsequent changes in fair
value will be recognised in profit or loss for the period. For other financial liabilities, relevant transaction costs
are included in the amount initially recognised and subsequently measured at amortised cost using the effective
interest method, and relevant gain or loss arising from derecognition or amortisation are included in current
profit or loss.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
10. Financial instruments (Cont’d)
(6) Derecognition of financial liabilities
Financial liabilities are derecognised in full or in part only when the present obligation is discharged in full or
in part. An agreement is entered between the Company (debtor) and a creditor to replace the original financial
liabilities with new financial liabilities with substantially different terms, derecognise the original financial liabilities
as well as recognise the new financial liabilities.
When financial liabilities is derecognised in full or in part, the difference between the carrying amount of the
financial liabilities derecognised and the consideration paid (including transferred non-cash assets or new
financial liability) is recognised in profit or loss for the current period.
(7) Offset of Financial Assets and Financial Liabilities
If the Company owns the legitimate rights of offsetting the recognised financial assets and financial liabilities,
which are enforceable currently, and the Company plans to realise the financial assets or to clear off the
financial liabilities on a net amount basis or simultaneously, the financial assets and financial liabilities shall be
reported in the balance sheet upon offsetting. Otherwise, financial assets and financial liabilities are presented
separately in the balance sheet without offsetting.
(8) Equity instruments
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. The issuance (including refinancing), repurchase, sale or cancellation of equity instruments
by the Company is accounted for movement in equity. The Company does not recognise the movement in fair
value of equity instruments. Transaction costs related to equity transactions are deducted from equity.
Various distributions (excluding dividends) made by the Company to holders of equity instruments reduces
owners’ equity. The Company does not recognise the movement in fair value of equity instruments.
11. Accounts receivable
Accounts receivable includes accounts receivable and other receivables etc.
(1) Basis for recognition and measurement of bad debt provision
The Company carries out an overall inspection on the carrying amount of accounts receivable on the balance
sheet date. Where there arises any of the following objective evidences indicating that accounts receivable have
been impaired, an impairment provision will be made: a serious financial difficulty occurs to the debtor; the
debtor breaches any of the contractual stipulations (such as he fails to pay or delays the payment of interests
or the principal); the debtor will probably go bankrupt or carry out other financial reorganisations; other
objective evidences show that the accounts receivable are impaired.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
11. Accounts receivable (Cont’d)
(2) Method for making bad debt provision
Recognition standard and method for making bad debt provision individually for individually significant
accounts receivable
Accounts receivable of more than RMB1 million is recognised as individually significant accounts
receivable by the Company.
For accounts receivable that is individually significant, the Company assesses such accounts receivable
individually for impairment. If it is determined that no objective evidence of impairment exists for an
individually assessed financial asset, the financial asset is included in a group of financial assets with
similar credit risk characteristics and collectively assessed for impairment. Accounts receivable for which
an impairment loss is individually recognised are not included in a group of accounts receivable with
similar credit risk characteristics and collectively assessed for impairment.
Determination and method for making bad debt provision for accounts receivable provided for bad debt
by credit risk portfolio
A. Basis for determining the credit risk portfolio
The Company classifies its individually insignificant accounts receivable and individually significant
but not impaired accounts receivable in accordance with their credit risk characteristics and
relevance of financial assets. These credit risks usually reflect the ability of debtor in repaying all
debts due based on the contracted terms of relevant assets, and are related to the forecast on
future cash flows of asset under assessment.
Portfolios are determined according to the following basis:
Portfolio Basis for determining the portfolio
Specific fund portfolio A portfolio which is classified as a category on the basis of certain
specific accounts receivable
Ageing portfolio A portfolio which is classified as a category on the basis of credit
risk features such as ageing
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
11. Accounts receivable (Cont’d)
(2) Method for making bad debt provision (Cont’d)
Determination and method for making bad debt provision for accounts receivable provided for bad debt
by credit risk portfolio (Cont’d)
B. Method for making bad debt provision according to credit risk characteristics
When an impairment test is performed by means of a group, bad debt provision will be assessed
and ascertained according to the structure of the group of accounts receivable and similar credit
risk characteristics (debtors’ ability to settle outstanding amounts based on contracted terms),
taking into account historical experience of losses, prevailing economic condition and losses that
are expected to incur in the group of accounts receivable.
Method for making bad debt provision for different portfolio:
Portfolio Method for making provision
Specific fund portfolio No bad debt provision provided
Ageing portfolio Ageing analysis
Use of ageing analysis for making bad debt provision in the portfolio:
Ratio of Ratio of other
accounts 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%
Accounts receivable individually insignificant but provided for bad debt separately
Accounts receivable which are individually insignificant but have the following features are subject to
impairment tests separately by the Company. If there is objective evidence indicating that the accounts
receivable are impaired, then impairment loss will be recognised and bad debts will be provided according
to the difference when the present value of future cash flow is lower than its carrying amounts, such as
accounts receivable with dispute against counterparties or involved in litigation or arbitration; there is
obvious objective of the accounts receivable indicated that the debtor is likely to fail to comply with the
repayment obligation, etc.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
11. Accounts receivable (Cont’d)
(3) Reversal of provision for bad debts
If there are evidences indicating that the value of the account receivable is recovered and that recovery is
connected to the event subsequent to the recognition of the loss, the impairment loss previously recognised
will be reversed and recorded into profit or loss for the period. However, the carrying amount so reversed shall
not exceed the amortised cost of the account receivable on the date of reversal on the assumption that no
impairment loss has been made.
12. Inventories
(1) Classification of inventories
Inventories mainly include raw materials, work in progress, goods in stock, developing products and
consumable biological assets etc.
(2) Pricing of inventories received and dispatched
Inventories are measured at their actual cost when obtained. Cost of an inventory consists of purchase costs,
processing costs and other costs. When used and dispatched, inventories will be calculated with weighted
average method.
The developing products of land development companies under the Company are initially measured at cost.
The costs of developing products include preconstruction costs, expenditures for auxiliary facilities, expenses
on construction and installation, borrowing costs incurred before the completion of the subject project and other
related expenses during the course of the development. Once the inventories are delivered, the actual costs will
be determined using specific measurement methods.
Consumable biological assets refer to biological assets held for sale which include growing timber. Consumable
biological assets without a stock are stated at cost at initial recognition, and subsequently measured at fair value
when there is a stock. Changes in fair values shall be recognised as profit or loss in the current period. The cost
of self-planting, self-cultivating consumable biological assets is the necessary expenses directly attributable to
such assets prior to canopy closure, including borrowing costs eligible for capitalisation. Subsequent expenses
such as maintenance cost 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 batch averaging method.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
12. Inventories (Cont’d)
(3) Recognition of net realisable value of inventory and provision for inventory impairment
Net realisable value refers to the amount of the estimated price of inventories less the estimated cost incurred
upon completion, estimated sales expenses and taxes and levies in daily operation. The realisable value of
inventories shall be determined on the basis of definite evidence, purpose of holding the inventories and effect
of after-balance-sheet-date events.
At the balance sheet date, inventories are calculated at the lower of cost and net realisable value. Usually,
provision for inventory impairment is made when the net realisable value is lower than the cost. Provisions for
impairment of inventory shall be made according to the amount by which the cost of a single item exceeds its
net realisable value. For large quantity and low value items of inventories, provision may be made based on
categories of inventories. For items of inventories relating to a product line that is produced and marketed in
the same geographical area and with the same or similar end uses or purposes, which cannot be practicable
evaluated separately from other items in that product line, provision for decline in value of inventories may be
determined on an aggregate basis.
After making the provision for inventory impairment, in case the factors causing inventory impairment no
longer exists, and the net realisable value of an inventory is higher than its book-value, the original provision for
inventory impairment shall be transferred back and incorporated into the profit or loss for the current period.
(4) We implement permanent inventory system as our inventory stock taking system.
13. Long-term equity investments
Long-term equity investments under this section refer to long-term equity investments in which the Company has
control, joint control or significant influence over the investee. Long-term equity investment without control or joint
control or significant influence of the Company is accounted for as available-for-sale financial assets or financial
assets measured at fair value with any change in fair value charged to profit or loss. Details on its accounting policy
please refer to Note V. 10. “Financial instruments”.
Joint control is the Company’s contractually agreed sharing of control over an arrangement, which relevant activities
of such arrangement must be decided by unanimously agreement from parties who share control. Significant influence
is the power of the Company to participate in the financial and operating policy decisions of an investee, but to fail to
control or joint control the formulation of such policies together with other parties.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(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 absorbing party’s
share of the carrying amount of the owner’s equity under the consolidated financial statements of the ultimate
controlling party on the date of combination. The difference between the initial cost of the long-term equity
investment and the cash paid, non-cash assets transferred as well as the book value of the debts borne by the
absorbing party shall offset against the capital reserve. If the capital reserve is insufficient to offset, the retained
earnings shall be adjusted. If the consideration of the merger is satisfied by issue of equity securities, the initial
investment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount
of the owner’s equity under the consolidated financial statements of the ultimate controlling party on the date
of combination. With the total face value of the shares issued as share capital, the difference between the initial
cost of the long-term equity investment and total face value of the shares issued shall be used to offset against
the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. For
business combination resulted in an enterprise under common control by acquiring equity of the absorbing
party under common control through a stage-up approach with several transactions, these transactions will be
judged whether they shall be treat as “transactions in a basket”. If they belong to “transactions in a basket”,
these transactions will be accounted for a transaction in obtaining control. If they are not belong to “transactions
in a basket”, the initial investment cost of the long-term equity investment shall be the absorbing party’s share of
the carrying amount of the owner’s equity under the consolidated financial statements of the ultimate controlling
party on the date of combination. The difference between the initial cost of the long-term equity investment
and the aggregate of the carrying amount of the long-term equity investment before merging and the carrying
amount the additional consideration paid for further share acquisition on the date of combination shall offset
against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted.
Other comprehensive income recognised as a result of the previously held equity investment accounted for
using equity method on the date of combination or recognised for available-for-sale financial assets will not be
accounted for.
For a long-term equity investment acquired through a business combination involving enterprises not under
common control, the initial investment cost of the long-term equity investment shall be the cost of combination
on the date of acquisition. Cost of combination includes the aggregate fair value of assets paid by the acquirer,
liabilities incurred or borne and equity securities issued. For business combination resulted in an enterprise not
under common control by acquiring equity of the acquiree under common control through a stage-up approach
with several transactions, these transactions will be judged whether they shall be treat as “transactions in a
basket”. If they belong to “transactions in a basket”, these transactions will be accounted for a transaction in
obtaining control. If they are not belong to “transactions in a basket”, the initial investment cost of the long-
term equity investment accounted for using cost method shall be the aggregate of the carrying amount of
equity investment previously held by the acquiree and the additional investment cost. For previously held
equity accounted for using equity method, relevant other comprehensive income will not be accounted for. For
previously held equity investment classified as available-for-sale financial asset, the difference between its fair
value and carrying amount, as well as the accumulated movement in fair value previously included in the other
comprehensive income shall be transferred to profit or loss for the current period.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(1) Determination of investment cost (Cont’d)
Agent fees incurred by the absorbing party or acquirer for the acquisition such as audit, legal service, and
valuation and consultation fees, and other related administration expenses are charged to profit or loss in the
current period at the time such expenses incurred.
The long-term equity investment acquired through means other than a business combination shall be initially
measured at its cost. Such cost is depended upon the acquired means of long-term equity investments,
which is recognised based on the purchase cost actually paid by the Company in cash, the fair value of equity
securities issued by the Company, the agreed value of investment contract or agreement, the fair value or
original carrying amounts of the non-monetary asset exchange transaction which the asset will be transferred
out of the Company, and the fair value of long-term equity investment itself. The costs, taxes and other
necessary expenses that are directly attributable to the acquisition of the long-term equity investments are also
included in the investment cost. For additional equity investment made in order to obtain significant influence or
common control over investee without resulted in control, the relevant cost for long-term equity investment shall
be the aggregate of fair value of previously held equity investment and additional investment cost determined
according to “Accounting Standard for Business Enterprises No. 22 – Recognition and measurement of
Financial Instruments”.
(2) Subsequent measurement and method for profit or loss recognition
Long-term equity investments with joint control (excluding those constitute joint ventures) or significant influence
on the investee are accounted for using equity method. In addition, long-term equity investments with control
on the investee are accounted for using cost method and record in the Company’s financial statements.
Long-term equity investments accounted for using the cost method
Under the cost method, a long-term equity investment is measured at its initial investment cost. The cost
for long-term equity investment is adjusted in the event of additional investment or investment recovery.
Except receiving the actual consideration paid for the investment or the declared but not yet distributed
cash dividends or profits which is included in the consideration, investment gains for the period is
recognised as the cash dividends or profits declared by the investee.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(2) Subsequent measurement and method for profit or loss recognition
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
the investor’s interest in the fair value of the investee’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 the
investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, the
difference shall be charged to profit or loss for the current period, and the cost of the long term equity
investment shall be adjusted accordingly.
Under the equity method, investment gain and other comprehensive income shall be recognised based
on the Company’s share of the net profits or losses and other comprehensive income made by the
investee, respectively. Meanwhile, the carrying amount of long-term equity investment shall be adjusted.
The carrying amount of long-term equity investment shall be reduced based on the Company’s share
of profit or cash dividend distributed by the investee. In respect of the other movement of net profit or
loss, other comprehensive income and profit distribution of investee, the carrying value of long-term
equity investment shall be adjusted and included in the capital reserves. The Company shall recognise
its share of the investee’s net profits or losses based on the fair values of the investee’s individual
separately identifiable assets at the time of acquisition, after making appropriate adjustments thereto. In
the event of inconformity between the accounting policies and accounting periods of the investee and
the Company, the financial statements of the investee shall be adjusted in conformity with the accounting
policies and accounting periods of the Company. Investment gain and other comprehensive income
shall be recognised accordingly. In respect of the transactions between the Company and its associates
and joint ventures in which the assets disposed of or sold are not classified as operation, the share of
unrealised gain or loss arising from internal transactions shall be eliminated by the portion attributable
to the Company. Investment gain shall be recognised accordingly. However, any unrealised loss arising
from internal transactions between the Company and an investee is not eliminated to the extent that the
loss is impairment loss of the transferred assets. In the event that the Company disposed of an asset
classified as operation to its joint ventures or associates, which resulted in acquisition of long-term equity
investment by the investor without obtaining control, the initial investment cost of additional long-term
equity investment shall be the fair value of disposed operation. The difference between initial investment
cost and the carrying value of disposed operation will be fully included in profit or loss for the current
period. In the event that the Company sold an asset classified as operation to its associates or joint
ventures, the difference between the carrying value of consideration received and operation shall be fully
included in profit or loss for the current period. In the event that the Company acquired an asset which
formed an operation from its associates or joint ventures, relevant transaction shall be accounted for in
accordance with “Accounting Standards for Business Enterprises No. 20 “Business combination”. All
profit or loss related to the transaction shall be accounted for.
The Company’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 the investor’s net investment in the investee are reduced to zero. If the Company has to assume
additional obligations, the estimated obligation assumed shall be provided for and charged to the profit
or loss as investment loss for the period. Where the investee is making profits in subsequent periods, the
Company shall resume recognising its share of profits after setting off against the share of unrecognised
losses.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(2) Subsequent measurement and method for profit or loss recognition
Long-term equity investments accounted for using the equity method (Cont’d)
If there is debit variation in relation to the long-term equity investments in associates and joint venture
held prior to first adoption of the Accounting Standards for Business Enterprises by the Company on 1
January 2007, the amounts amortised over the original residual term using the straight-line method is
included in the profit or loss for the period.
Acquisition of minority interest
Upon the preparation of the consolidated financial statements, capital reserve is adjusted based on the
difference between the additional long term equity investment from acquisition of minority interest and the
share of net assets of the subsidiary attributable to the additional shareholding from the date of acquisition
(or date of combination). In the case of insufficient capital surplus to offset impairment, retained earnings
shall be adjusted.
Disposal of long-term equity investments
In these consolidated financial statements, for disposal of a portion of the long-term equity investments
in a subsidiary without loss of control, the difference between disposal cost and disposal of long-term
equity investments relative to the net assets of the subsidiary is charged to the owners’ equity. If disposal
of a portion of the long-term equity investments in a subsidiary by the parent company results in a loss in
control, it shall be accounted for in accordance with the relevant accounting policies as described in Note V.
6. (2) “Preparation Method of the Consolidated Financial Statements”.
On disposal of a long-term equity investment otherwise, the difference between the carrying amount of
the investment and the actual consideration paid is recognised through profit or loss in the current period.
In respect of long-term equity investment accounted for using equity method with the remaining equity
interest after disposal also accounted for using equity method, other comprehensive income previously
under owners’ equity shall be accounted for in accordance with the same accounting treatment for
direct disposal of relevant asset or liability by investee on pro rata basis at the time of disposal. The
owners’ equity recognised for the movement of other owners’ equity (excluding net profit or loss, other
comprehensive income and profit distribution of investee) shall be transferred to profit or loss for the
current period on pro rata basis.
In respect of long-term equity investment accounted for using cost method with the remaining equity
interest after disposal also accounted for using cost method, other comprehensive income recognised
using equity method or the recognition and measurement standard of financial instruments before
obtaining control over the investee shall be accounted for in accordance with the same accounting
treatment for direct disposal of relevant asset or liability by investee, and transferred to profit or loss for
the current period on pro rata basis. Movement of other owners’ equity (excluding net profit or loss, other
comprehensive income and profit distribution under net asset of investee accounted for and recognised
using equity method) shall be transferred to profit or loss for the current period on pro rata basis.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
13. Long-term equity investments (Cont’d)
(2) Subsequent measurement and method for profit or loss recognition
Disposal of long-term equity investments (Cont’d)
In the event of loss of control over investee due to partial disposal of equity investment by the Company,
in preparing separate financial statements, the remaining equity interest which can apply common
control or impose significant influence over the investee after disposal shall be accounted for using equity
method. Such remaining equity interest shall be treated as accounting for using equity method since
it is obtained and adjustment was made accordingly. For remaining equity interest which cannot apply
common control or impose significant influence over the investee after disposal, it shall be accounted for
using the recognition and measurement standard of financial instruments. The difference between its fair
value and carrying amount as at the date of losing control shall be included in profit or loss for the current
period. In respect of other comprehensive income recognised using equity method or the recognition and
measurement standard of financial instruments before the Company obtained control over the investee,
it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant
asset or liability by investee at the time when the control over investee is lost. Movement of other owners’
equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of
investee accounted for and recognised using equity method) shall be transferred to profit or loss for the
current period at the time when the control over investee is lost. Of which, for the remaining equity interest
after disposal accounted for using equity method, other comprehensive income and other owners’ equity
shall be transferred on pro rata basis. For the remaining equity interest after disposal accounted for using
the recognition and measurement standard of financial instruments, other comprehensive income and
other owners’ equity shall be fully transferred.
In the event of loss of common control or significant influence over investee due to partial disposal of
equity investment by the Company, the remaining equity interest after disposal shall be accounted for
using the recognition and measurement standard of financial instruments. The difference between its
fair value and carrying amount as at the date of losing common control or significant influence shall be
included in profit or loss for the current period. In respect of other comprehensive income recognised
under previous equity investment using equity method, it shall be accounted for in accordance with
the same accounting treatment for direct disposal of relevant asset or liability by investee at the time
when equity method was ceased to be used. Movement of other owners’ equity (excluding net profit or
loss, other comprehensive income and profit distribution under net asset of investee accounted for and
recognised using equity method) shall be transferred to profit or loss for the current period at the time
when equity method was ceased to be used.
The Company disposes its equity investment in subsidiary by a stage-up approach with several
transactions until the control over the subsidiary is lost. If the said transactions belong to “transactions in
a basket”, each transaction shall be accounted for as a single transaction of disposing equity investment
of subsidiary and loss of control. The difference between the disposal consideration for each transaction
and the carrying amount of the corresponding long-term equity investment of disposed equity interest
before loss of control shall initially recognised as other comprehensive income, and subsequently
transferred to profit or loss arising from loss of control for the current period upon loss of control.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
14. Investment Property
Investment property refers to real estate held to earn rentals or for capital appreciation, or both.
Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be
included in cost of investment property only when the economic benefits associated with the asset will likely flow to
the Company and its cost can be measured reliably. All other expenditures on investment property shall be included
in profit or loss for the current period when incurred.
The Company adopts cost method for subsequent measurement of investment property, which is depreciated using
the same policy as that for buildings.
The method for impaired test of investment property and measurement of impairment provision are detailed in Note
V.19 “Impairment of long-term assets”.
In the event that an owner-occupied property or inventories is converted to an investment property (or vice versa),
upon the conversion, the property shall be stated at the carrying amount prior to the conversion.
In the event that an investment property is converted to an owner-occupied property, such property shall become
fixed assets or intangible assets since the date of its conversion. In the event that an owner-occupied property is
converted to real estate held to earn rentals or for capital appreciation, such fixed assets or intangible assets shall
become an investment property since the date of its conversion. Investment property is measured at cost during its
conversion. Upon the conversion, the property shall be stated at the carrying amount prior to the conversion.
If an investment property is disposed of or if it withdraws permanently from use and no economic benefit will be
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.
15. Fixed assets
(1) Conditions for recognition of fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental
to others, or for administrative purposes; and have a useful life of more than one accounting year. Fixed assets
are recognised only if the Company is very likely to receive economic benefits from the asset and its cost can
be measured reliably. A fixed asset shall be initially measured at cost and the effect of any expected costs of
abandoning the asset at the end of its use.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
15. Fixed assets (Cont’d)
(2) Method for depreciation of each category of fixed assets
A fixed asset is depreciated over its useful life using the straight-line method since the month subsequent
to the one in which it is ready for intended use. The useful life, estimated net residual value rate and annual
depreciation rate of each category of fixed assets are as follows:
Useful lives of
Method for depreciation Estimated Annual
Category depreciation (Year) residual value depreciation rate
Housing and building Straight-line method 20-40 5.00%-10.00% 2.25%-4.75%
structure
Machinery and Straight-line method 8-20 5.00%-10.00% 4.5%-11.88%
equipment
Transportation Straight-line method 5-8 5.00%-10.00% 11.25%-19.00%
equipment
Electronic equipment Straight-line method 5 5.00%-10.00% 18.00%-19.00%
and others
Estimated net residual value of a fixed asset is the estimated amount that the Company would currently obtain
from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the stage
and in the condition expected at the end of its useful life.
(3) Methods of impairment test and provision of fixed assets
The method for impaired test of fixed assets and measurement of impairment provision are detailed in Note V.19
“Impairment of long-term assets”.
(4) Recognition and accounting method of fixed assets acquired under finance leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of asset ownership to the lessee and titles to the assets may or may not eventually be transferred. For
fixed assets acquired under finance leases, the basis for provision of leased assets depreciation is the same
as that of self-owned fixed assets. When it can be reasonably determined that the ownership of a leased asset
will be transferred at the end of the lease term, it is depreciated over the period of expected use; otherwise, the
lease asset is depreciated over the shorter period of the lease term and the period of expected use.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
15. Fixed assets (Cont’d)
(5) Explanation on other matters
Subsequent expenditures incurred for a fixed asset shall be included in the cost of the fixed asset, only if it is
probable that economic benefits associated with the asset will flow to Chenming Paper and the relevant cost
can be measured reliably; meanwhile the carrying amount of the replaced part shall be derecognised. Other
subsequent expenditures shall be charged to profit or loss when incurred.
Fixed assets are derecognised when there is no economic benefit arising from disposal or expected use
or disposal of fixed assets. When a fixed asset is sold, transferred, retired or damaged, the Company shall
recognise the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes in
profit or loss for the current period.
The Company reviews the useful life and estimated net residual value of a fixed asset and the depreciation
method applied at least at each financial year-end. A change in the useful life or estimated net residual value of
a fixed asset or the depreciation method used shall be accounted for as a change in accounting estimate.
16. Construction in progress
Construction in progress is recognised based on the actual construction cost, including all expenditures incurred for
construction projects, capitalised borrowing costs for the construction in progress before it has reached the working
condition for its intended use, and other related expenses during the construction period. A construction in progress
is reclassified to fixed assets when it has reached the working condition for its intended use.
The method for impaired test of construction in progress and measurement of impairment provision are detailed in
Note V. 19 “Impairment of long-term asset”.
17. Borrowing costs
Borrowing costs include interest, amortisation of discounts or premiums related to borrowings, ancillary costs
incurred in connection with the arrangement of borrowings, and exchange differences arising from foreign currency
borrowings. For borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset, when expenditures for the asset and borrowing costs are being incurred, activities relating to the
acquisition, construction or production of the asset that are necessary to prepare the asset for its intended use or sale
have commenced, such borrowing costs shall be capitalised as part of the cost of that asset; and capitalisation shall
discontinue when the qualifying asset is ready for its intended use or sale. Other borrowing costs shall be recognised
as expense in the period in which they are incurred.
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actual interest
expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed
funds before being used into banks or any investment income on the temporary investment of those funds. Where
funds are borrowed for general purpose, the Company 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.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
17. Borrowing costs (Cont’d)
During the capitalisation period, exchange differences on a specific purpose borrowing denominated in foreign
currency shall be capitalised. Exchange differences related to general-purpose borrowings denominated in foreign
currency shall be included in profit or loss for the current period.
Qualifying assets are assets (fixed assets, investment property, inventories, etc.) that necessarily take a substantial
period of time for acquisition, construction or production to get ready for their intended use or sale.
Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction or
production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more
than 3 months, until the acquisition, construction or production of the qualifying asset is resumed.
18. Intangible assets
(1) Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled by the
Company.
An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible asset shall be
recognised as cost of the intangible asset only if it is probable that economic benefits associated with the asset
will flow to the Company and the cost of the asset can be measured reliably. Other expenditures on an item
asset shall be charged to profit or loss when incurred.
Land use right acquired shall normally be recognised as an intangible asset. Self-constructed buildings (e.g.
plants), related land use right and the buildings shall be separately accounted for as an intangible asset and
fixed asset. For buildings and structures purchased, the purchase consideration shall be allocated among
the land use right and the buildings on a reasonable basis. In case there is difficulty in making a reasonable
allocation, the consideration shall be recognised in full as fixed assets.
An intangible asset with a finite useful life shall be stated at cost less estimated net residual value and any
accumulated impairment loss provision and amortised using the straight-line method over its useful life when
the asset is available for use. Intangible assets with indefinite life are not amortised.
The Company shall review the useful life of intangible asset with a finite useful life and the amortisation method
applied at least at each financial year-end. A change in the useful life or amortisation method used shall be
accounted for as a change in accounting estimate. For an intangible asset with an indefinite useful life, the
Company shall review the useful life of the asset in each accounting period. If there is evidence indicating that
the useful life of that intangible asset is finite, Chenming Paper shall estimate the useful life of that asset and
apply the accounting policies accordingly.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
18. Intangible assets (Cont’d)
(2) Research and development expenditure
Research and development expenditure of the Company was divided into expenses incurred during the
research phase and expenses incurred during the development phase.
Expenses incurred during the research phase are recognised as profit or loss in the current period.
Expenses incurred during the development phase that satisfy the following conditions are recognised as
intangible assets, while those that do not satisfy the following conditions are accounted for in the profit or loss
for the current period:
it is technically feasible that the intangible asset can be used or sold upon completion;
there is intention to complete the intangible asset for use or sale;
the intangible asset can produce economic benefits, including there is evidence that the products
produced using the intangible asset has a market or the intangible asset itself has a market; and if the
intangible asset is for internal use, there is evidence that there exists usage for the intangible asset;
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;
the expenses attributable to the development phase of the intangible asset can be measured reliably.
If the expenses incurred during the research phase and the development phase cannot be distinguished
separately, all development expenses incurred are accounted for in the profit or loss for the current
period.
(3) Methods of impairment test and provision of intangible assets
The method for impaired test of intangible assets and measurement of impairment provision are detailed in Note
V.19 “Impairment of long-term assets”.
19. Impairment of long-term asset
The Company will judge if there is any indication of impairment as at the balance sheet date in respect of noncurrent
non-financial assets such as fixed assets, construction in progress, intangible assets with a finite useful life,
investment properties measured at cost, and long-term equity investments in subsidiaries, joint controlled entities and
associates. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated
for impairment test. Goodwill, intangible assets with an indefinite useful life and intangible assets beyond working
conditions will be tested for impairment annually, regardless of whether there is any indication of impairment.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
19. Impairment of long-term asset (Cont’d)
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. An asset’s fair value is the price in a sale agreement in an arm’s length
transaction. If there is no sale agreement but the asset is traded in an active market, fair value shall be determined
based on the bid price. If there is neither sale agreement nor active market for an asset, fair value shall be based on
the best available information. Costs of disposal are expenses attributable to disposal of the asset, including legal
fee, relevant tax and surcharges, transportation fee and direct expenses incurred to prepare the asset for its intended
sale. The present value of the future cash flows expected to be derived from the asset over the course of continued
use and final disposal is determined as the amount discounted using an appropriately selected discount rate.
Provisions for assets impairment shall be made and recognised for the individual asset. If it is not possible to estimate
the recoverable amount of the individual asset, the Company shall determine the recoverable amount of the asset
group to which the asset belongs. The asset group is the smallest group of assets capable of generating cash flows
independently.
For the purpose of impairment testing, the carrying amount of goodwill presented separately in the financial
statements 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 Company shall recognise an impairment loss. The
amount of impairment loss shall first reduce the carrying amount of any goodwill allocated to the asset group or set of
asset groups, and then reduce the carrying amount of other assets (other than goodwill) within the asset group or set
of asset groups, pro rata on the basis of the carrying amount of each asset.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of the
restorable value.
20. Long-term prepaid expenses
Long-term prepaid expenses are expenditures and other expenses which have incurred but that shall be amortised
over the current period and subsequent periods of more than one year. Long-term prepaid expenses of the Company
mainly include expenses on improvement of fixed assets and woodland rent. Long-term prepaid expenses are
amortised over the estimated benefit period using the straight-line method.
21. Employee benefits
Staff remuneration of the Company mainly includes short-term staff remuneration, post-employment benefits and
termination benefits, in which:
Short-term remuneration mainly includes salaries, bonuses, allowance and subsides, staff welfare, medical insurance
premium, maternity insurance premium, work-related injury insurance premium, housing provident funds, union
operation costs and employee education costs and non-monetary welfare etc. Short-term remuneration incurred
during the accounting in which the Company’s staff provided services for the Company is recognised as liability, and
included in profit or loss for the current period or related asset costs. Of which, non-monetary welfare is measured at
fair value.
Post-employment benefits mainly include defined contribution plan. Defined contribution plan mainly includes pension
insurance premium and unemployment insurance premium. Relevant contribution amount is included in related asset
costs or profit or loss for the current period during the period in which the expenses incurred.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
21. Employee benefits (Cont’d)
When the Company terminates the employment relationship with employees before the end of the employment
contracts or provides compensation as an offer to encourage employees to accept voluntary redundancy, the
Company shall recognise employee compensation liabilities arising from compensation for staff dismissal and
included in profit or loss for the current period, when the Company cannot revoke unilaterally compensation for
dismissal due to the cancellation of labour relationship plans and employee redundant proposals; and the Company
recognise cost and expenses related to payment of compensation for dismissal and restructuring, whichever is earlier.
However, if the compensation for termination of employment is not expected to be fully paid within 12 months from
the reporting period, it shall be accounted for other long-term staff remuneration.
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 scheduled retirement date, shall
be recognised (as compensation for termination of employment) in the current profit or loss by the Company if the
recognition principles for provisions are satisfied.
The Company does not provide any other long-term employee benefit for its staff.
22. Accrued liabilities
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as accrued liabilities: (1)
The obligation is a current obligation borne by the Company; (2) it is likely that an outflow of economic benefits will be
resulted from the performance of the obligation; and (3) the amount of the obligation can be reliably measured.
At the balance sheet date, accrued liabilities shall be measured at the best estimate of the necessary expenses
required for the performance of existing obligations, after taking into account relevant risks, uncertainties, time value
of money and other factors pertinent to the contingencies.
If all or some expenses incurred for settlement of accrued liabilities are expected to be borne by the third party, the
compensation amount shall, on a recoverable basis, be recognised as asset separately, and compensation amount
recognised shall not be more than the carrying amount of accrued liabilities.
23. Revenue
(1) Revenue from sales of goods
Revenue is recognised when Chenming Paper has transferred to the buyer the significant risks and rewards of
ownership of the goods, retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold, will receive the economic benefits associated with the
transaction, and can reliably measure the relevant amount of revenue and costs. Confirmation time for sales
revenue: In terms of domestic sales, confirmation will be made on the day when goods are delivered to the
clients. While in terms of overseas sales, confirmation will be made on the day when goods are loaded on board
and declared.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
23. Revenue (Cont’d)
(2) Revenue from the rendering of services
When the outcome of a transaction involving the rendering of services can be reliably estimated, it shall, on
the balance sheet date, recognise the revenue from the rendering of services employing the percentage-of-
completion method. The completion schedule of transaction concerning the rendering of services shall be
ascertained according to the proportion of service costs incurred to the estimated total costs.
The outcome of a transaction concerning the rendering of services can be reliably estimated, which shall
concurrently satisfy: The relevant amount of revenue can be reliably measured; it is probable that the
economic benefits will flow into the enterprise; the completion schedule of the transaction can be reliably
ascertained; and 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 Company includes sales of goods and rendering of services, if
sales of goods and rendering of services can be differentiated and separately measured, they will be recognised
respectively. If sales of goods and rendering of services cannot be differentiated or cannot be separately
measured, they will be recognised as sales of goods in full.
(3) Revenue from rendering of services
Revenue from rendering of services is recognised as income on the accrual basis in accordance with the
underlying contracts or agreements.
(4) Interest income
Interest income is calculated based on the time during which the Company’s monetary fund, and the effective
interest rates.
24. Government grants
Government grants are transfer of monetary assets or non-monetary assets from the government to the Company at
no consideration, excluding capital considerations from the government as an owner of the Company. Government
grants are classified into government grants related to assets and government grants related to income. Government
grants obtained for acquisition or construction of long-term assets or other forms of long-term asset formation are
classified as related to assets. Other government grants are classified as related to revenue. If related government
documents do not specify the objective of the grants, the grants are classified as related to assets or income
as follows: (1) In case a project for which the grants are granted is specified in such documents, the grants are
classified as related to assets and income based on the budgeted ratio of the expenditure on asset formation and the
expenditure recorded as expenses, where such ratio should be reviewed and, if necessary, changed on each balance
sheet date; and (2) in case of general description without specifying any project in such documents, the grants are
classified as related to income.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
24. Government grants (Cont’d)
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; and (3) the date of payment be specified in related documents and the payment
thereof be covered by corresponding budget to ensure such grants will be paid on time as specified.
A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit or loss
over the useful life of the asset. For a government grant related to income, if the grant is a compensation for related
expenses or losses to be incurred in subsequent periods, the grant shall be recognised as deferred income, and
recognised in profit or loss over the periods in which the related costs are recognised; if the grant is a compensation
for related expenses or losses already incurred, the grant shall be recognised immediately in profit or loss for the
current period.
For the repayment of a government grant already recognised, if there is any related deferred income, the repayment
shall be off set against the carrying amount of the deferred income, and any excess shall be recognised in profit or
loss for the current period; if there is no related deferred income, the repayment shall be recognised immediately in
profit or loss for the current period.
25. 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.
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V. Significant Accounting Policies and Accounting Estimates (Cont’d)
25. Deferred income tax assets/deferred income tax liabilities (Cont’d)
(2) Deferred income tax assets and deferred income tax liabilities
Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax
base, and the difference between the tax base and the carrying amount of those items that are not recognised
as assets or liabilities but have a tax base that can be determined according to tax laws, shall be recognised as
deferred income tax assets and deferred income tax liabilities using the balance sheet liability method.
Deferred income tax liabilities are not recognised for taxable temporary differences related to: the initial
recognition of goodwill; and the initial recognition of an asset or liability in a transaction which is neither a
business combination nor affects accounting profit or taxable profit (or deductible loss) at the time of the
transaction. In addition, the Company recognises the corresponding deferred income tax liability for taxable
temporary differences associated with investments in subsidiaries, associates and joint ventures, except when
both of the following conditions are satisfied: the Company is able to control the timing of the reversal of the
temporary difference; and it is probable that the temporary difference will not reverse in the foreseeable future.
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 Company
recognises the corresponding deferred income tax asset for deductible temporary differences associated with
investments in subsidiaries, associates and joint ventures to the extent that it is probable that taxable profits
will be available against which the deductible temporary differences can be utilised, except when both of the
following conditions are satisfied: it is not probable that the temporary difference will reverse in the foreseeable
future; and it is not probable that taxable profits will be available in the future, against which the temporary
difference can be utilised.
Chenming Paper recognises a deferred income tax asset for the carry forward of deductible losses and tax
credits to subsequent periods, to the extent that it is probable that future taxable profits will be available against
which the deductible losses and tax credits can be utilised.
At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the
tax rates that are expected to apply to the period when the asset is realised or the liability is settled, according
to the requirements of tax laws.
At the balance sheet date, Chenming Paper shall review the carrying amount of a deferred income tax asset.
If it is probable that sufficient taxable profits will not be available in future periods to allow the benefit of the
deferred income tax asset to be utilised, the carrying amount of the deferred income tax asset shall be reduced.
Any such reduction in amount shall be reversed when it becomes probable that sufficient taxable profits will be
available.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
25. 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 or owners’ equity, which are recognised directly in owners’ 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 Company, at the same time, records the net amount after offsetting its current income tax
assets and current income tax liabilities.
The Company was granted the legal rights of net settlement of current income tax assets and current income
tax liabilities. Deferred income tax assets and deferred income tax liabilities are related to income tax to be paid
by the same entity liable to pay tax to the same tax collection and management authority or related to different
entities liable to pay tax, but the relevant entity liable to pay tax is intended to apply net settlement of current
income tax assets and liabilities or, at the same time, obtain assets, repay debt whenever every deferred income
tax assets and liabilities with importance would be reversed in the future, the Company records the net amount
after offsetting its current income tax assets and current income tax liabilities.
26. Lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of asset ownership to the lessee and titles to the assets may or may not eventually be transferred. All other leases are
classified as operating leases.
(1) Operating lease business with the Company recorded as lessee
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 Company recorded as lessor
Rental income is recognised in profit or loss for the current period using the straight-line method over the lease
term. The initial direct cost where the amount is larger is capitalised when incurred, and accounted for as profit
or loss for the current period on the same basis as recognition of rental income over the entire lease period;
the initial direct cost where the amount is fewer is included in the profit or loss for the period when incurred.
Contingent rental is accounted for as profit or loss for the period in which it is incurred.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
26. Lease (Cont’d)
(3) Financing lease business with the Company recorded as lessee
On the beginning date of the lease, the entry value of leased asset shall be at the lower of the fair value
of the leased asset and the present value of minimum lease payment at the beginning date of the lease.
Minimum lease payment shall be the entry value of long-term accounts payable, with difference recognised as
unrecognised financing expenses. In addition, initial direct costs attributable to leased items incurred during the
process of lease negotiation and signing of lease agreement shall be included in the value of leased assets. The
balance of minimum lease payment after deducting unrecognised financing expenses shall be accounted for
long-term liability and long-term liability due within one year.
Unrecognised financing expenses shall be recognised as financing expenses for the current period using
effective interest method during the leasing period. Contingent rent shall be included in profit or loss for the
current period at the time it incurred.
(4) Financing lease business with the Company recorded as lessor
On the beginning date of the lease, the entry value of lease receivable shall be the aggregate of minimum
lease receivable and initial direct costs at the beginning date of the lease. The unsecured balance shall be
recorded. The aggregate of minimum lease receivable, initial direct costs and unsecured balance and the
different between their present values shall be recognised as unrealised financing income. The balance of lease
receivable after deducting unrecognised financing income shall be accounted for long-term debt and long-term
debt due within one year.
Unrecognised financing income shall be recognised as financing income for the current period using effective
interest method during the leasing period. Contingent rent shall be included in profit or loss for the current
period at the time it incurred.
27. Discontinued operation
Discontinued operation refers to the operation disposed or classified as held-for-sale by the Company and presented
separately under operation segments and financial statements, which has fulfilled one of the following criteria: it
represents an independent key operation or key operating region; it is part of the proposed disposal plan on an
independent key operation or proposed disposal in key operating region; or it only establishes for acquisition of
subsidiary through disposal.
28. Repurchase of shares
Share repurchase consideration paid and transaction costs to reduce the owner’s equity, repurchase, transfer or
cancellation of Chenming Paper’s shares, the gains or losses are not recognised.
In respect of transfer of treasury shares, the difference between the actual amount received and the carrying amount
of treasury shares shall be included in capital reserve. When insufficient to dilute, capital reserve will be offset against
the surplus reserve and retained profits. Treasury shares are cancelled at par value and by the number of shares
cancelled to reduce the share capital. The difference between the book balance and the nominal value of the treasury
shares shall be offset against the capital reserve. When insufficient to dilute, capital reserve will be offset against the
surplus reserve and retained profits.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
29. Changes in Significant Accounting Policies and Estimates
(1) Changes in Accounting Policies
Applicable √ Not applicable
(2) Changes in significant accounting estimates
Applicable √ Not applicable
30. Comparative figures
Certain comparative figures for prior periods have been restated in conformity with the current year’s financial
statement presentation.
31. Critical accounting judgments and estimates
The Company needs to make judgments, estimates and assumptions as to the carrying amount of statement items
which cannot be accurately calculated during the application of the Company’s accounting policies. Such judgments,
estimates and assumptions are made based on the historical experiences of the Company’s management and
taking into account other relevant factors, which may affect the reported amount of revenue, expenses, assets and
liabilities and disclosure of contingent liabilities at the balance sheet date. However, the outcome from such estimate
uncertainties may different from the current estimation of the Company’s management, which may cause critical
adjustment to the carrying amount of assets or liabilities which may be affected in the future.
The Company regularly reviews the aforesaid judgments, estimates and assumptions on the basis of continued
operation. A revision to accounting estimates is recognised in the period in which the estimate is revised if it only
affects that period. A revision is recognised in the period of the revision and future periods if it affects both current
and future periods.
At the balance sheet date, the critical areas where Company needs to make judgments, estimates and assumptions
as to the items amount of financial statements are set out below:
(1) Classification of leases
The Company classifies its leases as operating lease and financing lease in accordance with “Accounting
Standard for Business Enterprises No. 21 – Leases”. When classifying leases, the management needs to
analyse and judge whether all risks and returns relating to the ownership of leased out assets have transferred
to the leasee, or whether the Company has obliged to all risks and returns relating to the ownership of leased
assets.
(2) Provision for bad debts
The Company adopts the allowance method to account for bad debt loss under the accounting policies of
accounts receivable. Impairment of accounts receivable is based on the recoverability of assessed accounts
receivable. Given the management’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.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
31. Critical accounting judgments and estimates (Cont’d)
(3) Allowance for inventories
Under the accounting policies of inventories and by measuring at the lower of cost and net realisable value,
the Company makes allowance for inventories which have costs higher than net realisable value or become
obsolete and slow-moving. Write-down of inventories to their net realisable values is based on the sale ability
of the evaluated inventory and their net realisable values. Given the management’s judgments and estimates
required for inventory impairment on the basis of definite evidence, purpose of holding the inventories and
other factors, the difference between the actual outcome and original estimate will affect the carrying amount of
inventories and provision and reversal of bad debts of inventories allowance during the estimate revision period.
(4) Fair value of consumable biological assets
A consumable biological asset is measured at fair value when there is a stock. A stock is judged to be formed
when the consumable biological asset - timber survives well after a growth period and the merchantable timber
exceeds 0.8 cubic metres.
The fair value of a consumable biological asset is discounted using expected cash flow and estimated and
measured using income approach.
(5) Impairment of available-for-sale financial assets
In respect of impairment of available-for-sale financial assets, whether impairment loss shall be recognised in
income statement significantly depends on the judgments and assumptions of the management. While making
judgments and assumptions, the Company shall assess the excess of cost of the investee’s identifiable net
assets attributable to the investment over fair value and the duration.
(6) Provision for impairment of non-financial non-current assets
At the balance sheet date, the Company makes its judgment as to whether there is any evidence indicating
potential impairment of non-current assets other than financial assets. Intangible assets with indefinite useful life
shall be tested for impairment when there is any indication of impairment in addition to the annual impairment
testing. Other non-current assets other than financial assets shall be tested for impairment if there is any
evidence indicating that their carrying amount cannot be recovered.
When the carrying amount of an asset or asset groups is higher than the recoverable amount, being the higher
of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from
the asset, it indicates impairment.
The net amount of the fair value less costs of disposal is determined by making reference to the price in a sale
agreement in an arm’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 Company may adopt all relevant materials including
the projections as to the output, selling price and relevant operating costs based on reasonable and supportive
assumptions.
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XII Financial Report
V. Significant Accounting Policies and Accounting Estimates (Cont’d)
31. Critical accounting judgments and estimates (Cont’d)
(6) Provision for impairment of non-financial non-current assets (Cont’d)
The test shall be performed at least once a year as to whether there is any impairment. This requires an estimate
for the present value of the future cash flows of the asset groups or sets of asset groups to which goodwill is
allocated. In estimating the present value of the future cash flows, the Company needs to estimate the cash
flows generated from the future asset groups or sets of asset groups. Meanwhile, the present value of future
cash flows is determined using an appropriately selected discount rate.
(7) Depreciation and amortisation
The Company shall provide depreciation and amortisation for investment properties, fixed assets and intangible
assets over their useful lives and after taking into account of their residual value, using straight-line method.
The Company shall regularly review the useful lives to determine the amount depreciated and amortised to be
accounted for in each reporting period. The useful life is determined by the Company according to its previous
experience on the similar assets and estimated technical innovation. If there is any material change in the
previously made estimate, the depreciation and amortisation will be adjusted over the future period.
(8) Deferred income tax assets
It is probable that all unused tax loss will be recognised as the deferred income tax assets to the extent there
will be sufficient taxable profits against which the deducible loss is available. This requires the Company’s
management to apply numerous judgments to estimate the time and amount generated from the future taxable
profits so as to determine the amount of deferred income tax assets with reference to the tax planning strategy.
(9) Income tax
There are some uncertainties in tax treatment and calculation for some transactions of the Company during
its ordinary course of business. The approval from the tax authority is required for pre-tax expending of some
items. Any difference between the final recognition outcome of such tax matters and the initially estimated
amount will exert an effect on the current income tax and deferred income tax during their final recognition
period.
VI. Taxation
1. Main Tax Types and Tax Rates
Tax type Tax rate
Value added tax 17% for general and 13% for sales of gas and water. Value-added tax is
computed on the difference after deduction of input value-added tax
Business tax 3%-5% of taxable revenue
Urban maintenance and construction tax 7% of actual payment of turnover tax
Enterprise income tax 25% of taxable income
Educational surcharges 3% of actual payment of turnover tax
Local educational surcharges 2% of actual payment of turnover tax
159
XII Financial Report
VI. Taxation (Cont’d)
2. Tax Incentives
(1) Enterprise Income Tax
In May 2015, the Company submitted the information for the renewal of the high and new technology enterprise
status. On 10 December 2015, the Department of Science & Technology of Shandong Province, Shandong
Province Finance Bureau, Shandong Provincial Office of SAT and Shandong Local Taxation Bureau issued the
“The Notice on Proposed List of High and New Technology Enterprises in Shandong Province 2015” (Lu Ke
Zi [2015] No. 154). The notice was available for 15 business days from 10 December 2015 and the Company
was on the list. Prior to obtaining the approval of renewal of high and new technology enterprise certificate, the
Company could not be certain on whether the renewal would succeed, and hence temporarily calculated the
income tax expenses for the period at a statutory rate of 25% in accordance with the relevant requirements
under the Law on Enterprise Income Tax. The period of public notice had passed and the Company expected
the applicable tax rate would be 15% for the subsequent period in which relevant assets are recovered or
relevant liabilities are settled, and thus it recognised the deferred income tax assets and deferred income tax
expenses at a tax rate of 15%.
Pursuant to the requirements of Rule 27 of Law of the People’s Republic of China on Enterprise Income Tax
( ) and Rule 86 of Regulations for the Implementation of Law of the People’s
Republic of China on Enterprise Income Tax ( ), subsidiaries of
Chenming Paper, namely, Zhanjiang Chenming Arboriculture Co., Ltd., Yangjiang Chenming Arboriculture Co.,
Ltd., Nanchang Chenming Arboriculture Co., Ltd., Huanggang Chenming Arboriculture Co., Ltd. and Chenming
Arboriculture Co., Ltd. are engaged in arboriculture cultivating and thus exempt from corporate income tax.
Pursuant to the”Revenue Bill 2008” passed by The Legislative Council of the Hong Kong Special Administrative
Region on 26 June 2008, Chenming (HK) Limited, a subsidiary of Chenming Paper, has been subject to a
corporate income tax rate of 16.5% commencing 2008, and the applicable tax rate for 2015 was 16.5%.
Except for the above preferential policies, Chenming Paper and its remaining subsidiaries are subject to
enterprise income tax rate of 25%.
(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 than 30% 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 above 30% of coal ash in its production. It is thus qualified as an enterprise engaged in the utilisation
of waste in production and is exempted from VAT in 2015.
Pursuant to the related requirements of the “Notice of the Ministry of Finance and the State Administration of
Taxation on Issue Regarding Exemption from VAT for Certain Products that Comprehensively Utilize Resources”
(No. Cai Shui [1995] No. 44) as issued by and the State Administration of Taxation and the document No. Cai
Shui [2001] No. 72, Shandong Chenming Panels Co., Ltd., a subsidiary of the Company, produces products that
apply integrated use of resources and is subject to an immediate VAT refund policy.
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XII Financial Report
VII. Notes to items of the Consolidated Financial Statements
1. Monetary funds
Unit: RMB
Item Closing balance Opening balance
Treasury cash 1,869,583.60 1,437,037.09
Bank deposit 1,886,237,910.16 974,659,824.21
Other monetary funds 7,096,218,522.25 4,499,561,324.80
Total 8,984,326,016.01 5,475,658,186.10
Of which: Total deposits in overseas banks 270,967,129.46 853,450,001.81
Notes:
Other monetary funds of RMB2,647,639,732.52 (31 December 2014: RMB1,592,569,467.98) were the guarantee deposit for the
application for bank acceptance with the banks by the Company.
Other monetary funds of RMB1,146,136,561.08 (31 December 2014: RMB710,024,934.09) were the guarantee deposit for the
application for letter of credit with the banks by the Company.
Other monetary funds of RMB2,982,301,007.86 (31 December 2014: RMB1,685,461,808.73) were the guarantee deposit for the
application for guarantees with the banks by the Company.
Other monetary funds of RMB87,691,220.79 (31 December 2014: RMB473,405,114.00) were the guarantee deposit for the application
for loans with the banks by the Company.
Other monetary funds of RMB232,450,000.00 (31 December 2014: RMB38,100,000.00) were the statutory reserve deposit at the
People’s Bank of China by Shandong Chenming Financial Leasing Co., Ltd., a subsidiary of the Company.
2. Bills receivable
(1) Classification of bills receivable
Unit: RMB
Item Closing balance Opening balance
Bank acceptance bills 3,946,782,845.65 2,990,068,579.33
Commercial acceptance bills 52,000,000.00 57,472,976.82
Total 3,998,782,845.65 3,047,541,556.15
161
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
2. Bills receivable (Cont’d)
(2) Bills receivable of the Company pledged at the end of the period
Unit: RMB
Pledged amount
at the end
Item of the period
Bank acceptance bills 1,632,382,759.87
Total 1,632,382,759.87
(3) Outstanding bills receivable endorsed or discounted by the Company as at the end of the period
Unit: RMB
Recognised
Derecognised amount
amount as at the as at the end
Item end of the period of the period
Bank acceptance bills 5,284,549,559.35
Total 5,284,549,559.35
(4) Other explanation
As at 31 December 2015, bills with carrying amount of RMB389,088,621.98 (31 December 2014:
RMB501,084,854.72) were pledged in exchange for short-term borrowings of RMB472,286,374.54. As at 31
December 2015, bills with carrying amount of RMB786,353,404.24 (31 December 2014: RMB222,426,123.97)
were pledged for the issuance of acceptance bills and with carrying amount of RMB456,940,733.65 were
pledged for the issuance of guarantees or letters of credit.
As at 31 December 2015, the accumulated bank acceptance bills issued by the Group to banks amounted to
RMB3,861,622,115.19 (2014: RMB3,440,773,115.05), with discount expenses incurred of RMB65,559,613.69
(2014: RMB91,126,767.40). As at 31 December 2015, outstanding discounted bills receivable amounted to
RMB1,296,249,121.66 (2014: RMB1,320,918,334.62).
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XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
3. Accounts receivable
(1) Disclosure of accounts receivable by category
Unit: RMB
Closing balance Opening balance
Book balance Bad debts provision Book balance Bad debts provision
Category Amount Percentage Amount Percentage Book value Amount Percentage Amount Percentage Book value
Accounts receivable that are
i div dual y signif cant and
provided for bad debts separately 40,000,101.94 0.94% 40,000,101.94 100.00% 48,363,962.78 1.29% 48,363,962.78 100.00%
Accounts receivable that are provided
for bad debts on credit risk
features portfol o basis 4,216,225,669.00 99.06% 264,937,689.68 6.28% 3,951,287,979.32 3,705,668,686.18 98.71% 216,259,316.98 5.84% 3,489,409,369.20
Total 4,256,225,770.94 100.00% 304,937,791.62 7.16% 3,951,287,979.32 3,754,032,648.96 100.00% 264,623,279.76 7.05% 3,489,409,369.20
(2) Presentation of accounts receivable according to ageing analysis
Closing balance Opening balance
Item Amount Ratio Amount Ratio
Within 1 year 4,018,053,411.50 94.41 3,570,601,097.55 95.11
1-2 years 84,364,713.97 1.98 72,933,462.12 1.94
2-3 years 61,707,230.54 1.45 21,679,196.79 0.58
Over 3 years 92,100,414.93 2.16 88,818,892.50 2.37
Total 4,256,225,770.94 100.00 3,754,032,648.96 100.00
The Company 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 revenue recognizing date, net of impairment, as of the
reporting date:
Ageing Closing balance Opening balance
Within 1 year 3,825,167,449.49 3,406,294,889.68
1-2 years 76,754,745.39 65,771,122.09
2-3 years 49,365,784.44 17,343,357.43
Total 3,951,287,979.32 3,489,409,369.20
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XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(2) Presentation of accounts receivable according to ageing analysis (Cont’d)
The following is an ageing analysis of the overdue and uncollected accounts receivable beyond the credit
period, net of impairment:
Ageing Closing balance Opening balance
Within 1 year 523,536,649.12 997,161,679.10
1-2 years 76,754,745.39 65,771,122.09
2- 3 years 49,365,784.44 17,343,357.43
Total 649,657,178.95 1,080,276,158.62
Based on the accounts receivable collection experience of the Group, the accounts receivable of over 3 years
generally are uncollectable so the Company makes impairment provisions in full for the overdue receivables of
over 3 years.
Accounts receivable that are individually significant and are provided for bad debts separately as at the end of
the period:
√ Applicable Not applicable
Unit: RMB
Closing balance
Accounts Bad debt Reason
Receivable (by entity) receivable provision Percentage for provision
Foshan Shunde Xingchen 26,754,065.23 26,754,065.23 100.00% Overdue for a
Paper Co., Ltd. prolonged period
and unlikely to be
recovered
Beijing Huaxia Culture 9,825,843.00 9,825,843.00 100.00% Overdue for a
Media Co., Ltd. prolonged period
and unlikely to be
recovered
Jiangxi Longming 1,763,987.74 1,763,987.74 100.00% Overdue for a
Enterprise Co., Ltd. prolonged period
and unlikely to be
recovered
Nanchang Xingbo 1,656,205.97 1,656,205.97 100.00% Overdue for a
Paper Co., Ltd. prolonged period
and unlikely to be
recovered
Total 40,000,101.94 40,000,101.94
164
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(2) Presentation of accounts receivable according to ageing analysis (Cont’d)
Use of ageing analysis for making bad debt provision in the portfolio:
√ Applicable Not applicable
Unit: RMB
Closing balance
Ageing Accounts receivable Bad debt provision Percentage
Within 1 year
Of which: within 3 months 3,306,839,885.37 165,341,994.28 5.00%
Within 4-6 months 380,674,785.23 19,033,739.27 5.00%
7-12 months 170,204,569.13 8,510,228.46 5.00%
Sub-total for within 1 year 3,857,719,239.73 192,885,962.01 5.00%
1-2 years 76,099,685.79 7,609,968.58 10.00%
2-3 years 61,707,230.54 12,341,446.10 20.00%
Over 3 years 52,100,312.99 52,100,312.99 100.00%
Total 4,047,626,469.05 264,937,689.68 6.55%
Explanation on the basis of recognition of the portfolio:
Accounts receivable using percentage of balance for making bad debt provision in the portfolio:
Applicable √ Not applicable
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XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(3) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the current period amounted to RMB51,842,675.79. The amount for bad debt provision
recovered or reversed during the current period was RMB1,862,932.98. There is no significant reversal of bad
debt provision.
(4) Particulars of accounts receivable actually written off during the reporting period
Accounts receivable actually written off during the reporting period amounted to RMB9,665,230.95. Particulars
of significant accounts receivable written off:
Unit: RMB
Whether the
Written off amount is arising
Reason for procedure from connected
Name of entity Nature Amount written off written off performed transaction
Suzhou Tengjun Paper Co,. Ltd. Payment 6,500,927.86 Overdue for a Approved by No
for goods prolonged period general manager
and unlikely to be
recovered
Qingdao City Convenience Payment for goods 762,331.40 Overdue for a Approved by No
Media Co. Ltd. prolonged period general manager
and unlikely to be
recovered
Shandong Golden Media Payment for goods 682,436.20 Overdue for a Approved by No
Co. Ltd. prolonged period general manager
and unlikely to be
recovered
Total 7,945,695.46
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XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(5) Top five accounts receivable according to closing balance of debtors
Name of entity Nature Amount due Percentage (%) Bad debt provision
Shanxi Printing Materials Payment
Company for goods 123,650,768.46 2.91 6,182,538.42
Anhui Time Source Payment
Corporation for goods 89,493,535.25 2.10 4,474,676.76
Beijing Foreign Languages
Publishing and Payment
Paper Company for goods 67,744,837.61 1.59 3,387,241.88
Xinjiang Publishing & Payment
Printing Group for goods 52,721,611.83 1.24 2,636,080.59
Dongguan Huafa Paper Payment
Co., Ltd. for goods 51,267,700.43 1.20 2,563,385.02
Total 384,878,453.58 9.04 19,243,922.67
4. Prepayments
(1) Presentation of prepayments stated according to ageing analysis
Unit: RMB
Closing balance Opening balance
Ageing Amounts Percentage Amounts Percentage
Within 1 year 811,178,883.71 75.60% 858,757,969.24 46.72%
1-2 years 261,811,350.34 24.40% 979,259,485.66 53.28%
Total 1,072,990,234.05 1,838,017,454.90
Note:
Among significant prepayments overdue for more than 1 year, the prepayments to Jiangsu Xinhai Port Engineering Co., Ltd. of
RMB99,980,000.00 were prepayments for the construction works for land development. The prepayments to each village of Huanggang
City of RMB86,771,750.40 were prepaid deposits for woodland acquisition. Such amounts were classified as prepayments.
167
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
4. Prepayments (Cont’d)
(2) Top five prepayment according to closing balance of prepaid parties
Name of entity Amounts Percentage (%) Term Reason for being unsettled
Zhanjiang Mingli Trading Co., Ltd 152,113,578.75 14.18 Within 1 year Prepayments for
goods according to
the agreed contract
Jiangsu Xinhai Port Engineering 99,980,000.00 9.32 1-2 years Prepayments for
Co., Ltd. construction fee according
to the agreed contract
Each village of Huanggang City 86,771,750.40 8.09 1-2 years Deposits for woodland
acquisition
Guangdong Lepeng Trading 80,100,050.91 7.47 Within 1 year Prepayments for goods
Co., Ltd. according to the agreed
contract
Henan Xinyu International Pulp 43,591,736.67 4.06 Within 1 year Prepayments for goods
and Paper Co., Ltd. according to the agreed
contract
Total 462,557,116.73 43.12
5. Other receivables
(1) Disclosure of other receivables according to category
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amounts Percentage Amounts Percentage Book balance Amounts Percentage Amounts Percentage Book balance
Other receivables that are i div dual y
signif cant and are provided
for bad debts separately 8,686,748.70 0.56% 8,686,748.70 100.00% 8,755,053.51 0.47% 8,755,053.51 100.00%
Other receivables that are provided
for bad debts on portfol o basis
mbased on credit risk features 1,536,522,514.58 98.76% 66,949,150.57 4.36% 1,469,573,364.01 1,830,724,220.90 98.87% 54,256,334.83 2.96% 1,776,467,886.07
Other receivables that are i div dual y
i signif cant and are provided
mfor bad debts separately 10,514,189.79 0.68% 10,514,189.79 100.00% 12,150,098.81 0.66% 12,150,098.81 100.00%
Total 1,555,723,453.07 100.00% 86,150,089.06 5.54% 1,469,573,364.01 1,851,629,373.22 100.00% 75,161,487.15 4.06% 1,776,467,886.07
168
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
5. Other receivables (Cont’d)
(2) Presentation of other receivables according to ageing analysis
Closing balance Opening balance
Item Amounts Percentage (%) Amounts Percentage (%)
Within 1 year 490,423,341.96 31.52 784,347,727.46 42.36
1-2 years 462,643,415.78 29.74 900,869,097.38 48.65
2-3 years 484,552,388.25 31.15 101,820,067.51 5.50
Over 3 years 118,104,307.08 7.59 64,592,480.87 3.49
Total 1,555,723,453.07 100.00 1,851,629,373.22 100.00
Other receivables that are individually significant and are provided for bad debts separately as at the end of the
period:
√ Applicable Not applicable
Unit: RMB
Closing balance
Other Bad debt Reason
Other receivable (by entity) Receivables provision Percentage for provision
Ahlstrom Finland 2,820,742.72 2,820,742.72 100.00% Overdue for over 3
years and unlikely
to be recovered
Qingdao Second 1,137,295.16 1,137,295.16 100.00% Overdue for over 3
Automotive and years and unlikely
Transportation Logistics to be recovered
Branch Company
Elof Hansson Group 1,344,717.78 1,344,717.78 100.00% Overdue for over 3
of Sweden years and unlikely
to be recovered
Chuan Hua Precision 2,253,993.04 2,253,993.04 100.00% Overdue for over 3
Corporation of Taiwan years and unlikely
to be recovered
Zibo Kaihong Energy 1,130,000.00 1,130,000.00 100.00% Overdue for over 3
Co., Ltd. years and unlikely
to be recovered
Total 8,686,748.70 8,686,748.70
169
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
5. Other receivables (Cont’d)
(2) Presentation of other receivables according to ageing analysis (Cont’d)
Other receivables using ageing analysis for making bad debt provision in the portfolio:
√ Applicable Not applicable
Unit: RMB
Closing balance
Ageing Other Receivables Bad debt provision Percentage
Items within 1 year
Within 1 year 78,974,214.15 3,948,710.71 5.00%
Subtotal for within 1 year 78,974,214.15 3,948,710.71 5.00%
1-2 years 53,963,699.53 5,396,369.95 10.00%
2-3 years 25,178,445.85 5,035,689.17 20.00%
Over 3 years 52,568,380.74 52,568,380.74 100.00%
Total 210,684,740.27 66,949,150.57 31.78%
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
Other receivables individually insignificant but provided for bad debt separately
Other receivables Book balance Bad debt provision Percentage (%) Reason for provision
Open credit 10,514,189.79 10,514,189.79 100.00 Overdue for over three years and
are unlikely to be recovered
Total 10,514,189.79 10,514,189.79 100.00
170
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
5. Other receivables (Cont’d)
(3) Provision, recovery or reversal of bad debt provision for the period
Bad debt provision for the year amounted to RMB12,692,815.74. The amount for bad debt provision recovered
or reversed during the year was RMB1,704,213.83. There is no significant reversal of bad debt provision.
(4) Particulars of accounts receivable actually written off during the reporting period
There are no other receivables written off or reversed during the reporting period.
(5) Top five other receivables according to closing balance of debtors
Unit: RMB
Percentage of
closing balance Closing
of total other balance of bad
Name of entity Nature Closing balance Ageing receivables debt provision
Wuhan Chenming Wan Xing Non-equity investment 1,310,041,477.38 Within 1 year, 1-2 84.21%
Real Estate Co., Ltd. under contract years, 2-3 years
and 3-4 years
Qingdao Chenming Nonghai Open credit 21,000,000.00 Within 1 year 1.35% 1,050,000.00
Investment Co., Ltd.
Guangdong Zhongtuo Open credit 15,200,000.00 1-2 years 0.98% 1,520,000.00
Construction Co., Ltd.
The Finance Bureau Prepayments for 13,114,963.35 1-2 years 0.84% 1,311,496.34
of Zhejiang construction
Jiangsu Xinhai Port Interest on prepayments 10,330,966.70 Within 1 year 0.66% 516,548.34
Engineering Co., Ltd.
Total 1,369,687,407.43 88.04% 4,398,044.68
171
XII Financial Report
VII. Notes to 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 materials 1,821,711,468.69 1,821,711,468.69 2,117,477,615.09 2,117,477,615.09
Work-in-process 51,138,043.50 51,138,043.50 53,378,096.76 53,378,096.76
products
Goods in stock 1,520,091,660.50 1,520,091,660.50 1,539,604,250.80 5,319,730.37 1,534,284,520.43
Consumable 1,509,964,711.87 1,509,964,711.87 1,407,588,229.46 1,407,588,229.46
biological assets
Developing 308,012,006.86 308,012,006.86 308,012,006.86 308,012,006.86
products
Total 5,210,917,891.42 5,210,917,891.42 5,426,060,198.97 5,319,730.37 5,420,740,468.60
Notes:
Consumable biological assets are measure at fair value. The fair value of timber increased by RMB7,133,175.05 due to
acquisition, increased by RMB168,892,888.46 due to breeding, decreased by RMB19,078,538.02 due to change of fair value,
and decreased by RMB54,571,043.08 due to disposal.
As of 31 December 2015, there was no significant difference between the fair value and cost of the timber planted during
the year or unable to form a stock in the consumable biological assets so its carrying amount was taken as its fair value. The
timber forming a stock was measured at fair value and its 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 RMB239,909,866.69 and the consumable biological assets measured at assessed value as their fair value
amounted to RMB1,270,054,845.18.
Based on the lumbering arrangement of the Company, it is expected that the amount realised for consumable biological assets
upon lumbering after 1 year was RMB1.3 billion.
(2) Impairment provision for inventories
Unit: RMB
ncrease for the period Decrease for the period
Item Opening balance Provision Others Reversal or transfer Others Closing balance
Goods in stock 5,319,730.37 5,319,730.37
Total 5,319,730.37 5,319,730.37
(3) Basis for impairment provision for inventories and reason for reversal or transfer during the year
Reason for reversal Reason for transfer
of impairment of impairment
provision for provision
inventory during for inventory
Item Basis of impairment provision for inventory the year during the year
Goods in stock Disposed
172
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
7. Non-current assets due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term receivables due within one year 2,893,133,653.86 765,738,333.65
Entrusted loans due within one year 100,000,000.00
Total 2,893,133,653.86 865,738,333.65
8. Other current assets
Unit: RMB
Item Closing balance Opening balance
VAT recoverable 1,371,201,848.52 1,545,685,356.01
Prepaid income tax 50,700,246.25 110,916,876.08
Receivables under financial lease due within one year 6,160,937,261.77
Total 7,582,839,356.54 1,656,602,232.09
9. Available-for-sale financial assets
(1) Particulars of available-for-sale financial assets
Unit: RMB
Closing balance Opening balance
Provision Provision
Item Book balance for impairment Book value Book balance for impairment Book value
Available-for-sale
equity
instruments: 110,450,000.00 1,450,000.00 109,000,000.00 74,450,000.00 1,450,000.00 73,000,000.00
At cost 110,450,000.00 1,450,000.00 109,000,000.00 74,450,000.00 1,450,000.00 73,000,000.00
Total 110,450,000.00 1,450,000.00 109,000,000.00 74,450,000.00 1,450,000.00 73,000,000.00
173
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
9. Available-for-sale financial assets (Cont’d)
(2) Available-for-sale financial assets measured at cost as at the end of the period
Unit: RMB
Equity interest
Book balance Provision for impairment in the investee
Opening Increase for Decrease for Closing Opening Increase for Decrease for Closing held by the Cash dividends
Investee balance the period the period balance balance the period the period balance Company (%) for the period
QINGZHOU CHENMING
DENATURATION AMYLUM CO., LTD. 900,000.00 900,000.00 900,000.00 900,000.00 30.00%
SHANDONG PAPER MAKING
& PRINTING ENTERPRISES
CORPORATION 200,000.00 200,000.00 200,000.00 200,000.00 2.00%
JINAN SHANGYOU COMMERCIAL
COMPANY LIMITED 350,000.00 350,000.00 350,000.00 350,000.00 5.00%
ZHEJIANG PROVINCE
GUANGYU MEDIA PRINTING
COMPANY LIMITED 2,000,000.00 2,000,000.00 9.96%
SHOUGUANG MIHE WATER
COMPANY LIMITED 20,000,000.00 20,000,000.00 19.46%
ANHUI TIME SOURCE CORPORATION 1,000,000.00 1,000,000.00 10.00%
SHANDONG HONGQIAO VENTURE
CAPITAL CO., LTD. 50,000,000.00 50,000,000.00 16.67%
SHANGHAI LEADBANK ASSET
MANAGEMENT CO., LTD. 36,000,000.00 36,000,000.00 3.00%
Total 74,450,000.00 36,000,000.00 110,450,000.00 1,450,000.00 1,450,000.00
174
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
9. Available-for-sale financial assets (Cont’d)
(3) Changes in impairment of available-for-sale assets during the reporting period
Unit: RMB
Available-for-sale e Available-for-sale
Type of available-for-sale assets quity instruments debt instruments Total
Opening balance of provision for impairment 1,450,000.00 1,450,000.00
Provision made during the current period 0.00 0.00
Decrease for the current period 0.00 0.00
Closing balance of provision for impairment 1,450,000.00 1,450,000.00
10. Long-term receivables
Unit: RMB
Closing balance Opening balance
Book Provision for Book Book Provision for Book Range of
Item balance impairment value balance impairment value discount rate
Finance leasing payments 13,236,155,887.30 13,236,155,887.30 2,419,373,052.30 2,419,373,052.30 6.15-10.00
Less: unrealised finance income 1,258,935,089.60 1,258,935,089.60 233,036,050.66 233,036,050.66
Less: non-current assets due
within one year 2,893,133,653.86 2,893,133,653.86 765,738,333.65 765,738,333.65
Total 9,084,087,143.84 9,084,087,143.84 1,420,598,667.99 1,420,598,667.99
175
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
11. Long-term equity investments
Unit: RMB
Increase/decrease for the period
Profit/loss of
investment Adjustment Distribution of
recognised of other cash dividends Closing
Opening Investment Investment under comprehensive Changes in or profit Provision Closing balance
Investee balance addition reduction equity method income other equity declared for impairment Others balance of provision
I. Joint venture
Shouguang Chenming Huisen
New Building Materials Co., Ltd. 2,999,787.98 -22,970.47 2,976,817.51
Subtotal 2,999,787.98 -22,970.47 2,976,817.51
II. Associate
Arjo Wiggins Chenming Specialty
Paper Co., Ltd.
Jiangxi Jiangbao Media Colour
Printing Co., Ltd. 4,662,786.59 -445,096.34 4,217,690.25
Shanghai Zhongneng Enterprise
Development (Group) Co., Ltd. 300,000,000.00 300,000,000.00
Zhuhai Dechen New Third Board
Equity Investment Fund Company
(Limited Partnership) 50,000,000.00 343,241.28 50,343,241.28
Wuhan Chenming Wan Xing Real
Estate Co., Ltd. 22,610,293.87 -15,458,011.25 7,152,282.62
Jiangxi Chenming Port Co., Ltd. 5,814,979.68 -12,754.96 5,802,224.72
Subtotal 33,088,060.14 350,000,000.00 300,000,000.00 -15,572,621.27 67,515,438.87
Total 36,087,848.12 350,000,000.00 300,000,000.00 -15,595,591.74 70,492,256.38
176
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
12. Investment properties
(1) Investment properties measured at cost
√ Applicable Not applicable
Unit: RMB
Housing and Construction
Item building structure Land use right in progress Total
I. Original carrying amount 38,291,395.70 38,291,395.70
1. Opening balance 38,291,395.70 38,291,395.70
2. Increase for the period
3. Decrease for the period
4. Closing balance 38,291,395.70 38,291,395.70
II. Accumulated depreciation
and accumulated
amortisation 20,556,207.79 20,556,207.79
1. Opening balance 20,556,207.79 20,556,207.79
2. Increase for the period 1,738,256.04 1,738,256.04
(1) Provision or
amortisation 1,738,256.04 1,738,256.04
3. Decrease for the period
4. Closing balance 22,294,463.83 22,294,463.83
III. Impairment provision
1. Opening balance
2. Increase for the period
3. Decrease for the period
4. Closing balance
IV. Book value
1. Closing carrying amount 15,996,931.87 15,996,931.87
2. Opening carrying amount 17,735,187.91 17,735,187.91
Note: All long-term equity investments are held by the Company on medium-term leases for 2-3 years and accounted for at cost.
177
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
13. Fixed assets
(1) Particulars of fixed assets
Unit: RMB
Electronic
Housing and Machinery equipment
Item building structure and equipment Vehicles and others Total
I. Original carrying amount
1. Opening balance 5,423,155,935.77 28,939,108,616.14 274,006,653.55 438,345,516.07 35,074,616,721.53
2. Increase for the period 620,273,393.75 1,985,662,355.63 24,292,971.28 18,020,865.88 2,648,249,586.54
(1) Acquisition 163,704,648.36 17,876,065.29 13,117,655.12 194,698,368.77
(2) Transferred from
construction in progress 620,273,393.75 1,821,957,707.27 6,416,905.99 4,903,210.76 2,453,551,217.77
3. Decrease for the period 6,746,364.74 2,178,433,454.49 45,181,059.51 5,805,190.84 2,236,166,069.58
(1) Disposal or retirement 6,746,364.74 215,169,775.82 23,149,351.41 5,730,064.33 250,795,556.30
(2) Transferred to construction
in progress 1,963,263,678.67 22,031,708.10 75,126.51 1,985,370,513.28
4. Closing balance 6,036,682,964.78 28,746,337,517.28 253,118,565.32 450,561,191.11 35,486,700,238.49
II. Accumulated depreciation and
accumulated amortisation
1. Opening balance 929,355,284.32 9,040,169,521.06 111,557,530.65 222,582,680.46 10,303,665,016.49
2. Increase for the period 161,592,431.93 1,158.048,769.88 27,911,468.62 21,355,615.87 1,368,908,286.30
(1) Provision 161,592,431.93 1,158.048,769.88 27,911,468.62 21,355,615.87 1,368,908,286.30
3. Decrease for the period 5,368,419.37 320,439,175.33 25,430,174.69 4,360,824.09 355,598,593.48
(1) Disposal or retirement 5,368,419.37 120,573,907.22 19,182,508.15 4,309,752.74 149,434,587.48
(2) Disposal of subsidiaries 199,865,268.11 6,247,666.54 51,071.35 206,164,006.00
4. Closing balance 1,085,579,296.88 9,877,779,115.61 114,038,824.58 239,577,472.24 11,316,974,709.31
III. Provision for impairment
1. Opening balance 26,220,000.00 26,220,000.00
2. Increase for the period 0.00 0.00
3. Decrease for the period 26,220,000.00 26,220,000.00
(1) Disposal or retirement 26,220,000.00 26,220,000.00
4. Closing balance 0.00 0.00
IV. Book value
1. Closing carrying amount 4,951,103,667.90 18,868,558,401.67 139,079,740.74 210,983,718.87 24,169,725,529.18
2. Opening carrying amount 4,467,580,651.45 19,898,939,095.08 162,449,122.90 215,762,835.61 24,744,731,705.04
Note: As at 31 December 2015, property, plant and equipment with carrying amount of approximately RMB4,567,649,044.39 (31
December 2014: carrying amount: RMB4,762,682,480.74) and land use rights with carrying amount of RMB309,070,530.88
(31 December 2014: RMB316,286,184.74) were pledged as collateral for the long-term borrowings of RMB2,304,159,268.89
and long-term borrowings due within one year of RMB281,218,900.00 (31 December 2014: RMB2,520,707,400.00 and
RMB269,980,900.00) (Note VII. 32 and Note VII. 30).
178
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
13. Fixed assets (Cont’d)
(2) Particulars of temporarily idle fixed assets
Unit: RMB
Original Accumulated Provision for
Item carrying amount depreciation impairment Book value Remark
Housing and building structure 17,543,318.35 2,246,835.87 15,296,482.48
Machinery and equipment 59,287,663.46 6,340,114.13 52,947,549.33
Total 76,830,981.81 8,586,950.00 68,244,031.81
(3) Particulars of fixed assets without obtaining property right certificates
Unit: RMB
Reason for not yet obtaining
Item Book value property right certificates
Shandong Chenming Paper 213,798,349.59 Processing with scheduled operation
Holdings Limited commencement not imminent
Shouguang Meilun Paper Co., Ltd. 722,730,467.47 Processing with scheduled operation
commencement not imminent
Zhanjiang Chenming Pulp & Paper Co., Ltd. 1,473,805,159.70 Processing with scheduled operation
commencement not imminent
Jilin Chenming Paper Co., Ltd. 515,950,575.00 Processing with scheduled operation
commencement not imminent
Wuhan Chenming Hanyang Paper 80,814,984.60 Processing with scheduled operation
Holdings Co., Ltd. commencement not imminent
Fuyu Chenming Paper Co., Ltd. 40,938,047.46 Processing with scheduled operation
commencement not imminent
Jiangxi Chenming Paper Co., Ltd. 15,658,924.47 Processing with scheduled operation
commencement not imminent
Total 3,063,696,508.29
179
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
14. Construction in progress
(1) Particulars of construction in progress
Unit: RMB
Closing balance Opening balance
Provision Provision
Item Book balance for impairment Book value Book balance for impairment Book value
Railway project (the Company) 223,918,721.46 223,918,721.46
Desulphurisation, denitrification and
de-dusted project of power plant
(the Company and Meilun) 140,526,292.16 140,526,292.16
Biomass vaporisation project
(Zhanjiang Chenming) 113,499,021.38 113,499,021.38
New small-sized paper cutting workshop
(Zhanjiang Chenming) 94,353,419.69 94,353,419.69
MVR+ multi-effect evaporation plant project
(Zhanjiang Chenming) 29,259,003.60 29,259,003.60
450 tonnes/day mechanical pulp project
(Zhanjiang Chenming) 28,937,113.23 28,937,113.23
700,000 tonne pulp equipment upgrade
(Zhanjiang Chenming) 142,846,027.30 142,846,027.30 142,846,027.30 142,846,027.30
600,000 tonne liquid packaging paper
(Zhanjiang Chenming) 2,589,556,896.31 2,589,556,896.31
190,000 tonne high-end cultural paper
project (Zhanjiang Chenming) 950,143,385.07 950,143,385.07
Brick plant project (Jilin Chenming) 33,526,397.51 33,526,397.51
Food packaging paper project
(Jiangxi Chenming) 1,299,929,248.95 1,299,929,248.95 919,552,099.41 919,552,099.41
BTMP renovation project (Jiangxi Chenming) 66,440,550.11 66,440,550.11 41,214,162.60 41,214,162.60
Mid-water renovation project
(Jiangxi Chenming) 39,199,277.27 39,199,277.27 16,903,145.03 16,903,145.03
Power plant electro-elimination reconstruction
project (Jiangxi Chenming) 10,641,025.68 10,641,025.68
7800 paper machine press section upgrade
(Jiangxi Chenming) 12,435,133.15 12,435,133.15
Denitrification project
(Qianneng Electric Power) 41,968,651.72 41,968,651.72
Magnesite mining (Haicheng Haiming) 542,134,749.27 542,134,749.27 474,178,142.31 474,178,142.31
Forestry pulp integration project
(Huanggang Chenming) 660,485,661.78 660,485,661.78 319,549,872.05 319,549,872.05
Chemical pulp project (Meilun) 259,738,841.00 259,738,841.00 9,205,391.81 9,205,391.81
Others 218,646,980.81 218,646,980.81 117,254,849.05 117,254,849.05
Total 5,829,619,258.48 5,829,619,258.48 3,709,270,828.53 3,709,270,828.53
180
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
14. Construction in progress (Cont’d)
(2) Changes in material construction in progress projects for the period
Unit: RMB
Of which: Capital sation
Transfer Accumulated capital sed rate of the
Increase to fixed asset Other deductions i vestment Construction Accumulated i terest amount i terest amount
Item name Budget Opening balance for the period for the period for the period Closing balance to budget i progress capital sed i terest for the period for the period Source of fund
Rai way project (the Company) 240,000,000.00 223,918,721.46 109,681,381.76 333,600,103.22 139.00% Complete 12,381,635.90 4,594,000.16 6.00% Self-raised and
borrowings
Desulphurisation, denitrif cation and 143,000,000.00 140,526,292.16 2,275,084.90 142,801,377.06 99.86% Complete 5,668,663.46 1,715,828.08 6.00% Self-raised and
de-dusted project of power plant borrowings
(the Company and Mei un)
Biomass vaporisation 263,000,000.00 113,499,021.38 35,000,598.85 148,499,620.23 56.46% Complete 1,243,711.25 Self-raised and
(Zhanj ang Chenming) borrowings
New smal -sized paper cutting workshop 111,000,000.00 94,353,419.69 61,301,193.43 155,654,613.12 140.23% Complete 405,359.41 Self-raised and
(Zhanj ang Chenming) borrowings
MVR+ mult -effect evaporation 80,000,000.00 29,259,003.60 38,759,337.86 68,018,341.46 85.02% Complete 1,662,831.95 1,662,831.95 5.15% Self-raised and
plant project (Zhanj ang Chenming) borrowings
450 tonnes/day mechanical pulp 230,000,000.00 28,937,113.23 174,853,400.00 203,790,513.23 88.60% Complete 2,048,063.28 2,048,063.28 5.05% Self-raised and
project (Zhanj ang Chenming) borrowings
700,000 tonne pulp equipment upgrade 270,000,000.00 142,846,027.30 142,846,027.30 52.91% 52.91% 9,939,148.74 Self-raised and
(Zhanj ang Chenming) borrowings
600,000 tonne l quid packaging 3,800,000,000.00 2,589,556,896.31 2,589,556,896.31 68.15% 68.15% 4,679,353.07 4,679,353.07 5.07% Self-raised and
paper (Zhanj ang Chenming) borrowings
190,000 tonne high-end cultural 1,220,000,000.00 950,143,385.07 267,283,730.72 1,217,427,115.79 99.79% Completed 20,002,587.77 18,030,805.43 4.96% Self-raised and
paper project (Zhanj ang Chenming) borrowings
Brick plant project (Ji i Chenming) 36,000,000.00 33,526,397.51 650,615.58 34,177,013.09 94.94% Completed Self-raised
Food packaging paper project 1,248,000,000.00 919,552,099.41 380,377,149.54 1,299,929,248.95 104.16% 99.00% 77,290,546.22 55,282,373.98 4.98% Self-raised and
(Jiangxi Chenming) borrowings
BTMP renovation project 97,000,000.00 41,214,162.60 25,226,387.51 66,440,550.11 68.50% 68.50% 5,171,237.33 3,550,861.02 4.98% Self-raised and
(Jiangxi Chenming) borrowings
Mid-water renovation project 39,000,000.00 16,903,145.03 22,296,132.24 39,199,277.27 100.51% 99.00% 1,284,522.71 1,144,413.11 4.98% Self-raised and
(Jiangxi Chenming) borrowings
Power plant electro-el m nation 12,000,000.00 10,641,025.68 10,641,025.68 88.68% 88.68% Self-raised
reconstruction project
(Jiangxi Chenming)
7800 paper machine press section 16,000,000.00 12,435,133.15 12,435,133.15 77.72% Complete Self-raised
upgrade (Jiangxi Chenming)
Denitrif cation project 42,000,000.00 41,968,651.72 41,968,651.72 99.93% Complete Self-raised
(Qianneng Electric Power)
Magnesite min ng 700,000,000.00 474,178,142.31 67,956,606.96 542,134,749.27 77.45% 77.45% 42,986,133.18 19,364,710.22 5.34% Self-raised and
(Haicheng Haim ng) borrowings
Forestry pulp i tegration project 3,485,000,000.00 319,549,872.05 340,935,789.73 660,485,661.78 18.95% 18.95% 17,299,149.07 5,362,431.43 5.40% Self-raised and
(Huanggang Chenming) borrowings
Chemical pulp project (Mei un) 3,000,000,000.00 9,205,391.81 250,533,449.19 259,738,841.00 8.66% 8.66% 588,774.36 588,774.36 5.00% Self-raised and
borrowings
Others 117,254,849.05 196,570,867.46 95,178,735.70 218,646,980.81 795,227.87 459,522.63 5.00% Self-raised and
borrowings
Total 15,032,000,000.00 3,709,270,828.53 4,573,899,647.72 2,453,551,217.77 5,829,619,258.48 — — 203,446,945.57 118,483,968.72 —
181
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
15. Materials for project
Unit: RMB
Item Closing balance Opening balance
Special materials 14,128,489.39 22,810,138.46
Special equipment 533,627.37 145,843.92
Total 14,662,116.76 22,955,982.38
16. Intangible assets
Unit: RMB
Item Land use rights Software Total
I. Original carrying amount
1. Opening balance 1,521,545,407.58 21,645,247.47 1,543,190,655.05
2. Increase for the period 176,008,913.16 915,000.00 176,923,913.16
(1) Acquisition 176,008,913.16 915,000.00 176,923,913.16
3. Decrease for the period 0.00 0.00 0.00
4. Closing balance 1,697,554,320.74 22,560,247.47 1,720,114,568.21
II. Accumulated amortisation
1. Opening balance 207,729,903.04 16,356,326.97 224,086,230.01
2. Increase for the period 32,285,167.06 1,037,110.51 33,322,277.57
(1) Provision 32,285,167.06 1,037,110.51 33,322,277.57
3. Decrease for the period 0.00 0.00 0.00
4. Closing balance 240,015,070.10 17,393,437.48 257,408,507.58
III. Impairment provision
1. Opening balance
2. Increase for the period
3. Decrease for the period
4. Closing balance
IV. Book value
1. Closing book value 1,457,539,250.64 5,166,809.99 1,462,706,060.63
2. Opening book value 1,313,815,504.54 5,288,920.50 1,319,104,425.04
Note:
(1) On 31 December 2015, land use rights of carrying amount of RMB309,070,530.88 (31 December 2014: RMB316,286,184.74) and
ownership of property, plant and equipment of carrying amount of RMB4,567,649,044.39 (31 December 2014: carrying amount
of RMB4,762,682,480.74) was restricted, as collateral for long-term borrowings of RMB2,304,159,268.89 (31 December 2014:
RMB2,520,707,400.00) (Note VII. 32) and long-term borrowings due within one year of RMB281,218,900.00 (31 December 2014:
RMB269,980,900.00) (see Note VII. 30 for details). The amortisation of such land use rights in 2015 amounted to RMB7,215,654.36 (2014:
RMB7,215,654.36).
(2) The state-owned land use rights obtained by the Company in China were in compliance with PRC laws with a term of grant of 40-50
years upon receipt.
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
17. Goodwill
(1) Original carrying amount of goodwill
Unit: RMB
Name of investee or Increase Decrease
item generating goodwill Opening balance for the period for the period Closing balance
Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Shandong Chenming Panels Co., Ltd. 5,969,626.57 5,969,626.57
Total 20,283,787.17 20,283,787.17
(2) Provision for impairment of goodwill
Goodwill arose from business combination not under common control during prior years.
On the balance sheet date, the management of the Company assessed the recoverable amount of cash-
generating unit which results in goodwill, in order to determine whether to make provision for impairment loss
accordingly. The recoverable amount of cash-generating unit was determined based on the estimated cash
flow in the financial budget for the next five years by the management, and the time value of currency was
estimated using the discount rate of 8.32% (2014: 8.32%). Results of impairment test showed that no provision
for impairment loss was necessary to be made for goodwill.
18. Long-term prepaid expenses
Unit: RMB
Increase Amortisation
Item Opening balance for the period for the period Other deductions Closing balance
Woodland expenses 161,793,438.27 248,312.00 6,977,965.16 522,849.42 154,540,935.69
Others 11,897,309.56 751,298.64 11,146,010.92
Total 173,690,747.83 248,312.00 7,729,263.80 522,849.42 165,686,946.61
183
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
19. Deferred income tax assets/deferred income tax liabilities
(1) Deferred income tax assets before offsetting
Unit: RMB
Closing balance Opening balance
Deductible Deductible
temporary Deferred income temporary Deferred income
Item differences tax assets differences tax assets
Provision for impairment
of assets 384,938,613.04 89,456,807.32 340,772,888.98 79,501,792.10
Unrealised profit arising
from intra-group
transactions 130,647,470.24 32,661,867.55 110,493,658.36 27,623,414.59
Deductible loss 1,733,079,653.85 406,220,680.25 1,858,290,693.47 451,519,833.69
Outstanding payables 251,138,009.64 50,233,974.39 106,430,519.52 20,362,747.08
Deferred income 169,293,123.08 34,655,980.97 184,861,975.76 41,259,848.98
Total 2,669,096,869.85 613,229,310.48 2,600,849,736.09 620,267,636.44
(2) The breakdown of unrecognised deferred income tax assets
Unit: RMB
Item Closing balance Opening balance
Deductible temporary differences 36,714,728.52 31,495,183.10
Deductible loss 505,399,608.89 457,830,039.77
Total 542,114,337.41 489,325,222.87
Note: As there are uncertainties about the sufficiency of taxable profit in the future, no deductible temporary difference and deductible
loss have been recognised for deferred income tax assets.
(3) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows
Unit: RMB
Year Closing amount Opening amount Remark
2015 37,886,444.37
2016 56,787,869.12 59,767,165.56
2017 115,377,328.84 116,596,801.25
2018 135,000,510.29 140,521,936.04
2019 95,618,971.48 103,057,692.55
2020 102,614,929.16
Total 505,399,608.89 457,830,039.77 —
184
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
20. Other non-current assets
Unit: RMB
Item Closing balance Opening balance
Entrusted loans 900,000,000.00 1,000,000,000.00
Prepayments of properties 310,234,623.33 162,000,000.00
Prepayments of land 32,124,242.00 32,124,242.00
Less: portion due within one year (see Note VII. 7) 100,000,000.00
Total 1,242,358,865.33 1,094,124,242.00
21. Particulars of provision for impairment of assets
Provision
Item Opening balance for the year Decrease for the year Closing balance
Reversal Write-off Others
I. Provisions for bad debts 339,784,766.91 64,535,491.53 3,567,146.81 9,665,230.95 391,087,880.68
II. Provisions for inventory impairment 5,319,730.37 5,319,730.37
III. Provisions for impairment of
available-for-sale financial assets 1,450,000.00 1,450,000.00
IV. Provisions for impairment
of fixed assets 26,220,000.00 26,220,000.00
Total 372,774,497.28 64,535,491.53 3,567,146.81 41,204,961.32 392,537,880.68
185
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
22. Short-term borrowings
(1) Classification of short-term borrowings
Unit: RMB
Item Closing balance Opening balance
Pledged borrowings 472,286,374.54 584,082,701.72
Guarantee borrowings 10,240,162,328.25 9,628,636,791.99
Credit borrowings 8,312,516,970.07 7,317,577,099.21
Discounted borrowings 5,730,570,000.00 2,940,000,000.00
Total 24,755,535,672.86 20,470,296,592.92
Note:
(1) For classification and amount of secured assets in respect of pledged borrowings, please see Note VII. 2.
(2) All guaranteed borrowings were borrowings of the subsidiaries guaranteed by the Company. Please refer to Note XII.5(2) for
details of maturity of the above guarantees.
(3) Discounted borrowings refer to discounted bills payable, which are transferred to short-term borrowings at the end of the period.
(4) The Group had no short-term borrowings due and outstanding.
23. Bills payable
Unit: RMB
Category Closing balance Opening balance
Bank acceptance bills 3,281,599,412.31 1,598,110,792.85
Total 3,281,599,412.31 1,598,110,792.85
Unpaid bills payable due as at the end of the period amounted to nil.
186
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VII. Notes to 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 2,485,701,891.02 2,965,990,209.36
1-2 years 308,215,762.61 228,866,967.30
2-3years 69,577,394.46 112,980,731.55
Over 3 years 78,842,338.48 100,528,205.72
Total 2,942,337,386.57 3,408,366,113.93
(2) Significant accounts payable for over 1 year
Unit: RMB
Item Closing balance Opening balance
FORESTRY TASMANIA 27,995,705.76 Undue
JIANGSU NEW CENTURY JIANGNAN
ENVIRONMENTAL PROTECTION LTD 10,247,536.71 Undue
SHANGHAI CLEAR SCIENCE & TECHNOLOGY CO.,LTD 8,698,502.60 Undue
FUJIAN INDUSTRIAL EQUIPMENT INSTALLATION
CO. LTD SANMIN BRANCH 5,525,547.66 Undue
HARBIN BOILER COMPANY LIMITED 5,142,951.54 Undue
Total 57,610,244.27 —
25. Advance receipts
(1) Particulars of advance receipts
Unit: RMB
Item Closing balance Opening balance
Within 1 year 150,907,190.21 255,718,680.43
1-2 years 29,597,036.80 14,338,046.45
Total 180,504,227.01 270,056,726.88
187
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
25. Advance receipts
(2) Significant advance receipts for over 1 year
Unit: RMB
Item Closing balance Opening balance
YONG YI ADHESIVE (ZHONGSHAN) CO. LTD. 1,384,668.41 No delivery requirement
from the counterparty
ZHEJIANG PRINTING GROUP CO., LTD. 4,215,279.00 No delivery requirement
from the counterparty
DONGGUAN LIANFU PACKAGING 1,507,087.14 No delivery requirement
MATERIALS CO., LTD. from the counterparty
Total 7,107,034.55 —
26. Staff remuneration payables
(1) Particulars of Staff remuneration payables
Unit: RMB
Increase Decrease
Item Opening balance for the period for the period Closing balance
I. Short-term remuneration 152,531,447.83 861,178,514.89 808,732,143.34 204,977,819.38
II. Retirement benefit
plan – defined
contribution scheme 1,382,519.32 83,020,429.57 83,552,149.39 850,799.50
III. Lay off welfare 12,075.15 1,336,769.68 1,336,769.68 12,075.15
Total 153,926,042.30 945,535,714.14 893,621,062.41 205,840,694.03
188
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
26. Staff remuneration payables (Cont’d)
(2) Particulars of short-term remuneration
Unit: RMB
Opening Increase Decrease Closing
Item balance for the period for the period balance
1. Salaries, bonuses, allowance
and subsidies 96,539,011.57 710,623,564.61 652,746,634.33 154,415,941.85
2. Staff welfare 52,396,060.18 52,396,060.18
3. Social insurance premium 8,257,271.23 34,610,088.04 38,214,923.97 4,652,435.30
Of which: Medical insurance
premium 7,283,773.84 25,565,379.84 29,210,358.27 3,638,795.41
Work-related injury
insurance premium 5,552.06 5,639,975.04 5,610,154.53 35,372.57
Maternity insurance
premium 967,945.33 3,404,733.16 3,394,411.17 978,267.32
4. Housing provident funds 7,688,871.47 51,978,436.07 55,206,360.18 4,460,947.36
5. Union funds and workers education 21,241,698.02 11,264,215.06 9,842,100.19 22,663,812.89
6. Short paid leave 18,804,595.54 306,150.93 326,064.49 18,784,681.98
Total 152,531,447.83 861,178,514.89 808,732,143.34 204,977,819.38
(3) Defined contribution plan
Unit: RMB
Opening Increase Decrease Closing
Item balance for the period for the period balance
1. Basic pension insurance 1,303,789.76 77,742,746.45 78,286,351.25 760,184.96
2. Unemployment insurance 78,729.56 5,277,683.12 5,265,798.14 90,614.54
Total 1,382,519.32 83,020,429.57 83,552,149.39 850,799.50
189
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
27. Taxes payable
Unit: RMB
Item Closing balance Opening balance
Value added tax 43,110,126.98 27,861,717.80
Business tax 5,019,330.14 5,993,146.04
Enterprise income tax 121,532,520.76 88,084,906.73
Individual income tax 953,632.02 14,783,877.45
Urban maintenance and construction tax 3,274,749.38 2,479,631.43
Land use tax 9,620,892.06 11,103,517.24
Property tax 5,856,496.06 6,146,726.60
Educational surcharges and others 3,940,435.85 2,397,509.16
Stamp duty 1,544,300.55 2,249,056.49
Total 194,852,483.80 161,100,088.94
28. Interest payable
Unit: RMB
Item Closing balance Opening balance
Interest on corporate bonds 62,445,615.01 62,417,222.24
Interest on medium-term notes 27,455,083.22 27,455,083.26
Interest on privately placed bonds 60,175,000.00 60,175,000.00
Total 150,075,698.23 150,047,305.50
29. Other payables
(1) Other payables by nature
Unit: RMB
Item Closing balance Opening balance
Within 1 year 970,782,931.89 578,321,880.79
1-2 years 132,987,693.44 149,759,077.76
2-3 years 16,970,120.00 20,710,865.78
Over 3 years 37,826,608.05 34,999,060.28
Total 1,158,567,353.38 783,790,884.61
190
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
29. Other payables (Cont’d)
(2) Significant other payables for over 1 year
Unit: RMB
Reason for outstanding
Item Closing balance or not carried forward
LIAONING BEIHAI INDUSTRIES GROUP CO., LTD. 39,795,308.88 Debt investments as agreed by
shareholders of subsidiaries
SHOUGUANG HENGTAI ENTERPRISE 37,230,586.11 Debt investments as agreed by
INVESTMENT COMPANY LIMITED shareholders of subsidiaries
STATE-OWNED SHOUGUANG QINGSHUIPO FARM 8,800,000.00 Temporarily outstanding
Total 85,825,894.99 —
30. Non-current liabilities due within 1 year
Unit: RMB
Item Closing balance Opening balance
Long-term borrowings due within 1 year (Note VII. 32) 1,975,300,816.32 1,099,968,900.00
Bonds payable due within 1 year (Note VII. 33) 1,997,824,337.74
Privately placed bonds due within 1 year (Note VII. 37) 1,498,161,581.85
Total 5,471,286,735.91 1,099,968,900.00
31. Other current liabilities
Unit: RMB
Item Closing balance Opening balance
Short-term commercial paper 10,293,543,297.00
Total 10,293,543,297.00
191
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
31. Other current liabilities (Cont’d)
Increase/decrease in short-term commercial papers payable:
Issue Amortisation of Redemption d
Name of commercial paper Par value Date of issue Term Amount Opening balance during the period Interest at par value premium/discount ring the period Closing balance
15 Lu Chenming CP001 1,800,000,000.00 2015/4/23 365 days 1,792,800,000.00 1,792,800,000.00 57,270,000.00 5,400,000.00 1,855,470,000.00
15 Lu Chenming CP002 1,800,000,000.00 2015/4/27 365 days 1,794,600,000.00 1,794,600,000.00 61,250,000.00 3,600,000.00 1,859,450,000.00
15 Lu Chenming SCP001 1,500,000,000.00 2015/7/6 270 days 1,497,750,000.00 1,497,750,000.00 34,308,333.34 1,750,000.00 1,533,808,333.34
15 Lu Chenming SCP002 1,000,000,000.00 2015/8/7 220 days 998,777,778.00 998,777,778.00 15,435,000.00 873,015.00 1,015,085,793.00
15 Lu Chenming SCP003 1,000,000,000.00 2015/8/24 270 days 998,500,000.00 998,500,000.00 14,336,111.10 833,335.00 1,013,669,446.10
15 Lu Chenming SCP004 1,000,000,000.00 2015/10/20 270 days 998,500,000.00 998,500,000.00 7,644,722.23 500,001.00 1,006,644,723.23
15 Lu Chenming SCP005 1,000,000,000.00 2015/11/5 270 days 998,500,000.00 998,500,000.00 5,985,000.00 333,334.00 1,004,818,334.00
15 Lu Chenming SCP006 1,000,000,000.00 2015/11/10 270 days 998,500,000.00 998,500,000.00 5,763,333.33 333,334.00 1,004,596,667.33
Total — — — 10,077,927,778.00 10,077,927,778.00 201,992,500.00 13,623,019.00 10,293,543,297.00
32. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB
Item Closing balance Opening balance
Secured borrowings 2,585,378,168.89 2,790,688,300.00
Guarantee borrowings 3,206,495,675.32 1,274,978,809.25
Credit borrowings 1,352,808,035.94 1,412,592,035.94
Including: long-term borrowings
due within 1 year (see Note VII. 30) -1,975,300,816.32 -1,099,968,900.00
Total 5,169,381,063.83 4,378,290,245.19
Note:
(1) For the asset group of pledges of secured borrowings, please refer to Note VII.13 and VII.16.
(2) All guaranteed borrowings were borrowings of the subsidiaries guaranteed by the Company. Please refer to Note XII.5(2) for
details of maturity of the above guarantees.
192
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
33. Bonds payable
(1) Bonds payable
Unit: RMB
Item Closing balance Opening balance
11 Chenming debt 1,993,899,974.62
12 Chenming debt 3,788,539,249.59 3,783,231,333.39
Total 3,788,539,249.59 5,777,131,308.01
(2) Increase/decrease in bonds payable (excluding other financial instruments such as preference shares and
perpetual bonds classified as financial liabilities)
Unit: RMB
Amortisation of Redemption
Name of bond Par value Date of i sue Term Amount Opening balance Issue during the period Interest at par value premium/discount during the period Closing balance
11-year Chenming debt 2,000,000,000.00 2011/07/06 5 years 1,982,000,000.00 1,993,899,974.62 119,000,000.00 3,924,363.12 119,000,000.00 1,997,824,337.74
12-year Chenming debt 3,800,000,000.00 2012/12/26 5 years 3,773,400,000.00 3,783,231,333.39 214,700,000.00 5,307,916.20 214,700,000.00 3,788,539,249.59
Less: due within one year (Note VII. 30) 1,997,824,337.74
Total — — — 5,755,400,000.00 5,777,131,308.01 333,700,000.00 9,232,279.32 333,700,000.00 3,788,539,249.59
34. Long-term payables
(1) By nature
Unit: RMB
Item Closing balance Opening balance
Retention for the financial leasing operations 194,000,000.00
Specific capital for China Development 150,000,000.00
Of which: due within two to five years 294,000,000.00
due after five years 50,000,000.00
Total 344,000,000.00
193
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
35. Special accounts payable
Unit: RMB
Increase Decrease
Item Opening balance for the period for the period Closing balance Reason
Huanggang Chenming integrated forestry,
pulp and paper project 161,983,516.66 15,000,000.00 176,983,516.66
Total 161,983,516.66 15,000,000.00 176,983,516.66 —
Note: During the year, a special grant of RMB15,000,000.00 for the integrated forestry, pulp and paper project of Huanggang Chenming Pulp
& Paper Co., Ltd., a subsidiary of the Company, from the Finance Bureau of Huanggang City was accounted for as special accounts
payable according to the Provisional Measures for Special Government Grant of Huanggang Chenming integrated Forestry, Pulp and
Paper Project.
36. Deferred income
Unit: RMB
Increase Decrease
Item Opening balance for the period for the period Closing balance Reason
Government grants 1,476,121,434.78 100,612,200.00 81,628,745.52 1,495,104,889.26
Total 1,476,121,434.78 100,612,200.00 81,628,745.52 1,495,104,889.26 —
194
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
36. Deferred income (Cont’d)
Items in respect of government grant:
Unit: RMB
New grants New grants Asset-related/
Liabilities item Opening balance for the period Amount for the period Closing balance income-related
Special subsidy funds for
environmental protection 1,001,623,109.60 52,675,171.00 948,947,938.60 Asset-related
Project fund for National technological
support scheme 5,832,271.70 164,700.00 5,667,571.70 Asset-related
Special subsidy fund for Songhuajiang
environmental protection project 25,883,079.72 1,030,000.08 24,853,079.64 Asset-related
Modification of alkaline
recycling system 4,700,609.23 4,700,609.23 Asset-related
Sewage treatment and water
conservation reconfiguration project 10,918,732.67 2,000,000.00 1,070,731.68 11,848,000.99 Asset-related
Financial grants for technological
modification project 114,303,225.21 50,000,000.00 9,319,701.70 154,983,523.51 Asset-related
Zhanjiang integrated forestry,
pulp and paper project 266,329,668.36 24,700,000.00 12,754,200.34 278,275,468.02 Asset-related
Interest Subsidy 30,907,617.74 23,708,000.00 4,156,453.36 50,459,164.38 Asset-related
Railway line change compensation 14,250,000.00 14,250,000.00 Asset-related
Others 1,373,120.55 204,200.00 457,787.36 1,119,533.19 Asset-related
Total 1,476,121,434.78 100,612,200.00 81,628,745.52 1,495,104,889.26 —
195
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
37. Other non-current liabilities
Unit: RMB
Item Closing balance Opening balance
Medium-term notes 1,094,621,421.67 1,091,270,700.55
Privately placed bonds 1,498,161,581.85 1,493,497,659.09
Including: maturing within one year 1,500,000,000.00
maturing within 1 - 2 years 1,100,000,000.00 1,500,000,000.00
maturing within 2 -5 years 1,100,000,000.00
issue costs not amortised -7,216,996.48 -15,231,640.36
Less: the portion maturing within one year (Note VII. 30) 1,498,161,581.85
Total 1,094,621,421.67 2,584,768,359.64
38. Share capital
Increase/decrease
Item Opening balance for the year Closing balance
RMB ordinary shares (A shares) 1,113,278,456.00 1,113,278,456.00
Domestic listed foreign shares (B shares) 470,923,511.00 470,923,511.00
Overseas listed foreign shares (H shares) 352,203,500.00 352,203,500.00
Total number of shares 1,936,405,467.00 1,936,405,467.00
196
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
39. Other equity instruments – perpetual bonds
Increase Decrease
Outstanding financial instruments Opening balance during the year during the year Closing balance
15 Lu Chenming MMTN001 1,291,900,000.00 1,291,900,000.00
15 Lu Chenming MMTN001 1,290,900,000.00 1,290,900,000.00
Total 2,582,800,000.00 2,582,800,000.00
Note (1) Particulars of issue: The Company issued medium-term notes amounting to RMB2.6 billion on 6 July and 8 September 2015 at a
coupon rate of 6.00% and 5.78%. The proceeds net of issue costs amounted to RMB2582.8000 million.
Note (2) Particulars of the notes as perpetual bonds
The notes are debts without a defined maturity date and will continue indefinitely until the exercise of the right of
redemption by the Company.
The Company has the right to defer any payment of interest.
The right of redemption of the notes is vested with the Company so that it is up to the Company to decide whether to
redeem or not.
Based on the above, the notes do not contain any term giving rise to any contractual obligation to deliver cash or
other financial assets to any other entity, or to exchange any financial asset or financial liability with any other entity
under potential adverse circumstances. Consequently, they were eligible to be recognised and accounted for as
equity instruments and included under other equity instruments – perpetual bonds.
40. Capital reserves
Unit: RMB
Increase Decrease
Item Opening balance for the period for the period Closing balance
Capital premium (share premium) 5,478,814,366.20 1,403.40 5,478,815,769.60
Other capital reserves 670,322,507.21 670,322,507.21
Total 6,149,136,873.41 1,403.40 6,149,138,276.81
Note: The Company received income arising from disposal of odd lots for equity distributions by China Securities Depository and Clearing
Co., Ltd, with capital premium under capital reserves up by RMB1,403.40.
197
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
41. Other comprehensive income
Unit: RMB
Less:
Transferred
from Other
Comprehensive
Income in Attributable
Incurred before prior periods to Attributable to minority
Income tax profit or loss Less: income to parent shareholders
Item Opening balance for the period during the period tax expenses company after tax after tax Closing balance
Other comprehensive income to
be reclassified to profit or
loss in subsequent periods 33,763,168.13 -378,778,032.39 -378,778,032.39 -345,014,864.26
Exchange differences on translation
of foreign operations 33,763,168.13 -378,778,032.39 -378,778,032.39 -345,014,864.26
Total other comprehensive income 33,763,168.13 -378,778,032.39 -378,778,032.39 -345,014,864.26
42. Surplus reserve
Unit: RMB
Increase Decrease
Item Opening balance for the period for the period Closing balance
Statutory surplus reserve 1,132,116,106.40 1,132,116,106.40
Total 1,132,116,106.40 1,132,116,106.40
Note: Pursuant to the Companies Law and the Articles of Association, the Company transferred 10% of the net profit to the statutory surplus
reserves. There was no need to transfer if the accumulated amounts of the statutory reserves exceeded 50% of the Company’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.
198
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
43. Retained profit
Unit: RMB
Item The period The prior period
Retained profit as at the end of the prior year before adjustment 4,665,921,686.21 4,741,638,941.58
Retained profit as at the beginning of the year after adjustment 4,665,921,686.21 4,741,638,941.58
Plus: Net profit for year attributable to shareholders of the parent company 1,021,224,678.04 505,204,384.73
Ordinary dividend payable 271,096,765.38 580,921,640.10
Retained profit as at the end of the period 5,416,049,598.87 4,665,921,686.21
Note: (1) Profit distribution:
According to the 2014 Profit Distribution Plan which was approved at the 2015 annual general meeting of the
Company on 15 May 2015, the Company paid a cash dividend of RMB0.14 per share (2014: RMB0.30 per share) to all
shareholders, amounting to RMB271,096,765.38 (2014: RMB580,921,640.10) based on the number of the shares as
at the dividend distribution registration date of 1,936,405,467.00 shares.
(2) Appropriation of surplus reserve by subsidiaries during the reporting period
In 2015, subsidiaries of the Company appropriated surplus reserve of RMB56,372,502.96, of which RMB56,372,502.96
was attributable to the Company.
44. Revenue and operating costs
(1) Revenue and operating costs
Unit: RMB
Amount for the period Amount for the prior period
Item Revenue Costs Revenue Costs
Principal activities 20,060,774,786.74 14,693,179,492.87 18,998,422,868.69 15,276,153,607.54
Other activities 181,131,345.07 71,483,938.31 103,254,209.00 46,949,171.66
Total 20,241,906,131.81 14,764,663,431.18 19,101,677,077.69 15,323,102,779.20
199
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
44. Revenue and operating costs (Cont’d)
(2) Principal activities (by industry)
Amount for the year Amount for the prior year
Industry name Revenue Operating costs Revenue Operating costs
I. Machine-made paper 18,072,997,652.53 13,935,285,230.54 17,975,118,165.42 14,590,759,989.08
II. Electricity and steam 437,772,691.42 277,931,321.75 513,786,969.44 346,919,674.07
III. Construction materials 223,266,272.44 176,662,730.54 225,322,331.60 180,981,974.32
IV. Paper chemicals 124,008,406.45 102,039,011.48 59,945,519.46 54,847,129.21
V. Hotel 27,136,077.49 6,188,002.55 26,793,066.32 5,434,372.02
VI. Financial leasing 1,084,860,187.11 127,769,086.46 86,657,969.85 14,960,182.54
VII. Others 90,733,499.30 67,304,109.55 110,798,846.60 82,250,286.30
Total 20,060,774,786.74 14,693,179,492.87 18,998,422,868.69 15,276,153,607.54
(3) Principal activities (by products under machine-made paper)
Amount for the year Amount for the prior year
Product name Revenue Operating costs Revenue Operating costs
Light weight coated paper 612,237,436.63 515,155,387.78 693,819,246.02 602,872,005.81
Duplex press paper 4,460,441,279.15 3,359,857,786.59 2,967,684,563.34 2,361,726,555.66
Writing paper 289,489,121.26 236,603,150.06 211,560,370.68 159,961,258.19
Coated paper 4,365,890,220.92 3,258,280,750.13 4,428,510,204.03 3,602,836,734.87
Newsprint paper 970,297,912.12 819,429,101.14 1,091,419,636.72 816,390,508.43
Paperboard 183,744,883.99 174,790,766.95 754,167,430.95 715,607,309.32
White paper board 1,915,153,293.25 1,463,666,571.72 1,991,690,191.45 1,620,353,693.26
Electrostatic paper 1,580,897,670.32 1,043,674,436.61 1,742,073,088.67 1,309,377,091.22
Other machine-made papers 3,694,845,834.89 3,063,827,279.56 4,094,193,433.56 3,401,634,832.32
Total 18,072,997,652.53 13,935,285,230.54 17,975,118,165.42 14,590,759,989.08
200
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
44. Revenue and operating costs (Cont’d)
(4) Principal activities (by geographical areas under machine-made paper)
Amount for the year Amount for the prior year
Region Revenue Operating costs Revenue Operating costs
Mainland China 14,262,273,601.63 11,202,087,734.99 14,552,115,907.65 11,488,109,021.61
Other countries and regions 3,810,724,050.90 2,733,197,495.55 3,423,002,257.77 3,102,650,967.47
Total 18,072,997,652.53 13,935,285,230.54 17,975,118,165.42 14,590,759,989.08
(5) Revenue from top 5 customers
Total revenue Percentage of the
from top total revenue in
Period 5 customers the same period (%)
2015 1,362,000,050.80 6.73
2014 1,420,196,436.91 7.43
45. Business taxes and surcharges
Unit: RMB
Amount for Amount for
Item the period the prior period
Business tax 57,971,415.46 32,145,655.62
Urban maintenance and construction tax 39,811,578.29 31,769,524.59
Educational surcharges 29,762,311.83 22,655,151.08
Water engineering funds 5,421,903.84 4,395,872.20
Others 79,525.81 63,869.56
Total 133,046,735.23 91,030,073.05
Note: For details of payment standards for business taxes and surcharges, please see Note VI. Tax.
201
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
46. Selling and distribution expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Wages 149,119,158.11 120,719,398.48
Depreciation expenses 15,169,981.24 13,399,540.68
Office expenses 7,092,267.78 6,221,988.78
Travel expenses 29,039,476.77 34,664,069.53
Selling commissions 13,581,805.18 6,653,665.56
Transportation expenses 809,717,276.42 793,007,171.93
Cargo handling charges 18,220,233.14 20,458,378.39
Rental expenses 8,599,544.24 9,437,945.50
Hospitality expenses 67,545,878.65 64,557,863.44
Warehouse expenses 3,489,930.81 4,339,299.19
Others 69,386,187.65 74,596,213.75
Total 1,190,961,739.99 1,148,055,535.23
47. General and administrative expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Wages and surcharges 218,901,004.21 152,205,135.11
Welfare expenses 45,052,606.63 37,236,019.36
Labour insurance premium 12,390,793.58 10,824,798.38
Insurance premium 21,120,324.07 18,767,977.72
Depreciation expenses 62,330,981.98 54,439,941.88
Waste disposal expenses 20,000,681.81 24,663,623.70
Hospitality expenses 30,988,178.17 24,289,958.40
Amortisation of intangible assets 29,913,688.61 32,028,062.78
Technological development expenses 649,368,119.76 469,826,539.65
Tax 113,047,766.76 108,339,551.67
Production interruption loss 54,186,908.78 26,068,427.32
Repair fees 20,952,667.27 25,947,612.69
Audit fees 2,600,000.00 2,600,000.00
Others 103,798,775.19 173,305,258.73
Total 1,384,652,496.82 1,160,542,907.39
202
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
48. Finance expenses
Unit: RMB
Amount for Amount for
Item the period the prior period
Interest expenses 1,910,752,596.26 1,540,167,178.31
Less: interest income 376,655,680.35 232,604,192.19
Less: capitalised interest amount 190,070,482.43 185,230,554.68
Foreign exchange gains and losses 151,474,839.76 26,067,912.64
Bank charges 173,898,778.52 80,858,813.39
Total 1,669,400,051.76 1,229,259,157.47
Other particulars:
Interest expenses 2015 2014
Interests on bank loans, overdrafts and other loans
which require to be fully repaid within 5 years 927,200,426.19 954,007,544.33
Other interest expenses 1,172,941,025.92 1,106,872,842.55
Total 2,100,141,452.11 2,060,880,386.88
49. Loss on impairment of assets
Unit: RMB
Amount Amount
Item for the period for the prior period
I. Loss on bad debts 60,968,344.72 54,220,631.74
II. Loss on inventory impairment 5,319,730.37
Total 60,968,344.72 59,540,362.11
203
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
50. Gain on change in fair value
Unit: RMB
Amount Amount
Source of gain on change in fair value for the period for the prior period
Consumable biological assets measured at fair value -19,078,538.02 6,856,815.32
Total -19,078,538.02 6,856,815.32
51. Investment income
Unit: RMB
Amount Amount
Item for the period for the prior period
Income from long-term equity investments accounted
for using the equity method -15,595,591.74 -5,156,941.21
Investment gain on disposal of long-term equity investments 9,533,333.33 -8,516,933.29
Investment gain on disposal of available-for-sale financial assets -124,070.12
Income on external entrusted loans 94,777,777.77 82,833,581.81
Total 88,715,519.36 69,035,637.19
52. Non-operating income
Unit: RMB
Amounts included
in extraordinary
Amount Amount for gains and losses
Item for the period the prior period for the period
Total gain on disposal of non-current assets 15,395,550.60 86,153,319.82 15,395,550.60
Of which: Gain on disposal of fixed assets 15,395,550.60 2,388,902.38 15,395,550.60
Gain on disposal of intangible assets 83,764,417.44
Gain on debt restructuring 32,089,863.80 1,725,797.17 32,089,863.80
Government grants 251,169,920.24 269,545,217.93 244,716,579.78
Compensation on Wuhan relocation
for operation suspension 27,551,586.08
Compensation on Jilin relocation
for operation suspension 12,467,512.55
Others 12,350,469.71 12,867,912.27 12,350,469.71
Total 311,005,804.35 410,311,345.82 304,552,463.89
204
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
52. Non-operating income
Government grants included in profit or loss for the period:
Amount Amount for
Grants item for the year the prior year
Amortised deferred income (Note VII. 36) 81,628,745.52 59,434,500.08
Grants income 163,087,834.26 200,566,112.02
Value-added tax refund 6,453,340.46 9,544,605.83
Total 251,169,920.24 269,545,217.93
53. Non-operating expenses
Unit: RMB
Amounts included
in extraordinary
Amount Amount for gains and losses
Item for the period the prior period for the period
Total loss on disposal of non-current assets 6,610,974.07 12,236,126.04 6,610,974.07
Of which: loss on disposal of fixed assets 6,610,974.07 12,236,126.04 6,610,974.07
Donation 600,000.00 1,000,000.00 600,000.00
Others 1,476,158.68 2,105,652.24 1,476,158.68
Total 8,687,132.75 15,341,778.28 8,687,132.75
54. Income tax expenses
(1) Particulars of income tax expenses
Unit: RMB
Amount Amount for
Item for the period the prior period
Income tax expenses for the period 425,199,052.24 220,708,140.68
Deferred income tax expenses 7,038,325.96 -113,008,730.04
Total 432,237,378.20 107,699,410.64
205
XII Financial Report
VII. Notes to items of the Consolidated Financial Statements (Cont’d)
54. Income tax expenses (Cont’d)
(2) The reconciliation between accounting profit and income tax expenses
Unit: RMB
Amount
Item for the period
Total profit 1,410,168,985.05
Income tax expenses calculated at statutory/applicable tax rates 352,542,246.26
Effect of different tax rates applicable to subsidiaries
Effect of adjustments for income tax for prior periods 109,897.34
Effect of income not subject to tax 44,987,113.12
Effect of costs, expenses and loss not deductible for tax purposes 23,336,523.73
Effect of utilisation of previously unrecognised deductible
loss on deferred income tax assets -3,723,696.10
Effect of current unrecognised deductible temporary difference or
deductible loss arising from deferred tax income assets 62,310,912.85
Effect of additional deductible expenses -47,325,619.00
Income tax expenses 432,237,378.20
55. Other comprehensive income
For details, please see Note 41.
56. Items on statements of cash flow
(1) Cash received relating to other operating activities
Unit: RMB
Amount Amount for
Item for the period the prior period
Default penalty and fine 13,944,286.08 7,462,262.25
Finance expenses – Interest income 376,655,680.35 232,604,192.19
Income-related government grants 163,087,834.26 200,566,112.02
Open credit and other income 268,723,339.29 159,354,402.77
Deposit of Leasing Company 653,000,000.00
Total 1,475,411,139.98 599,986,969.23
206
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
56. Items on statements of cash flow (Cont’d)
(2) Cash paid relating to other operating activities
Unit: RMB
Amount Amount for
Item for the period the prior period
Financial institutions charge 173,898,778.52 80,858,813.39
Business hospitality expenses 98,534,056.82 88,847,821.84
Travel expenses 39,928,059.43 47,576,695.91
Office expenses 12,769,202.02 12,520,690.32
Transportation expenses 788,768,624.75 767,726,460.95
Rental expenses 14,619,838.83 14,350,343.74
Waste disposal expenses 20,992,253.21 24,663,623.70
Insurance premium 22,110,976.94 18,767,977.72
Repair expenses 20,952,667.27 30,372,618.50
Cargo handling charges 18,220,233.14 20,458,378.39
Intermediary service expenses 5,698,026.64 5,207,318.09
Net increase in principal receivables relating to
finance lease business 15,432,476,248.91 2,624,793,605.97
Others 200,094,630.81 455,827,098.55
Total 16,849,063,597.29 4,191,971,447.07
(3) Cash received relating to other investing activities
Unit: RMB
Amount Amount for
Item for the period the prior period
Special subsidy funds received 161,983,516.66
Demolition and relocation compensation received 590,920,000.00
Asset-related government grants 100,612,200.00 77,328,964.00
Interest income on entrusted loans 82,833,581.81
Subsidy for Huanggang Project 15,000,000.00
Total 115,612,200.00 913,066,062.47
207
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
56. Items on statements of cash flow (Cont’d)
(4) Cash paid relating to other investing activities
Unit: RMB
Amount Amount for
Item for the period the prior period
Entrusted loans 1,000,000,000.00
Total 1,000,000,000.00
(5) Cash received relating to other financing activities
Unit: RMB
Amount Amount for
Item for the period the prior period
Short-term commercial paper 10,077,927,778.00
Perpetual bonds 2,582,800,000.00
Special funds for China Development Bank 150,000,000.00
Total 12,810,727,778.00
(6) Cash paid relating to other financing activities
Unit: RMB
Amount Amount for
Item for the period the prior period
Repayment of long-term payables 60,000,000.00
Repayment of short-term commercial paper 3,800,000,000.00
Repayment of Chenming Hong Kong debt 500,000,000.00
Increase in restricted bank deposits for the period 2,596,657,197.45 2,678,364,459.52
Acquisition of minority interests by Power 23,413,560.00
Repurchase of H shares 74,699,131.07
Total 2,596,657,197.45 7,136,477,150.59
208
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
57. Supplementary information on cash flow statement
(1) Supplementary information on cash flow statement
Unit: RMB
Amount Amount for
Supplementary information for the period the prior period
1. Reconciliation of net profit as cash flows
from operating activities: — —
Net profit 977,931,606.85 453,308,872.65
Plus: Provision for impairment of assets 60,968,344.72 59,540,362.11
Depreciation of fixed assets, consumption of oil and
gas assets, depreciation of productive biological assets 1,370,646,542.34 1,402,497,083.69
Amortisation of intangible assets 33,322,277.57 33,890,044.27
Amortisation of long-term prepaid expenses 7,729,263.80 7,147,733.73
Loss on disposal of fixed assets, intangible assets and
other long-term assets (“-” denotes gain) -8,784,576.53 -73,917,193.78
Loss on changes in fair value (“-” denotes gain) 19,078,538.02 -6,856,815.32
Finance expenses (“-” denotes gain) 1,690,396,705.85 1,345,854,589.93
Investment loss (“-” denotes gain) -88,715,519.36 -69,035,637.19
Decrease in deferred income tax assets (“-” denotes increase) 7,038,325.96 -113,008,730.04
Decrease in inventories (“-” denotes increase) 267,650,283.24 -270,691,002.10
Decrease in operating receivables (“-” denotes increase) -16,218,923,038.36 -3,401,693,697.79
Increase in operating payables (“-” denotes decrease) 2,160,297,721.60 1,618,364,125.69
Net cash flows from operating activities -9,721,363,524.30 985,399,735.85
2. Major investing and financing activities
not involving cash settlements: — —
3. Net change in cash and cash equivalents: — —
Closing balance of cash 1,888,107,493.76 976,096,861.30
Less: Opening balance of cash 976,096,861.30 726,532,928.96
Net increase in cash and cash equivalents 912,010,632.46 249,563,932.34
209
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
57. Supplementary information on cash flow statement (Cont’d)
(2) Cash and cash equivalents composition
Unit: RMB
Item Closing balance Opening balance
I. Cash 1,888,107,493.76 976,096,861.30
Of which: Treasury cash 1,869,583.60 1,437,037.09
Bank deposit that can be used for payment at any time 1,886,237,910.16 974,659,824.21
III. Balance of cash and cash equivalent as at end of period 1,888,107,493.76 976,096,861.30
Note: As at 31 December 2015, restricted monetary funds amounted to RMB7,096,218,522.25 (31 December 2014:
RMB4,499,561,324.80).
Restricted cash and cash equivalents is not included in cash.
58. Assets with restricted ownerships or right to use
Unit: RMB
Closing
Item carrying amount Reason for such restrictions
Monetary funds 7,096,218,522.24 As pledges for bank borrowings, guarantee
deposits for bank acceptance bills and
letter of credit deposits, and deposit
reserves (Note VII. 1)
Bills receivable 1,632,382,759.87 As collaterals for short-term borrowings,
bills payable, letters of guarantee and
letters of credit (Note VII.2)
Fixed assets 4,567,649,044.39 As collaterals for bank borrowings (Note
VII. 13)
Intangible assets 309,070,530.88 As collaterals for bank borrowings (Note
VII. 16)
Total 13,605,320,857.38 —
210
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VII. Notes to items of the Consolidated Financial Statements (Cont’d)
59. Foreign currency items
(1) Foreign currency items
Unit: RMB
Closing foreign Closing
Item currency balance Exchange rate balance in RMB
Monetary funds
Of which: USD 51,069,532.36 6.4936 331,625,115.33
EUR 7,947,328.89 7.0952 56,387,887.94
HKD 534,867.26 0.83778 448,101.09
GBP 54,546.14 9.6159 524,510.23
Korean Won 249,160,472.00 0.005513 1,373,621.68
JPY 23,974,104.00 0.053875 1,291,604.85
Accounts receivable
Of which: USD 43,803,710.99 6.4936 284,443,777.68
EUR 3,858,481.21 7.0952 27,376,695.88
JPY 160,088,298.00 0.053875 8,624,757.05
Accounts payable
Of which: USD 41,015,284.86 6.4936 266,336,853.77
EUR 328,355.01 7.0952 2,329,744.47
Short-term borrowings
Of which: USD 786,738,503.19 6.4936 5,108,765,144.31
EUR 284,134,864.20 7.0952 2,015,993,688.47
Long-term borrowings
Of which: USD 274,986,000.00 6.4936 1,785,649,089.60
EUR 204,690,000.00 7.0952 1,452,316,488.00
Non-current liabilities due within one year
Of which: USD 193,000,000.00 6.4936 1,253,264,800.00
(2) Explanation on overseas operating entities (including major overseas operating entities), which shall disclose
their overseas principal places of business, reporting currency and basis. Reasons shall be disclosed if there
is any change in the reporting currency.
√ Applicable Not applicable
Principal Place of Reporting
Name of subsidiary place of business incorporation currency
Chenming (HK) Limited Hong Kong, China Hong Kong, China USD
Chenming International Co., Ltd. Los Angeles, USA Los Angeles, USA USD
Chenming Paper Japan Co., Ltd. Tokyo, Japan Tokyo, Japan JPY
Chenming GmbH Hamburg, Germany Hamburg, Germany EUR
Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea KRW
211
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VIII. Change in scope of consolidation
Newly established subsidiaries
Month of
Name incorporation Scope of business Registered capital Shareholding
Jinan Chenming Investment 2015.01 Investment with self-owned assets, 100,000,000.00 100%
Management Co., Ltd. investment management, investment
consultation, corporate management
consultation, commercial information
consultation, and creative planning service
etc.
Chenming Paper Korea Co., Ltd. 2015.04 Sales of machine-made paper USD1 million 100%
(Cont’d)
Closing Net profit
Name net assets for the year
Jinan Chenming Investment Management Co., Ltd. 100,173,810.09 173,810.09
Chenming Paper Korea Co., Ltd. 6,044,251.82 -347,992.47
Total 106,218,061.91 -174,182.38
212
XII Financial Report
IX. Interest in other entities
1. Interest in subsidiaries
(1) Constitution of the Group
Principle place Place of
Name of subsidiary of business incorporation Nature of business Shareholding Acquisition
Direct Indirect
Wuhan Chenming Hanyang Wuhan, China Wuhan, China Paper manufacture 50.93% Establishment
Paper Holdings Co., Ltd.
Shandong Chenming Power Shouguang, China Shouguang, China Power 100.00% Establishment
Supply Holdings Co., Ltd.
Hailaer Chenming Paper Co., Ltd. Hailaer, China Hailaer, China Paper manufacture 75.00% Establishment
Haicheng Haiming Mining Co., Ltd. Haicheng, China Haicheng, China Mining 60.00% Establishment
Jiangxi Chenming Paper Co., Ltd. Nanchang, China Nanchang, China Paper manufacture 51.00% 49.00% Establishment
Jilin Chenming Paper Co., Ltd. Jilin, China Jilin, China Paper manufacture 100.00% Merger and
acquisition
Shandong Grand View Hotel Co., Ltd. Shouguang, China Shouguang, China Catering 70.00% Establishment
Zhanjiang Chenming Zhanjiang, China Zhanjiang, China Paper manufacture 100.00% Establishment
Pulp & Paper Co., Ltd.
Chenming (HK) Limited Hong Kong, China Hong Kong, China Trade of paper 100.00% Establishment
Shouguang Chenming Shouguang, China Shouguang, China Transportation 100.00% Establishment
Modern Logistic Co., Ltd.
Shouguang Chenming Art Shouguang, China Shouguang, China Paper manufacture 75.00% Establishment
Paper Co., Ltd.
Fuyu Chenming Paper Co., Ltd. Fuyu, China Fuyu, China Paper manufacture 100.00% Establishment
Huanggang Chenming Huanggang, China Huanggang, China Pulp 100.00% Establishment
Pulp & Paper Co., Ltd.
Huanggang Chenming Huanggang, China Huanggang, China Arboriculture 100.00% Establishment
Arboriculture Co., Ltd.
Shouguang Meilun Paper Co., Ltd. Shouguang, China Shouguang, China Paper manufacture 100.00% Establishment
Shouguang Shun Da Shouguang, China Shouguang, China Customs declaration 100.00% Establishment
Customs Declaration Co, Ltd.
Shandong Chenming Paper Shouguang, China Shouguang, China Sales of paper 100.00% Establishment
Sales Co., Ltd.
Chenming International Co., Ltd. Los Angeles, Los Angeles, Trade of paper 100.00% Establishment
the United States the United States
Shouguang Chenming Shouguang, China Shouguang, China Packaging 100.00% Establishment
Hongxin Packaging Co., Ltd.
Shouguang Chenming Shouguang, China Shouguang, China Logistics 100.00% Establishment
Industrial Logistics Co., Ltd.
Shouguang Chenming Jiatai Shouguang, China Shouguang, China Property 100.00% Establishment
Property Management Co., Ltd. management
213
XII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
Principle place Place of
Name of subsidiary of business incorporation Nature of business Shareholding Acquisition
Direct Indirect
Shouguang Chenming Import Shouguang, China Shouguang, China Import and 100.00% Establishment
and Export Trade Co., Ltd. export trade
Shouguang Chenming Papermaking Shouguang, China Shouguang, China Machinery 100.00% Establishment
Machine Co., Ltd. manufacturing
Japan Chenming Paper Co., Ltd. Tokyo, Japan Tokyo, Japan Trade of paper 100.00% Establishment
100.00%
Chenming GmbH Hamburg, Germany Hamburg, Germany Trade of paper 100.00% Establishment
Shouguang Hongxiang Printing and Shouguang, China Shouguang, China Printing and 100.00% Merger and
Packaging Co., Ltd. packaging acquisition
Shandong Chenming Paper Group Fuyu, China Fuyu, China Sales of paper 100.00% Establishment
(Fuyu) Sales Co., Ltd.
Shandong Chenming Group Jinan, China Jinan, China Finance 80.00% 20.00% Establishment
Finance Co., Ltd.
Chenming Arboriculture Co., Ltd. Wuhan, China Wuhan, China Arboriculture 100.00% Establishment
Qingdao Chenming International Qingdao, China Qingdao, China Logistics 30.00% 70.00% Establishment
Logistics Co., Ltd.
Jinan Chenming Investment Jinan, China Jinan, China Investment 100.00% Establishment
Management Co., Ltd. management
Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea Sales of paper 100.00% Establishment
Zhanjiang Chenming Zhanjiang, China Zhanjiang, China Arboriculture 100.00% Establishment
Arboriculture Co., Ltd.
Yangjiang Chenming Yangjiang, China Yangjiang, China Arboriculture 100.00% Establishment
Arboriculture Co., Ltd.
Guangdong Huirui Investment Zhanjiang, China Zhanjiang, China Investment 51.00% Merger and
Co., Ltd. acquisition
Zhanjiang Meilun Pulp & Paper Zhanjiang, China Zhanjiang, China Pulp 100.00% Establishment
Co., Ltd.
Zhanjiang Chenming New-style Zhanjiang, China Zhanjiang, China Wall materials 100.00% Establishment
Wall Materials Co., Ltd.
Wuhan Chenming Qianneng Wuhan, China Wuhan, China Electric Power 51.00% Establishment
Electric Power Co., Ltd.
Jilin Chenming Machinery Jilin, China Jilin, China Machinery 100.00% Establishment
Manufacturing Co., Limited manufacturing
Jilin Chenming New-style Jilin, China Jilin, China Wall Materials 100.00% Establishment
Wall Materials Co., Ltd.
Shouguang Chenming Cement Shouguang, China Shouguang, China Cement 100.00% Establishment
Co., Limited
Shandong Chenming Panels Shouguang, China Shouguang, China Panel 100.00% Merger and
Co., Ltd. acquisition
214
XII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(1) Constitution of the Group (Cont’d)
Principle place Place of
Name of subsidiary of business incorporation Nature of business Shareholding Acquisition
Direct Indirect
Shandong Chenming Floor Shouguang, China Shouguang, China Floor board 100.00% Merger and
Board Co., Ltd. acquisition
Nanchang Chenming Arboriculture Nanchang, China Nanchang, China Arboriculture 100.00% Establishment
Co., Ltd.
Shouguang Hongyi Decorative Shouguang, China Shouguang, China Packaging 100.00% Merger and
Packaging Co., Ltd. acquisition
Shouguang Xinyuan Coal Co., Ltd. Shouguang, China Shouguang, China Coal 100.00% Merger and
acquisition
Shouguang City Run Sheng Wasted Shouguang, China Shouguang, China Purchase and 100.00% Merger and
Paper Recycle Co., Ltd. sales of waste and acquisition
obsolete materials
Shouguang Wei Yuan Logistics Shouguang, China Shouguang, China Logistics 100.00% Merger and
Company Limited acquisition
Wuxi Song Ling Paper Co., Ltd. Wuxi, China Wuxi, China Paper manufacture 100.00% Merger and
acquisition
Shandong Chenming Jinan, China Jinan, China Investment 100.00% Establishment
Investment Limited
Shandong Chenming Financial Jinan, China Jinan, China Financial leasing 100.00% Establishment
Leasing Co., Ltd.
215
XII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(2) Major non-wholly owned subsidiaries
Unit: RMB
Gain or loss Dividend
attributable to to minority
minority interests interests declared Closing balance of
Name Minority interests during the period during the period minority interests
Wuhan Chenming Hanyang 49.07% -30,976,674.52 161,018,478.42
Paper Holdings Co., Ltd.
Shouguang Chenming 25.00% -693,101.24 31,274,818.47
Art Paper Co., Ltd.
Shandong Grand View 30.00% -6,096,073.95 -29,088,942.13
Hotel Co., Ltd.
Hailaer Chenming Paper 25.00% -3,417,780.07 11,628,676.65
Co., Ltd.
Haicheng Haiming Mining 40.00% 96,000,000.00
Co., Ltd.
Guangdong Huirui 49.00% -2,109,441.41 116,598,829.25
Investment Co., Ltd.
Total -43,293,071.19 387,431,860.66
(3) Key financial information of major non-wholly owned subsidiaries
Unit: RMB
Closing balance Opening balance
Name Current assets Non-current assets Total assets Current l abi i i s Non-current l abi i i s Total l abi i i s Current assets Non-current assets Total assets Current l abi i i s Non-current l abi i i s Total l abi i i s
Wuhan Chenming Hanyang Paper
Hold ngs Co., Ltd. 2,007,256,202.41 1,380,850,115.36 3,388,106,317.77 2,774,652,401.54 329,704,558.79 3,104,356,960.33 1,559,637,606.19 1,419,006,574.94 2,978,644,181.13 2,621,126,071.09 8,505,849.24 2,629,631,920.33
Shouguang Chenming
Art Paper Co., Ltd. 348,618,114.49 775,158,813.32 1,123,776,927.81 998,677,653.92 998,677,653.92 294,635,745.00 819,868,366.27 1,114,504,111.27 986,632,432.45 986,632,432.45
Shandong Grand View Hotel Co., Ltd. 12,366,917.52 227,377,776.55 239,744,694.07 336,707,834.51 336,707,834.51 11,107,146.29 229,688,471.01 240,795,617.30 317,438,511.24 317,438,511.24
Hai aer Chenming Paper Co., Ltd. 23,595,841.82 28,431,683.32 52,027,525.14 5,512,818.55 5,512,818.55 22,878,608.35 41,823,416.58 64,702,024.93 4,516,198.05 4,516,198.05
Haicheng Haim ng Min ng Co., Ltd. 11,123,328.76 679,152,169.96 690,275,498.72 450,275,498.72 450,275,498.72 7,833,989.36 486,500,236.27 494,334,225.63 254,334,225.63 254,334,225.63
Guangdong Huirui Investment Co., Ltd. 429,746,302.55 402,131.87 430,148,434.42 14,211,640.04 177,980,000.00 192,191,640.04 1,170,292,476.52 626,555.39 1,170,919,031.91 10,657,255.05 918,000,000.00 928,657,255.05
216
XII Financial Report
IX. Interest in other entities (Cont’d)
1. Interest in subsidiaries (Cont’d)
(3) Key financial information of major non-wholly owned subsidiaries
Unit: RMB
Amounts during the year Amounts during the prior year
Total Cash flows from Total Cash flows from
comprehensive operating comprehensive operating
Name Revenue Net profit income activities Revenue Net profit income activities
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. 1,109,193,960.70 -65,262,903.36 -65,262,903.36 -326,014,851.95 928,484,990.10 -104,818,502.18 -104,818,502.18 -166,091,569.03
Shouguang Chenming Art Paper Co., Ltd. 620,022,538.30 -2,772,404.93 -2,772,404.93 194,874,455.71 454,978,226.98 -3,586,034.71 -3,586,034.71 86,244,090.82
Shandong Grand View Hotel Co., Ltd. 34,262,339.14 -20,320,246.50 -20,320,246.50 4,025,704.06 34,406,006.96 -19,312,204.99 -19,312,204.99 -80,881,267.27
Hailaer Chenming Paper Co., Ltd. -13,671,120.29 -13,671,120.29 -11,123,133.00 -1,038,734.15 -1,038,734.15 2,441.87
Haicheng Haiming Mining Co., Ltd. 76,226,073.35 6,848,946.00
Guangdong Huirui Investment Co., Ltd. -4,304,982.48 -4,304,982.48 -12,023,537.82 -11,919,324.22 -11,919,324.22 -117,757,282.06
2. Interest in joint arrangements or associates
(1) Major joint ventures and associates
Name of joint ventures Principle place Place of Nature of Accounting
and associates of business incorporation business Shareholding method
Direct Indirect
Shouguang Chenming Huisen Shouguang, China Shouguang, China Construction 50.00% Equity method
New-style Construction materials
Materials Co., Ltd.
Arjo Wiggins Chenming Specialty Shouguang, China Shouguang, China Paper making 30.00% Equity method
Paper Co., Ltd.
Jiangxi Jiangbao Media Colour Nanchang, China Nanchang, China Printing 21.16% Equity method
Printing Co. Ltd.
Zhuhai Dechen New Third Board Zhuhai, China Zhuhai, China Investment 33.33% Equity method
Equity Investment Fund Company management
(Limited Partnership)
Wuhan Chenming Wan Xing Wuhan, China Wuhan, China Real estate 40.00% Equity method
Real Estate Co., Ltd. development
Jiangxi Chenming Port Co., Ltd. Nanchang, China Nanchang, China Handling and 40.00% Equity method
transportation
of goods
and storage
217
XII Financial Report
IX. Interest in other entities (Cont’d)
2. Interest in joint arrangements or associates (Cont’d)
(2) Key financial information of major joint ventures
Unit: RMB
Closing Opening
balance/amounts balance/amounts
during the year during the prior year
Shouguang Shouguang
Chenming Chenming
Huisen New-style Huisen New-style
Construction Construction
Materials Co., Ltd. Materials Co., Ltd.
Current assets 5,729,672.61 4,493,895.83
Of which: Cash and cash equivalents 52,995.32 2,450,044.70
Non-current assets 12,036,429.24 1,613,798.14
Total assets 17,766,101.85 6,107,693.97
Current liabilities 11,812,466.81 108,118.00
Total liabilities 11,812,466.81 108,118.00
Equity interest attributable to
shareholders of the parent company 5,953,635.04 5,999,575.97
Share of net assets based on shareholding 2,976,817.52 2,999,787.99
Carrying amount of investment in joint ventures 2,976,817.52 2,999,787.99
Revenue 329,743.67
Finance expenses -127.50 -7,037.86
Net profit -45,940.93 -424.03
Total comprehensive income -45,940.93 -424.03
218
XII Financial Report
IX. Interest in other entities (Cont’d)
2. Interest in joint arrangements or associates (Cont’d)
(3) Key financial information of major associates
Unit: RMB
Closing balance/amounts during the year Opening balance/amounts during the prior year
Zhuhai Dechen
New Third
Board Equity Wuhan Jiangxi Wuhan
Jiangxi Jiangbao Investment Fund Chenming Jiangxi Jiangbao Chenming Jiangxi
Media Colour Company (Limited Wan Xing Real Chenming Media Colour Wan Xing Real Chenming
Printing Co. Ltd. Partnership) Estate Co., Ltd. Port Co., Ltd. Printing Co. Ltd. Estate Co., Ltd. Port Co., Ltd.
Current assets 24,151,413.58 75,285,532.03 1,511,430,436.81 10,285,611.08 34,431,533.02 1,157,970,131.09 8,473,980.97
Non-current assets 14,157,621.78 25,760,000.00 2,891,556.01 45,773,293.56 17,470,498.79 11,277,947.09 47,257,698.90
Total assets 38,309,035.36 101,045,532.03 1,514,321,992.82 56,058,904.64 51,902,031.81 1,169,248,078.18 55,731,679.87
Current liabilities 18,376,661.74 5,705.20 314,361,519.98 41,553,342.83 29,866,178.33 593,911,543.51 41,194,230.66
Non-current liabilities 1,152,550,550.91 518,810,800.00
Total liabilities 18,376,661.74 5,705.20 1,466,912,070.89 41,553,342.83 29,866,178.33 1,112,722,343.51 41,194,230.66
Shareholders’ equity 19,932,373.62 101,039,826.83 47,409,921.93 14,505,561.81 22,035,853.48 56,525,734.67 14,537,449.21
Share of net assets based
on shareholding 4,217,690.26 50,519,913.42 18,963,968.77 5,802,224.72 4,662,786.59 22,610,293.87 5,814,979.68
– Unrealised profit
arising from
intra-group
transactions -11,811,686.15
– Others -176,672.13
Carrying amount of
investment in associates 4,217,690.26 50,343,241.28 7,152,282.62 5,802,224.72 4,662,786.59 22,610,293.87 5,814,979.68
Revenue 21,450,057.79 261,784,437.00 43,828,917.16 22,626,028.80 2,786,061.08
Net profit -2,103,479.86 1,029,826.83 -9,115,812.74 -31,887.40 -389,395.82 -12,153,281.78 -532,550.79
Total comprehensive
income -2,103,479.86 1,029,826.83 -9,115,812.74 -31,887.40 -389,395.82 -12,153,281.78 -532,550.79
219
XII Financial Report
IX. Interest in other entities (Cont’d)
2. Interest in joint arrangements or associates (Cont’d)
(4) Excess loss of joint ventures or associates
Unit: RMB
Accumulated Unrecognised Accumulated
unrecognised loss (or share unrecognised
loss incurred of net profit) loss as at the end
Name for prior periods for the period of the period
Arjo Wiggins Chenming Specialty
Paper Co., Ltd. 7,308,869.16 7,308,869.16
X. Risk relating to financial instruments
Principal financial instruments of the Company include equity investments, debt investments, loans, receivables, payables
and others, further information of which are set out in relevant items of this note XII. Risks relating to these financial
instruments and relevant risk management policies of the Company are described below. The management of the Company
manage and control the risk exposures to ensure they are under control.
The Company adopts sensitivity analysis techniques to analyse the possible effects of rational and probable changes in
risk variables to profit or loss for the period or to the interests of shareholders. Since risk variables seldom change on a
stand-alone basis, while the correlation between variables may have significant influence to the ultimate amount of change
effected by the change in a single risk variable, the analysis below is based on the assumption that the changes in each
variable occurred separately.
1. Objective and policies of risk management
The objective of the risk management of the Company is to maintain an appropriate balance between risks and
return so as to minimise the negative effects of risks on the Company’s operating results in order to maximise the
benefits of the shareholders and other stakeholders. Based on such objective, the principal strategy of the Company’s
risk management is to identify and analyse all types of risks of the Company, establish appropriate risk tolerance
thresholds, carry out risk management procedures and perform risk monitoring on all kinds of risks in a timely and
reliable manner, thus controlling the risk exposures within a prescribed level.
220
XII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Objective and policies of risk management (Cont’d)
(1) Market risk
Foreign exchange risk
Foreign exchange risk describes the risk of loss arising from variation of the exchange rate. The Company
is primarily exposed to risks relating to USD, EUR, HKD and JPY. Save for several subsidiaries of the
Company whose purchases and sales are denominated in USD, EUR, HKD and JPY, other principal
activities of the Company are settled in RMB. As at 31 December 2015, except for the following assets
and liabilities whose balance were denominated in USD, EUR, HKD and JPY, the Company adopted RMB
to present the balance of its assets and liabilities. The foreign exchange risks arising from assets and
liabilities denominated in foreign currencies may affect the operating results of the Company.
Financial assets and financial liabilities denominated in foreign currencies held by the Company as at 31
December 2015 and 31 December 2014 were translated into RMB as follows:
31 December 2015
Items USD EUR HKD JPY GBP Korean Won
Financial assets denominated
in foreign currencies-
Monetary funds 331,625,115.33 56,387,887.94 448,101.09 1,291,604.85 524,510.23 1,373,621.68
Accounts receivable 284,443,777.68 27,376,695.88 8,624,757.05
Sub-total 616,068,893.01 83,764,583.82 448,101.09 9,916,361.90 524,510.23 1,373,621.68
Financial liabilities denominated
in foreign currencies-
Short-term borrowings 5,108,765,144.31 2,015,993,688.47
Accounts payable 266,336,853.77 2,329,744.47
Non-current liabilities due
within one year 1,253,264,800.00
Long-term borrowings 1,785,649,089.60 1,452,316,488.00
Sub-total 8,414,015,887.68 3,470,639,920.94
221
XII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Objective and policies of risk management (Cont’d)
(1) Market risk (Cont’d)
Foreign exchange risk (Cont’d)
31 December 2014
Items USD EUR HKD JPY AUD
Financial assets denominated
in foreign currencies-
Monetary funds 353,564,562.71 5,407,399.49 226,069.29 8,057,716.22 0.05
Accounts receivable 265,981,124.37 6,793,469.88 24,326,124.96
Sub-total 619,545,687.08 12,200,869.37 226,069.29 32,383,841.18 0.05
Financial liabilities denominated
in foreign currencies-
Short-term borrowings 7,356,869,468.98 291,802,384.43 83,221,020.00
Accounts payable 1,105,383,772.24 534,515,076.88
Non-current liabilities due
within one year 575,186,000.00
Long-term borrowings 2,689,830,809.25
Sub-total 11,727,270,050.47 826,317,461.31 83,221,020.00
The Company has been paying close attention to the effect of fluctuation in exchange rate on the foreign
exchange risks of the Company. The Company has not taken any measures to avoid foreign exchange
risk at present.
Exchange rate risk sensitivity analysis:
Exchange rate risk - sensitivity analysis assumes that there is a high level of effectiveness in hedging
both net investment in foreign operations and cash flow. Based on the assumptions, with other factors
unchanged, the exchange rate might float within a reasonable range, and has the following before tax
effect on profit or loss and shareholders’ equity for the current period:
Currency Exchange rate change For the year For the prior year
Effect on profit Effect on profit
USD 5% appreciation against RMB -389,897,349.73 -555,386,218.17
USD 5% devaluation against RMB 389,897,349.73 555,386,218.17
EUR 5% appreciation against RMB -169,343,766.86 -40,705,829.60
EUR 5% devaluation against RMB 169,343,766.86 40,705,829.60
GBP 5% appreciation against RMB 26,225.51
GBP 5% devaluation against RMB -26,225.51
HKD 5% appreciation against RMB 22,405.05 11,303.46
HKD 5% devaluation against RMB -22,405.05 -11,303.46
JYP 5% appreciation against RMB 495,818.10 -2,541,858.94
JYP 5% devaluation against RMB -495,818.10 2,541,858.94
Korean Won 5% appreciation against RMB 68,681.08
Korean Won 5% devaluation against RMB -68,681.08
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XII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Objective and policies of risk management (Cont’d)
(1) Market risk (Cont’d)
Interest rate risk
The interest rate risk of the Company arises from the interest bearing debt such as bank loans and bonds
payable. Variable-rate financial liabilities make the Company exposes to cash flow interest rate risk.
Fixed-rate financial liabilities make the Company exposes to fair value interest rate risk. The Company
determines the proportion between fixed-rate and variable-rate contracts based on the prevailing market
environment. As at 31 December 2015, the interest bearing debts of the Company mainly consisted of
variable-rate borrowings contracts in RMB and USD amounting to RMB31,900,217,553.01 (31 December
2014: RMB25,948,555,738.11), and fixed-rate interest rate contracts in RMB amounting to RMB18.5
billion (31 December 2014: RMB8.4 billion).
The finance department of the headquarters of the Company 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 Company
will increase, thereby having a material adverse effect on the financial results of the Company. 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 Company.
On 31 December 2015, if the interest rate of the interest bearing debts increases or decrease by 10%
with all other variables held constant, the profit for the year would have increased or decreased by
approximately RMB102,670,407.04 (2014: RMB70,147,828.58) mainly due to the increase and decrease
of the interest expenses.
(2) Credit risk
The Company manages the credit risk by portfolio. Credit risk mainly arises from bank deposit, accounts
receivable, other receivables and bills receivable. The majority of the Company’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
and commercial acceptance bills of higher credit rating. There is no significant credit risk in the opinion of the
Company and no significant loss will be incurred due to default by counterparties. Sales are settled through
the combination of advance receipts and credit. Customers are granted a credit period through a strict credit
approval system. The Company has set up a department specialising in reviewing the credibility of the trade
customers regularly, thereby reasonably controlling 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 Company believe that no significant loss will be incurred due to default by the aforesaid
parties.
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XII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Objective and policies of risk management (Cont’d)
(3) Liquidity risk
The Company maintains and monitors a level of cash and cash equivalents deemed adequate by the management to
meet the operation needs of the Company and to reduce the effect of cash flow movements. The management of the
Company monitors the usage of bank borrowings, and ensures compliance with borrowing agreements.
The Company considers bank loans as its primary source of fund. As at 31 December 2015, unutilised bank
loans of the Company amounted to RMB27,554,473,800.00 (31 December 2014: RMB24,687,355,704.86).
Each subsidiary of the Company is responsible for its own cash flows forecast. The finance department of the
headquarter 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 with borrowing agreements and obtains sufficient facilities
from major financial institutions to satisfy the short-term and long-term funding requirement.
As at the balance sheet date, the contracted cash flows of various financial assets and financial liabilities of the
Company are set out according to the maturity date as follows:
31 December 2015
Item Within one year One to two years Two to five years Over five years Total
Financial assets
Monetary funds 8,984,326,016.01 8,984,326,016.01
Bills receivable 3,998,782,845.65 3,998,782,845.65
Accounts receivable 4,256,225,770.94 4,256,225,770.94
Other receivables 1,555,723,453.07 1,555,723,453.07
Prepayments 1,072,990,234.05 1,072,990,234.05
Non-current assets due within one year 2,893,133,653.86 2,893,133,653.86
Other current assets 6,160,937,261.77 6,160,937,261.77
Long-term receivables 4,211,845,587.73 6,131,176,645.71 10,343,022,233.44
Other non-current assets 900,000,000.00 900,000,000.00
Sub-total 28,922,119,235.35 5,111,845,587.73 6,131,176,645.71 40,165,141,468.79
Financial liabilities
Short-term borrowings 24,755,535,672.86 24,755,535,672.86
Bills payable 3,281,599,412.31 3,281,599,412.31
Accounts payable 2,942,337,386.57 2,942,337,386.57
Advance receipts 180,504,227.01 180,504,227.01
Other payables 1,158,567,353.38 1,158,567,353.38
Non-current liabilities due within one year 1,975,300,816.32 1,975,300,816.32
Long-term borrowings 1,553,541,829.60 2,815,501,765.34 800,337,468.89 5,169,381,063.83
Bonds payable 2,000,000,000.00 3,800,000,000.00 5,800,000,000.00
Long-term payables 294,000,000.00 50,000,000.00 344,000,000.00
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 10,100,000,000.00 10,100,000,000.00
Sub-total 47,893,844,868.45 6,453,541,829.60 3,109,501,765.34 850,337,468.89 58,307,225,932.28
(Cont’d)
224
XII Financial Report
X. Risk relating to financial instruments (Cont’d)
1. Objective and policies of risk management (Cont’d)
(3) Liquidity risk (Cont’d)
31 December 2014
Item Within one year One to two years Two to five years Over five years Total
Financial assets
Monetary funds 5,475,658,186.10 5,475,658,186.10
Bills receivable 3,047,541,556.15 3,047,541,556.15
Accounts receivable 3,754,032,648.96 3,754,032,648.96
Other receivables 1,851,629,373.22 1,851,629,373.22
Prepayments 1,838,017,454.90 1,838,017,454.90
Non-current assets due within one year 865,738,333.65 865,738,333.65
Long-term receivables 620,460,274.14 1,033,174,444.51 1,653,634,718.65
Other non-current assets 900,000,000.00 900,000,000.00
Sub-total 16,832,617,552.98 620,460,274.14 1,933,174,444.51 19,386,252,271.63
Financial liabilities
Short-term borrowings 20,470,296,592.92 20,470,296,592.92
Bills payable 1,598,110,792.85 1,598,110,792.85
Accounts payable 3,408,366,113.93 3,408,366,113.93
Advance receipts 270,056,726.88 270,056,726.88
Other payables 783,790,884.61 783,790,884.61
Non-current liabilities due within one year 1,099,968,900.00 1,099,968,900.00
Long-term borrowings 1,725,485,400.00 1,485,450,209.25 1,167,354,635.94 4,378,290,245.19
Bonds payable 2,000,000,000.00 3,800,000,000.00 5,800,000,000.00
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
Sub-total 27,630,590,011.19 5,225,485,400.00 6,385,450,209.25 1,167,354,635.94 40,408,880,256.38
An analysis of the repayment of bank borrowings and bonds payable is as follows:
Closing balance Opening balance
Bank borrowings Bonds payable Bank borrowings Bonds payable
Borrowings with the last
repayment date within five years 31,099,880,084.12 8,400,000,000.00 24,781,201,102.17 8,400,000,000.00
Borrowings with the last
repayment date after five years 800,337,468.89 1,167,354,635.94
Total 31,900,217,553.01 8,400,000,000.00 25,948,555,738.11 8,400,000,000.00
225
XII Financial Report
X. Risk relating to financial instruments (Cont’d)
2. Transfer of financial assets
Financial assets transferred and ceased to be recognised but with involvement of the transferor
During the year, the Company discounted bank acceptance of RMB3,861,622,115.19 (last year:
RMB3,440,773,115.05). As key risks such as interest rate risk and rewards of the acceptance had been transferred
to relevant banks, the Company ceased to recognise the discounted acceptance not yet due. Pursuant to discount
agreements, the banks were entitled to require the Company to settle any balance of such acceptance if not accepted
when due, and the Company therefore had on-going involvement with them. As at 31 December 2015, discounted
bank acceptance not yet due amounted to RMB1,296,249,121.66 (31 December 2014: RMB1,320,918,334.62).
XI. Fair value
1. Fair value of assets and liabilities measured at fair value as at the end of the period
Unit: RMB
Fair value as at the end of the period
Item Level 1 Level 2 Level 3 Total
I. Continuous measurement
at fair value — — — —
1. Consumable biological assets 1,509,964,711.87 1,509,964,711.87
Total assets continuously
measured at fair value 1,509,964,711.87 1,509,964,711.87
II. Non-continuous measurement
at fair value — — — —
2. Level 3 continuous and non-continuous measurement, valuation techniques and qualification and
quantification of key inputs
The Company adopts the income method in determining the fair value of its consumable biological assets. Under
the income method, the valuation is arrived at based on the aggregate expected future profit estimates from forest
resources discounted to their present values at an applicable rate which is usually equivalent to yield prevailing in the
forestry industry.
Key inputs of the method includes expected annual income and discount rate.
Expected annual profit = expected annual income - expected total input
Expected annual income = expected output x expected sales price
Expected output = based on normal output of the Company’s logging
Expected sales price = normal sales price of the Company in 2015
Expected total input is based on total historic input of saplings growing of the Company up to logging.
Discount rate is 10.83%, based on the yield prevailing in the industry.
226
XII Financial Report
XI. Fair value (Cont’d)
3. Level 3 continuous measurement, adjustment between opening and closing value and sensitivity of
unobservable inputs
Opening carrying amount 1,407,588,229.46
Sapling increase during the year 176,026,063.51
Sales decrease during the year 54,571,043.08
Change in fair value through profit or loss for the year -19,078,538.02
Closing carrying amount 1,509,964,711.87
The Company adopts sensitivity analysis techniques to analyse the possible effects of rational and probable changes
in risk variables to profit or loss for the period or to the interests of shareholders. Since risk variables seldom change
on a stand-alone basis, while the correlation between variables may have significant influence to the ultimate amount
of change effected by the change in a single risk variable, the analysis below is based on the assumption that the
changes in each variable occurred separately.
For the year For the prior year
Change in Impact on Impact on
Item discount rate Impact on profit shareholders’ equity Impact on profit shareholders’ equity
Consumable biological assets Increase of -41,987,625.64 -41,987,625.64 -35,404,804.28 -35,404,804.28
1 percentage point
Consumable biological assets Decrease of 45,237,516.15 45,237,516.15 37,847,549.58 37,847,549.58
1 percentage point
Consumable biological assets 1% increase in price 16,198,936.84 16,198,936.84 16,524,599.37 16,524,599.37
Consumable biological assets 1% decrease in price -16,198,936.88 -16,198,936.88 -16,570,068.38 -16,570,068.38
4. Fair value of financial assets and financial liabilities not measured at fair value
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 payable 8,379,146,590.85 8,400,000,000.00 8,361,899,667.65 8,400,000,000.00
Level 1 1
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.
As at 31 December 2015, the Company had no financial instruments measured at fair value (31 December 2014:
Nil).
227
XII Financial Report
XII. Related parties and related party transactions
1. Parent company of the Company
Shareholding Voting right
of the parent of the parent
Place of Registered company in company in
Name of parent company incorporation Business nature capital the Company the Company
Shouguang Chenming Shouguang City Investment in 1,685,420,000 18.84% 18.84%
Holdings Co., Ltd. manufacture of paper,
electricity, steam,
arboriculture
The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office. As
of the date of this report, the largest shareholder of the Company, Shouguang Chenming Holdings Co., Ltd. increased
its shareholding in the Company to 20.35%.
2. Subsidiaries of the Company
Please refer to Note IX. 1. Interest in subsidiaries for details.
3. Joint ventures and associates of the Company
Please refer to Note IX. 3. Interest in joint arrangements or associates for details.
Balance of related party transaction between the Company and its joint ventures or associates during the period or
prior periods are as follows:
Name of joint ventures or associates Relation
Wuhan Chenming Wan Xing Real Estate Co., Ltd. An associate of the Company
Jiangxi Jiangbao Media Colour Printing Co. Ltd. An associate of the Company
Arjo Wiggins Chenming Specialty Paper Co., Ltd. An associate of the Company
Shouguang Chenming Huisen New-style
Construction Materials Co., Ltd. A joint venture of the Company
228
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
4. Other related parties
Name of other related parties Relation
Jiangxi Chenming Natural Gas Co., Ltd. A company invested by the senior management
of the Company
Anhui Time Source Corporation A subsidiary
Shouguang Hengtai Enterprise Investment A company invested by the senior management
Company Limited of the Company
Qingdao Chenming Nonghai Investment Co., Ltd. A subsidiary of Shouguang Hengtai Enterprise
Investment Company Limited
5. Related party transactions
(1) Purchase and sales of goods and rendering and receiving services
Table on purchase of goods and receiving of services
Unit: RMB
Whether the
Details of related Amounts Transaction transaction facility Amounts during
Related party party transaction during the period facility approved is exceeded the prior period
Jiangxi Chenming Natural Gas Procurement
Co., Ltd. of natural gas 123,255,310.36 320,000,000.00 No
Table on sales of goods and provision of services
Unit: RMB
Details of related Amounts Amount for
Related party party transactions during the period the prior period
Jiangxi Jiangbao Media
Colour Printing Co. Ltd. Sales of paper 1,512,721.99 524,885.20
Anhui Time Source Corporation Sales of paper 348,929,757.23 291,246,150.84
229
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee
The Company as guarantor
Unit: RMB
Whether
performance
Amounts Starting Expiry of guarantee
Party being guaranteed under guarantee date of guarantee date of guarantee is completed
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 40,000,000.00 29 September 2015 23 September 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 100,000,000.00 7 December 2015 7 December 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 75,000,000.00 10 July 2015 5 January 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 50,000,000.00 16 July 2015 12 January 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 90,000,000.00 30 July 2015 29 July 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 75,000,000.00 5 August 2015 4 July 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 85,000,000.00 26 October 2015 25 October 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 100,000,000.00 30 November 2015 29 November 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 100,000,000.00 30 November 2015 29 November 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 100,000,000.00 23 August 2015 22 August 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 100,000,000.00 3 July 2015 3 July 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 20,000,000.00 23 July 2015 22 July 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 82,000,000.00 3 June 2015 21 May 2020 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 100,000,000.00 29 June 2015 28 June 2017 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 72,000,000.00 27 November 2015 26 November 2017 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 64,936,000.00 16 June 2014 15 June 2016 No
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 92,209,120.00 5 June 2015 21 May 2020 No
230
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
Whether
performance
Amounts Starting Expiry of guarantee
Party being guaranteed under guarantee date of guarantee date of guarantee is completed
Zhanjiang Chenming
Pulp & Paper Co., Ltd. 62,987,920.00 29 June 2015 28 June 2017 No
Shandong Chenming Financial
Leasing Co., Ltd. 519,488,000.00 16 October 2014 26 August 2016 No
Shandong Chenming Financial
Leasing Co., Ltd. 130,430,449.60 28 November 2014 27 November 2017 No
Shandong Chenming Financial
Leasing Co., Ltd. 475,378,400.00 25 May 2015 26 March 2018 No
Shandong Chenming Financial
Leasing Co., Ltd. 118,418,888.00 30 November 2015 10 November 2018 No
Shandong Chenming Financial
Leasing Co., Ltd. 289,653,200.00 30 November 2015 2 November 2017 No
Shandong Chenming Financial
Leasing Co., Ltd. 567,615,297.72 21 December 2015 16 December 2018 No
Huanggang Chenming
Arboriculture Co., Ltd. 15,000,000.00 20 April 2015 20 April 2016 No
Huanggang Chenming
Arboriculture Co., Ltd. 30,000,000.00 26 August 2015 26 August 2016 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 20,000,000.00 17 August 2015 26 June 2017 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 20,000,000.00 17 August 2015 26 December 2017 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 15,000,000.00 17 August 2015 26 March 2018 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 5,000,000.00 14 December 2015 26 March 2018 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 20,000,000.00 14 December 2015 26 June 2018 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 30,000,000.00 14 December 2015 26 September 2018 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 30,000,000.00 14 December 2015 26 December 2018 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 40,000,000.00 14 December 2015 26 March 2019 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 45,455,200.00 7 August 2015 26 June 2017 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 45,455,200.00 7 August 2015 26 December 2017 No
231
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
Whether
performance
Amounts Starting Expiry of guarantee
Party being guaranteed under guarantee date of guarantee date of guarantee is completed
Huanggang Chenming
Pulp & Paper Co., Ltd. 32,468,000.00 7 August 2015 26 March 2018 No
Huanggang Chenming
Pulp & Paper Co., Ltd. 100,000,000.00 30 December 2015 29 December 2018 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 6 January 2015 5 January 2016 No
Jiangxi Chenming Paper Co., Ltd. 200,000,000.00 19 January 2015 19 January 2016 No
Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 29 October 2015 29 October 2016 No
Jiangxi Chenming Paper Co., Ltd. 50,000,000.00 4 November 2015 4 November 2016 No
Jiangxi Chenming Paper Co., Ltd. 3,092,543.67 26 November 2015 25 May 2016 No
Jiangxi Chenming Paper Co., Ltd. 20,389,904.00 21 September 2015 18 March 2016 No
Jiangxi Chenming Paper Co., Ltd. 4,545,520.00 16 October 2015 25 May 2016 No
Jiangxi Chenming Paper Co., Ltd. 33,702,306.35 29 October 2015 26 April 2016 No
Jiangxi Chenming Paper Co., Ltd. 18,868,968.01 27 November 2015 25 May 2016 No
Shouguang Meilun Paper Co., Ltd. 113,662,704.99 22 July 2015 18 January 2016 No
Shouguang Meilun Paper Co., Ltd. 200,000,000.00 4 August 2015 29 January 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 452,975,498.70 16 November 2015 13 May 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 499,848,266.34 11 December 2015 7 June 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 500,380,087.53 18 December 2015 14 June 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 250,000,000.00 22 September 2015 21 March 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 228,081,117.46 6 July 2015 4 January 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 104,329,247.51 18 August 2015 14 February 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 219,047,987.67 7 September 2015 29 February 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 148,084,998.36 17 September 2015 15 March 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 174,184,825.23 13 November 2015 11 May 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 254,042,551.00 20 November 2015 18 May 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 208,893,365.10 6 November 2015 4 May 2016 No
Shandong Chenming Paper
Sales Co., Ltd. 121,276,637.12 13 November 2015 11 May 2016 No
232
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(2) Guarantee (Cont’d)
Whether
performance
Amounts Starting Expiry of guarantee
Party being guaranteed under guarantee date of guarantee date of guarantee is completed
Chenming (HK) Limited 233,444,920.00 2 April 2014 26 February 2016 No
Chenming (HK) Limited 181,820,800.00 1 August 2015 4 January 2016 No
Chenming (HK) Limited 91,494,824.00 10 February 2015 5 February 2016 No
Chenming (HK) Limited 102,598,880.00 26 March 2015 18 March 2016 No
Chenming (HK) Limited 238,315,120.00 7 May 2015 28 April 2016 No
Chenming (HK) Limited 238,315,120.00 23 July 2015 14 April 2016 No
Chenming (HK) Limited 214,288,800.00 8 July 2015 29 June 2016 No
Chenming (HK) Limited 188,314,400.00 12 August 2015 30 June 2016 No
Chenming (HK) Limited 236,302,104.00 22 October 2015 15 August 2016 No
Chenming (HK) Limited 189,028,696.00 28 August 2015 19 August 2016 No
Chenming (HK) Limited 188,309,205.12 9 October 2015 26 September 2016 No
Chenming (HK) Limited 189,028,696.00 22 October 2015 13 October 2016 No
Chenming (HK) Limited 190,911,840.00 11 November 2015 21 October 2016 No
Chenming (HK) Limited 190,197,544.00 18 November 2015 4 November 2016 No
Chenming (HK) Limited 91,754,568.00 19 November 2015 7 November 2016 No
Chenming (HK) Limited 229,224,080.00 11 December 2015 2 December 2016 No
Chenming (HK) Limited 45,455,200.00 11 December 2015 1 December 2016 No
Chenming (HK) Limited 192,279,926.00 10 March 2015 19 February 2016 No
Chenming (HK) Limited 104,476,823.28 27 April 2015 7 April 2016 No
Chenming (HK) Limited 185,468,533.76 29 December 2015 15 December 2016 No
233
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(3) Related parties loans
Unit: RMB
Related party Loan amount Starting date Expiry date Explanation
Loan to
Shouguang Chenming Huisen
New-style Construction
Materials Co., Ltd. 2,200,000.00 19 April 2015 19 April 2018 Borrowings
Wuhan Chenming Wan Xing 283,797,544.91 5 January 2014 5 January 2017 Expenditure for real estate
Real Estate Co., Ltd. development to be undertaken by
the Company under agreement
(4) Distribution band of remuneration of key management staff
Distribution band of remuneration of key management staff
Amounts Amounts
Band of annual remuneration during the year during the prior year
Total RMB20.6861 million RMB22.8378 million
Of which: (number of staff in each band of amount)
RMB4.80-5.20 million 1 1
RMB3.60-4.00 million
RMB3.20-3.60 million 1
RMB2.80-3.20 million 1 1
RMB2.40-2.80 million
RMB2.00-2.40 million 1
RMB1.60-2.00 million 3 1
RMB1.20-1.60 million 1 2
RMB0.80-1.20 million 1 4
Below RMB0.80 million 16 15
234
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(4) Distribution band of remuneration of key management staff (Cont’d)
Breakdown of remuneration of key management staff
Amounts during the year
Basic annual Social welfare Payments of
Key management staff remuneration contribution housing funds Total
Zhang Zhiyuan 5.00 5.00
Wang Aiguo 5.00 5.00
Zhang Hong 5.00 5.00
Pan Ailing 5.00 5.00
Sub-total of Independent
Non-executive Directors 20.00 20.00
Yang Guihua 5.00 5.00
Wang Xiaoqun 5.00 5.00
Sub-total of
Non-executive Directors 10.00 10.00
Chen Hongguo 493.97 4.24 1.79 500.00
Yin Tongyuan 293.97 4.24 1.79 300.00
Li Feng 70.67 4.24 1.79 76.70
Geng Guanglin 140.98 4.24 1.79 147.01
Hou Huancai 28.14 4.24 1.79 34.17
Zhou Shaohua 161.75 6.03 2.03 169.81
Sub-total of
Executive Directors 1,189.48 27.23 10.98 1,227.69
Gao Junjie 24.35 4.24 1.79 30.38
Wang Ju 0.43 0.50 0.25 1.18
Yang Hongqin 15.83 2.38 1.01 19.22
Yin Qixiang 2.50 2.50
Guo Guangyao 2.50 2.50
Total of Supervisors 45.61 7.12 3.05 55.78
Sub-total of other
senior management 737.05 12.72 5.37 755.14
Total 2,002.14 47.07 19.40 2,068.61
(Cont’d)
235
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(4) Distribution band of remuneration of key management staff (Cont’d)
Breakdown of remuneration of key management staff (Cont’d)
Amounts during the prior year
Basic annual Social welfare Payments of
Key management staff remuneration contribution housing funds Total
Zhang Zhiyuan 5.00 5.00
Wang Aiguo 5.00 5.00
Zhang Hong 5.00 5.00
Pan Ailing 5.00 5.00
Sub-total of Independent
Non-executive Directors 20.00 20.00
Cui Youping 1.67 1.67
Yang Guihua 3.33 3.33
Wang Xiaoqun 5.00 5.00
Sub-total of
Non-executive Directors 10.00 10.00
Chen Hongguo 494.57 3.82 1.61 500.00
Yin Tongyuan 294.57 3.82 1.61 300.00
Li Feng 112.31 3.82 1.61 117.74
Geng Guanglin 133.58 3.82 1.61 139.01
Hou Huancai 48.89 3.82 1.61 54.32
Zhou Shaohua 105.99 1.62 1.64 109.25
Sub-total of
Executive Directors 1,189.91 20.72 9.69 1,220.32
Gao Junjie 32.41 3.82 1.61 37.84
Wang Ju 4.99 2.58 1.09 8.66
Yang Hongqin 15.42 2.42 1.02 18.86
Yin Qixiang 2.50 2.50
Guo Guangyao 2.50 2.50
Total of Supervisors 57.82 8.82 3.72 70.36
Sub-total of other
senior management 942.31 14.62 6.17 963.10
Total 2,220.04 44.16 19.58 2,283.78
236
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
5. Related party transactions (Cont’d)
(4) Distribution band of remuneration of key management staff (Cont’d)
The five highest paid individuals of the Company during the year comprised of 3 directors and 2 other
senior management of the Company. The remuneration band of the 2 senior management were RMB2.00-
2.40 million and RMB1.60-2.00 million, respectively.
A. Remuneration of the five highest paid individuals
Amounts Amounts during
during the year the prior year
Item (RMB’0,000) (RMB’0,000)
Basic annual remuneration 1,313.16 1,442.83
Provident fund 9.19 4.83
Social welfare contribution 22.99 11.46
Total 1,345.34 1,459.12
B. Distribution band of remuneration of the five highest paid individuals
Number of Number of
individuals individuals during
Band of annual remuneration during the year the prior year
RMB4.80-5.20 million 1 1
RMB3.20-3.60 million 1
RMB2.80-3.20 million 1 1
RMB2.40-2.80 million
RMB2.00-2.40 million 1
RMB1.60-2.00 million 2 1
RMB1.20-1.60 million 1
During the year, no other emoluments were paid by the Company to the directors of the Company and the
five highest paid individuals as an inducement to join or upon joining the Company or as compensation for
loss of office. None of the directors waived any emoluments during the year.
237
XII Financial Report
XII. Related parties and related party transactions (Cont’d)
6. Related party accounts receivable and accounts payable
(1) Accounts receivables
Unit: RMB
Closing balance Opening balance
Bad Bad
Item Related party Book balance debt provision Book balance debt provision
Accounts receivable Anhui Time Source 89,493,535.25 4,474,676.76 53,968,115.20 2,698,405.76
Corporation
Jiangxi Jiangbao Media 1,393,760.56 69,688.03
Colour Printing Co. Ltd.
Prepayments Jiangxi Chenming 8,900,712.18
Natural Gas Co., Ltd.
Other receivables Arjo Wiggins 1,290,901.12 1,290,901.12 1,290,901.12 1,290,901.12
Chenming Specialty
Paper Co., Ltd.
Wuhan Chenming 1,310,041,477.38 959,825,877.41
Wan Xing Real
Estate Co., Ltd.
Qingdao Chenming 21,000,000.00 1,050,000.00
Nonghai Investment
Co., Ltd.
Shouguang Chenming 2,200,000.00 110,000.00
Huisen New-style
Construction Materials
Co., Ltd.
(2) Accounts payable
Unit: RMB
Closing Opening
Item Related party book balance book balance
Other payables Shouguang Hengtai Enterprise 37,230,586.11 23,572,279.17
Investment Company Limited
Shouguang Chenming Holdings Co., Ltd. 209,980,923.16
238
XII Financial Report
XIII. Undertaking and contingency
1. Significant commitments
Significant commitments as at the balance sheet date
(1) Capital commitment
Item Closing balance Opening balance
Contracted but not yet recognised in the financial statements
Commitments in relation to acquisition and construction
of long-term assets 5,914,302,136.38 1,862,762,913.64
Huirui BT Project 2,500,000,000.00 3,000,000,000.00
Total 8,414,302,136.38 4,862,762,913.64
(2) Operating lease commitments
As at the balance sheet date, the Company entered into irrevocable operating lease contracts with external
companies as follows:
Item Closing balance Opening balance
Minimum lease payments under irrevocable operating leases:
The first year after balance sheet date 25,657,919.75 16,835,729.16
The second year after balance sheet date 14,982,757.03 14,161,003.48
The third year after balance sheet date 15,251,731.80 14,443,483.94
In the years thereafter 557,568,931.29 560,010,105.37
Total 613,461,339.87 605,450,321.95
2. Contingency
(1) Significant contingencies as at balance sheet date
As of 31 December 2015, there was no significant contingency that required to be disclosed by the Company.
(2) In case there was no significant contingency that required to be disclosed by the Company, please specify
There was no significant contingency that required to be disclosed by the Company.
XIV. Post-balance sheet date events
1. Issuance of preference shares
According to the approval at the 2015 first extraordinary general meeting of the Company and the Approval of
the Non-Public Issuance of Preference Shares of Shandong Chenming Paper Holdings Limited (Zheng Jian Xu Ke
[2015] No. 2130) from the China Securities Regulatory Commission, the first tranche under the non-public issuance
of 45.00 million preference shares of the Company shall be not less than 22.50 million shares. On 16 March 2016,
22.50 million perference shares were issued at the issue price of RMB100 per share with an aggregate face value of
RMB2,250.0000 million. On 17 March 2016, the Company received the proceeds from the issuance of preference
shares of RMB2,238.7500 million net of issuance expenses such as underwriting fees and sponsor fees amounting to
RMB11.2500 million.
2. Profit distribution
On 30 March 2016, the seventh session of the Board of the Company convened the thirteenth meeting and approved
the 2015 profit distribution plan to pay a cash dividend of RMB0.3 per share, subject to approval at a general meeting
pursuant to the articles of association of the Company.
239
XII Financial Report
XV. Other material matters
1. Segment information
(1) Basis for determination and accounting policies
The Company determined the reporting segments and disclosed the segments information according to the
requirements of Accounting Standards for Business Enterprises Interpretation No.3 in 2015, and the Company
no longer adopted the requirements of Accounting Standards for Business Enterprises No.35 – Segment
Reporting 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 are categorised into 4 reporting segments,
such categorisation is based on the categories of primary products. The management of the Group evaluates
the financial results of such reporting segments on a regular basis, in order to allocate the resources and
evaluate their results. The primary products or services provided by each reporting segment of the Company
include machine-made paper, construction materials, financial services and others.
The information from the reporting segments is disclosed in accordance with the accounting policies and
measurement standards adopted by each of the reporting segment when reporting to the management, which
are consistent with the accounting policies and measurement standards adopted in the preparation of the
financial statements.
(2) Segment revenue
Amounts unit: RMB’0,000
Item Machine-made paper Construction materials Financial services
Item The year Prior year The year Prior year The year Prior year
Revenue from
external transactions 1,807,299.76 1,848,890.51 22,326.63 22,532.24 130,515.20 15,872.50
Revenue from inter-segment
transactions 2.38 2,525.66 19,400.51 5,860.77
Total segment revenue 1,807,299.76 1,848,890.51 22,329.01 25,057.90 149,915.71 21,733.27
Operating costs 1,555,505.27 1,630,008.13 20,117.45 22,056.91 59,737.21 10,115.44
Segment operating profit 251,794.49 218,882.38 2,211.56 3,000.99 90,178.50 11,617.83
(Cont’d)
240
XII Financial Report
XV. Other material matters (Cont’d)
1. Segment information (Cont’d)
(2) Segment revenue (Cont’d)
Amounts unit: RMB’0,000
Others Elimination among each segment Total
Item The year Prior year The year Prior year The year Prior year
Revenue from external
transactions 64,049.02 22,872.46 2,024,190.61 1,910,167.71
Revenue from inter-segment
transactions 90,335.67 105,465.77 109,738.56 113,852.20 0.00
Total segment revenue 154,384.69 128,338.23 109,738.56 113,852.20 2,024,190.61 1,910,167.71
Operating costs 121,359.80 124,780.31 109,738.56 113,852.20 1,646,981.17 1,673,108.59
Segment operating profit 33,024.89 3,557.92 377,209.44 237,059.12
Reconciliation items
General and administrative
expenses 52,080.98 53,053.87
Finance expenses 191,075.26 135,493.66
Profit or loss from change
in fair value 1,907.85 -685.68
Investment income -8,871.55 -6,903.56
Total profit 141,016.90 56,100.83
Income tax 43,223.74 10,769.94
Net profit 97,793.16 45,330.89
(3) Segment assets and liabilities
Amounts unit: RMB’0,000
Machine-made paper Construction materials Financial services
Item
Segment assets 7,146,088.61 5,347,923.04 41,187.61 32,786.34 2,834,786.49 697,897.44
Segment liabilities 6,298,368.77 4,401,098.35 22,294.88 14,567.35 2,071,176.12 318,817.73
(Cont’d)
Amounts unit: RMB’0,000
Others Elimination among each segment Total
Item The year Prior year The year Prior year The year Prior year
Segment assets 427,353.86 403,957.60 2,653,246.62 800,361.76 7,796,169.95 5,682,202.65
Segment liabilities 331,684.16 313,274.16 2,653,246.62 800,361.76 6,070,277.31 4,247,395.83
241
XII Financial Report
XVI. Notes to major financial statement items of the parent company
1. Accounts receivable
(1) Accounts receivable by category
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision Carrying amount
Category Amounts Percentage Amounts Percentage Carrying amount Amounts Percentage Amounts Percentage
Accounts receivable that are provided
for bad debts on portfol o basis
based on credit risk features 2,059,434,721.08 100.00% 4,766,013.61 0.23% 2,054,668,707.47 3,507,799,132.77 100.00% 3,979,959.83 0.11% 3,503,819,172.94
Total 2,059,434,721.08 100.00% 4,766,013.61 0.23% 2,054,668,707.47 3,507,799,132.77 100.00% 3,979,959.83 0.11% 3,503,819,172.94
(2) Presentation of accounts receivable according to ageing analysis
Closing balance Opening balance
Item Amounts Percentage (%) Amounts Percentage (%)
Within 1 year 2,055,526,430.68 99.81 3,495,979,313.49 99.66
1 to 2 years 7,904,239.12 0.23
2 to 3 years
Over 3 years 3,908,290.40 0.19 3,915,580.16 0.11
Total 2,059,434,721.08 100.00 3,507,799,132.77 100.00
Accounts receivable that are individually significant and are provided for bad debt separately as at the end of
the period:
Applicable √ Not applicable
Accounts receivable using ageing analysis for making bad debt provision in the portfolio:
√ Applicable Not applicable
Unit: RMB
Closing balance
Accounts Provision for
Ageing receivable bad debts Ratio
Items under within 1 year
Within 1 year 17,154,464.15 857,723.21 5.00%
Sub-total of within 1 year 17,154,464.15 857,723.21 5.00%
Over 3 years 3,908,290.40 3,908,290.40 100.00%
Total 21,062,754.55 4,766,013.61 22.63%
Accounts receivable using percentage of amount outstanding for making bad debt provision in the portfolio:
Applicable √ Not applicable
242
XII Financial Report
XVI. Notes to major financial statement items of the parent company (Cont’d)
1. Accounts receivable (Cont’d)
(3) Bad debt provision made, recovered or reversed during the reporting period
The amount of bad debt provision made for the current period amounted to RMB786,053.78. The amount of
bad debt provision recovered or reversed during the current period was RMB0.00.
(4) There has been no accounts receivable written off during the reporting period.
(5) Top five accounts receivable based on closing balance by debtor
Nature of
accounts Outstanding Bad debt
Name of entity receivable balance Percentage (%) provision
Shouguang Meilun Paper Co., Ltd. Payment for goods 1,542,408,081.96 74.89
Shouguang Chenming
Art Paper Co., Ltd. Payment for goods 322,492,574.30 15.66
Chenming GmbH Payment for goods 81,673,060.32 3.97
Chenming (HK) Limited Payment for goods 36,356,382.29 1.77
Chenming International Co., Ltd. Payment for goods 29,908,785.03 1.45
Total 2,012,838,883.90 97.74
Note: During the year, top five accounts receivable of the Company based on closing balance by debtor were all due from related
partiers within the scope of consolidation.
2. Other receivables
(1) Other receivables by category
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amounts Percentage Amounts Percentage Carrying amount Amounts Percentage Amounts Percentage Carrying amount
Other receivables that are i div dual y
signif cant and are provided
for bad debts separately 8,686,748.70 0.04% 8,686,748.70 100.00% 8,755,053.51 0.09% 8,755,053.51 100.00%
Other receivables that are provided
for bad debts on portfol o basis
based on credit risk features 23,209,997,904.45 99.92% 41,398,628.05 0.18% 23,168,599,276.40 9,344,901,892.47 99.78% 31,920,619.31 0.34% 9,312,981,273.16
Other receivables that are i div dual y
i signif cant but are provided
for bad debts separately 10,514,189.79 0.05% 10,514,189.79 100.00% 12,150,098.81 0.13% 12,150,098.81 100.00%
Total 23,229,198,842.94 100.00% 60,599,566.54 0.26% 23,168,599,276.40 9,365,807,044.79 100.00% 52,825,771.63 0.56% 9,312,981,273.16
243
XII Financial Report
XVI. Notes to major financial statement items of the parent company (Cont’d)
2. Other receivables (Cont’d)
(2) Presentation of other receivables according to ageing analysis (Cont’d)
Closing balance Opening balance
Item Amounts Percentage (%) Amounts Percentage (%)
Within 1 year 22,140,971,799.69 95.32 8,869,930,319.01 94.71
1 to 2 years 1,016,626,362.97 4.38 441,932,482.93 4.72
2 to 3 years 17,100,940.15 0.07 4,383,728.11 0.04
Over 3 years 54,499,740.13 0.23 49,560,514.74 0.53
Total 23,229,198,842.94 100.00 9,365,807,044.79 100.00
Note: As at the end of the period, prepayments of over 2 years amounting to RMB58,184,208.13 were reclassified as other receivables
due to cessation of being prepayable.
Other receivables that are individually significant and are provided for bad debts separately as at the end of the
period:
√ Applicable Not applicable
Unit: RMB
Closing balance
Other receivables (by unit) Other receivables Bad debt provision Provision percentage Reasons for provision
Open credit 8,686,748.70 8,686,748.70 100.00% Open credit of over three years and are
unlikely to be recovered
Total 8,686,748.70 8,686,748.70 — —
Other receivables using ageing analysis for making bad debt provision in the portfolio:
√ Applicable Not applicable
Unit: RMB
Closing balance
Age Other receivables Bad debt provision Provision percentage
Items under within 1 year
Within 1 year 35,166,448.10 1,758,322.41 5.00%
Sub-total of within 1 year 35,166,448.10 1,758,322.41 5.00%
1 to 2 years 9,611,362.97 961,136.30 10.00%
2 to 3 years 16,901,838.52 3,380,367.70 20.00%
Over 3 years 35,298,801.64 35,298,801.64 100.00%
Total 96,978,451.23 41,398,628.05 42.69%
244
XII Financial Report
XVI. Notes to major financial statement items of the parent company (Cont’d)
2. Other receivables (Cont’d)
(2) Presentation of other receivables according to ageing analysis (Cont’d)
Other receivables using percentage of balance for making bad debt provision in the portfolio:
Applicable √ Not applicable
Other receivables that are individually insignificant but are provided for bad debts separately as at the end of
the year
Bad debt
Other receivables Book balance provision Percentage (%) Reasons for provision
Open credit 10,514,189.79 10,514,189.79 100.00 Open credit of over three years and are unlikely to be
recovered
Total 10,514,189.79 10,514,189.79 100.00
(3) Bad debt provision made, recovered or reversed during the reporting period
The amount of bad debt provision made for the current period amounted to RMB9,478,008.74. The amount of
bad debt provision recovered or reversed during the current period was RMB1,704,213.83.
(4) There were no other receivables written off during the reporting period.
(5) Other receivables by nature
Unit: RMB
Closing book Opening book
Nature balance balance
Open credit 23,140,656,481.38 9,281,801,884.62
Transfer from prepayments of over 2 years 58,184,208.13 43,702,281.34
Litigation fee 15,897,356.61 16,227,195.35
Others 4,921,066.16 8,027,052.53
Customs duty 4,643,201.73 10,140,824.70
Borrowings 3,867,928.93 4,909,206.25
Deposits 1,028,600.00 998,600.00
Total 23,229,198,842.94 9,365,807,044.79
245
XII Financial Report
XVI. Notes to major financial statement items of the parent company (Cont’d)
2. Other receivables (Cont’d)
(6) Top five other receivables based on closing balance by debtor
Unit: RMB
Percentage of total Closing balance
closing balance of of bad
Name of entity Nature Closing balance Ageing other receivables debt provision
Shouguang Meilun Paper Co., Ltd. Open credit 17,152,461,417.45 73.84%
Zhanjiang Chenming Pulp & Paper
Co., Ltd. Open credit 1,753,863,561.70 7.55%
Zhanjiang Meilun Pulp & Paper
Co., Ltd. Open credit 1,007,015,000.00 4.34%
Jiangxi Chenming Paper Co., Ltd. Open credit 756,918,874.66 3.26%
Haicheng Haiming Mining Co., Ltd. Open credit 354,860,864.95 1.52%
Total — 21,025,119,718.76 — 90.51%
3. Long-term equity investments
Unit: RMB
Closing balance Opening balance
Impairment Impairment
Item Book balance provision Book value Book balance provision Book value
Interest in subsidiaries 13,469,415,957.45 13,469,415,957.45 12,363,272,557.45 12,363,272,557.45
Interest in associates
and joint ventures 57,537,749.04 57,537,749.04 7,662,574.57 7,662,574.57
Total 13,526,953,706.49 13,526,953,706.49 12,370,935,132.02 12,370,935,132.02
246
XII Financial Report
XVI. Notes to major financial statement items of the parent company (Cont’d)
3. Long-term equity investments (Cont’d)
(1) Interest in subsidiaries
Unit: RMB
Opening Increase for Decrease for Closing Impairment provision Closing balance of
Investee balance the period the period balance for the period impairment provision
Shandong Chenming Power Supply
Holdings Co., Ltd. 157,810,117.43 157,810,117.43
Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. 202,824,716.34 202,824,716.34
Hailaer Chenming Paper Co., Ltd. 12,000,000.00 12,000,000.00
Jiangxi Chenming Paper Co., Ltd. 822,867,646.40 822,867,646.40
Shandong Grand View Hotel
Co., Ltd. 80,500,000.00 80,500,000.00
Jilin Chenming Paper Co., Ltd. 1,501,350,000.00 1,501,350,000.00
Zhanjiang Chenming Pulp & Paper
Co., Ltd. 3,000,000,000.00 3,000,000,000.00
Chenming (HK) Limited 183,472,902.00 183,472,902.00
Shouguang Chenming
Modern Logistic Co., Ltd. 10,000,000.00 10,000,000.00
Fuyu Chenming Paper Co., Ltd. 208,000,000.00 208,000,000.00
Shouguang Chenming Art Paper
Co., Ltd. 113,616,063.80 113,616,063.80
Huanggang Chenming Arboriculture
Co., Ltd. 70,000,000.00 70,000,000.00
Huanggang Chenming Pulp & Paper
Co., Ltd. 200,000,000.00 1,000,000,000.00 1,200,000,000.00
247
XII Financial Report
XVI. Notes to major financial statement items of the parent company (Cont’d)
3. Long-term equity investments (Cont’d)
(1) Interest in subsidiaries (Cont’d)
Opening Increase for Decrease for Closing Impairment provision Closing balance of
Investee balance the period the period balance for the period impairment provision
Shouguang Meilun Paper Co., Ltd. 4,646,349,570.28 4,646,349,570.28
Chenming International Co., Ltd. 19,861,955.00 19,861,955.00
Shouguang Shun Da
Customs Declaration Co, Ltd. 1,500,000.00 1,500,000.00
Shandong Chenming Paper
Sales Co., Ltd. 100,000,000.00 100,000,000.00
Shouguang Chenming Import
and Export Trade Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Jiatai Property
Management Co., Ltd. 1,000,000.00 1,000,000.00
Shouguang Chenming Papermaking
Machine Co., Ltd. 2,000,000.00 2,000,000.00
Shouguang Chenming Industrial
Logistics Co., Ltd. 10,000,000.00 10,000,000.00
Shouguang Chenming Hongxin
Packaging Co., Ltd. 1,000,000.00 1,000,000.00
Japan Chenming Paper Co., Ltd. 9,306,351.20 9,306,351.20
Haicheng Haiming Mining Co., Ltd. 144,000,000.00 144,000,000.00
Chenming GmbH 4,083,235.00 4,083,235.00
Shouguang Hongxiang Printing
and Packaging Co., Ltd. 2,730,000.00 2,730,000.00
Shandong Chenming Paper Group
(Fuyu) Sales Co., Ltd. 1,000,000.00 1,000,000.00
Shandong Chenming Group
MFinance Co., Ltd. 800,000,000.00 800,000,000.00
Chenming Arboriculture Co., Ltd. 45,000,000.00 45,000,000.00
Qingdao Chenming International
Logistics Co., Ltd. 3,000,000.00 3,000,000.00
Jinan Chenming Investment
Management Co., Ltd. 100,000,000.00 100,000,000.00
Chenming Paper Korea Co., Ltd. 6,143,400.00 6,143,400.00
Total 12,363,272,557.45 1,106,143,400.00 13,469,415,957.45
248
XII Financial Report
XVI. Notes to major financial statement items of the parent company (Cont’d)
3. Long-term equity investments (Cont’d)
(2) Interest in associates and joint ventures
Unit: RMB
Change for the period
Investment
gainor l ss Adjustment of
recognised other Distribution of Closing balance
Opening Addit onal Withdrawn under equity comprehensive Other change cash div dend Impairment Closing of i pairment
Investee balance contribution contribution method i come i i terest or profit declared provis on Others balance provis on
I. Joint venture
Shouguang Chenming Huisen
New-style Construction
Materia s Co., Ltd. 2,999,787.98 -22,970.47 2,976,817.51
Sub-total 2,999,787.98 -22,970.47 2,976,817.51
II. Associates
Arjo Wiggins Chenming Specia ty
Paper Co., Ltd.
Jiangxi Jiangbao Media
Colour Printing Co. Ltd. 4,662,786.59 -445,096.34 4,217,690.25
Shanghai Zhongneng Enterprise
Development (Group) Co., Ltd. 300,000,000.00 300,000,000.00
Zhuhai Dechen New Third Board
Equity Investment Fund
Company (Lim ted Partnership) 50,000,000.00 343,241.28 50,343,241.28
Sub-total 4,662,786.59 350,000,000.00 300,000,000.00 -101,855.06 54,560,931.53
Total 7,662,574.57 350,000,000.00 300,000,000.00 -124,825.53 57,537,749.04
249
XII Financial Report
XVI. Notes to major financial statement items of the parent company (Cont’d)
4. Revenue and operating costs
(1) Revenue and operating costs
Unit: RMB
Amounts during the period Amounts during the prior period
Item Revenue Costs Revenue Costs
Principal activities 6,432,663,278.11 5,198,230,774.68 6,988,901,803.37 5,462,982,348.69
Other activities 842,762,370.15 794,863,723.84 1,594,066,256.29 1,549,506,687.75
Total 7,275,425,648.26 5,993,094,498.52 8,582,968,059.66 7,012,489,036.44
(2) Principal activities (by industry)
Amounts during the year Amounts during the prior year
Industry Revenue Operating costs Revenue Operating costs
Machine-made paper 6,254,209,430.04 5,078,759,596.33 6,035,746,457.60 4,827,440,373.01
Electricity and steam 178,453,848.07 119,471,178.35 953,155,345.77 635,541,975.68
Total 6,432,663,278.11 5,198,230,774.68 6,988,901,803.37 5,462,982,348.69
(3) Principal activities (by geographical areas of machine-made paper)
Amounts during the year Amounts during the prior year
Region Revenue Operating costs Revenue Operating costs
Mainland China 5,900,523,116.11 4,713,351,792.07 5,634,561,396.87 4,504,466,944.37
Other countries and regions 353,686,313.93 365,407,804.26 401,185,060.73 322,973,428.64
Total 6,254,209,430.04 5,078,759,596.33 6,035,746,457.60 4,827,440,373.01
(4) Revenue from top 5 customers of the Company
Total revenue Percentage of
from top the revenue for
Period 5 customers the period (%)
2015 6,236,807,420.88 85.72
2014 6,029,194,239.19 70.25
250
XII Financial Report
XVI. Notes to major financial statement items of the parent company (Cont’d)
5. Investment income
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Income from long-term equity investments accounted
for using the cost method 631,000,000.00 1,073,924,052.21
Income from long-term equity investments
accounted for using the equity method -124,825.53 -82,608.18
Investment gain on disposal of long-term equity investments 9,533,333.33 -7,242,462.00
Investment gain from available-for-sale financial assets held -124,070.12
Interest income from entrusted loans 95,679,999.99 87,937,914.84
Total 736,088,507.79 1,154,412,826.75
XVII. Supplementary information
1. Breakdown of extraordinary gains and losses for the current period
√ Applicable Not applicable
Unit: RMB
Item Amount Remark
Profit or loss from disposal of non-current assets 18,317,909.85
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 244,716,579.78
Gain and loss from debt restructuring 32,089,863.80
Gain or loss on external entrusted loans 94,777,777.77
Non-operating gains and losses other than the above items 10,274,311.04
Gain or loss from change in fair value of consumable biological assets
adopting fair value method for follow-up measurements -19,078,538.02
Less: Effect of income tax 76,729,624.38
Effect of minority interest 3,034,961.43
Total 301,333,318.41 —
Notes for the Company’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
251
XII Financial Report
XVII. Supplementary information (Cont’d)
2. Returns on net assets and earnings per share
Earnings per share
Rate of return on
net assets on
weighted Basic Diluted
Profit for the reporting period average basis (RMB per share) (RMB per share)
Net profit attributable to ordinary
shareholders of the Company 6.73% 0.50 0.50
Net profit after extraordinary gains and
losses attributable to ordinary shareholders
of the Company 4.62% 0.34 0.34
Note: Net profit attributable to ordinary shareholders of the Company excluded the effect of interest payment deferred and accumulated to
subsequent periods or perpetual bonds under other equity instruments. When calculating earnings per share, the interests incurred but
not declared for perpetual bonds from the value date up to 31 December 2015 are deducted.
Profit for the
Item reporting period
Net profit attributable to the Company 1,021,224,678.04
Less: Effect of cumulative interests of perpetual bonds 61,506,739.73
Net profit attributable to ordinary shareholders of the Company 959,717,938.31
3. Difference in accounting data under domestic and overseas accounting standards
(1) Differences between the net profit and net assets disclosed in accordance with international accounting
standards and China accounting standards in the financial report
Applicable √ Not applicable
(2) Differences between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report
Applicable √ Not applicable
252
XIII 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 the auditors’ report which is sealed by the accounting firm and signed and sealed by the certified public
accountant;
III. The original copies of all of the documents and announcements of the Company disclosed in the designated newspaper
and on the website as approved by China Securities Regulatory Commission during the reporting period;
IV. The annual report disclosed on the website of the Stock Exchange of Hong Kong Limited;
V. Other related information.
Shandong Chenming Paper Holdings Limited
30 March 2016
253
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